Regional B de C : The Press Release for the 4Q22

EXECUTIVE SUMMARY

Regional, S.A.B. de C.V. presents, for informative purposes only, the internal financial statements for the period ended December 31, 2022. Also, and considering that the public company participated in a corporate restructuring through a merger in which it acted as a merging company with Banregio Grupo Financiero S.A.B. de C.V., who served as a merged and currently defunct company, discloses additional information regarding the financial statements of Banregio Grupo Financiero S.A.B. of CV, for the period ended March 31, 2018, in order to maintain continuity in the disclosure of financial information and for comparative and analytical purposes, as well as the pro forma financial statements in which the financial situation and the results of Regional, S.A.B. de C.V. are presented, as if the corporate restructuring referred to above had taken effect in the same quarter of the previous year.

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EXECUTIVE SUMMARY

EXECUTIVE SUMMARY

Growth

• The commercial portfolio with credit risk stage 1, which includes loans for small and medium businesses, registered $109,559 million pesos during 4Q22. The commercial portfolio with credit risk stage 2, which includes loans for small and medium businesses registered $1,445 million pesos during 4Q22
• On the other hand, Preferred Banking portfolio, which includes mortgages, auto credits and consumer credits such as credit cards, lay up $21,955 million pesos, representing a 22% annualized gain.
• Core deposits, formed by demand deposits and savings accounts as time deposits, reached $126,480 million pesos during the Fourth Quarter of 2022, presenting an 18% increase compared to the same quarter last year. Time deposits had an 21% growth compared to 4Q21.
• Core deposits costs in national currency cost is 5.3% at the end of 4Q22.

Risks and Strengths

• Loans portfolio with credit risk stage 3 ratio was 1.3% at the end of 4Q22, 51 basis points lower than the same quarter last year.
• Regional has credit provisions that cover 1.7 times its non-performing loan portfolio.
  Banco Regional's capitalization ratio as of November 2022 is 15.2%.

Profitability

• The financial margin at the end of 4Q22 was $3,166 million pesos, increasing 57% versus 4Q21.
• Net Income was $1,337 at the end of 4Q22, 45% more than 4Q21.
• The Efficiency Index1 at the end of 4Q22 was 43.7%.

Company Description

Regional, S.A.B de C.V. (Regional) is a Mexican public company, which principal subsidiaries, Banregio Grupo Financiero, S.A. de C.V. (BanregioGF), Banco Regional S.A. IBM (Banregio) and Start Banregio, SOFOM (Start), grant credits and leases to medium and small businesses as well to individuals as their main activity.

Banregio has presence in 22 federal entities through a 157 branches network, located in: Aguascalientes, Baja California, Baja California Sur, Chihuahua, Coahuila, Ciudad de México, Durango, Estado de México, Guanajuato, Jalisco, Michoacán, Nuevo León, Puebla, Querétaro, Quintana Roo, San Luis Potosí, Sinaloa, Sonora, Tamaulipas, Veracruz, Yucatán and Zacatecas.

Regional is a public traded company (R), its main subsidiary Banco Regional was founded in 1994.

1Last 12 months

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EXECUTIVE SUMMARY

San Pedro Garza Garcia, N.L. January 23th, 2023. Regional, S.A.B. de C.V. (BMV: R.A) announced today its consolidated financial and operational results corresponding to 4Q22. The figures are in current million pesos and the percentage variations are compared with the same period of the previous year, unless otherwise specified.

Results

Regional, S.A.B. de C.V. generated at the end of 4Q22 a net income of $1,337 million pesos, achieving a 21.0% ROAE.

Financial Margin

At the end of 4Q22 the financial margin registered $3,166 million pesos, showing a 57% increase compared to the same quarter last year.

Non-Interest Income

Non-Interest Income at the end of the Fourth Quarter 2022 amounted $220 million pesos. Income from Commissions, which generated $422 million pesos, stands out, with an increase of 37% over the same period of the previous year.

Operating Income

The operating income reached $1,712 million pesos, increasing 47% compared to the same period last year.

The net income at the end of 4Q22:

Net Income	4Q21	3Q22	4Q22		4Q22 vs	12M21	12M22	12M22 vs
(Million pesos)	4Q21	3Q22	12M21
Financial Margin	2,022	2,522	3,166	57%	26%	7,568	10,034	33%
Total operating income	2,523	3,001	3,193	27%	6%	9,599	11,867	24%
Non interest expenses	(1,362)	(1,306)	(1,481)	9%	13%	(4,855)	(5,364)	10%
Operating Income	1,161	1,695	1,712	47%	1%	4,744	6,503	37%
Net income	925	1,303	1,337	45%	3%	3,556	4,945	39%

Loan Portfolio

The loan portfolio with credit risk stage 1 reached a balance of $132,816 million pesos at the end of 4Q22, increasing 15% compared to the same quarter last year. It stands out the growth in consumer loans increasing 40%.

The loan portfolio with credit risk stage 2 reached a balance of $2,102 million pesos at the end of 4Q22.

The non-performing loan ratio was 1.3% at the end of 4Q22, 51 basis points lower than that of 4Q21, and Regional has a coverage ratio of provisions for credit loan losses of 1.7 times the non-performing loan portfolio.

Deposits

Core deposits reached $126,480 million pesos at the end of 4Q22 with an increase of 18% compared to the same quarter last year. Time deposits stand out with a 21% increase compared to the Fourth Quarter in 2021.

Capitalization

The capitalization ratio to total risky assets of Banco Regional, S.A. stood at 15.2% by November 2022.

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EXECUTIVE SUMMARY

Net Income by Subsidiary

During the Second Quarter of 2022, Banco Regional, S.A. generated 83% of Regional's total Net Income, Start Banregio, S.A. de C.V. which is a subsidiary of Banco Regional, generated 18% and other subsidiaries contributed (1%) of the Regional's net income.

Financial Indicators

The following chart shows information in a 12 month horizon in order to prevent distortions caused by seasonality.

Financial ratios Last Twelve Months (LTM)	4Q21	1Q22	2Q22	3Q22	4Q22	4Q22 vs
							4Q21	3Q22
Net Interest Margin (NIM)	(1)		5.3%	5.3%	5.4%	5.6%	5.9%	66 b.p.	38 b.p.
Total Loans NIM LTM	(2)				6.5%	6.5%	6.5%	6.7%	7.2%	66 b.p.	55 b.p.
Return on Equity (ROAE)	(3)		15.3%	16.9%	17.9%	19.5%	21.0%	565 b.p.	147 b.p.
Return on Assets	(ROAA)	(4)		2.2%	2.4%	2.4%	2.5%	2.7%	43 b.p.	11 b.p.
Return on Assets (ROAA) of Total Loans	(5)	2.3%	2.5%	2.5%	2.6%	2.8%	50 b.p.	25 b.p.
Efficiency Ratio	(6)						46.4%	46.1%	46.4%	44.9%	43.7%	(278 b.p.)	(123 b.p.)
Loans to deposits	(7)					110.5%	105.1%	99.4%	100.4%	108.1%	(241 b.p.)	763 b.p.

1. Net Interest Margin NIM: Financial Margin of last 4 quarters / Average productive assets of the last 12 months.
2. Total Loans NIM LTM: (Financial margin of last 4 quarters adjusted by repos, cash equivalents, derivatives and margin calls) / (Average Total Loan with credit risk stage 1 + Total Loan with credit risk stage 2 of last 12 months).
3. Return on Average Equity (ROAE): Net income of last 4 quarters / Average stockholders' equity of last 4 quarters.
4. Return on Average Assets (ROAA): Net income of last 4 quarters / Average total assets of last 4 quarters.
5. Return on Average Assets (ROAA) of total Loans: (Net income of last 4 quarters / (Average total assets of last 4 quarters (-) average balance of repos or last 4 quarters)).
6. Efficiency Ratio: Administration and promotion expenses of last 4 quarters / (Financial Margin + Commissions + Trading + Other Income) of last 4 quarters.
7. Loans to deposits: Loan portfolio at the end of the quarter / Core deposits at the end of the quarter.

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