01—Abstract
Summary
Summary of the 10-K filed February 24, 2021. Cited figures are marked; the original filing is the authoritative source.
Regions Financial Corporation (NYSE: RF), headquartered in Birmingham, Alabama, reported net income of $1.09 billiona for 2020, or $1.03 per diluted share, compared with $1.58 billion in 2019.
Total consolidated assets were approximately $147.4 billionb, deposits were approximately $122.5 billion, and shareholders' equity was approximately $18.1 billion at December 31, 2020. Results were shaped by the COVID-19 pandemic: the provision for credit losses rose to $1.3 billion from $387 million, reflecting the January 1, 2020 CECL adoption, a changed economic outlook, and higher net charge-offs of $512 million. The allowance for credit losses reached $2.3 billion, or 2.69 percent of total loans, up from 1.10 percent a year earlier.
Net interest margin declined to 3.21 percent from 3.45 percent, while non-interest income rose to $2.4 billionc from $2.1 billion, driven by capital markets and mortgage income. Capital and liquidity remained strong. The CET1 ratio was estimated at 9.84 percent at year-end 2020, and Regions was classified as well-capitalized.
Regions Bank held $16.4 billiond in cash on deposit with the Federal Reserve. The Federal Reserve set Regions' stress capital buffer at 3.0 percent and extended limits on common dividends and share repurchases through the first quarter of 2021. Regions made no share repurchases in 2020, and on February 3, 2021 it declared a first-quarter 2021 dividend of $0.155 per share.
The company acquired Ascentium Capital, an equipment finance business, on April 1, 2020, which added about $1.9 billion in loans and leases. For 2021, management guided that total adjusted revenue would be down modestly, depending on the timing and amount of PPP forgiveness; adjusted non-interest expense would be relatively stable to down modestly; ending loans would be up low single digits; and net charge-offs would fall in a range of 55 to 65 basis points of average loans. The effective tax rate was expected to be 20 to 22 percent.
02—Key points
Key Highlights
- Net income fell to $1.09 billion ($1.03 per diluted share) in 2020 from $1.58 billion ($1.50 per diluted share) in 2019, as the provision for credit losses rose to $1.33 billion.
- The allowance for credit losses rose to $2.29 billion, or 2.69% of total loans, from 1.10% at year-end 2019, following CECL adoption and COVID-19 economic deterioration.
- Net interest margin declined to 3.21% from 3.45%, while non-interest income increased to $2.39 billion from $2.12 billion, led by capital markets and mortgage income.
- Total deposits grew to $122.5 billion from $97.5 billion, largely in non-interest-bearing demand deposits, which reached $51.3 billion.
- The CET1 ratio was an estimated 9.84% at December 31, 2020, and the stress capital buffer was set at 3.0%; the Federal Reserve limited common dividends and share repurchases through Q1 2021.
- Regions made no share repurchases in 2020 and declared a Q1 2021 common dividend of $0.155 per share.
- The company completed the Ascentium Capital equipment finance acquisition on April 1, 2020, adding about $1.9 billion in loans and leases.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 24, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $84.00M$79.00M | +6.3% |
| Operating Income | $1.09B$1.58B | −30.8% |
| Interest Expense | $368.00M$851.00M | −56.8% |
| Net Income | $1.09B$1.58B | −30.8% |
| EPS (Basic) | $1.03$1.51 | −31.8% |
| EPS (Diluted) | $1.03$1.50 | −31.3% |
| Shares Outstanding (Basic) | 959.00M995.00M | −3.6% |
| Shares Outstanding (Diluted) | 962.00M999.00M | −3.7% |
05—Questions
Frequently Asked Questions
How did the COVID-19 pandemic affect Regions' 2020 financial results?
The pandemic drove a $1.33 billion provision for credit losses in 2020 versus $387 million in 2019, reflecting a worsened economic outlook, higher net charge-offs of $512 million, and the CECL adoption. Non-interest income declined in service charges and card and ATM fees, but mortgage and capital markets income rose. The company also reported that about 90 percent of non-branch associates were working remotely at year-end, and that only 3 percent of branches were temporarily closed as of December 31, 2020.
What is Regions' capital position and can it return capital to shareholders?
At December 31, 2020, the estimated CET1 ratio was 9.84%, Tier 1 capital ratio 11.39%, and total capital ratio 13.56%, and both Regions and Regions Bank were classified as well-capitalized. The Federal Reserve set Regions' stress capital buffer at 3.0%, and dividend and repurchase limits were extended through the first quarter of 2021. Management said any near-term repurchases would be considered with the intent to operate at the higher end of its 9.5% to 10% CET1 range. No repurchases were made in 2020.
What is the outlook for Regions in 2021?
Management guided that total adjusted revenue would be down modestly, depending on the timing and amount of PPP forgiveness; adjusted non-interest expense would be relatively stable to down modestly; adjusted ending loans would be up low single digits; and adjusted average loans would be down low single digits. Net charge-offs were expected at 55 to 65 basis points of average loans, and the effective tax rate at 20 to 22 percent. Total revenue guidance assumes short-term rates remain near zero.
How large is Regions' exposure to COVID-19-impacted industries?
Regions identified COVID-19 high-risk industries, including energy, healthcare, consumer services and travel, retail, restaurants, and hotels, with balances totaling $4.96 billion, or $5.15 billion including other at-risk assets. Total commercial and investor real estate loans in high-risk segments or considered at-risk assets were approximately $5.2 billion. Loan deferrals declined through 2020, and more than 95 percent of balances previously in deferral were current or less than 30 days past due as of December 31, 2020.
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