Press release·05/06/2025 21:13:06

Overview of Regions’ Financial Performance

Regions Financial Corporation, a major regional bank, reported solid financial results for the first quarter of 2025. The company generated net income available to common shareholders of $465 million, or $0.51 per diluted share, up from $343 million, or $0.37 per diluted share, in the same period a year earlier.

The improvement in earnings was driven by an increase in net interest income, which rose to $1.2 billion from $1.2 billion a year ago. This was primarily due to the bank’s ability to replace lower-yielding loans and securities with higher-yielding assets in the current interest rate environment. However, the net interest margin declined slightly to 3.52% from 3.55% a year earlier, as the bank held higher levels of cash with the Federal Reserve.

The provision for credit losses, which represents the amount set aside to cover expected loan losses, decreased to $124 million from $152 million a year earlier. Net charge-offs, or loans the bank has deemed uncollectible, ticked up to $123 million from $121 million. Overall, asset quality remained relatively stable.

Non-interest income, which includes fees and other revenue sources, increased to $590 million from $563 million a year ago. This was driven by higher service charges on deposit accounts and lower securities losses, partially offset by declines in capital markets income and unfavorable market valuation adjustments on employee benefit assets.

On the expense side, non-interest expense decreased to $1.0 billion from $1.1 billion a year earlier, primarily due to lower salaries and benefits, operational losses, and FDIC insurance expense. Regions’ effective tax rate was 21.1% in the first quarter of 2025, up slightly from 20.7% a year earlier.

Loan and Deposit Trends

Loans, net of unearned income, decreased by $994 million from the end of 2024 to $95.7 billion, primarily due to declines in the commercial and industrial loan portfolio. Regions manages loan growth with a focus on risk management and risk-adjusted returns.

The bank’s deposit base grew to $131.0 billion, up from $127.6 billion at the end of 2024. The increase was broad-based across Regions’ consumer, corporate, and wealth management segments, reflecting typical seasonal patterns and customer preference for liquidity in the uncertain economic environment.

Asset Quality and Allowance for Credit Losses

Regions’ allowance for credit losses, which represents management’s estimate of expected losses over the life of the loan and credit commitment portfolios, remained stable at $1.7 billion at both March 31, 2025 and December 31, 2024.

The bank’s baseline economic forecast, which is a key input to the allowance estimation process, declined slightly compared to the previous quarter, resulting in a modest increase to the allowance. The forecast anticipates further deceleration in job growth, but a slowdown in labor supply growth is expected to limit upward pressure on the unemployment rate.

Non-performing loans, excluding those held for sale, decreased by $85 million from the end of 2024 to $843 million, primarily due to charge-offs in previously identified portfolios of interest, such as the business offices and trucking sectors. Net charge-offs increased slightly to $123 million, or 0.52% of average loans, from $121 million, or 0.50%, a year earlier.

Capital and Liquidity

Regions and its banking subsidiary, Regions Bank, maintained strong capital positions, with a Common Equity Tier 1 (CET1) ratio of 10.79% and 11.77%, respectively, at March 31, 2025. These ratios exceeded the regulatory minimums, including the bank’s current stress capital buffer (SCB) requirement of 2.5%.

The company has ample liquidity, with $68.0 billion in available sources as of March 31, 2025. This includes $11.0 billion in cash on deposit with the Federal Reserve, $24.1 billion in unencumbered investment securities, and $32.9 billion in additional borrowing capacity from the Federal Home Loan Bank and Federal Reserve Bank.

Regions’ liquidity management framework is designed to effectively identify, measure, mitigate, monitor, and report liquidity risks. The bank maintains a diverse funding base, with deposits representing 92% of average earning assets, and utilizes various secured borrowing arrangements to supplement its liquidity position.

Interest Rate Risk Management

Regions is primarily exposed to interest rate risk, which is the potential for changes in interest rates to impact the company’s net interest income and the economic value of its balance sheet. The bank uses a variety of tools, including financial derivatives and debt securities, to manage this risk.

As of March 31, 2025, Regions’ net interest income profile was mostly neutral to both gradual and instantaneous parallel yield curve shifts, as changes in funding costs and balance sheet hedging income were expected to offset changes in asset yields. The bank remains exposed to intermediate and long-term yield curve tenors, which could impact net interest income as rates rise or fall.

Regions actively uses interest rate swaps, options, and other derivatives to convert a portion of its fixed-rate funding and debt securities to variable-rate positions, and to convert a portion of its floating-rate loan portfolios to fixed-rate. These hedging strategies are designed to mitigate the impact of interest rate changes on the bank’s net interest income and the economic value of its balance sheet.

Outlook and Risks

The economic environment, as described in Regions’ baseline forecast, is expected to continue impacting the company’s financial performance. While inflation is anticipated to remain above the Federal Reserve’s 2% target through 2026, it is expected to decelerate, which, along with a modestly higher unemployment rate, may give the Federal Reserve latitude to resume cutting interest rates.

However, considerable uncertainty around the scope and timing of changes to fiscal, regulatory, trade, and immigration policy could add volatility to Regions’ baseline forecasts, particularly around the paths of real GDP growth, inflation, and the unemployment rate. The company’s allowance and credit quality metrics may be affected by these economic factors, as well as circumstances related to individually large credits.

Overall, Regions’ diversified business model, strong capital and liquidity positions, and disciplined risk management approach position the company to navigate the evolving economic landscape. The bank will continue to focus on meeting the needs of its customers, managing risks, and delivering sustainable financial performance for its shareholders.