Regions Financial 2nd Quarter Earnings 2nd Quarter Earnings - PowerPoint PPT Presentation

Regions Financial 2nd Quarter Earnings 2nd Quarter Earnings Conference Call July 24, 2012 1

PRUDENT AND PROFITABLE GROWTH DRIVEN BY SOLID BUSINESS PERFORMANCE BUSINESS PERFORMANCE • Experienced continued growth in 2Q12 Financial Highlights commercial and industrial portfolio • Conservative low loan-to-deposit ratio Diluted EPS $0.20 provides considerable flexibility to take advantage of lending opportunities that will Pre-tax Pre-provision Pre tax Pre provision $503 $503 benefit future revenue growth benefit future revenue growth Income 1 million • Significantly grew mortgage loan production and related fee income EPS from Continuing $0.20 Operations Operations • Reduced operating expenses and credit costs Impact of Series A $0.05 Discount 1 • Continued asset quality improvement With each passing quarter, we are better positioned for ultimate outperformance. (1) Non-GAAP– See slides 13-18 for GAAP to non-GAAP reconciliation 2

2Q12 FINANCIAL HIGHLIGHTS 2Q12 vs. 1Q12 2Q12 vs. 2Q11 2Q11 1Q12 2Q12 ($ in millions, except EPS) From Continuing Operations $ 856 $ 827 $ 838 $ 11 1% $ (18) -2% Net Interest Income 543 524 (17) -3% (36) -7% 507 Non-Interest Revenue Non Interest Revenue 956 913 842 (71) -8% (114) -12% Non-Interest Expense Pre-tax Pre-provision Income (PPI) (non-GAAP) 1 443 438 65 15% 60 14% 503 548 332 265 (67) -20% (283) -52% Net Charge-Offs (150) (150) (215) (215) (239) (239) (24) (24) 11% 11% (89) (89) 59% 59% Loan Loss Reser e Red ction Loan Loss Reserve Reduction 398 117 26 (91) -78% (372) -93% Loan Loss Provision 54 54 71 17 31% 17 31% Preferred Expense Net Income Available to Common Shareholders 25 185 280 95 51% 255 NM from Continuing Operations g p Net Income / (Loss) from Discontinued 30 (40) 44 -110% (26) -87% 4 Operations $ 55 $ 145 $ 284 $ 139 96% $ 229 NM Net Income Available to Common Shareholders $0.04 $0.11 $0.20 $0.09 82% $0.16 NM Diluted EPS $0.02 $0.14 $0.20 $0.06 43% $0.18 NM Diluted EPS from Continuing Operations $0.06 $0.19 $0.25 $0.06 32% $0.19 NM Diluted EPS excluding Preferred Expense 2 $0.02 ($0.03) $0.03 NM ($0.02) NM $0.00 Diluted EPS from Discontinued Operations p (1) Non-GAAP– See slides 13-18 for GAAP to non-GAAP reconciliation (2) From Continuing Operations 3

COMMERCIAL AND INDUSTRIAL LOANS GREW 4% OVER LAST QUARTER LAST QUARTER Commercial and Industrial Loan Balances* • Commercial & industrial loan balances lions 9% increase Y-O-Y on an a erage basis increased $902 on an average basis increased $902 $ in mil $24,748 $25,650 $24,310 $23,953 $23,506 million, or 4% linked quarter reflecting strength in our middle market portfolio • Commercial & industrial line utilization • Commercial & industrial line utilization rose 130 basis points to 44.4% 2Q11 3Q11 4Q11 1Q12 2Q12 • Investor real estate totaled $9.4 billion Total Loan Balances* and Loan Yields at quarter end and has now been at quarter end and has now been $ in millions $81,106 reduced to 12% of total loans down $80,513 $78,702 from 17% one year ago $77,168 $76,670 4.31% • Loan yield remained flat linked quarter Loan yield remained flat linked quarter 4.27% % 4.35% despite the low rate environment 4.29% 4.29% 2Q11 2Q11 3Q11 3Q11 4Q11 4Q11 1Q12 1Q12 2Q12 2Q12 Avg. Loan Balance Loan Yield * Average Balances 4

FUNDING MIX CONTINUES TO IMPROVE AS DEPOSIT COSTS DECLINED 5 BPS COSTS DECLINED 5 BPS • Avg. time deposits as a % of avg. Deposit Balances* and Deposit Costs d deposits decreased to 18% in 2Q12 it d d t 18% i 2Q12 $ in millions from 23% in 2Q11 $96,122 $96,147 $96,061 $95,863 $95,155 17,175 19,053 • Deposit repricing opportunities 21,369 19,774 22,506 remain maturities include: remain, maturities include: 53 bps • 3Q12 - $2.9B at 1.2% 46 bps 40 bps • 4Q12 - $3.0B at 2.1% 37 bps 32 bps 32 bps • 1H13 - $4.6B at 1.8% 74,778 75,381 78,688 73,616 77,008 • 2H13 - $1.9B at 0.8% • Deposit costs declined 5 bps linked p p quarter, down 21 bps year-over-year 2Q11 3Q11 4Q11 1Q12 2Q12 • Total funding mix improved to 60 bps, Low Cost Deposits Time Deposits + Other Deposit Cost down 20 bps from one year ago * Average Balances 5

NET INTEREST MARGIN IMPROVES 7 BPS • Net interest margin favorably impacted by Net Interest Income and Net Interest Margin 1 improvements in deposit costs, lower excess cash and lower non-accrual $864 $858 $859 $839 $850 $ in millions balances 3.16% • Cash reserves negatively impacted net $ interest margin 8 bps in 2Q12 compared to 3.09% 13 bps in 1Q12, an improvement of 5 bps 3.08% 3.07% • Non-accruals negatively impacted net 3.04% i t interest margin 7 bps in 2Q12 compared to t i 7 b i 2Q12 d t 10 bps in 1Q12, an improvement of 3 bps • Securities portfolio totals $27 billion as a result of cash deployment result of cash deployment • Net interest margin expected to remain 2Q11 3Q11 4Q11 1Q12 2Q12 relatively stable in second half of 2012 Net Interest Income (FTE) Net Interest Income (FTE) Net Interest Margin Net Interest Margin (1) From continuing operations 6

NON-INTEREST REVENUE DRIVEN BY 17% INCREASE IN MORTGAGE INCOME MORTGAGE INCOME Fee Income by Quarter 1 • Non-interest revenue decreased 3% linked quarter linked quarter $ in millions $519 $516 $505 $490 $488 52 • Mortgage revenues increased 17% 66 55 60 57 27 25 28 15 - linked quarter and 80% over last year 26 26 14 50 50 16 16 15 15 68 68 57 77 70 44 • HARP II expected to increase 90 68 77 mortgage volume by $1 billion in 67 2012 2012 308 310 263 254 233 • Service charges declined due to the establishment of a reserve for certain customer fee refunds resulting from a 2Q11 3Q11 4Q11 1Q12 2Q12 change in the company’s non-sufficient Service charges Capital Markets, Investment Income & Trust Mortgage Income funds policy Credit Card Income Insurance Income Insurance Income Other (1) From continuing operations adjusted to exclude security gains and leveraged lease terminations gains–Non-GAAP, see appendix for GAAP to Non-GAAP reconciliation 7

REDUCTION IN CREDIT COSTS DRIVE NON-INTEREST EXPENSES DOWN 8% LINKED QUARTER EXPENSES DOWN 8% LINKED QUARTER Non-Interest Expenses 1 ons $956 • Diligent and continued focus on reducing Diligent and continued focus on reducing $ in millio $913 $ expenses through efficiencies $871 $842 $850 • Non-interest expenses were 8% lower than p prior quarter and down 12% year-over-year q y y • Other real estate expenses decreased $13 2Q11 3Q11 4Q11 1Q12 2Q12 million over prior quarter or 57% Other Real Estate and HFS Expenses Oth R l E t t d HFS E • Held for sale experienced net gains of $26 $ in millions million related to property sales, reflecting asset $48 $41 value improvements $33 • Headcount reduced by 544 positions, or 2% H d t d d b 544 iti 2% $15 $15 over the last year $(16) 2Q11 3Q11 4Q11 1Q12 2Q12 (1) Non-GAAP excludes 4Q11 goodwill impairment 8

CONTINUED MOMENTUM IN ASSET QUALITY METRICS CONTINUED MOMENTUM IN ASSET QUALITY METRICS NPL Gross Migration NPLs and Coverage Ratio 43% Decline* 31% Decline in Total NPLs* ons ons $ in millio $ in millio 122% 118% $755 120% $2,784 $2,372 $2,710 118% 120% $561 $555 116% 116% $2,151 114% $381 $1,915 112% $315 110% 112% 108% 109% 106% 104% 102% 2Q11 3Q11 4Q11 1Q12 2Q12 2Q11 3Q11 4Q11 1Q12 2Q12 NPLs** ALL / NPL** Business Services Criticized Loans Loan Loss Provision $ in millions $ in millions 31% Decline* 93% Decline* $398 $355 $7,899 $295 152 $7,305 156 $117 $6,370 $5,979 150 $26 $26 $5 436 $5,436 140 396 129 355 279 192 136 (134) (215) (150) (156) (239) 2Q11 3Q11 4Q11 1Q12 2Q12 2Q11 3Q11 4Q11 1Q12 2Q12 Business Services and HFS *Year-over-year change **Excludes loans held for sale 9 Consumer Reserve Reduction

STRONG CAPITAL RATIOS • The impact of the warrant redemption related to the Loan to Deposit Ratio (4) repayment of Series A preferred stock was $45 million during the second quarter 84% 83% 83% 81% 81% 80% 79% • Basel III Tier 1 Common ratio estimated under the new proposed rules at 8.0% • Low loan to deposit ratio allows Regions to be ready for loan growth when the market demand ready for loan growth when the market demand increases 2Q11 3Q11 4Q11 1Q12 2Q12 Tier 1 Capital Ratio Tier 1 Capital Ratio Tier 1 Common Ratio (2) Tier 1 Common Ratio 10.0% 14.3% 9.6% 13.3% 12.8% 12.6% 11.0% 3.8% 3.9% 8.5% 3.8% 3.8% 8.2% 7.9% 7.9% 11.0% 10.5% 9.4% 8.8% 9.0% (1) 2Q11 3Q11 4Q11 1Q12 2Q12 (1) 2Q11 3Q11 4Q11 1Q12 2Q12 ( ) (3) (2) ( ) Tier 1 Capital Excluding TARP Tier 1 Capital Excluding TARP TARP Impact TARP Impact (1) Current Quarter ratios are estimated (2) Non-GAAP – See appendix for reconciliation 10 (3) Includes Series A Preferred Stock and associated warrant (4) Based on ending balances

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