Regions reports $237 million net loss available to common shareholders for the second quarter of 2020
Despite significant increase to allowance for credit losses, delivers solid revenue and pre-tax pre-provision income(1) growth over the prior year
BIRMINGHAM, Ala.–(BUSINESS WIRE)–Regions Financial Corporation (NYSE:RF) today announced results for the second quarter ended June 30, 2020. The company reported a net loss available to common shareholders of $237 million, or $0.25 loss per share. Results include a credit loss provision in excess of net charge-offs of $700 million. The resulting increase to the company’s allowance for credit losses reflects adverse conditions and significant uncertainty around the economic outlook combined with downgrades in certain loan portfolios significantly impacted by the COVID-19 pandemic. Total revenue and pre-tax pre-provision income(1) each increased 8 percent over the prior year. Adjusted revenue(1) grew 6 percent while adjusted pre-tax pre-provision income(1) increased 8 percent, representing its highest level in over a decade. Pre-tax pre-provision income reflected strong loan and deposit growth and the benefits of a proactive interest rate hedging strategy despite a challenging operating environment.
“While our company and industry continue to navigate the unprecedented economic conditions created by the global coronavirus pandemic, this quarter’s results demonstrate that our core business is solid and resilient,” said John Turner, President and CEO. “Our reported net loss reflects a significant credit loss provision that provides for potential future losses in the severely adverse economy in which we are operating. The actions we have taken over time to strengthen and diversify our business, de-risk our loan book, deploy an effective interest rate hedging program and streamline our operating model have positioned us to support our customers and communities through these challenges.”
“We continue to prioritize proactive risk management and strategic investments to improve service, efficiency and effectiveness while carefully managing expenses,” continued Turner. “By focusing on our customers and the things we can control, we will deliver sustainable, long-term performance for our shareholders.”
Regions is continuing to offer financial assistance to support customers experiencing financial hardships related to the COVID-19 pandemic. As of June 30, 2020, the company has processed approximately 27,000 consumer payment deferral requests totaling $1.9 billion, including approximately 5,500 totaling $1.4 billion related to residential mortgages. In addition, the company has processed requests for approximately 18,000 mortgage loans serviced for others totaling $3.0 billion. From a business customer perspective, the company has processed approximately 14,000 payment deferral requests totaling $3.8 billion. In addition, Regions has facilitated assistance to its business customers through the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) totaling approximately $5 billion as of June 30, 2020.
Importantly, Regions continues to support customers outside of the stimulus programs. During the quarter, new and renewed originations to business customers, excluding PPP loans, totaled just under $13 billion. Of that total, approximately half represented new production and half represented renewals.
SUMMARY OF SECOND QUARTER 2020 RESULTS:
|
|
|
Quarter Ended |
||||||||||
|
(amounts in millions, except per share data) |
|
6/30/2020 |
|
3/31/2020 |
|
6/30/2019 |
||||||
|
Net income (loss) |
|
$ |
(214 |
) |
|
$ |
162 |
|
|
$ |
390 |
|
|
Preferred dividends |
|
23 |
|
|
23 |
|
|
16 |
|
|||
|
Net income (loss) available to common shareholders |
|
$ |
(237 |
) |
|
$ |
139 |
|
|
$ |
374 |
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
||||||
|
Weighted-average diluted shares outstanding |
|
960 |
|
|
961 |
|
|
1,012 |
|
|||
|
Actual shares outstanding—end of period |
|
960 |
|
|
957 |
|
|
1,004 |
|
|||
|
|
|
|
|
|
|
|
||||||
|
Diluted earnings (loss) per common share |
|
$ |
(0.25 |
) |
|
$ |
0.14 |
|
|
$ |
0.37 |
|
|
|
|
|
|
|
|
|
||||||
|
Selected items impacting earnings: |
|
|
|
|
|
|
||||||
|
Pre-tax adjusted items(1): |
|
|
|
|
|
|
||||||
|
Branch consolidation, property and equipment charges |
|
$ |
(10 |
) |
|
$ |
(11 |
) |
|
$ |
(2 |
) |
|
Loss on early extinguishment of debt |
|
(6 |
) |
|
— |
|
|
— |
|
|||
|
Salaries and benefits related to severance charges |
|
(2 |
) |
|
(1 |
) |
|
(2 |
) |
|||
|
Professional and related fees associated with the purchase of Ascentium Capital |
|
(8 |
) |
|
— |
|
|
— |
|
|||
|
Securities gains (losses), net |
|
1 |
|
|
— |
|
|
(19 |
) |
|||
|
Leveraged lease termination gains |
|
— |
|
|
2 |
|
|
— |
|
|||
|
Total pre-tax adjusted items(1) |
|
$ |
(25 |
) |
|
$ |
(10 |
) |
|
$ |
(23 |
) |
|
|
|
|
|
|
|
|
||||||
|
Diluted EPS impact* |
|
$ |
(0.02 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
||||||
|
Pre-tax additional selected items**: |
|
|
|
|
|
|
||||||
|
CECL provision in excess of net charge-offs*** |
|
$ |
(700 |
) |
|
$ |
(250 |
) |
|
$ |
— |
|
|
Capital markets income – CVA/DVA |
|
34 |
|
|
(34 |
) |
|
(7 |
) |
|||
|
MSR net hedge performance |
|
2 |
|
|
14 |
|
|
(7 |
) |
|||
|
PPP loans net interest income |
|
16 |
|
|
— |
|
|
— |
|
|||
|
COVID-19 related expenses |
|
(19 |
) |
|
(4 |
) |
|
— |
|
|||
|
Total pre-tax additional selected items** |
|
$ |
(667 |
) |
|
$ |
(274 |
) |
|
$ |
(14 |
) |
* Based on income taxes at an approximate 25% incremental rate. Tax rates associated with leveraged lease terminations are incrementally higher based on their structure.
** Items represent an outsized or unusual impact to the quarter or quarterly trends, but are not considered non-GAAP adjustments.
*** CECL was adopted January 1, 2020. Periods prior to January 1, 2020 reflect results under the incurred loss model.
During the second quarter of 2020, total revenue increased approximately 9 percent on a reported and adjusted basis(1) compared to the first quarter of 2020, reflecting growth in both net interest income and non-interest income. Despite lower market interest rates, net interest income benefited from the company’s significant hedging program as well as elevated loan balances, including the impact of the company’s second quarter purchase of equipment finance business Ascentium Capital and loans originated through the SBA’s PPP. Non-interest income benefited from strong mortgage production and capital markets activity, as well as market value recoveries in customer derivative credit valuation adjustments and assets held for employee benefits which are offset within salaries and benefits. Non-interest expense increased 11 percent during the quarter on a reported basis and 9 percent on an adjusted basis(1), driven by increases in salaries and benefits, including expenses related to the company’s recent equipment finance acquisition, professional fees and expenses related to the COVID-19 pandemic. Despite a challenging economic backdrop, pre-tax pre-provision income(1) increased 8 percent, and adjusted pre-tax pre-provision income(1) increased 10 percent, in each case, versus the prior quarter.
During the second quarter, credit loss provision totaled $882 million. The provision reflects adverse conditions and significant uncertainty within the economic outlook combined with downgrades in certain portfolios, as well as the impact of $182 million in net charge-offs. This quarter’s provision also includes $64 million related to the initial allowance for non-credit deteriorated loans acquired with the company’s equipment finance purchase, which closed on April 1, 2020. Compared to the first quarter of 2020, annualized net charge-offs increased to 0.80 percent of average loans, while total non-performing loans decreased 4 basis points to 0.68 percent of total loans outstanding. Business services criticized loans increased 263 basis points to 7.0 percent of total business services loans outstanding. The allowance for credit losses increased to 2.68 percent of total loans and 395 percent of non-performing loans, excluding loans held for sale. Excluding PPP loans, which are fully government guaranteed, the allowance for credit losses increases to 2.82 percent(1).
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 reflect, among other things, the company’s continued focus on increasing organizational efficiency and effectiveness. This included $10 million of net expenses associated with branch consolidations and property and equipment charges. Additional items this quarter include $6 million in early debt extinguishment charges and approximately $8 million in professional fees and related costs associated with the company’s equipment finance business purchase Ascentium Capital.
Total revenue
|
|
|
Quarter Ended |
||||||||||||||||||||||||
|
($ amounts in millions) |
|
6/30/2020 |
|
3/31/2020 |
|
6/30/2019 |
|
2Q20 vs. 1Q20 |
|
2Q20 vs. 2Q19 |
||||||||||||||||
|
Net interest income |
|
$ |
972 |
|
|
$ |
928 |
|
|
$ |
942 |
|
|
$ |
44 |
|
|
4.7 |
% |
|
$ |
30 |
|
|
3.2 |
% |
|
Taxable equivalent adjustment |
|
13 |
|
|
12 |
|
|
14 |
|
|
1 |
|
|
8.3 |
% |
|
(1 |
) |
|
(7.1 |
)% |
|||||
|
Net interest income, taxable equivalent basis |
|
$ |
985 |
|
|
$ |
940 |
|
|
$ |
956 |
|
|
$ |
45 |
|
|
4.8 |
% |
|
$ |
29 |
|
|
3.0 |
% |
|
Net interest margin (FTE) |
|
3.19 |
% |
|
3.44 |
% |
|
3.45 |
% |
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Non-interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Service charges on deposit accounts |
|
$ |
131 |
|
|
$ |
178 |
|
|
$ |
181 |
|
|
$ |
(47 |
) |
|
(26.4 |
)% |
|
$ |
(50 |
) |
|
(27.6 |
)% |
|
Card and ATM fees |
|
101 |
|
|
105 |
|
|
120 |
|
|
(4 |
) |
|
(3.8 |
)% |
|
(19 |
) |
|
(15.8 |
)% |
|||||
|
Wealth management income |
|
79 |
|
|
84 |
|
|
79 |
|
|
(5 |
) |
|
(6.0 |
)% |
|
— |
|
|
— |
% |
|||||
|
Capital markets income |
|
95 |
|
|
9 |
|
|
39 |
|
|
86 |
|
|
NM |
|
56 |
|
|
143.6 |
% |
||||||
|
Mortgage income |
|
82 |
|
|
68 |
|
|
31 |
|
|
14 |
|
|
20.6 |
% |
|
51 |
|
|
164.5 |
% |
|||||
|
Commercial credit fee income |
|
17 |
|
|
18 |
|
|
18 |
|
|
(1 |
) |
|
(5.6 |
)% |
|
(1 |
) |
|
(5.6 |
)% |
|||||
|
Bank-owned life insurance |
|
18 |
|
|
17 |
|
|
19 |
|
|
1 |
|
|
5.9 |
% |
|
(1 |
) |
|
(5.3 |
)% |
|||||
|
Securities gains (losses), net |
|
1 |
|
|
— |
|
|
(19 |
) |
|
1 |
|
|
NM |
|
20 |
|
|
105.3 |
% |
||||||
|
Market value adjustments on employee benefit assets* |
|
16 |
|
|
(25 |
) |
|
(2 |
) |
|
41 |
|
|
164.0 |
% |
|
18 |
|
|
NM |
||||||
|
Other |
|
33 |
|
|
31 |
|
|
28 |
|
|
2 |
|
|
6.5 |
% |
|
5 |
|
|
17.9 |
% |
|||||
|
Non-interest income |
|
$ |
573 |
|
|
$ |
485 |
|
|
$ |
494 |
|
|
$ |
88 |
|
|
18.1 |
% |
|
$ |
79 |
|
|
16.0 |
% |
|
Total revenue |
|
$ |
1,545 |
|
|
$ |
1,413 |
|
|
$ |
1,436 |
|
|
$ |
132 |
|
|
9.3 |
% |
|
$ |
109 |
|
|
7.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Adjusted total revenue (non-GAAP)(1) |
|
$ |
1,544 |
|
|
$ |
1,411 |
|
|
$ |
1,455 |
|
|
$ |
133 |
|
|
9.4 |
% |
|
$ |
89 |
|
|
6.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
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 second quarter 2020 to first quarter 2020
Total revenue of approximately $1.5 billion increased 9 percent on a reported and adjusted basis(1) compared to the prior quarter. Net interest income increased 5 percent, while net interest margin decreased 25 basis points to 3.19 percent. Net interest income was supported by loan growth attributable to the company’s equipment finance acquisition, PPP loans, and higher average commercial line draws, as well as the company’s significant hedging program. Net interest income also benefited from strong deposit growth, attributable to stimulus programs and customer focus on liquidity management. However, this elevated liquidity negatively impacted net interest margin. Additionally, while net interest income and net interest margin are well-protected from declines in short-term interest rates through hedging and deposit cost management, declines in long-term interest rates introduce pressure through higher mortgage-backed securities’ (MBS) premium amortization and the repricing of fixed-rate loans and securities at lower market interest rate levels.
Non-interest income increased approximately 18 percent on a reported and an adjusted basis(1) as increases in mortgage and capital markets income more than offset declines in service charges, card & ATM fees, and wealth management income. Mortgage income increased 21 percent driven primarily by record production volumes associated with the low interest rate environment. Capital markets also experienced a record quarter with income higher by $86 million, reflecting increases across most categories. Within capital markets, debt and equity underwriting as well as permanent financing placements for real estate clients each experienced a record quarter. Capital markets income was also favorably impacted by $34 million of positive market-related credit valuation adjustments resulting primarily from normalizing credit spreads during the second quarter, compared to $34 million of negative valuation adjustments during the prior quarter. Service charges and card & ATM fees decreased 26 percent and 4 percent, respectively driven by elevated customer deposits and a general decline in consumer spending activity associated with the COVID-19 pandemic. Similarly, wealth management income decreased 6 percent driven primarily by a decline in customer activity. Market value adjustments on employee benefit assets improved during the quarter, however, this improvement was offset through a corresponding increase in salaries and benefits.
Comparison of second quarter 2020 to second quarter 2019
Total revenue increased 8 percent on a reported basis and 6 percent on an adjusted basis(1) compared to the second quarter of 2019. Net interest income increased 3 percent, while net interest margin decreased 26 basis points. Net interest income was supported by loan growth attributable to the company’s equipment finance acquisition, PPP loans, and higher average commercial line draws. While these items support net interest income, elevated liquidity in the form of lower returning assets such as excess cash held at the Federal Reserve, PPP loans, and average commercial line draws reduced net interest margin. Additionally, while net interest income and net interest margin are well-protected from declines in short-term interest rates through hedging and deposit cost management, long-term interest rate reductions did introduce pressure when compared to the second quarter of 2019, through higher MBS premium amortization and repricing of fixed-rate loans and securities at lower market interest rate levels.
Non-interest income increased 16 percent on a reported basis and 12 percent on an adjusted basis(1). Mortgage income increased significantly to $82 million, driven by increased production and sales income reflecting a 171 percent increase in total mortgage production as lower market interest rates drove increased activity. Capital markets income also increased significantly reflecting growth across most categories. The increase was also impacted by significant improvement in market-related credit valuation adjustments tied to customer derivatives. Service charges and card & ATM fees declined 28 percent and 16 percent, respectively as consumer activity was negatively impacted by the COVID-19 pandemic.
Non-interest expense
|
|
|
Quarter Ended |
||||||||||||||||||||||||
|
($ amounts in millions) |
|
6/30/2020 |
|
3/31/2020 |
|
6/30/2019 |
|
2Q20 vs. 1Q20 |
|
2Q20 vs. 2Q19 |
||||||||||||||||
|
Salaries and employee benefits |
|
$ |
527 |
|
|
$ |
467 |
|
|
$ |
469 |
|
|
$ |
60 |
|
|
12.8 |
% |
|
$ |
58 |
|
|
12.4 |
% |
|
Net occupancy expense |
|
76 |
|
|
79 |
|
|
80 |
|
|
(3 |
) |
|
(3.8 |
)% |
|
(4 |
) |
|
(5.0 |
)% |
|||||
|
Furniture and equipment expense |
|
86 |
|
|
83 |
|
|
84 |
|
|
3 |
|
|
3.6 |
% |
|
2 |
|
|
2.4 |
% |
|||||
|
Outside services |
|
44 |
|
|
45 |
|
|
52 |
|
|
(1 |
) |
|
(2.2 |
)% |
|
(8 |
) |
|
(15.4 |
)% |
|||||
|
Professional, legal and regulatory expenses |
|
28 |
|
|
18 |
|
|
26 |
|
|
10 |
|
|
55.6 |
% |
|
2 |
|
|
7.7 |
% |
|||||
|
Marketing |
|
22 |
|
|
24 |
|
|
23 |
|
|
(2 |
) |
|
(8.3 |
)% |
|
(1 |
) |
|
(4.3 |
)% |
|||||
|
FDIC insurance assessments |
|
15 |
|
|
11 |
|
|
12 |
|
|
4 |
|
|
36.4 |
% |
|
3 |
|
|
25.0 |
% |
|||||
|
Credit/checkcard expenses |
|
12 |
|
|
13 |
|
|
18 |
|
|
(1 |
) |
|
(7.7 |
)% |
|
(6 |
) |
|
(33.3 |
)% |
|||||
|
Branch consolidation, property and equipment charges |
|
10 |
|
|
11 |
|
|
2 |
|
|
(1 |
) |
|
(9.1 |
)% |
|
8 |
|
|
400.0 |
% |
|||||
|
Visa class B shares expense |
|
9 |
|
|
4 |
|
|
3 |
|
|
5 |
|
|
125.0 |
% |
|
6 |
|
|
200.0 |
% |
|||||
|
Loss on early extinguishment of debt |
|
6 |
|
|
— |
|
|
— |
|
|
6 |
|
|
NM |
|
6 |
|
|
NM |
|||||||
|
Other |
|
89 |
|
|
81 |
|
|
92 |
|
|
8 |
|
|
9.9 |
% |
|
(3 |
) |
|
(3.3 |
)% |
|||||
|
Total non-interest expense |
|
$ |
924 |
|
|
$ |
836 |
|
|
$ |
861 |
|
|
$ |
88 |
|
|
10.5 |
% |
|
$ |
63 |
|
|
7.3 |
% |
|
Total adjusted non-interest expense(1) |
|
$ |
898 |
|
|
$ |
824 |
|
|
$ |
857 |
|
|
$ |
74 |
|
|
9.0 |
% |
|
$ |
41 |
|
|
4.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
NM – Not Meaningful
Comparison of second quarter 2020 to first quarter 2020
Non-interest expense increased 11 percent on a reported basis and 9 percent on an adjusted basis(1) compared to the first quarter. Salaries and benefits increased 13 percent driven primarily by positive market value adjustments on certain employee benefit assets, the addition of approximately 460 associates through the company’s equipment finance acquisition, increased production-based incentives tied primarily to elevated mortgage and capital markets income, COVID-19 related bonuses, and the company’s annual merit increase. Professional fees increased 56 percent driven primarily by costs associated with the company’s equipment finance acquisition. FDIC insurance assessments increased 36 percent attributable primarily to the effects of unfavorable economic conditions, a higher assessment base and changes in unsecured bank debt. In addition, expenses associated with Visa class B shares sold in a prior year increased to $9 million. The company also incurred a $6 million loss associated with $7.4 billion of early extinguishment of FHLB advances and a $650 million bank debt tender. These liability management actions were executed in response to excess liquidity levels resulting from this quarter’s significant deposit growth.
The company’s second quarter efficiency ratio was 59.4 percent on a reported basis and 57.7 percent on an adjusted basis(1). The effective tax rate was approximately 18.3 percent.
Comparison of second quarter 2020 to second quarter 2019
Non-interest expense increased 7 percent on a reported basis and 5 percent on an adjusted basis(1) compared to the second quarter of 2019. Salaries and benefits increased 12 percent driven primarily by higher production-based incentives and the addition of associates through the company’s equipment finance acquisition. Occupancy expense decreased 5 percent driven primarily by lower utilities and maintenance expenses resulting from the reduced use of corporate space during the pandemic. In addition, other non-interest expense decreased driven primarily by a reduction in operational losses.
Loans and Leases
|
|
|
Average Balances |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
($ amounts in millions) |
|
2Q20 |
|
1Q20 |
|
2Q19 |
|
2Q20 vs. 1Q20 |
|
2Q20 vs. 2Q19 |
|||||||||||||||
|
Commercial and industrial |
|
$ |
49,296 |
|
|
$ |
40,519 |
|
|
$ |
40,707 |
|
|
$ |
8,777 |
|
|
21.7 |
% |
|
$ |
8,589 |
|
|
21.1% |
|
Commercial real estate—owner-occupied |
|
5,804 |
|
|
5,832 |
|
|
5,895 |
|
|
(28 |
) |
|
(0.5 |
)% |
|
(91 |
) |
|
(1.5)% |
|||||
|
Investor real estate |
|
7,019 |
|
|
6,648 |
|
|
6,496 |
|
|
371 |
|
|
5.6 |
% |
|
523 |
|
|
8.1% |
|||||
|
Business Lending |
|
62,119 |
|
|
52,999 |
|
|
53,098 |
|
|
9,120 |
|
|
17.2 |
% |
|
9,021 |
|
|
17.0% |
|||||
|
Residential first mortgage |
|
14,884 |
|
|
14,469 |
|
|
14,150 |
|
|
415 |
|
|
2.9 |
% |
|
734 |
|
|
5.2% |
|||||
|
Home equity |
|
8,042 |
|
|
8,275 |
|
|
8,910 |
|
|
(233 |
) |
|
(2.8 |
)% |
|
(868 |
) |
|
(9.7)% |
|||||
|
Indirect—vehicles* |
|
1,441 |
|
|
1,679 |
|
|
2,578 |
|
|
(238 |
) |
|
(14.2 |
)% |
|
(1,137 |
) |
|
(44.1)% |
|||||
|
Indirect—other consumer |
|
3,111 |
|
|
3,263 |
|
|
2,662 |
|
|
(152 |
) |
|
(4.7 |
)% |
|
449 |
|
|
16.9% |
|||||
|
Consumer credit card |
|
1,230 |
|
|
1,348 |
|
|
1,286 |
|
|
(118 |
) |
|
(8.8 |
)% |
|
(56 |
) |
|
(4.4)% |
|||||
|
Other consumer |
|
1,137 |
|
|
1,216 |
|
|
1,221 |
|
|
(79 |
) |
|
(6.5 |
)% |
|
(84 |
) |
|
(6.9)% |
|||||
|
Consumer Lending |
|
29,845 |
|
|
30,250 |
|
|
30,807 |
|
|
(405 |
) |
|
(1.3 |
)% |
|
(962 |
) |
|
(3.1)% |
|||||
|
Total Loans |
|
$ |
91,964 |
|
|
$ |
83,249 |
|
|
$ |
83,905 |
|
|
$ |
8,715 |
|
|
10.5 |
% |
|
$ |
8,059 |
|
|
9.6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Adjusted Consumer Lending (non-GAAP)(1) |
|
28,404 |
|
|
28,571 |
|
|
28,229 |
|
|
(167 |
) |
|
(0.6 |
)% |
|
175 |
|
|
0.6% |
|||||
|
Adjusted Total Loans (non-GAAP)(1) |
|
$ |
90,523 |
|
|
$ |
81,570 |
|
|
$ |
81,327 |
|
|
$ |
8,953 |
|
|
11.0 |
% |
|
$ |
9,196 |
|
|
11.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
NM – Not meaningful.
* Indirect vehicles is an exit portfolio.
Comparison of second quarter 2020 to first quarter 2020
Average loans and leases increased approximately 10 percent on a reported basis and 11 percent on an adjusted basis(1) compared to the prior quarter. Business lending loan growth was driven by the company’s equipment finance acquisition and loans originated through the SBA’s PPP, which together added approximately $5 billion to average loans during the quarter. Average business lending loan growth was also impacted by elevated commercial line draws experienced late in the first quarter. Commercial loan utilization levels normalized during the quarter ending at approximately 45 percent, in-line with pre-pandemic trends. Adjusted(1) average balances in the consumer lending portfolio declined 1 percent as growth in residential first mortgage was more than offset by declines in other categories.
Comparison of second quarter 2020 to second quarter 2019
Average loans and leases increased 10 percent on a reported basis, and 11 percent on an adjusted basis(1) compared to the second quarter of 2019. Average balances in the business lending portfolio increased 17 percent led by growth in commercial and industrial loans resulting primarily from the company’s equipment finance acquisition, PPP loans, and elevated commercial line draws experienced late in the first quarter of 2020. Owner-occupied commercial real estate loans declined 2 percent, while investor real estate loans increased 8 percent. Adjusted(1) average balances in the consumer lending portfolio increased 1 percent as growth in residential first mortgage and indirect-other consumer was partially offset by declines in consumer credit card, home equity lending and other consumer loans.
Deposits
|
|
|
Average Balances |
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
($ amounts in millions) |
|
2Q20 |
|
1Q20 |
|
2Q19 |
|
2Q20 vs. 1Q20 |
|
2Q20 vs. 2Q19 |
||||||||||||||
|
Customer low-cost deposits |
|
$ |
104,159 |
|
|
$ |
87,451 |
|
|
$ |
85,908 |
|
|
$ |
16,708 |
|
|
19.1% |
|
$ |
18,251 |
|
|
21.2% |
|
Customer time deposits |
|
6,690 |
|
|
7,302 |
|
|
7,800 |
|
|
(612 |
) |
|
(8.4)% |
|
(1,110 |
) |
|
(14.2)% |
|||||
|
Corporate treasury time deposits |
|
72 |
|
|
280 |
|
|
657 |
|
|
(208 |
) |
|
(74.3)% |
|
(585 |
) |
|
(89.0)% |
|||||
|
Corporate treasury other deposits |
|
— |
|
|
639 |
|
|
553 |
|
|
(639 |
) |
|
(100.0)% |
|
(553 |
) |
|
(100.0)% |
|||||
|
Total Deposits |
|
$ |
110,921 |
|
|
$ |
95,672 |
|
|
$ |
94,918 |
|
|
$ |
15,249 |
|
|
15.9% |
|
$ |
16,003 |
|
|
16.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
($ amounts in millions) |
|
2Q20 |
|
1Q20 |
|
2Q19 |
|
2Q20 vs. 1Q20 |
|
2Q20 vs. 2Q19 |
||||||||||||||
|
Consumer Bank Segment |
|
$ |
65,722 |
|
|
$ |
59,711 |
|
|
$ |
59,277 |
|
|
$ |
6,011 |
|
|
10.1% |
|
$ |
6,445 |
|
|
10.9% |
|
Corporate Bank Segment |
|
36,409 |
|
|
26,618 |
|
|
26,154 |
|
|
9,791 |
|
|
36.8% |
|
10,255 |
|
|
39.2% |
|||||
|
Wealth Management Segment |
|
8,382 |
|
|
8,073 |
|
|
7,924 |
|
|
309 |
|
|
3.8% |
|
458 |
|
|
5.8% |
|||||
|
Other |
|
408 |
|
|
1,270 |
|
|
1,563 |
|
|
(862 |
) |
|
(67.9)% |
|
(1,155 |
) |
|
(73.9)% |
|||||
|
Total Deposits |
|
$ |
110,921 |
|
|
$ |
95,672 |
|
|
$ |
94,918 |
|
|
$ |
15,249 |
|
|
15.9% |
|
$ |
16,003 |
|
|
16.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comparison of second quarter 2020 to first quarter 2020
Total average deposit balances increased 16 percent to $111 billion in the second quarter. Average Consumer segment deposit growth was driven by government stimulus payments as well as reduced spending related to the COVID-19 pandemic. Corporate segment deposit growth reflects customers bringing excess deposits back to Regions. In addition, many corporate customers have used other sources of liquidity to paydown line draws maintaining current balances within their deposit accounts. Wealth segment deposit growth was driven by delayed tax filing deadline as well as elevated client liquidity needs.
Comparison of second quarter 2020 to second quarter 2019
Total average deposit balances increased 17 percent compared to the second quarter of 2019 as growth in low-cost deposits was partially offset a decrease in average time deposits. Growth in average Consumer, Wealth and Corporate segment deposits was partially offset by declines in average Other segment deposits.
Asset quality
|
|
|
As of and for the Quarter Ended |
||||
|
($ amounts in millions) |
|
6/30/2020 |
|
3/31/2020 |
|
6/30/2019 |
|
ACL/Loans, net |
|
2.68% |
|
1.89% |
|
1.08% |
|
ALL/Loans, net |
|
2.51% |
|
1.77% |
|
1.02% |
|
Allowance for credit losses to non-performing loans, excluding loans held for sale |
|
395% |
|
261% |
|
169% |
|
Allowance for loan losses to non-performing loans, excluding loans held for sale |
|
370% |
|
244% |
|
160% |
|
Provision for credit losses* |
|
$882 |
|
$373 |
|
$92 |
|
Net loans charged-off |
|
$182 |
|
$123 |
|
$92 |
|
Net loan charge-offs as a % of average loans, annualized |
|
0.80% |
|
0.59% |
|
0.44% |
|
Non-accrual loans, excluding loans held for sale/Loans, net |
|
0.68% |
|
0.72% |
|
0.64% |
|
NPAs (ex. 90+ past due)/Loans, foreclosed properties, non-marketable investments and non-performing loans held for sale |
|
0.74% |
|
0.79% |
|
0.72% |
|
NPAs (inc. 90+ past due)/Loans, foreclosed properties, non-marketable investments and non-performing loans held for sale** |
|
0.93% |
|
0.96% |
|
0.89% |
|
Total TDRs, excluding loans held for sale |
|
$626 |
|
$599 |
|
$703 |
|
Total Criticized Loans—Business Services*** |
|
$4,225 |
|
$2,524 |
|
$2,124 |
Contacts
Media Contact:
Evelyn Mitchell
(205) 264-4551
Investor Relations Contact:
Dana Nolan
(205) 264-7040