Regions Financial(US:RF)2021-11-03 16:00Part I. Financial Information Financial Statements (Unaudited) This section presents the company's unaudited consolidated financial statements as of September 30, 2021 Consolidated Balance Sheets Total assets grew to $156.2 billion, driven by a significant increase in deposits and debt securities Consolidated Balance Sheet Highlights (in millions) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Assets | $156,153 | $147,389 | | Net Loans | $81,842 | $83,099 | | Debt Securities (AFS & HTM) | $29,931 | $28,276 | | Goodwill | $5,181 | $5,190 | | Total Liabilities | $137,530 | $129,278 | | Total Deposits | $132,039 | $122,479 | | Long-term Borrowings | $2,451 | $3,569 | | Total Equity | $18,623 | $18,111 | Consolidated Statements of Income Q3 2021 net income rose to $624 million, driven by a significant benefit from credit loss provisions Income Statement Highlights (in millions, except per share data) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $965 | $988 | $2,895 | $2,888 | | Provision for (benefit from) credit losses | ($155) | $113 | ($634) | $1,368 | | Non-interest Income | $649 | $655 | $1,909 | $1,713 | | Non-interest Expense | $938 | $896 | $2,764 | $2,656 | | Net Income | $651 | $530 | $2,083 | $478 | | Net Income Available to Common Shareholders | $624 | $501 | $1,986 | $403 | | Diluted EPS | $0.65 | $0.52 | $2.06 | $0.42 | Notes to Consolidated Financial Statements These notes detail accounting policies for key areas like debt securities, loans, equity, and derivatives - The company's debt securities portfolio increased to $29.9 billion as of September 30, 2021, from $28.3 billion at year-end 20204142184 - The Allowance for Credit Losses (ACL) decreased significantly to $1.5 billion at September 30, 2021, reflecting an improved economic outlook5154207 - During Q2 2021, the company issued $400 million of Series E preferred stock and authorized a $2.5 billion common stock repurchase program9598233 - The company utilizes derivative instruments with a total notional amount of $128.8 billion for risk management114115 Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q3 2021 financial condition and operating results, including economic impacts - Q3 2021 net income available to common shareholders was $624 million ($0.65 per diluted share), up from $501 million in Q3 2020176178 - The economic outlook has improved, with a baseline forecast for real GDP growth of 5.5% in 2021172 - The company acquired EnerBank USA on October 1, 2021, adding approximately $3.1 billion in consumer loans170 2021 Expectations (excluding acquisitions) | Category | Expectation | | :--- | :--- | | Total Adjusted Revenue | Up modestly | | Adjusted Non-Interest Expense | Up modestly | | Adjusted Average Loans | Down low single digits | | Adjusted Ending Loans | Up low single digits | | Net charge-offs / average loans | Approximately 25 basis points | | Effective tax rate | 22-23% | Balance Sheet Analysis The balance sheet reflects a slight loan portfolio decrease, a reduced ACL, and strong deposit growth - Total loans decreased by $2.0 billion to $83.3 billion, primarily due to a $2.1 billion reduction in PPP loans188 - The allowance for credit losses (ACL) decreased to $1.5 billion (1.80% of total loans) from $2.3 billion at year-end 2020178207 - Total deposits increased by $9.6 billion to $132.0 billion, driven by pandemic-related inflows229 - The company maintains a strong Common Equity Tier 1 (CET1) ratio of 10.76%, up from 9.84% at year-end 2020176237 Operating Results Operating results show a compressed net interest margin, stable non-interest income, and higher expenses - Net interest margin was 2.76% in Q3 2021, down from 3.13% in Q3 2020, impacted by excess liquidity178257 - Non-interest income decreased slightly by $6 million to $649 million, as lower mortgage income was offset by higher capital markets income178279 - Non-interest expense increased by $42 million to $938 million in Q3 2021, due to higher compensation and a loss on debt extinguishment178283 - The company is asset sensitive, with a gradual 100 bps rate increase estimated to boost net interest income by $128 million to $258 million258262 Quantitative and Qualitative Disclosures About Market Risk This section details the company's primary market risk from interest rates and its management strategies - The company's primary market risk is interest rate risk, with details incorporated by reference from the MD&A section288 Controls and Procedures Management concluded that disclosure controls and internal controls over financial reporting were effective - The CEO and CFO concluded that the company's disclosure controls and procedures are effective as of the end of the period288 - No material changes were made to the company's internal control over financial reporting during the quarter288 Part II. Other Information Legal Proceedings The company faces potential legal losses and is cooperating with a CFPB investigation into overdraft practices - Regions estimates a reasonably possible loss of up to approximately $20 million in excess of accrued amounts for legal contingencies160 - The company is cooperating with a Consumer Financial Protection Bureau (CFPB) investigation regarding its overdraft practices161 Risk Factors No material changes have been made to the risk factors previously disclosed in the 2020 Annual Report - There are no material changes to the risk factors disclosed in the company's 2020 Annual Report on Form 10-K290 Unregistered Sales of Equity Securities and Use of Proceeds Share repurchases were temporarily paused in Q3 2021 pending the closing of the EnerBank acquisition - Regions did not repurchase any common stock during the three-month period ended September 30, 2021291 - A temporary pause on share repurchases was in effect until the closing of the EnerBank acquisition on October 1, 2021291 Exhibits This section lists exhibits filed with the Form 10-Q, including required CEO and CFO certifications - The exhibits include certifications from the CEO and CFO pursuant to the Sarbanes-Oxley Act of 2002293294