BIRMINGHAM, Ala.–(BUSINESS WIRE)–Regions Financial Corporation (NYSE:RF) today announced earnings for the second quarter ended June 30, 2019. The company reported net income from continuing operations available to common shareholders of $374 million, an increase of 3 percent compared to the second quarter of 2018. Earnings per diluted share from continuing operations were $0.37, a 16 percent increase. Reported pre-tax pre-provision income(1) increased 9 percent over the prior year, and 7 percent on an adjusted basis(1). The company also generated year-to-date positive operating leverage of 5 percent on a reported basis and 4 percent on an adjusted basis(1) versus the comparable prior year period.
“This quarter’s results demonstrate that our core business is strong and our focus on meeting client needs is producing sustainable growth,” said President and CEO John Turner. “We increased adjusted revenue and pre-tax pre-provision income, while also growing new customer relationships across our markets. Further, investments in talent and technology have allowed us to continue to improve the customer experience and enhance service quality, while driving greater efficiency and effectiveness. We are confident in our strategy and focused on executing our plans to generate consistent and sustainable performance while appropriately adapting to changing market dynamics.”
SUMMARY OF SECOND QUARTER 2019 RESULTS:
|
|
|
Quarter Ended |
||||||||||
|
(amounts in millions, except per share data) |
|
6/30/2019 |
|
3/31/2019 |
|
6/30/2018 |
||||||
|
Income from continuing operations (A) |
|
$ |
390 |
|
|
$ |
394 |
|
|
$ |
378 |
|
|
Income from discontinued operations, net of tax |
|
— |
|
|
— |
|
|
(3 |
) |
|||
|
Net income |
|
390 |
|
|
394 |
|
|
375 |
|
|||
|
Preferred dividends (B)* |
|
16 |
|
|
16 |
|
|
16 |
|
|||
|
Net income available to common shareholders |
|
$ |
374 |
|
|
$ |
378 |
|
|
$ |
359 |
|
|
Net income from continuing operations available to common shareholders (A) – (B) |
|
$ |
374 |
|
|
$ |
378 |
|
|
$ |
362 |
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
||||||
|
Weighted-average diluted shares outstanding—during quarter |
|
1,012 |
|
|
1,028 |
|
|
1,128 |
|
|||
|
Actual shares outstanding—end of quarter |
|
1,004 |
|
|
1,013 |
|
|
1,114 |
|
|||
|
|
|
|
|
|
|
|
||||||
|
Diluted earnings per common share from continuing operations |
|
$ |
0.37 |
|
|
$ |
0.37 |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
||||||
|
Diluted earnings per common share |
|
$ |
0.37 |
|
|
$ |
0.37 |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
||||||
|
Non-GAAP adjusted items impacting earnings from continuing operations(1): |
|
|
|
|
|
|
||||||
|
Pre-tax adjusted items: |
|
|
|
|
|
|
||||||
|
Securities gains (losses), net |
|
$ |
(19 |
) |
|
$ |
(7 |
) |
|
$ |
1 |
|
|
Branch consolidation, property and equipment charges |
|
(2 |
) |
|
(6 |
) |
|
(1 |
) |
|||
|
Salaries and benefits related to severance charges |
|
(2 |
) |
|
(2 |
) |
|
(34 |
) |
|||
|
Gain on sale of affordable housing residential mortgage loans |
|
— |
|
|
8 |
|
|
— |
|
|||
|
|
|
|
|
|
|
|
||||||
|
Diluted EPS impact** |
|
$ |
(0.02 |
) |
|
$ |
— |
|
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
||||||
|
* The first dividend for Series C preferred stock issued in April of 2019 will be declared in July of 2019 resulting in third quarter dividends that exceed their expected quarterly run rate. |
||||||||||||
|
** Based on income taxes at an approximate 25% incremental rate. |
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The company generated solid results during the second quarter of 2019. Despite volatility in market interest rates, which contributed to a decrease in the company’s net interest margin, reported total revenue remained relatively stable compared to the second quarter of 2018, while adjusted total revenue(1) increased 1 percent. Reported non-interest expense also remained well controlled during the quarter reflecting a 5 percent decline compared to the second quarter of 2018. Adjusted non-interest expense(1) decreased 2 percent reflecting decreases in most expense categories.
Asset quality continued to perform in line with the company’s expectations, and reflected stable performance within a relatively benign business environment during the quarter. While some normalization of certain credit metrics continued, overall credit results remained well within acceptable ranges of the company’s established risk appetite. Net charge-offs increased to 0.44 percent of average loans, while total non-performing loans decreased 10 percent compared to the second quarter of 2018 and represented 0.64 percent of total loans. The allowance for loan and lease losses equaled 1.02 percent of total loans and 160 percent of non-performing loans.
In response to market interest rate volatility, the company continued to execute certain balance sheet optimization strategies that will support future net interest income and net interest margin. The company executed additional forward starting derivatives during the quarter, and as of quarter end is largely complete with its hedging program objectives. The majority of these derivatives begin in early 2020 and provide stability to the company’s net interest income and net interest margin in a lower interest rate environment. In addition, while average loans and deposits grew modestly during the quarter, the pace of growth slowed as the company continued to focus on client selectivity and overall relationship profitability. The company also repositioned a portion of its investment securities portfolio incurring approximately $19 million in losses as lower yielding securities were sold and reinvested into higher yielding securities.
Non-GAAP adjusted items(1) impacting the company’s earnings are identified in order 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 second quarter include the $19 million of securities losses associated with repositioning a portion of the company’s securities portfolio. In addition, the company continued its focus on increasing organizational efficiency and effectiveness, including refining its corporate real estate and branch network. This resulted in $2 million of severance expense and $2 million of net expenses associated with branch consolidations and property and equipment charges during the quarter. Included in the net branch consolidations and property and equipment charges were several transactions impacting the company’s corporate real estate. A large office building in excess of 100,000 square feet was sold, and management made the decision to sell another large office building in excess of 300,000 square feet. These transactions will benefit future occupancy expense and advance the company toward its stated goal to reduce approximately 2 million square feet of space by 2021.
Total revenue from continuing operations
|
|
|
Quarter Ended |
||||||||||||||||||||||||
|
($ amounts in millions) |
|
6/30/2019 |
|
3/31/2019 |
|
6/30/2018 |
|
2Q19 vs. 1Q19 |
|
2Q19 vs. 2Q18 |
||||||||||||||||
|
Net interest income and other financing income |
|
$ |
942 |
|
|
$ |
948 |
|
|
$ |
926 |
|
|
$ |
(6 |
) |
|
(0.6 |
)% |
|
$ |
16 |
|
|
1.7 |
% |
|
Taxable equivalent adjustment |
|
14 |
|
|
13 |
|
|
12 |
|
|
1 |
|
|
7.7 |
% |
|
2 |
|
|
16.7 |
% |
|||||
|
Net interest income and other financing income, taxable equivalent basis |
|
$ |
956 |
|
|
$ |
961 |
|
|
$ |
938 |
|
|
$ |
(5 |
) |
|
(0.5 |
)% |
|
$ |
18 |
|
|
1.9 |
% |
|
Net interest margin (FTE) |
|
3.45 |
% |
|
3.53 |
% |
|
3.49 |
% |
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Non-interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Service charges on deposit accounts |
|
$ |
181 |
|
|
$ |
175 |
|
|
$ |
175 |
|
|
$ |
6 |
|
|
3.4 |
% |
|
6 |
|
|
3.4 |
% |
|
|
Card and ATM fees |
|
120 |
|
|
109 |
|
|
112 |
|
|
11 |
|
|
10.1 |
% |
|
8 |
|
|
7.1 |
% |
|||||
|
Wealth management income |
|
79 |
|
|
76 |
|
|
77 |
|
|
3 |
|
|
3.9 |
% |
|
2 |
|
|
2.6 |
% |
|||||
|
Capital markets income |
|
39 |
|
|
42 |
|
|
57 |
|
|
(3 |
) |
|
(7.1 |
)% |
|
(18 |
) |
|
(31.6 |
)% |
|||||
|
Mortgage Income |
|
31 |
|
|
27 |
|
|
37 |
|
|
4 |
|
|
14.8 |
% |
|
(6 |
) |
|
(16.2 |
)% |
|||||
|
Commercial credit fee income |
|
18 |
|
|
18 |
|
|
17 |
|
|
— |
|
|
NM |
|
1 |
|
|
5.9 |
% |
||||||
|
Bank-owned life insurance |
|
19 |
|
|
23 |
|
|
18 |
|
|
(4 |
) |
|
(17.4 |
)% |
|
1 |
|
|
5.6 |
% |
|||||
|
Securities gains (losses), net |
|
(19 |
) |
|
(7 |
) |
|
1 |
|
|
(12 |
) |
|
171.4 |
% |
|
(20 |
) |
|
NM |
||||||
|
Market value adjustments on employee benefit assets – defined benefit |
|
— |
|
|
5 |
|
|
(1 |
) |
|
(5 |
) |
|
(100.0 |
)% |
|
1 |
|
|
(100.0 |
)% |
|||||
|
Market value adjustments on employee benefit assets – other* |
|
(2 |
) |
|
(1 |
) |
|
(1 |
) |
|
(1 |
) |
|
100.0 |
% |
|
(1 |
) |
|
100.0 |
% |
|||||
|
Other |
|
28 |
|
|
35 |
|
|
20 |
|
|
(7 |
) |
|
(20.0 |
)% |
|
8 |
|
|
40.0 |
% |
|||||
|
Non-interest income |
|
$ |
494 |
|
|
$ |
502 |
|
|
$ |
512 |
|
|
$ |
(8 |
) |
|
(1.6 |
)% |
|
$ |
(18 |
) |
|
(3.5 |
)% |
|
Total revenue |
|
$ |
1,436 |
|
|
$ |
1,450 |
|
|
$ |
1,438 |
|
|
$ |
(14 |
) |
|
(1.0 |
)% |
|
$ |
(2 |
) |
|
(0.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Adjusted total revenue (non-GAAP)(1) |
|
$ |
1,455 |
|
|
$ |
1,449 |
|
|
$ |
1,437 |
|
|
$ |
6 |
|
|
0.4 |
% |
|
$ |
18 |
|
|
1.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
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 2019 to first quarter 2019
Total revenue of approximately $1.4 billion in the second quarter decreased approximately 1 percent on a reported basis, but increased modestly on an adjusted basis(1) compared to the prior quarter. Net interest income and other financing income decreased 1 percent over the prior quarter and net interest margin decreased to 3.45 percent. Net interest margin and net interest income and other financing income was negatively impacted primarily by deposit costs, as well as lower market interest rates, partially offset by the benefits from a higher yielding loan and securities mix. Net interest income and other financing income also benefited from one additional day in the quarter, which had a negative impact on net interest margin.
Non-interest income decreased 2 percent on a reported basis, but increased 2 percent on an adjusted basis(1). Service charges increased 3 percent reflecting a seasonal increase in activity combined with continued customer account growth. Card and ATM fees increased 10 percent reflecting seasonally higher interchange revenue associated with increased transactions and new account growth, including increased commercial card usage. Total mortgage income increased 15 percent, primarily due to seasonally higher mortgage production, partially offset by an increase in mortgage servicing rights payment decay driven by higher mortgage loan prepayments. Wealth management income increased 4 percent driven by growth in both investment management and trust fees, as well as investment services fees.
Offsetting these increases, bank owned life insurance decreased 17 percent due primarily to elevated market value recoveries recognized in the first quarter. Capital markets income decreased 7 percent attributable primarily to decreases in merger and acquisition advisory services and lower customer swap income, partially offset by an increase in fees generated from the placement of permanent financing for real estate customers. The decrease in customer swap income was driven by market-related credit valuation adjustments tied to customer derivatives. Excluding these market-based adjustments, total capital markets income would have increased approximately 5 percent compared to the prior quarter. The decrease in other non-interest income includes an $8 million gain in the first quarter associated with the sale of $167 million of affordable housing residential mortgage loans.
Comparison of second quarter 2019 to second quarter 2018
Total revenue was relatively unchanged on a reported basis, but increased 1 percent on an adjusted basis(1) compared to the second quarter of 2018. Net interest income and other financing income increased 2 percent, while net interest margin decreased 4 basis points. Net interest margin and net interest income and other financing income benefited primarily from higher loan and securities yields, including favorable remixing within the consumer loan portfolio into higher yielding products, as well as higher consumer loan balances. The benefits were partially offset by higher funding costs. While net interest income benefits from higher loan balances, overall loan growth was modestly dilutive to net interest margin.
Non-interest income decreased 4 percent on a reported basis, but increased modestly on an adjusted basis(1). Service charges increased 3 percent reflecting continued customer account growth, and card and ATM fees increased 7 percent primarily due to higher interchange revenue associated with increased transactions and new account growth. Service charges and card and ATM fees also benefited from an increase in commercial card usage and treasury management services. Wealth management income increased 3 percent, and bank-owned life insurance increased 6 percent.
Offsetting these increases, capital markets income decreased 32 percent due primarily to a decline in merger and acquisition advisory services and lower customer swap income. The decrease in customer swap income was driven primarily by market-related credit valuation adjustments tied to customer derivatives. Both mortgage production and sales and mortgage servicing income increased during the period; however, total mortgage income decreased 16 percent attributable primarily to hedging and valuation adjustments on residential mortgage servicing rights.
Non-interest expense from continuing operations
|
|
|
Quarter Ended |
||||||||||||||||||||||||
|
($ amounts in millions) |
|
6/30/2019 |
|
3/31/2019 |
|
6/30/2018 |
|
2Q19 vs. 1Q19 |
|
2Q19 vs. 2Q18 |
||||||||||||||||
|
Salaries and employee benefits |
|
$ |
469 |
|
|
$ |
478 |
|
|
$ |
511 |
|
|
$ |
(9 |
) |
|
(1.9 |
)% |
|
$ |
(42 |
) |
|
(8.2 |
)% |
|
Net occupancy expense |
|
80 |
|
|
82 |
|
|
84 |
|
|
(2 |
) |
|
(2.4 |
)% |
|
(4 |
) |
|
(4.8 |
)% |
|||||
|
Furniture and equipment expense |
|
84 |
|
|
76 |
|
|
81 |
|
|
8 |
|
|
10.5 |
% |
|
3 |
|
|
3.7 |
% |
|||||
|
Outside services |
|
52 |
|
|
45 |
|
|
48 |
|
|
7 |
|
|
15.6 |
% |
|
4 |
|
|
8.3 |
% |
|||||
|
Professional, legal and regulatory expenses |
|
26 |
|
|
20 |
|
|
33 |
|
|
6 |
|
|
30.0 |
% |
|
(7 |
) |
|
(21.2 |
)% |
|||||
|
Marketing |
|
23 |
|
|
23 |
|
|
25 |
|
|
— |
|
|
— |
% |
|
(2 |
) |
|
(8.0 |
)% |
|||||
|
FDIC insurance assessments |
|
12 |
|
|
13 |
|
|
25 |
|
|
(1 |
) |
|
(7.7 |
)% |
|
(13 |
) |
|
(52.0 |
)% |
|||||
|
Credit/checkcard expenses |
|
18 |
|
|
16 |
|
|
13 |
|
|
2 |
|
|
12.5 |
% |
|
5 |
|
|
38.5 |
% |
|||||
|
Branch consolidation, property and equipment charges |
|
2 |
|
|
6 |
|
|
1 |
|
|
(4 |
) |
|
(66.7 |
)% |
|
1 |
|
|
100.0 |
% |
|||||
|
Visa class B shares expense |
|
3 |
|
|
4 |
|
|
10 |
|
|
(1 |
) |
|
(25.0 |
)% |
|
(7 |
) |
|
(70.0 |
)% |
|||||
|
Provision (credit) for unfunded credit losses |
|
— |
|
|
(1 |
) |
|
(1 |
) |
|
1 |
|
|
(100.0 |
)% |
|
1 |
|
|
(100.0 |
)% |
|||||
|
Other |
|
92 |
|
|
98 |
|
|
81 |
|
|
(6 |
) |
|
(6.1 |
)% |
|
11 |
|
|
13.6 |
% |
|||||
|
Total non-interest expense from continuing operations |
|
$ |
861 |
|
|
$ |
860 |
|
|
$ |
911 |
|
|
$ |
1 |
|
|
0.1 |
% |
|
$ |
(50 |
) |
|
(5.5 |
)% |
|
Total adjusted non-interest expense(1) |
|
$ |
857 |
|
|
$ |
852 |
|
|
$ |
876 |
|
|
$ |
5 |
|
|
0.6 |
% |
|
$ |
(19 |
) |
|
(2.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
NM – Not Meaningful |
||||||||||||||||||||||||||
Comparison of second quarter 2019 to first quarter 2019
Non-interest expense remained relatively stable on a reported basis, but increased 1 percent on an adjusted basis(1) compared to the first quarter. Furniture and equipment expense increased 11 percent due in part to a beneficial property tax adjustment recorded in the first quarter, as well as an increase in depreciation expense associated with the deployment of new projects. Outside services increased 16 percent primarily due to higher loan servicing costs associated with growth in the company’s consumer indirect lending portfolio. Professional, legal and regulatory expenses also increased during the quarter primarily due to changes in estimated losses associated with existing exposures.
Partially offsetting these increases, salaries and benefits decreased 2 percent as seasonal increases in salaries and higher production-based incentives were offset by a decrease in benefits expense. Further, the company’s ongoing efforts to rationalize and streamline the organization contributed to a decline in staffing levels of 291 full-time equivalent positions from the prior quarter. Occupancy expense decreased 2 percent primarily due to a reduction in square footage related to corporate facilities and branch optimization efforts.
The company’s second quarter efficiency ratio was 59.4 percent on a reported basis and 58.3 percent on an adjusted basis(1). This represents an increase of 60 basis points on a reported basis and no change on an adjusted basis(1). The effective tax rate was approximately 19.4 percent reflecting excess tax benefits associated with the vesting of share-based payments connected to second quarter equity grants.
Comparison of second quarter 2019 to second quarter 2018
Non-interest expense decreased 5 percent on a reported basis and 2 percent on an adjusted basis(1) compared to the second quarter of 2018. Salaries and benefits decreased 8 percent on a reported basis. Excluding the impact of severance charges associated with staffing reductions, salaries and benefits decreased 2 percent. Staffing levels declined 3 percent or 561 full-time equivalent positions from the second quarter of 2018. FDIC insurance assessments decreased 52 percent reflecting the discontinuation of the FDIC’s surcharge, and professional fees decreased 21 percent driven primarily by lower consulting fees. In addition, expenses associated with Visa class B shares sold in a prior year decreased 70 percent.
Partially offsetting these decreases, other non-interest expense increased 14 percent driven primarily by an increase in non-service related pension costs associated with a lower discount rate, as well as higher operational losses.
Loans and Leases
|
|
|
Average Balances |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
($ amounts in millions) |
|
2Q19 |
|
1Q19 |
|
2Q18 |
|
2Q19 vs. 1Q19 |
|
2Q19 vs. 2Q18 |
|||||||||||||||
|
Commercial and industrial |
|
$ |
40,707 |
|
|
$ |
39,999 |
|
|
$ |
36,874 |
|
|
$ |
708 |
|
|
1.8 |
% |
|
$ |
3,833 |
|
|
10.4% |
|
Commercial real estate—owner-occupied |
|
5,895 |
|
|
5,969 |
|
|
6,315 |
|
|
(74 |
) |
|
(1.2 |
)% |
|
(420 |
) |
|
(6.7)% |
|||||
|
Investor real estate |
|
6,496 |
|
|
6,550 |
|
|
5,591 |
|
|
(54 |
) |
|
(0.8 |
)% |
|
905 |
|
|
16.2% |
|||||
|
Business Lending |
|
53,098 |
|
|
52,518 |
|
|
48,780 |
|
|
580 |
|
|
1.1 |
% |
|
4,318 |
|
|
8.9% |
|||||
|
Residential first mortgage* |
|
14,150 |
|
|
14,203 |
|
|
13,980 |
|
|
(53 |
) |
|
(0.4 |
)% |
|
170 |
|
|
1.2% |
|||||
|
Home equity |
|
8,910 |
|
|
9,135 |
|
|
9,792 |
|
|
(225 |
) |
|
(2.5 |
)% |
|
(882 |
) |
|
(9.0)% |
|||||
|
Indirect—vehicles** |
|
2,578 |
|
|
2,924 |
|
|
3,260 |
|
|
(346 |
) |
|
(11.8 |
)% |
|
(682 |
) |
|
(20.9)% |
|||||
|
Indirect—other consumer |
|
2,662 |
|
|
2,429 |
|
|
1,743 |
|
|
233 |
|
|
9.6 |
% |
|
919 |
|
|
52.7% |
|||||
|
Consumer credit card |
|
1,286 |
|
|
1,304 |
|
|
1,245 |
|
|
(18 |
) |
|
(1.4 |
)% |
|
41 |
|
|
3.3% |
|||||
|
Other consumer |
|
1,221 |
|
|
1,212 |
|
|
1,157 |
|
|
9 |
|
|
0.7 |
% |
|
64 |
|
|
5.5% |
|||||
|
Consumer Lending |
|
30,807 |
|
|
31,207 |
|
|
31,177 |
|
|
(400 |
) |
|
(1.3 |
)% |
|
(370 |
) |
|
(1.2)% |
|||||
|
Total Loans |
|
$ |
83,905 |
|
|
$ |
83,725 |
|
|
$ |
79,957 |
|
|
$ |
180 |
|
|
0.2 |
% |
|
$ |
3,948 |
|
|
4.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Adjusted Business Lending (non-GAAP) |
|
$ |
53,098 |
|
|
$ |
52,518 |
|
|
$ |
49,008 |
|
|
$ |
580 |
|
|
1.1 |
% |
|
$ |
4,090 |
|
|
8.3% |
|
Adjusted Consumer Lending (non-GAAP)(1) |
|
28,229 |
|
|
28,283 |
|
|
27,917 |
|
|
(54 |
) |
|
(0.2 |
)% |
|
312 |
|
|
1.1% |
|||||
|
Adjusted Total Loans (non-GAAP)(1) |
|
$ |
81,327 |
|
|
$ |
80,801 |
|
|
$ |
76,925 |
|
|
$ |
526 |
|
|
0.7 |
% |
|
$ |
4,402 |
|
|
5.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
NM – Not meaningful. |
|||||||||||||||||||||||||
|
* Average residential first mortgage balances include the impact of a $167 million loan sale at the end of the first quarter of 2019. |
|||||||||||||||||||||||||
|
** Indirect vehicles is an exit portfolio. |
|||||||||||||||||||||||||
Comparison of second quarter 2019 to first quarter 2019
Average loans and leases remained relatively stable in the second quarter, while adjusted(1) average loans and leases increased 1 percent. Average balances in the business lending portfolio increased 1 percent led by growth in commercial and industrial loans that was broad-based across industry sectors and geographic markets. Owner-occupied commercial real estate loans and investor real estate loans decreased modestly. Adjusted(1) average balances in the consumer lending portfolio remained relatively stable as growth in indirect-other consumer was offset by declines in most other consumer categories. Excluding the impact of $167 million of affordable housing residential mortgage loans sold late in the first quarter, average mortgage loans would have increased approximately 1 percent.
Comparison of second quarter 2019 to second quarter 2018
Average loans and leases increased 5 percent on a reported basis and 6 percent on an adjusted(1) basis compared to the second quarter of 2018. Adjusted(1) average balances in the business lending portfolio increased 8 percent led by 10 percent adjusted(1) growth in commercial and industrial loans. Owner-occupied commercial real estate loans declined 7 percent, while investor real estate loans increased 16 percent. Excluding the impact of senior assisted living loans reclassified to investor real estate from commercial real estate at the end of 2018, the increase in investor real estate loans was approximately 9 percent driven primarily by growth in term real estate lending. This growth reflects the company’s strategy to achieve better balance across term and construction lending. Adjusted(1) average balances in the consumer lending portfolio increased 1 percent as growth in indirect-other consumer, residential first mortgage, consumer credit card, and other consumer loans was partially offset by declines in home equity lending.
Deposits
|
|
|
Average Balances |
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
($ amounts in millions) |
|
2Q19 |
|
1Q19 |
|
2Q18 |
|
2Q19 vs. 1Q19 |
|
2Q19 vs. 2Q18 |
||||||||||||||
|
Customer low-cost deposits |
|
$ |
85,908 |
|
|
$ |
86,046 |
|
|
$ |
88,561 |
|
|
$ |
(138 |
) |
|
(0.2)% |
|
$ |
(2,653 |
) |
|
(3.0)% |
|
Customer time deposits |
|
7,800 |
|
|
7,471 |
|
|
6,610 |
|
|
329 |
|
|
4.4% |
|
1,190 |
|
|
18.0% |
|||||
|
Corporate treasury time deposits |
|
657 |
|
|
496 |
|
|
23 |
|
|
161 |
|
|
32.5% |
|
634 |
|
|
NM |
|||||
|
Corporate treasury other deposits |
|
553 |
|
|
157 |
|
|
59 |
|
|
396 |
|
|
252.2% |
|
494 |
|
|
NM |
|||||
|
Total Deposits |
|
$ |
94,918 |
|
|
$ |
94,170 |
|
|
$ |
95,253 |
|
|
$ |
748 |
|
|
0.8% |
|
$ |
(335 |
) |
|
(0.4)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
($ amounts in millions) |
|
2Q19 |
|
1Q19 |
|
2Q18 |
|
2Q19 vs. 1Q19 |
|
2Q19 vs. 2Q18 |
||||||||||||||
|
Consumer Bank Segment |
|
$ |
59,277 |
|
|
$ |
57,952 |
|
|
$ |
58,152 |
|
|
$ |
1,325 |
|
|
2.3% |
|
$ |
1,125 |
|
|
1.9% |
|
Corporate Bank Segment |
|
26,154 |
|
|
26,904 |
|
|
27,160 |
|
|
(750 |
) |
|
(2.8)% |
|
(1,006 |
) |
|
(3.7)% |
|||||
|
Wealth Management Segment |
|
7,924 |
|
|
7,948 |
|
|
8,528 |
|
|
(24 |
) |
|
(0.3)% |
|
(604 |
) |
|
(7.1)% |
|||||
|
Other |
|
1,563 |
|
|
1,366 |
|
|
1,413 |
|
|
197 |
|
|
14.4% |
|
150 |
|
|
10.6% |
|||||
|
Total Deposits |
|
$ |
94,918 |
|
|
$ |
94,170 |
|
|
$ |
95,253 |
|
|
$ |
748 |
|
|
0.8% |
|
$ |
(335 |
) |
|
(0.4)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comparison of second quarter 2019 to first quarter 2019
Total average deposit balances increased 1 percent to $94.9 billion in the second quarter. Average deposits in the Consumer segment increased 2 percent and Other segment deposits increased 14 percent. Consumer segment deposit growth was led by increases in money market, non-interest bearing and time deposits, partially offset by a decline in interest-bearing checking. Other segment deposit growth includes increases in corporate treasury short-term wholesale deposits, partially offset by declines in retail brokered sweep money market deposits. Corporate segment deposits decreased 3 percent and Wealth Management segment deposits decreased less than 1 percent. The decrease in Corporate segment deposits was primarily due to decreases in non-interest bearing and interest-bearing checking, and included seasonal declines within public fund accounts, as well as intentional reductions of certain higher cost deposits.
Comparison of second quarter 2019 to second quarter 2018
Total average deposit balances decreased less than 1 percent from the second quarter of 2018 as reductions in low-cost deposits, particularly non-interest bearing deposits, were partially offset by growth in time and corporate treasury deposits. Growth in average Consumer and Other segment deposits was offset by reductions in Corporate and Wealth Management segment deposits.
Asset quality
|
|
|
As of and for the Quarter Ended |
||||
|
($ amounts in millions) |
|
6/30/2019 |
|
3/31/2019 |
|
6/30/2018 |
|
ALL/Loans, net |
|
1.02% |
|
1.01% |
|
1.04% |
|
Allowance for loan losses to non-performing loans, excluding loans held for sale |
|
160% |
|
163% |
|
141% |
|
Net loan charge-offs as a % of average loans, annualized |
|
0.44% |
|
0.38% |
|
0.32% |
|
Non-accrual loans, excluding loans held for sale/Loans, net |
|
0.64% |
|
0.62% |
|
0.74% |
|
NPAs (ex. 90+ past due)/Loans, foreclosed properties, non-marketable investments and non-performing loans held for sale |
|
0.72% |
|
0.71% |
|
0.83% |
|
NPAs (inc. 90+ past due)/Loans, foreclosed properties, non-marketable investments and non-performing loans held for sale* |
|
0.89% |
|
0.88% |
|
0.99% |
|
Total TDRs, excluding loans held for sale |
|
$703 |
|
$756 |
|
$827 |
|
Total Criticized Loans—Business Services** |
|
$2,124 |
|
$2,119 |
|
$1,908 |
|
* 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 second quarter 2019 to first quarter 2019
Asset quality continued to perform in line with the company’s expectations, and reflected stable performance within a relatively benign business environment during the quarter.
Contacts
Media Contact:
Evelyn Mitchell
(205) 264-4551
Investor Relations Contact:
Dana Nolan
(205) 264-7040
