CEO Message

To our shareholders, customers, associates, and communities: 2020 was a year like no other in recent times. Disruption, change, volatility—everyone felt the uncertainty, individuals and businesses alike.

Despite these unprecedented events, there were specific things that did not change. Our mission and purpose, underscored by our values, remained steadfast. We continue to execute our shared value approach where our business decisions reflect the needs of our shareholders, customers, associates, and communities.

• We provided value to our shareholders: During a year of unprecedented stress and uncertainty, we produced our best adjusted pre-tax pre-provision income¹ in over a decade.
• We were there for our customers: We keep pace with a rapidly changing business environment by thinking from the customers’ perspective, anticipating their needs, and finding the best solutions to satisfy their expectations.
• We supported our associates: We are in a people-centric business and our long-term success depends on our ability to attract and nurture talent. A diverse and engaged workforce, equipped with the right training and technology, is a “must-have” to effectively serve customers. The investments we make in our associates are truly investments in the continued success of our business.
• We invested in our communities: Regions’ unique footprint boasts geographic diversity that couples stable funding and profitability from our core markets with growth opportunities in new markets. Our growth initiatives are targeted toward high-potential, priority markets, and our investments there help drive our growth strategy.

We were there when it mattered in 2020, whether big moments or small touchpoints. And that’s what it’s all about—developing relationships with our stakeholders and delivering on our purpose to create shared value for all of them. In my letter last year, I noted that we must focus on the things we can control because, in any given year, there is much in our operating environment that lies outside our control. When I wrote those words, I could never have imagined that 2020 would bring a global health crisis and widespread social and racial unrest. The supercharged political climate heightened the intensity across the country as well. All of these factors had…and continue to have…a profound impact.

We were able to respond effectively to these challenges because of two primary factors: the passion of our associates to live our values and the strength of our strategic plan. Regions associates rose to the challenges of 2020 with innovation and flexibility to serve our customers and each other in new and enhanced ways. It was inspiring and gratifying to watch their tireless commitment. Our associates demonstrated the vital role played by a strong and effective regional bank: taking care of customers during uncertain times, providing trusted advice and personalized solutions, and coupling “high-touch” customer service with technology that addressed their financial needs. While some competitors have greater scale, this alone does not build relationships that earn customer loyalty, trust, and confidence. Last year Regions associates continued to carry out their work with the mindset that every point of contact, whether through digital, the contact center, or in a branch, presents a valuable new opportunity to offer solutions, discover unmet needs, and build deeper relationships with our customers.

The cornerstones of our multi-year strategic plan are our mission, purpose, and values. While we adapt based on market conditions and operating environments, the cornerstones never change. We refresh our plan each year by looking over the horizon at what our stakeholders may need. The result is a simple, controllable approach to building a resilient bank generating consistent results.

Our sustained commitment to enhance our credit, interest rate, and operational risk management processes, while sharpening our focus on appropriate risk-adjusted returns and capital allocation, all helped Regions succeed in a very challenging environment. Although our operating environment changed drastically in 2020, the five key priorities that underpin the execution of our strategic plan remained unchanged: Strengthen Financial Performance; Focus on the Customer; Enhance Risk Management; Build the Best Team, and Continuously Improve.

Strengthen Financial Performance and Enhance Risk Management: Solid Financial Performance in a Challenging Year

I am pleased that Regions finished 2020 delivering top total shareholder returns among peers and strong financial results during such a remarkably challenging year:

• We reported net income available to common shareholders of $991 million and earnings per diluted share of $1.03.
• Revenue grew 7 percent; on an adjusted basis¹ revenue growth was 6 percent.
• Record pre-tax pre-provision income¹ increased 11 percent over the prior year and adjusted pre-tax pre-provision income¹ increased 9 percent to its highest level in more than a decade.
• A steady focus on continuous improvement across the enterprise helped generate positive operating leverage of 2.7 percent on a reported basis, and 2.6 percent on an adjusted basis.¹
• For the full year, our adjusted efficiency ratio¹ improved 140 basis points to 56.6 percent.

From an asset quality perspective, overall credit results were better than originally expected, especially given an operating environment that was challenging for many of our customers. In 2020 we adopted the Current Expected Credit Losses (CECL) methodology, one of the most significant accounting changes in decades. The new accounting standard, coupled with the timing of adoption, increased volatility in credit provision levels across the industry. While this change in methodology impacted our provision, actual credit losses remained in line with pre-pandemic expectations.

While interest rates fell to all-time lows, net interest income grew 4 percent from the prior year, attributable in large part to contributions from our comprehensive interest rate hedging program. First implemented in 2018, our hedging strategy is designed to safeguard net interest income in a declining rate environment and reduce earnings volatility. During 2020, we grew consumer and small business checking accounts and increased corporate loan production by 6 percent, while achieving adjusted average loan¹ growth of 3.7 percent. Regions supported more than 46,000 small business owners with nearly $5 billion in Paycheck Protection Program (PPP) loans.

Additionally, we processed approximately $1 billion in PPP loan forgiveness on behalf of the Small Business Administration. Full-year average deposits reached record levels, with most of the growth coming in core operating accounts across all three business segments. The strategic decision to add mortgage loan officers in recent years strengthened our mortgage business in a historic year for U.S. residential mortgage originations, resulting in record levels of mortgage production and related revenue. We expect another strong year for mortgage originations in 2021. Similarly, prior investments in our capital markets business resulted in record revenue driven by merger and acquisition and customer derivatives activity as well as fees for the placement of permanent financing. Strong revenue growth combined with continued expense discipline resulted in solid financial results. These results were made possible by strong execution and outstanding teamwork from Regions associates.

Our sustained commitment to enhance our credit, interest rate, and operational risk management processes, while sharpening our focus on appropriate risk-adjusted returns and capital allocation, all helped Regions succeed in a very challenging environment.”

Focus on the Customer: Responding to the Health Crisis and Related
Economic Disruption

In tackling the multifaceted challenges presented by the pandemic—ensuring the safety of associates and customers, addressing the financial distress experienced by individuals and businesses, and responding to community need—Regions’ strong culture, and our commitment to creating shared value for all stakeholders, shined through.

As the pandemic unfolded, we quickly:

• Transitioned to a remote work environment while keeping over 90 percent of our branches open.
• Supported customers with a significant number of loan payment deferral and forbearance requests.
• Provided much-needed capital to small businesses by reassigning more than 2,100 associates to assist with facilitating PPP funding.

Build the Best Team: Investing in Talent, Strengthening Engagement, and Fostering a Culture of Diversity, Equity, and Inclusion (DEI)

Our priority to build the best team at Regions has driven us to invest in talent and strengthen engagement. That priority served us well in 2020 because we had a prepared, resilient workforce ready to pivot literally on a moment’s notice. Throughout 2020, our associates demonstrated tremendous flexibility and adaptability in response to the changing and uncertain environment the pandemic created.

Leaning on the strength of our culture, associates shined a light on our mission, values, and purpose like never before. Teams throughout the organization adopted new practices and operating models so our customers and communities could receive the advice and guidance they needed.

That type of response, combined with a deep level of engagement, resulted in Regions being ranked first among regional banks in the J.D. Power 2020 U.S. Online Banking Satisfaction survey. And for the sixth consecutive year, we were named a Gallup Exceptional Workplace Award winner—an award that recognizes the most highly engaged workplace cultures.

Through investing in top talent, building a diverse and engaged workforce, and providing our associates with the right training and technology, we brought our mission and purpose to life. Our associates are our greatest asset, and during the pandemic we continued to promote development and career growth opportunities for them. We believe these investments positively impacted engagement in 2020 and will play a critical role in how we continue to build the best team at Regions.

We’re creating value for all associates and strengthening our team by creating a work environment where every associate feels they belong and have a voice. Welcoming diverse perspectives and building an equitable workplace culture makes us a stronger organization. In fact, these are vital to achieving our objectives for sustainable performance. In 2020, we continued to strengthen our diversity and inclusion strategy and initiatives and expanded our efforts to include a focus on equity by:

• Launching our first wave of Diversity Networks and making meaningful progress in attracting, hiring, developing, and retaining diverse talent, including several key senior-level leadership positions.
• Continuing to develop emerging diverse talent, with the launch of a peer mentoring program, which has improved retention rates among females and minorities.

In the aftermath of the social unrest that began last summer, the head of Diversity and Inclusion and I held a series of listening sessions with associates across the footprint to better understand the opportunities existing within the Bank to create greater equity internally with our Black associates, as well as in the communities we serve. We built on that important feedback by launching our first Week of Understanding. The leader-led discussions offered all associates a chance to come together so we could listen and understand each other’s perspectives. This was an important step in our diversity journey and moved us closer to positive change. Our intentional focus on diversity, equity, and inclusion continues to be a strategic initiative for Regions.

As of year end we have completed 48 continuous improvement initiatives providing significant benefit, and we are excited about the opportunities ahead to drive further progress.”

Continuously Improve: Accelerating the Cadence of Innovation

In 2020, we met our customers’ rapidly changing needs in large part because of the technology investments made over the last several years in omnichannel delivery. Among the highlights of this transition:

• Mobile transactions were up significantly, and our newly redesigned mobile app earned a 4.8-star rating on the Apple app store.
• Digital contacts like secured messaging, emails, and chats grew throughout the year.
• Our bankers used data and analytics to better understand customers’ individual needs so they could offer the best solutions to help them reach their financial goals.

Leveraging what we learned from the challenges of the past year, we are evolving our approach to serving customers and are committed to giving them the same great experience—regardless of the channel they choose to connect with us. We’re focused on instilling a mindset of prioritization and rapid deployment of innovative ideas and capabilities throughout our organization. Our initiatives are designed to meet customers where they are, to make banking easier, and to provide our associates with the tools they need to be competitive. Even as we implement new technology across the organization, we never forget that banking very much remains a people business. Moving forward, our digital investments will continue to be centered on arming talented bankers with great technology that empowers them to give the personalized advice and guidance our customers desire and need.

Our emphasis on innovation extends to how we approach non-bank acquisitions that expand our capabilities and grow and diversify revenue. As an example, we are leveraging the technology, speed, and convenience gained through the acquisition of Ascentium Capital to create a meaningful opportunity to attract new customers and deepen relationships across our combined customer base, especially in the small business and middle market segments. We understand the importance of staying ahead of the pace of change because both our business and customer expectations are changing rapidly. That’s why we’re building a culture where we get better every day at Regions. In the last three years, we have identified 90 specific revenue-generating or expense-saving actions, with 23 of those newly selected in 2020. Through year end we have completed 48 continuous improvement initiatives providing significant benefit, and we are excited about the opportunities ahead to drive further progress.

ESG: A Uniting Force

Our financial commitment to improving the environment helps inform our global business strategy, including how we work with partners, support our employees, make our operations more sustainable, manage issues, and govern our activities.

A commitment to ESG initiatives is a common thread knitting together our priorities. Our desire to be a socially responsible bank that respects the environment informs our strategic plan and how we execute it.

Partnering to Build Stronger Communities

Regions succeeds when the communities we serve are vibrant and thriving. That’s why being a strong community partner, both through our lending activity and philanthropic endeavors, is central to our purpose to create shared value. This purpose is integral to our business model as well as our approach to community engagement. In pursuit of that purpose, in 2020 Regions:

• Established and funded the Regions Community Development Corporation (RCDC) as a wholly owned subsidiary. The RCDC’s role is to provide debt and/or equity financing for projects and entities with a community development purpose.
• Promoted inclusive prosperity through the Regions Foundation by investing in initiatives aimed at reducing barriers to economic success.
• Disbursed more than $6 million through the Foundation to community partners across our 15-state footprint.

Elevating Our Commitment to Racial Equity and Economic Empowerment

In 2020, tragic events and racial injustices profoundly affected us as individuals and communities. Urgent and necessary calls for racial equity and justice quickly followed these events, and Regions responded with a firm commitment to stand with our communities to address systemic racism and bias. As a financial institution we see it as our responsibility to use our resources and expertise in ways that address disparities and create positive change:

• In July 2020, we announced a new two-year commitment to invest $12 million to advance programs and initiatives that promote racial equity and economic empowerment for communities of color.
• Together, Regions Bank, the Regions Foundation and the RCDC by year-end had allocated more than $5.2 million to positively impact communities of color, providing equitable opportunities for success and prosperity.

Achieving Our Environmental Objectives

We’re focusing on operating in socially responsible and environmentally sound ways that make life better for all. Although Regions is not a major emitter of carbon, we recognize our responsibility, and embrace the opportunity, to minimize our carbon impacts. Our environmental goals and initiatives are very much aligned with our objective to create shared value for all stakeholders and to drive continuous improvement in everything we do. Accordingly, we have established goals to reduce our Scope 1 and 2 greenhouse gas emissions and energy use, each by 30 percent by 2023 against a 2015 baseline, and we continued to progress toward these goals in 2020. A significant factor in these reductions is our work to streamline our facilities footprint. One benefit of our continuing digital transformation is resource conservation and waste reduction. We’ve also prioritized implementation of ESG frameworks with a financial materiality disclosure threshold, such as those developed by the Sustainability Accounting Standards Board and the Task Force on Climate-Related Financial Disclosures.

In 2020, we increased our efforts to assess the risks and opportunities associated with climate change by forming a cross-functional environmental and social risk management execution team. Scenario analysis is underway to assess the impact of physical and transition risks on our lending portfolio and our operational resiliency. Understanding these risks and opportunities will benefit our strategic planning process as we transition to a lower carbon economy.

Responsible Governance

We adopted a version of the Rooney Rule for Board of Director candidates in 2019, and instituted a similar practice for Section 16 Executive Officer positions, including the CEO, beginning in 2020. We have a robust year-round engagement process with institutional shareholders and provide that unfiltered feedback directly to Directors. We spend a lot of time ensuring our annual proxy statement includes the data and information investors have asked for, and I encourage you to read it.

Given the significance of DEI to our broader human capital strategy, we look forward to providing our stakeholders with additional insight into the demographics of our workforce later this year, after we file our 2019 and 2020 EEO-1 Report with the U.S. Equal Employment Opportunity Commission.

Facing Challenges and Reaching Higher—Together

Although change and challenge will continue into 2021, Regions’ mission, purpose, values, and culture will remain the cornerstones of our success. We approach 2021 from a position of strength, confident in our strategic plans—and in the talented teams that will execute them. As in the past, we will stay focused on the things we can control and strive every day to improve in everything we do. And I know we will continue to sharpen our competitive edge by leaning into our strengths, executing and competing with purpose and passion, and innovating through digital and data.

Working together, with a sense of unity and shared purpose, Regions associates can meet any challenge and weather any storm. They proved it in 2020, and I’m confident they will continue to reach even higher in the year to come. My thanks to them, and to all our stakeholders, for their contributions and support.

Sincerely,

John Turner
President and Chief Executive Officer
March 5, 2021

1. Non-GAAP; see reconciliations in Regions’ Annual Report on Form 10-K filed February 24, 2021 and Definitive Proxy Statement filed March 5, 2021.