Regional B de C : Results of the First Quarter

Table of Contents
EXECUTIVE SUMMARY	3
Growth	3
Risks and Strengths	3
Profitability	3
Company Description	3
Results	4
Financial Margin	4
Non-Interest Income	4
Operating Income	4
Loan Portfolio	4
Deposits	4
Capitalization	4
Net Income by Subsidiary	5
OPERATING RESULTS	6
Results	6
Financial Margin	6
Net Commissions and Fees	7
Insurance and FX Fees	7
Net Income by Leasing	7
Other Operating Income (Expenses)	7
Non-Interest Expenses	8
Information by Segment	8
FINANCIAL SITUATION	9
Cash and Equivalents	9
Loan Portfolio with a credit risk stage 1 and 2	9
Loan Portfolio with Credit Risk Stage 3	10
Credit Ratings	12
Deposits	12
Securities Investments	13
Repurchase Agreements	14
Financial Derivative Operations	14
Loan Securities Issued	16
Incurred and Deferred Taxes	17
Capitalization Ratio of Banco Regional S.A.	18
Value at Risk (VaR)	18
Branch Network	19
Alternative Channels	19
Treasury Policy	19
Internal and External Funding and Liquidity Sources	20
Regional on the Mexican Stock Exchange (R.A)	20
Analysis Coverage of Regional′s Stock	21
INTERNAL CONTROL	22
RELATED PARTS	24
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Table of Contents

Loans to Related Parties (Banco Regional, S.A.)	24
Loans to Related Parties (Start Banregio S.A. de C.V.)	24
INTEGRAL RISK MANAGEMENT	25
Ratings	25
CORPORATE STRUCTURE	27
Board of Directors	28
Main Officers	29
Dividend Policy	29
ACCOUNTING STANDARDS AND CRITERIA	30
Technical Note	34
FINANCIAL STATEMENTS	37
Quarterly Income Statement	37
Income Statement YTD	37
Balance Sheet: Assets and Liabilities	38
Balance Sheet: Stockholders Equity	39
Memorandum Accounts	40
Financial Ratios (CNBV criteria)	41
CERTIFICATION	42

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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 $130,181 million pesos during 1Q24. The commercial portfolio with credit risk stage 2, which includes loans for small and medium businesses registered $1,959 million pesos during 1Q24.
• On the other hand, Preferred Banking portfolio, which includes mortgages, auto credits and consumer credits such as credit cards, lay up $26,469 million pesos, representing a 14% annualized gain.
• Core deposits, formed by demand deposits and savings accounts as time deposits, reached $157,509 million pesos during the First Quarter of 2024, presenting a 15% increase compared to the same quarter last year. Time deposits had a 36% growth compared to 1Q23.
• Cost of funding in domestic currency is 6.7% at the end of 1Q24.

Risks and Strengths

• The Loans portfolio with credit risk stage 3 ratio was 1.4% at the end of 1Q24, 13 basis points higher than the same quarter last year.
• Regional has credit provisions that cover 1.6 times its non-performing loan portfolio.
• Banco Regional's capitalization ratio as of February 2024 is 15.7%.

Profitability

• The financial margin at the end of 1Q24 was $3,433 million pesos, increasing 22% versus 1Q23.
• Net Income was $1,615 at the end of 1Q24, 36% more than 1Q23.
• The Efficiency Index1 at the end of 1Q24 was 39.5%.

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 176 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. April 22nd, 2024. Regional, S.A.B. de C.V. (BMV: R.A) announced today its consolidated financial and operational results corresponding to 1Q24. 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 1Q24 a net income of $1,615 million pesos, achieving a 22.0% ROAE.

Financial Margin

At the end of 1Q24 the financial margin registered $3,433 million pesos, showing a 22% increase compared to the same quarter last year.

Non-Interest Income

Non-Interest Income at the end of the First Quarter of 2024 amounted $895 million pesos. The income from insurance placements stands apart, showing a year on year growth of 17%.

Operating Income

The operating income reached $2,150 million pesos, increasing 36% compared to the same period last year.

The net income at the end of 1Q24:

Net Income	1Q23	4Q23	1Q24	1Q24 vs		3M23	3M24	3M24 vs
(Million pesos)	1Q23	4Q23	3M23
Financial Margin	2,821	3,377	3,433	22%	2%	2,821	3,433	22%
Total operating income	3,084	3,872	3,713	20%	(4%)	3,083	3,713	20%
Non interest expenses	(1,498)	(1,664)	(1,563)	4%	(6%)	(1,498)	(1,563)	4%
Operating Income	1,585	2,208	2,150	36%	(3%)	1,585	2,150	36%
Net income	1,187	1,622	1,615	36%	(0%)	1,187	1,615	36%

Loan Portfolio

The loan portfolio with credit risk stage 1 reached a balance of $155,806 million pesos at the end of 1Q24, increasing 12% compared to the same quarter last year. It stands out the growth in consumer loans increasing 15%.

The loan portfolio with credit risk stage 2 reached a balance of $2,803, million pesos at the end of 1Q24, with a growth of 1% compared to the same period last year.

The non-performing loan ratio was 1.4% at the end of 1Q24, 13 basis points higher than that of 1Q23, and Regional has a coverage ratio of provisions for credit loan losses of 1.6 times the non-performing loan portfolio.

Deposits

Core deposits reached $157,509 million pesos at the end of 1Q24 with an increase of 15% compared to the same quarter last year. Time deposits stand out with a 36% increase compared to the First Quarter in 2023, reaching a balance of $84,880 million pesos.

Capitalization

The capitalization ratio to total risky assets of Banco Regional, S.A. stood at 15.7% by February 2024.

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EXECUTIVE SUMMARY

Net Income by Subsidiary

During the First Quarter of 2024, Banco Regional, S.A. generated 83% of Regional's total Net Income, while Start Banregio, S.A. de C.V. and Sinca Banregio, S.A. de C.V., Fondo de Inversión de Capitales,. which are subsidiaries of Banco Regional, generated 18% and (1%) respectively of Regional's net income.

Financial Indicators

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

													Variation
Financial ratios Last Twelve Months (LTM)	1Q23	2Q23	3Q23	4Q23	1Q24	1Q24 vs
								1Q23	4Q23
Net Interest Margin (NIM)	(1)		6.2%	6.1%	6.2%	5.9%	6.1%	(5 b.p.)	21 b.p.
Total Loans NIM LTM	(2)					7.7%	7.9%	7.7%	7.6%	7.6%	(5 b.p.)	(1 b.p.)
Return on Equity (ROAE)	(3)			21.0%	20.7%	20.9%	21.1%	22.0%	99 b.p.	82 b.p.
Return on Assets (ROAA)	(4)		2.5%	2.4%	2.4%	2.5%	2.7%	16 b.p.	18 b.p.
Return on Assets (ROAA) of Total Loans	(5)	2.7%	2.6%	2.6%	2.4%	2.4%	(26 b.p.)	4 b.p.
Efficiency Ratio	(6)							43.2%	42.6%	41.7%	40.9%	39.5%	(373 b.p.)	(145 b.p.)
Loans to deposits	(7)						104.7%	99.3%	100.1%	103.3%	102.1%	(263 b.p.)	(123 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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OPERATING RESULTS

OPERATING RESULTS

Results

Regional, S.A.B. de C.V., registered a net income of $1,615 million pesos at the end of March 2024, increasing 36% compared to the 1Q23, achieving a 22.0% ROAE.

The quarterly operating income reached $2,150 million pesos by the end of the First Quarter of 2024 showing an increase of 36% in comparison to 1Q23.

Net Income	1Q23	4Q23	1Q24	1Q24 vs		3M23	3M24	3M24 vs
(Million pesos)	1Q23	4Q23	3M23
Financial Margin	2,821	3,377	3,433	22%	2%	2,821	3,433	22%
Total operating income	3,084	3,872	3,713	20%	(4%)	3,083	3,713	20%
Non interest expenses	(1,498)	(1,664)	(1,563)	4%	(6%)	(1,498)	(1,563)	4%
Operating Income	1,585	2,208	2,150	36%	(3%)	1,585	2,150	36%
Net income	1,187	1,622	1,615	36%	(0%)	1,187	1,615	36%

Financial Margin

Financial margin in 1Q24 reached $3,433 million pesos, 22% higher than the same quarter last year. The interest income registered a growth of 10%, reaching $7,212 million pesos at the end of 1Q24, while interest expenses reached $3,779 million pesos showing a 2% increase.

The adjusted financial margin for possible loan losses was of $3,058 million pesos in 1Q24, which represents a variation of 21% compared to 1Q23.

Provisions for possible loan losses during 1Q24 amounted to $375 million pesos.

Financial margin	1Q23	4Q23	1Q24	1Q24 vs	3M23	3M24	3M24 vs
(Million pesos)	1Q23	4Q23	3M23
Interest income	6,530	7,481	7,212	10%	(4%)	6,530	7,212	10%
Interest expense	(3,709)	(4,104)	(3,779)	2%	(8%)	(3,709)	(3,779)	2%
Financial margin	2,821	3,377	3,433	22%	2%	2,821	3,433	22%
Net provision for possible loan losses	(290)	(305)	(375)	29%	23%	(290)	(375)	29%
Adjusted financial margin for possible loan losses	2,531	3,072	3,058	21%	(0%)	2,531	3,058	21%
Average productive assets	199,053	215,961	209,223	5%	(3%)	178,053	179,435	1%
Net Interest Margin (NIM)	5.7%	6.3%	6.6%	89 b.p.	31 b.p.	6.3%	7.7%	132 b.p.

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OPERATING RESULTS

Net Commissions and Fees

Net commissions and fees reached a total of $470 million pesos in 1Q24, showing a 13% increase in respect to 1Q23.

Cards and Merchant Fees represent 44% of the total net commissions and fees and constitute the main source of income in this account.

Commissions and fees	1Q23	4Q23	1Q24	1Q24 vs		3M23	3M24	3M24 vs
(Million pesos)	1Q23	4Q23	3M23
Cards and Merchant Fees	169	201	208	23%	3%	169	208	23%
Current account services	49	57	56	14%	(1%)	49	56	14%
Online banking	14	14	14	(2%)	1%	14	14	(2%)
Trusts	27	43	39	46%	(9%)	27	39	46%
Transfers	16	23	20	25%	(11%)	16	20	25%
Other fees	140	140	133	(5%)	(6%)	140	133	(5%)
Net Fees	415	478	470	13%	(2%)	415	470	13%

Insurance and FX Fees

The result for insurance and FX Fees for the First Quarter of 2024 reached a total of $374 million pesos, an increase of 17% compared to the same period of the previous year.

Insurance + FX Fee	1Q23	4Q23	1Q24		1Q24 vs		3M23	3M24		3M24 vs
(Million pesos)		1Q23	4Q23		3M23
Insurance	136	164	147	9%	(10%)	136	147	9%
FX Fee	184	219	227	23%	3%	184	227	23%
Insurance + FX Fee	320	384	374	17%	(2%)	320	374	17%

Net Income by Leasing

Net Income by pure leasing amounted a total of $51 million pesos in Income by Pure Leasing presented a decrease of (20%) compared to

1Q24, showing stability with respect to 1Q23. the same period of the previous year.

Net Income by Pure Leasing	1Q23	4Q23	1Q24	1Q24 vs	3M23	3M24	3M24 vs
(Million pesos)	1Q23	4Q23	3M23
Income by Pure Leasing	95	70	76	(20%)	9%	95	76	(20%)
Depreciation of Asset by Pure Leasing	(45)	(4)	(25)	(44%)	+100%	(45)	(25)	(44%)
Net Income by Pure Leasing	50	66	51	2%	(23%)	50	51	2%

Other Operating Income (Expenses)

During 1Q24 a loss of $240 million pesos was recorded for other expenses, presenting an increase of 4% respect 1Q23.

Other Income (expense) operations	1Q23	4Q23	1Q24		1Q24 vs		3M23	3M24		3M24 vs
(Million pesos)		1Q23	4Q23		3M23
Asset Sales	12	68	3	(75%)	(96%)	12	3	(75%)
Credit Operation	(84)	(93)	(92)	9%	(1%)	(84)	(92)	9%
Contributions to IPAB	(134)	(159)	(156)	16%	(1%)	(134)	(156)	16%
Other Income / Expenses	(25)	57	6	(+100%)	(90%)	(25)	6	(+100%)
Other income (expense) operations	(231)	(127)	(240)	4%	89%	(231)	(240)	4%

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OPERATING RESULTS

Non-Interest Expenses

Non-Interest Expenses by the end of 1Q24 were $1,563 million pesos, with a variation of 4% compared to 1Q23.

Non interest expenses	1Q23	4Q23	1Q24	1Q24 vs		3M23	3M24	3M24 vs
(Million pesos)	1Q23	4Q23	3M23
Compensations and Benefits	(901)	(1,012)	(1,020)	13%	1%	(901)	(1,020)	13%
Administrative Expenses	(390)	(411)	(340)	(13%)	(17%)	(390)	(340)	(13%)
Operational expenses	(1,290)	(1,423)	(1,360)	5%	(4%)	(1,290)	(1,360)	5%
Rents, Depreciation and Amortization	(147)	(155)	(149)	1%	(4%)	(147)	(149)	1%
Taxes other than income tax	(61)	(86)	(55)	(11%)	(37%)	(61)	(55)	(11%)
Non-controllable expenses	(208)	(241)	(203)	(2%)	(16%)	(208)	(203)	(2%)
Non interest expenses	(1,498)	(1,664)	(1,563)	4%	(6%)	(1,498)	(1,563)	4%

Information by Segment

In order to carry out the segmentation of the results for Regional, different business areas were subdivided into identifiable segments based on types of products and customer profile.

	Business	Personal	Markets	Total
Net adjusted margin	2,246	1,006	164	3,416
Non Financial Income	118	258	257	633
Total Income	2,364	1,265	421	4,049
Loans	128,539	30,333	0	158,871
Deposits	71,333	93,532	68,499	233,364

Note: The figures presented are integrated with a different classification from the one used for the formulation of the financial statements, as they are grouped by combining accounting and operational records.

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FINANCIAL SITUATION

FINANCIAL SITUATION

Cash and Equivalents

At the end of 1Q24, Regional held a cash deposit balance of $11,003 million pesos, which presented a variation of (23%) versus the balance registered on the same period last year.

Out of the total cash deposits in 1Q24, $2,811 million pesos are restricted and held in the Monetary Regulation Deposit (constituted in Banco de México) which yield Banxico's target rate.

Cash and Deposits	1Q23	4Q23	1Q24		1Q24 vs
(Million pesos)	1Q23	4Q23
Cash	1,944	2,480	2,126	9%	(14%)
Demand deposits	9,510	9,436	6,042	(36%)	(36%)
Others	30	41	24	(19%)	(41%)
Non restricted cash deposits	11,484	11,957	8,192	(29%)	(31%)
Demand deposits	2,878	1,848	2,811	(2%)	52%
Restricted cash deposits	2,878	1,848	2,811	(2%)	52%
Total Cash and due from Banks	14,362	13,805	11,003	(23%)	(20%)

Loan Portfolio with a credit risk stage 1 and 2

The loan portfolio with credit risk stage 1 increased 12% at the close of 1Q24 with a balance of $155,806 million pesos. Noteworthy, is the 15% increase in the consumer portfolio compared to 1Q23. Commercial portfolio, which represent Regional's core business, stand at $130,181 million pesos, which presents a 12% growth at the end of 1Q24.

The loan portfolio with credit risk stage 2 had a balance of $2,803 million pesos at the end of 1Q24, with an increase of 1% compared to the same quarter of the previous year. Noteworthy is the 39% increase in the consumer portfolio compared to 1Q23. Commercial portfolio with credit risk stage 2 stands at $1,959 million pesos at the close of 1Q24, with a decrease of (6%) respect the same quarter of last year.

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