2015 Investor Day Risk Management & Credit Matt Lusco Barb Godin. November 19, 2015

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1 2015 Investor Day Risk Management & Credit Matt Lusco Barb Godin November 19, 2015

2 Our priorities 5 strategic priorities that provide direction for decisions Focus on the Customer Strengthen Financial Performance Build the Best Team Enhance Risk Management Manage Performance 2

3 A look at our progress Evolution of risk management at Regions Shareholder Value Basic Risk Silos Top Down Integrated Risk Management Risk Intelligent Regions has transitioned from a basic risk management program, guided by ad hoc policies and procedures, to fully integrated risk management. 3

4 Enhancing risk culture at Regions A strategic priority Risk Appetite Business Strategy Financial Results Ensuring Regions business strategy is aligned with its appetite for risk SM Needs based selling Deepen existing relationships Ensure transparency and better credit performance Build the Best Bank Continuing to enhance Regions risk culture Regions is committed to continuous improvement and the sustainability of our mission. 4

5 Risk Ownership & Awareness (ROA) Initiatives ROA Communications & Outreach Campaign Risk and Control Self Assessment (RCSA) Refresh Business Risk Committees IT Risk Framework Enhancements 5

6 Risk Management Framework Sound Risk Appetite Overall Risk Capacity Understood across the Company Alignment with Strategy Risk Appetite Risk concentrations Financial Strength Risk reward evaluation 6

7 Regions approach to managing risk Three lines of defense 1 st Line of Defense Identifies, owns and manages risk Implements action plans to strengthen risk management or reduce risk Monitors and reports on risks relevant to the unit 2 nd Line of Defense Designs risk management framework Oversees the Company s risk taking activities and assesses aggregate risk independently Identifies, measures, mitigates, monitors, and reports risks 3 rd Line of Defense Performs independent review and objective assessments Conducts financial, operational, technology, risk management, compliance, and fiduciary audits 7

8 Regions approach to managing risk A sound risk management framework Sustainable Risk Processes Responsible Risk Governance Committees & Working Groups Policies & Procedures Risk Reporting 8

9 From de risking to recovery 4.00% Net Charge Offs % of Loans 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 4Q09 4Q10 4Q11 4Q12 4Q13* 4Q14 3Q15 *4Q13 included $151 million in Net Charge-Offs related to RFM TDR loan transfer to HFS, including these charges net charge-offs were 1.46%. Net Charge-Offs as presented excluding these charges would have been 0.67%. 9

10 Steady credit quality improvement $16,000 Criticized and Total Loans ($ in millions) $95,000 $4,000 Non Performing and Total Loans ($ in millions) $95,000 $14,000 $12,000 $90,000 $3,500 $3,000 $90,000 $10,000 $85,000 $2,500 $2,000 $85,000 $8,000 $80,000 $1,500 $80,000 $6,000 $4,000 $75,000 $1,000 $500 $75,000 $2,000 4Q09 4Q10 4Q11 4Q12 4Q13 4Q14 Criticized Loans Total Loans 3Q15 $70,000 $ 4Q09 4Q10 4Q11 4Q12 4Q13 4Q14 Non performing Loans Total Loans 3Q15 $70,000 10

11 5 pillars of credit culture Everybody Owns Credit Risk Committed to continuous improvement Asset Quality is Derived from People Quality Associates are accountable for decisions Diversification is key 11

12 Diversity in the loan portfolio Loan Balances at December 31, 2009 ($ in billions) Loan Balances at September 30, 2015 ($ in billions) Financial Wholesale, 3% Services, 3% Healthcare, 4% Manufacturing, 4% Commercial Real Estate Related, 5% Energy*, 1% All Other Commercial, 18% All Other Consumer, 1% $91 B Home Equity, 17% Investor Real Estate, 24% Indirect Vehicles, 3% Residential First Mortgage, 17% Financial Services, 5% Manufacturing, 5% Commercial Real Estate Related, 8% Energy*, 4% Healthcare, 5% All Other Commercial, 24% Wholesale, 3% $81 B Investor Real Estate, 8% Residential First Mortgage, 16% Home Equity, 14% All Other Consumer, 3% Indirect Vehicles, 5% * Energy includes both direct and indirect exposure including any amounts from Investor Real Estate. 12

13 Energy overview Energy 4% Only 4% or $3.3B of bank wide loan balances E&P OFS 40 Years The company has been involved with energy lending for more than 40 years 78% 78% of balances headquartered in four states TX LA MS AL Majority of balances consist of approximately 40 Exploration & Production and less than 40 Oilfield Services ( OFS ) customers. $11 MM Losses since 2008 are $11 million 13

14 Experienced energy team Energy Specialty 266 years of combined experience Energy Credit 245 years of combined experience Petroleum Engineering 100 years of combined industry experience 14

15 Energy lending Outstanding Balances (1) Oilfield Services Outstanding Balances (1) Other, $174 Downstream, $71 Indirect, $554 Oilfield Services, $1,095 Fluid Management, $99 Compression, $119 Pre drilling / Drilling, $86 Sand, $20 Marine, $481 Midstream, $405 Integrated OFS, $290 Exploration and production, $960 Note: Securities portfolio contains ~$240MM of high quality, investment grade corporate grade bonds that are energy related at 9/30/15 (1) As of 9/30/2015, $ in millions 15

16 Oil field services credit servicing Monthly review of all credits Swat Team review industry issues and tear sheets Renewals or new credits require CCO approval 16

17 E&P energy credit servicing The majority of E&P capital expenditures are discretionary This led to a 20 40% reduction in lease operating expenses in this price down cycle Regions Energy team re evaluates its portfolio monthly Upstream E&P clients are subject to mandatory semi annual borrowing base redetermination s Price Deck is redetermined quarterly, or more frequently as conditions dictate 17

18 Credit quality outlook Net charge offs Non performing loans Allowance to total loans 3Q15 Actual 30 bps 3Q15 Actual 97 bps 3Q15 Actual 138 bps Long term bps Long term bps Long term bps 18

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