Generated highest annual pre-tax pre-provision
income since 2007
Regions Financial Corporation (NYSE:RF) today announced earnings
for the fourth quarter and full year ended December 31, 2019. For
the fourth quarter, the company reported net income from continuing
operations available to common shareholders of $366 million, and
earnings per diluted share of $0.38. For the full year of 2019, the
company reported net income available to common shareholders from
continuing operations of $1.5 billion, and earnings per diluted
share from continuing operations of $1.50, a 10 percent increase.
Full-year pre-tax pre-provision income was at its highest level
since 2007, increasing 9 percent, generating positive operating
leverage of approximately 4 percent on a reported basis and 2
percent on an adjusted basis(1) versus the prior year.
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“Regions delivered strong financial results in 2019 by focusing
on our customers, maintaining expense discipline and proactively
managing our business to address evolving market dynamics,” said
John Turner, President and CEO. “Adjusted revenue grew 2 percent,
the adjusted efficiency ratio improved 130 basis points, and we
generated the highest pre-tax pre-provision income in over a
decade. We are well positioned to meet our performance goals for
2020 by executing our strategic plan and delivering consistent,
sustainable performance.”
SUMMARY OF FULL YEAR AND FOURTH QUARTER
2019 RESULTS:
Quarter Ended
Year Ended
(amounts in millions, except per share
data)
12/31/2019
9/30/2019
12/31/2018
2019
2018
Income from continuing operations (A)
$
389
$
409
$
406
$
1,582
$
1,568
Income from discontinued operations, net
of tax
—
—
—
—
191
Net income
389
409
406
1,582
1,759
Preferred dividends (B)
23
24
16
79
64
Net income available to common
shareholders
$
366
$
385
$
390
$
1,503
$
1,695
Net income from continuing operations
available to common shareholders (A) – (B)
$
366
$
385
$
390
$
1,503
$
1,504
Weighted-average diluted shares
outstanding
968
991
1,043
999
1,102
Actual shares outstanding—end of
period
957
964
1,025
957
1,025
Diluted earnings per common share from
continuing operations
$
0.38
$
0.39
$
0.37
$
1.50
$
1.36
Diluted earnings per common share
$
0.38
$
0.39
$
0.37
$
1.50
$
1.54
Non-GAAP adjusted items impacting
earnings from continuing operations(1):
Pre-tax adjusted items:
Loss on early extinguishment of debt
$
(16
)
$
—
$
—
$
(16
)
$
—
Branch consolidation, property and
equipment charges
(12
)
(5
)
(3
)
(25
)
(11
)
Salaries and benefits related to severance
charges
—
(1
)
(7
)
(5
)
(61
)
Contribution to Regions' charitable
foundation
—
—
—
—
(60
)
Expenses associated with residential
mortgage loan sale
—
—
—
—
(4
)
Securities gains (losses), net
(2
)
—
—
(28
)
1
Leveraged lease termination gains
—
1
—
1
8
Gain on sale of affordable housing
residential mortgage loans
—
—
—
8
—
Diluted EPS impact*
$
(0.02
)
$
—
$
(0.01
)
$
(0.05
)
$
(0.08
)
* Based on income taxes at an approximate
25% incremental rate.
During the fourth quarter of 2019, total revenue increased
approximately 3 percent on a reported and adjusted basis(1)
compared to the fourth quarter of 2018 as growth in non-interest
income exceeded a decline in net interest income. Non-interest
expense remained well controlled during the quarter on a reported
and adjusted basis(1), as higher production-based compensation and
marketing spend were partially offset by a reduction in occupancy
expense.
Overall asset quality remained in line with the company's
broader risk expectations during the quarter. Compared to the
fourth quarter of 2018, annualized net charge-offs remained
unchanged at 0.46 percent of average loans, and total
non-performing loans increased 1 basis point to 0.61 percent of
total loans outstanding. The allowance for loan and lease losses
increased to 1.05 percent of total loans and 171 percent of
non-performing loans. Business services criticized loans increased
17 percent driven by increases in classified loans, partially
offset by a decrease in special mention loans.
Non-GAAP adjusted items(1) impacting the company's earnings are
identified to assist investors in analyzing Regions' operating
results on the same basis as that applied by management and provide
a basis to predict future performance. Non-GAAP adjusted items(1)
in the current quarter include the company's continued focus on
increasing organizational efficiency and effectiveness. This
included $12 million of net expenses associated with branch
consolidations and property and equipment charges. In addition, the
company incurred a $16 million loss related to the early
extinguishment of debt and recorded $2 million in securities losses
during the quarter.
Total revenue
from continuing operations
Quarter Ended
($ amounts in millions)
12/31/2019
9/30/2019
12/31/2018
4Q19 vs. 3Q19
4Q19 vs. 4Q18
Net interest income and other financing
income
$
918
$
937
$
958
$
(19
)
(2.0
)%
$
(40
)
(4.2
)%
Taxable equivalent adjustment
13
13
13
—
—
%
—
—
%
Net interest income and other financing
income, taxable equivalent basis
$
931
$
950
$
971
$
(19
)
(2.0
)%
$
(40
)
(4.1
)%
Net interest margin (FTE)
3.39
%
3.44
%
3.52
%
Non-interest income:
Service charges on deposit accounts
$
187
$
186
$
185
$
1
0.5
%
$
2
1.1
%
Card and ATM fees
112
114
111
(2
)
(1.8
)%
1
0.9
%
Wealth management income
84
83
77
1
1.2
%
7
9.1
%
Capital markets income
61
36
50
25
69.4
%
11
22.0
%
Mortgage Income
49
56
30
(7
)
(12.5
)%
19
63.3
%
Commercial credit fee income
18
19
19
(1
)
(5.3
)%
(1
)
(5.3
)%
Bank-owned life insurance
18
18
12
—
—
%
6
50.0
%
Securities gains (losses), net
(2
)
—
—
(2
)
NM
(2
)
NM
Market value adjustments on employee
benefit assets - defined benefit
—
—
(7
)
—
NM
7
(100.0
)%
Market value adjustments on employee
benefit assets - other*
7
7
(8
)
—
NM
15
(187.5
)%
Other
28
39
12
(11
)
(28.2
)%
16
133.3
%
Non-interest income
$
562
$
558
$
481
$
4
0.7
%
$
81
16.8
%
Total revenue
$
1,480
$
1,495
$
1,439
$
(15
)
(1.0
)%
$
41
2.8
%
Adjusted total revenue
(non-GAAP)(1)
$
1,482
$
1,494
$
1,439
$
(12
)
(0.8
)%
$
43
3.0
%
NM - Not Meaningful
* These market value adjustments relate to
assets held for employee benefits that are offset within salaries
and employee benefits expense.
Comparison of fourth quarter 2019 to third
quarter 2019
Total revenue of approximately $1.5 billion in the fourth
quarter decreased 1 percent on a reported and adjusted basis(1)
compared to the prior quarter. Net interest income and other
financing income decreased 2 percent and net interest margin
decreased 5 basis points to 3.39 percent. Net interest margin and
net interest income and other financing income were negatively
impacted primarily by lower market interest rates, partially offset
by declining deposit costs and a more favorable funding mix. Lower
average loan balances also reduced net interest income and other
financing income but benefited net interest margin.
Non-interest income increased approximately 1 percent on a
reported and adjusted basis(1) led by growth in capital markets,
wealth management and service charges. Capital markets experienced
a record quarter driven by higher commercial swap income, loan
syndication revenue, and merger and acquisition advisory services.
Customer interest rate swap income was impacted by $5 million of
positive market-related credit valuation adjustments during the
fourth quarter, compared to $6 million of negative valuation
adjustments during the prior quarter. The increase in capital
markets income was partially offset by declines in mortgage income
and other non-interest income. The decrease in mortgage income was
driven primarily by less favorable hedging and valuation
adjustments on residential mortgage servicing rights. The decrease
in other non-interest income was driven primarily by a net $11
million increase in the value of certain equity investments during
the prior quarter that did not repeat at the same level.
Comparison of fourth quarter 2019 to
fourth quarter 2018
Total revenue increased 3 percent on a reported and adjusted
basis(1) compared to the fourth quarter of 2018. Net interest
income and other financing income decreased 4 percent, while net
interest margin decreased 13 basis points. Net interest margin and
net interest income and other financing income were negatively
impacted by lower market interest rates and higher funding costs.
This was partially offset by the positive impacts from
repositioning strategies executed in the investment portfolio
throughout 2019, higher loan balances and favorable loan
remixing.
Non-interest income increased 17 percent on a reported and
adjusted basis(1). Market volatility in the fourth quarter of 2018
drove significant valuation declines in assets held for employee
benefits and negatively impacted bank-owned life insurance income.
Compared to the prior-year quarter, market value adjustments on
total employee benefit assets increased $22 million, and favorably
impacted bank-owned life insurance income $5 million. Wealth
management income increased 9 percent reflecting growth in both
investment services and investment management and trust income
which includes the 2019 acquisition of Highland Associates, Inc.
Mortgage income increased 63 percent driven primarily by increased
production and sales income reflecting a 61 percent increase in
total mortgage production. Hedging and valuation adjustments on
residential mortgage servicing rights also contributed to the
increase. Capital markets income increased 22 percent due primarily
to higher customer interest rate swap income, loan syndication
revenue, and an increase in fees generated from the placement of
permanent financing for real estate customers. The increase in swap
income was driven primarily by market-related credit valuation
adjustments tied to customer derivatives.
Non-interest
expense from continuing operations
Quarter Ended
($ amounts in millions)
12/31/2019
9/30/2019
12/31/2018
4Q19 vs. 3Q19
4Q19 vs. 4Q18
Salaries and employee benefits
$
488
$
481
$
468
$
7
1.5
%
$
20
4.3
%
Net occupancy expense
79
80
86
(1
)
(1.3
)%
(7
)
(8.1
)%
Furniture and equipment expense
82
83
82
(1
)
(1.2
)%
—
—
%
Outside services
44
48
46
(4
)
(8.3
)%
(2
)
(4.3
)%
Professional, legal and regulatory
expenses
28
21
27
7
33.3
%
1
3.7
%
Marketing
28
23
21
5
21.7
%
7
33.3
%
FDIC insurance assessments
11
12
14
(1
)
(8.3
)%
(3
)
(21.4
)%
Credit/checkcard expenses
15
19
13
(4
)
(21.1
)%
2
15.4
%
Branch consolidation, property and
equipment charges
12
5
3
7
140.0
%
9
300.0
%
Visa class B shares expense
2
5
(2
)
(3
)
(60.0
)%
4
(200.0
)%
Provision (credit) for unfunded credit
losses
(3
)
(2
)
1
(1
)
50.0
%
(4
)
(400.0
)%
Loss on early extinguishment of debt
16
—
—
16
NM
16
NM
Other
95
96
94
(1
)
(1.0
)%
1
1.1
%
Total non-interest expense
$
897
$
871
$
853
$
26
3.0
%
$
44
5.2
%
Total adjusted non-interest expense(1)
$
869
$
865
$
843
$
4
0.5
%
$
26
3.1
%
NM - Not Meaningful
Comparison of fourth quarter 2019 to third
quarter 2019
Non-interest expense increased 3 percent on a reported basis but
remained relatively unchanged on an adjusted basis(1) compared to
the third quarter. Higher production-based incentives drove a 1
percent increase in salaries and benefits. Professional fees
increased 33 percent driven by the timing of legal and consulting
costs, and marketing expenses increased 22 percent driven by
additional campaigns targeting priority markets. Partially
offsetting these increases, outside services decreased 8 percent
reflecting the company's success in reducing overall third-party
spend.
The company's fourth quarter efficiency ratio was 60.1 percent
on a reported basis and 58.1 percent on an adjusted basis(1). The
effective tax rate was approximately 20.3 percent.
Comparison of fourth quarter 2019 to
fourth quarter 2018
Non-interest expense increased 5 percent on a reported basis and
3 percent on an adjusted basis(1) compared to the fourth quarter of
2018. Salaries and benefits increased 4 percent driven primarily by
an increase in production-based incentives, partially offset by
continued staffing reductions. Staffing levels declined 2 percent
or 405 full-time equivalent positions from the fourth quarter of
2018. Marketing expenses increased 33 percent as additional
targeted campaigns commenced during the current quarter.
Occupancy expense decreased 8 percent driven primarily by
storm-related charges associated with Hurricane Michael recorded in
the prior year period, combined with the targeted reduction of
approximately 650,000 square feet of space in 2019.
Loans and
Leases
Average Balances
($ amounts in millions)
4Q19
3Q19
4Q18
4Q19 vs. 3Q19
4Q19 vs. 4Q18
Commercial and industrial
$
39,743
$
40,200
$
38,111
$
(457
)
(1.1
)%
$
1,632
4.3
%
Commercial real estate—owner-occupied*
5,846
5,871
6,196
(25
)
(0.4
)%
(350
)
(5.6
)%
Investor real estate*
6,385
6,388
6,090
(3
)
—
%
295
4.8
%
Business Lending
51,974
52,459
50,397
(485
)
(0.9
)%
1,577
3.1
%
Residential first mortgage
14,416
14,298
14,230
118
0.8
%
186
1.3
%
Home equity
8,478
8,683
9,335
(205
)
(2.4
)%
(857
)
(9.2
)%
Indirect—vehicles**
1,948
2,247
3,109
(299
)
(13.3
)%
(1,161
)
(37.3
)%
Indirect—other consumer
3,005
2,750
2,287
255
9.3
%
718
31.4
%
Consumer credit card
1,337
1,310
1,298
27
2.1
%
39
3.0
%
Other consumer
1,234
1,239
1,217
(5
)
(0.4
)%
17
1.4
%
Consumer Lending
30,418
30,527
31,476
(109
)
(0.4
)%
(1,058
)
(3.4
)%
Total Loans
$
82,392
$
82,986
$
81,873
$
(594
)
(0.7
)%
$
519
0.6
%
Adjusted Business Lending (non-GAAP)
$
51,974
$
52,459
$
50,649
$
(485
)
(0.9
)%
$
1,325
2.6
%
Adjusted Consumer Lending
(non-GAAP)(1)
28,470
28,280
28,367
190
0.7
%
103
0.4
%
Adjusted Total Loans (non-GAAP)(1)
$
80,444
$
80,739
$
79,016
$
(295
)
(0.4
)%
$
1,428
1.8
%
NM - Not meaningful.
* Approximately $345 million of senior
assisted living balances were reclassified from owner-occupied
commercial real estate loans into investor real estate loans at the
end of 2018.
** Indirect vehicles is an exit
portfolio.
Comparison of fourth quarter 2019 to third
quarter 2019
Average loans and leases decreased approximately 1 percent on a
reported basis and remained relatively unchanged on an adjusted
basis(1) compared to the prior quarter. Average balances in the
business lending portfolio decreased modestly reflecting a
continued focus on client selectivity and overall relationship
profitability. Business lending loans were also impacted by lower
line utilization as payoffs and paydowns outpaced production.
Adjusted(1) average balances in the consumer lending portfolio
increased modestly as growth in residential first mortgage,
indirect-other consumer and consumer credit card was partially
offset by declines in home equity lending.
Comparison of fourth quarter 2019 to
fourth quarter 2018
Average loans and leases increased 1 percent on a reported basis
and 2 percent on an adjusted basis(1) compared to the fourth
quarter of 2018. Adjusted(1) average balances in the business
lending portfolio increased 3 percent led by 4 percent adjusted(1)
growth in commercial and industrial loans. Owner-occupied
commercial real estate loans declined 6 percent, while investor
real estate loans increased 5 percent. Adjusted(1) average balances
in the consumer lending portfolio increased modestly as growth in
indirect-other consumer, residential first mortgage, consumer
credit card, and other consumer loans was partially offset by
declines in home equity lending.
Deposits
Average Balances
($ amounts in millions)
4Q19
3Q19
4Q18
4Q19 vs. 3Q19
4Q19 vs. 4Q18
Customer low-cost deposits
$
86,671
$
85,367
$
86,141
$
1,304
1.5
%
$
530
0.6
%
Customer time deposits
7,543
7,712
6,792
(169
)
(2.2
)%
751
11.1
%
Corporate treasury time deposits
189
436
87
(247
)
(56.7
)%
102
117.2
%
Corporate treasury other deposits
109
541
139
(432
)
(79.9
)%
(30
)
(21.6
)%
Total Deposits
$
94,512
$
94,056
$
93,159
$
456
0.5
%
$
1,353
1.5
%
($ amounts in millions)
4Q19
3Q19
4Q18
4Q19 vs. 3Q19
4Q19 vs. 4Q18
Consumer Bank Segment
$
59,359
$
59,217
$
57,366
$
142
0.2
%
$
1,993
3.5
%
Corporate Bank Segment
26,627
25,690
26,323
937
3.6
%
304
1.2
%
Wealth Management Segment
7,891
7,843
8,027
48
0.6
%
(136
)
(1.7
)%
Other
635
1,306
1,443
(671
)
(51.4
)%
(808
)
(56.0
)%
Total Deposits
$
94,512
$
94,056
$
93,159
$
456
0.5
%
$
1,353
1.5
%
Comparison of fourth quarter 2019 to third
quarter 2019
Total average deposit balances remained relatively stable at
$94.5 billion in the fourth quarter. Average deposits were
relatively unchanged in the Consumer segment while the Corporate
and Wealth Management segments experienced increases of 4 percent
and 1 percent, respectively. The increase in Corporate segment
deposits was primarily driven by seasonally higher non-interest
bearing and money market balances. Average deposits in the Other
segment deposits decreased 51 percent primarily within the
wholesale corporate treasury deposit categories.
Comparison of fourth quarter 2019 to
fourth quarter 2018
Total average deposit balances increased 1 percent compared to
the fourth quarter of 2018 as reductions in low-cost deposits,
particularly non-interest-bearing deposits, were offset by growth
in time and money market deposits. Solid growth in average Consumer
segment deposits was partially offset by reductions in Other
segment deposits. Corporate and Wealth segment deposits remained
relatively stable. Within the Consumer segment, steady growth in
primary operating accounts contributed to a 3 percent increase in
average non-interest-bearing deposits, helping to reduce the impact
of deposit remixing within the other segments.
Asset
quality
As of and for the Quarter
Ended
($ amounts in millions)
12/31/2019
9/30/2019
12/31/2018
ALL/Loans, net
1.05%
1.05%
1.01%
Allowance for loan losses to
non-performing loans, excluding loans held for sale
171%
188%
169%
Provision for loan losses
$96
$108
$95
Net loans charged-off
$96
$92
$95
Net loan charge-offs as a % of average
loans, annualized
0.46%
0.44%
0.46%
Non-accrual loans, excluding loans held
for sale/Loans, net
0.61%
0.56%
0.60%
NPAs (ex. 90+ past due)/Loans, foreclosed
properties, non-marketable investments and non-performing loans
held for sale
0.70%
0.65%
0.68%
NPAs (inc. 90+ past due)/Loans, foreclosed
properties, non-marketable investments and non-performing loans
held for sale*
0.89%
0.82%
0.85%
Total TDRs, excluding loans held for
sale
$659
$657
$729
Total Criticized Loans—Business
Services**
$2,251
$2,319
$1,922
* Excludes guaranteed residential first
mortgages that are 90+ days past due and still accruing.
** Business services represents the
combined total of commercial and investor real estate loans.
Comparison of fourth quarter 2019 to third
quarter 2019
Asset quality performed in line with the company's broader risk
expectations reflecting improvements in several credit metrics and
some continued normalization of others. Total business services
criticized and classified loans decreased 3 percent and 8 percent,
respectively, while troubled debt restructured loans and delinquent
loans, excluding government guaranteed mortgages, remained stable.
Total non-accrual loans, excluding loans held for sale, increased 5
basis points to 0.61 percent of loans outstanding. The increase in
non-accrual loans was primarily attributable to one credit within
the waste management industry. Annualized net charge-offs increased
modestly to 0.46 percent of average loans. The provision for loan
losses equaled net charge-offs resulting in an allowance for loan
losses equal to 1.05 percent of total loans outstanding and 171
percent of total non-accrual loans. While overall asset quality
remains within expectations, volatility in certain credit metrics
can be expected.
Comparison of fourth quarter 2019 to
fourth quarter 2018
Annualized net charge-offs were in line with the fourth quarter
of 2018, and the allowance for loan losses as a percent of total
loans increased 4 basis points. Total non-accrual loans, excluding
loans held for sale, increased 1 basis point as a percent of loans
outstanding. Total business services criticized loans increased 17
percent driven primarily by an increase in classified loans,
partially offset by a reduction in special mention loans. In
addition, total troubled debt restructured loans, excluding loans
held for sale, decreased 10 percent driven primarily by reductions
in commercial loans.
Capital and
liquidity
As of and for Quarter
Ended
12/31/2019
9/30/2019
12/31/2018
Basel III Common Equity Tier 1
ratio(2)
9.6%
9.6%
9.9%
Tier 1 capital ratio(2)
10.8%
10.8%
10.7%
Tangible common stockholders’ equity to
tangible assets (non-GAAP)(1)
8.34%
8.44%
7.80%
Tangible common book value per share
(non-GAAP)(1)*
$10.58
$10.79
$9.19
* 2019 improvement in tangible common book
value per share includes the impact of quarterly earnings, as well
as improvement to market value adjustments within accumulated other
comprehensive income, offset by continued capital returns.
Regions’ estimated capital ratios remain well above current
regulatory requirements under the Basel III capital rules. The Tier
1(2) and Common Equity Tier 1(2) ratios were estimated at 10.8
percent and 9.6 percent, respectively, at quarter-end.
During the fourth quarter, the company repurchased 7.8 million
shares of common stock for a total of $132 million through open
market purchases and declared $149 million in dividends to common
shareholders. The company’s loan-to-deposit ratio at the end of the
third quarter was 85 percent.
(1)
Non-GAAP; refer to pages 8, 12, 13, 14, 22, 23, and 26 of the
financial supplement to this earnings release.
(2)
Current quarter Basel III common equity Tier 1, and Tier 1
capital ratios are estimated.
Conference Call
A replay of the earnings call will be available beginning
Friday, Jan. 17, 2020, at 2 p.m. ET through Monday, Feb. 17, 2020.
To listen by telephone, please dial 855-859-2056, and use access
code 8473987. An archived webcast will also be available on the
Investor Relations page of www.regions.com.
About Regions Financial Corporation
Regions Financial Corporation (NYSE:RF), with $126 billion in
assets, is a member of the S&P 500 Index and is one of the
nation’s largest full-service providers of consumer and commercial
banking, wealth management, and mortgage products and services.
Regions serves customers across the South, Midwest and Texas, and
through its subsidiary, Regions Bank, operates approximately 1,400
banking offices and 2,000 ATMs. Regions Bank is an Equal Housing
Lender and Member FDIC. Additional information about Regions and
its full line of products and services can be found at
www.regions.com.
Forward-Looking Statements
This release may include forward-looking statements as defined
in the Private Securities Litigation Reform Act of 1995.
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. These
risks, uncertainties and other factors include, but are not limited
to, those described below:
- Current and future economic and market conditions in the United
States generally or in the communities we serve, including the
effects of possible declines in property values, increases in
unemployment rates and potential reductions of economic growth,
which may adversely affect our lending and other businesses and our
financial results and conditions.
- Possible changes in trade, monetary and fiscal policies of, and
other activities undertaken by, governments, agencies, central
banks and similar organizations, which could have a material
adverse effect on our earnings.
- Possible changes in market interest rates or capital markets
could adversely affect our revenue and expense, the value of assets
and obligations, and the availability and cost of capital and
liquidity.
- Any impairment of our goodwill or other intangibles, any
repricing of assets, or any adjustment of valuation allowances on
our deferred tax assets due to changes in law, adverse changes in
the economic environment, declining operations of the reporting
unit or other factors.
- The effect of changes in tax laws, including the effect of any
future interpretations of or amendments to Tax Reform, which may
impact our earnings, capital ratios and our ability to return
capital to stockholders.
- Possible changes in the creditworthiness of customers and the
possible impairment of the collectability of loans and leases,
including operating leases.
- Changes in the speed of loan prepayments, loan origination and
sale volumes, charge-offs, loan loss provisions or actual loan
losses where our allowance for loan losses may not be adequate to
cover our eventual losses.
- Possible acceleration of prepayments on mortgage-backed
securities due to low interest rates, and the related acceleration
of premium amortization on those securities.
- Loss of customer checking and savings account deposits as
customers pursue other, higher-yield investments, which could
increase our funding costs.
- Possible changes in consumer and business spending and saving
habits and the related effect on our ability to increase assets and
to attract deposits, which could adversely affect our net
income.
- Our ability to effectively compete with other traditional and
non-traditional financial services companies, some of whom possess
greater financial resources than we do or are subject to different
regulatory standards than we are.
- Our inability to develop and gain acceptance from current and
prospective customers for new products and services and the
enhancement of existing products and services to meet customers’
needs and respond to emerging technological trends in a timely
manner could have a negative impact on our revenue.
- Our inability to keep pace with technological changes could
result in losing business to competitors.
- Changes in laws and regulations affecting our businesses,
including legislation and regulations relating to bank products and
services, as well as changes in the enforcement and interpretation
of such laws and regulations by applicable governmental and
self-regulatory agencies, which could require us to change certain
business practices, increase compliance risk, reduce our revenue,
impose additional costs on us, or otherwise negatively affect our
businesses.
- Our ability to obtain a regulatory non-objection (as part of
the CCAR process or otherwise) to take certain capital actions,
including paying dividends and any plans to increase common stock
dividends, repurchase common stock under current or future
programs, or redeem preferred stock or other regulatory capital
instruments, may impact our ability to return capital to
stockholders and market perceptions of us.
- Our ability to comply with stress testing and capital planning
requirements (as part of the CCAR process or otherwise) may
continue to require a significant investment of our managerial
resources due to the importance of such tests and
requirements.
- Our ability to comply with applicable capital and liquidity
requirements (including, among other things, the Basel III capital
standards and the LCR rule), including our ability to generate
capital internally or raise capital on favorable terms, and if we
fail to meet requirements, our financial condition could be
negatively impacted.
- The effects of any developments, changes or actions relating to
any litigation or regulatory proceedings brought against us or any
of our subsidiaries.
- The costs, including possibly incurring fines, penalties, or
other negative effects (including reputational harm) of any adverse
judicial, administrative, or arbitral rulings or proceedings,
regulatory enforcement actions, or other legal actions to which we
or any of our subsidiaries are a party, and which may adversely
affect our results.
- Our ability to manage fluctuations in the value of assets and
liabilities and off-balance sheet exposure so as to maintain
sufficient capital and liquidity to support our business.
- Our ability to execute on our strategic and operational plans,
including our ability to fully realize the financial and
non-financial benefits relating to our strategic initiatives.
- The risks and uncertainties related to our acquisition or
divestiture of businesses.
- The success of our marketing efforts in attracting and
retaining customers.
- Our ability to recruit and retain talented and experienced
personnel to assist in the development, management and operation of
our products and services may be affected by changes in laws and
regulations in effect from time to time.
- Fraud or misconduct by our customers, employees or business
partners.
- Any inaccurate or incomplete information provided to us by our
customers or counterparties.
- Inability of our framework to manage risks associated with our
business such as credit risk and operational risk, including
third-party vendors and other service providers, which could, among
other things, result in a breach of operating or security systems
as a result of a cyber attack or similar act or failure to deliver
our services effectively.
- Dependence on key suppliers or vendors to obtain equipment and
other supplies for our business on acceptable terms.
- The inability of our internal controls and procedures to
prevent, detect or mitigate any material errors or fraudulent
acts.
- The effects of geopolitical instability, including wars,
conflicts and terrorist attacks and the potential impact, directly
or indirectly, on our businesses.
- The effects of man-made and natural disasters, including fires,
floods, droughts, tornadoes, hurricanes, and environmental damage,
which may negatively affect our operations and/or our loan
portfolios and increase our cost of conducting business. The
severity and impact of future earthquakes, fires, hurricanes,
tornadoes, droughts, floods and other weather-related events are
difficult to predict and may be exacerbated by global climate
change.
- Changes in commodity market prices and conditions could
adversely affect the cash flows of our borrowers operating in
industries that are impacted by changes in commodity prices
(including businesses indirectly impacted by commodities prices
such as businesses that transport commodities or manufacture
equipment used in the production of commodities), which could
impair their ability to service any loans outstanding to them
and/or reduce demand for loans in those industries.
- Our ability to identify and address cyber-security risks such
as data security breaches, malware, “denial of service” attacks,
“hacking” and identity theft, including account take-overs, a
failure of which could disrupt our business and result in the
disclosure of and/or misuse or misappropriation of confidential or
proprietary information, disruption or damage to our systems,
increased costs, losses, or adverse effects to our reputation.
- Our ability to realize our adjusted efficiency ratio target as
part of our expense management initiatives.
- Possible cessation or market replacement of LIBOR and the
related effect on our LIBOR-based financial products and contracts,
including, but not limited to, hedging products, debt obligations,
investments, and loans.
- Possible downgrades in our credit ratings or outlook could
increase the costs of funding from capital markets.
- The effects of a possible downgrade in the U.S. government’s
sovereign credit rating or outlook, which could result in risks to
us and general economic conditions that we are not able to
predict.
- The effects of problems encountered by other financial
institutions that adversely affect us or the banking industry
generally could require us to change certain business practices,
reduce our revenue, impose additional costs on us, or otherwise
negatively affect our businesses.
- The effects of the failure of any component of our business
infrastructure provided by a third party could disrupt our
businesses, result in the disclosure of and/or misuse of
confidential information or proprietary information, increase our
costs, negatively affect our reputation, and cause losses.
- Our ability to receive dividends from our subsidiaries could
affect our liquidity and ability to pay dividends to
shareholders.
- Changes in accounting policies or procedures as may be required
by the FASB or other regulatory agencies could materially affect
our financial statements and how we report those results, and
expectations and preliminary analyses relating to how such changes
will affect our financial results could prove incorrect.
- Other risks identified from time to time in reports that we
file with the SEC.
- Fluctuations in the price of our common stock and inability to
complete stock repurchases in the time frame and/or on the terms
anticipated.
- The effects of any damage to our reputation resulting from
developments related to any of the items identified above.
The foregoing list of factors is not exhaustive. For discussion
of these and other factors that may cause actual results to differ
from expectations, look under the captions “Forward-Looking
Statements” and “Risk Factors” of Regions’ Annual Report on Form
10-K for the year ended December 31, 2018 as filed with the
SEC.
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. You should not place undue reliance on
any forward-looking statements, which speak 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 and do not intend 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.
Regions’ Investor Relations contact is Dana Nolan at (205)
264-7040; Regions’ Media contact is Evelyn Mitchell at (205)
264-4551.
Use of non-GAAP financial measures
Management uses pre-tax pre-provision income (non-GAAP) and
adjusted pre-tax pre-provision income (non-GAAP), as well as the
adjusted efficiency ratio (non-GAAP) and the adjusted fee income
ratio (non-GAAP) to monitor performance and believes these measures
provide meaningful information to investors. Non-interest expense
(GAAP) is presented excluding certain adjustments to arrive at
adjusted non-interest expense (non-GAAP), which is the numerator
for the efficiency ratio. Non-interest income (GAAP) is presented
excluding certain adjustments to arrive at adjusted non-interest
income (non-GAAP), which is the numerator for the fee income ratio.
Adjusted non-interest income (non-GAAP) and adjusted non-interest
expense (non-GAAP) are used to determine adjusted pre-tax
pre-provision income (non-GAAP). Net interest income and other
financing income (GAAP) on a taxable-equivalent basis and
non-interest income are added together to arrive at total revenue
on a taxable-equivalent basis. Adjustments are made to arrive at
adjusted total revenue on a taxable-equivalent basis (non-GAAP),
which is the denominator for the fee income and efficiency ratios.
Regions believes that the exclusion of these adjustments provides a
meaningful base for period-to-period comparisons, which management
believes will assist investors in analyzing the operating results
of the Company and predicting future performance. These non-GAAP
financial measures are also used by management to assess the
performance of Regions’ business. It is possible that the
activities related to the adjustments may recur; however,
management does not consider the activities related to the
adjustments to be indications of ongoing operations. Regions
believes that presentation of these non-GAAP financial measures
will permit investors to assess the performance of the Company on
the same basis as that applied by management.
Tangible common stockholders’ equity ratios have become a focus
of some investors and management believes they may assist investors
in analyzing the capital position of the Company absent the effects
of intangible assets and preferred stock. Analysts and banking
regulators have assessed Regions’ capital adequacy using the
tangible common stockholders’ equity measure. Because tangible
common stockholders’ equity is not formally defined by GAAP or
prescribed in any amount by federal banking regulations it is
currently considered to be a non-GAAP financial measure and other
entities may calculate it differently than Regions’ disclosed
calculations. Since analysts and banking regulators may assess
Regions’ capital adequacy using tangible common stockholders’
equity, management believes that it is useful to provide investors
the ability to assess Regions’ capital adequacy on this same
basis.
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 selected items does
not represent the amount that effectively accrues directly to
stockholders.
Management and the Board of Directors utilize non-GAAP measures
as follows:
- Preparation of Regions' operating budgets
- Monthly financial performance reporting
- Monthly close-out reporting of consolidated results (management
only)
- Presentation to investors of company performance
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200117005043/en/
Media Contact: Evelyn Mitchell (205) 264-4551 Investor
Relations Contact: Dana Nolan (205) 264-7040
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