Regions Financial Corporation — 2023 Form 10-K
Business context and reporting period
Regions Financial is a Birmingham-based bank holding company serving the South, Midwest and Texas, with commercial, consumer and wealth-management businesses. This filing reports the fiscal year ended December 31, 2023; it is an annual report, not a standalone fourth-quarter report. At year-end, the Company had $152.2 billion in assets, $127.8 billion in deposits and $17.4 billion in shareholders’ equity.
Financial results and condition
| Metric | 2023 | 2022 |
|---|---|---|
| Net interest income | $5.320 billion; $5.371 billion taxable-equivalent | $4.786 billion; $4.833 billion taxable-equivalent |
| Net interest margin, taxable-equivalent | 3.90% | 3.36% |
| Non-interest income | $2.256 billion | $2.429 billion |
| Non-interest expense | $4.416 billion | $4.068 billion |
| Provision for credit losses | $553 million | $271 million |
| Net income | $2.074 billion | $2.245 billion |
| Net income available to common shareholders; diluted EPS | $1.976 billion; $2.11 | $2.146 billion; $2.28 |
| Net cash from operating activities | $2.308 billion | $3.102 billion |
Interest income growth from higher rates and loan growth lifted net interest income, but deposit and wholesale funding costs rose sharply. Total revenue was $7.576 billion. The effective tax rate declined to 20.5% from 22.0%. Net cash from investing activities was negative $1.607 billion and financing activities were negative $5.127 billion; cash and cash equivalents fell to $6.801 billion from $11.227 billion.
Loans were $98.379 billion, up 1.4% year over year. Net charge-offs were $397 million, or 0.40% of average loans (0.37% adjusted for loan-sale charge-offs). The allowance for credit losses was $1.700 billion, or 1.73% of loans; nonperforming loans excluding held-for-sale loans rose to $805 million from $500 million. The allowance-to-nonperforming-loans coverage ratio declined to 211% from 317%.
Deposits declined $4.0 billion to $127.788 billion. Non-interest-bearing deposits fell $9.0 billion; time deposits increased $9.2 billion as customers shifted to higher-yield products. Long-term borrowings were $2.330 billion. Year-end liquidity sources totaled $59.5 billion, including $4.2 billion of Federal Reserve cash, $18.9 billion of unencumbered securities and secured borrowing availability. The loan-to-deposit ratio was 77%. The Company and bank were well-capitalized: Regions’ estimated CET1 ratio was 10.26%, Tier 1 ratio 11.57%, and total capital ratio 13.35%. AOCI remained negative $2.812 billion, improved from negative $3.343 billion.
Material changes versus 2022
- Net income available to common shareholders declined 8%; diluted EPS fell from $2.28 to $2.11.
- Net interest income, taxable-equivalent, increased $538 million and margin expanded 54 basis points, primarily from higher market rates and loan growth.
- Credit costs increased: provision more than doubled, net charge-offs rose, and nonperforming loans increased, reflecting credit normalization and adverse risk migration.
- Non-interest income fell 7.1%, notably from lower capital markets and mortgage income and reduced deposit service charges. Non-interest expense rose 8.6%, including higher FDIC assessments and operational losses.
- Deposits declined and shifted toward more expensive products; cash and cash equivalents also fell. Shareholders’ equity increased to $17.4 billion, helped by $531 million of other comprehensive income.
Outlook, risks and unusual items
For 2024, Regions expected net interest income of $4.7–$4.8 billion, adjusted non-interest income of $2.3–$2.4 billion, and adjusted non-interest expense of approximately $4.1 billion. It forecast low-single-digit average loan growth, average deposits stable to modestly lower, net charge-offs of 40–50 basis points, an effective tax rate of 21–22%, and CET1 managed around 10%. The NII outlook assumes stable or lower short-term rates and long-term rates unchanged from year-end 2023. Management’s economic baseline anticipated 2.6% U.S. real GDP growth in 2024 and four 25-basis-point Federal Reserve rate cuts by year-end; these are forecasts, not assurances.
- A $119 million FDIC special assessment was recorded in fourth-quarter 2023 and is payable in eight quarterly installments beginning in 2024. Higher operational losses—primarily check-related fraud—and salary costs also contributed to expense growth.
- After year-end, Regions sold approximately $1.3 billion of available-for-sale securities, recognizing $50 million in pretax losses; proceeds were reinvested at higher yields.
- Key risks include deposit competition and funding costs, interest-rate changes, credit deterioration—particularly commercial real estate and office exposure—economic weakness in its concentrated footprint, fraud and cybersecurity, and regulatory changes. Proposed Basel III capital and long-term debt rules could increase capital or funding needs.
- Management reported no cybersecurity incident in 2023 that materially affected, or was reasonably likely to materially affect, the Company. Management estimated aggregate reasonably possible legal losses in excess of accruals as immaterial; outcomes remain uncertain.
Important facts for investors to verify
- Whether deposit balances stabilize and deposit costs ease as expected, and the resulting effect on NII and margin.
- Quarterly trends in criticized/classified credits, nonperforming loans, charge-offs, and the allowance—especially commercial real estate and office loans.
- The effects of the FDIC assessment, fraud-related operational losses, and other expense items on reported and adjusted costs.
- Actual results versus 2024 guidance, including the assumptions behind the stated NII range and adjusted measures.
- Capital and liquidity headroom after shareholder distributions and any final regulatory capital or long-term debt rules; assess AOCI and securities-related risks as well.
The independent auditor issued unqualified opinions on the consolidated financial statements and internal control over financial reporting as of December 31, 2023.