Earnings call transcript: Regions Financial beats Q3 2025 earnings expectations

Regions Financial Corporation (market cap: $20.76B) reported its third-quarter earnings for 2025, surpassing analyst expectations with an adjusted EPS of $0.63 compared to the forecasted $0.60. The company also exceeded revenue projections, reporting $1.94 billion against an anticipated $1.92 billion. Following the announcement, the stock price rose by 1.93% in pre-market trading, reflecting investor optimism. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value model, with 6 analysts recently revising their earnings estimates upward for the upcoming period.

Key Takeaways

• Regions Financial exceeded earnings and revenue forecasts for Q3 2025.
• The stock price increased by 1.93% in pre-market activity.
• The company is investing in technology upgrades and banker recruitment.
• Positive growth in deposit and loan pipelines was reported.
• Guidance for net interest margin and loan growth remains optimistic.

Company Performance

Regions Financial demonstrated robust performance in Q3 2025, with adjusted earnings reaching $561 million, or $0.63 per share. Trading at an attractive P/E ratio of 11.32x and a PEG ratio of 0.53, the company shows strong value metrics. This performance marks a positive trend compared to previous quarters, highlighting the company’s strategic focus on capital allocation and market expansion. The bank’s strong presence in the Southeast markets and its extensive branch network have contributed to its competitive edge. InvestingPro subscribers can access detailed analysis of RF’s valuation metrics and 10+ additional exclusive insights in the comprehensive Pro Research Report.

Financial Highlights

• Revenue: $1.94 billion, up from the forecasted $1.92 billion.
• Earnings per share: $0.63, exceeding the forecast of $0.60.
• Return on Tangible Common Equity: 19%.
• Adjusted Pre-Tax, Pre-Provision Income: $830 million, a 4% increase year-over-year.

Earnings vs. Forecast

Regions Financial’s Q3 2025 results outperformed expectations, with an EPS surprise of 5% and a revenue surprise of 1.04%. This marks a continuation of the company’s positive earnings trajectory, as it also achieved significant growth in adjusted pre-tax income.

Market Reaction

Following the earnings announcement, Regions Financial’s stock experienced a 1.93% increase in pre-market trading, reaching $23.80. This movement positions the stock closer to its 52-week high of $27.96, signaling positive investor sentiment and confidence in the company’s future prospects.

Outlook & Guidance

Regions Financial maintains a positive outlook, with expectations for loan growth to align with GDP plus additional gains. The company anticipates a rebound in net interest margin to the mid-360s in Q4. Continued investments in technology and market expansion are expected to drive growth in 2026. The company’s overall Financial Health Score of "GOOD" from InvestingPro supports this positive outlook, backed by its 13-year track record of consecutive dividend increases and strong profitability metrics.

Executive Commentary

• "We’re proud of our third quarter results," stated John, an executive, emphasizing the company’s strong performance.
• David, another executive, noted, "We continue to focus on capital allocation and returns," highlighting strategic priorities.
• John added, "We’re a relationship bank, and we live that," underscoring the company’s commitment to customer relationships.

Risks and Challenges

• Potential credit risks in telecom and other sectors could impact financial stability.
• Expense growth, projected at around 2% for 2025, may affect profit margins.
• Economic fluctuations could influence loan growth and net interest margins.
• Technological upgrades and transitions pose operational risks.
• Competitive pressures in the banking sector may challenge market share.

Q&A

During the earnings call, analysts inquired about portfolio shaping efforts, potential credit risks, and deposit beta strategy. Executives addressed these concerns, maintaining a cautious stance against near-term mergers and acquisitions, while focusing on organic growth and technological advancements. For comprehensive analysis of Regions Financial’s strategic initiatives and peer comparison, investors can access the detailed Pro Research Report available exclusively on InvestingPro, covering over 1,400 top US stocks with expert insights and actionable intelligence.

Full transcript - Regions Financial Corporation (RF) Q3 2025:

Operator: Good morning and welcome to the Regions Financial Corporation quarterly earnings call. My name is Chris, and I’ll be your operator for today’s call. I would like to remind everyone that all participant phone lines have been placed on listen only. At the end of the call, there will be a question and answer session. If you wish to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. I will now turn the call over to Dana Nolan to begin.

Dana, Executive, Regions Financial Corporation: Thank you, Chris. Welcome to Regions’ third quarter earnings call. John and David will provide high-level commentary regarding our results. Earnings documents, which include our forward-looking statement disclaimer and non-GAAP reconciliations, are available in the investor relations section of our website. These disclosures cover our presentation materials, today’s prepared remarks, and Q&A. I will now turn the call over to John.

John, Executive (likely CEO), Regions Financial Corporation: Thank you, Dana, and good morning, everyone. We appreciate you joining our call today. Earlier this morning, we reported strong quarterly earnings of $548 million, resulting in earnings per share of $0.61. On an adjusted basis, earnings were $561 million or $0.63 per share. We delivered adjusted pre-tax, pre-provision income of $830 million, a 4% increase year over year, and we generated a strong return on tangible common equity of 19%. We are proud of our third quarter performance as we continue to enjoy the benefits of the investments we’ve made across our businesses and the successful execution of our strategic plans. Reflecting the strong benefits of our footprint, the recently released FDIC deposit data indicates that we generated top quartile deposit growth and above peer median change in market share over the measurement period. We did this while maintaining the lowest deposit cost amongst our peers.

This momentum carried into the third quarter as we grew total average deposits as well as accounts across consumer checking, small business, and wealth management. We also grew average loans modestly during the quarter as corporate client sentiment has continued to improve. Year over year, pipelines are almost doubled, and we’re also experiencing nice increases in production. In year to date, loan commitments have increased approximately $2 billion. However, we still face some headwinds from our portfolio shaping efforts in certain areas of higher risk leveraged lending. This type of portfolio shaping is consistent with our long-standing focus on soundness and appropriate risk-adjusted returns. In addition, we saw a meaningful increase in loans refinanced off our balance sheet through the debt capital markets during the quarter.

Importantly, with improving macro conditions along with an expected pickup in line utilization, we believe we’re well-positioned to generate stronger loan growth as we move into 2026. Our consumers also remain healthy. Debit and credit spend continue to increase versus the prior year, and payment rates on our consumer credit card remain above pre-pandemic levels. Importantly, consumer credit quality remains strong, exceeding our expectations. Asset quality metrics remain relatively stable, near historic lows. Shifting to fees, we delivered another strong quarter in terms of non-interest revenue. Wealth management continues to be a good story for us, generating another quarter of record fee income. In capital markets, excluding CBA, also reached a record high during the quarter. M&A activity continues to pick up along with commercial swaps, syndications, and debt underwriting. Additionally, treasury management continues to grow at a nice pace year over year.

We see continued opportunity to grow clients through both new relationships and within our existing customer base. We continue to make good progress on investments to modernize our core technology platforms. We’re planning to upgrade our commercial loan system to a new cloud platform in the first half of 2026. We’ll begin running pilots on our new cloud-based deposit system beginning in late 2026, with full conversion anticipated in 2027. Once completed, we expect to be one of the first regional banks in the country on a truly modern core platform. We’re also having success in our efforts to recruit and hire quality bankers across our priority markets, and we remain on track with our target banker additions and our branch banker reskilling and reallocation efforts. Wrapping up, we’re proud of our third quarter results.

The investments we’re making to modernize our core systems and add talent in priority markets are progressing well, further enhancing our ability to serve customers’ evolving needs and positioning us to capitalize on growth opportunities. Our associates’ commitment and strong execution have been instrumental in driving these results. We expect this momentum will continue into 2026 and beyond, creating sustained value for our shareholders. With that, I’ll hand it over to David to provide some highlights for the quarter.

David, Executive (likely CFO), Regions Financial Corporation: Thank you, John. Let’s start with the balance sheet. Average loans grew 1% while ending declined 1%. Within the corporate bank, areas experiencing growth during the quarter include financial services, government and public sectors, commercial durable goods manufacturing, and utilities within CNI, along with a modest increase in CRE. Offsetting this growth, however, is our ongoing portfolio shaping efforts that John mentioned. Year to date, we have exited approximately $900 million in targeted loans and estimate we have another $300 million of these loans to work through over the remainder of the year. While we are also very proud of the record quarter we experienced in our capital markets business, that does come with additional headwinds to loan growth, where we saw approximately $700 million in loan balances refinanced into the debt capital markets.

Average and ending consumer loans remained relatively stable as growth in credit card and home equity was offset by modest decline in other categories. We now expect full-year 2025 average loans to remain relatively stable versus 2024. Deposits remain strong overall. Consumer deposits were roughly flat quarter over quarter, which is slightly ahead of typical seasonal trends. Both acquisition and retention have been solid across core and priority markets. Priority markets performed well with the majority experiencing average balance increases. Commercial deposits also showed strength, with a notable increase in average balances across money market and non-interest-bearing checking. The overall share of non-interest-bearing deposits to total deposits remained within our expected low 30% range. The commercial bank continued a five-quarter trend of growing total client-managed liquidity on and off balance sheet, reflecting strong client retention and acquisition.

Favorable business profitability and healthy liquid balance sheets, combined with our bankers’ efforts, have helped us capture available opportunities. As a result, we are increasing our expectations for full-year average deposit balances. We now expect average deposits to be up low single digits versus the prior year. Let’s shift to net interest income. Net interest income was relatively stable late quarter. After adjusting for elevated income in the second quarter associated with a large credit-related interest recovery and fluctuations in hedge-related income, net interest income grew modestly, benefiting primarily from new fixed-rate asset originations and reinvestments in today’s elevated rate environment. Interest-bearing deposit costs increased two basis points in the third quarter, due in part to growth in market-rate corporate deposits, coupled with a muted quarter for CD maturities as previously discussed.

The low absolute level of deposit cost continued to highlight Regions’ competitive funding advantage and its benefit through cycles. The net interest margin declined six basis points. In addition to the non-recurring items from second quarter, the margin was negatively impacted by day count, as well as elevated cash levels that were slightly above our long-term target. Looking ahead, we expect the net interest margin to rebound into the mid-360s in the fourth quarter, providing positive momentum into 2026. Growth in net interest income and margin are expected to resume from fixed-rate asset turnover, additional securities repositioning performed late in the third quarter, prudent funding cost management, including lower deposit pricing, and modest loan growth. The strength of our balance sheet positioning is evident as expectations shift to a declining Fed funds environment.

We believe net interest income remains well protected from lower short-term interest rates with a neutral position when combining our floating rate product mix, prudent hedging program, and ability to manage deposit costs. To remain relatively neutral to changes in Fed funds, we target a mid-30s interest-bearing deposit beta. We remain confident in our ability to achieve the beta target through the repricing of our market price and index deposits. Additionally, we have the opportunity to further reduce CD rates as maturities escalate in the fourth quarter. Tactics to reduce deposit costs are well underway, and we expect a meaningful decline in the fourth quarter. We now expect full-year 2025 net interest income to grow between 3% and 4%. Now let’s take a look at fee revenue performance during the quarter, which is a really good story for us.

Adjusted non-interest income increased 6% link quarter as we achieved growth in several categories. Service charges increased 6%, driven by increased account openings, seasonally higher activity, and one additional business day in the quarter. Capital markets income, excluding CBA, increased 22% compared to the prior quarter, representing a new record. The increase was driven by higher M&A advisory activity, commercial swap sales, loan syndications, and debt underwriting activity. With respect to the fourth quarter, we currently expect to be in the $95 to $105 million range. Wealth management delivered a third consecutive quarter of record-setting income, driven primarily by elevated sales activity and favorable market conditions. With respect to full-year 2025, we now expect adjusted non-interest income to grow between 4% and 5% versus 2024. Let’s move on to non-interest expense. Adjusted non-interest expense increased 4% compared to the prior quarter.

Salaries and benefits increased 2%, reflecting higher than anticipated health insurance-related costs, higher revenue-based incentives, and growth initiative-related hires. Year to date, higher than anticipated health insurance-related costs, as well as market value adjustments on employee benefit assets, have pressured our full-year expense expectations. We now expect full-year 2025 adjusted non-interest expense to be up approximately 2%, and we expect to generate full-year adjusted positive operating leverage at the lower end of the 150 to 250 basis point range. Regarding asset quality, annualized net charge-offs as a percentage of average loans increased 8 basis points to 55 basis points and reflect solid progress made on resolutions within certain previously identified portfolios of interest which were already reserved for. Business services criticized loans improved significantly during the quarter, decreasing almost $1 billion or 20%, while non-performing loans decreased 2%, with the NPL ratio declining 1 basis point to 79 basis points.

As a result of the significant improvement in business services criticized loans and the overall decline in NPLs, as well as the solid progress made on resolutions within certain stress portfolios, the allowance for credit losses decreased $30 million during the quarter. The resulting allowance for credit loss ratio was reduced 2 basis points to 1.78%, while the allowance as a percentage of NPLs actually increased to 226%. We now expect full-year net charge-offs to be approximately 50 basis points. We expect losses to remain elevated in the fourth quarter as we continue to resolve credits in the portfolios of interest. Importantly, we have reserved for the remaining anticipated losses associated with these portfolios. Let’s turn to capital and liquidity.

We ended the quarter with an estimated common equity tier one ratio of 10.8% while executing $250 million in share repurchases and paying $235 million in common dividends during the quarter. When adjusted to include AOCI, common equity tier one increased from 9.3% to an estimated 9.5% quarter over quarter, attributable to strong capital generation and a reduction in long-term interest rates. We expect to manage common equity tier one inclusive of AOCI at this approximate level going forward, which should provide meaningful capital flexibility to meet proposed and evolving regulatory changes while supporting strategic growth objectives and allowing us to continue to increase the dividend and repurchase shares commensurate with earnings. As John indicated, we’re pleased with our quarterly performance, particularly given the evolving market dynamics, and we believe we are well positioned regardless of market conditions.

This covers our prepared remarks, and we’ll now move to the Q&A portion of the call.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. Please hold while we compile the Q&A roster. Thank you. Our first question comes from the line of Ken Usdin with Autonomous Research. Please proceed with your question.

John, Executive (likely CEO), Regions Financial Corporation: Morning, Ken.

Good morning, everybody. I just wanted to level set and make sure we’re very clear with everybody that it was the stuff you had set aside, David, that you ended up with. That was stuff you’ve been talking about for a long, long time. It looks like underneath that, once those are resolved, can you give a good update for how you’re seeing any other portfolios that you’re watching? Obviously, given the tone that we’re talking about this week across the group. Thanks.

Yeah. Again, this is John. I would say, you know, we’ve identified office and transportation as portfolios of interest for quite some time, and the charge-offs, predominantly the charge-offs you saw in the third quarter related to office, we expect to resolve some additional credit exposures either at office or transportation in the fourth quarter, which is why we’re guiding to continued somewhat elevated charge-offs, but still feel good about long-term our guidance of 40 to 50 basis points. Significantly, if you look at just credit quality overall, we had over $900 million in reductions, almost $1 billion in reductions in classified loans during the quarter. Some portion of that was a result of upgrades, and in fact, we saw more upgrades than downgrades for the first time in a number of quarters, significantly more upgrades than downgrades, I would say.

Importantly, we had significant payoffs in the portfolio during the quarter as well, which resulted in the paydowns. That improvement was across a variety of categories. It was in office. It was in transportation. Some of that was the result of the resolution of some of the problems that we have. We also saw improvement in technology in that portfolio and generally in multifamily, where the biggest amount of improvement was seen in the portfolio. Good trends, non-performing loans down modestly. We would expect that trend to continue as we resolve matters in the fourth quarter and potentially in the first. The only other area that we’re seeing maybe a little elevated risk is in telecommunications, where we’ve had some exposures related to just the changing dynamics in the television and media industry.

Nothing that we would say is overly significant, but if we’re watching another portfolio, that would likely be it. Feel good about our exposures to non-depository financial institutions. Almost 40% of our exposure is in our REIT portfolio, which is a legacy business, something we’ve been involved in for quite some time. It’s a relationship business, generates significant deposits and capital markets fee income for us. It’s very low leverage and has performed really well. Very good credit quality as demonstrated over a long period of time. The balance of our NDFI business is pretty well distributed. There are no significant concentrations of any kind. The business is managed by bankers with a good deal of experience and in many cases also involves our asset-based lending group we call Regions Business Capital, which is trained and routinely monitors customer accounts, asset quality, etc.

We feel really good about our NDFI exposure. Very limited, not a lot of private, not a lot of direct private equity exposure, I would say.

Appreciate all that, Carter. One more point on that loan point you made is that there has been some, you know, continued, like you said, paydowns in a bunch of the portfolios. How close are we to getting to what you would anticipate to be the bottom, just looking at, you know, a bunch of the ending period balances and also just noting that CNI was a little bit lower this quarter, probably in part to what you were just speaking to? Thanks.

Yeah, I think in David’s prepared comments, he said we would expect another $300 million plus or minus in paydowns related to exit portfolios. The good news is that pipelines are up 100% year over year. They are growing significantly. Production’s up a little less than 20% year over year. We feel good about what we’re seeing. Unfortunately, line utilization is down 70+ basis points. We still have a lot of liquidity that’s reflected, the customers do, and that’s reflected by the deposit growth we’ve seen in our corporate banking business. Until customers use some of that liquidity, excess liquidity, probably not going to see a real increase in line utilization, but we’re prepared for it. We continue to grow new relationships, to grow existing relationships, and that’s, I think, demonstrated in the increase in commitments we’re seeing and in pipeline activity.

We’re optimistic about 2026 and what we will see based upon the experience we’re having today.

David, Executive (likely CFO), Regions Financial Corporation: Ken, just to be clear, that $300 million we think will get dealt with this year so that we start 2026 and we’re ready to go and grow. Great. Thank you.

Operator: Our next question comes from the line of Scott Siefers with Piper Sandler Companies. Please proceed with your question.

Morning, guys. Thanks for taking the question. I want to follow up just a little, just so I make sure that I understand kind of what’s being reduced. When you make the comments about portfolio shaping, do those indeed align with what you would characterize as sort of portfolios of interest on the credit side? In other words, the stuff that you’re charging off, is that also the stuff where we’re getting those balance reductions, or are those mutually exclusive?

John, Executive (likely CEO), Regions Financial Corporation: No, it would be a combination of both. I think you’re seeing balance reductions in some categories where we had identified credits as having some weakness, so they weren’t necessarily in our portfolios of interest. An example of that would be maybe multifamily, where it was a portfolio we were observing, but we did not feel there was any risk of loss in that portfolio. As absorption rates have improved, as projects have stabilized and moved from construction to lease-up or lease-up to stabilization, we’ve been able to upgrade those credits, and that’s had a positive impact on the multifamily portfolio. On the other hand, we did have some charge-offs in apartment and in transportation, which in part led to some of the reductions that we experienced.

David, Executive (likely CFO), Regions Financial Corporation: The big change was leveraged lending portfolio. That $900 million year to date is where that predominantly came from.

Okay. Wonderful. Thank you for that clarification. I guess regardless, it sounds like we’re getting to a point where you enter next year kind of free and clear anyway. Nonetheless, I appreciate that. John, just a broader strategic question. You’ve been pretty clear that you all would rather focus internally than engage in M&A. Just curious if your thoughts have changed now that you have a smaller competitor in your footprint getting much larger and then one of your category four competitors making its way into category three with a deal of its own. Any change now that the ground is shifting a little in your thinking at all?

John, Executive (likely CEO), Regions Financial Corporation: No, our position hasn’t changed. I’d say we have great confidence in our strategic plan. We’ve been focused on executing it over the last seven, eight years, and it’s produced all the good results for our shareholders. We have, we think, really great bankers. We’re in really good markets. Our opportunity is to continue to grow from the presence that we have. We’re certainly aware of all that’s going on in the marketplace. We continue to follow the activity, and we challenge ourselves from time to time about whether or not we ought to be more interested in depository M&A. Today, we continue to believe that it is disruptive, that it takes your focus off executing your business on a day-to-day basis.

I would say that we are completely focused on the execution of our strategic plan, and we’ll continue to maintain that position, recognize that we’re always going to do what’s in the best interest of our business and for our shareholders. Today, we think that’s executing our plan.

Understood. Okay, perfect. Thank you all very much.

Operator: Our next question comes from the line of Steven Alexopoulos with TD Cowen. Please proceed with your question.

David, Executive (likely CFO), Regions Financial Corporation: Hey, good morning, everybody.

John, Executive (likely CEO), Regions Financial Corporation: Morning.

David, Executive (likely CFO), Regions Financial Corporation: I want to start on the margin first. You’re guiding to mid-360s in the fourth quarter. It’s going to give you one of the highest margins in the industry. I’m looking at slide six, which says you’re mostly neutral to rates. Does that mean that if the Fed is cutting rates, you can hold the NIM steady from that but continue to see NIM expansion from this mid-360 level, given the fixed asset turnover you’re calling out on the same slide?

Yeah. This is David. Right now, the frontbook, backbook benefit is about 125 basis points if you average out loans and securities. That is down from the second quarter, primarily because the 10-year is coming down. We still see some benefit there. The beauty of our hedging portfolio is to protect us as rates come down. We still have negative carry in our derivative portfolio, our hedging portfolio. It gets less negative as rates come down. That is why we have confidence that we’ve been able to have a pretty resilient net interest margin regardless of what rate environment we have. We clearly had a higher margin last quarter. We’ve tried to provide and remind everybody what we said on the call last time. We had some one-timers that boosted that about three to four basis points that did not repeat.

We put on page five to try to help walk that forward. We have pretty good confidence that we’re going to grow 1% to 2% in net interest income. If you look at kind of where we think earning assets will be, that should produce a margin getting close to the mid-360s.

John, Executive (likely CEO), Regions Financial Corporation: Okay. That’s helpful. On the positive operating leverage, I know you’re saying it’s going to be the lower end of the 150 to 250 range, and you’re taking the adjusted expense outlook up to the upper end of the 1% to 2% range. The question is, should we assume that the increase in the expense outlook is sticky here just given inflationary impacts? As we look forward, there’s more of a tailwind to expenses, which is going to restrict your ability to drive more material positive operating leverage?

David, Executive (likely CFO), Regions Financial Corporation: If you look at, we do not adjust our HR asset number. That was about $12 million. We’ve tried to show you if there’s $12 million in NIR and there’s $12 million in NIE, they offset. When you’re looking at percentage change for positive operating leverage, which is a percentage change in revenue less a percentage change in expense, it affects you there. We can’t undo what’s happened. All it is is a recognition of where we are through nine months. We have really good expense controls. We feel good about where our expenses will be in the fourth quarter. We’re giving you the guide for the fourth quarter, assuming our HR asset thing’s zero because we don’t know if what’s going to happen with the market could go up or down. In some regards, we’d like to adjust for that, but that’s frowned upon.

What we do is we show you both sides so that you could do your own math. That’s all this is. There’s no runaway inflation. There’s no cost that we can’t deal with appropriately. We’re going to have approximately 2% increase in cost for the year, which is pretty good, and nice operating leverage. We feel good about our expectations for the fourth quarter.

John, Executive (likely CEO), Regions Financial Corporation: Okay. Thanks for taking my questions.

David, Executive (likely CFO), Regions Financial Corporation: Okay.

Operator: Our next question comes from a line of John Pancari with Evercore ISI. Please proceed with your questions.

David, Executive (likely CFO), Regions Financial Corporation: Hey, John.

John, Executive (likely CEO), Regions Financial Corporation: Morning. Morning. Back to the charge-offs and the resolutions that you’re working through. Just for a little bit more color there, is this more a function of a more proactive posture by Regions to address some of these lingering and previously identified issues, or is it more a function of, you know, borrower progression that they’re now at the point where you can quantify the loss content and then address them? Yeah. Typically, John, it’s the latter. You just work on something until you can’t work on it anymore or until the borrower doesn’t have any capacity to continue to support the loan or the borrower makes some decision that potentially is adverse to the potential collection of the credit, then we’re in a position to resolve it. Each case is different, and timing has a lot to do with recognition of loss.

In this case, we just had a number of things come together in the quarter. Okay. Got it. Thanks, John. Secondly, also related to this, back to the portfolio shaping efforts around the exit portfolios, if I could maybe ask Scott’s question another way, how much of the rationale in these portfolio shaping actions is rate? Is it driven by the rate environment in the backdrop versus the credit risk dynamic? Yeah.

David, Executive (likely CFO), Regions Financial Corporation: I would say it’s driven both by our credit risk appetite and returns. We have, going back to 2015, really focused on capital allocation. I think that’s been one of the hallmarks of our success and the execution of our plan. We’re aligning our credit risk appetite with expected returns in portfolios. We will occasionally originate a credit believing that we have the opportunity to expand a relationship. As we look back on that, we conclude after two or three years that we were wrong. There wasn’t a path to expand a relationship, and we choose to exit. There are also situations where we just look at the overall profile of a portfolio or relationship and decide that the credit risk is more than we want to take. Much of what we’ve been executing is part of a leveraged portfolio that was primarily based on enterprise value lending and assumptions.

We just don’t believe that’s a place where we want to be at this point, and we’ve chosen to exit a number of those relationships.

John, Executive (likely CEO), Regions Financial Corporation: Got it. If I could just ask one more related to that, what’s the risk or the potential that you flagged the remaining $300 million that you’re working through? What’s the potential that it could continue to increase even after that and be more of a growth headwind or anything as you look at it?

David, Executive (likely CFO), Regions Financial Corporation: That is what we’ve identified. We have an ongoing rigor around looking at relationships and portfolios. Today, that’s our best advice and guidance. We don’t anticipate any significant additional reductions. I would say that one of the things that we feel really good about is, again, the rigor and the process around continuing to think about capital allocation and returns on that capital. Six to twelve months from now, we might identify something else that we decide we want to trade out of. All the while, we’re improving returns on the capital that our shareholders are giving us to deploy into our business. We think our, if you look at our track record, it’s served us awfully well.

John, I’ll add, sometimes a customer’s business model will change after we’ve provided credit to them. That business model change is not consistent with our expectations, and our original underwriting and return expectations change. We’ll exit as a result of that. We have constantly been portfolio shaping. This particular year, it was just a little bit larger than it has been. To John’s point, you’ll see it in 2026, but today, we don’t anticipate it being at the level that you’ve seen in 2025.

John, Executive (likely CEO), Regions Financial Corporation: Got it. That makes sense. All right, David. Thank you. Thanks, John.

David, Executive (likely CFO), Regions Financial Corporation: Thank you.

Operator: Our next question comes from the line of Dave Rochester with Cantor Fitzgerald. Please proceed with your question.

David, Executive (likely CFO), Regions Financial Corporation: Hey, good morning, guys.

Hey. On loan growth, I know you’ve had some investors point out that loan growth has been kind of hard to come by at Regions over the last year or two. You lay out a really solid case here for some acceleration next year with all the assets you mentioned. Plus, you had the banker expansion and the reskilling going on. You’re far along that plan there. It seems like you might be pretty well positioned to grow maybe even faster than GDP in the group next year once you kick out that $300 million. Is that the thinking at this point? Is that within the realm of possibility?

I think we’ve consistently said our expectations would be to grow our loan portfolio consistent with GDP in our markets, plus a little bit. We have real GDP right now low at around 2%. That’s baked in. We’ll give you guidance in terms of what our expectation will be for loan growth later. You’re framing that up kind of consistent with what we’ve been saying.

Sounds good. Maybe just switching to credit real quick, your comments earlier on the telecom book. How big is that exposure that you’re looking at within that segment right now that you’re maybe a little bit more concerned about?

John, Executive (likely CEO), Regions Financial Corporation: Total is about $700 million, not, you know, relatively speaking, not significant.

Great. One last one on credit. Obviously, great to see the reduction in criticized loans. It was a pretty meaningful move lower. You guys have done a lot of work on that front on de-risking in the portfolio. I know you talked about NPAs continuing to decline. Are you looking at maybe more steeper declines over the next few quarters, just given everything you’re seeing and all the work you’ve done?

I think you can assume that, although I’m reluctant to give too much guidance there because, again, the timing of when we resolve credits has a lot to do with, ultimately, what the level of NPAs is.

Yep.

You can assume if criticized loans came down by almost $1 billion, the trajectory is positive.

Yep.

David, Executive (likely CFO), Regions Financial Corporation: As a result, our 1.78% loan allowance ratio should, over time, as we work through the charge-offs, which we have reserves for, you would see our reserve trickle down closer to that 2019 kind of day one CECL of 1.63%. I think we show that on one of our pages on our deck. I think it’s page 40 or something like that.

Sounds good. Thank you very much.

Okay.

John, Executive (likely CEO), Regions Financial Corporation: Thank you.

Operator: Our next question comes from the line of Gerard Cassidy with RBC Capital Markets. Please proceed with your question.

John, Executive (likely CEO), Regions Financial Corporation: Morning, Gerard.

David, Executive (likely CFO), Regions Financial Corporation: Morning.

John, Executive (likely CEO), Regions Financial Corporation: Morning, Dennis. Hey, guys. You guys don’t have a dog in this fight. I’m asking this more from a theoretical point of view. These issues we’re seeing with some of your peers in the regional bank space on fraud, can you share with us from your experience, when fraud happens, is it driven more because the people that are running the organizations are crooks, or is it more that the underlying fundamentals really deteriorate and the first action they may take is to kind of cover it up with fraud, which then eventually leads to a bad outcome? Do you guys have a sense from just your experience when you go back a number of decades how this kind of develops?

Gerard, first of all, I certainly don’t want to speak for, and I know you didn’t ask this question, but for any other institutions, I’ll just speak about my own experience. Over 43 years in the banking industry, most of that as a commercial banker. I think it’s both. Occasionally, you will get in business with someone that is a crook from the get-go. In other cases, the business deteriorates. The owner or the sponsor doesn’t know what else to do. They think just like anybody that embezzles. Typically, they think they’re going to pay it back. I think it’s true of people that get involved with fraud and double pledging assets and those kinds of things. They think they can resolve the matter over time, and ultimately, they can’t. My experience has been both.

That’s why we focus so intensely on client selectivity, knowing who we’re banking and doing business almost exclusively in our footprint because that’s the best way to know who you’re banking, to observe on a regular basis how your customer’s doing, and to ensure you’re on top of what’s going on with the exposures.

Very good, very helpful. Thank you. Coming back to your earlier comments, John, about your deposits and I think deposit market share from the FDIC data, there’s always been a concern that the big trillionaire banks are going to take advantage of deposits from the regional banks. Obviously, you’re not seeing that. Can you share with us the strategies you’re using that you have seen your success in deposit growth and maybe allay some of the fears that some investors have that regional banks are not going to be that competitive against these trillionaire banks?

Thank you for the question. We’ve been in a lot of the markets that we’re in for 150, 160, 170-plus years. We’re the hometown bank in so many places. We have a well-known brand, well-known bankers. We believe in our people and think they do a great job. We continue to make investments in technology to ensure that we are providing customers with access to banking anywhere they want to bank. We continue to focus on how we use the data that we have and the technology that we offer to provide personalized, unique ideas and solutions to help customers. I think all those things, Gerard, are really, really important. Combine that with our focus on customer service and the great job our bankers do building brand loyalty. We’re continuing to grow consumer checking accounts across our footprint. That’s a challenging aspect of what we do.

We are a relationship bank, and we live that. I think, as a result, we feel good about our ability to continue to compete with the larger banks. There are lots of smaller banks who are coming into our markets as well, and then non-banks. I think we’re in a good position. We’re going to continue to leverage our brand, leverage our footprint, and we believe we can continue to be very competitive and grow.

David, Executive (likely CFO), Regions Financial Corporation: Gerard, I’ll add one thing. I get a lot of questions about branches, and we clearly have more branches on a relative basis than almost anybody. The reason for that is we’re in a lot of towns inside of our four states that we operate in. When we see people moving into the Southeast, for instance, it depends on where they’re going. They’re coming to the larger major metros. We’ll compete for deposits based on services John just mentioned. We aren’t seeing that type of competition move in in the smaller towns. It’s just cost-prohibitive. I don’t think people would do that. We’ve been in these little markets for a long, long time. When you’re in these small markets, you have to have a physical point of presence, which is why we have as many branches that we do. We can continue to compete.

Two-thirds of our deposits are consumer, non-interest-bearing deposits that are based on how we serve our customers. If we continue to do a good job there, we get a high promoter score and a lot of loyalty from that customer base.

Very good. Thank you, gentlemen.

John, Executive (likely CEO), Regions Financial Corporation: Thank you.

Operator: Our next question comes from the line of Ibrahim Punawala with Bank of America. Please proceed with your question.

David, Executive (likely CFO), Regions Financial Corporation: Good morning.

John, Executive (likely CEO), Regions Financial Corporation: Hey, morning, David. I just wanted to follow up. When we think about just the expense growth this year, 2% means you have best-in-class ROE. Just remind us, you started this, I think, a year ago in terms of just the investment spend. To what level do you think you could see investment spend pick up, be it branches? You obviously have a big technology conversion coming up. How are you thinking about growth versus the ROE maths, whether better growth for a slightly lower ROE would be okay? Just would love your thought process there.

David, Executive (likely CFO), Regions Financial Corporation: To your point, we continue to make investments in our technology initiative. That’s kind of in our running brief. We don’t expect that to change materially year on year. We have made investments in bankers, and we will continue to do so, in particular in those eight priority markets that we have listed. It’s important for us. It’s a great question because it’s a good challenge in terms of how much money can we invest today without having too much negative impact on our return. The return on tangible common equity is critically important to us. John mentioned it. In 2015, we became fixated on capital allocation because we think having an appropriate return correlates real tightly to your share price, and that’s what shareholders want you to do. That being said, we want to grow too.

We’re trying to be balanced in terms of how much investment we make while keeping the returns relatively high. We have begun to invest in our network and in marketing and things of that nature to change a little bit of the growth trajectory. You should see us grow things like small business relationships, which will come with deposits, not really as much in loans, but deposits, which is the fuel for how we really make money going forward. As loan growth picks up, we want the good core low-cost funding to be right there with it. That’s why we started making the investments, like you said, about a year ago, and we’ll continue that into 2026.

John, Executive (likely CEO), Regions Financial Corporation: Got it. Thanks for that. Just one on capital, you have the slide 11 where you talk about just the Basel endgame. As you look forward on changes on the regulatory and the supervisory fronts, anything in particular that would help you in terms of how you’re running the business or the balance sheet? Could that cause any changes, even at the margin on the capital liquidity growth?

David, Executive (likely CFO), Regions Financial Corporation: Things like the long-term debt thing we hope has gone. That’s to prevent us from having to issue more expensive long-term debt, so that’s positive. The Basel III, where it was going until right at the very end when it kind of got pushed off, was going in a way that was reasonably helpful to us. RWAs were going to come down a little bit as the gold plating was removed. That being said, the AOCI component, there’s a chance it doesn’t cover a category four like us. We’ve given you the numbers, assuming it’s in there, but it may not be. We also have to consider rating agencies. That’s important too, and they’re trying to figure it out as well.

We’ve seen other larger institutions talk about capital targets that are real close to where we are, and we’re trying to figure out how, you know, what the new regime is going to be. We think we’re in a good spot, and we have a lot of optionality with capital because we’re already there at 9.5% with AOCI. You know, could there be some incremental benefit? There could be, but we’re not counting on that. If it works to our favor, then we’ll take advantage of it as we see it.

John, Executive (likely CEO), Regions Financial Corporation: Hopeful. Thanks, David.

Operator: Our next question comes from a line of Chris McGrady with KBW. Please proceed with your question.

Morning, Chris.

David, Executive (likely CFO), Regions Financial Corporation: Hey, good morning.

John, Executive (likely CEO), Regions Financial Corporation: Hey, good morning.

David, Executive (likely CFO), Regions Financial Corporation: Hey, good morning.

John, Executive (likely CEO), Regions Financial Corporation: Going back to the deposit betas, I think it was the mid-30s comment. It feels conservative to me. I guess maybe interested in your view there. Is it an element of conservatism, or is it an element a bit of like protecting your market, some of the larger banks coming in?

David, Executive (likely CFO), Regions Financial Corporation: What we’re trying to do is tell you what our guidance is based on, and our guidance is based on that 35% in beta. We clearly were higher than that going up, and we would expect over time that we would get the 43% beta that we had back. That will take some time, and we don’t want to commit to that because we don’t want it to be time-based. We feel fairly confident we can have a 35% beta, and with that has a nice continued growth and a resulting margin as a result of it. We have a chance to outperform on that front. We’re at 32%, 33% right now. We have a big CD maturity quarter coming up in the fourth quarter, which gives us confidence on that 1% to 2% NII growth and margin growth.

We expect that to result in an accumulative beta pushing on 35% at that time. If we get a little bit more, then everybody will be happier.

John, Executive (likely CEO), Regions Financial Corporation: Understood. Perfect. For my follow-up, I think you were pretty clear about our capital priorities. If and when the situation changes and inorganic growth becomes more likely, is that a situation where you think you would have to communicate that change to the market before, or do you kind of think what you said publicly is sufficient? Thanks. I think we always want to keep our options open. As I said earlier, M&A is not part of our strategic plan today. We feel really confident in our strategic plan. We have to run the business for the benefit of the business and the shareholders. Things change. I don’t know how we necessarily signal that any more than providing the perspective that I just have.

David, Executive (likely CFO), Regions Financial Corporation: Okay, thank you.

Operator: Our next question comes from the line of Betsy Graseck with Morgan Stanley. Please proceed with your question.

John, Executive (likely CEO), Regions Financial Corporation: Hi, good morning.

David, Executive (likely CFO), Regions Financial Corporation: Morning, Betsy.

John, Executive (likely CEO), Regions Financial Corporation: Hey.

David, Executive (likely CFO), Regions Financial Corporation: Hey. I had two quick questions. One is on the CD rolls that are coming in the coming quarter. Can you give us a sense as to the NIM impact there or basis point impact in deposits? It’s $5.5 billion, and it really just depends on what happens with rates there. That’s a big driver of our improvement from 3.59% to the mid-3.60s%. We also have some backbook opportunities to change as we go through time. We’re trying to shortcut the math for you and tell you that’s the driver of probably the single biggest, that and the frontbook, backbook, or repricing. Those are the two big drivers of getting to the mid-3.60s%. Okay. All right. Thanks.

Then separately, how should we think about the NIM NII outlook in an environment where the Fed is cutting slowly, 25 bps a meeting, versus more rapidly, call it 50 bps a meeting for a little bit? When you go rapidly, it takes time to reprice things. That will hurt your NIM in the short term, and you’ll catch up later. If it goes slow enough where you can reprice appropriately, that helps you maintain a little more stable net interest margin. That’s the beauty of what we’ve done because we can change our pricing. We have our hedge portfolio that’s protecting us. As rates continue to come down, that negative carry that we have today will dissipate or decline, helping us support net interest income and the resulting margin.

That’s why we have a fairly stable margin in just about any interest rate environment, especially if the Fed moves at a moderated pace. It’s the quick pace up and down that poses risks to a given quarter’s net interest income and margin because you just can’t go reprice time deposits immediately. It takes time to work through it.

Operator: All right. Great. Thank you. Thank you. Your final question comes from a line of Christopher Spahr with Wells Fargo. Please proceed with your question.

David, Executive (likely CFO), Regions Financial Corporation: Good morning. Thanks. Hi. Good morning. Thanks for taking the call. I just want to think about the salary and comp outlook as we kind of exit the fourth quarter. If you look at average headcount for the year, it’s pretty much flat. It’s kind of creeped up a little bit on an end-of-period basis, but average is about flat. Yet, comp for the full year or year to date is up 4%. How do you kind of take that into account as we kind of exit the fourth quarter? How does that kind of relate to some of your investments and maybe some of the tech benefits that you expect over time with all the investments you already made? Thank you. Yeah. We don’t see a huge change in headcount. We are making investments in client-facing people in all of our businesses.

We are looking to have savings on headcount through natural attrition by leveraging technology and process improvement. We’ve been reasonably effective at that. We have an opportunity, I think, to move that up quite a bit. When you talk about artificial intelligence and things of that nature, I think it can be helpful. We are in the formative stage of that. How much we can change, we’re not going to go there just yet. We don’t see any big change in salaries and benefits. We generally start with about a 2.5% to 3% baked-in salary increase kind of across the board. Some are higher, some are lower. That’s generally how it’s been working. We don’t see that changing for 2026 at this point. I do want to make sure that you know that HR asset valuation, which is offset in NIR, is in that salary and benefit line item.

When you’re calculating your averages, you need to take that out because that can skew the numbers a little bit too.

John, Executive (likely CEO), Regions Financial Corporation: All right. Thank you. Thank you all. Appreciate your interest in our company, and I hope you have a good weekend.

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