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COMPENSATION DISCUSSION AND ANALYSIS
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How Pay is Tied to Company Performance
Throughout this Compensation Discussion and Analysis (“CD&A”), we describe our executive compensation philosophy, program, and decisions made in 2020 for our Named Executive Officers (“NEOs”):
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Name
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Principal Position
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John M. Turner, Jr.
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President and CEO (“CEO”)
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David J. Turner, Jr.
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Chief Financial Officer (“CFO”)
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John B. Owen
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Chief Operating Officer (“COO”)
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C. Matthew Lusco
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Chief Risk Officer (“CRO”)
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Ronald G. Smith
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Head of Corporate Banking Group
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Linking Performance to Compensation Decisions. One of the central principles of our executive compensation program is tying pay to Company performance. At the beginning of each year, our CHR Committee of the Board sets performance goals based on our Board-approved budget and other goals related to our strategic priorities. At the end of the year, the CHR Committee compares these goals to actual results for the Company and each individual. The following is a high-level summary of our 2020 strategic priorities and achievements:
Continuous Improvement. Serving as the foundation of our 2020 strategic priorities is Continuous Improvement, a transformation priority that focuses on the following key elements: making banking easier for our customers, accelerating revenue growth, achieving greater efficiencies, and improving the associate experience. Led by Mr. Owen, we completed 21 initiatives in 2020, including:
•Digital Banking and electronic signature solutions that improve the customers’ experience across all channels;
•Third party spend reductions;
•Continued reductions in real estate square footage;
•Virtual collaboration tools to maintain strong relationships with our customers while unable to meet face to face; and
•Revenue growth initiatives including the acquisition of Ascentium Capital, an equipment finance lender; and analytical tools for our Wealth and Commercial bankers.
Focus on the Customer. Throughout the year, we remained committed to meeting our customers’ needs in a rapidly changing environment. As the pandemic began, our teams remained nimble, adopting new practices and operating models so our customers and communities could receive the advice and guidance they needed. We are proud that during this unprecedented time, Regions was ranked first in the J.D. Power 2020 U.S. Online Banking Satisfaction study, was recognized by Greenwich Associates as a Standout Commercial Bank Amid Crisis for providing superior client support through the 2020 COVID-19 pandemic, and received 13 Greenwich Associates Greenwich Excellence Awards for Small Business and Middle Market Banking.
Strengthen Financial Performance. Throughout 2020, we delivered strong financial results, controlled expenses, and
proactively managed risks. While our Company successfully navigated the COVID-19 pandemic, we ended the year with solid financial results highlighted below (for the adjusted efficiency ratio reconciliation see page 50 in Regions’ Annual Report on Form 10-K for the year ended December 31, 2020, and for the remaining non-GAAP measures see reconciliations in Appendix A):
•Reported net income available to common shareholders of $991 million and earnings per diluted share of $1.03;
•Reported total revenue increased by 7 percent and 5 percent on an adjusted basis (non-GAAP);
•Generated the highest pre-tax pre-provision income (non-GAAP) in more than a decade with an 11 percent increase compared to 2019 and a 9 percent increase on an adjusted basis (non-GAAP);
•Generated positive operating leverage of 2.7 percent on a reported basis and 2.6 percent on an adjusted basis (non-GAAP); and
•Realized a 150 basis point improvement in our efficiency ratio to 57.5 percent; and a 140 basis point improvement in our adjusted efficiency ratio (non-GAAP) to 56.6 percent.
Enhance Risk Management. Risk management is the responsibility of every Regions associate. As such, we are committed to maintaining a culture of risk ownership and awareness where each associate is responsible for identifying and prudently managing our Company’s risks. In 2020, we continued to enhance our risk management framework and strengthen our risk culture by:
•Investing in people, processes, and technology to continuously improve our risk management capabilities;
•Leveraging technology, automation, innovation, data, and analytics to drive increased efficiency and effectiveness of our risk management tools, programs, and testing;
•Promoting soundness, profitability, and growth through a disciplined credit culture; and
•Maintaining focus on recruiting, developing and retaining key risk management associates.
In 2020, we maintained strong risk governance processes, which helped to ensure our risk management framework appropriately identified and managed all material risks to the company, including environmental and social risks, as well as risks associated with adapting to a largely remote work environment. A strong credit risk governance program supported continuous credit portfolio management activities, including the early identification of high risk industries and exposures impacted by the COVID-19 pandemic, as well as proactive support of customers through various customer assistance programs and the execution of government sponsored stimulus programs. We also continued making investments in advancing our BSA/AML/OFAC technology solutions, our overall modeling and data analytics capabilities,
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COMPENSATION DISCUSSION AND ANALYSIS
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and our suite of predictive risk and early warning indicators and mechanisms in an effort to drive increased effectiveness and efficiency of our risk management tools, programs, and testing.
Build the Best Team. The pandemic provided Regions the opportunity to bring our mission and values to life while also demonstrating our commitment to keep our teammates and customers safe. We put that commitment into action during this unprecedented time:
•Developed strategy to support impacted associates who were infected or exposed to the virus, conducted contact tracing efforts, and implemented an expanded leave policy and process to ensure associate safety remained the top priority;
•Expanded health benefits to associates, including wellness and mental health resources, increased telehealth benefits and no-cost COVID testing and treatment through Regions benefits plans;
•In addition to expanded quarantine and personal leave programs, we also offered a special paid time off purchase plan and additional compensation to front-line associates;
•Added provisions to the 401(k) and flexible spending account plans through the CARES Act and offered free legal resources;
•Scored 100% on the Corporate Equality Index, that measures corporate policies related to LGBTQ+;
•Named a Military Friendly Employer by the US Department of Defense;
•CEO signed the Valuable 500 pledge in support of workplace inclusion of those with disabilities;
•Organization responded well to the social unrest during the Summer of 2020, including CEO communication, Diversity Network hosted associate table talks on race and
racism, Week of Understanding --- leader led dialogue on race, and CEO listening sessions; and
•Launched peer mentoring initiative called Expanding My Circle, that is being piloted with our diverse talent.
In March 2020, Regions was awarded the sixth consecutive Exceptional Workplace Award by Gallup. This award recognizes organizations that are devoted to cultivating a culture of engagement and that know that investing in people is the key to performance excellence and high engagement. Regions was one of 38 winners across the world to receive this award for our commitment to creating and sustaining an engaged workforce where associates can do what they do best every day and live their best lives. Despite the ongoing pandemic and challenges to the operating environment, results from the 2020 Associate Engagement survey conducted in September showed an increase in the Grand Mean score for the organization when compared to the prior survey results. In particular, Engagement items related to associates’ perceptions of care and having their opinions count showed the highest scoring results for those items in Regions’ eight year history of the survey.
Focused execution on these strategic priorities, with an emphasis on building a culture of continuous improvement despite a challenging interest rate and credit environment, led to Company performance that was slightly above target expectations in 2020.
These accomplishments are reflected in pay decisions made by the CHR Committee. The following table summarizes key components of pay and decisions related to those components, as well as the impact of performance on the compensation of our NEOs:
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COMPENSATION DISCUSSION AND ANALYSIS
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Compensation Component
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Key Decisions Made and the Impact of Performance on Decisions
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2020 Base Salaries
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Two NEOs received a base salary increase, our CEO, Mr. J. Turner, and the Head of Corporate Banking Group, Mr. Smith. After consideration of performance, market benchmark data for the roles, and in consultation with its independent compensation consultant, the CHR Committee increased Mr. J. Turner’s and Mr. Smith’s base salary by 2.6 percent and 6 percent, respectively, in early 2020.
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Annual Cash Incentive Compensation Awards
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Our performance against goals set at the beginning of 2020 generated annual incentive payments slightly above target. In recognition of his performance as COO, the short-term incentive target opportunity increased for Mr. Owen. The target incentive opportunity for other NEOs remained at the prior year’s level. Additionally, the CHR Committee reviewed corporate performance, noting that diligent execution of our strategic plan in a challenging credit and interest rate environment yielded a result of 101 percent of target expectations. The 2020 annual incentive plan was not adjusted or modified as the result of the COVID-19 pandemic.
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Long-Term Incentives
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The COVID-19 global health pandemic impacted the timing and design of the long-term incentive grants made in 2020. Consistent with previous years, the grants were divided equally among restricted stock units, performance share units, and performance cash units. For the current year grants, long-term incentive performance is being measured on the absolute and relative performance of ROATCE. With consideration given to performance, individual contribution, and benchmark data, the CHR Committee approved a $100,000 increase to the long-term incentive target for Mr. Owen and a $625,000 increase for Mr. J. Turner. While the CHR Committee considers the grants made in 2020 to be current-year compensation, it is important to also recognize and evaluate the impact of performance on prior years’ awards in ensuring executive compensation is in line with performance.
To that end, the CHR Committee approved an adjustment to the performance measurement methodology of the 2018-2020 Long Term Incentive Plan performance-based grants in response to the volatility and challenges related to the COVID-19 pandemic. The CHR Committee determined that two-thirds of the final result would be calculated based on pre-pandemic performance (as of the end of 2019) under the originally approved plan (i.e. measurement of both absolute and relative EPS growth and ROATCE), and the remaining one-third of the performance results would be calculated using the originally approved plan metrics (EPS growth and ROATCE) but evaluating performance on a relative-to-peers basis for the full three-year period 2018-2020. This resulted in award payouts of 99 percent of target. This approach was determined by the CHR Committee as a fair and balanced outcome based on our projected payout prior to the impact of the COVID-19 pandemic, the unanticipated and dramatic impact the pandemic had on our pre-established absolute goals, while still holding management accountable for performance against peers facing similar business conditions for the entire 3-year period.
More information regarding long-term incentive compensation can be found on pages 83 - 87.
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COMPENSATION DISCUSSION AND ANALYSIS
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Summary of our Pay-for-Performance Decisions for 2020
Below is a graphic representation of our 2020 pay elements highlighting the performance-based nature of our compensation programs. Compensation for our NEOs is highly correlated to performance and heavily weighted toward compensation components directly connected to the interests of our shareholders. Detailed discussions of each of these elements can be found in the subsection entitled 2020 Compensation Decisions — What We Paid and Why.
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COMPENSATION DISCUSSION AND ANALYSIS
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Compensation Philosophy and Objectives
Our compensation and benefit programs operate under the guidance and oversight of the CHR Committee. The CHR Committee is responsible to the Board for approving Regions’ executive compensation objectives and ensuring that the compensation programs and policies of the Company support the business goals and strategic plans approved by the Board.
We operate in a highly competitive and regulated environment. Our ability to successfully compete and grow our business depends on the skill, acumen, and motivation of our executives and their ability to develop and execute a dynamic strategic plan. With this in mind, the CHR Committee established the following guiding principles of compensation to serve as the foundation of our compensation philosophy:
1. Compensation targets should be transparent and set at competitive levels.
2. Actual compensation should pay for performance based on goals that are clear and focused. As an associate’s business responsibilities increase, the mix of compensation should be more heavily weighted toward variable compensation that is considered “at-risk,” based on corporate and individual results.
3. Compensation programs should promote shared value through alignment of the long-term interests of our shareholders, customers, and associates.
4. Compensation programs should be balanced, incenting sustainable, profitable growth without encouraging associates to take unreasonable risks that may damage the long-term value of the Company. To ensure programs remain consistent with the safety and soundness of the Company, compensation programs will be subject to robust risk management and governance frameworks, including oversight by the CHR Committee of the Board.
5. Compensation programs should be fair, equitable, and align with our corporate values.
In addition to these broad guiding principles, the CHR Committee adopted a number of key practices that are consistent with our philosophy and our commitment to excellence in corporate governance. Equally as important as adopting strong practices is a commitment to refrain from certain compensation and employment practices that are inconsistent with our philosophy and goals. The following chart details some of these decisions and where these decisions are discussed in more detail in this CD&A:
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What We Do
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ü
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Pay for Performance (pages 79-87)
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Executive pay decisions are made to ensure that the majority of total direct compensation is at-risk and not guaranteed. For example, 66 percent of our CEO’s actual 2020 compensation is performance based with 64 percent of Mr. J. Turner’s compensation subject to deferral and the requirement for sustained performance over a multi-year period.
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ü
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Evaluate Performance Using a Combination of Balanced Performance Metrics (pages 79-87)
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We evaluate both corporate and individual performance in our annual incentive plans. Performance is evaluated compared to internal expectations, budgets, and plans, including non-financial metrics important to our stakeholders. Plans also include a degree of discretion allowing for the exercise of sound business judgment by the CHR Committee when assessing performance and corresponding pay decisions.
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ü
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Require Strong Stock Ownership and Retention of Equity (page 93)
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The Board established robust stock ownership guidelines that each of our Directors and NEOs must meet in order to assure that Directors’ and executives’ interests are tied to those of our shareholders. The guidelines include a rigorous 6x base pay ownership requirement for our CEO and a 3x ownership requirement for the remaining NEOs.
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ü
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Provide for a Strong Clawback Policy (page 92)
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In the event previously paid incentive compensation is determined to be based on materially inaccurate performance metrics or an executive has engaged in excessively risky or other detrimental conduct, the CHR Committee has wide latitude to cancel or reduce any current or future incentive compensation. In addition, the CHR Committee has further authority to recapture incentive compensation that has been paid if determined to be in the best interests of the Company and our shareholders. The policy governing clawbacks is reviewed at least annually by the CHR Committee.
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ü
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Require Double Trigger Change-in-Control Provisions (page 102)
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Our change-in-control agreements, Executive Severance Plan, and long-term incentive awards require both a change-in-control and termination of employment (so-called “double trigger”) to trigger payment. No awards or benefits are paid only upon a change-in-control.
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ü
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Use an Independent Compensation Consultant (page 90)
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The CHR Committee determined its compensation consultant to be independent under both SEC and NYSE rules. The compensation consultant does no other work for the Company.
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ü
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Listen to and Engage with Our Shareholders (pages 43-45 and 78)
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We conduct an annual advisory Say-on-Pay vote, as recommended by our shareholders, and actively review the results of these votes as we make program decisions. In 2020, shareholders voiced substantial support for our executive compensation plans and programs, with 93.57 percent of votes cast in approval. Additionally, as a part of our corporate governance shareholder engagement program, we solicit feedback regarding our compensation programs from shareholders and proxy advisors and consider any other shareholder comments we receive. Shareholders are also invited to share their views with the CHR Committee as described on page 45.
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COMPENSATION DISCUSSION AND ANALYSIS
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What We Don’t Do
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X
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No Incentive Plans that Encourage Excessive Risk Taking
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Protecting against unreasonable risk is a core guiding principle of our compensation philosophy and is demonstrated in numerous ways, including balanced program design; the use of multiple and competing performance measures; the adoption of a clawback and other enterprise-wide risk-related policies; and robust governance and oversight processes to identify, monitor, mitigate, and manage risk. Our comprehensive risk assessment of incentive-based compensation plans by our Risk Management Group, including our CRO, validates our belief that none of our compensation programs create risks that are reasonably likely to have a material adverse impact on the Company.
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X
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No Employment Agreements for Executive Officers
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Our executive officers are at-will employees with no employment contracts.
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X
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No Tax Gross-Ups on Perquisites (“Perks”)
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Once an associate becomes an NEO, we do not provide tax gross-ups for any taxable perk provided. In addition, we have not entered into any agreements that permit excise tax gross-ups on change-in-control payments since 2011.
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X
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No Repricing of Underwater Options
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We do not reprice “out-of-the-money” stock options.
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X
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No Hedging, Pledging, or Short Sales
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We do not permit our associates or Directors to hedge or short-sell Regions securities. Additionally, our executive officers and Directors are prohibited from pledging Regions securities against other debt.
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X
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No Dividends or Dividend Equivalents on Unearned Grants
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We do not pay dividends or dividend equivalents on shares or units that are not earned. We issue dividend and dividend equivalent payments at the end of a performance period only on shares and units that ultimately vest.
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X
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No Excessive Perks
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While the CHR Committee has eliminated most perks, those that remain are monitored to ensure they continue to be based on sound business rationale.
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With the guiding principles and key practices mentioned above and set forth by the CHR Committee serving as the foundation, our executive compensation programs described in this CD&A are designed to: (1) retain key talent necessary to compete; (2) motivate talent with a strong pay-for-performance culture to
achieve desired results; and (3) encourage sustainable, profitable growth while ensuring the long-term health of the Company is not jeopardized due to imprudent short-term decisions or excessive risk-taking.
Compensation-Setting Process and Timeline
The CHR Committee designs a balanced compensation program that provides competitive fixed base compensation, as well as variable incentive compensation opportunities for performance over the short- and long-term. To do so, the CHR Committee considers market-competitive pay and practices in establishing target pay levels and uses both formulaic determinations and discretionary factors in determining the actual compensation for the year. While the CHR Committee considers an objective evaluation of performance based on business results to be critical, it also believes it is important to apply discretion, flexibility, and judgment in the decision-making process to ensure executive compensation is balanced between near-term performance and progress toward our longer-term objectives.
The illustration to the right depicts elements of the CHR Committee’s decision-making process for the executive compensation program. The program uses a mix of fixed and variable compensation elements that are aligned with the guiding principles described above. Using this process, the CHR Committee has consistently designed executive compensation programs where the large majority of compensation is performance-based, with measures for both corporate and individual performance. It is important to note that though we discuss phases and timeliness of the decision-making process in a manner that may appear to be linear, many steps described below occur continuously and concurrently as the CHR Committee evaluates compensation throughout the year.
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COMPENSATION DISCUSSION AND ANALYSIS
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1. Review Competitiveness and Business Objectives
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Prior to the start of each calendar year, the CHR Committee focuses on two areas related to upcoming compensation decisions:
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Review Market Competitiveness of Pay
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Review Potential Plan Changes, Business Plans,
Budgets, and Expected Results
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The CHR Committee evaluates the market competitiveness of compensation for each of our executive officers in order to guide target compensation decisions for the coming year. With the assistance of its independent compensation consultant, the CHR Committee reviews the compensation of our executive officers against that of the Company’s compensation peer group, as well as a larger group of diversified financial institutions that we compete with for both business and potential talent.
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The CHR Committee begins its discussions about compensation plan design for the coming year. Potential plan changes are discussed based on previous effectiveness evaluations. In addition, members of the management team advise the Board with respect to business plans, business risks, expected financial results, and shareholder return expectations. The CHR Committee uses these discussions to facilitate the goal setting process for both our short- and long-term performance-based compensation plans.
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2. Set Pay Levels and Targets
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During the first quarter, the CHR Committee generally establishes current compensation by targeting pay levels, as well as the performance requirements executives must achieve in order to receive performance-based pay elements:
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Set Competitive Target Pay Levels
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Establish Incentive Plan Metrics, Targets, and
Other Requirements
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Based on the competitive data previously reviewed and the recommendations of the CHR Committee’s independent compensation consultant and the CEO (when appropriate for executive officers other than himself), the CHR Committee establishes the target pay levels for each executive officer. While competitive benchmarking is not the only consideration in establishing these targets, the CHR Committee generally considers, but does not specifically target, the 50th percentile of total direct compensation (the sum of base salary, short term annual incentive compensation, and long-term incentive compensation grants). The reference point for this comparison includes a competitive set of peer organizations and other competitors for talent.
In considering competitive market practices, the CHR Committee reviews and determines the compensation peer group on an annual basis. For more information about our compensation peer group, see page 90 in the Other Policies and Practices Impacting Compensation Decisions subsection.
While we generally consider market medians as the competitive standard, the CHR Committee may set one or more components of compensation for an executive at a level above or below the 50th percentile if it is determined to be appropriate due to either the experience or performance of an individual executive or the needs or specific circumstances of the Company.
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Based on previous discussions and presentations to the CHR Committee and the full Board, the CHR Committee reviews previously approved business plans and sets performance targets for both short- and long-term performance plans.
The CHR Committee generally requires budgeted performance levels to be achieved for target payout levels to be paid. Corporate performance is modeled using both adverse and extraordinarily positive performance scenarios. Meaningful threshold and maximum performance levels are also set so executive officers are appropriately incented to achieve results while not being incented to take excessive risk to achieve compensation payments.
Short-term incentive plans are generally based on the Company’s budget and internal goals while expectations for long-term plan metrics are set based upon performance compared to internal goals and relative performance as compared to peers. To measure relative performance, the CHR Committee uses a performance peer group that is reviewed and determined on an annual basis. For more information about our performance peer group, which is slightly different than our compensation peer group, see page 91 in the Other Policies and Practices Impacting Compensation Decisions subsection.
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3. Assess Risks and Shareholder and Other Stakeholder Feedback
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During the second and third quarters, the CHR Committee focuses on internal performance assessments, risk assessments of compensation, audits of pay practices, pay-for-performance evaluations, as well as shareholder and other stakeholder feedback related to compensation practices:
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Internal Assessments
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External Feedback Reviews
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During the annual joint meeting of the CHR Committee and the Risk Committee, a comprehensive risk analysis of incentive compensation plans is presented by the CRO and is reviewed and discussed. The risk assessment is based on a thorough and comprehensive multi-disciplinary review of incentive compensation plans to ensure they do not encourage executive officers or other associates of the Company to take excessive risks in order to achieve certain compensation levels.
The CHR Committee reviews a current assessment of corporate performance against the performance goals set at the beginning of the year for both the short-term performance plans and any long-term performance grants currently outstanding.
With the assistance of its independent compensation consultant, the CHR Committee evaluates the effectiveness of the prior year compensation programs in achieving established goals and adhering to program principles.
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With the assistance of its independent compensation consultant, the CHR Committee considers feedback from external stakeholders, including feedback from shareholders related to the annual Say-on-Pay vote. The CHR Committee reviews compensation assessments from Institutional Shareholder Services, Glass Lewis, and other external sources and feedback from individual shareholders that is received through our corporate governance shareholder engagement program.
In addition to shareholder and investor community feedback, the CHR Committee evaluates any regulatory reviews and matters and, with the assistance of its independent compensation consultant, considers compensation best practices and governance improvements as a part of its continuous improvement process.
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4. Evaluate and Certify Company Performance and NEO Compensation
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During the fourth quarter of the current year and the first quarter of the following year, the CHR Committee considers items related to both current year compensation and compensation decisions for the upcoming year. Decisions related to NEO compensation and current year performance can be summarized as follows:
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Evaluate Company Performance
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Certify Company Performance and Calculate Compensation
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In the fourth quarter, the CHR Committee previews Company forecasts with regard to performance under the short-term and long-term plans to prepare for payment discussions in the first quarter. Forecasts of performance include financial results based on GAAP, as well as a thorough review of any proposed adjustments to earnings and any unanticipated or extraordinary events that may have occurred during the year. The CHR Committee begins to evaluate qualitative performance factors and separately, in executive session with only CHR Committee members present, participates in a detailed performance discussion relating to the CEO.
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In the first quarter of the following year, after performance results are known and calculated, the CHR Committee reviews final performance results and determines the need to apply discretion, flexibility, and judgment in order to balance the objective evaluations of performance with near-term performance and progress toward our longer-term objectives. After decisions are made, the CHR Committee certifies the performance results and executive officer compensation for the performance period.
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COMPENSATION DISCUSSION AND ANALYSIS
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2020 Compensation Decisions — What We Paid and Why
Establishment of 2020 Base Salaries and Compensation Targets. After reviewing the competitive pay data provided by its independent compensation consultant, the CHR Committee determined that 2020 compensation levels and targets for our NEOs were generally competitive and reflect the contribution of our executives to the success of the Company. Changes were limited to the CEO, COO, and the Head of Corporate Banking Group in recognition of performance, growth in new roles, and market changes.
Base Salaries. The CHR Committee, in consultation with its independent compensation consultant, approved two base salary increases in early 2020. Mr. J. Turner received a 2.6 percent base salary increase in acknowledgement of his performance since becoming CEO in July 2018 and in recognition that his base salary was below the 50th percentile of CEO pay in our compensation peer group. Additionally, Mr. Smith received a 6 percent base salary increase in recognition of his performance and leadership as the Head of Corporate Banking Group, a role that Mr. Smith assumed in mid-2018.
Annual Incentive Targets. The CHR Committee approved an increase in the 2020 annual incentive target bonus opportunity for our COO. Mr. Owen’s annual incentive target bonus opportunity increased from 115 percent to 125 percent. These decisions were made with guidance from the CHR Committee’s
independent compensation consultant and were generally in line with the 50th percentile for those positions at companies in our compensation peer group. For the remaining four NEOs, the CHR Committee considered competitive market information, as well as individual performance and contribution to the Company, and determined no change would be made for the 2020 performance year.
Long-Term Incentive Targets. With respect to long-term incentive compensation, the CHR Committee approved target increases, for Mr. J. Turner and Mr. Owen, and determined the targets for the other three NEOs would remain unchanged as compared to 2019. As further discussed on page 83, the CHR Committee approved increasing the long-term incentive target by $625,000 for Mr. J. Turner and $100,000 for Mr. Owen, resulting in targets of $5,000,0000 and $1,500,000 respectively. The changes were made in consultation with the CHR Committee’s compensation consultant, with the consideration of each executive’s contributions to the Company as well as an analysis of competitive market data.
The resulting 2020 annualized base salaries, annual incentive targets, and long-term compensation targets, including the magnitude of changes, are summarized below:
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Base Salary Change
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2020 Annualized Base Salary
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2020 Annual Incentive(1)
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2020 Long-Term Incentive
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2020 Total Target
Compensation
(2)
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Name
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Previous Target
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2020 Target
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Target Annual Incentive
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Target Change
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Target
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John M. Turner, Jr.
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ñ
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2.6%
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$
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1,000,000
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ó
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170%
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170%
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$
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1,700,000
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ñ
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$
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625,000
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$
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5,000,000
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$
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7,700,000
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David J. Turner, Jr.
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ó
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—%
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$
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664,200
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ó
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115%
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115%
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$
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763,830
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ó
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$
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—
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$
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1,400,000
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$
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2,828,030
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John B. Owen
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ó
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—%
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$
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700,000
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ñ
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115%
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125%
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$
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875,000
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ñ
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$
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100,000
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$
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1,500,000
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$
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3,075,000
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C. Matthew Lusco
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ó
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—%
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$
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584,250
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ó
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115%
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115%
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$
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671,888
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ó
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$
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—
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$
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1,200,000
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$
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2,456,138
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Ronald G. Smith
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ñ
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6.0%
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$
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535,000
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ó
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115%
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115%
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$
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615,250
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ó
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$
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—
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$
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900,000
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$
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2,050,250
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(1) The 2020 annual incentive target is based on multiplying the NEO’s target bonus opportunity percentage by the annualized 2020 base salary for each NEO (based on annualizing base salary rates as determined by the CHR Committee). Calculating the annual target incentive in this manner does not take into consideration the timing of changes in base salary, should any change occur, throughout the year.
(2) The CHR Committee considers Total Target Compensation to be the target NEO compensation for the performance period. The Summary Compensation Table reports additional elements of compensation including the value of certain perks and benefits and an annual change in pension value. While the CHR Committee considers our executives’ participation in certain benefits (including retirement benefits) in making their decisions about compensation, they do not consider these items to represent annual compensation.
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COMPENSATION DISCUSSION AND ANALYSIS
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2020 Annual Cash Incentive Payments
Plan Requirements. At the beginning of the year, the CHR Committee established corporate performance targets based on our financial plans, budgets, and expectations in support of strategic priorities, subject to the safety and soundness requirements described below. Additionally, the CHR Committee decided to simplify the performance metrics, focusing on profitability and efficiency. The CHR Committee also determined that customer service goals would serve as a potential modifier to the plan and that annual incentive performance would be determined on an absolute basis, comparing actual performance to budgeted internal goals. In keeping with its philosophy that individual performance plays
an important role in our annual incentive plan design, the CHR Committee did not change the weight for individual performance and focused on role-based expectations supporting our strategic priorities during the same time period. The combination of corporate and individual performance results in an annual cash incentive award that can be earned between zero percent and 200 percent of target. The design of the annual cash incentive plan, as determined in early 2020, is tied to the achievement of strategic priorities as follows:
Safety and Soundness Requirements. In keeping with prior years, the CHR Committee decided that in addition to the specific corporate and individual performance requirements, any payout of annual incentive should be subject to meeting safety and soundness thresholds. Guidance issued by the Federal Reserve instructs banking institutions to consider the “full range of current and potential risks including the cost and amount of capital and liquidity needed to support risks” in their compensation plans. To address this principle, the CHR Committee included the potential for two negative adjustments designed to reduce annual incentive payments in the event Regions does not maintain capital and liquidity at levels vital to the safety and soundness of the Company. The deduction for not meeting each requirement is 20 percent of the measured achievement. Therefore, even if corporate performance meets the financial and customer service goals set by the Board, the portion of incentive compensation based on corporate performance may be reduced up to 40 percent if performance is at the expense of capital and/or liquidity requirements.
Discretion to Adjust in Response to Risk and Performance. The CHR Committee reserves the discretion to adjust the performance goals established at the beginning of a plan year, including the ability to consider corporate performance metrics either on a GAAP or non-GAAP adjusted basis and other qualitative factors, if deemed necessary. The CHR Committee also retains discretion in the determination of individual performance under the plan. Blending the clarity provided by predetermined targets and expectations with the thoughtful application of discretion to consider items that should be excluded from, or included in, performance calculations, provides the CHR Committee the flexibility and judgment critical to deliver incentive compensation that reflects both near-term performance results and progress toward longer-term objectives. This combination of fixed formulas,
along with latitude in assessing performance based on the CHR Committee’s informed judgment, allows for consideration of unanticipated market conditions and other events that may impact operating performance. We believe that this latitude is important in mitigating risk as it reduces the potential that our executive officers may be encouraged to take actions with respect to unanticipated items based on the impact the actions may have on their incentive compensation, rather than based on the merits and impact that the actions may have on achieving our long-term goals and objectives.
2020 Annual Incentive Plan Results. For four of our NEOs, 70 percent of the annual incentive is based upon corporate performance, with the remaining 30 percent of the annual incentive based upon an assessment of each NEO’s individual performance. For Mr. Smith, who has responsibility for a revenue-generating business unit, 50 percent of his annual incentive is based upon corporate performance, with the remaining 50 percent based on business and individual performance results directly correlated to the Corporate Banking division of the Company which Mr. Smith leads.
Assessment of Corporate Performance. Throughout 2020, the CHR Committee received regular updates on corporate performance and forecasted incentive payments under the plan. As a result of the COVID-19 pandemic, preliminary forecasts indicated plan payouts could potentially be below target. As such, the CHR Committee carefully monitored performance with executive management, discussing performance actions being taken, but refraining from making any changes to the performance metrics or goals previously approved under the plan.
In early 2021, the CHR Committee reviewed and considered corporate performance under the criteria set at the beginning of 2020. Performance measurements for the metrics established
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COMPENSATION DISCUSSION AND ANALYSIS
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were based on our results as adjusted and reported to shareholders. When final performance was measured, it was noted adjusted net income was below expectations due to COVID-19 credit events, but improvement in the adjusted efficiency ratio exceeded target in part to careful management of expenses and other strategies implemented by the executive management team. The culmination of results generated an
overall corporate performance score of 101 percent. The CHR Committee determined this was in line with overall performance and certified results as calculated with no adjustments and as illustrated below:
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Absolute Performance Against Internal Targets
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2020 Goal Achievements
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Performance Metric
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Threshold
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Target
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Maximum
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Attainment
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% of Goal
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Weighting
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Profitability Metrics
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50%
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Adjusted Efficiency Ratio (1)
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60.1%
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57.8%
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56.3%
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56.6%
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167.0%
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=
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91%
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40%
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Adjusted Income Available to Common Shareholders ($ millions) (2)
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$1,284
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$1,511
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$1,662
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$1,001
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0.0%
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10%
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Net Charge-Offs/Average Loans (3)
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0.71%
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0.50%
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0.40%
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0.58%
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74.0%
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Plus or minus10 points
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Customer Service Metrics Modifier
* No modification for target performance
* Minus 1 point for every percentile below the 70th percentile, maximum 10 points
* Add 1 point for every percentile above the 80th percentile, maximum 10 points
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60th
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> 80th
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90th
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>90th
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Maximum
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=
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10%
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TOTAL CORPORATE PERFORMANCE
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101%
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(1) Non-GAAP measure — see reconciliation in Regions’ Annual Report on Form 10-K for the year ended December 31, 2020, on page 50.
(2) Non-GAAP measures — see reconciliation in Appendix A.
(3) See calculation in Regions’ Annual Report on Form 10-K for the year ended December 31, 2020, on page 77.
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Required Reductions
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Goal
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Result
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Required Reduction Indicated?
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Primary Liquidity Level
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Low Risk or Better
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Low Risk
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NO
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Capital Action Decision Tree Status
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Monitoring or Deploy
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Monitoring
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NO
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Assessment of Individual Performance. With respect to Mr. J. Turner, the independent Board members used a formal process consistent with prior years to assess performance. Each Board member provided an evaluation in the areas of leadership, strategic planning, financial performance management, customer relations, management of personnel, communications, and Board relations. Mr. J. Turner’s achievements noted by Board members include, but are not limited to, items listed in the table below.
To determine the individual performance rating for Mr. J. Turner, the CHR Committee met in executive session with its compensation consultant to discuss and finalize performance results. To determine the individual performance rating of the other NEOs, the CHR Committee consulted with our CEO regarding the assessment. The table below outlines the individual NEO performance ratings and a high-level summary of the achievements noted when making the performance rating decisions:
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COMPENSATION DISCUSSION AND ANALYSIS
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Name
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Individual
Performance
Rating
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Comments
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John M. Turner, Jr.
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125%
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•Demonstrated strong leadership focusing executive management on what could be controlled during the unprecedented global pandemic leading to the following financial results:
•Best Operating results in over a decade with pre-tax, pre-provision income growth of 11.4%, driven by strong performance in Capital Markets activity, Mortgage production, PPP program fee income, strong expense control and interest rate hedging activity
•Top Shareholder return performance with Regions at number one out of peers for the one year period ending in 2020 and a rank of third out of the peer group on a three year basis
•Drove efficiency ratio to 56.6% beating the budget of 57.8%
•Served our customers and communities through:
•Swift adaptation of branch banking model to “Lobby by Appointment” hours keeping over 90% of our branches open and operational throughout the pandemic
•Supported customers through fee structure accommodations while providing access to capital, including consumer and mortgage payment deferrals as well as both small and large business deferrals
•Supported the Paycheck Protection Program by providing over 46,000 small business loans to customers in every state of the footprint, 98% of which were allocated to businesses with less than 100 employees
•Investment in and improvement of digital and omnichannel tools and products
•Invested $10 million in our communities through the Regions Foundation
•Strengthened our commitment to Build the Best Team:
•Supported associates throughout the pandemic with programs to promote their health and safety, including expanding compensation and benefit programs to support their families and work-life balance
•Increased diversity with the addition of multiple diverse leaders into the executive and senior management ranks
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David J. Turner, Jr.
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130%
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•Generated positive operating leverage through expense management
•Hedging strategies contributed $260 million in revenue in 2020
•Successfully restructured bank owned life insurance program to benefit future years and generated a gain of $25 million in 2020
•Finance associate engagement improved measurably in spite of the disruption caused by the COVID-19 pandemic
•Through execution of human capital strategies, successfully replaced talent in key positions in a seamless manner
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John B. Owen
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125%
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•Led continuous improvement initiatives, resulting in financial impacts exceeding pre-established targets
•Successfully reduced square footage by 650,000 square feet in 2020 and laid the ground work for an additional 800,000 square foot reduction in 2021
•Third party spend reduction of $33 million
•Strengthened diversity of leadership team through strategic, diverse hires
•Successfully implemented technology and operational support to transition over 9,000 associates to remote work
•Improved fraud and cyber security capabilities
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C. Matthew Lusco
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115%
|
•Successfully established highly adaptable and effective risk management and governance programs to evaluate and oversee operational changes during rapidly changing work environments
•Strong credit risk management program led to early identification and mitigation of portfolio risk during the pandemic, including early involvement of Problem Asset Management division where appropriate
•Partnered with the Corporate Banking Group, to deliver the Payroll Protection Program to 46,000 customers
•Strengthened diversity in Risk leadership through strategic and diverse hires
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Ronald G. Smith
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120%
|
•Despite the COVID-19 pandemic challenges, the Corporate Banking Group revenue increased 13% from prior year and was 9% above target
•Successfully implemented the Payroll Protection Program, providing access to $5 billion for 46,000 customers
•Completed Ascentium integration into the Company with solid five month performance, despite onboarding and other integration challenges as the result of the pandemic
•Worked with Risk and Technology to automate virtual tools to facilitate business during the pandemic. These tools will have long lasting impact to the organization
•Targeted disrupted markets and firms to execute strategic recruiting and hiring
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COMPENSATION DISCUSSION AND ANALYSIS
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2020 Annual Incentives Earned. As a result of the 2020 performance decisions discussed above, the CHR Committee approved the following annual cash incentive payments for our NEOs in early 2021:
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Name
|
2020 Target Incentive(1)
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Total Incentive Received
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John M. Turner, Jr.
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$1,689,049
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$1,827,550
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David J. Turner, Jr.
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$763,830
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$837,922
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John B. Owen
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$875,000
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$946,750
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C. Matthew Lusco
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$671,888
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$706,826
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Ronald G. Smith
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$605,788
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$669,396
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(1) The 2020 target incentive is based on multiplying the NEO’s bonus opportunity percentage achieved by the actual salary paid to the NEO during 2020. Using the actual salary paid accommodates changes in base salary, should any change occur, throughout the year.
Long Term Incentive Plan (“LTIP”). The CHR Committee believes long-term deferred compensation plays an important role in linking incentives to risk outcomes or aspects of performance that become apparent only with the passage of time. The responsibilities of our NEOs are largely strategic in nature, and while our NEOs diligently work to understand and mitigate risks, the actual outcomes of many of the business actions taken will not be certain for extended periods of time. For this reason, long-term incentive compensation is the largest portion of our executive compensation program for NEOs.
2020 Long Term Incentive Plan Grants. The CHR Committee met independently with its compensation consultant to review the long-term incentive grant target for Mr. J. Turner. After comparing Mr. J. Turner’s total compensation target to that of other CEOs within our compensation peer group, the CHR Committee determined to increase the value of Mr. J. Turner’s long-term compensation target by $625,000 to a total of $5,000,000. The CHR Committee’s decision was informed by market competitive information and driven by recognition of his outstanding performance leading the Company since his promotion to the role in July 2018.
In setting the value of the long-term portion of compensation for our other NEOs, the CHR Committee reviewed recommendations from Mr. J. Turner for his direct reports and
consulted with its independent compensation consultant. On February 6, 2020, the CHR Committee approved the total grant values for NEOs and set a future grant date of April 1, 2020, in keeping with our normal business practices and schedules. The only change in value from the prior year for other NEOs was an increase of $100,000 in the target for Mr. Owen, resulting in a 2020 award of $1,500,000. This change was approved based on an analysis of competitive market data for the COO position and in consideration of Mr. Owen’s performance in leading the Company through several important initiatives designed to improve efficiency and effectiveness in delivering our products and services to market.
The value of long-term incentive grants for other NEOs remained unchanged from the prior year.
The table below presents the targeted economic value of the grants awarded by the CHR Committee to each NEO on April 1, 2020, and the division of the grant between each long-term component:
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Name
|
|
Total Targeted LTIP
Economic Value1
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Value of RSUs2
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Value of PSUs3
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Value of PCUs3
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John M. Turner, Jr.
|
ñ
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$5,000,000
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$1,666,667
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$1,666,667
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$1,666,666
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David J. Turner, Jr.
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ó
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$1,400,000
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$466,667
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$466,667
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$466,666
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John B. Owen
|
ñ
|
$1,500,000
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$500,000
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$500,000
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$500,000
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C. Matthew Lusco
|
ó
|
$1,200,000
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$400,000
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$400,000
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$400,000
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Ronald G. Smith
|
ó
|
$900,000
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$300,000
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$300,000
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$300,000
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1 Economic value is determined by dollar amount in early 2020.
2 RSUs were granted on April 1, 2020.
3 As discussed on page 84 and in the tables on pages 98 and 99, executives were granted awards on April 1, 2020, using the 30-day average stock price to determine the number of shares granted as RSUs and PSUs. While the number of performance shares was determined on this date, the CHR Committee deferred the final decision as to performance requirements until a later date. Performance criteria were established as of October 14, 2020, and, as a result, under current accounting rules the final value of PSU grants was not set until that time. This resulted in a value for accounting purposes that is higher than the value presented above.
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COMPENSATION DISCUSSION AND ANALYSIS
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Long Term Incentive Program Components. Our long-term incentive program is designed to drive long-term performance, enhance retention, align interest with shareholders, and address longer-term risk concerns. Grants to NEOs are split equally among the following three components, each designed to support a distinct goal of our compensation philosophy:
•Restricted Stock Unit Awards (“RSUs”),
•Performance Stock Unit Awards (“PSUs”), and
•Performance Cash Unit Awards (“PCUs”).
RSUs represent one-third of the award and include a three-year service-based vesting requirement, which means that the awards will generally not vest unless the NEO remains employed until April 1, 2023, the third anniversary of the grant. The CHR Committee has chosen to include RSU grants in the design of the program because they encourage retention of executives while also closely tying executive interests to those of shareholders. While vesting is service-based, the CHR Committee has added an additional risk-based vesting requirement to support decisions that protect the safety and soundness of the Company. In the event that Regions does not continually meet standards for liquidity and capital deployment throughout the entire vesting period, up to 40 percent of the award may be forfeited, regardless of meeting the service requirement.
PSUs and PCUs are performance-based awards and equally comprise the remaining two-thirds of the award. PSUs and PCUs can be earned between zero percent and 150 percent of target depending on the level of achievement.
The CHR Committee has chosen to split the performance-based portion of the award between these two types of grants in order to incent executives to superior performance, but also limit leverage that might encourage excessively risky behavior of executives. PSUs require performance hurdles to be met to establish the number of shares ultimately paid under the award. In addition, since the award is delivered in shares of stock of the Company, its value is also tied to company performance and shareholder interest through stock price performance creating what is often referred to as “double leverage.”
PCUs include the same performance hurdles, but since they are denominated in cash rather than stock, there is less upside and downside opportunity in these grants giving them a lower risk profile than that of PSUs. The CHR Committee believes splitting performance-based awards between these two vehicles with different risk profiles is in the best interest of the Company and shareholders. The CHR Committee also believes these awards should be subject to the service vesting and safety and soundness requirements, therefore, just like RSUs, these awards include a three-year service-based vesting requirement and are subject to standards for liquidity and capital deployment.
Performance measures. The performance measures included in the PSUs and performance-based cash awards are chosen because they are operating measures that: (i) are critical to the long-term success of the Company, (ii) transparent to shareholders and the NEOs, and (iii) create healthy tension between profitability and the quality of earnings, which is important to shareholder value. Additionally, performance goals are based on anticipated capital distribution plans as submitted to our bank regulators through the CCAR process and
approved by the Board. As a result, management has little discretion in altering capital plan actions which, in turn, limits their ability to impact executive compensation.
Weighting of Metrics. Generally, each metric is weighted equally and measured based upon both absolute performance against Company goals over the three-year performance period and an evaluation of relative performance as compared to our peers. We do this through the use of a matrix where the “X” axis represents our performance against the absolute goals we set for ourselves over the performance period, and the “Y” axis represents our performance against banks selected as our performance peer group using these same measures.
Balancing of Absolute and Relative Performance. By establishing absolute goals within a range of outcomes, coupled with performance against banks in our performance peer group, a matrix mitigates some of the challenges associated with setting precise goals that could incent imprudent risk taking by executive officers and avoids the “best of the worst” outcome that is possible with the exclusive use of relative measurement.
2020 LTIP Design. On February 20, 2020, the CHR Committee approved a 2020-2022 LTIP design consistent with previous years, using the performance metrics EPS Growth and ROATCE weighted equally, by considering financial and operational expectations related to our strategic planning process for the January 1, 2020, through December 31, 2022, performance period. The CHR Committee also determined the grants would be made on April 1, 2020.
However, within weeks of this approval and prior to the actual grant of the awards, the COVID-19 pandemic began. Recognizing the significant economic disruption and uncertainty created by the pandemic, the CHR Committee met to consider whether the viability of the previously approved LTIP performance metrics was in question. On March 30, 2020, before awards were granted and in consultation with executive management and its independent compensation consultant, the CHR Committee unanimously approved to issue grants to NEOs on April 1, 2020, as previously determined and consistent with our historical grant practices. With respect to performance metrics and goals, however, the CHR Committee acknowledged that the pandemic could have a material and unknown impact on the Company’s strategic business plan. Based on discussion, the CHR Committee made the decision to defer the establishment of specific performance metrics for PSUs and performance cash grants until a later date.
The CHR Committee continued to monitor economic conditions and made the following performance decisions during its October 14, 2020 meeting:
•Performance Metric – After considerable discussion, the CHR Committee determined that the 2020 performance-based grants would be measured using only the ROATCE metric rather than the two metrics utilized for the past several years. In making its decision, the CHR Committee noted that given market expectations, EPS growth (a metric previously utilized) was expected to be too volatile to be appropriate during this performance period, but that ROATCE remained the most critical long-term performance metric to align management with shareholder value creation.
•Performance Measurement – In measuring performance, the CHR Committee determined that ROATCE would be
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COMPENSATION DISCUSSION AND ANALYSIS
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measured utilizing a performance matrix that considers both absolute and relative performance, each with an equal weight of 50 percent. Absolute performance requirements would be based on the expectations for Regions’ own three-year business plan while relative performance would be measured against the performance of peers along a continuum that ranges from zero to 150 percent of target.
•Calculation of ROATCE - In determining to calculate ROATCE performance, however, the CHR Committee also considered the GAAP impact of the new CECL accounting standard that became effective in 2020. The new accounting standard requires forecasts of potential losses on a quarterly basis considering the prevailing economic backdrop at the end of each quarter. Understanding how volatile this calculation may be, particularly in the midst of such uncertain economic conditions, the CHR Committee determined to calculate ROATCE on a non-GAAP basis by substituting Net Charge-Offs for Provision for Credit Losses in the calculation, and adjusting for income tax expense accordingly. The CHR Committee believes that it is more appropriate to hold executives accountable for Net Charge-Offs as budgeted and projected in our strategic planning than Provision for Credit Losses. Therefore, the CHR Committee determined that Regions’ absolute ROATCE performance would be based on this adjusted definition while performance against peers would be determined on a traditional GAAP basis.
The following chart sets forth the matrices used for measuring performance and the ultimate payout level of the PSUs and performance-based cash awards granted in 2020:
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ROATCE Metric — 100% Weight
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Peer Group
|
Payout Opportunity for ROATCE Goal
|
Max
|
75 %ile
|
50%
|
75%
|
100%
|
125%
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150%
|
Target
|
50 %ile
|
25%
|
50%
|
75%
|
100%
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125%
|
Thresh.
|
25 %ile
|
0%
|
25%
|
50%
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75%
|
100%
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Significantly Below Target
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Below Target
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Slightly Below Target
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Target
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Above Target
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Regions’ Absolute ROATCE
(3-year average)
|
As noted in the footnotes to the LTIP Economic Value chart on page 83, the monetary value of each LTIP award was determined in February 2020. The number of share units subject to share-based awards was determined based on the 30-day average price of Regions common stock immediately prior to the grant date of April 1, 2020. Pursuant to stock-based accounting rules, the fair value of an RSU granted on April 1, 2020, was $8.30 per share, (the closing price of stock as of the date of grant). With respect to PSUs, accounting rules require that the fair value of awards be determined at the time all of the conditions and requirements of awards are determined and communicated to grantees. For Regions 2020 PSU grants, final terms and conditions, including performance metrics and the goals thereunder, were not determined until October 14, 2020. As a result, the fair market value for accounting purposes was established as $12.25 per share, which was the closing
price of Regions stock on that date. As a result, the Grants of Plan Based Awards table, the Outstanding Equity Awards table, and the Summary Compensation Table reflect values for grants that are different than the values represented on page 83 and considered by the CHR Committee when making compensation decisions.
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LTIP PERFORMANCE TARGET DISCLOSURE
|
Performance targets and the payout percentages generated for each level of long-term incentive performance are determined each year by the CHR Committee based on Company budgets and goals, as well as known prevailing economic conditions. We do not disclose the internal absolute performance targets set for the three-year performance period in the above matrix because such disclosure could be construed as earnings guidance. The CHR Committee believes the target levels for absolute performance are challenging, yet achievable. While we do not disclose forward looking goals, we commit to disclosing target performance and performance achievement in the CD&A each year as performance awards vest. Though the matrix above does not include goals, it demonstrates the expectation of a zero percent payment if we do not meet approximately one-half of the cumulative amount projected, as part of our strategic planning process, for the three-year period ending December 31, 2022.
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Other Compensation Decisions Made - 2018 Long Term Incentive Grants. In addition to the compensation decisions made for 2020 performance, the CHR Committee continuously monitors the performance of previous outstanding LTIP grants during the three-year performance period and approves the performance results at the end of the vesting period. Based on the Company’s performance through the end of 2019, the 2018-2020 LTIP grant was projecting to pay approximately at target as Regions entered 2020. With two-thirds of the performance period complete, the CHR Committee noted that the performance and plan design were performing as expected and desired. Beginning in March 2020, however, economic disruption due to the COVID-19 pandemic began to negatively impact the credit environment. The combination of business disruption and the required methodology for credit loss provisioning under the new accounting standard, CECL, foreshadowed a significant downturn. During each successive quarter of 2020, management reviewed projections with the CHR Committee and discussed the impact of the unprecedented conditions. It was noted that while absolute results under the grant were negatively impacted, performance against peers was holding steady with Regions performing at approximately the median of its performance peer group on ROATCE and EPS growth. The CHR Committee noted that relative performance against peers has always been an important component of plan performance and that management was taking actions given the conditions of the pandemic to ensure that the Company continued to perform compared to peers. Although discussed, no actions to modify the performance conditions of any executive compensation programs were taken during the year, and the CHR Committee committed to review possible adjustments following the close of the year.
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COMPENSATION DISCUSSION AND ANALYSIS
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After final performance results were determined in early 2021, the CHR Committee acknowledged that the three-year performance results were unduly impacted by the pandemic and were not reflective of the performance of the executive team in leading the Company over the full performance period. It was noted that performance prior to the pandemic would have generated a payout approximating the target level under the grant, and that during the third year of the period, management’s actions kept the Company’s performance at approximately the peer median level on both financial measures. Therefore, during its deliberations in February 2021, the CHR Committee approved an adjustment to the results of the performance-based grants for the 2018-2020 grant. The
CHR Committee determined that two-thirds of the final result would be calculated using the Company’s performance on the original ROATCE and EPS growth metrics and goals as of the end of 2019 and that the remaining one-third of the performance results would be calculated using the performance metrics originally approved but with performance evaluated only on a relative to peers basis for the full three-year performance period. This resulted in a change in calculated results from 53 percent of target to 99 percent and was aligned with shareholder returns over the same 3-year period. The adjusted performance-based award results are as follows:
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2018 - 2019 Performance-Based Award Results
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Performance Metrics and Weights
|
Target
|
Performance
|
Payout
|
Weight
|
Payout % of Target
|
|
Absolute EPS Growth (Compounded Annual Growth Rate)
|
25%
|
20%
|
24.4%
|
121%
|
50.0%
|
60.5%
|
|
Relative EPS Growth
|
25%
|
50th percentile
|
46th percentile
|
|
Absolute ROATCE
|
25%
|
16%
|
15.25%
|
84%
|
50.0%
|
42%
|
|
Relative ROATCE
|
25%
|
50th percentile
|
46th percentile
|
|
|
(2/3 weighting) 2018-2019 Results
|
103%
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2018 - 2020 Performance-Based Award Results
|
|
|
Performance Metrics and Weights
|
Target
|
Performance
|
Payout
|
Weight
|
Payout % of Target
|
|
|
3-year Relative EPS
|
50%
|
50th percentile
|
46th percentile
|
92%
|
50%
|
46%
|
|
3-year Relative ROATCE
|
50%
|
50th percentile
|
46th percentile
|
92%
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50%
|
46%
|
|
|
(1/3 weighting) 2018 - 2020 Results
|
92%
|
|
|
Final Results
|
99%
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COMPENSATION DISCUSSION AND ANALYSIS
|
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Differences in SEC Reporting Requirements and How the CHR Committee Views Compensation
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It is important to note that the CHR Committee considers LTIP awards as compensation for the year in which the award is granted. As a result, there are multiple differences between how the CHR Committee views compensation and the SEC reporting requirements that impact this year’s Summary Compensation Table. These differences are described below:
•The CHR Committee considers the entirety of the 2020-2022 LTIP award as compensation given to the NEOs at the time of the grant – in April 2020. In contrast, the SEC views only the equity denominated portion of the award to be 2020 compensation and will not consider the performance-based cash unit awards to be compensation until the end of the performance period when the LTIP awards fully vest. Due to this difference, the equity denominated awards are reported in the Summary Compensation Table under the “Stock Awards” column in the year the grant is made. However, the performance-based cash units, with the same performance period and vesting date, will not be reported as compensation until the value of the cash is earned at the end of the performance vesting period in 2022.
•An additional difference between SEC reporting requirements and the CHR Committee’s view of compensation relates to the reported value of stock-based awards. The SEC rules require that companies report the value of equity-denominated awards in the “Stock Awards” column of the Summary Compensation Table in the year they are granted. This is the same way the CHR Committee considered these awards. However, there is a difference in the values noted in the table above and the values reported in the Summary Compensation Table due to the way we determine the number of shares each NEO will receive after the CHR Committee has established the monetary value of an award. To determine the number of PSUs and RSUs, we divide the monetary award value by the 30-day average closing price of Regions common stock prior to the grant date to minimize any impact of day-to-day stock price changes on the number of shares granted. The 30-day average for 2020 was $10.29. SEC rules require us to report in our tables, however, the grant date fair value of shares. For grants made in 2020, the fair value for RSUs was the closing price on the date of grant which was $8.30 per share, making the grant date fair value in the compensation tables appear to be approximately 80% of the value the CHR Committee determined to make. In the case of PSUs, however, the grant date fair market value is based on the date at which all of the terms and conditions of the grants were determined and made. As we previously outlined, 2020 performance metrics were not determined until October 14, 2020. The value of share units as of October 14, 2020, was $12.25 per share rather than the $10.29 used to determine the number of shares, therefore making the values in the compensation tables for PSUs appear to be approximately 120 percent of the value the CHR determined to make.
•The CHR Committee considers the entirety of the 2018-2020 LTIP award as compensation given to the NEOs at the time of the grant – in April 2018. However, the SEC requires awards denominated as cash awards (such as Regions PCUs) be reported in the year that they vest, rather than in the year they are granted. As such, the Summary Compensation Table on page 96 includes the value of the 2018 PCU awards in its totals and does not include the similar grant values from PCUs granted as a part of the 2020 grant cycle described on page 83.
•Additionally, in the event long-term performance grants of any type are adjusted or modified prior to payout, there is an SEC requirement that the compensation impact be reported at the time of the adjustment or modification of payout. As noted earlier, the CHR Committee approved modifications to grants issued in 2018 following the end of the performance period. As a result of these changes, the SEC reporting requirement impact is that the modifications that increased the value of Performance Cash Units be reported as 2020 compensation. Therefore, the Summary Compensation Table reports this compensation in the Non-Equity Incentive Compensation column as adjusted at 99 percent of target. For the PSU portion of the grant, however, SEC rules require those modifications to be valued and reported based on the share price at the date of adjustment and reported in the Grants of Plan Based Awards Table and the Summary Compensation Table for the year in which the adjustment is approved. Therefore, the additional compensation awarded under 2018 PSU awards will be reported in the Grants of Plan Based Awards Table and the Summary Compensation Table for 2021 compensation as reported in the 2022 Proxy Statement.
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Other Benefits and Perks
In addition to the compensation elements described above, NEOs participate in limited perk programs and other benefits programs, many of which are available to all associates.
Regions Retirement Programs. Regions sponsors two types of retirement programs: defined benefit and defined contribution retirement programs, each made up of tax-qualified and nonqualified plans. The operation of these retirement plans and the value of the benefits that NEOs accrue under these plans are described below and in the discussion that accompanies the Pension Benefits and Nonqualified Deferred Compensation tables and the Summary
Compensation Table.
(1) Defined benefit plans. The Regions Financial Corporation Retirement Plan for Associates (the “Retirement Plan”) and Regions Financial Corporation Post 2006 Supplemental Executive Retirement Plan (“SERP”) are defined benefit plans. While participation requirements were impacted over time due to several corporate transactions, the Retirement Plan and the SERP generally were closed to new participants as of 2007.
The Retirement Plan is a tax-qualified plan under Section 401(a) of the IRC. NEOs participating in this plan participate on the same basis as all associates.
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COMPENSATION DISCUSSION AND ANALYSIS
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The SERP is a nonqualified plan that provides benefits to a limited number of senior officers of the Company, including all of our NEOs. The SERP provides benefits that serve to attract and retain high quality senior executive talent. There are two types of retirement benefits in the SERP: a regular benefit and a benefit calculated under an alternative target formula. The regular benefit is calculated using the same formula as the Retirement Plan with the following differences: (1) instead of averaging base earnings over five years of service, it averages base earnings and short-term cash incentives over the highest three consecutive years of service out of the last 10 years of service, (2) there are no compensation limitations, and (3) the maximum years of service used in the calculation is 35 years of service instead of 30.
The alternative target benefit includes a more generous formula for determining retirement benefits and was designed to be highly retentive as it includes significant vesting requirements as determined by the CHR Committee. The current NEOs that benefit from this formula must generally work for the Company for a minimum of 10 years and must reach age 60 before the alternative target benefits vest. Any termination of employment (except in the case of death, disability, or a change-in-control) prior to reaching age 60 with a minimum of 10 years of service will result in a forfeiture of amounts attributable to the alternative target benefit in excess of the regular benefit. A limited number of executives are eligible for an alternative target benefit in the SERP.
The following is a brief description of each NEO’s participation in these plans:
Mr. John Turner - Mr. J. Turner through his prior service is a participant in the Retirement Plan with 9 years of credited service and is no longer accruing additional benefits under that plan. Upon his rehire by the Company, Mr. J. Turner began participation in the SERP under which he receives the alternative target benefits outlined above. Although he is accruing benefits and has 10 years of credited service, he is not vested at this time and will not vest until September 2021 when he reaches the minimum vesting age.
SEC rules require us to report the value of the benefit even though it may not be vested; therefore, the values reported in the Pension Benefits table and in the column of the Summary Compensation Table relating to increases in pension benefits include amounts that Mr. J. Turner has not yet earned.
Mr. David Turner - Mr. D. Turner has 15 years of credited service with the Company and participates in both the Retirement Plan and the SERP. His benefits are determined using the regular benefit calculations previously discussed, and he is not eligible for the alternative target benefit. Having met the age and years of service requirements, Mr. D. Turner is vested in both the Retirement Plan and the SERP.
Mr. Owen - Mr. Owen has 13 years of credited service. He does not participate in the Retirement Plan but is entitled to receive the alternative target benefit under the SERP. While Mr. Owen was not vested as of the end of 2020, he reached age 60 in February 2021 and is now vested in the SERP benefit. As previously announced, Mr. Owen will retire from Regions on March 15, 2021.
Mr. Lusco - Mr. Lusco has 10 years of credited service. He does not participate in the Retirement Plan but does participate
in the SERP. His benefit is subject to significant retentive vesting requirements and is calculated using the regular benefit calculations previously discussed. He is not eligible for the alternative target benefit. In order to receive the regular benefit, Mr. Lusco must have reached age 62, or have reached age 55 with a minimum of 10 years of service. Having met the vesting requirements, Mr. Lusco is vested in the SERP benefit.
Mr. Smith - Mr. Smith is a participant in the Retirement Plan and the SERP and has accrued the maximum years of credited service allowed under each plan (30 and 35 years respectively). His benefits are determined using the regular benefit calculations previously discussed, and he is not eligible for the alternative target benefit and is vested in the Retirement Plan and the SERP.
Pension Benefits Compensation. The Pension Benefits description and table include a more detailed description of retirement benefits and a calculation of the value of pension benefits for each NEO. In addition, the Summary Compensation Table provides a value that represents the change in the lump sum value of pension benefits from 2019 to 2020. Several factors influence the calculation of this change. For most participants, the change is a result of additional years of service, the passage of time, changes in discount rates, and mortality tables. While each contributed to different degrees to the pension benefit increases reported in the Summary Compensation Table, some of the more notable factors in this year’s change include:
•Specifically with respect to Mr. J. Turner’s pay, in the last three years his compensation has been appropriately increased to an amount commensurate with his new role and responsibilities. Our retirement benefit formula is a “final average earnings” formula using the highest three consecutive years of pay. As a result, increases in pay can have a significant impact on the change in pension value when the years of higher pay replace lower values in the three year average calculation.
•Interest rates used to value plan liabilities remain at record lows, which increases the current lump sum value of the benefit for each of our NEOs.
(2) Defined contribution plans. The Regions Financial Corporation 401(k) Plan and Non-Qualified Excess 401(k) Plan are defined contribution plans that allow eligible associates to contribute a portion of their total base and annual incentive compensation on a pre-tax (or Roth in the case of the 401(k) Plan) basis into accounts that are held and invested on a tax-deferred basis until termination of employment or retirement. The 401(k) Plan is a tax-qualified retirement plan under Section 401(a) of the IRC in which all eligible associates can participate, while the Excess 401(k) Plan is a nonqualified plan for certain associates whose participation in the 401(k) Plan is generally limited due to the qualified plan’s compensation and contribution limits.
The Company makes a contribution to the 401(k) Plan (and a deemed contribution to the Excess 401(k) Plan) equal to the deferral rate elected by the participant up to a maximum of 5 percent of pay. In addition to the matching contribution, the Company provides a non-contributory 2 percent of pay allocation to the 401(k) Plan (and a deemed 2 percent of pay allocation to the Excess 401(k) Plan) for any associate who does not accrue a benefit in the Retirement Plan. In 2020, all of
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COMPENSATION DISCUSSION AND ANALYSIS
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our NEOs participated in these plans and received the Company matching contribution of 5 percent of pay. With the exception of Mr. Smith and Mr. D. Turner, the other NEOs receive the 2 percent non-contributory contribution in the 401(k) Plan since they are not accruing benefits in the Retirement Plan. No NEO receives the 2 percent non-contributory contribution in the Excess 401(k) Plan.
Perquisites. Our NEOs are eligible to participate in employee benefit programs generally available to all associates. While we generally do not offer a broad range of perks to our NEOs, we have provided certain personal benefits that are not available to other associates. The CHR Committee regularly reviews the perks available to executive officers to determine whether these programs continue to serve the purpose of benefiting the Company and has historically discontinued programs that it determines are not based on sound business rationale.
In General. In 2020, NEOs continued to be eligible for financial planning services, Company-provided security monitoring for private residences, certain relocation benefits, and enhanced coverage for annual physicals. Additionally, the Company may maintain memberships in organizations that certain executive officers may utilize for business entertainment purposes. These memberships are provided because we believe that they serve a necessary and reasonable business purpose. It is expected that executive use will always involve a bona fide business purpose. The total cost of these perquisites to the Company represents an immaterial portion of total compensation. Any special benefits our NEOs received are included in the Summary Compensation Table.
Use of Corporate Aircraft. The use of corporate aircraft is
subject to a formal program, approved by the CHR Committee and the NCG Committee, that sets forth the criteria and procedures applicable to its use.
It has long been our policy to require our CEO to use corporate-owned or other non-commercial aircraft for business travel when possible. The policy allows our CEO to use corporate-owned aircraft for personal travel up to a maximum value of $100,000 per year. In the event the value of personal use (as measured based on the incremental cost of operating the aircraft) exceeds $100,000 in any year, our policy requires the CEO to reimburse the Company the full incremental cost of operating the corporate aircraft.
Mr. J. Turner is subject to an Aircraft Time Sharing Agreement with the Company that governs the terms and conditions of personal use of the corporate aircraft. Although the policy and the agreement allow for personal use without cost up to $100,000 per year, Mr. J. Turner’s 2020 personal use of corporate aircraft was $17,750. Additionally, the Board authorized the CEO to make corporate-owned aircraft available for the personal travel of other Company associates on a limited basis, such as in the event of emergency or when personal use may be in the best interest of the Company due to either efficiency or safety concerns. No other NEO utilized the corporate aircraft for personal use in 2020.
Tax Liabilities. Any perquisites that result in a personal benefit are imputed as income to the executive in accordance with IRS rules. Once an executive becomes an NEO, he or she is personally responsible for all taxes on this income. The Company does not gross up the income to cover taxes for NEOs.
Compensation Framework, Policies, Processes, and Risk Considerations
Our compensation and benefit programs operate under the guidance and oversight of the CHR Committee. The CHR Committee is comprised of independent non-employee Directors, with considerable experience in executive compensation matters, and who are not eligible to participate in any of the management compensation programs or other employee benefit or compensation plans of the Company, except for grants of equity compensation under the Company’s LTIP pursuant to the Director Compensation Program. Directors who served as members of the CHR Committee during 2020 include:
Members serving the entire year:
Don DeFosset, Chair
Samuel A. Di Piazza, Jr.
Zhanna Golodryga
Ruth Ann Marshall
Timothy Vines
Each CHR Committee member has been affirmatively determined to be independent as defined by NYSE rules, applicable SEC rules and regulations, and our Corporate Governance Principles’ considerations. The CHR Committee operates under a written charter approved by the Board. A copy of the charter is available on our website at ir.regions.com/governance.
Committee Meetings. The CHR Committee holds meetings as
often as it deems necessary to perform its duties and responsibilities, but not fewer than three times a year. Although many compensation decisions are made in the first quarter of the year, as outlined in the Compensation-Setting Process and Timeline section, the decision-making process is continuous and neither ends nor begins with any one meeting. During 2020, the CHR Committee met nine times to review, discuss, and approve compensation decisions for the Company and held one joint meeting with the Risk Committee.
The CHR Committee asks its independent compensation consultant to attend all regularly scheduled meetings, as well as some of the CHR Committee’s special meetings. Other outside advisors, including legal counsel, may also attend meetings when members feel additional guidance on specific topics may be beneficial. Meetings are typically attended by the CEO, Chief Administrative and Human Resources Officer, Head of Total Rewards, and Chief Governance Officer. The CFO and CRO attend meetings when Company budget and performance information or incentive plan design is presented. As previously noted, at least one joint meeting of the CHR Committee and the Risk Committee is held each year. During this joint meeting, representatives from the Risk Management Group, including the CRO, review associate conduct and a comprehensive risk assessment of the Company’s incentive plans, including both plans that cover executive officers, as well as plans that cover other associates of the Company.
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COMPENSATION DISCUSSION AND ANALYSIS
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In February 2018, the CHR Committee expanded its charter to include additional human capital management oversight. Throughout 2020, the CHR Committee heard from other executives in relation to its expanded oversight or other topics of interest. Additionally, every CHR Committee meeting includes an executive session without the participation of any member of the executive management team. The independent compensation consultant typically participates in a portion of these executive sessions.
Independent Compensation Consultant. During 2020, the CHR Committee engaged Cook & Co. to serve as the independent compensation consultant to the CHR Committee and to provide advice relating to Regions’ executive compensation programs and practices.
As one of the leading independent compensation consulting firms in the country serving as a consultant to a large number of Fortune 500 companies, Cook & Co. advises the CHR Committee on best practices for compensation governance, including practices outside of the financial services industry. The CHR Committee assessed the independence of Cook & Co., as required under the listing standards adopted by the NYSE pursuant to SEC requirements, and concluded that no conflict of interest exists.
Cook & Co. reports directly to the CHR Committee and engages with the CHR Committee Chair and members without the presence of management. Additionally, they work with Regions’ management, at the direction of the CHR Committee, to obtain information and further its goals. Cook & Co. does no work for executive management and provides no other services to Regions. The scope of services provided by Cook & Co. for the CHR Committee during 2020 included:
•Attending all CHR Committee meetings;
•Advising the CHR Committee regarding matters related to executive succession planning, retirement, and transition;
•Providing the CHR Committee with analysis of competitive market data to assist in establishing target levels for compensation components, such as base salary levels, annual incentives, long-term performance awards, and benefit levels for executive management;
•Assisting the CHR Committee with the evaluation and establishment of the design and construct of the short-term and long-term incentive programs for 2020, including values, opportunity levels, performance metrics, targets (including thresholds and maximums), performance curves, peer group comparisons, and risk mitigants to be included in the plan;
•Advising the CHR Committee with respect to year-end compensation determinations based on performance evaluations and other factors, including succession planning and related considerations;
•Providing competitive market practices regarding Director compensation targets and programs;
•Advising the CHR Committee regarding regulatory and compliance issues and the development of leading best practices and market competitive information with respect to compensation guidelines established by the SEC, the Federal Reserve, and other banking regulatory bodies; and
•Providing current trend information on industry and executive compensation issues.
Other Policies and Practices Impacting Compensation Decisions
Use of Peer Groups for Benchmarking Purposes. The CHR Committee utilizes peer groups to benchmark both executive compensation and corporate performance. In conjunction with its independent compensation consultant, the CHR Committee reviews both peer groups each year.
Compensation Peer Group. In determining the competitiveness of compensation compared to the market, the CHR Committee, with the assistance of its independent compensation consultant, regularly reviews the compensation of our executive officers against the Company’s compensation peer group and against survey data from a larger segment of companies within the financial services industry. While we do not specifically benchmark each individual Regions position to specific job matches within these peer companies, we use the information from these peers to assist the CHR Committee in evaluating the competitiveness of the compensation of our executive team including the NEOs covered in this proxy statement.
The CHR Committee believes that peer group construction revolves around finding a balance between including relative
companies that match in size and focus and enough companies to make comparisons meaningful. The companies listed below are those that the CHR Committee believes are appropriate for compensation benchmarking purposes due to industry, asset size, revenue, and market capitalization. These companies have executive positions that are most similar in breadth and scope to Regions and represent the financial institutions that compete with Regions for our top executive talent.
When evaluating the compensation peer group for 2020 plans and pay levels, the CHR Committee’s independent compensation consultant recommended Synovus be added to the compensation peer group, specifically noting the rapid growth of Synovus, its geographically comparable footprint, and the fact that Regions competes with Synovus for talent. After reviewing the existing group and recommended addition, the CHR Committee elected to approve the compensation peer group as proposed. The 2020 compensation peer group is presented below:
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COMPENSATION DISCUSSION AND ANALYSIS
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Compensation Peer Group
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Company
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12/31/2020
Assets
($ in millions)
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12/31/2020
Market Cap
($ in millions)
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U.S. Bancorp
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553,905
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70,211
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Truist Financial Corporation
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509,228
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64,656
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The PNC Financial Services Group, Inc.
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466,679
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63,176
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Capital One Financial Corporation
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421,602
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45,372
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Fifth Third Bancorp
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204,680
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19,651
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Citizens Financial Group
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183,349
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15,277
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KeyCorp
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170,336
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16,012
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Regions Financial Corporation
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147,389
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15,475
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M&T Bank Corporation
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142,601
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16,337
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Huntington Bancshares Incorporated
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123,038
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12,847
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Comerica Incorporated
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88,129
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7,774
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Zions Bancorporation
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81,476
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7,128
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Synovus
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54,366
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4,792
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In addition to reviewing compensation peer group information annually, the CHR Committee’s independent compensation consultant periodically reviews the Company’s total compensation program against broader financial services industry survey data compiled by other sources (including compensation surveys prepared for the financial services industry by McLagan, a leading performance/reward consulting and benchmarking firm focused specifically on the financial services industry). All of this information is used by the CHR Committee when it considers the competitiveness and appropriateness of the amount and composition of pay at Regions.
Performance Peer Group. For purposes of measuring relative performance under our long-term incentive plan, we use a peer group that is slightly different from the one utilized for compensation analysis. While the CHR Committee believes
compensation measures should be reviewed against financial institutions closer in size and scope to Regions, they further believe performance is more appropriately measured against a broad group of financial institutions that investors would consider in competition with Regions for their investment dollars. The key driver for performance peer group selection is business similarities. The CHR Committee looks for a focus on retail, consumer, and corporate banking with a regional/geographic focus. Though the CHR Committee also considers size, it is not a key determining factor due to its lack of material impact on performance comparisons, especially when related to its impact on compensation comparisons. The CHR Committee elected to approve the performance peer group without changes for 2020. The 2020 performance peer group is presented below:
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Performance Peer Group
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Company
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12/31/2020
Assets
($ in millions)
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12/31/2020
Market Cap
($ in millions)
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U.S. Bancorp
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553,905
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70,211
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Truist Financial Corporation
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509,228
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64,656
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The PNC Financial Services Group, Inc.
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466,679
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63,176
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Fifth Third Bancorp
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204,680
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19,651
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Citizens Financial Group
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183,349
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15,277
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KeyCorp
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170,336
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16,012
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Regions Financial Corporation
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147,389
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15,475
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M&T Bank Corporation
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142,601
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16,337
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Huntington Bancshares Incorporated
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123,038
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12,847
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Comerica Incorporated
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88,129
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7,774
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First Horizon National Corporation
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84,209
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7,082
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Zions Bancorporation
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81,476
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7,128
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Synovus Financial Corp.
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54,366
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4,792
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Hancock Whitney Corporation
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33,639
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2,950
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The above-noted peer groups are not the same as the group of companies that comprise the S&P 500 Banks Index, which is the index included in the stock performance chart presented in Regions’ Annual Report on Form 10-K for the year ending December 31, 2020, and repeated in the Proxy Summary section of this proxy statement. Each of these peer groups
represents a smaller group of financial institutions tailored primarily by asset size, core business services, geographic similarity, and alignment to the principles for each type of measurement.
Say-on-Pay. Regions understands that shareholders,
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COMPENSATION DISCUSSION AND ANALYSIS
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regulators, and other stakeholders have a strong interest in executive compensation and attempts to balance the interests of these constituencies in the design and execution of our executive compensation program. In accordance with the vote of our shareholders, we provide an annual Say-on-Pay advisory vote regarding executive compensation. This year’s proposal is included as Proposal 3.
In our 2020 Say-on-Pay vote, we received strong approval of our executive compensation program, with 93.57 percent of the votes cast in favor of our program. Following our 2020 annual meeting, we participated in an enhanced corporate governance shareholder engagement process. Members from our executive compensation, investor relations, and corporate governance functions met with large shareholders to answer questions and discuss any issues or concerns. We will continue to monitor the results of future advisory votes on compensation and take feedback from our shareholder outreach program into consideration when assessing compensation design and disclosure matters in the future.
Clawbacks. It has long been the CHR Committee’s practice to review past awards in light of any material restatement of our financial results. As such, we continue to review and strengthen our policies with respect to the recoupment of prior incentive compensation awards or adjustment of future awards in these events. The CHR Committee annually reviews a formal clawback policy that applies to each of our NEOs, as well as a number of other officers of the Company (each a “Covered Officer”). The policy permits the Company to clawback incentive compensation awarded, paid or payable, within the three years prior, ending on the triggering event under the policy.
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Regions’ Clawback Policy is
reviewed at least annually by the
CHR Committee.
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In the event the Company is required to prepare an accounting restatement due to the material noncompliance with any financial reporting requirement under either GAAP or federal securities law, or the Company subsequently finds that the financial information or performance metrics used to determine the amount of incentive compensation for a prior period is materially inaccurate, the Company may seek repayment of incentive compensation or require the forfeiture or reduction of outstanding or future cash and equity-based incentive compensation as may be determined by the CHR Committee.
In addition to allowing for clawback in the case of financial restatement or materially inaccurate performance metrics, the policy allows the Company to recoup cash and equity-based incentive compensation in the case of misconduct of a Covered Officer, regardless of whether or not there is an accompanying financial restatement, to the extent any performance or vesting period for such incentive compensation overlapped in whole or in part with, or was exercised during, the period of misconduct. For purposes of the policy, misconduct is defined as: (i) knowing violation of federal, state or local law, rule, or regulation; (ii) material breach of any written Company policy or covenant between Regions and the Covered Officer; (iii) disclosure of the Company’s confidential information or trade secrets; or (iv) commission of an act of fraud, dishonesty, or recklessness in the performance of the Covered Officer’s
duties, which is not in good faith and subjects the Company to excessive risk or financial loss or materially disrupts, damages, impairs, or interferes with the business of the Company.
Regulatory Oversight and Risk Governance. As a bank holding company, we must comply with various regulatory requirements. The Federal Reserve adopted guidelines on incentive compensation for financial institutions that include the following three main principles:
• Incentive compensation arrangements should balance risk and financial results in a manner that does not provide employees with incentives to take excessive risks on behalf of the banking organization;
• A banking organization’s risk management processes and internal controls should reinforce and support the development and maintenance of balanced incentive compensation arrangements; and
• Banking organizations should have strong and effective corporate governance to help ensure sound compensation practices including effective oversight by the Board.
In response to these guidelines, we established a governance and oversight process for the design, operation, and monitoring of our incentive plans that improves our ability to evaluate and reduce risk or to risk-adjust payouts under the plans. We created an internal cross-functional oversight committee with representation from risk management, finance, human resources, and legal to review, consider, and approve, as appropriate, certain higher risk plans. This cross-functional oversight committee also works with business group leadership to monitor the performance and effectiveness of all our incentive plans to ensure that they include features and metrics designed to discourage inappropriate risk-taking.
As a part of our oversight process, this internal oversight committee meets on a regular basis and provides a quarterly report to the CHR Committee with respect to the activities around incentive compensation management. In addition, at least once each year, the CHR Committee meets jointly with the Risk Committee, the CRO, and other members of the risk management team to receive a thorough risk assessment of each of our material incentive plans.
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The risks arising from our compensation plans, policies, and practices are not reasonably likely
to have a material adverse
effect on the Company.
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In presenting the risk assessment, the CRO noted that the process of limiting risk starts with the Board setting the risk appetite of the Company, establishing policies, and implementing appropriate limits. The process then continues with management developing the policies and practices to ensure the Company operates within our risk appetite and avoids unnecessary or excessive risk. As described in the Relationship of Compensation Policies and Practices to Risk Management section, we believe that the risks arising from our compensation plans, policies, and practices are not reasonably likely to have a material adverse effect on the Company. In making this determination, we consider the impact of the: (i) Board’s role in the determination of the overall risk profile and
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COMPENSATION DISCUSSION AND ANALYSIS
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appetite; (ii) level of controls in place; and (iii) incentive policies, procedures, and governance activities we follow.
Equity Grant Policies and Practices. A grant of equity compensation to eligible key associates is generally made on an annual basis. Although the Company does not currently issue stock option grants under the 2015 LTIP, the plan requires that the exercise price for options be based on the closing price of Regions common stock on the date of the grant in the event this practice resumes. The CHR Committee has adopted a schedule and process of reviewing the program provisions and grant levels in the first quarter of the year to coincide with the annual performance management compensation review process established by the Company for all associates. As a part of that process each year, the CHR Committee will pre-establish a grant date for grants to eligible associates subject to the needs and business considerations of the Company. The equity grants to all eligible key associates were made on April 1, 2020.
The CHR Committee specifically approves all grants of equity compensation to executive officers, as well as other officers covered by Section 16(a) of the Exchange Act. The CHR Committee has delegated authority to the CEO to determine and approve annual grants, as well as modify outstanding grants, to other key associates within the limits and budgets established each year as part of the CHR Committee’s consideration of the annual grant program guidelines.
From time to time, the Company may find it necessary to issue special grants to new hires or other key associates outside of the normal grant process. The CHR Committee also has delegated authority to the CEO to determine the need for and value of these grants. For these grants, the CHR Committee’s policy provides that grants will be made on the first business day of the calendar quarter following the hire date or the determination for the need to grant an award for retention purposes. This timing was chosen to prevent even an appearance that either management or the associate could manipulate the pricing date and also to reduce the administrative and accounting burden that would be created by multiple grant dates. Any grants made by the CEO are reported to the CHR Committee on a regular basis each year.
Policy on Cash versus Non-Cash and Current versus Future Compensation. The CHR Committee does not maintain a stated policy that dictates cash versus non-cash compensation or current versus future compensation. However, the allocation of cash and non-cash compensation for each of the NEOs is reviewed by the CHR Committee annually and reflects the CHR Committee’s best efforts to balance short-term and long-term objectives of the Company.
Stock Ownership Guidelines and Stock Retention Requirements. Regions has adopted stock ownership guidelines requiring executive officers and members of the Board to have a meaningful economic stake in Regions. These guidelines are designed to maintain stock ownership levels high enough to ensure our commitment to creating shareholder value. For purposes of meeting the guidelines, the following types of stock ownership are counted:
•Shares directly owned by the executive officer or Director without restriction;
•Restricted stock and stock units (except for those that may be subject to future performance requirements);
•Stock equivalents allocated through any deferred stock investment plan, as well as an executive officer’s shares held in a 401(k) Plan account and notionally held in an Excess 401(k) Plan account; and
•Shares held in trust for the benefit of the executive officer or his or her immediate family members.
Any executive officer who does not meet the ownership guidelines must retain at least 50 percent of the after-tax value of any compensatory equity grant upon vesting until such time as the ownership guidelines are met. The equity stake of our NEOs and Directors is reflected in the beneficial ownership information contained in the Security Ownership of Directors and Officers subsection of Ownership of Regions Common Stock.
The table below summarizes the stock ownership guidelines for our CEO and each of the NEOs (including their compliance with the guidelines as of February 22, 2021):
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|
Name
|
Ownership
Requirement
|
Approximate Stock Value
Required to be Held
|
Holds
Required
Amount
|
Percent of Required
Amount Owned
|
John M. Turner, Jr.
|
6 X Base Pay
|
$6,000,000
|
Yes
|
229%
|
David J. Turner, Jr.
|
3 X Base Pay
|
$1,992,600
|
Yes
|
399%
|
John B. Owen
|
3 X Base Pay
|
$2,100,000
|
Yes
|
126%
|
C. Matthew Lusco
|
3 X Base Pay
|
$1,752,750
|
Yes
|
322%
|
Ronald G. Smith
|
3 X Base Pay
|
$1,605,000
|
Yes
|
420%
|
Other Policies Related to Stock Ownership (prohibitions against insider trading, hedging, and pledging of Regions securities). The Company has a long-standing General Policy on Insider Trading to guard against improper securities trading. Under the policy, no Director, executive officer, or other associate of Regions who is aware of material nonpublic information relating to the Company may, directly or through family members or other persons or entities, buy or sell securities of the Company (other than pursuant to a previously approved trading plan that complies with SEC Rule 10b5-1), or engage in any other action to take personal advantage of any
material nonpublic information about Regions that they may have.
|
|
|
Regions’ policy prohibits hedging
and the pledging of Regions equity securities as collateral.
|
Our General Policy on Insider Trading prohibits all associates from engaging in short-term or speculative trading in Regions securities, including engaging in any hedging transactions or short sales of Regions securities. The policy further prohibits
|
|
|
COMPENSATION DISCUSSION AND ANALYSIS
|
transactions in puts, calls, or other publicly traded options, as well as any other derivative securities transactions conducted on an exchange or in any other organized market involving Regions securities. In addition to these broader prohibitions, our General Policy on Insider Trading further prohibits our Directors and executive officers from purchasing Regions securities on margin or holding them in a margin account, borrowing against any account in which Regions equity securities are held, or pledging Regions equity securities as collateral for a loan. The policy’s prohibitions also cover transactions in Regions securities conducted by parties related to the Regions associate, executive officer, or Director, as applicable. This policy is reviewed and approved by the Board’s NCG Committee on an annual basis. For more information, see the Anti-Hedging and Anti-Pledging subsection of Ownership of Regions Common Stock.
Accounting for Stock-Based Compensation. Regions accounts for and reports stock-based compensation under our long-term incentive plans in accordance with the requirements of Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation - Stock Compensation. For further disclosure of Regions’ accounting for stock-based compensation, refer to Note 17, “Share-Based Payments,” to the consolidated financial statements included in Regions’ Annual Report on Form 10-K for the year ended December 31, 2020.
Consideration of the Impact of IRC Section 162(m). As part of its responsibilities, the CHR Committee has historically reviewed and considered the deductibility of executive compensation under IRC Section 162(m), which generally disallowed tax deductions for compensation over $1 million to our covered executive officers unless that compensation met a “performance-based” exception. Historically, significant aspects of the Company’s compensation programs were designed to permit (but not require) compensation to qualify for this performance-based compensation exception.
In December 2017, IRC Section 162(m) was amended by the Tax Cuts and Jobs Act to eliminate the exception for performance-based compensation (other than with respect to payments made pursuant to certain “grandfathered” arrangements entered into prior to November 2, 2017) so that now any compensation above $1 million paid to covered executive officers is not deductible unless it qualifies as “grandfathered.”
Despite these new limits on the deductibility of performance-based compensation, the CHR Committee continues to believe that a significant portion of our NEOs’ compensation should be tied to Company performance. Therefore, it is not anticipated that the changes to IRC Section 162(m) will significantly impact the design of our compensation program going forward.
Change-in-Control, Post-Termination, and Other Employment Arrangements
For competitive and fairness reasons, we believe it is important to protect key associates (including the NEOs) in the event of certain terminations of employment during a transition period following a change-in-control of Regions. The potential or actual occurrence of a change-in-control could create uncertainty regarding the continued employment of our NEOs and providing employment protection should eliminate, or at least significantly reduce, any potential reluctance of our executives to pursue potential transactions that may be in the best interests of our shareholders. To align the interests of our shareholders and our executives, we have entered into agreements with all NEOs that govern some of the terms of their employment and compensation in the event of a qualifying termination after a change-in-control of Regions.
Change-in-Control Agreements. The change-in-control agreements entered into with NEOs generally provide that during the two-year period following a change-in-control of Regions, if the NEO’s employment is terminated other than for “cause,” or if the NEO resigns for “good reason,” they would be paid accrued compensation and benefits, plus an amount equal to a specified multiple of base salary and average annual bonus during the three years preceding the year in which the change-in-control occurs.
The Company entered into agreements that provide Mr. J. Turner and Mr. Owen with a three times multiple of pay upon termination following a change-in-control and provide Mr. D. Turner, Mr. Lusco, and Mr. Smith with a two times multiple of pay. If employment is terminated for “cause” or due to death, disability, or resignation other than for “good reason,” payments would be limited to accrued compensation and benefits.
Agreements issued after February 2011 do not include any income tax gross up payments under the excise tax provisions of IRC Section 4999. Mr. Owen, Mr. D. Turner, and Mr. Smith have change-in-control agreements that were issued in 2007 and provide that additional payments may become due to avoid a negative tax consequence to the executive in the event any payment or benefit would cause the NEO to become subject to the excise tax imposed under IRC Section 4999. Mr. J. Turner and Mr. Lusco entered into agreements after February 2011, and therefore, are not entitled to receive a payment to compensate for excise taxes. None of the NEOs’ agreements provide any type of severance benefits in connection with termination of employment at any other time. For additional information, including definitions of “cause,” “good reason,” and “change-in-control,” see the subsection entitled Potential Payments by Regions Upon Termination or Change-in-Control.
Executive Severance Plan. In an effort to increase transparency, promote fair and equitable treatment among associates in like positions, and improve executive recruiting efforts, in October 2019 the CHR Committee approved the Regions Financial Corporation Executive Severance Plan effective January 1, 2020. While existing change-in-control agreements are grandfathered, the plan provides standardized change-in-control and severance benefits for our NEOs and other associates who are eligible under the terms and conditions of the plan. The Executive Severance Plan prohibits tax gross-ups.
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|
|
COMPENSATION DISCUSSION AND ANALYSIS
|
|
|
|
COMPENSATION OF EXECUTIVE OFFICERS
|
The following tables, narratives, and footnotes contain compensation information about our President and CEO; our CFO; and our three other most highly paid executive officers for the year ended December 31, 2020, our NEOs.
Summary Compensation Table
The Summary Compensation Table that follows contains information with respect to our NEOs. Based on the amounts for 2020, salary accounted for approximately 14 percent of direct compensation (including salary, stock awards, and non-equity incentive compensation) for our President and CEO and 21 percent on average among all other NEOs, which reflects our performance-based pay philosophy. The following is a brief summary of the components of Regions’ pay programs included in each column of the Summary Compensation Table:
Salary – The “Salary” column includes the year-to-date base salary amounts for each NEO for the fiscal years indicated. New base salary amounts are generally effective on April 1 of each year.
Bonus – Regions does not generally issue nonperformance-based or discretionary bonuses to NEOs, and this column reflects the absence of any such payments.
Stock Awards – Equity awards granted in 2020 were composed of PSUs and RSUs and are reported in the “Stock Awards” column at the grant date fair value. The grant date fair value does not correspond with the amounts that may be eventually realized relative to these awards. Any benefit from these awards depends on the future value of Regions common stock, the satisfaction of time-based vesting requirements in the case of RSUs and the attainment of performance requirements in the case of PSUs. For more detail regarding the stock awards for NEOs, see pages 83 through 87 of the CD&A section and the Grants of Plan-Based Awards table.
Option Awards – Although our long-term incentive plan allows for the granting of option awards, we have not awarded stock options to NEOs in a number of years. The absence of this practice is reflected in the “Options” column.
Non-Equity Incentive Plan Compensation – The amounts in the “Non-Equity Incentive Plan Compensation” column represent annual incentives earned for 2020 performance under our annual incentive plan as described beginning on page 80 of the CD&A and paid in early 2021. Also included in this amount is the value of the 2018 PCUs for the performance period ended December 31, 2020. While the value of these Performance Cash Unit awards has been determined, they remain subject to service based vesting until April 1, 2021, and will be payable as of that date. The SEC rules require us to report these values in the Summary Compensation Table for the year that represents the final performance year of the grant. However, the CHR Committee does not consider these awards as current compensation, but rather compensation for the year in which the grant was issued. For more information on how the CHR Committee views awards compared to how the SEC requires us to report awards, see page 87 of the CD&A.
Change in Pension Value and Nonqualified Deferred Compensation Earnings – This column includes the change in pension value for each NEO, which is the difference in the total present value of accrued benefit on December 31, 2020, minus the total present value of accrued benefit on December 31, 2019. For additional information about pension benefits, refer to pages 87 through 89 in the CD&A and to the Pension Benefits subsection and table. As for nonqualified deferred compensation earnings, none of the NEOs receive above-market or preferential earnings on their nonqualified deferred compensation accounts. More information regarding the provisions of the nonqualified deferred compensation plans in which the NEOs participate can be found on pages 100-102.
For most participants, the change is a result of additional years of service, the passage of time, changes in discount rates, and mortality tables. While each contributed to different degrees to the pension benefit increases reported in the Summary Compensation Table, some of the more notable factors in this year’s change include:
•Specifically with respect to our CEO, Mr. J. Turner’s pay in the last three years has been appropriately increased to an amount commensurate with his new role and responsibilities. Our retirement benefit formula is a “final average earnings” formula using the highest three consecutive years of pay. As a result, increases in pay can have a significant impact on the change in pension value when the years of higher pay replace lower values in the three year average calculation.
•Interest rates used to value plan liabilities remain at record lows, which increases the current lump sum value of the benefit for each of our NEOs.
All Other Compensation – Amounts in the “All Other Compensation” column represent the aggregate dollar amount for each NEO for perquisites, other personal benefits, and additional compensation items not disclosed in other columns of the Summary Compensation Table. Items may include the value of: group term life insurance coverage, financial planning services, personal use of corporate aircraft, an enhanced executive physical, home security, as well as matching charitable gift contributions. “All Other Compensation” also includes the value of Company contributions to the 401(k) Plan and the Excess 401(k) Plan.
Total – This column represents the sum of all columns for each of the NEOs, and includes all amounts earned by the NEO, including any amounts that may have been deferred for tax purposes.
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|
Name & Principal Position
|
Year
|
Salary
($)
|
Stock
Awards
($) (1)
|
Non-Equity
Incentive Plan
Compensation
($) (2)
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings
($) (3)
|
All Other
Compensation
($) (4)
|
Total
($)
|
John M. Turner, Jr.
President and Chief Executive Officer
|
2020
|
993,558
|
3,328,484
|
2,405,050
|
6,914,629
|
190,795
|
13,832,516
|
2019
|
968,750
|
2,835,476
|
2,295,559
|
6,821,591
|
193,891
|
13,115,267
|
2018
|
806,250
|
|
1,098,317
|
|
2,230,019
|
|
3,142,908
|
|
120,129
|
|
7,397,623
|
|
David J. Turner, Jr.
Chief Financial Officer
|
2020
|
664,200
|
931,963
|
1,299,922
|
1,821,210
|
100,843
|
4,818,138
|
2019
|
664,200
|
907,369
|
1,320,656
|
1,526,566
|
120,101
|
4,538,892
|
2018
|
664,200
|
878,653
|
1,683,937
|
140,855
|
92,790
|
3,460,436
|
John B. Owen
Chief Operating Officer
|
2020
|
700,000
|
998,545
|
1,408,750
|
1,961,622
|
110,733
|
5,179,651
|
2019
|
700,000
|
907,369
|
1,379,335
|
3,333,674
|
125,670
|
6,446,048
|
2018
|
695,150
|
|
878,653
|
|
1,763,088
|
|
1,172,687
|
|
106,756
|
|
4,616,334
|
|
C. Matthew Lusco
Chief Risk Officer
|
2020
|
584,250
|
798,840
|
1,102,826
|
723,405
|
|
100,729
|
3,310,050
|
2019
|
584,250
|
777,745
|
1,196,420
|
1,263,719
|
|
121,882
|
3,944,016
|
2018
|
584,250
|
753,132
|
1,541,426
|
756,268
|
|
99,485
|
3,734,560
|
Ronald G. Smith*
Head of Corporate Banking Group
|
2020
|
526,772
|
599,135
|
966,396
|
918,322
|
83,518
|
3,094,143
|
2019
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2018
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
* Prior to 2020, Mr. Smith was not an NEO. As a result, Mr. Smith’s compensation for 2019 and 2018 is not included.
(1) As reflected in the following table, amounts in this column are the grant date fair value of awards computed in accordance with the FASB ASC Topic 718, Compensation - Stock Compensation. See Note 17, “Share-Based Payments,” to the consolidated financial statements included in our Annual Report on Form 10-K filed February 24, 2021, for additional information about how the grant date fair value of these awards is determined.
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|
|
2020 Annual Equity Grant (PSUs & RSUs)
|
Total Stock
Awards Value
($)
|
|
PSUs ($/units) (a)
|
|
RSUs ($/units) (b)
|
Name
|
Performance
Stock Units
($)
|
Performance
Stock Units
(#)
|
|
Restricted
Stock Units
($)
|
Restricted
Stock Units
(#)
|
John M. Turner, Jr.
|
1,984,133
|
161,970
|
|
1,344,351
|
161,970
|
3,328,484
|
David J. Turner, Jr.
|
555,550
|
45,351
|
|
376,413
|
45,351
|
931,963
|
John B. Owen
|
595,240
|
48,591
|
|
403,305
|
48,591
|
998,545
|
C. Matthew Lusco
|
476,194
|
38,873
|
|
322,646
|
38,873
|
798,840
|
Ronald G. Smith
|
357,149
|
29,155
|
|
241,987
|
29,155
|
599,135
|
(a) The amounts in this column reflect the number of units granted and the grant date fair value of PSUs based on the probable outcome of the performance conditions. Actual payout under these awards can range from 0% to 150% of target based on performance metrics of absolute and relative EPS Growth and ROATCE established at grant. The maximum award value for the PSUs (determined as described on pages 83-87) is $2,976,199 for Mr. J. Turner, $833,325 for Mr. D. Turner, $892,860 for Mr. Owen, $714,291 for Mr. Lusco, and $535,723 for Mr. Smith.
(b) The amounts in this column represent the number of units granted and the grant date fair value of RSUs that cliff vest at the end of the three-year vesting period ending April 1, 2023.
(2) This amount represents annual cash incentives for 2020 performance plus the value of the 2018 PCUs based on certification of performance goals as of the three-year period ending on December 31, 2020, and will be vested based on service effective April 1, 2021. The following table sets forth the details of these awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-equity Incentive Plan Compensation
|
Name
|
2020 Annual
Cash Incentive
($)
|
Value of 2018
Performance
Cash Units
at 12/31/20
($) (a)
|
Total
($)
|
John M. Turner Jr.
|
1,827,550
|
577,500
|
2,405,050
|
David J. Turner, Jr.
|
837,922
|
462,000
|
1,299,922
|
John B. Owen
|
946,750
|
462,000
|
1,408,750
|
C. Matthew Lusco
|
706,826
|
396,000
|
1,102,826
|
Ronald G. Smith
|
669,396
|
297,000
|
966,396
|
(a) This column reflects 99% of target earned at December 31, 2020. Grants are subject to service vesting requirements until April 1, 2021 (the third anniversary of the date of grant).
|
|
|
COMPENSATION OF EXECUTIVE OFFICERS
|
(3) Amounts shown in this column represent the total change of the actuarial present value of our NEO’s accumulated benefit under our defined benefit and non-qualified deferred compensation plans and include benefits for Mr. J. Turner and Mr. Owen described on pages 87-89 and 100-102, which are subject to significant vesting requirements. Therefore, all of the change in benefit for Mr. J. Turner and Mr. Owen would not be payable as of December 31, 2020, if they left the Company. Mr. D. Turner, Mr. Lusco, and Mr. Smith are fully vested in their benefits. Importantly, the change in pension value is not currently paid to an executive and arise from multiple factors including additional benefit accruals for another year of service, changes in compensation, and actuarial assumptions used to value plan liabilities such as mortality assumptions, discount periods, and interest rates (which are at historic lows).
(4) All other compensation consists of the following:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Life Insurance,
Perquisites and Other
Personal Benefits
($)(a)
|
Matching Contributions
Under Qualified
Savings Plans
($)
|
Matching Contributions
Under Nonqualified
Savings Plans
($)
|
Non-Elective
Contributions
under the
Qualified and
Nonqualified
401(k) plans
($)
|
Total All Other
Compensation
($)
|
John M. Turner, Jr.
|
43,440
|
14,250
|
127,406
|
5,700
|
190,795
|
David J. Turner, Jr.
|
24,400
|
14,250
|
62,193
|
—
|
100,843
|
John B. Owen
|
23,867
|
14,250
|
66,917
|
5,700
|
110,733
|
C. Matthew Lusco
|
28,795
|
14,250
|
51,984
|
5,700
|
100,729
|
Ronald G. Smith
|
24,550
|
14,250
|
44,718
|
—
|
83,518
|
(a) The 2020 amount includes the value of items such as financial planning services, personal use of the corporate aircraft, an enhanced executive physical, home security, and matching charitable gift contributions. For Mr. J. Turner, the value for personal use of the corporate aircraft in 2020 was $17,750, and the value of personal financial planning services was $17,335.
Grants of Plan-Based Awards
Plan-based awards made in 2020 to the NEOs included annual cash incentives, PCUs, PSUs, and RSUs.
Annual cash incentives were based on an assessment of both corporate performance, as well as individual performance in 2020. For four of our NEOs excluding Mr. Smith, corporate performance measures, including profitability, credit management, and customer service, accounted for 70 percent of the incentive. Individual performance, in relation to certain strategic priorities, accounted for the remaining 30 percent. For Mr. Smith, corporate performance measures account for 50 percent of the incentive, with business unit and individual results accounting for the remaining 50 percent.
Equity grants were issued in 2020 under the Regions 2015 LTIP. The Regions 2015 LTIP, which was approved by shareholders at the 2015 Annual Meeting, permits grants of awards in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance-based awards, dividend equivalents, other stock-based awards, and any other right or interest relating to stock or cash. Awards under the Regions 2015 LTIP may vest over time or upon the
achievement of pre-established performance goals. Awards are paid in the event of certain terminations of employment within 24 months after a change-in-control.
The 2020 PCUs and PSUs were issued based on the Company’s absolute and relative EPS Growth and ROATCE over the three-year period from January 1, 2020, through December 31, 2022. The ultimate value of these performance awards can vary from 0 percent to 150 percent of target, depending on performance measured against goals as more fully described on pages 84 through 85 of the CD&A. The RSUs generally cliff vest three years from the date of grant; however, up to 40 percent of a grant may be forfeited if certain capital and liquidity performance thresholds are not met. Dividends and dividend equivalents accrued on both the PSUs and RSUs will be paid in cash at vesting based on the number of units actually earned.
For more information regarding the grants of plan-based awards for NEOs, see pages 79 through 87 of the CD&A.
|
|
|
COMPENSATION OF EXECUTIVE OFFICERS
|
The following table sets forth details regarding non-equity and equity plan-based awards granted to each of the NEOs in 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Grant
Date
|
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
|
Estimated Future Payouts
Under Equity Incentive
Plan Awards
|
All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#) (1)
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
|
Exercise
or Base
Price of
Option
Awards
($/sh)
|
Grant
Date Fair
Value of
Stock and
Option
Awards
($)(2)
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
John M. Turner, Jr.
|
01/01/20(3)
|
—
|
|
1,689,049
|
3,378,098
|
|
|
|
|
|
|
|
|
04/01/20
|
|
|
|
|
|
|
161,970
|
—
|
|
—
|
|
1,344,351
|
|
10/14/20 (4)
|
—
|
|
1,666,667
|
2,500,001
|
—
|
|
161,970
|
242,955
|
|
|
|
1,984,133
|
David J. Turner, Jr.
|
01/01/20(3)
|
—
|
|
763,830
|
1,527,660
|
|
|
|
|
|
|
|
|
04/01/20
|
|
|
|
|
|
|
45,351
|
—
|
|
—
|
|
376,413
|
|
10/14/20(4)
|
—
|
|
466,667
|
700,001
|
—
|
|
45,351
|
68,027
|
|
|
|
555,550
|
John B. Owen
|
01/01/20(3)
|
—
|
|
875,000
|
1,750,000
|
|
|
|
|
|
|
|
|
04/01/20
|
|
|
|
|
|
|
48,591
|
—
|
|
—
|
|
403,305
|
|
10/14/20(4)
|
—
|
|
500,000
|
750,000
|
—
|
|
48,591
|
72,887
|
|
|
|
595,240
|
C. Matthew Lusco
|
01/01/20(3)
|
—
|
|
671,888
|
1,343,776
|
|
|
|
|
|
|
|
|
04/01/20
|
|
|
|
|
|
|
38,873
|
—
|
|
—
|
|
322,646
|
|
10/14/20(4)
|
—
|
|
400,000
|
600,000
|
—
|
|
38,873
|
58,310
|
|
|
|
476,194
|
Ronald G. Smith
|
01/01/20(3)
|
—
|
|
605,788
|
1,211,576
|
|
|
|
|
|
|
|
|
04/01/20
|
|
|
|
|
|
|
29,155
|
—
|
|
—
|
|
241,987
|
|
10/14/20(4)
|
—
|
|
300,000
|
450,000
|
—
|
|
29,155
|
43,733
|
|
|
|
357,149
|
(1) In addition to service-vesting requirements, the RSUs included in this column are subject to performance-vesting requirements based on the Company’s achievement of certain capital and liquidity performance thresholds during each of the periods from January 1, 2020, to December 31, 2020; January 1, 2021, to December 31, 2021; and January 1, 2022, to December 31, 2022. To the extent that the capital performance threshold and/or the liquidity performance threshold has not been satisfied for each performance period, 20% for each requirement (up to a maximum of 40% total) of the RSUs awarded will be forfeited. For purposes of this award, the Company’s performance will be measured relative to the following capital and liquidity performance thresholds as certified by the CHR Committee:
(i) “Capital Performance Threshold”: Capital Action Decision Tree Status as defined in the Capital Policy must remain in either “Monitor Capital” or “Capital Deployment” status; and
(ii) “Liquidity Performance Threshold”: Risk for Primary Liquidity Level must remain at “Moderate” or better.
Notwithstanding the achievement of the capital and liquidity performance thresholds, in order to be eligible to receive any shares of stock under this award, employment must continue through the third anniversary of the grant date, which is April 1, 2023, except in the case of death, disability, retirement, or certain terminations following a change-in-control.
(2) The grant date fair value is determined under FASB ASC Topic 718.
(3) Amounts included in the Estimated Future Payouts Under Non-Equity Incentive Plan Awards column reflect the range of possible annual cash incentive payouts for 2020 performance. Actual amounts earned, as determined by the CHR Committee in the first quarter of 2021, are reflected in the 2020 Summary Compensation Table under the Non-Equity Incentive Plan Compensation column.
(4) The Performance-Based Cash Unit awards included in the Estimated Future Payouts Under Non-Equity Incentive Plan Awards column and PSUs included in the Estimated Future Payouts Under Equity Incentive Plan Awards column have performance requirements based on absolute and relative ROATCE. In addition, in the event the achievement of the performance criteria for ROATCE is less than or equal to an absolute threshold and in the bottom twenty-fifth percentile of the peer group on a relative basis, the payout will be zero. The performance period for these awards is January 1, 2020, through December 31, 2022, and will fully vest on April 1, 2023. Notwithstanding the achievement of the performance requirements, in order to receive any cash payout or shares of stock under these awards, employment must continue through the third anniversary of the grant date, which is April 1, 2023, except in the case of death, disability, retirement, or certain terminations following a change-in-control. Executives were granted shares on April 1, 2020, using the 30-day average stock price to determine the number of shares granted as RSUs and PSUs. Performance criteria for PSUs and PCUs were established as of October 14, 2020, and, as a result, under current accounting rules the final value of PSU grants was not set until that time.
Outstanding Equity Awards at December 31, 2020
Awards in the following table include:
• Grants of stock options made over time that are exercisable and unexercisable;
• Grants of RSUs;
• Grants of PSUs made in 2018, 2019, and 2020 that may be paid if Regions achieves specific performance criteria and meets certain capital performance and liquidity performance thresholds; and
• Grants of RSUs made in 2018, 2019, and 2020 that will pay in full if Regions meets certain capital performance and liquidity performance thresholds.
|
|
|
COMPENSATION OF EXECUTIVE OFFICERS
|
The following table sets forth outstanding equity-based awards held by each of the NEOs as of December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards(1)
|
Name
|
Grant
Date(2)
|
|
Number of Shares or Units of Stock That Have Not Vested
(#)(a)
|
Market Value of Shares or Units of Stock That Have Not Vested
($)(a)
|
Equity Incentive Plan Awards: # of Unearned Shares, Units, or Other Rights That Have Not Vested
(#)(b)
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested
($)(b)
|
John M. Turner, Jr.
|
04/02/18
|
|
30,240
|
|
487,469
|
|
29,938
|
|
482,594
|
|
04/01/19
|
|
96,642
|
|
1,557,869
|
|
96,642
|
|
1,557,869
|
|
04/01/20
|
|
161,970
|
|
2,610,956
|
|
—
|
|
—
|
|
10/14/20
|
|
—
|
|
—
|
|
161,970
|
|
2,610,956
|
|
David J. Turner, Jr.
|
04/02/18
|
|
24,192
|
|
389,975
|
|
23,950
|
|
386,075
|
|
04/01/19
|
|
30,926
|
|
498,527
|
|
30,926
|
|
498,527
|
|
04/01/20
|
|
45,351
|
|
731,058
|
|
—
|
|
—
|
|
10/14/20
|
|
—
|
|
—
|
|
45,351
|
|
731,058
|
|
John B. Owen
|
04/02/18
|
|
24,192
|
|
389,975
|
|
23,950
|
|
386,075
|
|
04/01/19
|
|
30,926
|
|
498,527
|
|
30,926
|
|
498,527
|
|
04/01/20
|
|
48,591
|
|
783,287
|
|
—
|
|
—
|
|
10/14/20
|
|
—
|
|
—
|
|
48,591
|
|
783,287
|
|
C. Matthew Lusco
|
04/02/18
|
|
20,736
|
|
334,264
|
|
20,529
|
|
330,922
|
|
04/01/19
|
|
26,508
|
|
427,309
|
|
26,508
|
|
427,309
|
|
04/01/20
|
|
38,873
|
|
626,633
|
|
—
|
|
—
|
|
10/14/20
|
|
—
|
|
—
|
|
38,873
|
|
626,633
|
|
Ronald G. Smith
|
04/02/18
|
|
15,552
|
|
250,698
|
|
15,396
|
|
248,191
|
|
04/01/19
|
|
19,881
|
|
320,482
|
|
19,881
|
|
320,482
|
|
04/01/20
|
|
29,155
|
|
469,979
|
|
—
|
|
—
|
|
10/14/20
|
|
—
|
|
—
|
|
29,155
|
|
469,979
|
|
(1) As Company performance at December 31, 2020, is not projected at levels higher than target, amounts reported for 2019 and 2020 are calculated at 100% of target. Amounts reported for 2018 are calculated at 99% of target. The stock value used to determine the market value of shares is the fair market value of Regions common stock of $16.12 per share on December 31, 2020. In addition to service-vesting requirements, RSUs and PSUs are subject to additional vesting requirements as follows:
|
|
|
|
|
|
|
|
|
Grant Date
|
Vesting Schedule
|
Restrictions
|
April 2, 2018
|
Third anniversary of the April 2, 2018, grant date
|
(a) RSUs are also subject to vesting that requires meeting certain capital and liquidity thresholds
|
April 1, 2019
|
Third anniversary of the April 1, 2019, grant date
|
(b) PSUs may be earned between 0% and 150% subject to meeting certain capital performance and liquidity performance thresholds and achieving required performance levels of ROATCE as follows:
•For grants made on April 2, 2018, the performance period is January 1, 2018, through December 31, 2020
•For grants made on April 1, 2019, the performance period is January 1, 2019, through December 31, 2021
•For grants made on October 14, 2020, the performance period is January 1, 2020, through December 31, 2022
|
April 1, 2020 and
October 14, 2020
|
Third anniversary of the original April 1, 2020, grant date
|
(2) For information regarding the April 1, 2020, and October 14, 2020, grant dates, see page 84 in the CD&A.
|
|
|
COMPENSATION OF EXECUTIVE OFFICERS
|
Option Exercises and Stock Vested
The following table sets forth the amounts realized by each of the NEOs as a result of the exercise of options and vesting of stock awards in 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
Stock Awards
|
Name
|
Number of Shares
Acquired on Exercise
(#)
|
Value Realized
on Exercise
($)(1)
|
Number of Shares
Acquired on
Vesting
(#)
|
Value
Realized on
Vesting
($)(2)
|
John M. Turner, Jr.
|
118,650
|
887,502
|
58,035
|
468,342
|
David J. Turner, Jr.
|
—
|
—
|
58,035
|
468,342
|
John B. Owen
|
—
|
—
|
58,035
|
468,342
|
C. Matthew Lusco
|
—
|
—
|
58,035
|
468,342
|
Ronald G. Smith
|
—
|
—
|
29,016
|
234,159
|
(1) The value realized on exercise is determined by multiplying the number of exercised shares by the difference between the October 26, 2020, exercise fair market value of $13.78 and the July 1, 2011, grant date closing stock price of $6.30.
(2) The value realized on vesting is determined by multiplying the number of vested units granted on April 3, 2017, by Regions’ April 3, 2020, closing stock price of $8.07.
Pension Benefits
The Retirement Plan is a qualified defined benefit plan providing for a lifetime monthly annuity following retirement. Benefits earned by our NEOs under the Retirement Plan are generally based on the following formula:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.3% of
“Average
Monthly
Earnings” up to
Covered
Compensation
|
+
|
1.8% of
“Average
Monthly
Earnings” in
excess of
Covered
Compensation
|
X
|
Years of
Service up to a
maximum of 30
total years
|
“Average Monthly Earnings” is defined as the average of the highest five consecutive years of base compensation within the last 10 years of service, and “Covered Compensation” is defined as the estimated average maximum amount of a participant’s earnings on which Social Security benefits will be based assuming that in each year of the participant’s working career, the participant’s wages equaled the Social Security Taxable Wage Base.
Any accrued benefit under the Retirement Plan is generally 100 percent vested after five years of service. While the Retirement Plan defines normal retirement age as age 65, there is no reduction in benefits due to age after a participant has reached age 62. Upon separation of service, benefits are payable as early as age 55, although between age 55 and 62, benefits are subject to a reduction for early payment.
Mr. D. Turner and Mr. Smith are the only NEOs who participate in the Retirement Plan. While Mr. J. Turner has a vested benefit in the Retirement Plan that he earned during a previous period of employment, he is no longer accruing additional benefits because he was rehired subsequent to the closure of the Retirement Plan.
The SERP is an unfunded nonqualified defined benefit plan that was created to supplement benefits provided through the Retirement Plan. The SERP restores benefits that would otherwise have been provided to participants under the Retirement Plan but were limited because of tax code limitations on qualified plan benefits. In addition to these restorative benefits, the SERP provides benefits that serve to
attract and retain high quality senior executive talent for the Company. There are two types of retirement benefits in the SERP: a regular benefit and a targeted benefit.
The regular benefit is available to all eligible SERP participants and is calculated using the same formula as the Retirement Plan with the following differences: (1) instead of averaging base earnings over five years of service, it averages base and short-term cash incentives over the highest three consecutive years of service out of the last 10 years of service, (2) there are no compensation limitations, and (3) the maximum years of service used in the calculation of the regular benefit is 35 years of service instead of 30.
Mr. D. Turner and Mr. Smith participate in the SERP, accruing benefits under the regular benefit formula. Mr. Lusco does not participate in the Retirement Plan because he was employed by the Company subsequent to the Retirement Plan’s closure, but he does participate in the SERP and is also accruing benefits under the regular benefit formula.
The targeted SERP benefit is available to a select group of senior officers as a result of a previously grandfathered arrangement. The targeted SERP benefit provides a benefit using the following formula:
|
|
|
|
|
|
|
|
|
4% of “Average
Monthly
Earnings” for the first
10 Years of Service
|
+
|
1% of “Average
Monthly
Earnings” for every year in
excess of 10 Years of
Service up to a maximum of
an additional 25 years of
service (for a maximum
benefit of 65% of
“Average
Monthly Earnings” with
35 Years of Service)
|
For purposes of this formula, “Average Monthly Earnings”
has the same definition as the regular SERP benefit.
|
Regions’ targeted benefit is offset by both the benefit under the Retirement Plan, as well as Social Security. The targeted benefit is also subject to significant retentive vesting requirements. Participants will receive the benefit following
|
|
|
COMPENSATION OF EXECUTIVE OFFICERS
|
termination of employment after reaching age 60 and completing a minimum of 10 years of service, except in the case of death, disability, or change-in-control. Termination of employment for any other reason prior to age 60 and completion of 10 years of service will result in forfeiture of the targeted benefit. If a participant who is eligible for both the regular benefit and the targeted benefit retires prior to meeting the targeted benefit’s vesting requirements, he or she will receive a regular benefit.
Mr. Owen and Mr. J. Turner participate in the targeted benefit under the SERP. Because neither had attained age 60 by December 31, 2020, the table below reflects unvested benefits as of year-end.
The following Pension Benefits table reflects the actuarial present value of the benefits from the Retirement Plan and the SERP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
Name
|
Plan Name
|
Number of
Years Credited
Service
(#) (1)
|
Present Value
of Accumulated
Benefit
($) (2)
|
Payments During
Last Fiscal Year
($)
|
John M. Turner, Jr.
|
Regions Retirement Plan for Associates
|
9
|
|
111,690
|
|
—
|
|
|
Regions Post 2006 SERP (3)
|
10
|
|
21,270,243
|
|
—
|
|
David J. Turner, Jr.
|
Regions Retirement Plan for Associates
|
15
|
|
980,241
|
|
—
|
|
|
Regions Post 2006 SERP
|
15
|
|
6,624,119
|
|
—
|
|
John B. Owen
|
Regions Retirement Plan for Associates
|
N/A
|
—
|
|
—
|
|
|
Regions Post 2006 SERP (4)
|
13
|
|
15,008,710
|
|
—
|
|
C. Matthew Lusco
|
Regions Retirement Plan for Associates
|
N/A
|
—
|
|
—
|
|
|
Regions Post 2006 SERP
|
10
|
|
4,937,589
|
|
—
|
|
Ronald G. Smith
|
Regions Retirement Plan for Associates
|
30
|
|
1,656,916
|
|
—
|
|
|
Regions Post 2006 SERP (5)
|
35
|
|
5,341,324
|
|
—
|
|
(1) Mr. Owen and Mr. Lusco do not participate in the Retirement Plan. Mr. J. Turner’s years of credited service in the Retirement Plan are from a previous period of employment; he is not currently accruing additional benefits under the Retirement Plan.
(2) In 2009, future benefit accruals under the Retirement Plan and the SERP were suspended for all participants. Even during the suspension, participants continued to earn service toward vesting and eligibility for early retirement benefits. Effective January 1, 2010, benefit accruals were resumed for Retirement Plan and SERP participants. The present value of the accumulated Retirement Plan benefits is calculated as of December 31, 2020, and was determined using a 2.65% discount rate and the Pri-2012 employee (or retiree) and non-disabled annuitant mortality tables, no collar, with generational projection based on scale MSS-2020 for participants and for future beneficiaries respectively. The present value of the accumulated SERP benefits is calculated as of December 31, 2020, and was determined using a 1.99% discount rate (PPA segment rates as of September 2020 reduced by 100 basis points (-0.49% for the first 5 years, 1.31% for the next 15 years, and 2.15% thereafter) to calculate expected lump sum distributions), and the 2021 Pension Protection Act lump sum mortality table. For purposes of the present value calculation, no pre-retirement mortality was assumed, and the payment date was assumed to be the earliest unreduced retirement date under both plans. The payment age of 62 (life only) was assumed for the Retirement Plan and the payment age of 60 was assumed for the SERP for Mr. Owen and Mr. J. Turner and age 62 for Mr. D. Turner, Mr. Lusco and Mr. Smith.
(3) Mr. J. Turner must complete a minimum of 10 years of service and attain at least age 60 before benefits are fully vested. Mr. J. Turner’s benefit includes partial vesting at age 55 and 10 years of service.
(4) The table above represents benefits as of December 31, 2020. Mr. Owen must complete a minimum of 10 years of service and attain at least age 60 before benefits are fully vested. As of year-end, Mr. Owen had not yet vested in these benefits and therefore if he had terminated employment, for reasons other than death, disability or change-in-control, the benefit noted in the table would be forfeited.
(5) Mr. Smith is fully vested in both the Retirement Plan and in the SERP and has reached the maximum years of credited service allowed under both plans.
Nonqualified Deferred Compensation
Regions maintains the Excess 401(k) Plan, which is a nonqualified deferred compensation plan. The Excess 401(k) Plan is an excess contribution plan primarily open to NEOs and other highly compensated individuals whose compensation exceeds the annual tax code limit on compensation that can be taken into account for purposes of contributions to the 401(k) Plan. Under the Excess 401(k) Plan, participants may make contributions of up to 80 percent of base salary and cash incentive pay on a nonqualified basis. Regions’ contribution under the plan is limited to 5 percent of base salary and incentive compensation, provided the NEO has elected a deferral rate on base or annual incentive compensation of at least 5 percent for the year. All of the NEOs participated in the Excess 401(k) Plan during 2020.
Benefits under the Excess 401(k) Plan are held in notional accounts on the Company’s balance sheet. Earnings and
losses are credited to accounts based on notional investment elections made by participants. Notional investments available to participants are generally the same investments available under the 401(k) Plan. None of these notional investments provide for above market or preferential earnings that require us to report earnings in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the Summary Compensation Table.
Benefits under the Excess 401(k) Plan are fully vested at all times and are payable only upon separation from service according to the IRC Section 409A compliant distribution election made by the NEO upon participation in the plan.
|
|
|
COMPENSATION OF EXECUTIVE OFFICERS
|
The following table sets forth the NEOs’ contributions; Regions’ contributions; and the aggregate earnings, withdrawals, and balances during 2020 under the Excess 401(k) Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified Deferred Compensation
|
Name
|
|
Executive
Contributions
in 2020
($)(1)
|
Company
Contributions
in 2020
($)(2)
|
Aggregate
Earnings
in 2020
($)(3)
|
Aggregate
Withdrawals/
Distributions
($)(4)
|
Aggregate
Balance at
December 31, 2020
($)(5)
|
John M. Turner, Jr.
|
Excess 401(k) Plan
|
224,259
|
127,406
|
395,996
|
—
|
2,051,694
|
David J. Turner, Jr.
|
Excess 401(k) Plan
|
78,703
|
62,193
|
595,240
|
—
|
2,839,628
|
John B. Owen
|
Excess 401(k) Plan
|
223,308
|
66,917
|
13,482
|
—
|
2,571,944
|
C. Matthew Lusco
|
Excess 401(k) Plan
|
44,425
|
51,984
|
121,074
|
—
|
1,124,185
|
Ronald G. Smith
|
Excess 401(k) Plan
|
522,066
|
44,718
|
146,492
|
—
|
5,791,271
|
(1) This column represents amounts deferred from base salary and annual incentive, if applicable. Although deferred, these amounts are included in the “Salary” and “Non-Equity Incentive Plan Compensation,” if applicable, columns of the Summary Compensation Table.
(2) This column includes Company contributions under the Excess 401(k) Plan. These amounts are included in the “All Other Compensation” column of the Summary Compensation Table.
(3) This column includes total earnings/losses on amounts held in the Excess 401(k) Plan.
(4) This column includes withdrawals/distributions from the Excess 401(k) Plan.
(5) The December 31, 2020, aggregate balances do not include true-up Company contributions that were made in early 2021 based on 2020 deferral elections. These contributions are included, however, in the “Company Contributions in 2020”. The aggregate balance at December 31, 2020, reflects the balance in the Excess 401(k) Plan. The aggregate balance as of December 31, 2020, includes Company contribution amounts previously reported for prior years in the “All Other Compensation” column of the Summary Compensation Table. The amounts were reported for the applicable year in which the contributions were earned.
Potential Payments by Regions Upon Termination or Change-in-Control
Regions maintains certain arrangements, plans, and programs under which our NEOs would be eligible to receive severance payments and other benefits upon termination of employment or a change-in-control of Regions.
Employment and/or Change-in-Control Agreements. Regions does not generally enter into employment agreements with any of our executive officers. As a result, no NEO has post-employment benefits that differ from any other associate.
While we have not entered into any employment agreements, all of our NEOs hold a change-in-control agreement. Under the change-in-control agreements, certain severance benefits are due if, during the two-year period following a change-in-control, Regions terminates employment without “cause” or the NEO terminates employment with “good reason.”
For Mr. J. Turner and Mr. Owen, if Regions terminates their employment other than for “cause,” or if they resign for “good reason” during the two-year period, they are entitled to enhanced severance in an amount equal to three times base salary and average annual bonus during the three years prior to the year in which the change-in-control occurred. In addition to severance benefits, benefit continuation under our welfare benefits plans is also available for the three-year period following termination. Mr. D. Turner, Mr. Lusco, and Mr. Smith are covered by a similar change-in-control agreement, but their severance multiple is equal to two times pay and the benefit continuation period is two years following termination. If a NEO’s employment is terminated by Regions for “cause,” or by reason of death, disability, or resignation other than for “good reason” during the two-year period, Regions’ liability is limited to accrued but unpaid compensation and benefits.
Three of our NEOs are subject to grandfathered agreements that provide for additional benefits in the event that change-in-control payments and benefits (referred to as “parachute
payments”) become subject to the excise tax under IRC Section 4999. Mr. D. Turner, Mr. Owen, and Mr. Smith have an agreement that requires Regions to make an additional payment covering the excise tax under IRC Section 4999, as well as any income tax on the excise tax payment and any penalty and interest that might be due (sometimes referred to as “Section 280G gross up payments”). However, if parachute payments do not exceed 110 percent of the greatest amount that could be paid without triggering the excise tax (the “Safe Harbor Amount”), then those payments and benefits will be reduced to that amount.
The agreements for Mr. J. Turner and Mr. Lusco do not provide for Section 280G gross up payments. Their agreements stipulate that in the event severance benefits are subject to the terms of IRC Section 4999, amounts payable to them (under their change-in-control agreements or otherwise) would be reduced to the Safe Harbor Amount if the reduction would result in them receiving a greater after-tax amount.
Equity-Based Award Plans. Under the terms of our LTIP, equity-based awards generally vest fully or in part at retirement, death, disability, termination of employment without “cause,” or if following a change-in-control, termination of employment without “cause” or for “good reason” within the 24-month period following the change-in-control (so-called “double trigger” vesting following a change-in-control).
Death – Under the terms of performance-based equity grant award agreements, the performance period lapses at death and release/payment is equal to the target performance value.
Disability – In the event of disability, performance-based awards continue to vest as scheduled and are released/paid subject to performance at the end of the performance period. Service-based vesting for RSUs accelerates.
|
|
|
COMPENSATION OF EXECUTIVE OFFICERS
|
Retirement – At retirement, performance-based awards continue to vest as scheduled and are released/paid subject to performance at the end of the performance period. Service-based vesting for RSUs accelerates. Mr. D. Turner, Mr. Owen, and Mr. Smith meet the requirements for retirement under the Regions 2015 LTIP. As of December 31, 2020, Mr. J. Turner and Mr. Lusco do not meet the retirement vesting requirements under the Regions 2015 LTIP due to their length of continuous service.
Termination without “cause” – For involuntary termination without “cause,” performance-based awards continue to vest as scheduled. At the vesting date, grants are released/paid subject to performance achievement at the end of the performance period and are further prorated based on the service between the grant date and the date employment was terminated. RSUs are released on a prorated basis based on the service between the grant date and the date employment was terminated.
Change-in-control – Upon the occurrence of a change-in-control, performance-based awards will be deemed to have been earned based on the greater of targeted performance and actual performance being attained as of the effective date of the change-in-control and will remain subject to service-vesting requirements. In the event termination of employment without “cause” or for “good reason” occurs within a 24-month period following the change-in-control, service-vesting requirements on awards are accelerated to the termination of employment.
Pension Benefits. Benefits under the Retirement Plan are fully vested; therefore, upon termination of employment for any
reason, each NEO would be entitled to receive the amounts designated as Retirement Plan benefits represented in the “Present Value of Accumulated Benefit” column of the Pension Benefits table. Mr. D. Turner, Mr. Lusco, and Mr. Smith are vested in the SERP benefit as well.
As of December 31, 2020, Mr. Owen and Mr. J. Turner are not yet vested in the SERP benefits presented in the Pension Benefits table except in the case of death or disability.
Upon a change-in-control, vesting of pension benefits is accelerated, and therefore, upon termination of employment following a change-in-control, each NEO will fully vest in their SERP benefits and be entitled to the benefits included in the following table as additional change-in-control termination benefits.
Nonqualified Deferred Compensation Plan Benefits. Each NEO is currently fully vested in the amounts reported in the “Aggregate Balance at December 31, 2020” column of the Nonqualified Deferred Compensation table on page 102, and therefore, these amounts would be payable to the NEOs upon termination of employment for any reason.
Welfare and Other Insurance Benefits. Regions sponsors a number of broad-based health, life, and disability benefit programs for its associates, in which NEOs also participate, such as short-term and long-term disability coverage and group term life insurance coverage.
The following table quantifies certain amounts that would be payable to NEOs upon various separation situations. The amounts reflected in the table assume a December 31, 2020, termination of employment:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Voluntary
($)
|
Involuntary
Without
Cause
($)
|
Early
Retirement
($)
|
For
Cause
($)
|
Involuntary
for Good
Reason
Following
a CIC
($)(1)
|
Death
($)(2)
|
Disability
($)
|
John M. Turner, Jr.
|
|
|
|
|
|
|
|
Compensation:
|
|
|
|
|
|
|
|
Cash Severance
|
—
|
—
|
—
|
—
|
8,100,000
|
—
|
—
|
Long-Term Incentive
|
|
|
|
|
|
|
|
Restricted Stock Units(4)
|
—
|
1,383,744
|
—
|
—
|
4,656,294
|
4,656,294
|
2,988,764
|
Performance Stock Units(4)
|
—
|
442,378
|
—
|
—
|
4,651,420
|
4,651,420
|
482,594
|
Performance Cash Units
|
—
|
529,375
|
—
|
—
|
3,702,500
|
3,702,500
|
577,500
|
Perquisites:
|
|
|
|
|
|
|
|
Financial Planning(5)
|
—
|
34,670
|
—
|
—
|
34,670
|
34,670
|
34,670
|
Outplacement(6)
|
—
|
—
|
—
|
—
|
60,000
|
—
|
—
|
Benefits:
|
|
|
|
|
|
|
|
Value of continued welfare benefits(8)
|
—
|
—
|
—
|
—
|
29,883
|
—
|
—
|
Value of additional retirement benefits(9)
|
—
|
—
|
—
|
—
|
13,531,538
|
—
|
—
|
Total:
|
—
|
2,390,167
|
—
|
—
|
34,766,305
|
13,044,884
|
4,083,528
|
David J. Turner, Jr.(3)
|
|
|
|
|
|
|
|
Compensation:
|
|
|
|
|
|
|
|
Cash Severance
|
—
|
—
|
—
|
—
|
|
3,454,666
|
—
|
—
|
Long-Term Incentive
|
|
|
|
|
|
|
|
Restricted Stock Units(4)
|
1,127,726
|
1,127,726
|
1,127,726
|
—
|
|
1,619,560
|
1,619,560
|
1,127,726
|
Performance Stock Units(4)
|
386,075
|
386,075
|
386,075
|
—
|
|
1,615,661
|
1,615,661
|
386,075
|
Performance Cash Units
|
462,000
|
462,000
|
462,000
|
—
|
|
1,395,334
|
1,395,334
|
462,000
|
|
|
|
COMPENSATION OF EXECUTIVE OFFICERS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Voluntary
($)
|
Involuntary
Without
Cause
($)
|
Early
Retirement
($)
|
For
Cause
($)
|
Involuntary
for Good
Reason
Following
a CIC
($)(1)
|
Death
($)(2)
|
Disability
($)
|
Perquisites:
|
|
|
|
|
|
|
|
Financial Planning(5)
|
34,670
|
34,670
|
34,670
|
—
|
|
34,670
|
34,670
|
34,670
|
Outplacement(6)
|
—
|
—
|
—
|
—
|
|
60,000
|
—
|
—
|
280G Tax Gross-up(7)
|
—
|
—
|
—
|
—
|
|
—
|
—
|
—
|
Benefits:
|
|
|
|
|
|
|
|
Value of continued welfare benefits(8)
|
—
|
—
|
—
|
—
|
|
16,994
|
—
|
—
|
Value of additional retirement benefits(9)
|
—
|
—
|
—
|
—
|
|
1,546,706
|
—
|
—
|
Total:
|
2,010,471
|
2,010,471
|
2,010,471
|
—
|
9,743,591
|
4,665,225
|
2,010,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John B. Owen(3)
|
|
|
|
|
|
|
|
Compensation:
|
|
|
|
|
|
|
|
Cash Severance
|
—
|
—
|
—
|
—
|
|
5,477,720
|
—
|
—
|
Long-Term Incentive
|
|
|
|
|
|
|
|
Restricted Stock Units(4)
|
1,159,063
|
1,159,063
|
1,159,063
|
—
|
|
1,671,789
|
1,671,789
|
1,159,063
|
Performance Stock Units(4)
|
386,075
|
386,075
|
386,075
|
—
|
|
1,667,889
|
1,667,889
|
386,075
|
Performance Cash Units
|
462,000
|
462,000
|
462,000
|
—
|
|
1,428,667
|
1,428,667
|
462,000
|
Perquisites:
|
|
|
|
|
|
|
|
Financial Planning(5)
|
34,670
|
34,670
|
34,670
|
—
|
|
34,670
|
34,670
|
34,670
|
Outplacement(6)
|
—
|
—
|
—
|
—
|
|
60,000
|
—
|
—
|
280G Tax Gross-up(7)
|
—
|
—
|
—
|
—
|
|
12,780,249
|
—
|
—
|
Benefits:
|
|
|
|
|
|
|
|
Value of continued welfare benefits(8)
|
—
|
—
|
—
|
—
|
|
22,259
|
—
|
—
|
Value of additional retirement benefits(9)
|
—
|
—
|
—
|
—
|
|
15,228,473
|
—
|
—
|
Total:
|
2,041,808
|
2,041,808
|
2,041,808
|
—
|
38,371,716
|
4,803,015
|
2,041,808
|
C. Matthew Lusco
|
|
|
|
|
|
|
|
Compensation:
|
|
|
|
|
|
|
|
Cash Severance
|
—
|
—
|
—
|
—
|
3,025,388
|
—
|
—
|
Long-Term Incentive
|
|
|
|
|
|
|
|
Restricted Stock Units(4)
|
—
|
549,962
|
—
|
—
|
1,388,206
|
1,388,206
|
966,629
|
Performance Stock Units(4)
|
—
|
303,345
|
—
|
—
|
1,384,863
|
1,384,863
|
330,922
|
Performance Cash Units
|
—
|
363,000
|
—
|
—
|
1,196,000
|
1,196,000
|
396,000
|
Perquisites:
|
|
|
|
|
|
|
|
Financial Planning(5)
|
—
|
34,670
|
—
|
—
|
34,670
|
34,670
|
34,670
|
Outplacement(6)
|
—
|
—
|
—
|
—
|
60,000
|
—
|
—
|
Benefits:
|
|
|
|
|
|
|
|
Value of continued welfare benefits(8)
|
—
|
—
|
—
|
—
|
14,687
|
—
|
—
|
Value of additional retirement benefits(9)
|
—
|
—
|
—
|
—
|
602,014
|
—
|
—
|
Total:
|
—
|
1,250,977
|
—
|
—
|
7,705,828
|
4,003,739
|
1,728,221
|
Ronald G. Smith(3)
|
|
|
|
|
|
|
|
Compensation:
|
|
|
|
|
|
|
|
Cash Severance
|
—
|
—
|
—
|
—
|
2,533,294
|
—
|
—
|
Long-Term Incentive
|
|
|
|
|
|
|
|
Restricted Stock Units(4)
|
724,974
|
724,974
|
724,974
|
—
|
1,041,159
|
1,041,159
|
724,974
|
Performance Stock Units(4)
|
248,191
|
248,191
|
248,191
|
—
|
1,038,652
|
1,038,652
|
248,191
|
Performance Cash Units
|
297,000
|
297,000
|
297,000
|
—
|
897,000
|
897,000
|
297,000
|
Perquisites:
|
|
|
|
|
|
|
|
Financial Planning(5)
|
34,670
|
34,670
|
34,670
|
—
|
34,670
|
34,670
|
34,670
|
Outplacement(6)
|
—
|
—
|
—
|
—
|
60,000
|
—
|
—
|
280G Tax Gross-up(7)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Benefits:
|
|
|
|
|
|
|
|
Value of continued welfare benefits(8)
|
—
|
—
|
—
|
—
|
19,718
|
—
|
—
|
Value of additional retirement benefits(9)
|
—
|
—
|
—
|
—
|
201,674
|
—
|
—
|
Total:
|
1,304,835
|
1,304,835
|
1,304,835
|
—
|
5,826,167
|
3,011,481
|
1,304,835
|
|
|
|
COMPENSATION OF EXECUTIVE OFFICERS
|
(1) The following chart summarizes the meaning of “cause,” “good reason/without cause,” and “change-in-control” under the change-in-control agreements of the NEOs:
|
|
|
|
|
|
“cause”
|
(i) willful and continued failure to substantially perform reasonably assigned duties; (ii) breach of fiduciary duty involving personal profit or commission of a felony or a crime involving fraud or moral turpitude, material breach of the agreement; (iii) engaging in illegal conduct or gross misconduct that materially injures Regions; (iv) failure to materially cooperate with an investigation authorized by the Board, a regulatory body, or a governmental department or agency; or (v) disqualification or bar by any governmental or regulatory authority from carrying out duties and responsibilities, or loss of any required licenses.
|
“good reason” and
“without cause”
|
(i) an adverse change in responsibilities as in effect immediately before the change-in-control; (ii) a material diminution in the budget over which the executive has control; (iii) a material breach of the compensation provisions of the agreement; or (iv) requiring the executive to move his principal place of work by more than 50 miles.
|
“change-in-control”
|
(i) an acquisition of 20% or more of the combined voting power of Regions voting securities; (ii) a change in a majority of the members of the Board; (iii) the consummation of a merger (unless voting securities of Regions outstanding immediately prior to the merger continued to represent at least 55% of the combined voting power of the voting securities of the surviving company outstanding immediately after such merger); or (iv) shareholder approval of a complete liquidation or dissolution of Regions.
|
(2) Death would result in vesting in the enhanced portion of the benefit for Mr. J. Turner and Mr. Owen as is displayed in the chart in footnote (9) below.
(3) Mr. Owen, Mr. D. Turner, and Mr. Smith are eligible for early retirement. For purposes of the various termination columns in the table, with the exception of the “For Cause” column, they are assumed to have taken early/normal retirement and, therefore, are entitled to receive the benefits shown.
(4) Based on the closing price of Regions common stock of $16.12 per share on December 31, 2020.
(5) The service agreement with Regions’ financial planning provider allows for continuation of financial planning services for two years following termination due to retirement, death, disability, change-in-control, and involuntary termination without cause.
(6) The change-in-control agreement provides for reasonable outplacement services for up to two years.
(7) 280G Tax Gross-up represents the amount of the excise tax and related gross-up for excise taxes levied under Section 4999 of the IRC on payment and benefits following a change-in-control (otherwise referred to as “excess parachute payments” under Section 280G of the IRC). The change-in-control agreements covering Mr. Owen, Mr. D. Turner, and Mr. Smith provide for a gross up payment in the event the change-in-control benefits exceed their 280G limit by more than 110% (otherwise benefits are automatically cut back to their 280G limit). The change-in-control agreements covering Mr. J. Turner and Mr. Lusco provide only for a cut back of change-in-control payments to their 280G limit if the executive’s change-in-control benefits exceed their 280G limit and a cut back in benefits would result in a greater net after-tax payment to the executive.
(8) For Mr. J. Turner and Mr. Owen, the change-in-control agreement provides for continuation of medical and dental coverage equal under Regions’ medical and dental plans for a period of three years. For Mr. D. Turner, Mr. Lusco and Mr. Smith, the agreement provides for a period of two years.
(9) All of the NEOs participate in the Retirement Plan and/or the SERP. The change-in-control agreement provides for additional years’ credit for age and service under the Retirement Plan and the SERP that the NEO would have accrued had he remained employed through the second anniversary of the change-in-control. In addition, Mr. J. Turner and Mr. Owen are each eligible for the alternative target benefit under the SERP, which would normally require the NEO to reach age 60 and have a minimum of 10 years of service. Under the SERP, in the event of an involuntary termination of employment without cause (or termination for good reason) within 24 months following a change-in-control, unvested benefits become fully vested. Because these benefits are already accrued, they are reflected in the Pension Benefits table and do not represent additional expense to the Company. The following chart details the value of the SERP benefit attributable to the additional years of age and service, as well as the amounts already accrued that will vest upon involuntary termination of employment without cause (or termination with good reason) within 24-months of a change-in-control:
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Value for Targeted/Regular
Years of Age and Service Credit
($)
|
Value for Vesting in
Targeted/Regular
Benefit
($)
|
Total Additional Value
($)
|
John M. Turner, Jr.
|
543,990
|
|
12,987,548
|
|
13,531,538
|
|
David J. Turner, Jr.
|
1,546,706
|
|
—
|
|
1,546,706
|
|
John B. Owen
|
(110,182)
|
|
15,338,655
|
|
15,228,473
|
|
C. Matthew Lusco
|
602,014
|
|
—
|
|
602,014
|
|
Ronald G. Smith
|
201,674
|
|
—
|
|
201,674
|
|
CEO Pay Ratio
CEO Pay Ratio and Compensation Philosophy. The guiding principles of compensation set forth by the CHR Committee and described in the CD&A form the foundation for Regions’ compensation and benefits philosophy for all associates. Accordingly, our compensation and benefit programs are designed to encourage and reward all associates who contribute to our success. We strive to ensure that the compensation of every associate reflects the level of their job impact and responsibilities and is benchmarked to be competitive in the market where the associate is geographically located. Regions associates are primarily residents of southeastern states where Regions has physical locations.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we are required to identify and disclose
the annual total compensation of our median employee, the annual total compensation of our President and CEO, Mr. J. Turner, and the ratio of these two amounts.
SEC rules for identifying the median employee and calculating the pay ratio allow companies to apply various methodologies and assumptions. As a result, the pay ratio reported by us may not be comparable to the pay ratio reported by other companies, including those within our peer groups and industry.
Consistently Applied Compensation Measure (“CACM”), Methodology, Associate Population, and Measurement Date. Entering the fourth year of pay ratio disclosure, we intended to use the same median employee as last year. To
|
|
|
COMPENSATION OF EXECUTIVE OFFICERS
|
determine whether or not there had been a material change in pay distribution for the Company, we repeated the median employee identification process set forth in our 2018, 2019, and 2020 proxy statements. Using base salary (annualized for new employees) as the CACM, we identified 20,213 full- and part-time associates, excluding our CEO, who were actively employed as of the first pay period at the beginning of the fourth quarter (October 2, 2020).
Though no material change in pay distribution occurred, our previous median employee is currently on a leave of absence from the Company. As a result, we determined a new median employee should be identified. In keeping with our belief that the median employee should be reflective of the compensation structure and benefits profile of the average Regions associate, we verified that approximately 41 percent of our associate population is in the retail organization, approximately 68 percent are incentive eligible, more than 95 percent participate in the 401(k) Plan, and 88 percent participate in our medical and/or dental insurance programs.
Median Employee. Our median employee for 2021 is a full-time associate serving as a Financial Relationship Consultant within our branch network; is incentive eligible; and participates in our 401(k) Plan and in the medical, dental, life, and disability insurance programs provided by the Company. Our median employee’s base compensation is $49,504. All elements of the median employee’s 2020 compensation, including incentives and the Company-paid cost of benefits mentioned above, totaled $70,496.
Pay Ratio. Using Mr. J. Turner’s income disclosed in the Summary Compensation Table, and including an additional $15,218 in Company-paid benefit costs associated with medical, dental, life, and disability insurance, we calculate our CEO’s total compensation for purposes of the pay ratio to be $13,847,734. As a result, the ratio of our CEO’s annual total compensation to that of our median employee is 196 to 1. We believe that this ratio is a reasonable estimate calculated in a manner consistent with the pay ratio disclosure requirements.
Alternative Pay Ratio. In addition to the required pay ratio calculation, we have calculated an alternative pay ratio that compares compensation for our median employee to our CEO compensation excluding the $6,914,629 change in pension value reported in the Summary Compensation Table. When calculated without this value, our CEO’s adjusted pay is $6,933,105, resulting in an alternative pay ratio of 98 to 1.
Regions’ Retirement Plan was closed to new participants in 2007, and, at this time, only approximately 16 percent of our associates remain participants in the plan. Changes in pension value, as required to be disclosed in the Summary Compensation Table, are impacted by changes in interest rates and, as a result, can represent a significant additional compensation component for those associates still eligible under the closed Retirement Plan. In keeping with the spirit of the disclosure, we believe it is important to identify an associate most reflective of our average associate. Therefore, our median employee is representative of our larger associate population as an individual who is not a Retirement Plan participant. Our CEO participates in the Retirement Plan and the SERP as previously described. The change in pension value for the CEO represents actuarial increases in the lump sum value of his pension that are primarily impacted by promotional salary increases, age, and additional years of service.
|
|
|
COMPENSATION OF EXECUTIVE OFFICERS
|
|
|
|
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING & OTHER INFORMATION
|
Who is entitled to vote at the meeting, and what are my voting rights?
The Board set February 22, 2021, as the Record Date for the annual meeting. If you were a shareholder of record at the close of business on the Record Date, you are entitled to vote at the meeting.
As of the Record Date, 960,674,032 shares of our common stock were issued and outstanding and, therefore, eligible to be voted at the meeting. Holders of our common stock are entitled to one vote per share; therefore, a total of 960,674,032 votes are entitled to be cast at the meeting. There is no cumulative voting.
Holders of our Class A Depositary Shares, Class B Depositary Shares, Class C Depositary Shares, or Class D Depositary Shares are not entitled to vote at the annual meeting.
How many shares must be present to hold the meeting?
A majority of the outstanding shares of Regions common stock must be present, in attendance or by properly executed or otherwise documented proxy, to constitute a quorum at the annual meeting.
Abstentions and Broker non-votes will be counted for the purpose of determining whether a quorum is present. We urge you to vote promptly by proxy, even if you plan to attend the meeting, so we will know as soon as possible that enough shares will be present for us to hold the meeting.
What is a proxy statement, and what is a proxy?
In accordance with the federal securities laws and the regulations of the SEC, a proxy statement is a document we give to you, or provide you access to, when we are soliciting your vote.
A proxy is your designation of another person to vote your shares. Tara A. Plimpton, our Chief Legal Officer and Corporate Secretary, has been designated as the proxy to cast the votes of our shareholders at our 2021 Annual Meeting.
What is Notice and Access?
“Notice and Access” is an SEC rule that allows us to furnish our proxy materials over the Internet instead of mailing paper copies of the materials to each shareholder. As a result, beginning on or about March 8, 2021, we will send most of our shareholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy materials over the Internet and vote online.
The Notice of Internet Availability of Proxy Materials is not a proxy card and cannot be used to vote your shares. If you received a notice this year, you will not receive paper copies of the proxy materials unless you request the materials by following the instructions on the notice or on the website referred to in the notice.
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|
|
Since 2012, when we started distributing our annual meeting materials under the SEC’s “Notice and Access” rule, we have printed roughly 90 percent fewer proxy statements and annual reports each year, helping us reduce our impact on the environment and printing and mailing expenses.
|
How can I access Regions’ proxy materials and annual report electronically?
This proxy statement, the Company’s 2020 Annual Report on Form 10-K, and the CEO’s Letter are available on ir.regions.com and at proxyvote.com, as set out in the Notice of Internet Availability of Proxy Materials.
How do I sign up for electronic delivery of proxy materials?
Most shareholders can elect to view our future proxy statements and annual reports over the Internet instead of receiving paper copies in the mail. You can choose to receive future proxy statements and annual reports electronically by following the prompt that will appear if you choose to vote through the Internet. Shareholders who choose to view future proxy statements and annual reports through the Internet will receive an email with instructions containing the Internet address of these materials, as well as voting instructions, approximately four weeks before future meetings.
If you have not already done so, we ask you to consider signing up to receive these materials electronically in the future by following the instructions after you vote your shares over the Internet. Enrolling in future electronic delivery of these materials helps reduce Regions’ impact on the environment as well as printing and mailing expenses.
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Benefits of Accessing Annual Meeting Materials Online
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•Immediate receipt of the proxy statement, Annual Report on Form 10-K, and related materials
•Online proxy voting
•You will receive less mail and will not have to worry about misplacing your paper materials
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•It saves Regions and its shareholders money by eliminating the costs of printing and postage
•It is much better for the environment
•Electronic documents are more convenient than paper
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If you elect to view our proxy statement and annual report electronically and vote your proxy through the Internet, your enrollment will remain in effect for all shareholder meetings until you cancel it. To cancel enrollment, registered shareholders should visit http://enroll.icsdelivery.com/rf and follow the instructions to cancel enrollment. If you hold your shares in street name, check the information provided by your Broker for instructions on how to cancel your enrollment.
If at any time you would like to receive a paper copy of the proxy statement or annual report, email investors@regions.com, or write to:
Regions Financial Corporation
1900 Fifth Avenue North
Birmingham, Alabama 35203
Attention: Investor Relations
What is the difference between a “shareholder of record” and a “street name” holder or “beneficial owner”?
If your shares are registered directly in your name with Computershare, our transfer agent, you are considered the “shareholder of record” with respect to those shares. If your shares are held by a Broker, you are considered the “beneficial owner” of shares held in “street name.” If you hold your shares in “street name,” you will have the opportunity to instruct your Broker how to vote your shares. “Street name” shareholders may only vote at the meeting if they have a legal proxy––if you intend to do so, be sure to request the legal proxy from your Broker promptly following receipt of these materials so there is enough time for it to be received before the meeting.
What is the deadline for voting by mail, internet, mobile device, or telephone?
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If You Are:
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And You Are Voting by:
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Your Vote Must Be Received:
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A shareholder of record
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Mail
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By April 20, 2021
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Internet, mobile device, or telephone
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By 11:59 P.M. ET on April 20, 2021
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A street name holder
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Mail
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By April 20, 2021
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Internet, mobile device, or telephone
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By 11:59 P.M. ET on April 20, 2021
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A participant in Regions 401(k) Plan
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Internet, mobile device, or telephone
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By 11:59 P.M. ET on April 18, 2021
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How do I vote?
Shareholders of record, and most beneficial shareholders, have several ways to vote, as described on page 4. If you have the ability to vote online, we encourage you to record your vote through the Internet to reduce corporate expenses. See the Notice of Internet Availability of Proxy Materials or Voter Instruction Form from your Broker for available options.
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Your vote is important!
Please submit your vote by proxy over the Internet, by telephone,
or complete, sign, date, and return your proxy card or voting instruction form.
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How do I vote shares held in the Regions 401(k) Plan?
If you are a participant in the Regions 401(k) Plan, you may direct the 401(k) Plan trustee how to vote your shares. Under the terms of the 401(k) Plan, the trustee votes all shares held by the 401(k) Plan, but each participant may direct the trustee how to vote the shares of Regions common stock allocated to their 401(k) Plan account. If you own shares through the 401(k) Plan and do not submit voting instructions, the 401(k) Plan trustee will vote the shares in accordance with the Board’s recommendations. To vote your shares held in the 401(k) Plan, follow the instructions above.
How do I vote shares held in the dividend reinvestment plan?
If you are a participant in the Computershare Investment Plan for Regions Financial Corporation (the “Dividend Reinvestment Plan”), the proxy card or electronic voting instructions cover all shares allocated to your account under the plan. If you do not return your proxy card, or vote by telephone or over the Internet, your shares in the Dividend Reinvestment Plan will not be voted. To vote your shares held in the Dividend Reinvestment Plan, follow the instructions above.
What if I do not specify how I want my shares voted?
If you requested printed copies of the proxy materials and sign and return your proxy card without giving specific voting instructions, your proxy will be voted in accordance with the Board’s recommendations.
Our telephone and Internet voting procedures do not permit you to submit your proxy vote without specifying how you want your shares voted.
How will my shares be voted if I don’t provide my proxy and don’t attend the annual meeting?
If you...
...are a shareholder of record and do not provide a proxy or vote at the meeting, your shares will not be voted.
...hold your shares through the 401(k) Plan and do not vote your shares, your shares (along with all other shares in the 401(k) Plan for which votes are not cast) will be voted by the trustee in favor of Proposals 1, 2, and 3 (see the question How do I vote shares held in the Regions 401(k) Plan? above).
...are a participant in the Dividend Reinvestment Plan and do not vote, your shares in the plan will not be voted.
...hold your shares in street name and do not give your Broker instructions on how to vote your shares, your Broker may not vote on any proposal other than Proposal 2 (the ratification of appointment of EY as our independent registered public accounting firm for 2021).
Can I change my vote after submitting my proxy?
If you are a shareholder of record, you may change or revoke any previously cast vote, so long as the new vote or revocation is received prior to the completion of voting at the annual meeting. The following methods of re-voting/revocation, and their associated timing, are as follows:
•Signing and mailing a new proxy card with a later date, allowing adequate time for it to be received and processed prior to the date of the annual meeting;
•Delivering a written revocation of your previously cast vote to our Corporate Secretary at Regions Financial Corporation, 1900 Fifth Avenue North, Birmingham, Alabama 35203, prior to the date of the annual meeting;
•Casting a new vote over the Internet or by telephone, prior to 11:59 P.M., Eastern Time on April 20, 2021; or
•Attending the annual meeting and voting again at the meeting.
If your shares are held in street name, you should follow your Broker’s instructions regarding the revocation of proxies.
Subsequent proxy cards or written revocations must still be received by the regular voting deadline in order to be effective.
Who pays the expenses of this proxy solicitation?
Our proxy materials are being distributed by our Board in connection with the solicitation of proxies for our annual meeting. We pay the entire cost of soliciting your proxy, including the cost of preparing, assembling, printing, mailing, and otherwise distributing the Notice of Internet Availability of Proxy Materials and these proxy materials, as well as soliciting your vote. In addition to solicitation of proxies by mail, we request that Brokers send proxies and proxy materials or Notice of Internet Availability of Proxy Materials to the street name/ beneficial owners of Regions common stock and secure their voting instructions. We will reimburse Brokers for their reasonable expenses in taking those actions.
We have made arrangements with Innisfree M&A Incorporated to assist us in soliciting proxies and have agreed to pay $17,500, plus reasonable and customary expenses, for these services. If necessary, we also may use several of our associates, without additional compensation, to solicit proxies from shareholders, either personally or by telephone, facsimile, email, or letter, on Regions’ behalf. If you have any questions or need assistance voting your shares, please contact Innisfree M&A Incorporated:
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Innisfree M&A Incorporated, 501 Madison Avenue, 20th Floor, New York, NY 10022.
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Shareholders may call Innisfree toll-free: 1-888-750-5834.
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Brokers may call Innisfree collect: 1-212-750-5833.
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Who counts the votes?
We have engaged Broadridge Financial Solutions, Inc. to count the votes represented by proxies and cast at the meeting by online ballot and to act as Inspector of Election. A representative from Broadridge will be present at the annual meeting.
When will the Company announce the voting results?
We will announce the preliminary voting results at the annual meeting. The Company will report the final voting results in a Current Report on Form 8-K filed with the SEC within four business days of the annual meeting.
What were the voting results of the 2020 Annual Meeting?
At Regions’ annual meeting held in 2020, the shareholders elected Regions’ 12 Director nominees, ratified the appointment of EY as the independent registered public accounting firm for 2020, and approved executive compensation on an advisory basis (“Say-on-Pay”). The following is a summary of the voting on each matter presented to our shareholders last year:
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Eligible Votes
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957,393,175
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Total Voted
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831,263,743
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86.83
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%
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Broker Non-Votes
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146,282,121
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17.60
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%
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Proposal
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Votes “For”
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Proposal
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Votes “For”
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Carolyn H. Byrd
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99.11%
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James T. Prokopanko
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98.95%
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Don DeFosset
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93.47%
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Lee J. Styslinger III
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93.25%
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Samuel A. Di Piazza, Jr.
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97.66%
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José S. Suquet
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99.53%
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Zhanna Golodryga
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99.50%
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John M. Turner, Jr.
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99.34%
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John D. Johns
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99.14%
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Timothy Vines
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98.94%
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Ruth Ann Marshall
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98.39%
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Ratification of Selection of Auditors
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94.22%
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Charles D. McCrary
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94.78%
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Say-on-Pay
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93.57%
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Who can attend the annual meeting, and who can vote and ask questions at the meeting?
Registered and beneficial shareholders as of the Record Date are entitled to attend, vote, and ask questions at this year’s virtual annual meeting at www.virtualshareholdermeeting.com/RF2021 by logging in using the 16-digit control number appearing on the Notice of Internet Availability of Proxy Materials, email notification, voting instruction form, or paper proxy card. Guests without a control number may also attend the meeting, but they will not be permitted to vote or ask questions.
The annual meeting will begin at 9:00 A.M. Central Time. It is recommended that attendees log into the meeting with sufficient time before the meeting time to address any technical issues. The Virtual Shareholder Meeting website will provide technical assistance to attendees experiencing issues accessing the meeting. The technical support contact information will appear on the meeting website prior to the start of our meeting.
How do I inspect the list of shareholders of record?
A list of the shareholders of record as of the Record Date will be made available for inspection (i) at our headquarters during ordinary business hours from April 9, 2021, to April 20, 2021 and (ii) on the Virtual Shareholder Meeting website on the day of the meeting. If you would like to review the list prior to the annual meeting, please contact Tara A. Plimpton, Corporate Secretary at 1900 Fifth Avenue North, Birmingham, Alabama 35203 to arrange a time for inspection.
How do I submit a shareholder proposal for Regions’ 2022 Annual Meeting of Shareholders?
The table below summarizes the requirements for shareholders who wish to submit proposals, including Director nominations, for next year’s annual meeting. Each of the following descriptions are summaries and are qualified in their entirety by reference to SEC Rule 14a-8 and our By-Laws. Shareholders are encouraged to consult SEC Rule 14a-8 or our By-Laws, as applicable, to see all necessary requirements.
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Proposals for inclusion in Regions’ 2022 Proxy Statement
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Director nominees for inclusion in Regions’ 2022 Proxy Statement (proxy access)
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Other proposals/nominees outside of SEC Rule 14a-8 to be presented at the 2022 annual meeting (advance notice)
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Type of Proposal
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SEC rules permit shareholders to submit proposals for inclusion in our proxy statement by satisfying the requirements specified in SEC Rule 14a-8.
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A shareholder (or a group of up to 20 shareholders) owning at least 3% of Regions stock for at least 3 years may submit Director nominees† for inclusion in our proxy statement by satisfying the requirements specified in Article II, Section 8 of our By-Laws.*
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Shareholders may present proposals or Director nominees directly at the annual meeting (and not for inclusion in our proxy statement) by satisfying the requirements specified in Article II, Section 7 of our By-Laws.*
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When proposal must be received by Regions
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No later than the close of business on
November 5, 2021.
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Between October 6, 2021 and November 5, 2021.
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Between November 5, 2021 and December 6, 2021.
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What to include
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The information required by SEC Rule 14a-8. As the rules of the SEC make clear, however, simply submitting a proposal does not guarantee its inclusion.
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The information required by our By-Laws.*
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The information required by our By-Laws.*
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Where to send
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Regions Financial Corporation
1900 Fifth Avenue North
Birmingham, Alabama 35203
Attention: Corporate Secretary
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† Note that proxy access may only be used to nominate up to the greater of (i) two nominees or (ii) 20% of the total number of Directors.
* Our By-Laws are available on Regions’ website at ir.regions.com/governance.
How do I recommend a candidate for directorship to be considered by the NCG Committee?
The NCG Committee considers recommendations for directorship submitted by shareholders and other parties outside of our By-Laws. Recommendations for directorships may be submitted to the NCG Committee at any time by sending the candidate’s information to our Corporate Secretary at the below address. You should provide as much relevant information about the candidate as possible. Refer to the subsection What skills and characteristics are currently represented on the Board? in Proposal 1 — Election of Directors to see the personal attributes that each nominee must possess, as well as the skills and diversity attributes considered by the NCG Committee and Board when selecting nominees.
Regions Financial Corporation
1900 Fifth Avenue North
Birmingham, Alabama 35203
Attention: Corporate Secretary
How do I have my dividend check automatically deposited into my bank account?
If you are a shareholder of record and do not participate in the dividend reinvestment plan, we encourage you to sign up for direct deposit of your dividend check rather than receiving a paper check. You can do so by logging into your Computershare account through their website at www.computershare.com/investor and updating your “payment method” under your profile. Doing so will reduce the Company’s quarterly printing and mailing expenses and reduce our paper usage. For additional information, please contact Computershare at 1-800-524-2879.
Forward-looking statements
This proxy statement, other reports filed by the Company under the Exchange Act, and any other written or oral statements made by us or on our behalf to analysts, investors, the media, and others, may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The words “future,” “anticipates,” “assumes,” “intends,” “plans,” “seeks,” “believes,” “predicts,” “potential,” “objectives,” “estimates,” “expects,” “targets,” “projects,” “outlook,” “forecast,” “would,” “will,” “may,” “might,” “could,” “should,” “can,” and similar terms and expressions often signify forward-looking statements. Forward-looking statements are not based on historical information, but rather are related to future operations, strategies, financial results, or other developments. Forward-looking statements are based on management’s current expectations as well as certain assumptions and estimates made by, and information available to, management at the time the statements are made. Those statements are based on general assumptions and are subject to various risks, and because they also relate to the future, they are likewise subject to inherent uncertainties and other factors that may cause actual results to differ materially from the views, beliefs, and projections expressed in such statements. Therefore, we caution you against relying on any of these forward-looking statements.
You should not place undue reliance on any forward-looking statements, which are only as of the date made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible to predict all of them. We assume no obligation to update or revise any forward-looking statements that are made from time to time, either as a result of future developments, new information, or otherwise, except as may be required by law.
See also the reports filed with the SEC, including the discussions under the “Forward-Looking Statements” and “Risk Factors” sections of Regions’ Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC and available on its website at sec.gov.
Trademark information
Regions®, the Regions logo, Regions360®, and the LifeGreen bike are registered trademarks of Regions Bank. The LifeGreen color is a trademark of Regions Bank. Other words or symbols in this proxy statement that identify other parties’ goods or services may be trademarks or service marks of those other parties.
Information not incorporated into this Proxy Statement
Information contained on or accessible through our website at regions.com or doingmoretoday.com is not and shall not be deemed to be a part of this proxy statement by reference or otherwise incorporated into any other filings we make with the SEC, except to the extent we specifically incorporate such information by reference.
GAAP TO NON-GAAP AND OTHER RECONCILIATIONS
The following tables provide: 1) a reconciliation of net income available to common shareholders (GAAP) to adjusted income available to common shareholders for incentive purposes (non-GAAP), 2) a reconciliation of net income available to common shareholders (GAAP) to adjusted pre-tax pre-provision income (non-GAAP), 3) a reconciliation of non-interest expense (GAAP) to adjusted non-interest expense (non-GAAP), 4) a reconciliation of non-interest income (GAAP) to adjusted non-interest income (non-GAAP), 5) a computation of adjusted total revenue (non-GAAP), and 6) a computation of the adjusted operating leverage ratio.
These selected items are included in financial results presented in accordance with GAAP. The selected items in the tables below represent the amounts recognized in the financial results but not included in the 2020 target. Regions believes that their exclusion from income available to common shareholders provides a meaningful base for period-to-period comparisons, which management believes will assist stakeholders in analyzing the operating results of the Company and predicting future performance. These non-GAAP financial measures are also used by management to assess the performance of Regions’ business. It is possible that the activities related to the adjustments may recur; however, management does not consider the activities related to the adjustments to be indications of ongoing operations. Management and the CHR Committee use these non-GAAP financial measures for the evaluation of performance. Regions believes that presenting these non-GAAP financial measures will permit stakeholders to assess the performance of the Company on the same basis as that applied by management and the Board. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by stakeholders in the evaluation of a company, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analyses of results as reported under GAAP. In particular, a measure of earnings that excludes these selected items does not represent the amount that effectively accrues directly to shareholders. Because analysts and banking regulators may assess Regions based on these measures, management believes that it is useful to provide investors the ability to assess Regions on these same bases.
Adjusted Net Income Available to Common Shareholders for Incentive Purposes (Non-GAAP)
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(Unaudited)
($ amounts in millions)
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Year Ended
December 31, 2020
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Net income available to common shareholders (GAAP)
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$
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991
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Adjustments:
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Branch consolidation, property and equipment charges, net of tax
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23
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Salary and employee benefits - severance charges, net of tax
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23
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Loss on early extinguishment of debt, net of tax
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16
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Contribution to the Regions Corporation Foundation, net of tax
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8
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Professional, legal and regulatory expenses, net of tax
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5
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Acquisition expense, net of tax
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1
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Valuation gain on equity investment, net of tax
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(37)
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Bank-owned life insurance(1)
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(25)
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Securities losses, net of tax
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(3)
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Leveraged lease termination gains, net of tax
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(1)
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Adjusted income available to common shareholders for incentive purposes (non-GAAP)
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$
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1,001
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___________
(1) The Bank-owned life insurance policy exchange is not subject to tax. This adjustment reflects the actual charge included in financial results.
Pre-tax Pre-Provision Income (Non-GAAP)
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(Unaudited)
($ amounts in millions)
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Year Ended
December 31, 2020
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Net income available to common shareholders (GAAP)
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$
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991
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Preferred dividends (GAAP)
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103
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Income tax expense (GAAP)
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220
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Income before income taxes (GAAP)
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1,314
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Provision for credit losses (GAAP)
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1,330
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Pre-tax pre-provision income (non-GAAP)
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2,644
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Other adjustments:
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Branch consolidation, property and equipment charges
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31
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Salary and employee benefits - severance charges
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31
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Loss on early extinguishment of debt
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22
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Contribution to the Regions Corporation Foundation
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10
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Professional, legal and regulatory expenses
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7
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Acquisition expense
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1
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Valuation gain on equity investment
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(50)
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Bank-owned life insurance
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(25)
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Securities losses
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(4)
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Leveraged lease termination gains
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(2)
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Total other adjustments
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21
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Adjusted pre-tax pre-provision income (non-GAAP)
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$
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2,665
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Adjusted Operating Leverage Ratio (Non-GAAP)
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(Unaudited)
($ amounts in millions)
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Year Ended
December 31, 2020
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Non-interest expense (GAAP)
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A
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$
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3,643
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Adjustments:
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Contribution to the Regions Financial Corporation foundation
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(10)
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Branch consolidation, property and equipment charges
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(31)
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Salary and employee benefits—severance charges
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(31)
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Loss on early extinguishment of debt
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(22)
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Professional, legal and regulatory expenses
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(7)
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Ascentium deal costs
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(1)
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Adjusted non-interest expense (non-GAAP)
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B
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$
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3,541
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Net interest income (GAAP)
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C
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$
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3,894
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Taxable-equivalent adjustment
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48
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Net interest income, taxable-equivalent basis
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D
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$
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3,942
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Non-interest income (GAAP)
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E
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$
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2,393
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Adjustments:
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Securities (gains) losses, net
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(4)
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Leveraged lease termination gains
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(2)
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Valuation gain on equity investment
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(50)
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Bank-owned life insurance
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(25)
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Adjusted non-interest income (non-GAAP)
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F
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$
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2,312
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Total revenue
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C+E=G
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$
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6,287
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Adjusted total revenue (non-GAAP)
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C+F=H
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$
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6,206
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Total revenue, taxable-equivalent basis
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D+E=I
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$
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6,335
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Adjusted total revenue, taxable-equivalent basis (non-GAAP)
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D+F=G
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$
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6,254
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Operating leverage ratio (GAAP)
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I-A
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2.7
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%
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Adjusted operating leverage ratio (non-GAAP)
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G-B
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2.6
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%
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