regions stripped down v2

Banking IndustryFinancial Analysis

Agenda

• Banking Industry Characteristics

• Business Strategy of Regions Bank and PNC Bank

• Earnings Quality and Accounting Issues

• Risks and Profitability

• Future Prospects

Banking Industry Characteristics

RIVALRY:

Competitive

Market

BARRIERS: Low

Internet technology

SUPPLIERS: High

Fed Interest Rate

CUSTOMERS: High

Numerous Banks

SUBSTITUTES: High

Investment Vehicles

Retail Banking Industry

Agenda

• Banking Industry Characteristics

• Business Strategy of Regions Bank and PNC Bank

• Earnings Quality and Accounting Issues

• Risks and Profitability

• Future Prospects

Business Strategy

Business Strategy of Regions and PNC

Bank Strategy Regions PNC  Traditional Growth Innovation

GrowthHold Southeast Market

Share"Checking

Relationships"Risk Profile Conservative ModerateCost Control Lower "Cost of Deposit" Virtual Customers

Customer Acqusition High Growth Cities Invest in Technology

Agenda

• Banking Industry Characteristics

• Business Strategy of Regions Bank and PNC Bank

• Earnings Quality and Accounting Issues

• Risks and Profitability

• Future Prospects

Earnings Quality and Accounting Issues

Income and Expense Recognition

• Income - Interest income: revenue earned on interest-earnings asset like loans and investment securities - Non-interest income :fees and commissions from continuing operations other than issuing loans

• Expense - Interest expense: expense paid on interest-bearing liabilities, principally deposits and borrowings - Noninterest expense: salaries and employee benefits, occupancy cost and FDIC insurance

Earnings Quality and Accounting Issues

• Provision for Loan Losses - reflect management’s judgment of probable credit losses inherent in the portfolio, and will adversely affect the bank’s income - Regions and PNC earnings growth is driven by the huge decrease in provisions for loan losses rather than core business operations growth

Earnings Quality and Accounting Issues

• Discontinued Operations: - Regions bank agreed to sell its non-banking subsidiary Morgan Keegan to Raymond James Financial, resulting in a non-cash goodwill impairment recorded in the loss from discontinued operations in 2011, while there was no major disposition for PNC in 2011 - One-time charge and should be eliminated

Agenda

• Banking Industry Characteristics

• Business Strategy of Regions Bank and PNC Bank

• Earnings Quality and Accounting Issues

• Risks and Profitability

• Future Prospects

Risks &Profitability－ Loans

• Loan can by grouped into Commercial, Investor Real Estate and Consumer Loans

• Commercial Loans: -loans to normal business operations to finance working capital needs, equipment purchases or other expansion projects - collection risk in this portfolio is driven by the cash flow from customers’ business operations

• Investor Real Estate Loans: -credit to real estate developers or investors where repayment is dependent on the sale of real estate or income generated from the real estate collateral

• Consumer Loans: -residential first mortgage, home equity, indirect, consumer credit card, and other consumer loans -sensitive to unemployment and other key consumer economic measures

Risks &Profitability－ Loans

Total Commercial Total Investor real estate Total Consumer -

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Regions Loan by Type 2011 and 2010

20112010

Total Commercial

46%

Total Investor Real Estate14%

Total Consumer

40%

2011 Regions Loan Composition

Total Commercial

44%

Total Investor Real Estate17%

Total Consumer

40%

2010 Regions Loan Composition

• Regions

Risks &Profitability－ Loans

• PNC

Total Commercial Total Investor real estate Total Consumer -

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

PNC Loan by Type for 2011 and 2010

20112010

Total Commercial

41%

Total Investor Real Estate14%

Total Consumer

44%

2011 PNC Loan Composition

Total Commercial

37%

Total Investor Real Estate16%

Total Consumer

47%

2010 PNC Loan Composition

Risks &Profitability－ Loans

• Loans by Geographic - Regions: Alabama, Florida, Tennessee, Mississippi and Georgia - the value of real estate in the Southeastern United States in particular declined significantly more than real estate values in the United States as a whole

- PNC: Illinois, Michigan, District of Columbia and Pennsylvania - less impacted by the “Great Recession”

Risks &Profitability－ Loans

• Both banks have decreased classified loans in absolute amount as a percentage of total loans, solidifying the fact than the credit quality if improving.

2011 20100

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

Classified Loan for 2011 and 2010

RegionsPNCRegions RatioPNC Ratio

Risks &Profitability－ Loans

• Allowance for loan losses to total loans ratio and the exact amount for both banks have decreased from 2011 to 2010, indicating an improving credit-worthiness of their loan portfolios

2011 20100

1

2

3

4

5

6

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

Allowance for Loan Losses for 2011 and 2010

RegionsPNCRegions RatioPNC Ratio

Deposits Structure- Regions

• Transaction Accounts cover money

markets, interest-bearing, and

interest-free accounts.

• Transaction Accounts continued to

be major contributor funding

source.

• Money Market Accounts & Time

Deposits further shrank.

2011 2010 200910%

20%

30%

40%

50%

60%

70%

80%

90%

100%

24.50%29.59%

24.40%

20.27%

24.09% 31.92%

49.83%

41.38%39.52%

5.39% 4.93% 4.13%

Money Markets Time depositsDemand (Interest & non-interest) Deposits Savings Accounts

Deposits Structure- Regions

• Interest-bearing accounts go up substantially with 44% growth.

• Money Market Accounts experienced a roller coaster.

• Time Deposits slow down the downward trends.

Growth Rate 2011 2010

Transaction Accounts 5.87% 6.49%Money Markets -16.28% 16.34%

Time Deposits -14.95% -27.60%

Demand Deposits 21.70% 0.41%Interest 44.44% -15.00%Non-interest 9.84% 10.90%

Deposits Structure-PNC Bank

• Money Markets Accounts & Transaction Accounts increased by 6% and 10% respectively.

• Time Deposits shrank by 24 percent.• PNC had negligible interest-bearing accounts; so demand

deposits purely consist of non-interest bearing accounts.

Transaction Accounts Money Markets Time deposits Demand Deposits0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

78.69%

47.50%

16.71%

31.19%

73.42%

46.12%

22.57%27.30%

20112010

Risks and Profitability－ Profitability

_x000c_Regions 2010

_x000d_ Regions 2011

PNC 2010 PNC 20110.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

Net Interest Margin

_x000c_Regions 2010

_x000d_ Regions 2011

PNC 2010 PNC 201150.00%

52.00%

54.00%

56.00%

58.00%

60.00%

62.00%

64.00%

66.00%

68.00%

70.00%

Efficiency Ratio

Banks headed in different directions?

Agenda

• Banking Industry Characteristics

• Business Strategy of Regions Bank and PNC Bank

• Earnings Quality and Accounting Issues

• Risks and Profitability

• Future Prospects

Future Prospects

After-Presentation Events

Key Milestones

• No objection to capital plan• Closed Morgan Keegan Sale• Successful common equity

offering• Credit ratings upgrade• Redeemed $3.5 billion of Series

A preferred stock

1Q12 Results

• Net income available to common shareholders of $145MM or $0.11 per diluted share

• Income from continuing operations $0.14 per diluted share

Broad-Based Asset Quality Improvement

• Net charge-offs decreased $98MM or23% to $332MM• Lowest quarterly loan loss provision inmore than four years at $117MM• NPLs declined 9%• Inflows of NPLs down 32% to $381 MM

Q&A