Item 8. Financial Statements and Supplementary Data

447K characters. Original on sec.gov · Markdown

Item 8. Financial Statements and Supplementary Data

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

We, as members of the Management of Regions Financial Corporation and subsidiaries (the “Company”), are responsible for establishing and maintaining effective internal control over financial reporting. Regions’ internal control system was designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of the Company’s financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes self-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified.

All internal controls systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements in the Company’s financial statements, including the possibility of circumvention or overriding of controls. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Regions’ management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in its 2013 Internal Control—Integrated Framework. Based on our assessment, we believe and assert that, as of December 31, 2020, the Company’s internal control over financial reporting is effective based on those criteria.

Regions’ independent registered public accounting firm has issued an audit report on the effectiveness of the Company’s internal control over financial reporting. This report appears on the following page.



						REGIONS FINANCIAL CORPORATION

			by			/S/ JOHN M. TURNER, JR.
						John M. Turner, Jr. President and Chief Executive Officer

			by			/S/ DAVID J. TURNER, JR.
						David J. Turner, Jr. Chief Financial Officer

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Regions Financial Corporation

Opinion on Internal Control over Financial Reporting

We have audited Regions Financial Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Regions Financial Corporation and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Regions Financial Corporation and subsidiaries as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes of the Company and our report dated February 24, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Birmingham, Alabama

February 24, 2021

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Regions Financial Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Regions Financial Corporation and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 24, 2021 expressed an unqualified opinion thereon.

Adoption of New Accounting Standard

As discussed in Notes 1 and 6 to the consolidated financial statements, the Company changed its method of accounting for credit losses in 2020 due to the adoption of ASU 2016-13, Measurement of Credit Losses on Financial Instruments. As explained below, auditing the Company’s allowance for credit losses, including the adoption of the new accounting guidance, was a critical audit matter.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Table of Contents


						Allowance for credit losses
Description of the Matter						The allowance for credit losses consists of two components: the allowance for loan losses and the reserve for unfunded commitments. As of December 31, 2020, the allowance for credit losses (ACL) was $2.3 billion. The provision for credit losses was $1.3 billion for the year ended December 31, 2020. As discussed above and in Notes 1 and 6 to the consolidated financial statements, effective January 1, 2020 the Company adopted new accounting guidance related to the estimate of the ACL, resulting in an ACL increase of $501 million. The ACL is established to absorb expected credit losses over the contractual life of the loans measured at amortized cost, including unfunded commitments. Management’s measurement of expected losses is driven by loss forecasting models which utilize relevant quantitative information about historical experience, current conditions and the reasonable and supportable economic forecast that affects the collectability of the reported amount. Management’s estimate for the expected credit losses is established through these quantitative factors, as well as qualitative considerations to account for the imprecision inherent in the estimation process. As a result, management may adjust the ACL for the potential impact of qualitative factors through their established framework. Management’s qualitative framework provides for specific model and general imprecision adjustments for such factors as the economic forecast imprecision, potential model error imprecision, process imprecision and specific issues or events that Management believes are not adequately captured in the modeled outcomes. Auditing management’s ACL estimate and related provision for credit losses involved a high degree of complexity in evaluating the expected loss forecasting models and subjectivity in evaluating management’s measurement of the economic forecast used during the reasonable and supportable period and the qualitative factors.

How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s process for establishing the ACL, including management’s controls over: 1) expected loss forecasting models including model validation, implementation, monitoring, the completeness and accuracy of key inputs and assumptions used in the models; 2) the development and application of the reasonable and supportable economic forecast; 3) the identification and measurement of qualitative factors. With respect to expected loss forecasting models, with the support of specialists, we evaluated the conceptual soundness of the model methodology and re-performed the calculation for a sample of models. We also tested the appropriateness of key inputs and assumptions used in these models by agreeing a sample of inputs to supporting information. Regarding the reasonable and supportable economic forecast, with the support of specialists, we assessed the forecasted economic scenario by, among other procedures, evaluating management’s methodology for developing the forecast and comparing a sample of key economic variables developed to external sources, historical and peer bank information. With respect to the identification of qualitative factors, we evaluated 1) the potential impact of imprecision in the quantitative models and hence the need to consider a qualitative adjustment to the ACL, and 2) changes, assumptions and adjustments to the models. Regarding measurement of the qualitative factors, we evaluated internal data utilized by management to estimate the appropriate level of the qualitative factors, as well as internal data produced by the Company’s Credit Review, Internal Audit and Model Validation groups, and external macroeconomic factors independently obtained during the audit. We evaluated the overall ACL amount, including model estimates and qualitative factor adjustments, and whether the recorded ACL appropriately reflects expected credit losses on the loan portfolio and unfunded credit commitments. We reviewed historical loss statistics, peer-bank information, subsequent events and transactions and considered whether they corroborate or contradict the Company’s measurement of the ACL.

We have served as the Company’s auditor since 1971.

Birmingham, Alabama

February 24, 2021

Table of Contents

REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	December 31
	2020		2019
	(In millions, except share data)
Assets
Cash and due from banks	$	1,558	$	1,598
Interest-bearing deposits in other banks	16,398		2,516

Debt securities held to maturity (estimated fair value of $1,215 and $1,372 respectively)	1,122		1,332
Debt securities available for sale (amortized cost of $26,092 and $22,332, respectively)	27,154		22,606
Loans held for sale (includes $1,446 and $439 measured at fair value, respectively)	1,905		637
Loans, net of unearned income	85,266		82,963
Allowance for loan losses	(2,167)		(869)
Net loans	83,099		82,094
Other earning assets	1,217		1,518
Premises and equipment, net	1,897		1,960
Interest receivable	346		362
Goodwill	5,190		4,845
Residential mortgage servicing rights at fair value	296		345
Other identifiable intangible assets, net	122		105
Other assets	7,085		6,322
Total assets	$	147,389	$	126,240
Liabilities and Equity
Deposits:
Non-interest-bearing	$	51,289	$	34,113
Interest-bearing	71,190		63,362
Total deposits	122,479		97,475
Borrowed funds:



Short-term borrowings	—		2,050
Long-term borrowings	3,569		7,879
Total borrowed funds	3,569		9,929
Other liabilities	3,230		2,541
Total liabilities	129,278		109,945
Equity:
Preferred stock, authorized 10 million shares, par value $1.00 per share:
Non-cumulative perpetual, including related surplus, net of issuance costs; issued—1,850,000 and 1,500,000 shares, respectively	1,656		1,310
Common stock, authorized 3 billion shares, par value $.01 per share:
Issued including treasury stock—1,001,507,052 and 998,278,188 shares, respectively	10		10
Additional paid-in capital	12,731		12,685
Retained earnings	3,770		3,751
Treasury stock, at cost— 41,032,676 shares	(1,371)		(1,371)
Accumulated other comprehensive income (loss), net	1,315		(90)
Total shareholders’ equity	18,111		16,295
Total liabilities and equity	$	147,389	$	126,240

See notes to consolidated financial statements.

Table of Contents

REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME


	Year Ended December 31
		2020		2019		2018
		(In millions, except per share data)
Interest income, including other financing income on:
Loans, including fees		$	3,610	$	3,866	$	3,613
Debt securities		582		643		625
Loans held for sale		28		17		15
Other earning assets		42		70		84
Total interest income		4,262		4,596		4,337
Interest expense on:
Deposits		180		447		250
Short-term borrowings		10		53		30
Long-term borrowings		178		351		322
Total interest expense		368		851		602


Net interest income		3,894		3,745		3,735
Provision for credit losses (1)		1,330		387		229
Net interest income after provision for credit losses (1)		2,564		3,358		3,506
Non-interest income:
Service charges on deposit accounts		621		729		710
Card and ATM fees		438		455		438
Investment management and trust fee income		253		243		235
Capital markets income		275		178		202
Mortgage income		333		163		137
Securities gains (losses), net		4		(28)		1
Other		469		376		296
Total non-interest income		2,393		2,116		2,019
Non-interest expense:
Salaries and employee benefits		2,100		1,916		1,947
Net occupancy expense		313		321		335
Furniture and equipment expense		348		325		325
Other		882		927		963
Total non-interest expense		3,643		3,489		3,570
Income from continuing operations before income taxes		1,314		1,985		1,955
Income tax expense		220		403		387
Income from continuing operations		1,094		1,582		1,568
Discontinued operations:
Income from discontinued operations before income taxes		—		—		271
Income tax expense		—		—		80
Income from discontinued operations, net of tax		—		—		191
Net income		$	1,094	$	1,582	$	1,759
Net income from continuing operations available to common shareholders		$	991	$	1,503	$	1,504
Net income available to common shareholders		$	991	$	1,503	$	1,695
Weighted-average number of shares outstanding:
Basic		959		995		1,092
Diluted		962		999		1,102
Earnings per common share from continuing operations:
Basic		$	1.03	$	1.51	$	1.38
Diluted		1.03		1.50		1.36
Earnings per common share:
Basic		$	1.03	$	1.51	$	1.55
Diluted		1.03		1.50		1.54

(1)Upon adoption of CECL on January 1, 2020, the provision for credit losses is the sum of the provision for loans losses and the provision for unfunded credit commitments. Prior to the adoption of CECL, the provision for unfunded commitments was included in other non-interest expense.

See notes to consolidated financial statements.

Table of Contents

REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Year Ended December 31
	2020		2019		2018
	(In millions)
Net income	$	1,094	$	1,582	$	1,759
Other comprehensive income (loss), net of tax:
Unrealized losses on securities transferred to held to maturity:
Unrealized losses on securities transferred to held to maturity during the period (net of zero, zero and zero tax effect, respectively)	—		—		—
Less: reclassification adjustments for amortization of unrealized losses on securities transferred to held to maturity (net of ($2), ($2) and ($3) tax effect, respectively)	(6)		(5)		(6)
Net change in unrealized losses on securities transferred to held to maturity, net of tax	6		5		6
Unrealized gains (losses) on securities available for sale:
Unrealized holding gains (losses) arising during the period (net of $200, $196 and ($83) tax effect, respectively)	592		581		(244)
Less: reclassification adjustments for securities gains (losses) realized in net income (net of $1, ($7) and zero tax effect, respectively)	3		(21)		—
Net change in unrealized gains (losses) on securities available for sale, net of tax	589		602		(244)
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Unrealized holding gains (losses) on derivatives arising during the period (net of $363, $123 and ($1) tax effect, respectively)	1,077		367		(3)
Less: reclassification adjustments for gains (losses) on derivative instruments realized in net income (net of $65, ($6) and $3 tax effect, respectively)	195		(18)		9
Net change in unrealized gains (losses) on derivative instruments, net of tax	882		385		(12)
Defined benefit pension plans and other post employment benefits:
Net actuarial gains (losses) arising during the period (net of ($36), ($50) and $4 tax effect, respectively)	(108)		(150)		7
Less: reclassification adjustments for amortization of actuarial loss and settlements realized in net income (net of ($11), ($11) and ($8) tax effect, respectively)	(36)		(32)		(28)
Net change from defined benefit pension plans and other post employment benefits, net of tax	(72)		(118)		35
Other comprehensive income (loss), net of tax	1,405		874		(215)
Comprehensive income	$	2,499	$	2,456	$	1,544

See notes to consolidated financial statements.

Table of Contents

REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY


	Shareholders' Equity
	Preferred Stock			Common Stock			Additional Paid-In Capital		Retained Earnings		Treasury Stock, At Cost		Accumulated Other Comprehensive Income (Loss), Net		Total
	Shares	Amount		Shares	Amount
	(In millions, except per share data)
BALANCE AT JANUARY 1, 2018	1	$	820	1,133	$	12	$	15,858	$	1,628	$	(1,377)	$	(749)	$	16,192
Cumulative effect from change in accounting guidance									(2)						(2)
Net income	—	—		—	—		—		1,759		—		—		1,759
Other comprehensive income (loss), net of tax	—	—		—	—		—		—		—		(215)		(215)

Cash dividends declared	—	—		—	—		—		(493)		—		—		(493)
Preferred stock dividends	—	—		—	—		—		(64)		—		—		(64)


Common stock transactions:
Impact of share repurchases	—	—		(115)	(1)		(2,121)		—		—		—		(2,122)
Impact of stock transactions under compensation plans, net and other	—	—		7	—		29		—		6		—		35
BALANCE AT DECEMBER 31, 2018	1	$	820	1,025	$	11	$	13,766	$	2,828	$	(1,371)	$	(964)	$	15,090
Cumulative effect from change in accounting guidance	—	—		—	—		—		2		—		—		2
Net income	—	—		—	—		—		1,582		—		—		1,582

Other comprehensive income (loss), net of tax	—	—		—	—		—		—		—		874		874

Cash dividends declared	—	—		—	—		—		(582)		—		—		(582)
Preferred stock dividends	—	—		—	—		—		(79)		—		—		(79)
Net proceeds from issuance of 500 thousand shares of Series C, fixed to floating rate, non-cumulative perpetual preferred stock, including related surplus	1	490		—	—		—		—		—		—		490
Common stock transactions:
Impact of share repurchases	—	—		(72)	(1)		(1,100)		—		—		—		(1,101)
Impact of stock transactions under compensation plans, net and other	—	—		4	—		19		—		—		—		19
BALANCE AT DECEMBER 31, 2019	2	$	1,310	957	$	10	$	12,685	$	3,751	$	(1,371)	$	(90)	$	16,295
Cumulative effect from change in accounting guidance	—	—		—	—		—		(377)		—		—		(377)
Net income	—	—		—	—		—		1,094		—		—		1,094

Other comprehensive income (loss), net of tax	—	—		—	—		—		—		—		1,405		1,405
Cash dividends declared	—	—		—	—		—		(595)		—		—		(595)
Preferred stock dividends	—	—		—	—		—		(103)		—		—		(103)

Net proceeds from issuance of 350 thousand shares of Series D, fixed to floating rate, non-cumulative perpetual preferred stock, including related surplus	—	346		—	—		—		—		—		—		346


Impact of stock transactions under compensation plans, net and other	—	—		3	—		46		—		—		—		46
BALANCE AT DECEMBER 31, 2020	2	$	1,656	960	$	10	$	12,731	$	3,770	$	(1,371)	$	1,315	$	18,111

See notes to consolidated financial statements.

Table of Contents

REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended December 31
	2020		2019		2018
	(In millions)
Operating activities:
Net income	$	1,094	$	1,582	$	1,759
Adjustments to reconcile net income to net cash from operating activities:
Provision for credit losses (1)	1,330		387		229
Depreciation, amortization and accretion, net	421		426		462

Securities (gains) losses, net	(4)		28		(1)
(Gain) on sale of business	—		—		(281)

Deferred income tax expense (benefit)	(158)		62		226
Originations and purchases of loans held for sale	(6,634)		(4,381)		(3,351)
Proceeds from sales of loans held for sale	5,865		4,144		3,451

(Gain) loss on sale of loans, net	(241)		(124)		(73)
Loss on early extinguishment of debt	22		16		—

Net change in operating assets and liabilities:
Other earning assets	313		158		116
Interest receivable and other assets	(246)		(347)		171
Other liabilities	459		453		(470)
Other	103		177		37
Net cash from operating activities	2,324		2,581		2,275
Investing activities:
Proceeds from maturities of debt securities held to maturity	209		148		174
Proceeds from sales of debt securities available for sale	304		5,372		254
Proceeds from maturities of debt securities available for sale	4,921		3,532		3,383
Purchases of debt securities available for sale	(8,956)		(8,102)		(3,410)
Net proceeds from (payments for) bank-owned life insurance	(1)		(8)		(4)

Proceeds from sales of loans	256		471		307
Purchases of loans	(1,558)		(1,561)		(612)
Net change in loans	546		859		(3,272)
Purchases of mortgage servicing rights	(59)		(24)		(71)
Net purchases of other assets	(134)		(178)		(151)
Proceeds from disposition of a business, net of cash transferred	—		—		357
Payment for acquisition of a business, net of cash received	(381)		—		—
Net cash from investing activities	(4,853)		509		(3,045)
Financing activities:
Net change in deposits	25,004		2,984		(2,398)
Net change in short-term borrowings	(2,050)		450		1,100
Proceeds from long-term borrowings	4,698		21,274		21,750
Payments on long-term borrowings	(10,918)		(25,926)		(17,451)
Net proceeds from issuance of preferred stock	346		490		—
Cash dividends on common stock	(595)		(577)		(452)
Cash dividends on preferred stock	(103)		(79)		(64)


Repurchases of common stock	—		(1,101)		(2,122)
Taxes paid related to net share settlement of equity awards	(8)		(29)		(35)
Other	(3)		—		(1)
Net cash from financing activities	16,371		(2,514)		327
Net change in cash and cash equivalents	13,842		576		(443)
Cash and cash equivalents at beginning of year	4,114		3,538		3,981
Cash and cash equivalents at end of year	$	17,956	$	4,114	$	3,538

(1)Upon adoption of CECL on January 1, 2020, the provision for credit losses is now the sum of the provision for loans losses and the provision for unfunded credit commitments. Prior to the adoption, the provision for unfunded commitments is included in other non-interest expense.

See notes to consolidated financial statements.

Table of Contents

REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Regions Financial Corporation (“Regions” or the “Company”) provides a full range of banking and bank-related services to individual and corporate customers through its subsidiaries and branch offices located across the South, Midwest and Texas. The Company competes with other financial institutions located in the states in which it operates, as well as other adjoining states. Regions is subject to the regulations of certain government agencies and undergoes periodic examinations by certain of those regulatory authorities.

The accounting and reporting policies of Regions and the methods of applying those policies that materially affect the consolidated financial statements conform with GAAP and with general financial services industry practices. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the balance sheet dates and revenues and expenses for the periods presented. Actual results could differ from the estimates and assumptions used in the consolidated financial statements including, but not limited to, the estimates and assumptions related to the allowance for credit losses, fair value measurements, intangibles, residential MSRs and income taxes.

Regions has evaluated all subsequent events for potential recognition and disclosure through the filing date of this Annual Report on Form 10-K.

During 2020, the Company adopted new accounting guidance related to several topics, including CECL. The cumulative effect of the modified retrospective application of CECL on retained earnings is discussed below. All prior period amounts impacted by guidance that required retrospective application have been revised.

Certain amounts in prior period financial statements have been reclassified to conform to the current period presentation, except as otherwise noted. These reclassifications are immaterial and have no effect on net income, comprehensive income (loss), total assets or total shareholders’ equity as previously reported.

CECL

On January 1, 2020, the Company adopted CECL*,* which replaces the incurred loss methodology with an expected loss methodology. The measurement of expected losses under CECL is applicable to financial assets measured at amortized cost, including loan receivables and debt securities held to maturity. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with accounting guidance on leases. In addition, CECL required changes to the accounting for debt securities available for sale. The adoption of CECL had a material impact to the allowance for credit losses (see below). The cumulative effect of the modified retrospective application for all items in scope was a reduction to retained earnings of $377 million, $375 million of which was attributable to the allowance and $2 million of which was attributable to other financial assets.

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Regions, its subsidiaries and certain VIEs. Significant intercompany balances and transactions have been eliminated. Regions considers a voting rights entity to be a subsidiary and consolidates it if Regions has a controlling financial interest in the entity. VIEs are consolidated if Regions has the power to direct the activities of the VIE that significantly impact financial performance and has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE (i.e., Regions is the primary beneficiary). The determination of whether Regions is the primary beneficiary of a VIE is reassessed on an ongoing basis. Investments in companies which are not VIEs but in which Regions has significant influence over the operating and financing decisions, are accounted for using the equity method of accounting. Investments in VIEs, where Regions is not the primary beneficiary of a VIE, are accounted for using either the proportional amortization method or the equity method of accounting. These investments are included in other assets in the consolidated balance sheets. The maximum potential exposure to losses relative to investments in VIEs is generally limited to the sum of the outstanding balance, future funding commitments and any related loans to the entity. Loans to these entities are underwritten in substantially the same manner as are other loans and are generally secured. Refer to Note 2 for additional disclosures regarding Regions’ significant VIEs.

Unconsolidated equity investments that do not meet the criteria to be accounted for under the equity method and do not have a readily determinable fair value are accounted for at cost under the measurement alternative with adjustments for impairment and observable price changes as applicable. Cost method investments are included in other assets in the consolidated balance sheets. Dividends received or receivable and observable price changes from these investments are included as a component of other non-interest income in the consolidated statements of income.

Table of Contents

DISCONTINUED OPERATIONS

On April 4, 2018, Regions entered into a stock purchase agreement to sell Regions Insurance Group, Inc. and related affiliates to BB&T Insurance Holdings, Inc. (now Truist Insurance Holdings, Inc). The transaction closed on July 2, 2018. Results of operations for the entities sold are presented separately as discontinued operations for all periods presented on the consolidated statements of income. Other expenses related to the transaction are also included in discontinued operations. See Note 3 and Note 24 for further discussion.

CASH EQUIVALENTS AND CASH FLOWS

Cash equivalents represent assets that can be converted into cash immediately. At Regions, these assets include cash and due from banks, interest-bearing deposits in other banks, and federal funds sold and securities purchased under agreements to resell. Cash flows from loans, either originated or acquired, are classified at that time according to management’s intent to either sell or hold the loan for the foreseeable future. When management’s intent is to sell the loan, the cash flows of that loan are presented as operating cash flows. When management’s intent is to hold the loan for the foreseeable future, the cash flows of that loan are presented as investing cash flows.

The following table summarizes supplemental cash flow information for the years ended December 31:


	2020		2019		2018
	(In millions)
Cash paid during the period for:
Interest on deposits and borrowings	$	408	$	851	$	581
Income taxes, net	132		85		57
Non-cash transfers:

Loans held for sale and loans transferred to other real estate	31		63		54
Loans transferred to loans held for sale	275		66		313
Loans held for sale transferred to loans	1		3		14
Properties transferred to held for sale	33		62		21

SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities purchased under agreements to resell and securities sold under agreements to repurchase are treated as collateralized financing transactions. It is Regions’ policy to take possession of securities purchased under resell agreements either through direct delivery or a tri-party agreement.

DEBT SECURITIES

Management determines the appropriate accounting classification of debt securities at the time of purchase, based on intent, and periodically re-evaluates such designations. Debt securities are classified as held to maturity when the Company has the intent and ability to hold the securities to maturity. Debt securities held to maturity are presented at amortized cost. Debt securities not classified as held to maturity are classified as available for sale. Debt securities available for sale are presented at estimated fair value with changes in unrealized gains and losses, net of taxes, reported as a component of accumulated other comprehensive income (loss). See the “Fair Value Measurements” section below for discussion of determining fair value.

The amortized cost of debt securities classified as held to maturity and available for sale is adjusted for amortization of premiums and accretion of discounts to maturity, or in the case of mortgage-backed securities, over the estimated life of the security, using the interest method. Such amortization or accretion is included in interest income on securities. Realized gains and losses are included in net securities gains (losses). The cost of securities sold is based on the specific identification method.

For debt securities available for sale, the Company reviews its securities portfolio for impairment and determines if impairment is related to credit loss or non-credit loss. In making the assessment of whether a loss is from credit or other factors, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows is less than the amortized cost basis, a credit loss exists and an allowance is created, limited by the amount that the fair value is less than the amortized cost basis.

Subsequent activity related to the credit loss component (e.g. write-offs, recoveries) is recognized as part of the allowance for credit losses on debt securities available for sale. Securities held to maturity are evaluated under the allowance for credit losses model. For securities which have an expectation of zero nonpayment of the amortized cost basis (e.g. U.S. Treasury securities or agency securities), the expected credit loss is zero. Refer to Note 4 for further detail and information on securities.

Table of Contents

LOANS HELD FOR SALE

Regions’ loans held for sale include commercial loans, investor real estate loans and residential real estate mortgage loans. Loans held for sale are recorded at either estimated fair value, if the fair value option is elected, or the lower of cost or estimated fair value. Regions has elected to account for residential real estate mortgages originated with the intent to sell at fair value. Intent is established for these conforming residential real estate mortgage loans when Regions enters into an interest rate lock commitment. Gains and losses on these residential mortgage loans held for sale for which the fair value option has been elected are included in mortgage income. Certain commercial loans held for sale where management has elected the fair value option are recorded at fair value. Gains and losses on commercial loans held for sale for which the fair value option has been elected are included in capital markets income. Regions also transfers certain commercial, investor real estate, and residential real estate mortgage portfolio loans to held for sale when management has the intent to sell in the near term. These held for sale loans are recorded at the lower of cost or estimated fair value. At the time of transfer, write-downs on the loans are recorded as charge-offs when credit related and non-interest expense when not credit related and a new cost basis is established. Any subsequent lower of cost or market adjustment is determined on an individual loan basis. Gains and losses on the sale of non-performing commercial and investor real estate loans are included in other non-interest expense. See the “Fair Value Measurements” section below for discussion of determining estimated fair value.

LOANS

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are considered loans held for investment (or portfolio loans). Loans held for investment are carried at amortized cost (the principal amount outstanding, net of premiums, discounts, unearned income and deferred loan fees and costs). Regions elected to exclude accrued interest receivable balances from the amortized cost basis. Interest receivable is included as a separate line item on the balance sheet. Regions' loans balance is comprised of commercial, investor real estate and consumer loans. Interest income on all types of loans is accrued based on the contractual interest rate and the principal amount outstanding using methods that approximate the interest method, except for those loans classified as non-accrual. Premiums and discounts on purchased loans and non-refundable loan origination and commitment fees, net of direct costs of originating or acquiring loans, are deferred and recognized over the contractual or estimated lives of the related loans as an adjustment to the loans’ constant effective yield, which is included in interest income on loans. Direct financing, sales-type and leveraged leases are included within the commercial portfolio segment. See Note 5 for further detail and information on loans and Note 14 for further detail on leases.

Regions determines past due or delinquency status of a loan based on contractual payment terms.

Commercial and investor real estate loans are placed on non-accrual if any of the following conditions occur: 1) collection in full of contractual principal and interest is no longer reasonably assured (even if current as to payment status), 2) a partial charge-off has occurred, unless the loan has been brought current under its contractual terms (original or restructured terms) and the full originally contracted principal and interest is considered to be fully collectible, or 3) the loan is delinquent on any principal or interest for 90 days or more unless the obligation is secured by collateral having a net realizable value (estimated fair value less costs to sell) sufficient to fully discharge the obligation and the loan is in the legal process of collection. Factors considered regarding full collection include assessment of changes in borrower’s cash flow, valuation of underlying collateral, ability and willingness of guarantors to provide credit support, and other conditions. Charge-offs on commercial and investor real estate loans are primarily based on the facts and circumstances of the individual loan and occur when available information confirms the loan is not or will not be fully collectible. Factors considered in making these determinations are the borrower’s and any guarantor’s ability and willingness to pay, the status of the account in bankruptcy court (if applicable), and collateral value. Commercial and investor real estate loan relationships of $250,000 or less are subject to charge-off or charge down to estimated fair value at 180 days past due, based on collateral value.

Non-accrual and charge-off decisions for consumer loans are dictated by the FFIEC's Uniform Retail Credit Classification and Account Management Policy which establishes standards for the classification and treatment of consumer loans. The charge-off process drives consumer non-accrual status as follows. If a consumer loan secured by real estate in a first lien position (residential first mortgage or home equity) becomes 180 days past due, Regions evaluates the loan for non-accrual status and potential charge-off based on net loan to value exposure. For home equity loans and lines of credit in a second lien position, the evaluation is performed at 120 days past due. If a loan is secured by collateral having a net realizable value sufficient to fully discharge the obligation, then a partial write-down is not necessary and the loan remains on accrual status, provided it is in the process of legal collection. If a partial charge-off is necessary as a result of the evaluation, then the remaining balance is placed on non-accrual. Consumer loans not secured by real estate are generally charged-off at either 120 days past due for closed-end loans, 180 days past due for open-end loans other than credit cards or the end of the month in which the loan becomes 180 days past due for credit cards.

When loans are placed on non-accrual status, the accrual of interest, amortization of loan premium, accretion of loan discount and amortization/accretion of deferred net loan fees/costs are discontinued. When a commercial or investor real estate loan is placed on non-accrual status, uncollected interest accrued in the current year is reversed and charged to interest income. Uncollected interest accrued from prior years on commercial and investor real estate loans placed on non-accrual status in the current year is charged against the allowance for loan losses. When a consumer loan is placed on non-accrual status, all

Table of Contents

uncollected interest accrued is reversed and charged to interest income due to immateriality. Interest collections on commercial and investor real estate non-accrual loans are applied as principal reductions. Interest collections on consumer loans are recorded using the cash basis, due to immateriality.

All loans on non-accrual status may be returned to accrual status and interest accrual resumed if all of the following conditions are met: 1) the loan is brought contractually current as to both principal and interest, 2) future payments are reasonably expected to continue being received in accordance with the terms of the loan and repayment ability can be reasonably demonstrated, and 3) the loan has been performing for at least six months.

Purchased Loans

Purchased loans are recorded at their fair value at the acquisition date. Purchased loans are evaluated and classified as either PCD, which indicates that the loan has experienced more than insignificant credit deterioration since origination, or non-PCD loans. For PCD loans, the sum of the loans' purchase price and allowance for credit losses, which is determined using the same methodology as originated loans, becomes their initial amortized cost basis. For non-PCD loans, the difference between the fair value and the par value is considered the fair value mark. The non-credit discount or premium related to PCD loans and the fair value mark on non-PCD loans is accreted or amortized into interest income over the contractual life of the loan using the effective interest method. Subsequent changes in the allowance to the PCD and non-PCD loans are recognized in the provision for credit losses.

TDRs

TDRs are loans in which the borrower is experiencing financial difficulty at the time of restructuring, and Regions has granted a concession to the borrower. TDRs are undertaken in order to improve the likelihood of recovery on the loan and may take the form of modifications made with the stated interest rate lower than the current market rate for new debt with similar risk, other modifications to the structure of the loan that fall outside of normal underwriting policies and procedures, or in limited circumstances forgiveness of principal and/or interest. Insignificant delays in payments are not considered TDRs. TDRs can involve loans remaining on non-accrual, moving to non-accrual, or continuing on accrual status, depending on the individual facts and circumstances of the borrower. TDRs are subject to policies governing accrual/non-accrual evaluation consistent with all other loans of the same product type as discussed in the “Loans” section above. Prior to the adoption of CECL on January 1, 2020, all loans with the TDR designation were considered to be impaired, even if they were accruing. With the adoption of CECL on January 1, 2020, the definition of impaired loans was removed from accounting guidance.

The CAP was designed to evaluate potential consumer loan participants as early as possible in the life cycle of the troubled loan (as described in Note 6). Many of the modifications are finalized without the borrower ever reaching the applicable number of days past due, and therefore the loan may never be placed on non-accrual. Accordingly, given the positive impact of the restructuring on the likelihood of recovery of cash flows due under the modified terms, accrual status continues to be appropriate for these loans.

As provided in the CARES Act passed into law on March 27, 2020, certain loan modifications related to the COVID-19 pandemic beginning March 1, 2020 through the earlier of 60 days after the end of the pandemic or December 31, 2020 were eligible for relief from TDR classification. Regions elected this provision of the CARES Act; therefore, modified loans that met the required guidelines for relief are not considered TDRs. The CARES Act relief and short-term nature of most COVID-19 deferrals precluded the majority of Regions' COVID-19 loan modifications from being classified as TDRs as of December 31, 2020. Further, on December 27, 2020, the Consolidated Appropriations Act was signed into law and extended the relief from TDR classification through January 1, 2022. Regions elected this provision.

ALLOWANCE

Regions adopted CECL using the modified retrospective method for loans held for investment, net investment in lease assets, and off-balance sheet credit exposures. Regions elected not to estimate an allowance on interest receivable balances because the Company has non-accrual policies in place that provide for the accrual of interest to cease on a timely basis when all contractual amounts due are not expected. The cumulative effect of the retrospective application for loans and unfunded commitments was an increase in the allowance of $501 million and a reduction to retained earnings of $375 million, with the difference being an increase to deferred tax assets. The adoption of CECL on January 1, 2020 replaced the incurred loss methodology to estimate the allowance with the expected loss methodology. Refer to Note 1 "Summary of Significant Accounting Policies" of the Annual Report on Form 10-K for the year ended December 31, 2019, for additional information regarding the accounting and reporting policies related to the incurred loss methodology.

Upon the adoption of CECL, the allowance is intended to cover expected credit losses over the contractual life of loans measured at amortized cost, including unfunded commitments. Management’s measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and R&S forecasts that affect the collectability of the reported amount. For periods beyond which Regions makes or obtains such R&S forecasts, Regions reverts to historical credit loss information. Regions maintains an appropriate level of allowance that falls within an acceptable range of estimated losses, measured in accordance with GAAP. Management's determination of the appropriateness of the allowance is

Table of Contents

based on many factors, including, but not limited to, an evaluation and rating of the loan portfolio; historical loan loss experience; current economic conditions; collateral values securing loans; levels of problem loans; volume, growth, quality and composition of the loan portfolio; regulatory guidance; R&S economic forecasts; and other relevant factors. Changes in any of these factors, assumptions, or the availability of new information, could require that the allowance be adjusted in future periods, perhaps materially. Loss forecasting models are built on historical loss information and then applied to the current portfolio. Outputs from the loss forecasting models in combination with Regions' qualitative framework, and other analyses are used to inform management in its estimation of Regions' expected credit losses. Actual losses could vary, perhaps materially, from management’s estimates. The entire allowance is available to cover all charge-offs that arise from the loan portfolio.

Regions' allowance calculation is a significant estimate. Regions uses its best judgment to assess economic conditions and loss data in estimating the CECL allowance and these estimates are subject to periodic refinement based on changes in underlying external or internal data. Therefore, assumptions and decisions driving the estimate may change as conditions change. These assumptions and estimates are detailed below.

R & S forecast period

During the two-year R&S forecast period, Regions incorporates forward-looking information by utilizing its internally developed and approved Base economic forecast. The scenario is developed by the Chief Economist and approved through a formal governance process. The Base forecast considers market forward/consensus information and is consistent with the Company's organization-wide economic outlook. When appropriate, additional scenarios, including externally created scenarios, are considered as part of the determination of the allowance.

Reversion period

Regions utilizes an exponential reversion approach that reverts to TTC rates derived from the simple average of all historical quarterly observations for PD, LGD, EAD and prepayment rates. The length of the reversion period differs by class of financing receivable.

Historical loss period

Regions does not adjust historical loss information for existing economic conditions or expectations of future economic conditions for periods that are beyond the R&S period. Regions utilizes internal historical loss information; however, there are certain loan portfolios that also benefit from the use of external or other reference data due to identified limitations with internal historical data.

Contractual life

Regions estimates expected credit losses over the contractual life of a loan. Regions defines contractual life for non-revolving loans as contractual maturity, net of estimated prepayments and excluding expected extensions, renewals and modifications unless 1) Regions has a reasonable expectation at the reporting date that it will execute a TDR with the borrower ("RETDR") or 2) extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by Regions.

RETDR

Regions individually identifies commercial and investor real estate loans for inclusion as RETDRs. The identification criteria are based on internal risk ratings and time to maturity. Regions typically does not identify consumer loans as RETDRs due to the insignificant period between initial contact with a customer regarding a loan modification and when a TDR modification is consummated.

The RETDR status extends the life of the loan past the contractual maturity and includes the allowance impact of interest rate concessions. Loans identified as RETDRs will be treated consistently from a modeling/reserving perspective as loans identified as TDRs.

Contractual term extensions (borrower versus lender option to renew)

Regions' consumer loan contracts do not permit automatic extensions or unilateral customer extensions, and Regions retains the right to approve or deny any extension requested from the borrower. As a result, extensions and renewal options are not included in the life of consumer loans for the purposes of calculating the allowance. Similarly, Regions does not include extension and renewal options in the life of commercial loans for the purposes of calculating the allowance, unless it is a RETDR. Most commercial products do not offer borrowers a unilateral right to renew or extend.

Contractual life of credit card receivables

Regions estimates the life of credit card receivables based on the amount and timing of payments expected to be collected. Regions' credit card allowance estimate only considers the amount of debt outstanding at the reporting date (the current position) because undrawn balances are unconditionally cancellable and therefore are not considered. Regions classifies credit card accounts into one of three payment patterns: dormant, transacting or revolving. The dormant accounts are idle, carry no balance, and do not contribute to the allowance. The transacting account holders tend to pay the entire balance due every month

Table of Contents

and are, therefore, subject to practically no interest charges. For transactor accounts, the current position balance is expected to be paid off in one quarter. The revolving accounts tend to be subject to interest charges, and their current position balance liquidates over time. Regions' credit card portfolio is comprised primarily of revolvers.

Collateral-dependent loans

Regions' collateral-dependent consumer loans are loans secured by collateral (primarily real estate) that meet the partial charge-down requirements disclosed within this section. Regions evaluates significant commercial and investor real estate loans that are in financial difficulty and secured by collateral to determine if they are collateral dependent.

For collateral-dependent loans, CECL requires an entity to measure the expected credit losses based on the fair value of the collateral at the reporting date when the entity determines that foreclosure is probable. Additionally, CECL allows a fair value of collateral practical expedient as a measurement approach for loans when the repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty ("collateral dependent”). For any collateral-dependent loans that meet Regions' specific allowance criteria (see below), Regions will calculate the CECL allowance based on the fair value of collateral methodology. For collateral-dependent consumer, commercial and investor real estate loans that do not meet Regions' specific allowance criteria (as described below), Regions considers the value of the collateral through the LGD component of the loss model based on collateral type.

Credit enhancements

Regions' estimate of credit losses reflects how credit enhancements, other than those that are freestanding contracts, mitigate expected credit losses on financial assets. In the event that a credit enhancement arrangement is considered to be a freestanding contract, Regions excludes the credit enhancement from the related loan when estimating expected credit losses.

Unfunded commitments and other off-balance sheet items

CECL requires an entity to record a liability or allowance for credit losses for the unfunded portion of a loan commitment in the event that the issuer does not have the unconditional right to cancel the commitment. For an unfunded commitment to be considered unconditionally cancellable, Regions must be able to, at any time, with or without cause, refuse to extend credit. The liability is measured over the full contractual period for which Regions is exposed to credit risk through a current obligation to extend credit. In determining the liability, management considers the likelihood that funding will occur, and if funded, the related expected credit losses under the CECL model.

Regions' off-balance sheet unfunded commitments in the form of home equity lines, standby letters of credit, commercial letters of credit and commercial revolving products that are deemed to be conditionally cancellable will include unfunded balances within the allowance estimate. Future advances from certain unfunded commitments and other revolving products where Regions does have the unconditional right to cancel these agreements will not be included.

CALCULATION OF ALLOWANCE FOR CREDIT LOSSES

Pooled allowances

The allowance is measured on a collective (pool) basis when similar risk characteristics exist. Segmentation variables for commercial and investor real estate segments include product, loan size, collateral type, risk rating and term. Segmentation variables considered for consumer segments include product, FICO, LTV, age, TDR status, etc. The allowance is estimated for most portfolios and classes using econometric models to estimate expected credit losses. In general, discounted cash flow models are not used for the purpose of estimating expected losses for the purpose of the ACL. Most of the econometric models include PD, LGD, and EAD components. Less complex estimation methods are used for smaller loan portfolios.

Specific allowances

Due to their size, complexity and individualized risk characteristics and monitoring, the allowance for significant non-accrual commercial and investor real estate loans (including TDRs) and unfunded commitments is measured on an individual basis. Loans evaluated individually are not included in the collective evaluation. Regions generally measures the allowance for these loans based on the present value of estimated cash flows, considering all facts and circumstances specific to the borrower and market and economic conditions. The allowance measurement for collateral-dependent loans that meet the individually evaluated threshold is based on the fair value of collateral methodology.

TDRs and RETDRs

Loans identified as TDRs and RETDRs are treated consistently in CECL loss models. These loans are included in their respective loan pools (if they do not qualify for specific evaluation) and losses are determined by CECL models. The effect of the interest rate concession on these loans is considered through a post-model adjustment.

Qualitative framework

While quantitative allowance methodologies strive to reflect all risk factors, any estimate involves assumptions and uncertainties resulting in some level of imprecision. Imprecision exists in the estimation process due to the inherent time lag

Table of Contents

between obtaining information, performing the calculation, as well as variations between estimates and actual outcomes. Regions adjusts the allowance considering quantitative and qualitative factors which may not be directly measured in the modeled calculations. Regions' qualitative framework provides for specific, quantitatively supported model adjustments and general imprecision adjustments. Specific model adjustments capture highly specific issues or events that Regions believes are not adequately captured in model outcomes. General imprecision adjustments address other sources of imprecision that are not specifically identifiable or quantifiable to a particular loan portfolio and have not been captured by the model or by a specific model adjustment. Regions considers general imprecision in three dimensions; economic forecast imprecision, model error imprecision, and process imprecision.

Refer to Note 6 for further discussion regarding the calculation of the allowance for credit losses.

LEASES

LESSEES

Regions' lease portfolio is primarily composed of property leases that are classified as either operating or finance leases with the majority classified as operating leases. Property leases, which primarily include office locations and retail branches, typically have original lease terms ranging from 1 year to 20 years, some of which may also include an option to extend the lease beyond the original lease term. In some circumstances, Regions may also have an option to terminate the lease early with advance notice. Regions includes renewal and termination options within the lease term if deemed reasonably certain of exercise. As most leases do not state an implicit rate, Regions utilizes the incremental borrowing rate based on information available at the lease commencement date to determine the present value of lease payments. Leases with a term of 12 months or less are not recorded on the balance sheet. Regions continues to recognize lease payments as an expense over the lease term as appropriate. The remainder of the lease portfolio is comprised of equipment leases that have remaining lease terms of 1 year to 4 years.

Operating leases vary in term and, from time to time, include incentives and/or rent escalations. Examples of incentives include periods of “free” rent and leasehold improvement incentives. Regions recognizes incentives and escalations on a straight-line basis over the lease term as a reduction of or increase to rent expense, as applicable, within net occupancy expense in the consolidated statements of income. See Note 14 "Leases" for additional information.

LESSORS

Regions engages in both direct financing and sales-type leasing. Regions also has portfolios of leveraged and operating leases. These arrangements provide equipment financing for leased assets, such as vehicles and aircraft. At the commencement date, Regions (lessor) enters into an agreement with the customer (lessee) to lease the underlying equipment for a specified lease term. The lease agreements may provide customers the option to terminate the lease by buying the equipment at fair market value at the time of termination or at the end of the lease term. Regions' equipment finance asset management group performs due diligence procedures on the lease residual and overall equipment values as part of the origination process. Regions performs lease residual value reviews on an ongoing basis. In order to manage the residual value risk inherent in some of its direct financing leases, Regions purchases residual value insurance from an independent third party.

Sales-type, direct financing, and leveraged leases are recorded within loans and operating leases are recorded within other earning assets on the consolidated balance sheet. The net investment in direct financing leases is the sum of all minimum lease payments and estimated residual values, less unearned income. Unearned income is recognized over the terms of the leases to produce a constant effective yield. The net investment in leveraged leases is the sum of all lease payments (less non-recourse debt payments) and estimated residual values, less unearned income. Income from leveraged leases is recognized over the term of the leases based on the unrecovered equity investment. See Note 14 "Leases" for additional information.

OTHER EARNING ASSETS

Other earning assets consist primarily of investments in FRB stock, FHLB stock, marketable equity securities and operating lease assets. See Note 8 for additional information.

INVESTMENTS IN FEDERAL RESERVE BANK AND FEDERAL HOME LOAN BANK STOCK

Ownership of FRB and FHLB stock is a requirement for all banks seeking membership into and access to the services provided by these banking systems. These shares are accounted for at amortized cost, which approximates fair value.

MARKETABLE EQUITY SECURITIES

Marketable equity securities are recorded at fair value with changes in fair value reported in net income.

INVESTMENTS IN OPERATING LEASES

Investments in operating leases represent the assets underlying the related lease contracts and are reported at cost, less accumulated depreciation and net of origination fees and costs. Depreciation on these assets is generally provided on a straight-line basis over the lease term down to an estimated residual value. Regions periodically evaluates its depreciation rate for leased

Table of Contents

assets based on projected residual values and adjusts depreciation expense over the remaining life of the lease if deemed appropriate. Regions also evaluates the current value of the operating lease assets and tests for impairment when indicators of impairment are present. Income from operating lease assets includes lease origination fees, net of lease origination costs, and is recognized as operating lease revenue on a straight line basis over the scheduled lease term. The accrual of revenue on operating leases is generally discontinued at the time an account is determined to be uncollectible. Operating lease revenue and the depreciation expense on the related operating lease assets are included as components of net interest income on the consolidated statements of income. When a leased asset is returned, its remaining value is reclassified from other earning assets to other assets and recorded at the lower of cost or estimated fair value, less costs to sell, on Regions' consolidated balance sheet. Impairment of the operating lease asset, as well as residual value gains and losses at the end of the lease term are recorded through other non-interest income.

PREMISES AND EQUIPMENT

Premises and equipment are stated at cost, less accumulated depreciation and amortization, as applicable. Land is carried at cost. Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the estimated useful lives of the improvements (or the terms of the leases, if shorter). Generally, premises and leasehold improvements are depreciated or amortized over 7-40 years. Furniture and equipment are generally depreciated or amortized over 3-10 years. Premises and equipment are evaluated for impairment at least annually, or more often if events or circumstances indicate that the carrying value of the asset may not be recoverable. Maintenance and repairs are charged to non-interest expense in the consolidated statements of income. Improvements that either add functionality or extend the useful life of the asset are capitalized to the carrying value and depreciated. See Note 9 for detail of premises and equipment.

INTANGIBLE ASSETS

Intangible assets include goodwill, which is the excess of cost over the fair value of net assets of acquired businesses, and other identifiable intangible assets. Other identifiable intangible assets primarily include the following: 1) core deposit intangible assets, which are amounts recorded related to the value of acquired indeterminate maturity deposits, 2) amounts capitalized related to the value of acquired customer relationships, and 3) the DUS license. Core deposit intangibles, purchased credit card relationships, customer relationship intangibles and other identifiable intangibles assets are amortized over their expected useful lives.

The Company’s goodwill is tested for impairment on an annual basis in the fourth quarter, or more often if events or circumstances indicate that there may be impairment. Regions assesses the following indicators of goodwill impairment for each reporting period:

Recent operating performance,
Changes in market capitalization,
Regulatory actions and assessments,
Changes in the business climate (including legislation, legal factors and competition),
Company-specific factors (including changes in key personnel, asset impairments, and business dispositions), and
Trends in the banking industry.

Adverse changes in the economic environment, declining operations, or other factors could result in a decline in the implied estimated fair value of goodwill. Accounting guidance permits the Company to first assess qualitative factors to determine if it is more likely than not that the fair value of a reporting unit exceeds its carrying value. If, based on the weight of the evidence, the Company determines it is more likely than not that the fair value exceeds book value, then an impairment test is not necessary. If the Company elects to bypass the qualitative assessment, or concludes that it is more likely than not that the fair value is less than the carrying value, a goodwill impairment test is performed. The Company compares the estimated fair value of a reporting unit with its carrying amount, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its estimated fair value, an impairment loss is recognized in non-interest expense in an amount equal to that excess.

For purposes of performing the qualitative assessment, Regions evaluates events and circumstances which may include, but are not limited to, events and circumstances since the last impairment analysis, recent operating performance including reporting unit performance, changes in market capitalization, regulatory actions and assessments, changes in the business climate, company-specific factors, and trends in the banking industry to determine if it is more likely than not that the fair value of a reporting unit exceeds its carrying amount.

For purposes of performing the goodwill impairment test, if applicable, Regions uses both income and market approaches to value its reporting units. The income approach, which is the primary valuation approach, consists of discounting projected long-term future cash flows, which are derived from internal forecasts and economic expectations for the respective reporting

Table of Contents

units. The significant inputs to the income approach include expected future cash flows, the long-term target equity ratios, and the discount rate.

Other identifiable intangible assets, primarily core deposit intangibles, purchased credit card relationships and other acquired customer relationships, are reviewed at least annually (usually in the fourth quarter) for events or circumstances that could impact the recoverability of the intangible asset. These events could include loss of core deposits, significant losses of credit card or other types of acquired customer accounts and/or balances, increased competition, or adverse changes in the economy. To the extent other identifiable intangible assets are deemed unrecoverable, impairment losses are recorded in non-interest expense and reduce the carrying amount of the asset.

Refer to Note 10 for further detail and discussion of the results of the goodwill and other identifiable intangibles impairment tests.

ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS

Regions accounts for transfers of financial assets as sales when control over the transferred assets is surrendered. Control is generally considered to have been surrendered when 1) the transferred assets are legally isolated from the Company or its consolidated affiliates, even in bankruptcy or other receivership, 2) the transferee has the right to pledge or exchange the assets with no conditions that constrain the transferee and provide more than a trivial benefit to the Company, and 3) the Company does not maintain the obligation or unilateral ability to reclaim or repurchase the assets. If these sale criteria are met, the transferred assets are removed from the Company’s balance sheet and a gain or loss on sale is recognized. If not met, the transfer is recorded as a secured borrowing, and the assets remain on the Company’s balance sheet, the proceeds from the transaction are recognized as a liability, and gain or loss on sale is deferred until the sale criterion are achieved.

Regions has elected to account for its residential MSRs using the fair value measurement method. Under the fair value measurement method, residential MSRs are measured at estimated fair value each period with changes in fair value recorded as a component of mortgage income. The fair value of residential MSRs is calculated using various assumptions including future cash flows, market discount rates, expected prepayment rates, servicing costs and other factors. A significant change in prepayments of residential mortgages in the servicing portfolio could result in significant valuation adjustments, thus creating potential volatility in the carrying amount of residential MSRs. The valuation method relies on an OAS to consider prepayment risk and equate the asset's discounted cash flows to its market price. See the “Fair Value Measurements” section below for additional discussion regarding determination of fair value.

Regions is a DUS lender. The DUS program provides liquidity to the multi-family housing market. Regions' related commercial MSRs are recorded in other assets on the consolidated balance sheets at the lower of cost or estimated fair value and are amortized in proportion to, and over the estimated period that net servicing income is expected to be received based on projections of the amount and timing of estimated future net cash flows. The amount and timing of estimated future net cash flows are updated based on actual results and updated projections. Regions periodically evaluates its commercial MSRs for impairment. Regions has a one-third loss share guarantee associated with the majority of the DUS servicing portfolio. The other two-thirds loss share guarantee is retained by Fannie Mae. The estimated fair value of the loss share guarantee is recorded in other liabilities on the consolidated balance sheets.

Refer to Note 7 for further information on servicing of financial assets.

FORECLOSED PROPERTY AND OTHER REAL ESTATE

Other real estate and certain other assets acquired in satisfaction of indebtedness (“foreclosure”) are carried in other assets at the lower of the recorded investment in the loan or estimated fair value less estimated costs to sell the property. At the date of transfer from the loan portfolio, if the recorded investment in the loan exceeds the property’s estimated fair value less estimated costs to sell, a write-down is recorded against the allowance. Regions allows a period of up to 60 days after the date of transfer to record finalized write-downs as charge-offs against the allowance in order to properly accumulate all related invoices and updated valuation information, if necessary. Subsequent to transfer, Regions obtains valuations from professional valuation experts and/or third party appraisers on at least an annual basis. See the “Fair Value Measurements” section below for additional discussion regarding determination of fair value. Subsequent to transfer and the additional 60 days, any further write-downs are recorded as other non-interest expense. Gain or loss on the sale of foreclosed property and other real estate is included in other non-interest expense.

From time to time, assets classified as premises and equipment are transferred to held for sale for various reasons. These assets are carried in other assets at the lower of the recorded investment in the asset or estimated fair value less estimated cost to sell based upon the property’s appraised value at the date of transfer. Any adjustments to property held for sale are recorded as other non-interest expense.

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

The Company enters into derivative financial instruments to manage interest rate risk, facilitate asset/liability management strategies and manage other exposures. These instruments primarily include interest rate swaps, options on interest rate swaps,

Table of Contents

options including interest rate caps and floors, Eurodollar futures, forward rate contracts and forward sale commitments. All derivative financial instruments are recognized on the consolidated balance sheets as other assets or other liabilities, as applicable, at estimated fair value. Regions enters into master netting agreements with counterparties and/or requires collateral to cover exposures. In at least some cases, counterparties post collateral at a zero threshold regardless of credit rating. The majority of interest rate derivatives traded by Regions with dealing counterparties are subject to mandatory clearing through a central clearinghouse. The variation margin payments made for derivatives cleared through a central clearinghouse are legally characterized as settlements of the derivatives. As a result, these positions are reflected as settled with no fair value presented for purposes of the balance sheets and related disclosures. The counterparty risk for cleared trades effectively moves from the executing broker to the clearinghouse allowing Regions to benefit from the risk mitigation controls in place at the respective clearinghouse.

Interest rate swaps are agreements to exchange interest payments based upon notional amounts. Interest rate swaps subject Regions to market risk associated with changes in interest rates, changes in interest rate volatility as well as the credit risk that the counterparty will fail to perform. Option contracts involve rights to buy or sell financial instruments on a specified date or over a period at a specified price. These rights do not have to be exercised. Some option contracts such as interest rate floors, involve the exchange of cash based on changes in specified indices. Interest rate floors are contracts to hedge interest rate declines based on a notional amount, generally associated with a principal balance at risk. Interest rate floors subject Regions to market risk associated with changes in interest rates, changes in interest rate volatility, as well as the credit risk that the counterparty will fail to perform. Forward rate contracts are commitments to buy or sell financial instruments at a future date at a specified price or yield. Regions primarily enters into forward rate contracts on marketable instruments, which expose Regions to market risk associated with changes in the value of the underlying financial instrument, as well as the credit risk that the counterparty will fail to perform. Eurodollar futures are futures contracts on Eurodollar deposits. Eurodollar futures subject Regions to market risk associated with changes in interest rates. Because futures contracts are cash settled daily through a margining process in an exchange, there is minimal credit risk associated with Eurodollar futures. Forward sale commitments are sales of securities at a specified price at a future date. Forward sale commitments subject Regions to market risk associated with changes in market value, as well as the credit risk that the counterparty will fail to perform.

The Company elects to account for certain derivative financial instruments as accounting hedges which, based on the exposure being hedged, are either fair value or cash flow hedges.

Fair value hedge relationships mitigate exposure to the change in fair value of the hedged risk in an asset, liability or firm commitment. Under the fair value hedging model, gains or losses attributable to the change in fair value of the derivative instrument, as well as the gains and losses attributable to the change in fair value of the hedged item, are recognized in interest income or interest expense in the same income statement line item with the hedged item in the period in which the change in fair value occurs. To the extent the changes in fair value of the derivative do not offset the changes in fair value of the hedged item, the difference is recognized. The corresponding adjustment to the hedged asset or liability is included in the basis of the hedged item, while the corresponding change in the fair value of the derivative instrument is recorded as an adjustment to other assets or other liabilities, as applicable.

Cash flow hedge relationships mitigate exposure to the variability of future cash flows or other forecasted transactions. For cash flow hedge relationships, the entire change in the fair value of the hedging instrument would be recorded in accumulated other comprehensive income (loss) except for amounts excluded from the assessment of hedge effectiveness. Amounts recorded in accumulated other comprehensive income (loss) are recognized in earnings in the same income statement line item where the earnings effect of the hedged item is presented in the period or periods during which the hedged item impacts earnings.

The Company formally documents all hedging relationships, as well as its risk management objective and strategy for entering into various hedge transactions. The Company performs periodic qualitative and quantitative assessments to determine whether the hedging relationship has been highly effective in offsetting changes in fair values or cash flows of hedged items and whether the relationship is expected to continue to be highly effective in the future.

If a hedge relationship is de-designated or if hedge accounting is discontinued because the hedged item no longer exists, or does not meet the definition of a firm commitment, or because it is probable that the forecasted transaction will not occur, the derivative will continue to be recorded as an other asset or other liability in the consolidated balance sheets at its estimated fair value, with changes in fair value recognized in other non-interest expense. Any asset or liability that was recorded pursuant to recognition of the firm commitment is removed from the consolidated balance sheets and recognized in other non-interest expense. Gains and losses that were unrecognized and aggregated in accumulated other comprehensive income (loss) pursuant to the hedge of a forecasted transaction are recognized immediately in other non-interest expense.

Derivative contracts for which the Company has not elected to apply hedge accounting are classified as other assets or liabilities with gains and losses related to the change in fair value recognized in capital markets income or mortgage income, as applicable, in the statements of income during the period. These positions, as well as non-derivative instruments, are used to mitigate economic and accounting volatility related to customer derivative transactions, the mortgage pipeline and the fair value of residential MSRs.

Table of Contents

Regions enters into interest rate lock commitments, which are commitments to originate mortgage loans whereby the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. Accordingly, such commitments are recorded at estimated fair value with changes in fair value recorded in mortgage income or capital markets income, as applicable. Regions also has corresponding forward sale commitments related to these interest rate lock commitments, which are recorded at estimated fair value with changes in fair value recorded in mortgage income or capital markets income, as applicable. See the “Fair Value Measurements” section below for additional information related to the valuation of interest rate lock commitments.

Regions enters into various derivative agreements with customers desiring protection from possible future market fluctuations. Regions manages the market risk associated with these derivative agreements. The contracts in this portfolio for which the Company has elected not to apply hedge accounting are marked-to-market through capital markets income and included in other assets and other liabilities.

Concurrent with the election to use fair value measurement for residential MSRs, Regions began using various derivative instruments to mitigate the impact of changes in the fair value of residential MSRs in the statements of income. This effort may involve the use of various derivative instruments, including, but not limited to, forwards, futures, swaps and options. These derivatives are carried at estimated fair value, with changes in fair value reported in mortgage income.

Refer to Note 21 for further discussion and details of derivative financial instruments and hedging activities.

INCOME TAXES

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for expected future tax consequences. Under this method, deferred tax assets and liabilities are determined by applying the federal and state tax rates to the differences between financial statement carrying amounts and the corresponding tax bases of assets and liabilities. Deferred tax assets are also recorded for any tax attributes, such as tax credit and net operating loss carryforwards. The net balance of deferred tax assets and liabilities is reported in other assets or other liabilities in the consolidated balance sheets, as appropriate. Any effect of a change in federal and state tax rates on deferred tax assets and liabilities is recognized in income tax expense in the period that includes the enactment date. The Company reflects the expected amount of income tax to be paid or refunded during the year as current income tax expense or benefit, as applicable.

The Company determines the realization of deferred tax assets by considering all positive and negative evidence available, including the impact of recent operating results, future reversals of taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards and tax planning strategies. A valuation allowance is recorded for any deferred tax assets that are not more-likely-than-not to be realized.

Income tax benefits generated from uncertain tax positions are accounted for using the recognition and cumulative-probability measurement thresholds. Based on the technical merits, if a tax benefit is not more-likely-than-not of being sustained upon examination, the Company records a liability for the recognized income tax benefit. If a tax benefit is more-likely-than-not of being sustained based on the technical merits, the Company utilizes the cumulative probability measurement and records an income tax benefit equivalent to the largest amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with a taxing authority. The Company recognizes interest expense, interest income and penalties related to unrecognized tax benefits within current income tax expense.

The Company applies the proportional amortization method in accounting for its qualified affordable housing investments. This method recognizes the amortized cost of the investment as a component of income tax expense.

The deferral method of accounting is used for investments that generate investment tax credits. Under this method, the investment tax credits are recognized as a reduction of the related asset.

Refer to Note 20 for further discussion regarding income taxes.

TREASURY STOCK AND SHARE REPURCHASES

The purchase of the Company’s common stock is recorded at cost. At the date of repurchase, shareholders' equity is reduced by the repurchase price. Upon retirement, or upon purchase for constructive retirement, treasury stock would be reduced by the cost of such stock with the excess of repurchase price over par or stated value recorded in additional paid-in capital. If the Company subsequently reissues treasury shares, treasury stock is reduced by the cost of such stock with differences recorded in additional paid-in capital or retained earnings, as applicable.

Pursuant to recent share repurchase programs, shares repurchased were immediately retired, and therefore were not included in treasury stock. The Company's policy related to these share repurchases is to reduce its common stock based on the par value of the shares repurchased and to reduce its additional paid-in capital for the excess of the repurchase price over the par value.

Table of Contents

SHARE-BASED PAYMENTS

Regions sponsors stock plans which most commonly include restricted stock (i.e., unvested common stock) units, restricted stock awards, performance stock units and stock options. The Company accounts for share-based payments under the fair value recognition provisions whereby compensation cost is measured based on the estimated fair value of the award at the grant date and is recognized in the consolidated financial statements on a straight-line basis over the requisite service period for service-based awards. The fair value of restricted stock units, restricted stock awards or performance stock units is determined based on the closing price of Regions common stock on the date of grant. Historical data is also used to estimate future employee attrition, which is considered in calculating estimated forfeitures. Estimated forfeitures are adjusted when actual forfeitures differ from estimates, resulting in the recognition of compensation cost only for awards that vest. The effect of a change in estimated forfeitures is recognized through a cumulative catch-up adjustment that is included in salaries and employee benefits expense in the period of the change in estimate. The fair value of stock options where vesting is based on service is estimated at the date of grant using a Black-Scholes option pricing model and related assumptions. As compensation cost is recognized, a deferred tax asset is recorded that represents an estimate of the future tax deduction from exercise or release of restrictions. At the time the share-based awards are exercised, cancelled, have expired, or restrictions are released, the Company may be required to recognize an adjustment to tax expense depending on the market price of the Company’s common stock.

See Note 17 for further discussion and details of share-based payments.

EMPLOYEE BENEFIT PLANS

Regions uses an expected long-term rate of return applied to the fair market value of assets as of the beginning of the year and the expected cash flows during the year for calculating the expected investment return on all pension plan assets. At a minimum, amortization of the net gain or loss included in accumulated other comprehensive income resulting from experience different from that assumed and from changes in assumptions is included as a component of net periodic benefit cost if, as of the beginning of the year, that net gain or loss exceeds 10 percent of the greater of the projected benefit obligation or the market value of plan assets. If amortization is required, the minimum amortization is that excess divided by the average remaining service period of active participating employees expected to receive benefits under the plans. Regions records the service cost component of net periodic pension and postretirement benefit cost in salaries and employee benefits expense on the consolidated statements of income. The other components of net periodic pension and postretirement benefit cost are recorded in other non-interest expense on the consolidated statements of income. Regions uses a third-party actuary to compute the remaining service period of active participating employees. This period reflects expected turnover, pre-retirement mortality, and other applicable employee demographics.

See Note 18 for further discussion and details of employee benefit plans.

REVENUE RECOGNITION

Interest Income

The largest source of revenue for Regions is interest income. Interest income is recognized using the interest method driven by nondiscretionary formulas based on written contracts, such as loan agreements or securities contracts.

Service Charges on Deposit Accounts

Service charges on deposit accounts include non-sufficient fund fees and other service charges. Non-sufficient fund fees are earned when a depositor presents an item for payment in excess of available funds, and Regions, at its discretion, provides the necessary funds to complete the transaction.

Regions generates other service charges by providing depositors proper safeguard and remittance of funds as well as by providing optional services for depositors, such as check imaging or treasury management, that are performed upon the depositor’s request. Charges for the proper safeguard and remittance of funds are recognized monthly, as the customer retains funds in the account. Regions recognizes revenue for other optional services when the customer uses the selected service to execute a transaction (e.g., execute an ACH wire).

Card and ATM Fees

Card and ATM fees include the combined amounts of credit card, debit card, and ATM related revenue. The majority of the fees are card interchange where Regions earns a fee for remitting cardholder funds (or extends credit) via a third party network to merchants. Regions satisfies performance obligations for each transaction when the card is used and the funds are remitted. The network establishes interchange fees that the merchant remits to Regions for each transaction, and Regions incurs costs from the network for facilitating the interchange with the merchant. Due to its inability to establish prices and direct activities of the related processing network’s service, Regions is deemed the agent in this arrangement and records interchange revenues net of related costs. Regions also pays consideration to certain commercial card holders based on interchange fees and contractual volume. These costs are recognized as a reduction to interchange income.

Table of Contents

Card and ATM fees also include ATM fee income generated from allowing a Regions cardholder to withdraw funds from a non-Regions ATM and from allowing a non-Regions cardholder to withdraw funds from a Regions ATM. Regions satisfies performance obligations for each transaction when the withdrawal is processed. Regions does not direct activities of the related processing network’s service and recognizes revenue on a net basis as the agent in each transaction.

Investment Management and Trust Fee Income

Investment management and trust fee income represents revenue generated from asset management services provided to individuals, businesses, and institutions. Regions has a fiduciary responsibility to the beneficiary of the trust to perform agreed upon services which can include investing the assets, periodic reporting to the beneficiaries, and providing tax information regarding the trust. In exchange for these trust and custodial services, Regions collects fee income from beneficiaries as contractually determined via fee schedules. Regions’ performance obligations to customers are primarily satisfied over time as the services are performed and provided to the customer.

Mortgage Income

Mortgage income is recognized when earned or as each transaction occurs through the origination and servicing of residential mortgage loans for long-term investors and sales of residential mortgage loans in the secondary market. Mortgage income also includes any fair value adjustments for mortgage loans Regions has elected to measure under the fair value option and fair value adjustments related to mortgage servicing rights.

Capital Markets Income

Regions generates capital markets fee revenue through capital raising activities which include revenue streams such as securities underwriting and placement, loan syndication and placement, as well as foreign exchange, derivatives, merger and acquisition and other advisory services. For those revenue streams, revenue is primarily recognized at a point in time which coincides with the satisfaction of a single performance obligation, typically the transaction closing.

Securities underwriting and placement fees involve the issuing and distribution of securities for an underwriting fee from customers. The underwriting fee is a single performance obligation which is satisfied at the time that the transaction is closed, and the amount of the fee is either a fixed or variable percentage based on the deal value which is determinable at the time of deal closing.

Regions generates revenue from affordable housing investments through the syndication of investment funds to third parties. Regions transfers the primary benefits of the investment to the customer and recognizes syndication revenue on the closing date of the transaction.

Bank-Owned Life Insurance

Bank-owned life insurance income primarily represents income earned from the appreciation of the cash surrender value of insurance contracts held and the proceeds of insurance benefits. Regions recognizes revenue each period in the amount of the appreciation of the cash surrender value of the insurance policies. Revenue from the proceeds of insurance benefits is recognized at the time a claim is confirmed.

Commercial Credit Fee Income

Commercial credit fee income includes letters of credit fees and unused commercial commitment fees. Regions recognizes revenue for letters of credit fees over time. Regions recognizes revenue for unused commercial commitment fees on the date that the commitment expires.

Investment Services Fee Income

Investment services fee income represents income earned from investment advisory services. Through the use of third party carriers, Regions provides its customers with access to investment products that meet customers’ financial needs and investment objectives. Upon selection of an investment product, the customer enters into a policy with the carrier. Regions’ performance obligation is satisfied by fulfilling its responsibility to place customers in investment vehicles for which Regions earns commissions from the carrier based on agreed-upon fee percentages. In addition, Regions has a contractual relationship with a third party broker dealer to provide full service brokerage and investment advisory activities. As the principal in the arrangement, Regions recognizes the investment services commissions on a gross basis.

Securities Gains (Losses), Net

Net securities gains or losses result from Regions’ asset/liability management process. Gains or losses on the sale of securities are recognized as each sales transaction occurs with the cost of securities sold based on the specific identification method.

Market Value Adjustments on Employee Benefit Assets

Regions holds assets for certain employee benefit assets, both defined and other. Those assets are recorded at estimated fair value and the market value variations are recognized each period.

Table of Contents

Other Miscellaneous Income

Other miscellaneous income includes miscellaneous revenue from affordable housing, valuation adjustments to equity investments, fees from safe deposit boxes, check fees and other miscellaneous income including unusual gains. Regions recognizes the related fee or gain in a manner that reflects the timing of when transactions occur or as services are provided.

PER SHARE AMOUNTS

Earnings per common share is calculated by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share is calculated by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period, plus the effect of outstanding stock options, restricted and performance stock awards if dilutive. Refer to Note 16 for additional information.

FAIR VALUE MEASUREMENTS

Fair value guidance establishes a framework for using fair value to measure assets and liabilities and defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) as opposed to the price that would be paid to acquire the asset or received to assume the liability (an entry price). A fair value measure should reflect the assumptions that market participants would use in pricing the asset or liability, including the assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of nonperformance. Required disclosures include stratification of balance sheet amounts measured at fair value based on inputs the Company uses to derive fair value measurements. These strata include:

Level 1 valuations, where the valuation is based on quoted market prices for identical assets or liabilities traded in active markets (which include exchanges and over-the-counter markets with sufficient volume),
Level 2 valuations, where the valuation is based on quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market, and
Level 3 valuations, where the valuation is generated from model-based techniques that use significant assumptions not observable in the market, but observable based on Company-specific data. These unobservable assumptions reflect the Company’s own estimates for assumptions that market participants would use in pricing the asset or liability. Valuation techniques typically include option pricing models, discounted cash flow models and similar techniques, but may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability.

ITEMS MEASURED AT FAIR VALUE ON A RECURRING BASIS

Debt securities available for sale, certain mortgage loans held for sale, marketable equity securities, residential MSRs, derivative assets and derivative liabilities are recorded at fair value on a recurring basis. Below is a description of valuation methodologies for these assets and liabilities.

Debt securities available for sale consist of U.S. Treasuries, obligations of states and political subdivisions, mortgage-backed securities (including agency securities), and other debt securities.

U.S. Treasuries are valued based on quoted market prices of identical assets on active exchanges. Pricing received for U.S. Treasuries from third-party services is based on a market approach using dealer quotes from multiple active market makers and real-time trading systems. These valuations are Level 1 measurements.
Mortgage-backed securities are valued primarily using data from third-party pricing services for similar securities as applicable. Pricing from these third-party services is generally based on a market approach using observable inputs such as benchmark yields, reported trades, broker/dealer quotes, benchmark securities, TBA prices, issuer spreads, bids and offers, monthly payment information, and collateral performance, as applicable. These valuations are Level 2 measurements. Where such comparable data is not available, the Company develops valuations based on assumptions that are not readily observable in the market place; these valuations are Level 3 measurements.
Obligations of states and political subdivisions are generally based on data from third-party pricing services. The valuations are based on a market approach using observable inputs such as benchmark yields, MSRB reported trades, material event notices and new issue data. These valuations are Level 2 measurements. Where such comparable data is not available, the Company develops valuations based on assumptions that are not readily observable in the market place; these valuations are Level 3 measurements.
Other debt securities are valued based on Level 1, 2 and 3 measurements, depending on pricing methodology selected and are valued primarily using data from third-party pricing services. Pricing from these third-party services is generally based on a market approach using observable inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids and offers, and TRACE reported trades.

The majority of Regions' debt securities available for sale are valued using third-party pricing services. To validate pricing related to liquid investment securities, which represent the vast majority of the available for sale portfolio (e.g., mortgage-

Table of Contents

backed securities), Regions compares price changes received from the third-party pricing service to overall changes in market factors in order to validate the pricing received. To validate pricing received on less liquid investment securities in the available for sale portfolio, Regions receives pricing from third-party brokers-dealers on a sample of securities that are then compared to the pricing received. The pricing service uses standard observable inputs when available, for example: benchmark yields, reported trades, broker-dealer quotes, issuer spreads, benchmark securities, and bids and offers, among others. For certain security types, additional inputs may be used, or some inputs may not be applicable. It is not customary for Regions to adjust the pricing received for the available for sale portfolio. In the event that prices are adjusted, Regions classifies the measurement as a Level 3 measurement.

Mortgage loans held for sale consist of residential first mortgage loans and commercial mortgages held for sale. Regions has elected to measure certain residential and commercial mortgage loans held for sale at fair value by applying the fair value option (see additional discussion under the “Fair Value Option” section in Note 22). The residential first mortgage loans held for sale are valued based on traded market prices of similar assets where available and/or discounted cash flows at market interest rates, adjusted for securitization activities that include servicing value and market conditions, a Level 2 measurement. The commercial mortgage loans held for sale are valued based on traded market prices for comparable commercial mortgage-backed securitizations, into which the loans will be placed, adjusted for movements of interest rates and credit spreads, a Level 3 measurement due to the unobservable inputs included in the credit spreads for bonds in commercial mortgage-backed securitizations.

Marketable equity securities, which primarily consist of assets held for certain employee benefits and money market funds, are valued based on quoted market prices of identical assets on active exchanges; these valuations are Level 1 measurements.

Residential mortgage servicing rights are valued using an option-adjusted spread valuation approach, a Level 3 measurement. The underlying assumptions and estimated values are corroborated at least quarterly by values received from independent third parties. See Note 7 for information regarding the servicing of financial assets and additional details regarding the assumptions relevant to this valuation.

Derivative assets and liabilities, which primarily consist of interest rate, foreign exchange, and commodity contracts that include forwards, futures, options and swaps, are included in other assets and other liabilities (as applicable) on the consolidated balance sheets. Interest rate swaps are predominantly traded in over-the-counter markets and, as such, values are determined using widely accepted discounted cash flow models, which are Level 2 measurements. These discounted cash flow models use projections of future cash payments/receipts that are discounted at an appropriate index rate. Regions utilizes OIS curves as fair value measurement inputs for the valuation of interest rate and commodity derivatives. The projected future cash flows are sourced from an assumed yield curve, which is consistent with industry standards and conventions. These valuations are adjusted for the unsecured credit risk at the reporting date, which considers collateral posted and the impact of master netting agreements. For options and futures contracts traded in over-the-counter markets, values are determined using discounted cash flow analyses and option pricing models based on market rates and volatilities, which are Level 2 measurements. Interest rate lock commitments on loans intended for sale and risk participations categorized as credit derivatives are valued using option pricing models that incorporate significant unobservable inputs, and therefore are Level 3 measurements.

Equity investments, which consists of the Company's holding in an equity investee that is traded on an active exchange, is valued using a quoted market price for a similar instrument in an active market, adjusted for marketability considerations; this valuation is a Level 2 measurement.

ITEMS MEASURED AT FAIR VALUE ON A NON-RECURRING BASIS

From time to time, certain assets may be recorded at fair value on a non-recurring basis. These non-recurring fair value adjustments typically are a result of the application of lower of cost or fair value accounting or a write-down occurring during the period. For example, if the fair value of an asset in these categories falls below its cost basis, it is considered to be at fair value at the end of the period of the adjustment. In periods where there is no adjustment, the asset is generally not considered to be at fair value. The following is a description of the valuation methodologies used for assets measured at fair value on a non-recurring basis.

Foreclosed property and other real estate is carried in other assets at the lower of the recorded investment in the loan or fair value less estimated costs to sell the property. The fair value for foreclosed property that is based on either observable transactions of similar instruments or formally committed sale prices is classified as a Level 2 measurement. If no formally committed sale price is available, Regions also obtains valuations from professional valuation experts and/or third party appraisers. Updated valuations are obtained on at least an annual basis. Foreclosed property exceeding established dollar thresholds is valued based on appraisals. Appraisals are performed by third-parties with appropriate professional certifications and conform to generally accepted appraisal standards as evidenced by the Uniform Standards of Professional Appraisal Practice. Regions’ policies related to appraisals conform to regulations established by the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and other regulatory guidance. Professional valuations are considered Level 2 measurements because they are based largely on observable inputs. Regions has a centralized appraisal review function that is

Table of Contents

responsible for reviewing appraisals for compliance with banking regulations and guidelines as well as appraisal standards. Based on these reviews, Regions may make adjustments to the market value conclusions determined in the appraisals of real estate (either as other real estate or loans held for sale) when the appraisal review function determines that the valuation is based on inappropriate assumptions or where the conclusion is not sufficiently supported by the market data presented in the appraisal. Adjustments to the market value conclusions are discussed with the professional valuation experts and/or third-party appraisers; the magnitude of the adjustments that are not mutually agreed upon is insignificant. Adjustments, if made, must be based on sufficient information available to support an alternate opinion of market value. An estimated standard discount factor, which is updated at least annually, is applied to the appraisal amount for certain commercial and investor real estate properties when the recorded investment in the loan is transferred into foreclosed property. Internally adjusted valuations are considered Level 3 measurements as management uses assumptions that may not be observable in the market. These non-recurring fair value measurements are typically recorded on the date an updated offered quote, appraisal, or third-party valuation is received.

Equity investments without a readily determinable fair value are adjusted prospectively to estimated fair value when an observable price transaction for a same or similar investment with the same issuer occurs; these valuations are Level 3 measurements.

Loans held for sale for which the fair value option has not been elected are recorded at the lower of cost or fair value and therefore may be reported at fair value on a non-recurring basis. The fair values for commercial loans held for sale are based on Company-specific data not observable in the market. These valuations are Level 3 measurements.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by the Company in estimating fair values of financial instruments that are not disclosed above:

Cash and cash equivalents: The carrying amounts reported in the consolidated balance sheets and statements of cash flows approximate the estimated fair values. Because these amounts generally relate to either currency or highly liquid assets, these are considered Level 1 valuations.

Debt securities held to maturity: The fair values of debt securities held to maturity are estimated in the same manner as the corresponding debt securities available for sale, which are measured at fair value on a recurring basis.

Loans (excluding sales-type, direct financing, and leveraged leases), net of unearned income and allowance for loan losses: A discounted cash flow method under the income approach is utilized to estimate the fair value of the loan portfolio. The discounted cash flow method relies upon assumptions about the amount and timing of scheduled principal and interest payments, principal prepayments, and current market rates. The loan portfolio is aggregated into categories based on loan type and credit quality. For each loan category, weighted average statistics, such as coupon rate, age, and remaining term are calculated. These are Level 3 valuations.

Other earning assets (excluding equity investments and operating leases): The carrying amounts reported in the consolidated balance sheets approximate the estimated fair values. While these instruments are not actively traded in the market, the majority of the inputs required to value them are actively quoted and can be validated through external sources. Accordingly, these are Level 2 valuations.

Deposits: The fair value of non-interest-bearing demand accounts, interest-bearing transaction accounts, savings accounts, money market accounts and certain other time deposit accounts is the amount payable on demand at the reporting date (i.e., the carrying amount). Fair values for certificates of deposit are estimated by using discounted cash flow analyses, based on market spreads to benchmark rates. These are Level 2 valuations.

Short-term and long-term borrowings: The carrying amounts of short-term borrowings reported in the consolidated balance sheets approximate the estimated fair values, and are considered Level 2 measurements as similar instruments are traded in active markets. The fair values of certain long-term borrowings are estimated using quoted market prices of identical instruments in active markets and are considered Level 1 measurements. The fair values of certain long term borrowings are estimated using quoted market prices of identical instruments in non-active markets and are considered Level 2 valuations. Otherwise, valuations are based on non-binding broker quotes and are considered Level 3 valuations.

Loan commitments and letters of credit: The fair value of these instruments is reasonably estimated by the carrying value of deferred fees plus the unfunded loan commitments reserve related to the creditworthiness of our counterparty. Because the valuation inputs are not observable in the market and are considered Company specific, these are Level 3 valuations.

See Note 22 for additional information related to fair value measurements.

Table of Contents

RECENT ACCOUNTING PRONOUNCEMENTS

The following table provides a brief description of accounting standards adopted in 2020 and those that could have a material impact to Regions’ consolidated financial statements upon adoption in the future.


Standard	Description	Required Date of Adoption	Effect on Regions' financial statements or other significant matters
Standards Adopted (or partially adopted) in 2020
ASU 2016-13, Measurement of Credit Losses on Financial Instruments ASU 2018-19, Codification Improvements to Topic 326 ASU 2019-04, Codification Improvements to Topic 326 ASU 2019-05, Targeted Transition Relief to Topic 326 ASU 2019-11, Financial Instruments- Credit Losses ASU 2020-02, Financial Instruments - Credit Losses	This ASU amends Topic 326, Financial Instruments- Credit Losses to replace the current incurred loss accounting model with a current expected credit loss approach (CECL) for financial instruments measured at amortized cost and other commitments to extend credit. The amendments require entities to consider all available relevant information when estimating current expected credit losses, including details about past events, current conditions, and R&S forecasts. The resulting allowance for credit losses is to reflect the portion of the amortized cost basis that the entity does not expect to collect. The ASU also eliminates the current accounting model for purchased credit-impaired loans, but requires an allowance to be recognized for purchased-credit-deteriorated (PCD) assets (those that have experienced more-than-insignificant deterioration in credit quality since origination). Entities that had loans accounted for under ASC 310-30 at the time of adoption should prospectively apply the guidance in this amendment for purchase credit deteriorated assets. Additional quantitative and qualitative disclosures are required upon adoption. While the CECL model does not apply to available for sale debt securities, the ASU does require entities to record an allowance when recognizing credit losses for available for sale securities, rather than reduce the amortized cost of the securities by direct write-offs. The ASU should be adopted on a modified retrospective basis.	January 1, 2020	The allowance increased by $501 million based on loan exposure balances and Regions' internally developed macroeconomic forecast upon adoption of CECL on January 1, 2020. The increase in the allowance at adoption was primarily the result of significant increases within the consumer portfolio segment, specifically residential first mortgages, home equity loans, home equity lines, and indirect-other consumer. The impact to the residential first mortgage and home equity classes was mainly driven by their longer time to maturity. Additionally, a significant portion of the indirect-other consumer class is unsecured lending through third parties which yielded higher loss rates. Under CECL these higher loss rates compounded over a life of loan estimate result in a significantly larger allowance estimate. A suite of controls including governance, data, forecast and model controls was in place at adoption. The impact was reflected as a reduction of approximately $375 million to retained earnings and an increase of approximately $126 million to deferred tax assets. In the third quarter of 2020, the Federal Banking agencies finalized a rule related to the impact of CECL on regulatory capital. The rule allows an add-back to regulatory capital for the impacts of CECL for a two-year period. At the end of the two years, the impact is then phased in over the following three years. The add-back is calculated as the impact of initial adoption, plus 25 percent of subsequent changes in allowance. At December 31, 2020 this amount is approximately $582 million year-to-date. The impact on CET1 is approximately 54 basis points. There was no material impact to available for sale or held to maturity securities upon adoption of CECL, nor to any other financial assets in scope. Most of the held to maturity portfolio consists of agency-backed securities that inherently have an immaterial risk of loss. Additionally, Regions had no purchase credit impaired assets that were converted to PCD upon adoption. See relevant sections of this note for additional information about Regions' CECL methodologies and assumptions.
ASU 2017-04, Simplifying the Test for Goodwill Impairment	This ASU amends Topic 350, Intangibles-Goodwill and Other, and eliminates Step 2 from the goodwill impairment test.	January 1, 2020	The adoption of this guidance did not have a material impact.
ASU 2018-15, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement	This ASU amends Topic 350-40, Intangibles-Goodwill and Other-Internal-Use Software, regarding a customer's accounting for implementation, set-up, and other upfront costs incurred in a cloud computing arrangement that is hosted by the vendor, i.e. a service contract. Customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license. The amendments also prescribe the balance sheet, income statement, and cash flow classification of the capitalized implementation costs and related amortization expense, and require additional quantitative and qualitative disclosures.	January 1, 2020	The adoption of this guidance did not have a material impact.
ASU 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities	This ASU amends Topic 810, Consolidation, guidance on how all reporting entities evaluate indirect interests held through related parties in common control arrangements when determining whether fees paid to decision makers and service providers are variable interests.	January 1, 2020	The adoption of this guidance did not have a material impact.

Table of Contents


Standard	Description	Required Date of Adoption	Effect on Regions' financial statements or other significant matters
Standards Adopted (or partially adopted) in 2020 (continued)
ASU 2019-04, Codification Improvements to Topics 815 and 825	This ASU amends Topic 815, Derivatives and Hedging, by providing clarification on ASU 2017-12, which the Company previously adopted. The amendment provides clarity on the term used to measure the change in fair value on a partial term hedge of interest rate risk. The amendment also provides additional guidance on the amortization of the basis adjustment on partial term hedges. This ASU also amends Topic 825, Financial Instruments, by providing clarification on ASU 2016-01, which the Company previously adopted. The amendment clarifies that an entity must remeasure a security without a readily determinable fair value at fair value in accordance with Topic 820 when an orderly transaction is identified for an identical or similar investment.	January 1, 2020	The adoption of this guidance did not have a material impact.
ASU 2019-08 Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606)	The amendments in this Update require that an entity measure and classify share-based payment awards granted to a customer by applying the guidance in Topic 718. The amount recorded as a reduction of the transaction price is required to be measured on the basis of the grant-date fair value of the share-based payment award measured in accordance with Topic 718. The grant date is the date at which a grantor (supplier) and grantee (customer) reach a mutual understanding of the key terms and conditions of a share-based payment award. The classification and subsequent measurement of the award are subject to the guidance in Topic 718 unless the share-based payment award is subsequently modified and the grantee is no longer a customer.	January 1, 2020	The adoption of this guidance did not have a material impact.
ASU 2020-03, Codification Improvements to Financial Instruments	This Update was issued to make minor technical corrections and improvements to the Codification as part of an ongoing FASB project to clarify guidance and correct inconsistent application of unclear guidance. This ASU provides clarification for disclosures related to the fair value option and debt securities and minor updates to Topics 470, Debt, 820, Fair Value Measurement, 842, Leases, and 860, Transfers and Servicing.	The Update is effective upon issuance.	The adoption of this guidance did not have a material impact.
ASU 2020-04, Reference Rate Reform - Topic 848	This Update provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications, hedge accounting, and other transactions affected that reference LIBOR or another reference rate expected to be discontinued.	The Update is effective upon issuance and can be applied through December 31, 2022.	Regions adopted this ASU on July 1, 2020, and at the time of adoption, there was no material impact. Regions anticipates optional expedients adopted such as contract modification and hedge accounting will provide significant relief otherwise not provided through December 31, 2022.
ASU 2020-09, Debt (Topic 470)— Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762	The amendments in this Update were issued to amend and supersede the SEC section of Topic 470, Debt, to reflect the guidance on guaranteed debt securities offerings in SEC Release 33-10762 which related to financial disclosure requirements for subsidiary issuers and guarantors of registered debt securities and affiliates whose securities are pledged as collateral for registered securities.	The Update is effective upon issuance.	The adoption of this guidance did not have a material impact.

Table of Contents


Standard	Description	Required Date of Adoption	Effect on Regions' financial statements or other significant matters
Standards Not Yet Adopted
ASU 2019-12 Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes	The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.	January 1, 2021	Regions adopted this guidance as of January 1, 2021 with no material impact.
ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)	The amendments clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815.	January 1, 2021 Early adoption is permitted.	Regions adopted this guidance as of January 1, 2021 with no material impact
ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40)	This Update simplifies accounting for convertible instruments by removing certain separation models. Additionally, it revises and clarifies guidance on the derivatives scope exception to make the exception easier to apply.	January 1, 2022	Regions is evaluating the impact upon adoption; however, the impact is not expected to be material.
ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs	The amendments in this Update were issued to clarify that entities should reevaluate at each reporting period whether callable debt securities are within the scope of the guidance in Topic 310-20, which requires the premium on such debt securities to be amortized to the next call date.	January 1, 2021 Early adoption is not permitted.	Regions adopted this guidance as of January 1, 2021 with no material impact
ASU 2020-10, Codification Improvements	This Update was issued to make minor technical corrections and improvements to the Codification as part of an ongoing FASB project to clarify guidance and correct inconsistent application of unclear guidance. The ASU codifies in Section 50 (Disclosure) of various Codification Topics the disclosure guidance that includes an option to provide certain information either on the face of the financial statements or in notes to the financial statements that was previously codified only in Section 45 (Other Presentation Matters). It also amends various Codification Topics to clarify guidance that may have been unclear when originally codified and that has resulted in inconsistent application.	January 1, 2021 Early adoption is not permitted.	Regions is evaluating the impact upon adoption; however, the impact is not expected to be material.

Table of Contents

NOTE 2. VARIABLE INTEREST ENTITIES

Regions is involved in various entities that are considered to be VIEs, as defined by authoritative accounting literature. Generally, a VIE is a corporation, partnership, trust or other legal structure that either does not have equity investors with substantive voting rights or has equity investors that do not provide sufficient financial resources for the entity to support its activities. The following discusses the VIEs in which Regions has a significant interest.

AFFORDABLE HOUSING TAX CREDIT INVESTMENTS

Regions periodically invests in various limited partnerships that sponsor affordable housing projects, which are funded through a combination of debt and equity. These partnerships meet the definition of a VIE. Regions uses the proportional amortization method to account for these investments. Due to the nature of the management activities of the general partner, Regions is not the primary beneficiary of these partnerships. See Note 1 for additional details. Additionally, Regions has loans or letters of credit commitments with certain limited partnerships. The funded portion of the loans and letters of credit are classified as commercial and industrial loans or investor real estate loans as applicable in Note 5.

A summary of Regions’ affordable housing tax credit investments and related loans and letters of credit, representing Regions’ maximum exposure to loss as of December 31 is as follows:


	2020		2019
	(In millions)
Affordable housing tax credit investments included in other assets	$	975	$	932
Unfunded affordable housing tax credit commitments included in other liabilities	249		$	213
Loans and letters of credit commitments	243		$	265
Funded portion of loans and letters of credit commitments	130		$	157


	2020		2019		2018
	(In millions)
Tax credits and other tax benefits recognized	$	164	$	165	$	174
Tax credit amortization expense included in provision for income taxes	133		131		137

In addition to the investments discussed above, Regions also syndicates affordable housing investments. In these syndication transactions, Regions creates affordable housing funds in which a subsidiary is the general partner or managing member and sells limited partnership interests to third parties. Regions' general partner or managing member interest represents an insignificant interest in the affordable housing fund. The affordable housing funds meet the definition of a VIE. As Regions is not the primary beneficiary and does not have a significant interest, these investments are not consolidated. At December 31, 2020 and 2019, the value of Regions’ general partnership interest in affordable housing investments was immaterial.

OTHER INVESTMENTS

Other investments determined to be VIEs include investments in CRA projects, SBICs, and other miscellaneous investments. A summary of Regions' equity method investments representing Regions' maximum exposure to loss as of December 31 is as follows:


	2020		2019
	(In millions)
Gross equity method investments	$	186	$	176
Unfunded equity method commitments	57		72
Net funded equity method investments included in other assets	$	129	$	104

NOTE 3. DISCONTINUED OPERATIONS

On July 2, 2018, Regions sold Regions Insurance Group, Inc. and related affiliates. The gain associated with the transaction amounted to $281 million ($196 million after-tax). In connection with the agreement, the results of the entities sold are reported in the Company's consolidated statements of income separately as discontinued operations for all periods presented.

On April 2, 2012, Regions sold Morgan Keegan and related affiliates to Raymond James. Regions Investment Management, Inc. (formerly known as Morgan Asset Management, Inc.) and Regions Trust were not included in the sale. In connection with the closing of the sale, Regions agreed to indemnify Raymond James for all litigation matters related to pre-closing activities. See Note 24 for related disclosure. Results of operations for the Morgan Keegan entities sold are presented separately as discontinued operations for all periods presented on the consolidated statements of income.

Table of Contents

The following table represents the condensed results of operations for the Regions Insurance Group, Inc. entities sold as discontinued operations in 2018:


	Year Ended December 31, 2018
	(In millions)
Interest income	$	1
Interest expense	—
Net interest income	1
Non-interest income:
Securities gains (losses), net	(1)
Insurance commissions and fees	69
Gain on sale of business	281
Other	—
Total non-interest income	349
Non-interest expense:
Salaries and employee benefits	49
Net occupancy expense	3
Furniture and equipment expense	2
Other	16
Total non-interest expense	70
Income from discontinued operations before income taxes	280
Income tax expense	84
Income from discontinued operations, net of tax	$	196

The following table represents the condensed results of operations for both the Regions Insurance Group, Inc. entities and Morgan Keegan and Company, Inc. and related affiliates as discontinued operations:


	Year Ended December 31
	2020		2019		2018
	(In millions, except per share data)
Income from discontinued operations before income taxes	$	—	$	—	$	271
Income tax expense	—		—		80
Income from discontinued operations, net of tax	$	—	$	—	$	191
Earnings per common share from discontinued operations:
Basic	$	0.00	$	0.00	$	0.18
Diluted	$	0.00	$	0.00	$	0.17

Table of Contents

NOTE 4. DEBT SECURITIES

The amortized cost, gross unrealized gains and losses, and estimated fair value of debt securities held to maturity and debt securities available for sale are as follows:


	December 31, 2020
			Recognized in OCI (1)						Not recognized in OCI
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In millions)
Debt securities held to maturity:


Mortgage-backed securities:
Residential agency	$	554	$	—	$	(19)	$	535	$	34	$	—	$	569
Commercial agency	589		—		(2)		587		59		—		646
	$	1,143	$	—	$	(21)	$	1,122	$	93	$	—	$	1,215

Debt securities available for sale:
U.S. Treasury securities	$	178	$	5	$	—	$	183					$	183
Federal agency securities	102		3		—		105						105

Mortgage-backed securities:
Residential agency	18,455		625		(4)		19,076						19,076
Residential non-agency	1		—		—		1						1
Commercial agency	5,659		346		(6)		5,999						5,999
Commercial non-agency	571		15		—		586						586
Corporate and other debt securities	1,126		78		—		1,204						1,204
	$	26,092	$	1,072	$	(10)	$	27,154					$	27,154


	December 31, 2019
			Recognized in OCI (1)						Not recognized in OCI
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In millions)
Debt securities held to maturity:


Mortgage-backed securities:
Residential agency	$	736	$	—	$	(26)	$	710	$	22	$	—	$	732
Commercial agency	625		—		(3)		622		20		(2)		640
	$	1,361	$	—	$	(29)	$	1,332	$	42	$	(2)	$	1,372

Debt securities available for sale:
U.S. Treasury securities	$	180	$	2	$	—	$	182					$	182
Federal agency securities	42		1		—		43						43

Mortgage-backed securities:
Residential agency	15,336		218		(38)		15,516						15,516
Residential non-agency	1		—		—		1						1
Commercial agency	4,720		77		(31)		4,766						4,766
Commercial non-agency	639		8		—		647						647
Corporate and other debt securities	1,414		38		(1)		1,451						1,451
	$	22,332	$	344	$	(70)	$	22,606					$	22,606

(1)The gross unrealized losses recognized in OCI on securities held to maturity resulted from a transfer of securities available for sale to held to maturity in the second quarter of 2013.

Debt securities with carrying values of $10.3 billion and $8.3 billion at December 31, 2020 and 2019, respectively, were pledged to secure public funds, trust deposits and certain borrowing arrangements. Included within total pledged securities is approximately $24 million of encumbered U.S. Treasury securities at both December 31, 2020 and 2019.

Table of Contents

The amortized cost and estimated fair value of debt securities held to maturity and debt securities available for sale at December 31, 2020, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Amortized Cost		Estimated Fair Value
	(In millions)
Debt securities held to maturity:
Mortgage-backed securities:
Residential agency	$	554	$	569
Commercial agency	589		646
	$	1,143	$	1,215
Debt securities available for sale:
Due in one year or less	$	200	$	202
Due after one year through five years	828		873
Due after five years through ten years	267		299
Due after ten years	111		118
Mortgage-backed securities:
Residential agency	18,455		19,076
Residential non-agency	1		1
Commercial agency	5,659		5,999
Commercial non-agency	571		586
	$	26,092	$	27,154

The following tables present gross unrealized losses and the related estimated fair value of debt securities held to maturity and debt securities available for sale at December 31, 2020 and 2019. For debt securities transferred to held to maturity from available for sale, the analysis in the tables below is comparing the securities' original amortized cost to its current estimated fair value. These securities are segregated between investments that have been in a continuous unrealized loss position for less than twelve months and for twelve months or more.


	December 31, 2020
	Less Than Twelve Months				Twelve Months or More				Total
	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
	(In millions)







Debt securities available for sale:


Mortgage-backed securities:
Residential agency	$	914	$	(4)	$	101	$	—	$	1,015	$	(4)

Commercial agency	819		(6)		—		—		819		(6)


	$	1,733	$	(10)	$	101	$	—	$	1,834	$	(10)

Table of Contents


	December 31, 2019
	Less Than Twelve Months				Twelve Months or More				Total
	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
	(In millions)
Debt securities held to maturity:

Mortgage-backed securities:
Residential agency	$	82	$	—	$	501	$	(5)	$	583	$	(5)
Commercial agency	—		—		127		(5)		127		(5)
	$	82	$	—	$	628	$	(10)	$	710	$	(10)

Debt securities available for sale:


Mortgage-backed securities:
Residential agency	$	2,402	$	(11)	$	2,505	$	(27)	$	4,907	$	(38)

Commercial agency	1,449		(31)		73		—		1,522		(31)

Corporate and other debt securities	19		—		32		(1)		51		(1)
	$	3,870	$	(42)	$	2,610	$	(28)	$	6,480	$	(70)

The number of individual debt positions in an unrealized loss position in the tables above decreased from 500 at December 31, 2019 to 129 at December 31, 2020. The decrease in the number of securities and the total amount of gross unrealized losses was primarily due to changes in market interest rates. In instances where an unrealized loss existed, there was no indication of an adverse change in credit on the underlying positions in the tables above. As it relates to these positions, management believes no individual unrealized loss, other than those discussed below, represented credit impairment as of those dates. The Company does not intend to sell, and it is not more likely than not that the Company will be required to sell, the positions before the recovery of their amortized cost basis, which may be at maturity.

Gross realized gains and gross realized losses on sales of debt securities available for sale are shown in the table below. The cost of securities sold is based on the specific identification method. As part of the Company's normal process for evaluating impairment, management did identify a limited number of positions where impairment was believed to exist in certain periods, as shown in the table below.



	2020		2019		2018
	(In millions)
Gross realized gains	$	5	$	16	$	4
Gross realized losses	(1)		(43)		(1)
Impairment	—		(1)		(2)
Securities gains (losses), net	$	4	$	(28)	$	1

Table of Contents

NOTE 5. LOANS

The following table presents the distribution of Regions' loan portfolio by segment and class, net of unearned income as of December 31:


	2020		2019
	(In millions)
Commercial and industrial	$	42,870	$	39,971
Commercial real estate mortgage—owner-occupied	5,405		5,537
Commercial real estate construction—owner-occupied	300		331
Total commercial	48,575		45,839
Commercial investor real estate mortgage	5,394		4,936
Commercial investor real estate construction	1,869		1,621
Total investor real estate	7,263		6,557
Residential first mortgage	16,575		14,485
Home equity lines	4,539		5,300
Home equity loans	2,713		3,084
Indirect—vehicles	934		1,812
Indirect—other consumer	2,431		3,249
Consumer credit card	1,213		1,387
Other consumer	1,023		1,250
Total consumer	29,428		30,567
Total loans, net of unearned income (1)	$	85,266	$	82,963

(1)Loans are presented net of unearned income, unamortized discounts and premiums and net deferred loan costs of $678 million and $234 million at December 31, 2020 and 2019, respectively.

During both 2020 and 2019, Regions purchased approximately $1.6 billion in indirect-other consumer, residential first mortgage and commercial and industrial loans from third parties. The 2020 purchases do not include loans from the Ascentium acquisition.

In January 2019, Regions decided to discontinue its indirect auto lending business due to margin compression impacting overall returns on the portfolio. Regions ceased originating new indirect auto loans in the first quarter of 2019 and completed any in-process indirect auto loan closings at the end of the second quarter of 2019. The Company remains in the direct auto lending business.

At December 31, 2020, $20.8 billion in securities and net eligible loans held by Regions were pledged to secure current and potential borrowings from the FHLB. At December 31, 2020, an additional $17.6 billion in net eligible loans held by Regions were pledged to the FRB for potential borrowings.

See Note 14 for details regarding Regions’ investment in sales-type, direct financing, and leveraged leases included within the commercial and industrial loan portfolio.

NOTE 6. ALLOWANCE FOR CREDIT LOSSES

Regions determines the appropriate level of the allowance on a quarterly basis. The methodology is described in Note 1.

On January 1, 2020, Regions adopted CECL, which replaces the incurred loss methodology with an expected loss methodology. Refer to Note 1 for a description of the adoption of CECL and Regions' allowance methodology. Additionally, refer to Note 1 "Summary of Significant Accounting Policies" to the consolidated financial statements to the Annual Report on Form 10-K for the year ended December 31, 2019, for a description of the methodology prior to the adoption of CECL on January 1, 2020.

As of December 31, 2020, Regions' total loans included $3.6 billion of PPP loans. These loans are guaranteed by the Federal government and as the guarantee is not separable from the loans, Regions recorded an immaterial allowance on these loans.

ROLLFORWARD OF ALLOWANCE FOR CREDIT LOSSES

The cumulative effect of the adoption of CECL on January 1, 2020 for loans and unfunded commitments was an increase in the allowance of $501 million. During 2020, Regions increased the allowance by an additional $878 million to $2.3 billion, which represents management's best estimate of expected losses over the life of the portfolio. The increase was due primarily to

Table of Contents

higher expected credit losses due to the economic impact and ongoing uncertainty of the COVID-19 pandemic and the purchase of Ascentium. Macroeconomic factors utilized in the CECL loss models include, but are not limited to, unemployment rate, GDP, HPI and the S&P 500 index, with unemployment being the most significant macroeconomic factor within the CECL models. Regions' models are sensitive to changes in the economic scenario, specifically to the level of unemployment. The December 31, 2020 economic forecast includes a high degree of uncertainty around how long the COVID-19 pandemic will persist, the timeliness and effectiveness of vaccinations and the effectiveness of government relief programs and debt payment relief provided by Regions. These factors cannot be fully reflected in the models. Therefore, the risks to the economic forecast and the model limitations were considered through model adjustments and the qualitative framework.

The following tables present analyses of the allowance for credit losses by portfolio segment for the years ended December 31, 2020, 2019 and 2018. The total allowance for loan losses and the related loan portfolio ending balances for the years ended 2019 and 2018 are disaggregated to detail the amounts derived through individual evaluation and collective evaluation for impairment. Prior to 2020, the allowance for loan losses related to individually evaluated loans was attributable to allowances for non-accrual commercial and investor real estate loans and all TDRs ("impaired loans") and the allowance for loan losses related to collectively evaluated loans was attributable to the remainder of the portfolio. With the adoption of CECL on January 1, 2020, the impaired loan designation and disclosures related to impaired loans are no longer required.


	2020
	Commercial		Investor Real Estate		Consumer		Total
	(In millions)
Allowance for loan losses, December 31, 2019	$	537	$	45	$	287	$	869
Cumulative change in accounting guidance (Note 1)	(3)		7		434		438
Allowance for loan losses, January 1, 2020 (adjusted for change in accounting guidance)	534		52		721		1,307
Provision for loan losses	927		129		256		1,312
Initial allowance on acquired PCD loans	60		—		—		60
Loan losses:
Charge-offs	(368)		(1)		(244)		(613)
Recoveries	43		3		55		101
Net loan losses	(325)		2		(189)		(512)
Allowance for loan losses, December 31, 2020	$	1,196	$	183	$	788	$	2,167
Reserve for unfunded credit commitments, December 31, 2019	41		4		—		45
Cumulative change in accounting guidance (Note 1)	36		13		14		63
Reserve for unfunded credit commitments, January 1, 2020 (adjusted for change in accounting guidance)	77		17		14		108
Provision (credit) for unfunded credit losses	20		(3)		1		18
Reserve for unfunded credit commitments, December 31, 2020	97		14		15		126
Allowance for credit losses, December 31, 2020	$	1,293	$	197	$	803	$	2,293

Table of Contents


	2019
	Commercial		Investor Real Estate		Consumer		Total
	(In millions)
Allowance for loan losses, January 1, 2019	$	520	$	58	$	262	$	840
Provision (credit) for loan losses	138		(16)		265		387
Loan losses:
Charge-offs	(150)		(1)		(292)		(443)
Recoveries	29		4		52		85
Net loan losses	(121)		3		(240)		(358)
Allowance for loan losses, December 31, 2019	537		45		287		869
Reserve for unfunded credit commitments, January 1, 2019	47		4		—		51
Provision (credit) for unfunded credit losses	(6)		—		—		(6)
Reserve for unfunded credit commitments, December 31, 2019	41		4		—		45
Allowance for credit losses, December 31, 2019	$	578	$	49	$	287	$	914
Portion of ending allowance for loan losses:
Individually evaluated for impairment	$	120	$	4	$	29	$	153
Collectively evaluated for impairment	417		41		258		716
Total allowance for loan losses	$	537	$	45	$	287	$	869
Portion of loan portfolio ending balance:
Individually evaluated for impairment	$	537	$	34	$	381	$	952
Collectively evaluated for impairment	45,302		6,523		30,186		82,011
Total loans evaluated for impairment	$	45,839	$	6,557	$	30,567	$	82,963


	2018
	Commercial		Investor Real Estate		Consumer		Total
	(In millions)
Allowance for loan losses, January 1, 2018	$	591	$	64	$	279	$	934
Provision (credit) for loan losses	32		(5)		202		229
Loan losses:
Charge-offs	(148)		(9)		(276)		(433)
Recoveries	45		8		57		110
Net loan losses	(103)		(1)		(219)		(323)
Allowance for loan losses, December 31, 2018	520		58		262		840
Reserve for unfunded credit commitments, January 1, 2018	49		4		—		53
Provision (credit) for unfunded credit losses	(2)		—		—		(2)
Reserve for unfunded credit commitments, December 31, 2018	47		4		—		51
Allowance for credit losses, December 31, 2018	$	567	$	62	$	262	$	891
Portion of ending allowance for loan losses:
Individually evaluated for impairment	$	104	$	2	$	26	$	132
Collectively evaluated for impairment	416		56		236		708
Total allowance for loan losses	$	520	$	58	$	262	$	840
Portion of loan portfolio ending balance:
Individually evaluated for impairment	$	490	$	25	$	419	$	934
Collectively evaluated for impairment	44,725		6,411		31,082		82,218
Total loans evaluated for impairment	$	45,215	$	6,436	$	31,501	$	83,152

PORTFOLIO SEGMENT RISK FACTORS

The following describe the risk characteristics relevant to each of the portfolio segments.

Commercial—The commercial portfolio segment includes commercial and industrial loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases or other expansion projects. Commercial also includes owner-occupied commercial real estate mortgage loans to operating businesses, which are loans for long-term financing of land and buildings, and are repaid by cash flow generated by business operations. Owner-occupied construction loans are made to commercial businesses for the development of land or construction of a building where the repayment is derived from revenues generated from the business of the borrower. Collection risk in this portfolio is driven by

Table of Contents

the creditworthiness of underlying borrowers, particularly cash flow from customers’ business operations, and the sensitivity to market fluctuations in commodity prices.

Investor Real Estate—Loans for real estate development are repaid through cash flow related to the operation, sale or refinance of the property. This portfolio segment includes extensions of 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. A portion of Regions’ investor real estate portfolio segment consists of loans secured by residential product types (land, single-family and condominium loans) within Regions’ markets. Additionally, these loans are made to finance income-producing properties such as apartment buildings, office and industrial buildings, and retail shopping centers. Loans in this portfolio segment are particularly sensitive to the valuation of real estate.

Consumer—The consumer portfolio segment includes residential first mortgage, home equity lines, home equity loans, indirect-vehicles, indirect-other consumer, consumer credit card, and other consumer loans. Residential first mortgage loans represent loans to consumers to finance a residence. These loans are typically financed over a 15 to 30 year term and, in most cases, are extended to borrowers to finance their primary residence. Home equity lending includes both home equity loans and lines of credit. This type of lending, which is secured by a first or second mortgage on the borrower’s residence, allows customers to borrow against the equity in their home. Real estate market values as of the time the loan or line is secured directly affect the amount of credit extended and, in addition, changes in these values impact the depth of potential losses. Indirect-vehicles lending, which is lending initiated through third-party business partners, largely consists of loans made through automotive dealerships. Indirect-other consumer lending includes other point of sale lending through third parties. Consumer credit card lending includes Regions branded consumer credit card accounts. Other consumer loans include other revolving consumer accounts, direct consumer loans, and overdrafts. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.

CREDIT QUALITY INDICATORS

The following tables present credit quality indicators for the loan portfolio segments and classes, excluding loans held for sale, as of December 31, 2020.

Commercial and investor real estate portfolio segments are detailed by categories related to underlying credit quality and probability of default. Regions assigns these categories at loan origination and reviews the relationship utilizing a risk-based approach on, at minimum, an annual basis or at any time management becomes aware of information affecting the borrowers' ability to fulfill their obligations. Both quantitative and qualitative factors are considered in this review process. These categories are utilized to develop the associated allowance for credit losses.

Pass—includes obligations where the probability of default is considered low;
Special Mention—includes obligations that have potential weakness that may, if not reversed or corrected, weaken the credit or inadequately protect the Company’s position at some future date. Obligations in this category may also be subject to economic or market conditions that may, in the future, have an adverse effect on debt service ability;
Substandard Accrual—includes obligations that exhibit a well-defined weakness that presently jeopardizes debt repayment, even though they are currently performing. These obligations are characterized by the distinct possibility that the Company may incur a loss in the future if these weaknesses are not corrected;
Non-accrual—includes obligations where management has determined that full payment of principal and interest is in doubt.

Substandard accrual and non-accrual loans are often collectively referred to as “classified.” Special mention, substandard accrual, and non-accrual loans are often collectively referred to as “criticized and classified.”

Regions considers factors such as periodic updates of FICO scores, unemployment rates, home prices, accrual status and geography as credit quality indicators for the consumer loan portfolio. FICO scores are obtained at origination as part of Regions' formal underwriting process. Refreshed FICO scores are obtained by the Company quarterly for all consumer loans, including residential first mortgage loans. Current FICO data is not available for certain loans in the portfolio for various reasons; for example, if customers do not use sufficient credit, an updated score may not be available. These categories are utilized to develop the associated allowance for credit losses. The higher the FICO score the less probability of default and vice versa.

With the adoption of CECL in 2020, the disclosure of credit quality indicators for loan portfolio segments and classes, excluding loans held for sale, is presented by credit quality indicator by vintage year. Regions defines the vintage date for the purposes of disclosure as the date of the most recent credit decision. In general, renewals are categorized as new credit decisions and reflect the renewal date as the vintage date. Loans that are modified as a TDR are considered to be a continuation of the original loan, therefore the origination date of the original loan is reflected as the vintage date. The following tables present applicable credit quality indicators for the loan portfolio segments and classes, excluding loans held for sale, as of December 31, 2020. Classes in the commercial and investor real estate portfolio segments are disclosed by risk rating. Classes in the consumer portfolio segment are disclosed by current FICO scores. Refer to Note 6 "Allowance for Credit Losses" in the

Table of Contents

Annual Report on Form 10-K for the year ended December 31, 2019, for disclosure of the Credit Quality Indicators as of December 31, 2019.


	December 31, 2020
Term Loans													Revolving Loans			Revolving Loans Converted to Amortizing			Unallocated (1)			Total
Origination Year
2020	2019		2018		2017		2016		Prior
(In millions)
Commercial and industrial:
Risk Rating:
Pass	$	12,260	$	6,115	$	3,550	$	2,413	$	1,166	$	2,493		$	12,138		$	—		$	(39)		$	40,096
Special Mention	133		250		376		84		5		48			722			—			—			1,618
Substandard Accrual	41		50		78		55		20		4			490			—			—			738
Non-accrual	42		59		97		20		23		19			158			—			—			418
Total commercial and industrial	$	12,476	$	6,474	$	4,101	$	2,572	$	1,214	$	2,564		$	13,508		$	—		$	(39)		$	42,870

Commercial real estate mortgage—owner-occupied:
Risk Rating:
Pass	$	1,379	$	882	$	913	$	547	$	401	$	801		$	140		$	—		$	(3)		$	5,060
Special Mention	18		31		23		22		10		44			6			—			—			154
Substandard Accrual	3		38		16		16		4		15			2			—			—			94
Non-accrual	14		23		19		21		6		14			—			—			—			97
Total commercial real estate mortgage—owner-occupied:	$	1,414	$	974	$	971	$	606	$	421	$	874		$	148		$	—		$	(3)		$	5,405

Commercial real estate construction—owner-occupied:
Risk Rating:
Pass	$	61	$	75	$	39	$	24	$	24	$	40		$	9		$	—		$	—		$	272
Special Mention	1		—		—		2		2		—			—			—			—			5
Substandard Accrual	—		3		1		3		4		3			—			—			—			14
Non-accrual	—		—		—		1		—		8			—			—			—			9
Total commercial real estate construction—owner-occupied:	$	62	$	78	$	40	$	30	$	30	$	51		$	9		$	—		$	—		$	300
Total commercial	$	13,952	$	7,526	$	5,112	$	3,208	$	1,665	$	3,489		$	13,665		$	—		$	(42)		$	48,575

Commercial investor real estate mortgage:
Risk Rating:
Pass	$	1,663	$	1,243	$	1,137	$	252	$	65	$	162		$	332		$	—		$	(5)		$	4,849
Special Mention	5		77		76		15		—		7			—			—			—			180
Substandard Accrual	69		114		57		—		2		9			—			—			—			251
Non-accrual	—		44		1		—		—		1			68			—			—			114
Total commercial investor real estate mortgage	$	1,737	$	1,478	$	1,271	$	267	$	67	$	179		$	400		$	—		$	(5)		$	5,394

Table of Contents


	December 31, 2020
Term Loans													Revolving Loans			Revolving Loans Converted to Amortizing			Unallocated (1)			Total
Origination Year
2020	2019		2018		2017		2016		Prior
(In millions)
Commercial investor real estate construction:
Risk Rating:
Pass	$	224	$	601	$	266	$	1	$	—	$	1		$	679		$	—		$	(11)		$	1,761
Special Mention	30		36		31		—		—		—			9			—			—			106
Substandard Accrual	1		1		—		—		—		—			—			—			—			2
Non-accrual	—		—		—		—		—		—			—			—			—			—
Total commercial investor real estate construction	$	255	$	638	$	297	$	1	$	—	$	1		$	688		$	—		$	(11)		$	1,869
Total investor real estate	$	1,992	$	2,116	$	1,568	$	268	$	67	$	180		$	1,088		$	—		$	(16)		$	7,263

Residential first mortgage:
FICO scores
Above 720	$	5,564	$	1,738	$	809	$	1,023	$	1,279	$	2,709		$	—		$	—		$	—		$	13,122
681-720	525		189		103		112		113		360			—			—			—			1,402
620-680	211		100		73		64		67		404			—			—			—			919
Below 620	31		44		50		51		60		499			—			—			—			735
Data not available	52		23		13		16		15		126			10			—			142			397
Total residential first mortgage	$	6,383	$	2,094	$	1,048	$	1,266	$	1,534	$	4,098		$	10		$	—		$	142		$	16,575

Home equity lines:
FICO scores
Above 720	$	—	$	—	$	—	$	—	$	—	$	—		$	3,334		$	45		$	—		$	3,379
681-720	—		—		—		—		—		—			492			10			—			502
620-680	—		—		—		—		—		—			319			11			—			330
Below 620	—		—		—		—		—		—			181			7			—			188
Data not available	—		—		—		—		—		—			107			3			30			140
Total home equity lines	$	—	$	—	$	—	$	—	$	—	$	—		$	4,433		$	76		$	30		$	4,539

Home equity loans
FICO scores
Above 720	$	417	$	251	$	233	$	325	$	304	$	580		$	—		$	—		$	—		$	2,110
681-720	57		40		35		39		37		76			—			—			—			284
620-680	21		17		19		22		25		65			—			—			—			169
Below 620	2		7		9		13		15		52			—			—			—			98
Data not available	1		2		2		4		5		17			—			—			21			52
Total home equity loans	$	498	$	317	$	298	$	403	$	386	$	790		$	—		$	—		$	21		$	2,713

Indirect—vehicles:
FICO scores
Above 720	$	—	$	18	$	305	$	137	$	92	$	40		$	—		$	—		$	—		$	592
681-720	—		5		50		22		16		8			—			—			—			101
620-680	—		4		44		23		18		8			—			—			—			97
Below 620	—		3		42		26		24		14			—			—			—			109
Data not available	—		—		4		6		4		4			—			—			17			35
Total indirect- vehicles	$	—	$	30	$	445	$	214	$	154	$	74		$	—		$	—		$	17		$	934

Table of Contents


	December 31, 2020
Term Loans													Revolving Loans			Revolving Loans Converted to Amortizing			Unallocated (1)			Total
Origination Year
2020	2019		2018		2017		2016		Prior
(In millions)
Indirect—other consumer:
FICO scores
Above 720	$	297	$	721	$	392	$	138	$	60	$	31		$	—		$	—		$	—		$	1,639
681-720	39		173		116		41		18		9			—			—			—			396
620-680	9		73		63		27		12		6			—			—			—			190
Below 620	1		22		22		9		5		2			—			—			—			61
Data not available	—		3		3		2		1		1			—			—			135			145
Total indirect- other consumer	$	346	$	992	$	596	$	217	$	96	$	49		$	—		$	—		$	135		$	2,431

Consumer credit card:
FICO scores
Above 720	$	—	$	—	$	—	$	—	$	—	$	—		$	667		$	—		$	—		$	667
681-720	—		—		—		—		—		—			255			—			—			255
620-680	—		—		—		—		—		—			208			—			—			208
Below 620	—		—		—		—		—		—			91			—			—			91
Data not available	—		—		—		—		—		—			7			—			(15)			(8)
Total consumer credit card	$	—	$	—	$	—	$	—	$	—	$	—		$	1,228		$	—		$	(15)		$	1,213

Other consumer:
FICO scores
Above 720	$	209	$	163	$	84	$	30	$	7	$	3		$	117		$	—		$	—		$	613
681-720	61		44		20		5		1		1			52			—			—			184
620-680	34		28		13		4		1		1			42			—			—			123
Below 620	11		11		6		3		1		—			19			—			—			51
Data not available	46		1		—		—		—		—			3			—			2			52
Total other consumer	$	361	$	247	$	123	$	42	$	10	$	5		$	233		$	—		$	2		$	1,023
Total consumer loans	$	7,588	$	3,680	$	2,510	$	2,142	$	2,180	$	5,016		$	5,904		$	76		$	332		$	29,428
Total Loans	$	23,532	$	13,322	$	9,190	$	5,618	$	3,912	$	8,685		$	20,657		$	76		$	274		$	85,266

(1)These amounts consist of fees that are not allocated at the loan level and loans serviced by third parties wherein Regions does not receive FICO or vintage information.

AGING AND NON-ACCRUAL ANALYSIS

The following tables include an aging analysis of DPD and loans on non-accrual status for each portfolio segment and class as of December 31, 2020 and December 31, 2019. Loans on non-accrual status with no related allowance included $112 million of commercial and industrial loans as of December 31, 2020. Non–accrual loans with no related allowance typically include loans where the underlying collateral is deemed sufficient to recover all remaining principal. Prior to the adoption of CECL on January 1, 2020, all TDRs and all non-accrual commercial and investor real estate loans, excluding leases, were deemed to be impaired. The definition of impairment and the required impaired loan disclosures were removed with CECL. Refer to Note 6 "Allowance for Credit Losses" in the Annual Report on Form 10-K for the year ended December 31, 2019 for disclosure of Regions' impaired loans as of December 31, 2019. Loans that have been fully charged-off do not appear in the tables below.

Table of Contents


	2020
	Accrual Loans
	30-59 DPD		60-89 DPD		90+ DPD		Total 30+ DPD		Total Accrual		Non-accrual		Total
	(In millions)
Commercial and industrial	$	37	$	22	$	7	$	66	$	42,452	$	418	$	42,870
Commercial real estate mortgage—owner-occupied	4		1		1		6		5,308		97		5,405
Commercial real estate construction—owner-occupied	1		—		—		1		291		9		300
Total commercial	42		23		8		73		48,051		524		48,575
Commercial investor real estate mortgage	3		—		—		3		5,280		114		5,394
Commercial investor real estate construction	—		—		—		—		1,869		—		1,869
Total investor real estate	3		—		—		3		7,149		114		7,263
Residential first mortgage	104		41		156		301		16,522		53		16,575
Home equity lines	24		11		19		54		4,493		46		4,539
Home equity loans	10		7		13		30		2,705		8		2,713
Indirect—vehicles	15		4		4		23		934		—		934
Indirect—other consumer	12		8		5		25		2,431		—		2,431
Consumer credit card	8		6		14		28		1,213		—		1,213
Other consumer	12		3		2		17		1,023		—		1,023
Total consumer	185		80		213		478		29,321		107		29,428
	$	230	$	103	$	221	$	554	$	84,521	$	745	$	85,266


	2019
	Accrual Loans
	30-59 DPD		60-89 DPD		90+ DPD		Total 30+ DPD		Total Accrual		Non-accrual		Total
	(In millions)
Commercial and industrial	$	30	$	21	$	11	$	62	$	39,624	$	347	$	39,971
Commercial real estate mortgage—owner-occupied	11		3		1		15		5,464		73		5,537
Commercial real estate construction—owner-occupied	2		—		—		2		320		11		331
Total commercial	43		24		12		79		45,408		431		45,839
Commercial investor real estate mortgage	1		1		—		2		4,934		2		4,936
Commercial investor real estate construction	—		—		—		—		1,621		—		1,621
Total investor real estate	1		1		—		2		6,555		2		6,557
Residential first mortgage	83		47		136		266		14,458		27		14,485
Home equity lines	30		12		32		74		5,259		41		5,300
Home equity loans	12		6		10		28		3,078		6		3,084
Indirect—vehicles	31		10		7		48		1,812		—		1,812
Indirect—other consumer	16		9		3		28		3,249		—		3,249
Consumer credit card	11		8		19		38		1,387		—		1,387
Other consumer	13		5		5		23		1,250		—		1,250
Total consumer	196		97		212		505		30,493		74		30,567
	$	240	$	122	$	224	$	586	$	82,456	$	507	$	82,963

Table of Contents

TROUBLED DEBT RESTRUCTURINGS

Regions regularly modifies commercial and investor real estate loans in order to facilitate a workout strategy. Typical modifications include accommodations, such as renewals and forbearances. The majority of Regions’ commercial and investor real estate TDRs are the result of renewals of classified loans at an interest rate that is not considered to be a market interest rate. For smaller dollar commercial loans, Regions may periodically grant interest rate and other term concessions, similar to those under the consumer program described below.

Regions works to meet the individual needs of consumer borrowers to stem foreclosure through its CAP. Regions designed the program to allow for customer-tailored modifications with the goal of keeping customers in their homes and avoiding foreclosure where possible. Modification may be offered to any borrower experiencing financial hardship regardless of the borrower’s payment status. Consumer TDRs primarily involve an interest rate concession, however under the CAP, Regions may also offer a short-term deferral, a term extension, a new loan product, or a combination of these options. For loans restructured under the CAP, Regions expects to collect the original contractually due principal. The gross original contractual interest may be collectible, depending on the terms modified. All CAP modifications are considered TDRs regardless of the term because they are concessionary in nature and because the customer documents a financial hardship in order to participate.

As noted above, the majority of Regions’ TDRs are results of interest rate concessions and not a forgiveness of principal. Accordingly, the financial impact of the modifications is best illustrated by the impact to the allowance calculation at the loan or pool level, as a result of the loans being considered impaired due to their TDR status. Regions most often does not record a charge-off at the modification date.

As provided in the CARES Act passed into law on March 27, 2020, certain loan modifications related to the COVID-19 pandemic beginning March 1, 2020 through the earlier of 60 days after the end of the pandemic or December 31, 2020 were eligible for relief from TDR classification. Regions elected this provision of the CARES Act; therefore, modified loans that met the required guidelines for relief are not considered TDRs and are excluded from the disclosures below. The CARES Act relief and short-term nature of most COVID-19 deferrals precluded the majority of Regions' COVID-19 loan modifications from being classified as TDRs as of December 31, 2020. Further, on December 27, 2020, the Consolidated Appropriations Act was signed into law and extended the relief from TDR classification through the earlier of 60 days after the national emergency concerning the COVID-19 outbreak ends or January 1, 2022. Regions elected this provision.

The following tables present the end of period balance for loans modified in a TDR during the periods presented by portfolio segment and class, and the financial impact of those modifications. The tables include modifications made to new TDRs, as well as renewals of existing TDRs.


	2020
			Financial Impact of Modifications Considered TDRs
	Number of Obligors	Recorded Investment	Increase in Allowance at Modification
	(Dollars in millions)
Commercial and industrial	151	250	—
Commercial real estate mortgage—owner-occupied	21	16	—
Commercial real estate construction—owner-occupied	1	1	—
Total commercial	173	267	—
Commercial investor real estate mortgage	11	78	—
Commercial investor real estate construction	4	5	—
Total investor real estate	15	83	—
Residential first mortgage	378	85	11
Home equity lines	—	—	—
Home equity loans	43	4	—
Consumer credit card	14	—	—
Indirect—vehicles and other consumer	66	1	—
Total consumer	501	90	11
	689	440	11

Table of Contents


	2019
				Financial Impact of Modifications Considered TDRs
	Number of Obligors	Recorded Investment		Increase in Allowance at Modification
	(Dollars in millions)
Commercial and industrial	97	$	259	$	3
Commercial real estate mortgage—owner-occupied	51	29		—
Commercial real estate construction—owner-occupied	1	2		—
Total commercial	149	290		3
Commercial investor real estate mortgage	12	26		—
Commercial investor real estate construction	12	18		2
Total investor real estate	24	44		2
Residential first mortgage	159	32		4
Home equity lines	—	—		—
Home equity loans	99	7		—
Consumer credit card	37	—		—
Indirect—vehicles and other consumer	75	1		—
Total consumer	370	40		4
	543	$	374	$	9

NOTE 7. SERVICING OF FINANCIAL ASSETS

RESIDENTIAL MORTGAGE BANKING ACTIVITIES

The fair value of residential MSRs is calculated using various assumptions including future cash flows, market discount rates, expected prepayment rates, servicing costs and other factors. A significant change in prepayments of mortgages in the servicing portfolio could result in significant changes in the valuation adjustments, thus creating potential volatility in the carrying amount of residential MSRs. The Company compares fair value estimates and assumptions to observable market data where available, and also considers recent market activity and actual portfolio experience.

The table below presents an analysis of residential MSRs under the fair value measurement method for the years ended December 31:


	2020		2019		2018
	(In millions)
Carrying value, beginning of year	$	345	$	418	$	336
Additions	108		42		111
Increase (decrease) in fair value:
Due to change in valuation inputs or assumptions	(89)		(62)		18
Economic amortization associated with borrower repayments (1)	(68)		(53)		(47)
Carrying value, end of year	$	296	$	345	$	418

(1)"Economic amortization associated with borrower repayments" includes both total loan payoffs as well as partial paydowns. In the first quarter of 2020, Regions revised its MSR decay methodology from a passage of time approach to a discounted net cash flow approach. The change in methodology results in shifts between decay and hedge impacts, but does not impact the overall valuation.

In 2020, the Company purchased the rights to service residential mortgage loans on a flow basis for approximately $59 million.

In 2019, the Company purchased the rights to service approximately $409 million in residential mortgage loans for approximately $4 million. Additionally, Regions purchased the rights to service residential mortgage loans on a flow basis for approximately $13 million. The Company also sold $167 million of affordable housing residential mortgage loans and as part of the transaction kept the rights to service the loans, which resulted in the retained residential MSR of approximately $2 million.

In 2018, the Company purchased the rights to service approximately $6.1 billion in residential mortgage loans for approximately $77 million. Approximately $7 million of the purchase price was paid in 2019.

Table of Contents

Data and assumptions used in the fair value calculation, as well as the valuation’s sensitivity to rate fluctuations, related to residential MSRs (excluding related derivative instruments) as of December 31 are as follows:


	2020			2019
	(Dollars in millions)
Unpaid principal balance	$	34,454		$	34,467
Weighted-average CPR (%)	15.6		%	12.0		%
Estimated impact on fair value of a 10% increase	$	(23)		$	(19)
Estimated impact on fair value of a 20% increase	$	(42)		$	(35)
Option-adjusted spread (basis points)	560			618
Estimated impact on fair value of a 10% increase	$	(7)		$	(8)
Estimated impact on fair value of a 20% increase	$	(13)		$	(16)
Weighted-average coupon interest rate	3.9		%	4.2		%
Weighted-average remaining maturity (months)	287			278
Weighted-average servicing fee (basis points)	27.5			27.3

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, the effect of an adverse variation in a particular assumption on the fair value of the residential MSRs is calculated without changing any other assumption, while in reality changes in one factor may result in changes in another, which may either magnify or counteract the effect of the change. The derivative instruments utilized by Regions would serve to reduce the estimated impacts to fair value included in the table above.

The following table presents servicing related fees, which includes contractually specified servicing fees, late fees and other ancillary income resulting from the servicing of residential mortgage loans for the years ended December 31:


	2020		2019		2018
	(In millions)
Servicing related fees and other ancillary income	$	95	$	102	$	95

Residential mortgage loans are sold in the secondary market with standard representations and warranties regarding certain characteristics such as the quality of the loan, the absence of fraud, the eligibility of the loan for sale and the future servicing associated with the loan. Regions may be required to repurchase these loans at par, or make-whole or indemnify the purchasers for losses incurred when representations and warranties are breached.

Regions maintains an immaterial repurchase liability related to residential mortgage loans sold with representations and warranty provisions. This repurchase liability is reported in other liabilities on the consolidated balance sheets and reflects management’s estimate of losses based on historical repurchase and loss trends, as well as other factors that may result in anticipated losses different from historical loss trends. Adjustments to this reserve are recorded in other non-interest expense on the consolidated statements of income.

COMMERCIAL MORTGAGE BANKING ACTIVITIES

Regions is an approved DUS lender. The DUS program provides liquidity to the multi-family housing market. In connection with the DUS program, Regions services commercial mortgage loans, retains commercial MSRs and intangible assets associated with the DUS license, and assumes a loss share guarantee associated with the loans. See Note 1 for additional information. Also see Note 24 for additional information related to the guarantee.

As of December 31, 2020 and 2019, the DUS servicing portfolio was approximately $4.5 billion and $3.9 billion, respectively. The related commercial MSRs were approximately $74 million and $59 million at December 31, 2020 and 2019, respectively. The estimated fair value of the commercial MSRs was approximately $81 million and $64 million at December 31, 2020 and December 31, 2019, respectively.

NOTE 8. OTHER EARNING ASSETS

Other earning assets consist primarily of investments in FRB stock, FHLB stock, marketable equity securities and operating lease assets. See Note 14 for information related to operating leases.

Table of Contents

FRB AND FHLB STOCK

The following table presents the amount of Regions' investments in FRB and FHLB stock as of December 31:


	2020		2019
	(In millions)
Federal Reserve Bank	$	492	$	492
Federal Home Loan Bank	15		209

MARKETABLE EQUITY SECURITIES

Marketable equity securities carried at fair value, which primarily consist of assets held for certain employee benefits and money market funds, are reported in other earning assets in the consolidated balance sheets. Total marketable equity securities were $388 million and $450 million at December 31, 2020 and 2019, respectively. Unrealized gains recognized in earnings for marketable equity securities still being held by the Company were $12 million at December 31, 2020.

NOTE 9. PREMISES AND EQUIPMENT

A summary of premises and equipment, net at December 31 is as follows:


	2020		2019
	(In millions)
Land	$	434	$	446
Premises and improvements	1,678		1,783
Furniture and equipment	1,041		1,023
Software	836		756
Leasehold improvements	413		407
Construction in progress	208		199
	4,610		4,614
Accumulated depreciation and amortization	(2,713)		(2,654)
	$	1,897	$	1,960

NOTE 10. INTANGIBLE ASSETS

GOODWILL

Goodwill allocated to each reportable segment (each a reporting unit) at December 31 is presented as follows:


	2020		2019
	(In millions)
Corporate Bank	$	2,819	$	2,474
Consumer Bank	1,978		1,978
Wealth Management	393		393
	$	5,190	$	4,845

The goodwill allocated to the Corporate Bank reporting unit increased due to the acquisition of Ascentium in the second quarter of 2020.

Regions assessed the indicators of goodwill impairment for all three reporting units as part of its annual impairment test, as of October 1, 2020, and through the date of the filing of this Annual Report, by performing a qualitative assessment of goodwill at the reporting unit level. In performing the qualitative assessment, the Company evaluated events and circumstances since the last impairment analysis, recent operating performance including reporting unit performance, changes in market capitalization, regulatory actions and assessments, changes in the business climate, company-specific factors and trends in the banking industry. The results of the qualitative assessment indicated that it was more likely than not that the estimated fair value of each reporting unit exceeded its carrying amount as of the test date; therefore, the quantitative goodwill impairment tests were deemed unnecessary.

Table of Contents

OTHER INTANGIBLES

The following table presents other intangibles and related accumulated amortization as of December 31:


	2020		2019		2020		2019		2020		2019
	Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
	(In millions)
Core deposit intangibles	$	1,011	$	1,011	$	991	$	980	$	20	$	31
Purchased credit card relationship assets	175		175		149		140		26		35
Other—amortizing (1)	82		36		24		15		58		21
DUS license (2)									15		15
Other—non-amortizing (3)									3		3
	$	1,268	$	1,222	$	1,164	$	1,135	$	122	$	105

(1)Includes intangible assets primarily related to acquired trust services, trade names, intellectual property, customer relationships, and employee agreements.

(2)The DUS license is a non-amortizing intangible asset.

(3)Includes non-amortizing intangible assets related to other acquired trust services.

Core deposit intangibles, purchased credit card relationships and other customer relationship intangibles are being amortized in other non-interest expense on an accelerated basis over their expected useful lives. Other remaining intangibles are amortized in other non-interest expense on a straight line basis over their expected useful lives.

Regions purchased a DUS license in 2014. The intangible asset associated with the DUS license is a non-amortizing intangible asset. Refer to Note 7 for additional information related to this license.

The aggregate amount of amortization expense for core deposit intangibles, purchased credit card relationship assets, and other intangible assets is estimated as follows:


	Year Ended December 31
	(In millions)
2021	$	27
2022	22
2023	18
2024	12
2025	8

Identifiable intangible assets other than goodwill are reviewed at least annually, usually in the fourth quarter, for events or circumstances that could impact the recoverability of the intangible asset. Regions concluded that no impairment for any other identifiable intangible assets occurred during 2020, 2019 or 2018.

Table of Contents

NOTE 11. DEPOSITS

The following schedule presents a detail of interest-bearing deposits at December 31:


	2020		2019
	(In millions)

Savings	$	11,635	$	8,640
Interest-bearing transaction	24,484		20,046
Money market—domestic	29,719		25,326
Time deposits	5,341		7,442
Interest-bearing customer deposits	71,179		61,454
Corporate treasury time deposits	11		108
Corporate treasury other deposits	—		1,800
Total interest-bearing deposits	$	71,190	$	63,362

The aggregate amount of time deposits of $250,000 or more, including certificates of deposit of $250,000 or more, was $696 million at December 31, 2020 and $1.7 billion at December 31, 2019.

At December 31, 2020, the aggregate amounts of maturities of all time deposits (deposits with stated maturities, consisting primarily of certificates of deposit and IRAs) were as follows:


	December 31, 2020
	(In millions)
2021	$	3,721
2022	843
2023	446
2024	149
2025	102
Thereafter	91
	$	5,352

NOTE 12. BORROWINGS

SHORT-TERM BORROWINGS

Short-term borrowings consist of FHLB advances and were zero at December 31, 2020 and $2.1 billion at December 31, 2019. The levels of these borrowings can fluctuate depending on the Company's funding needs and the sources utilized.

Table of Contents

LONG-TERM BORROWINGS

Long-term borrowings at December 31 consist of the following:


	2020		2019
	(In millions)
Regions Financial Corporation (Parent):
3.20% senior notes due February 2021	$	360	$	358
2.75% senior notes due August 2022	—		997
3.80% senior notes due August 2023	997		996
2.25% senior notes due April 2025	744		—
7.75% subordinated notes due September 2024	100		100
6.75% subordinated debentures due November 2025	155		156
7.375% subordinated notes due December 2037	298		298
Valuation adjustments on hedged long-term debt	64		45
	2,718		2,950
Regions Bank:
FHLB advances	—		2,501
2.75% senior notes due April 2021	190		549
3 month LIBOR plus 0.38% of floating rate senior notes due April 2021	66		350
3.374% senior notes converting to 3 month LIBOR plus 0.50%, callable August 2020, due August 2021	—		499
3 month LIBOR plus 0.50% of floating rate senior notes, callable August 2020, due August 2021	—		499
6.45% subordinated notes due June 2037	496		495
Ascentium note securitizations	97		—
Other long-term debt	2		32
Valuation adjustments on hedged long-term debt	—		4
	851		4,929
Total consolidated	$	3,569	$	7,879

As of December 31, 2020, Regions had three issuances and Regions Bank had one issuance of subordinated notes totaling $553 million and $496 million, respectively, with stated interest rates ranging from 6.45% to 7.75%. All issuances of these notes are, by definition, subordinated and subject in right of payment of both principal and interest to the prior payment in full of all senior indebtedness of the Company, which is generally defined as all indebtedness and other obligations of the Company to its creditors, except subordinated indebtedness. Payment of the principal of the notes may be accelerated only in the case of certain events involving bankruptcy, insolvency proceedings or reorganization of the Company. The subordinated notes described above qualify as Tier 2 capital under Federal Reserve guidelines, subject to diminishing credit as the respective maturity dates approach and subject to certain transition provisions. None of the subordinated notes are redeemable prior to maturity, unless there is an occurrence of a qualifying capital event.

In the second quarter of 2020, Regions issued $750 million of 2.25% senior notes due 2025. Also in the second quarter, Regions executed a partial tender of the two senior bank notes due April 2021. In the third quarter, Regions redeemed the two senior bank notes due August 2021 in their entirety. In the fourth quarter, Regions redeemed the 2.75% senior notes due August 2022 in their entirety. In conjunction with the partial tenders, redemptions, and early terminations of FHLB advances Regions incurred related early extinguishment pre-tax charges totaling $22 million.

As a part of Regions' acquisition of Ascentium on April 1, 2020, the Company assumed note securitizations with a remaining balance of $97 million as of December 31, 2020. The Ascentium note securitizations have two classes and have a weighted-average interest rate of 2.12% as of December 31, 2020, with remaining maturities ranging from 3 years to 5 years and a weighted-average of 4.1 years.

On January 12, 2021, Regions sent notices of redemption, which resulted in the redemption on January 22, 2021, of its 3.20% senior notes due February 2021 pursuant to their terms, at an aggregate redemption price equal to the sum of 100% of the principal amount of the notes being redeemed and any accrued and unpaid interest to, but excluding, the redemption date.

On February 19, 2021, Regions Bank sent notices of redemption, which will result in the redemption on March 1, 2021 of its 2.75% senior bank notes due April 1, 2021 and of its senior floating rate bank notes due April 1, 2021 pursuant to their

Table of Contents

terms, at an aggregate redemption price equal to the sum of 100% of the principal amount of the notes being redeemed and any accrued and unpaid interest to, but excluding, the redemption date.

FHLB advances at December 31, 2019 and 2018 had a weighted-average interest rate of 1.9 percent, and 2.6 percent, respectively. FHLB borrowing capacity is contingent upon the amount of collateral pledged to the FHLB. Regions has pledged certain loans as collateral for the FHLB advances outstanding. See Note 5 for loans pledged to the FHLB at December 31, 2020 and 2019. Additionally, membership in the FHLB requires an institution to hold FHLB stock. See Note 8 for the amount of FHLB stock held at December 31, 2020 and 2019. Regions’ total borrowing capacity with the FHLB (including outstanding advances) as of December 31, 2020, based on assets available for collateral at that date, was approximately $16.2 billion.

Regions uses derivative instruments, primarily interest rate swaps, to manage interest rate risk by converting a portion of its fixed-rate debt to a variable-rate. The effective rate adjustments related to these hedges are included in interest expense on long-term borrowings. The weighted-average interest rate on total long-term debt, including the effect of derivative instruments, was 2.7 percent, 3.4 percent, and 3.2 percent for the years ended December 31, 2020, 2019 and 2018, respectively. Further discussion of derivative instruments is included in Note 21.

The aggregate amount of contractual maturities of all long-term debt in each of the next five years and thereafter is as follows:


	Year Ended December 31
	Regions Financial Corporation (Parent)		Regions Bank
	(In millions)
2021	$	360	$	256
2022	—		—
2023	1,061		—
2024	100		40
2025	899		57
Thereafter	298		498
	$	2,718	$	851

On February 22, 2019, Regions filed a shelf registration statement with the SEC. This shelf registration does not have a capacity limit and can be utilized by Regions to issue various debt and/or equity securities. The registration statement will expire in February 2022.

Regions Bank may issue bank notes from time to time, either as part of a bank note program or as stand-alone issuances. Notes issued by Regions Bank may be senior or subordinated notes. Notes issued by Regions Bank are not deposits and are not insured or guaranteed by the FDIC.

Regions may, from time to time, consider opportunistically retiring outstanding issued securities, including subordinated debt in privately negotiated or open market transactions. Regulatory approval would be required for retirement of some securities.

Table of Contents

NOTE 13. REGULATORY CAPITAL REQUIREMENTS AND RESTRICTIONS

Regions and Regions Bank are required to comply with regulatory capital requirements established by Federal and State banking agencies. These regulatory capital requirements involve quantitative measures of the Company’s assets, liabilities and selected off-balance sheet items, and also qualitative judgments by the regulators. Failure to meet minimum capital requirements can subject the Company to a series of increasingly restrictive regulatory actions.

Banking regulations identify five capital categories: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. At December 31, 2020 and 2019, Regions and Regions Bank exceeded all current regulatory requirements, and were classified as "well-capitalized." Management believes that no events or changes have occurred subsequent to December 31, 2020 that would change this designation.

Quantitative measures established by regulation to ensure capital adequacy require institutions to maintain minimum ratios of common equity Tier 1, Tier 1, and Total capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to average tangible assets (the "Leverage" ratio).

In the third quarter of 2020, the federal banking agencies finalized a rule related to the impact of CECL in regulatory capital requirements. The rule allows an add-back to the regulatory capital for the impacts of CECL for a two-year period. At the end of the two years, the impact is then phased-in over the following three years. The add-back is calculated as the impact of initial adoption, adjusted for 25 percent of subsequent changes in the allowance. At December 31, 2020, the impact of the addback on CET1 was approximately $582 million, or approximately 54 basis points.

The following tables summarize the applicable holding company and bank regulatory capital requirements:


	December 31, 2020 (1)				Minimum Requirement		To Be Well Capitalized
	Amount		Ratio
Basel III Regulatory Capital Rules	(Dollars in millions)
Common equity Tier 1 capital:
Regions Financial Corporation	$	10,525	9.84	%	4.50	%	N/A
Regions Bank	12,972		12.17		4.50		6.50	%
Tier 1 capital:
Regions Financial Corporation	$	12,181	11.39	%	6.00	%	6.00	%
Regions Bank	12,972		12.17		6.00		8.00
Total capital:
Regions Financial Corporation	$	14,498	13.56	%	8.00	%	10.00	%
Regions Bank	14,803		13.89		8.00		10.00
Leverage capital:
Regions Financial Corporation	$	12,181	8.71	%	4.00	%	N/A
Regions Bank	12,972		9.30		4.00		5.00	%


	December 31, 2019				Minimum Requirement		To Be Well Capitalized
	Amount		Ratio
Basel III Regulatory Capital Rules	(Dollars in millions)
Common equity Tier 1 capital:
Regions Financial Corporation	$	10,228	9.68	%	4.50	%	N/A
Regions Bank	12,212		11.58		4.50		6.50	%
Tier 1 capital:
Regions Financial Corporation	$	11,537	10.91	%	6.00	%	6.00	%
Regions Bank	12,212		11.58		6.00		8.00
Total capital:
Regions Financial Corporation	$	13,406	12.68	%	8.00	%	10.00	%
Regions Bank	13,621		12.92		8.00		10.00
Leverage capital:
Regions Financial Corporation	$	11,537	9.65	%	4.00	%	N/A
Regions Bank	12,212		10.24		4.00		5.00	%

(1)The 2020 Basel III CET1 capital, Tier 1 capital, Total capital, and Leverage capital ratios are estimated.

Table of Contents

During the third quarter of 2020, the Federal Reserve finalized Regions' SCB requirement for the fourth quarter of 2020 through the third quarter of 2021 at 3.0 percent. The 3.0 percent requirement represented the amount of capital degradation under the supervisory severely adverse scenario, inclusive of four quarters of planned common stock dividends. The Federal Reserve may decide at any point through March 31, 2021 to update Regions' and other firms' SCB requirement based on the results of its supervisory stress test associated with the capital plan resubmission disclosed in December 2020.

The Federal Reserve approved its rule for tailoring enhanced prudential standards for bank holding companies with $100 billion or more in total consolidated assets. The framework outlines tailored standards for matters related to capital and liquidity. Regions is a "Category IV" institution under these rules.

Substantially all net assets are owned by subsidiaries. The primary source of operating cash available to Regions is provided by dividends from subsidiaries. Statutory limits are placed on the amount of dividends the subsidiary bank can pay without prior regulatory approval. In addition, regulatory authorities require the maintenance of minimum capital-to-asset ratios at banking subsidiaries. Under the Federal Reserve’s Regulation H, Regions Bank may not, without approval of the Federal Reserve, declare or pay a dividend to Regions if the total of all dividends declared in a calendar year exceeds the total of (a) Regions Bank’s net income for that year and (b) its retained net income for the preceding two calendar years, less any required transfers to additional paid-in capital or to a fund for the retirement of preferred stock. Under Alabama law, Regions Bank may not pay a dividend to Regions in excess of 90 percent of its net earnings until the bank’s surplus is equal to at least 20 percent of capital. Regions Bank is also required by Alabama law to seek the approval of the Alabama Superintendent of Banking prior to paying a dividend to Regions if the total of all dividends declared by Regions Bank in any calendar year will exceed the total of (a) Regions Bank’s net earnings for that year, plus (b) its retained net earnings for the preceding two years, less any required transfers to surplus. The statute defines net earnings as “the remainder of all earnings from current operations plus actual recoveries on loans and investments and other assets, after deducting from the total thereof all current operating expenses, actual losses, accrued dividends on preferred stock, if any, and all federal, state and local taxes.” In addition to dividend restrictions, Federal statutes also prohibit unsecured loans from banking subsidiaries to the parent company.

In addition, Regions must adhere to various HUD regulatory guidelines including required minimum capital to maintain their HUD approved status. Failure to comply with the HUD guidelines could result in withdrawal of this certification. As of December 31, 2020, Regions was in compliance with HUD guidelines. Regions is also subject to various capital requirements by secondary market investors.

NOTE 14. LEASES

LESSEE

As of December 31, 2020, assets and liabilities recorded under operating leases for properties were $475 million and $545 million, respectively, and $443 million and $514 million, respectively, as of December 31, 2019. The difference between the asset and liability balance is largely driven by increases in rent over the lease term and any strategic decisions to exit a lease location early, resulting in derecognition of the asset. The asset is recorded within other assets, and the lease liability is recorded within other liabilities on the consolidated balance sheets. Lease expense, which is operating lease costs recorded within net occupancy expense in the consolidated statements of income, was $85 and $81 million for the years ended December 31, 2020 and 2019, respectively.

Other information related to operating leases at December 31 is as follows:


	2020		2019
Weighted-average remaining lease term (years)	9.6 years		9.3 years
Weighted-average discount rate (%)	2.7	%	3.2	%

Future, undiscounted minimum lease payments on operating leases are as follows:


	December 31, 2020
	(In millions)
2021	$	99
2022	92
2023	84
2024	70
2025	58
Thereafter	248
Total lease payments	651
Less: Imputed interest	106
Total present value of lease liabilities	$	545

Table of Contents

LESSOR

The following tables present a summary of Regions' sales-type, direct financing, operating, and leveraged leases for the years ended December 31:


	Net Interest Income
	2020		2019
	(In millions)
Sales-Type and Direct Financing	$	59	$	33
Operating	8		11
Leveraged(1)	14		14
	$	81	$	58

(1)Leveraged lease income is shown pre-tax with related tax expense of $8 million for December 31, 2020 and $9 million for December 31, 2019. Leveraged lease termination gains excluded from amounts presented above were immaterial at both December 31, 2020 and 2019.


	As of December 31, 2020
	Sales-Type and Direct Financing		Operating		Leveraged		Total
	(In millions)
Lease receivable	$	1,293	$	60	$	174	$	1,527
Unearned income	(232)		(15)		(96)		(343)
Guaranteed residual	36		—		—		36
Unguaranteed residual	183		155		144		482
Total net investment	$	1,280	$	200	$	222	$	1,702


	As of December 31, 2019
	Sales-Type and Direct Financing		Operating		Leveraged		Total
	(In millions)
Lease receivable	$	1,068	$	113	$	182	$	1,363
Unearned income	(215)		(29)		(113)		(357)
Guaranteed residual	32		—		—		32
Unguaranteed residual	152		213		147		512
Total net investment	$	1,037	$	297	$	216	$	1,550

The following table presents the minimum future payments due from customers for sales-type, direct financing, and operating leases:


	December 31, 2020
	Sales-Type and Direct Financing		Operating		Total
	(In millions)
2021	$	297	$	24	$	321
2022	236		14		250
2023	178		7		185
2024	118		6		124
2025	76		3		79
Thereafter	388		6		394
	$	1,293	$	60	$	1,353

Table of Contents

NOTE 15. SHAREHOLDERS' EQUITY AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

PREFERRED STOCK

The following table presents a summary of the non-cumulative perpetual preferred stock as of December 31:


													2020		2019
	Issuance Date	Earliest Redemption Date	Dividend Rate (1)			Liquidation Amount		Liquidation preference per Share		Liquidation preference per Depositary Share		Ownership Interest per Depositary Share	Carrying Amount		Carrying Amount
	(Dollars in millions)
Series A	11/1/2012	12/15/2017	6.375	%		$	500	$	1,000	$	25	1/40th	$	387	$	387
Series B	4/29/2014	9/15/2024	6.375	%	(2)	500		1,000		25		1/40th	433		433
Series C	4/30/2019	5/15/2029	5.700	%	(3)	500		1,000		25		1/40th	490		490
Series D	6/5/2020	9/15/2025	5.750	%	(4)	350		100,000		1,000		1/100th	346		—
						$	1,850						$	1,656	$	1,310

(1)Dividends on all series of preferred stock, if declared, accrue and are payable quarterly in arrears.

(2)Dividends, if declared, will be paid quarterly at an annual rate equal to (i) for each period beginning prior to September 15, 2024, 6.375%, and (ii) for each period beginning on or after September 15, 2024, three-month LIBOR plus 3.536%.

(3)Dividends, if declared, will be paid quarterly at an annual rate equal to (i) for each period beginning prior to August 15, 2029, 5.700%, and (ii) for each period beginning on or after August 15, 2029, three-month LIBOR plus 3.148%.

(4)Dividends, if declared, will be paid quarterly at an annual rate equal to (i) for each period beginning prior to September 15, 2025, 5.750%, and (ii) for each period beginning on or after September 15, 2025, the five-year treasury rate as of the most recent reset dividend determination date plus 5.426%.

All series of preferred stock have no stated maturity and redemption is solely at Regions' option, subject to regulatory approval, in whole, or in part, after the earliest redemption date or in whole, but not in part, within 90 days following a regulatory capital treatment event for the Series A preferred stock or at any time following a regulatory capital treatment event for the Series B, Series C, and Series D preferred stock.

The Board of Directors declared a total of $64 million in cash dividends on both Series A and Series B Preferred Stock during both 2020 and 2019. In 2020 and 2019, the Board of Directors declared $28 million and $15 million in cash dividends on Series C Preferred stock, respectively. The initial quarterly dividend for the Series D Preferred Stock was declared in the third quarter of 2020. In 2020, the Board of Directors declared a total of $11 million in cash dividends on Series D preferred stock. In total the Board of Directors declared $103 million and $79 million in cash dividends on preferred stock in 2020 and 2019, respectively.

In the event Series A, Series B, Series C, Series D preferred shares are redeemed at the liquidation amounts, $113 million, $67 million, $10 million, or $4 million in excess of the redemption amount over the carrying amount will be recognized, respectively. Approximately $100 million of Series A preferred dividends that were recorded as a reduction of preferred stock, including related surplus, will be recorded as a reduction to retained earnings, and approximately $13 million of related issuance costs that were recorded as a reduction of preferred stock, including related surplus, will be recorded as a reduction to net income available to common shareholders. Approximately $52 million of Series B preferred dividends that were recorded as a reduction of preferred stock, including related surplus, will be recorded as a reduction to retained earnings, and approximately $15 million of related issuance costs that were recorded as a reduction of preferred stock, including related surplus, will be recorded as a reduction to net income available to common shareholders. Approximately $10 million of Series C issuance costs that were recorded as a reduction of preferred stock, including related surplus, will be recorded as a reduction to net income available to common shareholders. Approximately $4 million of Series D issuance costs that were recorded as a reduction of preferred stock, including related surplus, will be recorded as a reduction to net income available to common shareholders.

COMMON STOCK

On June 25, 2020, the Federal Reserve indicated that the Company exceeded all minimum capital levels under the supervisory stress test. The capital plan submitted to the Federal Reserve reflected no share repurchases through year-end 2020 and Regions is in compliance with the capital plan. Prior to the supervisory stress test submission, the Board had authorized for the repurchase of $1.370 billion of the Company's common stock repurchase plan, permitting repurchases from the beginning of the third quarter of 2019 through the second quarter of 2020.

During the third quarter of 2020, the Federal Reserve mandated that banks must not increase their quarterly per share common dividend and implemented an earnings-based payout restriction in connection with the supervisory stress test, requiring the third quarter 2020 dividend to not exceed the average of the prior four quarters of net income excluding preferred dividends. This mandate was subsequently extended through the first quarter of 2021.

Table of Contents

Regions declared $0.62 per share in cash dividends for 2020, $0.59 for 2019, and $0.46 for 2018.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables present the balances and activity in AOCI on a pre-tax and net of tax basis for the years ended December 31:


	2020
	Pre-tax AOCI Activity		Tax Effect (1)		Net AOCI Activity
	(In millions)
Total accumulated other comprehensive income (loss), beginning of period	$	(120)	$	30	$	(90)

Unrealized losses on securities transferred to held to maturity:
Beginning balance	$	(29)	$	7	$	(22)
Reclassification adjustments for amortization on unrealized losses (2)	8		(2)		6
Ending balance	$	(21)	$	5	$	(16)
Unrealized gains (losses) on securities available for sale:
Beginning balance	$	274	$	(69)	$	205
Unrealized holding gains (losses) arising during the period	792		(200)		592
Reclassification adjustments for securities (gains) losses realized in net income (3)	(4)		1		(3)
Change in AOCI from securities available for sale activity in the period	788		(199)		589
Ending balance	$	1,062	$	(268)	$	794
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Beginning balance	$	430	$	(108)	$	322
Unrealized holding gains (losses) on derivatives arising during the period	1,440		(363)		1,077
Reclassification adjustments for (gains) losses realized in net income (2)	(260)		65		(195)
Change in AOCI from derivative activity in the period	1,180		(298)		882
Ending balance	$	1,610	$	(406)	$	1,204
Defined benefit pension plans and other post employment benefit plans:
Beginning balance	$	(795)	$	200	$	(595)
Net actuarial gains (losses) arising during the period	(144)		36		(108)
Reclassification adjustments for amortization of actuarial (gains) losses and settlements realized in net income (4)	47		(11)		36
Change in AOCI from defined benefit pension plans and other post employment benefits activity in the period	(97)		25		(72)
Ending balance	$	(892)	$	225	$	(667)

Total other comprehensive income	1,879		(474)		1,405
Total accumulated other comprehensive income, end of period	$	1,759	$	(444)	$	1,315

Table of Contents


	2019
	Pre-tax AOCI Activity		Tax Effect (1)		Net AOCI Activity
	(In millions)
Total accumulated other comprehensive income (loss), beginning of period	$	(1,289)	$	325	$	(964)

Unrealized losses on securities transferred to held to maturity:
Beginning balance	$	(36)	$	9	$	(27)
Reclassification adjustments for amortization on unrealized losses (2)	7		(2)		5
Ending balance	$	(29)	$	7	$	(22)
Unrealized gains (losses) on securities available for sale:
Beginning balance	$	(531)	$	134	$	(397)
Unrealized holding gains (losses) arising during the period	777		(196)		581
Reclassification adjustments for securities (gains) losses realized in net income (3)	28		(7)		21
Change in AOCI from securities available for sale activity in the period	805		(203)		602
Ending balance	$	274	$	(69)	$	205
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Beginning balance	$	(84)	$	21	$	(63)
Unrealized holding gains (losses) on derivatives arising during the period	490		(123)		367
Reclassification adjustments for (gains) losses realized in net income (2)	24		(6)		18
Change in AOCI from derivative activity in the period	514		(129)		385
Ending balance	$	430	$	(108)	$	322
Defined benefit pension plans and other post employment benefit plans:
Beginning balance	$	(638)	$	161	$	(477)
Net actuarial gains (losses) arising during the period	(200)		50		(150)
Reclassification adjustments for amortization of actuarial (gains) losses and settlements realized in net income (4)	43		(11)		32
Change in AOCI from defined benefit pension plans and other post employment benefits activity in the period	(157)		39		(118)
Ending balance	$	(795)	$	200	$	(595)

Total other comprehensive income	1,169		(295)		874
Total accumulated other comprehensive income (loss), end of period	$	(120)	$	30	$	(90)


	2018
	Pre-tax AOCI Activity		Tax Effect (1)		Net AOCI Activity
	(In millions)
Total accumulated other comprehensive income (loss), beginning of period	$	(1,002)	$	253	$	(749)

Unrealized losses on securities transferred to held to maturity:
Beginning balance	$	(45)	12		$	(33)
Reclassification adjustments for amortization on unrealized losses (2)	9		(3)		6
Ending balance	$	(36)	9		$	(27)
Unrealized gains (losses) on securities available for sale:
Beginning balance	$	(204)	$	51	$	(153)
Unrealized holding gains (losses) arising during the period	(327)		83		(244)


Ending balance	$	(531)	$	134	$	(397)
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Beginning balance	$	(68)	$	17	$	(51)
Unrealized holding gains (losses) on derivatives arising during the period	(4)		1		(3)
Reclassification adjustments for (gains) losses realized in net income (2)	(12)		3		(9)
Change in AOCI from derivative activity in the period	(16)		4		(12)
Ending balance	$	(84)	$	21	$	(63)
Defined benefit pension plans and other post employment benefit plans:
Beginning balance	$	(685)	$	173	$	(512)
Net actuarial gains (losses) arising during the period	11		(4)		7
Reclassification adjustments for amortization of actuarial (gains) losses and settlements realized in net income (4)	36		(8)		28
Change in AOCI from defined benefit pension plans and other post employment benefits activity in the period	47		(12)		35
Ending balance	$	(638)	$	161	$	(477)

Total other comprehensive income	(287)		72		(215)
Total accumulated other comprehensive income (loss), end of period	$	(1,289)	$	325	$	(964)

(1)The tax impact of each component of AOCI is calculated using an effective tax rate of approximately 25%.

(2)Reclassification amount is recognized in net interest income in the consolidated statements of income.

(3)Reclassification amount is recognized in securities gains (losses), net in the consolidated statements of income.

(4)Reclassification amount is recognized in other non-interest expense in the consolidated statements of income. Additionally, these accumulated other comprehensive income (loss) components are included in the computation of net periodic pension cost (see Note 18 for additional details).

Table of Contents

NOTE 16. EARNINGS PER COMMON SHARE

The following table sets forth the computation of basic earnings per common share and diluted earnings per common share for the years ended December 31:



	2020		2019		2018
	(In millions, except per share data)
Numerator:
Income from continuing operations	$	1,094	$	1,582	$	1,568
Preferred stock dividends	(103)		(79)		(64)
Income from continuing operations available to common shareholders	991		1,503		1,504
Income from discontinued operations, net of tax	—		—		191
Net income available to common shareholders	$	991	$	1,503	$	1,695
Denominator:
Weighted-average common shares outstanding—basic	959		995		1,092
Potential common shares	3		4		10
Weighted-average common shares outstanding—diluted	962		999		1,102
Earnings per common share from continuing operations available to common shareholders(1):
Basic	$	1.03	$	1.51	$	1.38
Diluted	1.03		1.50		1.36
Earnings per common share from discontinued operations(1):
Basic	$	0.00	$	0.00	$	0.18
Diluted	0.00		0.00		0.17
Earnings per common share(1):
Basic	$	1.03	$	1.51	$	1.55
Diluted	1.03		1.50		1.54

(1) Certain per share amounts may not appear to reconcile due to rounding.

The effect from the assumed exercise of 7 million, 7 million and 6 million in stock options, restricted stock units and awards and performance stock units for the years ended December 31, 2020, 2019 and 2018, respectively, was not included in the above computations of diluted earnings per common share because such amounts would have had an antidilutive effect on earnings per common share.

NOTE 17. SHARE-BASED PAYMENTS

Regions administers long-term incentive compensation plans that permit the granting of incentive awards in the form of stock options, restricted stock awards, performance awards and stock appreciation rights. While Regions has the ability to issue stock appreciation rights, none have been issued to date. The terms of all awards issued under these plans are determined by the CHR Committee of the Board; however, no awards may be granted after the tenth anniversary from the date the plans were initially approved by shareholders. Incentive awards usually vest based on employee service, generally within 3 years from the date of the grant. The contractual lives of options granted under these plans are typically ten years from the date of the grant.

On April 23, 2015, the shareholders of the Company approved the Regions Financial Corporation 2015 LTIP, which permits the Company to grant to employees and directors various forms of incentive compensation. These forms of incentive compensation are similar to the types of compensation approved in prior plans. The 2015 LTIP authorizes 60 million common share equivalents available for grant, where grants of options and grants of full value awards (e.g., shares of restricted stock, restricted stock units and performance stock units) count as one share equivalent. Unless otherwise determined by the CHR Committee of the Board, grants of restricted stock, restricted stock units, and performance stock units accrue dividends, or their notional equivalent, as they are declared by the Board, and are paid upon vesting of the award. Upon adoption of the 2015 LTIP, Regions closed the prior long-term incentive plan to new grants, and, accordingly, prospective grants must be made under the 2015 LTIP or a successor plan. All existing grants under prior long-term incentive plans are unaffected by adoption of the 2015 LTIP. The number of remaining share equivalents available for future issuance under the 2015 LTIP was approximately 33 million at December 31, 2020.

Grants of performance-based restricted stock typically have a three-year performance period, and shares vest within three years after the grant date. Restricted stock units typically have a vesting period of three years. Grantees of restricted stock awards or units must either remain employed with the Company for certain periods from the date of grant in order for shares to

Table of Contents

be released or issued or retire after meeting the standards of a retiree, at which time shares would be issued and released. The terms of these plans generally stipulate that the exercise price of options may not be less than the fair market value of Regions' common stock at the date the options are granted. Regions issues new shares from authorized reserves upon exercise.

The following table summarizes the elements of compensation cost recognized in the consolidated statements of income for the years ended December 31:


	2020		2019		2018
	(In millions)
Compensation cost of share-based compensation awards:
Restricted and performance stock awards	$	53	$	51	$	50
Tax benefits related to share-based compensation cost	(13)		(13)		(13)
Compensation cost of share-based compensation awards, net of tax	$	40	$	38	$	37

STOCK OPTIONS

The following table summarizes the activity for 2020, 2019 and 2018 related to stock options:


	Number of Options	Weighted- Average Exercise Price		Aggregate Intrinsic Value (In millions)		Weighted-Average Remaining Contractual Term
Outstanding at December 31, 2017	9,407,898	$	16.58	$	35	1.05 years
Granted	—	—
Exercised	(1,619,206)	7.08
Forfeited or expired	(6,063,969)	21.88
Outstanding at December 31, 2018	1,724,723	$	6.86	$	11	1.74 years
Granted	—	—
Exercised	(756,954)	6.93
Forfeited or expired	—	—
Outstanding at December 31, 2019	967,769	$	6.80	$	10	0.83 years
Granted	—	—
Exercised	(911,181)	6.80
Forfeited or expired	(29,917)	7.00
Outstanding at December 31, 2020	26,671	$	6.54	$	—	0.41 years
Exercisable at December 31, 2020	26,671	$	6.54	$	—	0.41 years

The aggregate intrinsic value of exercised options was $8 million for 2020, $8 million for 2019, and $10 million for 2018. Cash received from options exercised was $5 million, $5 million, and $11 million in 2020, 2019, and 2018, respectively. The actual tax benefit realized for the tax deductions from options exercised totaled $1 million for 2020, $2 million for 2019, and $4 million for 2018.

RESTRICTED STOCK AWARDS AND PERFORMANCE STOCK AWARDS

During 2020, 2019 and 2018, Regions made restricted stock grants that vest upon satisfaction of service conditions and restricted stock award and performance stock award grants that vest based upon service conditions and performance conditions. Incremental shares earned above the performance target associated with previous performance stock awards are included when and if performance targets are achieved. Dividend payments during the vesting period are deferred to the end of the vesting term. The fair value of these restricted shares, restricted stock units and performance stock units was estimated based upon the fair value of the underlying shares on the date of the grant. The valuation was not adjusted for the deferral of dividends.

Table of Contents

Activity related to restricted stock awards and performance stock awards for 2020, 2019 and 2018 is summarized as follows:


	Number of Shares/Units	Weighted-Average Grant Date Fair Value
Non-vested at December 31, 2017	15,263,034	$	10.12
Granted	3,051,090	18.17
Vested	(6,038,566)	9.64
Forfeited	(747,021)	13.00
Non-vested at December 31, 2018	11,528,537	$	12.32
Granted	3,971,303	14.70
Vested	(6,068,969)	8.47
Forfeited	(433,513)	15.25
Non-vested at December 31, 2019	8,997,358	$	15.62
Granted	6,466,526	8.46
Vested	(3,314,572)	14.60
Forfeited	(467,152)	11.86
Non-vested at December 31, 2020	11,682,160	$	12.14

As of December 31, 2020, the pre-tax amount of non-vested restricted stock, restricted stock units and performance stock units not yet recognized was $43 million, which will be recognized over a weighted-average period of 1.50 years. The total fair value of shares vested during the years ended December 31, 2020, 2019, and 2018, was $35 million, $89 million, and $112 million, respectively. No share-based compensation costs were capitalized during the years ended December 31, 2020, 2019 or 2018.

NOTE 18. EMPLOYEE BENEFIT PLANS

PENSION AND OTHER POSTRETIREMENT BENEFITS

Regions' defined benefit pension plans cover only certain employees as the pension plans are closed to new entrants. Benefits under the pension plans are based on years of service and the employee’s highest five consecutive years of compensation during the last ten years of employment. Regions’ funding policy is to contribute annually at least the amount required by IRS minimum funding standards. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future.

The Company also sponsors a SERP, which is a non-qualified pension plan that provides certain senior executive officers defined benefits in relation to their compensation. Actuarially determined pension expense is charged to current operations using the projected unit credit method. All defined benefit plans are referred to as “the plans” throughout the remainder of this footnote.

Table of Contents

The following table sets forth the plans’ change in benefit obligation, plan assets and funded status, using a December 31 measurement date, and amounts recognized in the consolidated balance sheets at December 31:


	Qualified Plans				Non-qualified Plans				Total
	2020		2019		2020		2019		2020		2019
	(In millions)
Change in benefit obligation
Projected benefit obligation, beginning of year	$	2,192	$	1,865	$	172	$	145	$	2,364	$	2,010
Service cost	34		28		5		3		39		31
Interest cost	64		75		4		5		68		80
Actuarial (gains) losses	278		349		21		33		299		382
Benefit payments	(130)		(122)		(14)		(7)		(144)		(129)
Administrative expenses	(3)		(3)		—		—		(3)		(3)
Plan settlements	—		—		—		(7)		—		(7)
Projected benefit obligation, end of year	$	2,435	$	2,192	$	188	$	172	$	2,623	$	2,364
Change in plan assets
Fair value of plan assets, beginning of year	$	2,299	$	2,105	$	—	$	—	$	2,299	$	2,105
Actual return on plan assets	303		319		—		—		303		319
Company contributions	—		—		14		14		14		14
Benefit payments	(130)		(122)		(14)		(7)		(144)		(129)
Administrative expenses	(3)		(3)		—		—		(3)		(3)
Plan settlements	—		—		—		(7)		—		(7)
Fair value of plan assets, end of year	$	2,469	$	2,299	$	—	$	—	$	2,469	$	2,299
Funded status and accrued benefit (cost) at measurement date	$	34	$	107	$	(188)	$	(172)	$	(154)	$	(65)
Amount recognized in the Consolidated Balance Sheets:

Other assets	$	34	$	107	$	—	$	—	$	34	$	107
Other liabilities	—		—		(188)		(172)		(188)		(172)
	$	34	$	107	$	(188)	$	(172)	$	(154)	$	(65)
Pre-tax amounts recognized in Accumulated Other Comprehensive (Income) Loss:
Net actuarial loss	$	819	$	736	$	80	$	66	$	899	$	802

The accumulated benefit obligation for the qualified plans was $2.3 billion and $2.1 billion as of December 31, 2020 and 2019, respectively. Total plan assets exceeded the corresponding accumulated benefit obligation for the qualified plans as of both December 31, 2020 and 2019. The accumulated benefit obligation for the non-qualified plans was $188 million and $171 million as of December 31, 2020 and 2019, respectively, which exceeded all corresponding plan assets for each period. As of December 31, 2020 and 2019, the actuarial (gains) losses related to the change in the benefit obligation were primarily driven by changes in the discount rate.

Table of Contents

Net periodic pension cost (benefit) included the following components for the years ended December 31:


	Qualified Plans						Non-qualified Plans						Total
	2020		2019		2018		2020		2019		2018		2020		2019		2018
	(In millions)
Service cost	$	34	$	28	$	35	$	5	$	3	$	3	$	39	$	31	$	38
Interest cost	64		75		70		4		5		5		68		80		75
Expected return on plan assets	(148)		(137)		(153)		—		—		—		(148)		(137)		(153)
Amortization of actuarial loss	39		36		31		8		5		5		47		41		36

Settlement charge	—		—		—		—		2		—		—		2		—
Net periodic pension (benefit) cost	$	(11)	$	2	$	(17)	$	17	$	15	$	13	$	6	$	17	$	(4)

The service cost component of net periodic pension (benefit) cost is recorded in salaries and employee benefits on the consolidated statements of income. Components other than service cost are recorded in other non-interest expense on the consolidated statements of income.

The settlement charges relate to the settlement of liabilities under the SERP for certain plan participants.

The assumptions used to determine benefit obligations at December 31 are as follows:


	Qualified Plans				Non-qualified Plans
	2020		2019		2020		2019
Discount rate	2.48	%	3.35	%	2.07	%	3.05	%
Rate of annual compensation increase	4.00	%	4.00	%	3.00	%	3.00	%

The weighted-average assumptions used to determine net periodic pension (benefit) cost for the years ended December 31 are as follows:


	Qualified Plans						Non-qualified Plans
	2020		2019		2018		2020		2019		2018
Discount rate	3.37	%	4.39	%	3.70	%	3.00	%	4.18	%	3.49	%
Expected long-term rate of return on plan assets	6.65	%	6.84	%	6.84	%	N/A		N/A		N/A
Rate of annual compensation increase	4.00	%	3.75	%	3.75	%	3.00	%	3.75	%	3.75	%

Regions utilizes a disaggregated approach in the estimation of the service and interest components of net periodic pension costs by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. This provides a more precise measurement of service and interest costs by improving the correlation between projected benefit cash flows and the corresponding spot yield curve rates.

The expected long-term rate of return on the qualified plans' assets is based on an estimated reasonable range of probable returns. The assumption is established by considering historical and anticipated return of the asset classes invested in by the qualified plans and the allocation strategy currently in place among those classes. Management chose a point within the range based on the probability of achievement combined with incremental returns attributable to active management. For 2021, the expected long-term rate of return on plan assets is 5.87 percent.

The qualified plans' investment strategy is continuing to shift from focusing on maximizing asset returns to minimizing funding ratio volatility, with a planned increase in the allocation to fixed income securities. The combined target asset allocation is 50 percent equities, 38 percent fixed income securities and 12 percent in all other types of investments. Equity securities include investments in large and small/mid cap companies primarily located in the U.S., international equities, and private equities. Fixed income securities include investments in corporate and government bonds, asset-backed securities and any other fixed income investments as allowed by respective prospectuses and other offering documents. Other types of investments may include hedge funds and real estate funds that follow several different strategies. The plans' assets are highly diversified with respect to asset class, security and manager. Investment risk is controlled with the plans' assets rebalancing to target allocations on a periodic basis and continual monitoring of investment managers’ performance relative to the investment guidelines established with each investment manager.

Regions’ qualified plans have a portion of their investments in Regions' common stock. At December 31, 2020, the plans held 2,855,618 shares, which represents a total market value of approximately $46 million, or approximately 2 percent of the plans' assets.

Table of Contents

The following table presents the fair value of Regions’ qualified pension plans’ financial assets as of December 31:


	2020								2019
	Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3		Fair Value
	(In millions)
Cash and cash equivalents	$	50	$	—	$	—	$	50	$	25	$	—	$	—	$	25
Fixed income securities:
U.S. Treasury securities	$	299	$	—	$	—	$	299	$	481	$	—	$	—	$	481
Federal agency securities	—		18		—		18		—		26		—		26
Corporate bonds	—		490		—		490		—		111		—		111
Total fixed income securities	$	299	$	508	$	—	$	807	$	481	$	137	$	—	$	618
Equity securities:
Domestic	$	130	$	—	$	—	$	130	$	346	$	—	$	—	$	346
International	164		—		—		164		176		—		—		176
Total equity securities	$	294	$	—	$	—	$	294	$	522	$	—	$	—	$	522
International mutual funds	$	179	$	—	$	—	$	179	$	181	$	—	$	—	$	181
Total assets in the fair value hierarchy	$	822	$	508	$	—	$	1,330	$	1,209	$	137	$	—	$	1,346
Collective trust funds:
Fixed income fund(1)							$	408							$	440
Common stock fund(1)							217								178
International fund(1)							46								47
Total collective trust funds							$	671							$	665

Real estate funds measured at NAV(1)							$	188							$	187
Private equity funds measured at NAV(1)							$	280							$	101
							$	2,469							$	2,299

(1)In accordance with accounting guidance, investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient are not required to be classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of amounts reported in the fair value hierarchy to amounts reported on the balance sheet.

For all investments, the plans attempt to use quoted market prices of identical assets on active exchanges, or Level 1 measurements. Where such quoted market prices are not available, the plans typically employ quoted market prices of similar instruments (including matrix pricing) and/or discounted cash flows to estimate a value of these securities, or Level 2 measurements. Level 2 discounted cash flow analyses are typically based on market interest rates, prepayment speeds and/or option adjusted spreads.

Investments held in the plans consist of cash and cash equivalents, fixed income securities, equity securities, collective trust funds, hedge funds, real estate funds, private equity and other assets and are recorded at fair value on a recurring basis. See Note 1 for a description of valuation methodologies related to U.S. Treasuries, federal agency securities, and equity securities. The methodology described in Note 1 for other debt securities is applicable to corporate bonds.

Mutual funds are valued based on quoted market prices of identical assets on active exchanges; these valuations are Level 1 measurements. Collective trust funds, hedge funds, real estate funds, private equity funds and other assets are valued based on net asset value or the valuation of the limited partner’s portion of the equity of the fund. Third party fund managers provide these valuations based primarily on estimated valuations of underlying investments.

Table of Contents

Information about the expected cash flows for the qualified and non-qualified plans is as follows:


	Qualified Plans		Non-qualified Plans
	(In millions)
Expected Employer Contributions:
2021	$	—	$	33
Expected Benefit Payments:
2021	$	138	$	33
2022	138		31
2023	136		15
2024	138		11
2025	137		12
Next five years	673		57

OTHER PLANS

Regions has a defined-contribution 401(k) plan that includes a Company match of eligible employee contributions. Eligible employees include those who have been employed for one year and have worked a minimum of 1,000 hours. The Company match is invested based on the employees' allocation elections. Regions provides an automatic 2 percent cash 401(k) contribution to eligible employees regardless of whether or not they are contributing to the 401(k) plan. To receive this contribution, employees must be employed at the end of the year and not actively accruing a benefit in the Regions’ pension plans. Regions’ cash contribution was approximately $19 million for 2020, $17 million for 2019 and $18 million for 2018. For 2020 and 2019, eligible employees who were already contributing to the 401(k) plan received up to a 5 percent Company match plus the automatic 2 percent cash contribution. In 2018, eligible employees who were already contributing to the 401(k) plan received up to a 4 percent Company match plus the automatic 2 percent cash contribution. Regions’ match to the 401(k) plan on behalf of employees totaled $62 million in 2020, $58 million in 2019, and $48 million in 2018. Regions’ 401(k) plan held 20 million shares and 21 million shares of Regions' common stock at December 31, 2020 and 2019, respectively. The 401(k) plan received approximately $12 million, $13 million and $10 million in dividends on Regions' common stock for the years ended December 31, 2020, 2019 and 2018, respectively.

Regions also sponsors defined benefit postretirement health care plans that cover certain retired employees. For these certain employees retiring before normal retirement age, the Company currently pays a portion of the costs of certain health care benefits until the retired employee becomes eligible for Medicare. Certain retirees, participating in plans of acquired entities, are offered a Medicare supplemental benefit. The plan is contributory and contains other cost-sharing features such as deductibles and co-payments. Retiree health care benefits, as well as similar benefits for active employees, are provided through a self-insured program in which Company and retiree costs are based on the amount of benefits paid. The Company’s policy is to fund the Company’s share of the cost of health care benefits in amounts determined at the discretion of management. Postretirement life insurance is also provided to a grandfathered group of employees and retirees.

NOTE 19. OTHER NON-INTEREST INCOME AND EXPENSE

The following is a detail of other non-interest income from continuing operations for the years ended December 31:


	2020		2019		2018
	(In millions)
Bank-owned life insurance	95		78		65
Investment services fee income	$	84	$	79	$	71
Commercial credit fee income	77		73		71
Valuation gain on equity investment(1)	50		—		—
Market value adjustments on employee benefit assets - defined benefit	—		5		(6)
Market value adjustments on employee benefit assets- other	12		11		(5)
Other miscellaneous income	151		130		100
	$	469	$	376	$	296

(1)In the third quarter of 2020, the equity investee executed an initial public offering. The Company was subject to a conventional post-issuance 180 day lock-up period, which prevented the sale of its position until January 2021. The Company sold its position in January 2021 and recognized an immaterial gain.

Table of Contents

The following is a detail of other non-interest expense from continuing operations for the years ended December 31:


	2020		2019		2018
	(In millions)
Outside services	$	170	$	189	$	187
Marketing	94		97		92
Professional, legal and regulatory expenses	89		95		119
Credit/checkcard expenses	50		68		57
FDIC insurance assessments	48		48		85
Branch consolidation, property and equipment charges	31		25		11
Visa class B shares expense	24		14		10
Loss on early extinguishment of debt	22		16		—
Provision (credit) for unfunded credit losses(1)	—		(6)		(2)
Other miscellaneous expenses	354		381		404
	$	882	$	927	$	963

(1)Upon adoption of CECL on January 1, 2020, the provision for credit losses presented within net interest income after provision for credit losses is the sum of the provision for loan losses and the provision for unfunded credit commitments. Prior to the adoption of CECL, the provision for unfunded commitments was included in other non-interest expense.

NOTE 20. INCOME TAXES

The components of income tax expense from continuing operations for the years ended December 31 were as follows:


	2020		2019		2018
	(In millions)
Current income tax expense:
Federal	$	312	$	279	$	175
State	66		62		29
Total current expense	$	378	$	341	$	204
Deferred income tax expense (benefit):
Federal	$	(142)	$	29	$	130
State	(16)		33		53
Total deferred expense (benefit)	$	(158)	$	62	$	183
Total income tax expense	$	220	$	403	$	387

Note: The table above does not include total income tax expense from discontinued operations of zero, zero, and $80 million in 2020, 2019 and 2018, respectively. The deferred income tax expense reflected in discontinued operations was zero, zero and $43 million in 2020, 2019 and 2018, respectively.

On December 22, 2017, Tax Reform was enacted. Effective January 1, 2018, Tax Reform reduced the maximum corporate statutory federal income tax rate from 35 percent to 21 percent. During 2018, the Company made the determination to and completed administrative filings with the Internal Revenue Service that allowed it to accelerate various deductions into the prior year. As a result, the Company recognized during the 2018 measurement period approximately $37 million in tax benefits due to Tax Reform. The measurement period ended in December 2018.

Income tax expense does not reflect the tax effects of unrealized losses on securities transferred to held to maturity, unrealized gains and losses on securities available for sale, unrealized gains and losses on derivative instruments and the net change from defined benefit pension plans and other postretirement benefits. Refer to Note 15 for additional information on shareholders' equity and accumulated other comprehensive income (loss).

The Company accounts for investment tax credits using the deferral method. Investment tax credits generated totaled $94 million, $59 million and $90 million for 2020, 2019 and 2018, respectively.

Table of Contents

Income taxes from continuing operations for financial reporting purposes differs from the amount computed by applying the statutory federal income tax rate of 21 percent for the years ended December 31, 2020, 2019, and 2018, as shown in the following table:


	2020			2019			2018
	(Dollars in millions)
Tax on income from continuing operations computed at statutory federal income tax rate	$	276		$	417		$	410
Increase (decrease) in taxes resulting from:
State income tax, net of federal tax effect	39			75			65
Tax-exempt interest	(34)			(39)			(37)
Affordable housing investment amortization, net of tax benefits (excluding Tax Reform)	(31)			(34)			(37)
Other impacts of Tax Reform	—			—			(37)
Non-deductible expenses	22			19			28
Bank-owned life insurance	(22)			(19)			(16)
Impact of change in unrecognized tax benefits	(20)			20			—
Lease financing	5			5			11



Other, net	(15)			(41)			—
Income tax expense	$	220		$	403		$	387
Effective tax rate	16.8		%	20.3		%	19.8		%

Note: Income tax expense includes amortization of affordable housing investments of $133 million, $131 million, and $137 million for 2020, 2019 and 2018, respectively.

Significant components of the Company’s net deferred tax liability at December 31 are listed below:


	2020		2019
	(In millions)
Deferred tax assets:
Allowance for credit losses(1)	$	573	$	231
Right of use liability	137		124
Federal and State net operating losses, net of federal tax effect	58		50
Unrealized losses included in shareholder's equity	—		30
Accrued expenses	35		30
Federal tax credit carryforwards	—		12
Other	13		16
Total deferred tax assets	816		493
Less: valuation allowance	(31)		(32)
Total deferred tax assets less valuation allowance	785		461
Deferred tax liabilities:
Unrealized gains included in shareholder's equity	444		—
Lease financing	413		354
Right of use asset	128		115
Goodwill and intangibles	106		92
Employee benefits and deferred compensation	54		90
Fixed assets	54		42
Mortgage servicing rights	45		61
Other	46		35

Total deferred tax liabilities	1,290		789
Net deferred tax liability	$	(505)	$	(328)

(1)Regions adopted CECL on January 1, 2020 and the impact resulted in an increase of $126 million in deferred tax assets. Prior to adoption, the deferred tax assets impact is for the allowance for loan losses.

Table of Contents

The following table provides details of the Company’s tax carryforwards at December 31, 2020, including the expiration dates, any related valuation allowance and the amount of pre-tax earnings necessary to fully realize each net deferred tax asset balance:


	Expiration Dates	Deferred Tax Asset Balance (2)		Valuation Allowance		Net Deferred Tax Asset Balance		Pre-Tax Earnings Necessary to Realize (1)
	(In millions)
Net operating losses-federal	2037	$	18	$	—	$	18	$	87
Net operating losses-federal	None	7		—		7		N/A
Net operating losses-states	2021-2025	14		14		—		—
Net operating losses-states	2026-2032	13		12		1		8
Net operating losses-states	2033-2040	4		3		1		23
Net operating losses-states	None	2		2		—		N/A
		58		31		27

(1)N/A indicates that net operating losses with no expiration are not measured on a pre-tax basis.

(2) Federal and state deferred tax assets of $25 million and $2 million, respectively, related to net operating losses were acquired as part of the Company’s April 2020 equipment finance acquisition. While the federal net operating losses are subject to certain annual utilization limits, the Company has determined that a valuation allowance is not necessary based on projected annual limitation and the length of the net operating loss carryover period.

The Company’s determination of the realization of the net deferred tax asset is based on its assessment of all available positive and negative evidence. At December 31, 2020, positive evidence supporting the realization of the deferred tax assets includes a history of positive earnings with no history of significant tax carryforwards expiring unused. In addition, the reversal of taxable temporary differences, excluding goodwill and the inclusion of the accretion of taxable temporary differences related to leveraged leases acquired in a previous business combination, will offset approximately $1.2 billion of the gross deferred tax assets, which is significantly larger than the $785 million deferred tax asset balance net of valuation allowance at December 31, 2020.

The Company believes that a portion of the state net operating loss carryforwards will not be realized due to the length of certain state carryforward periods. Accordingly, a valuation allowance has been established in the amount of $31 million against such benefits at December 31, 2020 compared to $32 million at December 31, 2019.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


	2020		2019		2018
	(In millions)
Balance at beginning of year	$	37	$	13	$	27
Additions based on tax positions taken in a prior period	2		25		—
Additions based on tax positions taken in the current period	—		—		11
Reductions based on tax positions taken in a prior period	(25)		—		(13)
Settlements	(1)		—		(11)
Expiration of statute of limitations	(1)		(1)		(1)
Balance at end of year	$	12	$	37	$	13

The Company files U.S. federal, state, and local income tax returns. The Company is in the IRS’s Compliance Assurance Process program. Pursuant to this program, examinations for tax years through 2018 have been completed. Also, with few exceptions, the Company is no longer subject to state and local income tax examinations for tax years before 2016. The completion of tax examinations was the primary reason for the reduction in unrecognized tax benefits in 2020. Currently, there are no material disputed tax positions with federal or state taxing authorities. Accordingly, the Company does not anticipate that any adjustments relating to federal or state tax examinations will result in material changes to its business, financial position, results of operations or cash flows.

As a result of the potential resolution of certain federal and state income tax positions, it is reasonably possible that the UTBs could decrease as much as $4 million during the next twelve months, since resolved items will be removed from the balance whether their resolution results in payment or recognition in earnings.

Table of Contents

As of December 31, 2020, 2019 and 2018, the balances of the Company’s UTBs that would reduce the effective tax rates, if recognized, were $9 million, $34 million and $10 million, respectively. The remainder of the UTB balance has indirect tax benefits in other jurisdictions or is the tax effect of temporary differences.

Income tax expense for 2020, 2019 and 2018, includes an immaterial expense (benefit) for interest expense, interest income and penalties before the impact of any applicable federal and state deductions. As of December 31, 2020 and 2019, the Company had an immaterial liability for interest and penalties related to income taxes, before the impact of any applicable federal and state deductions.

NOTE 21. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

The following tables present the notional amount and estimated fair value of derivative instruments on a gross basis as of December 31:


	2020						2019
	Notional Amount		Estimated Fair Value				Notional Amount		Estimated Fair Value
	Gain(1)		Loss(1)		Gain(1)		Loss(1)
	(In millions)
Derivatives in fair value hedging relationships:
Interest rate swaps	$	2,100	$	77	$	—	$	2,900	$	67	$	—

Derivatives in cash flow hedging relationships:
Interest rate swaps	16,000		1,181		—		17,250		338		83
Interest rate floors (2)	5,750		430		—		6,750		208		—
Total derivatives in cash flow hedging relationships	21,750		1,611		—		24,000		546		83
Total derivatives designated as hedging instruments	$	23,850	$	1,688	—		$	26,900	$	613	$	83
Derivatives not designated as hedging instruments:
Interest rate swaps	$	76,764	$	1,492	$	1,464	$	68,075	$	659	$	656
Interest rate options	13,806		90		28		11,347		27		9
Interest rate futures and forward commitments	4,270		11		26		27,324		10		11
Other contracts	9,924		68		80		10,276		48		58
Total derivatives not designated as hedging instruments	$	104,764	$	1,661	$	1,598	$	117,022	$	744	$	734
Total derivatives	$	128,614	$	3,349	$	1,598	$	143,922	$	1,357	$	817

Total gross derivative instruments, before netting			$	3,349	$	1,598			$	1,357	$	817
Less: Netting adjustments (3)			2,428		1,545				1,022		770
Total gross derivative instruments, after netting (4)			$	921	$	53			$	335	$	47

(1)Derivatives in a gain position are recorded as other assets and derivatives in a loss position are recorded as other liabilities on the consolidated balance sheets.

(2)Estimated fair value includes premium of approximately $83 million as of December 31, 2020 and $108 million as of December 31, 2019 to be amortized over the remaining life. Approximately $15 million of the decrease since December 31, 2019 related to hedges that were terminated during the third quarter of 2020 and were not amortized into earnings as of the date of termination.

(3)Netting adjustments represent amounts recorded to convert derivative assets and derivative liabilities from a gross basis to a net basis in accordance with applicable accounting guidance. The net basis takes into account the impact of cash collateral received or posted, legally enforceable master netting agreements and variation margin that allow Regions to settle derivative contracts with the counterparty on a net basis and to offset the net position with the related cash collateral.

(4)The gain amounts, which are not collateralized with cash or other assets or reserved for, represent the net credit risk on all trading and other derivative positions. As of December 31, 2020 and December 31, 2019, financial instruments posted of $24 million, for both periods, were not offset in the consolidated balance sheets.

HEDGING DERIVATIVES

Derivatives entered into to manage interest rate risk and facilitate asset/liability management strategies are designated as hedging derivatives. Derivative financial instruments that qualify in a hedging relationship are classified, based on the exposure being hedged, as either fair value hedges or cash flow hedges. Additional information regarding accounting policies for derivatives is described in Note 1.

FAIR VALUE HEDGES

Fair value hedge relationships mitigate exposure to the change in fair value of an asset, liability or firm commitment.

Regions enters into interest rate swap agreements to manage interest rate exposure on the Company’s fixed-rate borrowings. These agreements involve the receipt of fixed-rate amounts in exchange for floating-rate interest payments over the life of the agreements. Regions enters into interest rate swap agreements to manage interest rate exposure on certain of the

Table of Contents

Company's fixed-rate available for sale debt securities. These agreements involve the payment of fixed-rate amounts in exchange for floating-rate interest receipts.

CASH FLOW HEDGES

Cash flow hedge relationships mitigate exposure to the variability of future cash flows or other forecasted transactions.

Regions enters into interest rate swap and floor agreements to manage overall cash flow changes related to interest rate risk exposure on LIBOR-based loans. The agreements effectively modify the Company’s exposure to interest rate risk by utilizing receive fixed/pay LIBOR interest rate swaps and interest rate floors. As of December 31, 2020, Regions is hedging its exposure to the variability in future cash flows for forecasted transactions through 2026 and a small portion of these hedges are forward starting.

The following table presents the pre-tax impact of terminated cash flow hedges on AOCI. The balance of terminated cash flow hedges in AOCI will be amortized into earnings through 2026.


	Twelve Months Ended December 31
	2020		2019
	(In millions)
Unrealized gains on terminated hedges included in AOCI- January 1	$	78	$	68
Unrealized gains on terminated hedges arising during the period	55		23
Reclassification adjustments for amortization of unrealized (gains) into net income	(12)		(13)
Unrealized gains on terminated hedges included in AOCI-December 31	$	121	$	78

Regions expects to reclassify into earnings approximately $415 million in pre-tax income due to the receipt or payment of interest payments and floor premium amortization on all cash flow hedges within the next twelve months. Included in this amount is $26 million in pre-tax net gains related to the amortization of discontinued cash flow hedges.

The following tables present the effect of hedging derivative instruments on the consolidated statements of income and the total amounts for the respective line items affected for the years ended December 31:


	2020
	Interest Income				Interest Expense
	Debt securities		Loans, including fees		Long-term borrowings
	(In millions)
Total amounts presented in the consolidated statements of income	$	582	$	3,610	$	178

Gains/(losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements on derivatives	$	—	$	—	$	37
Recognized on derivatives	—		—		52
Recognized on hedged items	—		—		(51)
Net income recognized on fair value hedges	$	—	$	—	$	38

Gains/(losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income (2)	$	—	$	260	$	—
Income (expense) recognized on cash flow hedges (2)	$	—	$	260	$	—

Table of Contents


	2019
	Interest Income				Interest Expense
	Debt securities		Loans, including fees		Long-term borrowings
	(In millions)
Total amounts presented in the consolidated statements of income	$	643	$	3,866	$	351

Gains/(losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements on derivatives	$	—	$	—	$	(14)
Recognized on derivatives	(2)		—		92
Recognized on hedged items	2		—		(92)
Net income recognized on fair value hedges	$	—	$	—	$	(14)

Gains/(losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income (2)	$	—	$	(24)	$	—
Income (expense) recognized on cash flow hedges(2)	$	—	$	(24)	$	—


	2018
	Interest Income				Interest Expense
	Debt securities		Loans, including fees		Long-term borrowings
	(In millions)
Total amounts presented in the consolidated statements of income	$	625	$	3,613	$	322

Gains/(losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements on derivatives	$	(1)	$	—	$	(15)
Recognized on derivatives	4		—		1
Recognized on hedged items	(4)		—		(1)
Net income recognized on fair value hedges	$	(1)	$	—	$	(15)

Gains/(losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income (2)	$	—	$	12	$	—
Income (expense) recognized on cash flow hedges(2)	$	—	$	12	$	—

(1)See Note 15 for gain or (loss) recognized for cash flow hedges in AOCI.

(2)Pre-tax

The following tables present the carrying amount and associated cumulative basis adjustment related to the application of hedge accounting that is included in the carrying amount of hedged assets and liabilities in fair value hedging relationships as of December 31:


	2020		2019
	Hedged Items Currently Designated			Hedged Items Currently Designated
	Carrying Amount of Assets/(Liabilities)	Hedge Accounting Basis Adjustment			Carrying Amount of Assets/(Liabilities)	Hedge Accounting Basis Adjustment
	(In millions)		(In millions)

Long-term borrowings	(2,171)	(64)			(2,954)	(49)

Table of Contents

During 2020 and 2019, the Company had terminated fair value hedges related to debt securities available for sale with carrying values of $301 million and $337 million, respectively. The remaining basis adjustments related to these terminated hedges were $1 million and $3 million, respectively.

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS

The Company holds a portfolio of interest rate swaps, option contracts, and futures and forward commitments that result from transactions with its commercial customers in which they manage their risks by entering into a derivative with Regions. The Company monitors and manages the net risk in this customer portfolio and enters into separate derivative contracts in order to reduce the overall exposure to pre-defined limits. For both derivatives with its end customers and derivatives Regions enters into to mitigate the risk in this portfolio, the Company is subject to market risk and the risk that the counterparty will default. The contracts in this portfolio are not designated as accounting hedges and are marked-to market through earnings (in capital markets income) and included in other assets and other liabilities, as appropriate.

Regions enters into interest rate lock commitments, which are commitments to originate mortgage loans whereby the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. At December 31, 2020 and 2019, Regions had $924 million and $366 million, respectively, in total notional amount of interest rate lock commitments. Regions manages market risk on interest rate lock commitments and mortgage loans held for sale with corresponding forward sale commitments. Residential mortgage loans held for sale are recorded at fair value with changes in fair value recorded in mortgage income. Commercial mortgage loans held for sale are recorded at either the lower of cost or market or at fair value based on management's election. At December 31, 2020 and 2019, Regions had $1.9 billion and $662 million, respectively, in total notional amounts related to these forward sale commitments. Changes in mark-to-market from both interest rate lock commitments and corresponding forward sale commitments related to residential mortgage loans are included in mortgage income. Changes in mark-to-market from both interest rate lock commitments and corresponding forward sale commitments related to commercial mortgage loans are included in capital markets income.

Regions has elected to account for residential MSRs at fair market value with any changes to fair value being recorded in mortgage income. Concurrent with the election to use the fair value measurement method, Regions began using various derivative instruments, in the form of forward rate commitments, futures contracts, swaps and swaptions to mitigate the effect of changes in the fair value of its residential MSRs in its consolidated statements of income. As of December 31, 2020 and 2019, the total notional amount related to these contracts was $4.1 billion and $4.8 billion respectively.

The following table presents the location and amount of gain or (loss) recognized in income on derivatives not designated as hedging instruments in the consolidated statements of income for the years ended December 31:


Derivatives Not Designated as Hedging Instruments	2020		2019		2018
	(In millions)
Capital markets income:
Interest rate swaps	$	21	$	13	$	19
Interest rate options	36		23		28
Interest rate futures and forward commitments	14		10		3
Other contracts	1		(1)		5
Total capital markets income	72		45		55
Mortgage income:
Interest rate swaps	83		68		(12)
Interest rate options	30		(1)		—
Interest rate futures and forward commitments	(2)		5		(8)
Total mortgage income	111		72		(20)
	$	183	$	117	$	35

CREDIT DERIVATIVES

Regions has both bought and sold credit protection in the form of participations on interest rate swaps (swap participations). These swap participations, which meet the definition of credit derivatives, were entered into in the ordinary course of business to serve the credit needs of customers. Swap participations, whereby Regions has purchased credit protection, entitle Regions to receive a payment from the counterparty if the customer fails to make payment on any amounts due to Regions upon early termination of the swap transaction and have maturities between 2021 and 2029. Swap participations, whereby Regions has sold credit protection have maturities between 2020 and 2038. For contracts where Regions sold credit protection, Regions would be required to make payment to the counterparty if the customer fails to make payment on any amounts due to the counterparty upon early termination of the swap transaction. Regions bases the current status of the prepayment/performance risk on bought and sold credit derivatives on recently issued internal risk ratings consistent with the risk management practices of unfunded commitments.

Table of Contents

Regions’ maximum potential amount of future payments under these contracts as of December 31, 2020 was approximately $552 million. This scenario occurs if variable interest rates were at zero percent and all counterparties defaulted with zero recovery. The fair value of sold protection at December 31, 2020 and 2019 was immaterial. In transactions where Regions has sold credit protection, recourse to collateral associated with the original swap transaction is available to offset some or all of Regions’ obligation.

Regions has bought credit protection in the form of credit default indices. These indices, which meet the definition of credit derivatives, were entered into in the ordinary course of business to economically hedge credit spread risk in commercial mortgage loans held for sale whereby the fair value option has been elected. Credit derivatives, whereby Regions has purchased credit protection, entitle Regions to receive a payment from the counterparty if losses on the underlying index exceed a certain threshold, dependent upon the tranche rating of the capital structure.

CONTINGENT FEATURES

Certain of Regions’ derivative instrument contracts with broker-dealers contain credit-related termination provisions and/or credit related provisions regarding the posting of collateral, allowing those broker-dealers to terminate the contracts in the event that Regions’ and/or Regions Bank’s credit ratings falls below specified ratings from certain major credit rating agencies. The aggregate fair values of all derivative instruments with any credit-risk-related contingent features that were in a liability position on December 31, 2020 and 2019, were $74 million and $64 million, respectively, for which Regions had posted collateral of $74 million and $67 million, respectively, in the normal course of business.

Table of Contents

NOTE 22. FAIR VALUE MEASUREMENTS

See Note 1 for a description of valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis. Assets and liabilities measured at fair value rarely transfer between Level 1 and Level 2 measurements. Marketable equity securities and debt securities available for sale may be periodically transferred to or from Level 3 valuation based on management’s conclusion regarding the observability of inputs used in valuing the securities. Such transfers are accounted for as if they occur at the beginning of a reporting period.

The following table presents assets and liabilities measured at estimated fair value on a recurring basis and non-recurring basis as of December 31:


	2020								2019
	Level 1		Level 2		Level 3 (1)		Total Estimated Fair Value		Level 1		Level 2		Level 3 (1)		Total Estimated Fair Value
	(In millions)
Recurring fair value measurements
Debt securities available for sale:
U.S. Treasury securities	$	183	$	—	$	—	$	183	$	182	$	—	$	—	$	182
Federal agency securities	—		105		—		105		—		43		—		43
Mortgage-backed securities (MBS):
Residential agency	—		19,076		—		19,076		—		15,516		—		15,516
Residential non-agency	—		—		1		1		—		—		1		1
Commercial agency	—		5,999		—		5,999		—		4,766		—		4,766
Commercial non-agency	—		586		—		586		—		647		—		647
Corporate and other debt securities	—		1,200		4		1,204		—		1,450		1		1,451
Total debt securities available for sale	$	183	$	26,966	$	5	$	27,154	$	182	$	22,422	$	2	$	22,606
Loans held for sale	$	—	$	1,446	$	—	$	1,446	$	—	$	436	$	3	$	439
Marketable equity securities	$	388	$	—	$	—	$	388	$	450	$	—	$	—	$	450
Residential mortgage servicing rights	$	—	$	—	$	296	$	296	$	—	$	—	$	345	$	345
Derivative assets (2):
Interest rate swaps	$	—	$	2,750	$	—	$	2,750	$	—	$	1,064	$	—	$	1,064
Interest rate options	—		477		43		520		—		227		8		235
Interest rate futures and forward commitments	—		11		—		11		—		4		6		10
Other contracts	2		65		1		68		—		47		1		48
Total derivative assets	$	2	$	3,303	$	44	$	3,349	$	—	$	1,342	$	15	$	1,357
Equity investments	$	—	$	74	$	—	$	74	$	—	$	—	$	—	$	—
Derivative liabilities (2):
Interest rate swaps	$	—	$	1,464	$	—	$	1,464	$	—	$	739	$	—	$	739
Interest rate options	—		28		—		28		—		9		—		9
Interest rate futures and forward commitments	—		26		—		26		—		11		—		11
Other contracts	2		72		6		80		—		53		5		58
Total derivative liabilities	$	2	$	1,590	$	6	$	1,598	$	—	$	812	$	5	$	817
Non-recurring fair value measurements
Loans held for sale	$	—	$	—	$	4	$	4	$	—	$	—	$	14	$	14
Equity investments without a readily determinable fair value	—		—		12		12		—		—		32		32
Foreclosed property and other real estate	—		—		5		5		—		—		42		42

(1)All following disclosures related to Level 3 recurring and non-recurring assets do not include those deemed to be immaterial.

(2)As permitted under U.S. GAAP, variation margin collateral payments made or received for derivatives that are centrally cleared are legally characterized as settled. As such, these derivative assets and derivative liabilities and the related variation margin collateral are presented on a net basis on the balance sheet.

Table of Contents

Assets and liabilities in all levels could result in volatile and material price fluctuations. Realized and unrealized gains and losses on Level 3 assets represent only a portion of the risk to market fluctuations in Regions’ consolidated balance sheets. Further, derivatives included in Levels 2 and 3 are used by ALCO in a holistic approach to managing price fluctuation risks.

The following tables illustrate rollforwards for residential mortgage servicing rights, which are the only material assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2020, 2019 and 2018, respectively.


	Residential mortgage servicing rights
	For the Years Ended December 31
	2020		2019		2018
	(In millions)
Carrying value, beginning of period	$	345	$	418	$	336
Total realized/unrealized gains (losses) included in earnings (1)	(157)		(115)		(29)
Purchases	108		42		111
Carrying value, end of period	$	296	$	345	$	418

(1) Included in mortgage income. Amounts presented exclude offsetting impact from related derivatives.

The following table presents the fair value adjustments related to non-recurring fair value measurements for the years ended December 31:



	2020		2019
	(In millions)
Loans held for sale	$	(8)	$	(12)
Equity investments without a readily determinable fair value	2		1
Foreclosed property and other real estate	(10)		(30)

The following tables present detailed information regarding material assets and liabilities measured at fair value using significant unobservable inputs (Level 3) as of December 31, 2020, 2019 and 2018. The tables include the valuation techniques and the significant unobservable inputs utilized. The range of each significant unobservable input as well as the weighted-average within the range utilized at December 31, 2020, 2019 and 2018 are included. Following the tables are descriptions of the valuation techniques and the sensitivity of the techniques to changes in the significant unobservable inputs.


	December 31, 2020
	Level 3 Estimated Fair Value at December 31, 2020	Valuation Technique	Unobservable Input(s)	Quantitative Range of Unobservable Inputs and (Weighted-Average)
	(Dollars in millions)
Recurring fair value measurements:
Residential mortgage servicing rights (1)	$296	Discounted cash flow	Weighted-average CPR (%)	8.1% - 31.2% (15.6%)
			OAS (%)	4.8% - 9.5% (5.6%)


	December 31, 2019
	Level 3 Estimated Fair Value at December 31, 2019	Valuation Technique	Unobservable Input(s)	Quantitative Range of Unobservable Inputs and (Weighted-Average)
	(Dollars in millions)
Recurring fair value measurements:
Residential mortgage servicing rights (1)	$345	Discounted cash flow	Weighted-average CPR (%)	7.4% - 26.1% (12.0%)
			OAS (%)	5.2% - 10.2% (6.2%)

Table of Contents


	December 31, 2018
	Level 3 Estimated Fair Value at December 31, 2018	Valuation Technique	Unobservable Input(s)	Quantitative Range of Unobservable Inputs and (Weighted-Average)
	(Dollars in millions)
Recurring fair value measurements:
Residential mortgage servicing rights (1)	$418	Discounted cash flow	Weighted-average CPR (%)	4.4% -42.6% (9.0%)
			OAS (%)	5.7% - 15.0% (7.6%)

(1)See Note 7 for additional disclosures related to assumptions used in the fair value calculation for residential mortgage servicing rights.

RECURRING FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS

Residential mortgage servicing rights

The significant unobservable inputs used in the fair value measurement of residential MSRs are OAS and CPR. This valuation requires generating cash flow projections over multiple interest rate scenarios and discounting those cash flows at a risk adjusted rate. Additionally, the impact of prepayments and changes in the OAS are based on a variety of underlying inputs including servicing costs. Increases or decreases to the underlying cash flow inputs will have a corresponding impact on the value of the MSR asset. The net change in unrealized gains (losses) included in earnings related to MSRs held at period end are disclosed as the changes in valuation inputs or assumptions included in the MSR rollforward table in Note 7.

FAIR VALUE OPTION

Regions has elected the fair value option for all eligible agency residential mortgage loans and certain commercial loans originated with the intent to sell. These elections allow for a more effective offset of the changes in fair values of the loans and the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting. Regions has not elected the fair value option for other loans held for sale primarily because they are not economically hedged using derivative instruments. Fair values of residential mortgage loans held for sale are based on traded market prices of similar assets where available and/or discounted cash flows at market interest rates, adjusted for securitization activities that include servicing values and market conditions, and are recorded in loans held for sale in the consolidated balance sheets.

The Company also elected to measure certain commercial and industrial loans held for sale at fair value, as these loans are actively traded in the secondary market. The Company is able to obtain fair value estimates for substantially all of these loans through a third party valuation service that is broadly used by market participants. While most of the loans are traded in the market, the volume and level of trading activity is subject to variability and the loans are not exchange-traded. The balance of these loans held for sale was immaterial at December 31, 2020.

The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for mortgage loans held for sale measured at fair value at December 31:


	2020						2019
	Aggregate Fair Value		Aggregate Unpaid Principal		Aggregate Fair Value Less Aggregate Unpaid Principal		Aggregate Fair Value		Aggregate Unpaid Principal		Aggregate Fair Value Less Aggregate Unpaid Principal
	(In millions)
Mortgage loans held for sale, at fair value	$	1,439	$	1,362	$	77	$	439	$	425	$	14

Interest income on mortgage loans held for sale is recognized based on contractual rates and is reflected in interest income on loans held for sale in the consolidated statements of income. The following table details net gains and losses resulting from changes in fair value of these loans, which were recorded in mortgage income in the consolidated statements of income for the years presented. These changes in fair value are mostly offset by economic hedging activities. An immaterial portion of these amounts was attributable to changes in instrument-specific credit risk.


	2020		2019
	(In millions)
Net gains (losses) resulting from changes in fair value of mortgage loans held for sale	$	63	$	4

Table of Contents

The carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of the Company’s financial instruments as of December 31, 2020 are as follows:


	2020
	Carrying Amount		Estimated Fair Value(1)		Level 1		Level 2		Level 3
	(In millions)
Financial assets:
Cash and cash equivalents	$	17,956	$	17,956	$	17,956	$	—	$	—
Debt securities held to maturity	1,122		1,215		—		1,215		—
Debt securities available for sale	27,154		27,154		183		26,966		5
Loans held for sale	1,905		1,905		—		1,901		4
Loans (excluding leases), net of unearned income and allowance for loan losses(2)(3)	81,597		82,773		—		—		82,773
Other earning assets(4)	1,017		1,017		388		629		—
Derivative assets	3,349		3,349		2		3,303		44
Equity investments	74		74		—		74		—
Financial liabilities:
Derivative liabilities	1,598		1,598		2		1,590		6
Deposits	122,479		122,511		—		122,511		—

Long-term borrowings	3,569		4,063		—		3,592		471
Loan commitments and letters of credit	151		151		—		—		151

(1)Estimated fair values are consistent with an exit price concept. The assumptions used to estimate the fair values are intended to approximate those that a market participant would use in a hypothetical orderly transaction. In estimating fair value, the Company makes adjustments for estimated changes in interest rates, market liquidity and credit spreads in the periods they are deemed to have occurred.

(2)The estimated fair value of portfolio loans assumes sale of the loans to a third-party financial investor. Accordingly, the value to the Company if the loans were held to maturity is not reflected in the fair value estimate. The fair value premium on the loan portfolio's net carrying amount at December 31, 2020 was $1.2 billion or 1.4 percent.

(3)Excluded from this table is the sales-type, direct financing, and leveraged lease carrying amount of $1.5 billion at December 31, 2020.

(4)Excluded from this table is the operating lease carrying amount of $200 million at December 31, 2020.

The carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of the Company's financial instruments as of December 31, 2019 are as follows:


	2019
	Carrying Amount		Estimated Fair Value(1)		Level 1		Level 2		Level 3
	(In millions)
Financial assets:
Cash and cash equivalents	$	4,114	$	4,114	$	4,114	$	—	$	—
Debt securities held to maturity	1,332		1,372		—		1,372		—
Debt securities available for sale	22,606		22,606		182		22,422		2
Loans held for sale	637		637		—		620		17
Loans (excluding leases), net of unearned income and allowance for loan losses(2)(3)	80,841		80,799		—		—		80,799
Other earning assets (4)	1,221		1,221		450		771		—
Derivative assets	1,357		1,357		—		1,342		15
Financial liabilities:
Derivative liabilities	817		817		—		812		5
Deposits	97,475		97,516		—		97,516		—
Short-term borrowings	2,050		2,050		—		2,050		—
Long-term borrowings	7,879		8,275		—		7,442		833
Loan commitments and letters of credit	67		67		—		—		67

Table of Contents

(2)The estimated fair value of portfolio loans assumes sale of the loans to a third-party financial investor. Accordingly, the value to the Company if the loans were held to maturity is not reflected in the fair value estimate. The fair value discount on the loan portfolio's net carrying amount at December 31, 2019 was $42 million or 0.1 percent.

(3)Excluded from this table is the sales-type, direct financing, and leveraged lease carrying amount of $1.3 billion at December 31, 2019.

(4)Excluded from this table is the operating lease carrying amount of $297 million at December 31, 2019.

NOTE 23. BUSINESS SEGMENT INFORMATION

Each of Regions’ reportable segments is a strategic business unit that serves specific needs of Regions’ customers based on the products and services provided. The segments are based on the manner in which management views the financial performance of the business. The Company has three reportable segments: Corporate Bank, Consumer Bank, and Wealth Management, with the remainder split between Discontinued Operations and Other.

The application and development of management reporting methodologies is a dynamic process and is subject to periodic enhancements. As these enhancements are made, financial results presented by each reportable segment may be periodically revised.

The Corporate Bank segment represents the Company’s commercial banking functions including commercial and industrial, commercial real estate and investor real estate lending. This segment also includes equipment lease financing, as well as capital markets activities, which include securities underwriting and placement, loan syndication and placement, foreign exchange, derivatives, merger and acquisition and other advisory services. Corporate Bank customers include corporate, middle market, and commercial real estate developers and investors. Corresponding deposit products related to these types of customers are also included in this segment.

The Consumer Bank segment represents the Company’s branch network, including consumer banking products and services related to residential first mortgages, home equity lines and loans, branch small business loans, indirect loans, consumer credit cards and other consumer loans, as well as the corresponding deposit relationships. These services are also provided through the Company's digital channels and contact center.

The Wealth Management segment offers individuals, businesses, governmental institutions and non-profit entities a wide range of solutions to help protect, grow and transfer wealth. Offerings include credit related products, trust and investment management, asset management, retirement and savings solutions and estate planning.

Discontinued operations includes all brokerage and investment activities associated with the sale of Morgan Keegan which closed on April 2, 2012, as well as the sale of Regions Insurance Group, Inc. and related affiliates, which closed on July 2, 2018. See Note 3 "Discontinued Operations" for related discussion.

Other includes the Company’s Treasury function, the securities portfolio, wholesale funding activities, interest rate risk management activities and other corporate functions that are not related to a strategic business unit. Also within Other are certain reconciling items in order to translate the segment results that are based on management accounting practices into consolidated results. Management accounting practices utilized by Regions as the basis of presentation for segment results include the following:

Net interest income is presented based upon an FTP approach, for which market-based funding charges/credits are assigned within the segments. By allocating a cost or a credit to each product based on the FTP framework, management is able to more effectively measure the net interest margin contribution of its assets/liabilities by segment. The summation of the interest income/expense and FTP charges/credits for each segment is its designated net interest income and other financing income. The variance between the Company’s cumulative FTP charges and cumulative FTP credits is offset in Other.
Provision for credit losses is allocated to each segment based on an estimated loss methodology. The difference between the consolidated provision for credit losses and the segments’ estimated loss is reflected in Other.
Income tax expense (benefit) is calculated for the Corporate Bank, Consumer Bank and Wealth Management based on a consistent federal and state statutory rate. Discontinued Operations reflects the actual income tax expense (benefit) of its results. Any difference between the Company’s consolidated income tax expense (benefit) and the segments’ calculated amounts is reflected in Other.
Management reporting allocations of certain expenses are made in order to analyze the financial performance of the segments. These allocations consist of operational and overhead cost pools and are intended to represent the total costs to support a segment.

Table of Contents

The following tables present financial information for each reportable segment for the year ended December 31:


	2020
	Corporate Bank		Consumer Bank		Wealth Management		Other		Continuing Operations		Discontinued Operations		Consolidated
	(In millions)
Net interest income (loss)	$	1,783	$	2,274	$	156	$	(319)	$	3,894	$	—	$	3,894
Provision (credit) for credit losses (1)	299		320		14		697		1,330		—		1,330
Non-interest income	656		1,266		343		128		2,393		—		2,393
Non-interest expense	1,026		2,046		346		225		3,643		—		3,643
Income (loss) before income taxes	1,114		1,174		139		(1,113)		1,314		—		1,314
Income tax expense (benefit)	279		294		34		(387)		220		—		220
Net income (loss)	$	835	$	880	$	105	$	(726)	$	1,094	$	—	$	1,094
Average assets	$	61,237	$	34,516	$	2,021	$	40,321	$	138,095	$	—	$	138,095


	2019
	Corporate Bank		Consumer Bank		Wealth Management		Other		Continuing Operations		Discontinued Operations		Consolidated
	(In millions)
Net interest income (loss)	$	1,446	$	2,336	$	180	$	(217)	$	3,745	$	—	$	3,745
Provision (credit) for credit losses (1)	205		340		16		(174)		387		—		387
Non-interest income	538		1,214		330		34		2,116		—		2,116
Non-interest expense	934		2,107		343		105		3,489		—		3,489
Income (loss) before income taxes	845		1,103		151		(114)		1,985		—		1,985
Income tax expense (benefit)	211		276		37		(121)		403		—		403
Net income (loss)	$	634	$	827	$	114	$	7	$	1,582	$	—	$	1,582
Average assets	$	53,867	$	35,045	$	2,183	$	34,015	$	125,110	$	—	$	125,110


	2018
	Corporate Bank		Consumer Bank		Wealth Management		Other		Continuing Operations		Discontinued Operations		Consolidated
	(In millions)
Net interest income (loss)	$	1,384	$	2,216	$	194	$	(59)	$	3,735	$	1	$	3,736
Provision (credit) for credit losses (1)	191		317		16		(295)		229		—		229
Non-interest income	545		1,146		316		12		2,019		349		2,368
Non-interest expense	909		2,066		334		261		3,570		79		3,649
Income (loss) before income taxes	829		979		160		(13)		1,955		271		2,226
Income tax expense (benefit)	207		245		40		(105)		387		80		467
Net income (loss)	$	622	$	734	$	120	$	92	$	1,568	$	191	$	1,759
Average assets	$	51,530	$	35,066	$	2,287	$	34,415	$	123,298	$	82	$	123,380

Table of Contents

NOTE 24. COMMITMENTS, CONTINGENCIES AND GUARANTEES

COMMERCIAL COMMITMENTS

Regions issues off-balance sheet financial instruments in connection with lending activities. The credit risk associated with these instruments is essentially the same as that involved in extending loans to customers and is subject to Regions’ normal credit approval policies and procedures. Regions measures inherent risk associated with these instruments by recording a reserve for unfunded commitments based on an assessment of the likelihood that the guarantee will be funded and the creditworthiness of the customer or counterparty. Collateral is obtained based on management’s assessment of the creditworthiness of the customer.

Credit risk associated with these instruments as of December 31 is represented by the contractual amounts indicated in the following table:


	2020		2019
	(In millions)
Unused commitments to extend credit	$	56,644	$	52,976
Standby letters of credit	1,742		1,521
Commercial letters of credit	132		59
Liabilities associated with standby letters of credit	25		22
Assets associated with standby letters of credit	25		23
Reserve for unfunded credit commitments	126		45

Unused commitments to extend credit—To accommodate the financial needs of its customers, Regions makes commitments under various terms to lend funds to consumers, businesses and other entities. These commitments include (among others) credit card and other revolving credit agreements, term loan commitments and short-term borrowing agreements. Many of these loan commitments have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of these commitments are expected to expire without being funded, the total commitment amounts do not necessarily represent future liquidity requirements.

Standby letters of credit—Standby letters of credit are also issued to customers which commit Regions to make payments on behalf of customers if certain specified future events occur. Regions has recourse against the customer for any amount required to be paid to a third party under a standby letter of credit. The credit risk involved in the issuance of these guarantees is essentially the same as that involved in extending loans to clients and as such, the instruments are collateralized when necessary. Historically, a large percentage of standby letters of credit expire without being funded. The contractual amount of standby letters of credit represents the maximum potential amount of future payments Regions could be required to make and represents Regions’ maximum credit risk.

Commercial letters of credit—Commercial letters of credit are issued to facilitate foreign or domestic trade transactions for customers. As a general rule, drafts will be drawn when the goods underlying the transaction are in transit.

LEGAL CONTINGENCIES

Regions and its subsidiaries are subject to loss contingencies related to litigation, claims, investigations and legal and administrative cases and proceedings arising in the ordinary course of business. Regions evaluates these contingencies based on information currently available, including advice of counsel. Regions establishes accruals for those matters when a loss contingency is considered probable and the related amount is reasonably estimable. Any accruals are periodically reviewed and may be adjusted as circumstances change. Some of Regions' exposure with respect to loss contingencies may be offset by applicable insurance coverage. In determining the amounts of any accruals or estimates of possible loss contingencies however, Regions does not take into account the availability of insurance coverage. To the extent that Regions has an insurance recovery, the proceeds are recorded in the period the recovery is received.

When it is practicable, Regions estimates possible loss contingencies, whether or not there is an accrued probable loss. When Regions is able to estimate such possible losses, and when it is reasonably possible Regions could incur losses in excess of amounts accrued, Regions discloses the aggregate estimation of such possible losses. Regions currently estimates that it is reasonably possible that it may experience losses in excess of what Regions has accrued in an aggregate amount of up to approximately $20 million as of December 31, 2020, with it also being reasonably possible that Regions could incur no losses in excess of amounts accrued. However, as available information changes, the matters for which Regions is able to estimate, as well as the estimates themselves will be adjusted accordingly. The reasonably possible estimate includes a legal contingency that is subject to an indemnification agreement.

Assessments of litigation and claims exposure are difficult because they involve inherently unpredictable factors including, but not limited to, the following: whether the proceeding is in the early stages; whether damages are unspecified, unsupported, or uncertain; whether there is a potential for punitive or other pecuniary damages; whether the matter involves

Table of Contents

legal uncertainties, including novel issues of law; whether the matter involves multiple parties and/or jurisdictions; whether discovery has begun or is not complete; whether meaningful settlement discussions have commenced; and whether the lawsuit involves class allegations. Assessments of class action litigation, which is generally more complex than other types of litigation, are particularly difficult, especially in the early stages of the proceeding when it is not known whether a class will be certified or how a potential class, if certified, will be defined. As a result, Regions may be unable to estimate reasonably possible losses with respect to some of the matters disclosed below, and the aggregated estimated amount discussed above may not include an estimate for every matter disclosed below.

Regions is involved in formal and informal information-gathering requests, investigations, reviews, examinations and proceedings by various governmental regulatory agencies, law enforcement authorities and self-regulatory bodies regarding Regions’ business, Regions' business practices and policies, and the conduct of persons with whom Regions does business. As previously disclosed, Regions is cooperating with an investigation by the CFPB into certain of Regions' overdraft practices and policies. Additional inquiries will arise from time to time. In connection with those inquiries, Regions receives document requests, subpoenas and other requests for information. The inquiries could develop into administrative, civil or criminal proceedings or enforcement actions that could result in consequences that have a material effect on Regions' consolidated financial position, results of operations or cash flows as a whole. Such consequences could include adverse judgments, findings, settlements, penalties, fines, orders, injunctions, restitution, or alterations in our business practices, and could result in additional expenses and collateral costs, including reputational damage.

While the final outcome of litigation and claims exposures or of any inquiries is inherently unpredictable, management is currently of the opinion that the outcome of pending and threatened litigation and inquiries will not have a material effect on Regions’ business, consolidated financial position, results of operations or cash flows as a whole. However, in the event of unexpected future developments, it is reasonably possible that an adverse outcome in any of the matters discussed above could be material to Regions’ business, consolidated financial position, results of operations or cash flows for any particular reporting period of occurrence.

GUARANTEES

INDEMNIFICATION OBLIGATION

As discussed in Note 3, on April 2, 2012 (“Closing Date”), Regions closed the sale of Morgan Keegan and related affiliates to Raymond James. In connection with the sale, Regions agreed to indemnify Raymond James for all legal matters related to pre-closing activities, including matters filed subsequent to the Closing Date that relate to actions that occurred prior to closing. Losses under the indemnification include legal and other expenses, such as costs for judgments, settlements and awards associated with the defense and resolution of the indemnified matters. The maximum potential amount of future payments that Regions could be required to make under the indemnification is indeterminable due to the indefinite term of some of the obligations. As of December 31, 2020, the carrying value and fair value of the indemnification obligation were immaterial.

FANNIE MAE DUS LOSS SHARE GUARANTEE

Regions is a DUS lender. The DUS program provides liquidity to the multi-family housing market. Regions services loans sold to Fannie Mae and is required to provide a loss share guarantee equal to one-third of the principal balance for the majority of its DUS servicing portfolio. At December 31, 2020 and 2019, the Company's DUS servicing portfolio totaled approximately $4.5 billion and $3.9 billion, respectively. Regions' maximum quantifiable contingent liability related to its loss share guarantee was approximately $1.5 billion and $1.3 billion at December 31, 2020 and 2019, respectively. The Company would be liable for this amount only if all of the loans it services for Fannie Mae, for which the Company retains some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement. Therefore, the maximum quantifiable contingent liability is not representative of the actual loss the Company would be expected to incur. The estimated fair value of the associated loss share guarantee recorded as a liability on the Company's consolidated balance sheets was approximately $5 million and $4 million at December 31, 2020 and 2019, respectively. Refer to Note 1 for additional information.

VISA INDEMNIFICATION

As a member of the Visa USA network, Regions, along with other members, indemnified Visa USA against litigation. On October 3, 2007, Visa USA was restructured and acquired several Visa affiliates. In conjunction with this restructuring, Regions' indemnification of Visa USA was modified to cover specific litigation (“covered litigation”).

A portion of Visa's proceeds from its IPO was put into escrow to fund the covered litigation. To the extent that the amount available under the escrow arrangement, or subsequent fundings of the escrow account resulting from reductions in the class B share conversion ratio, is insufficient to fully resolve the covered litigation, Visa will enforce the indemnification obligations of Visa USA's members for any excess amount. At this time, Regions has concluded that it is not probable that covered litigation exposure will exceed the class B share value.

Table of Contents

NOTE 25. REVENUE RECOGNITION

The Company records revenue when control of the promised products or services is transferred to the customer, in an amount that reflects the consideration Regions expects to be entitled to receive in exchange for those products or services. Refer to Note 1 for descriptions of the accounting and reporting policies related to revenue recognition.

The following tables present total non-interest income disaggregated by major product category for each reportable segment for the period indicated:


	Year Ended December 31, 2020
	Corporate Bank		Consumer Bank		Wealth Management		Other Segment Revenue		Other(2)		Continuing Operations		Discontinued Operations
	(In millions)
Service charges on deposit accounts	$	152	$	459	$	3	$	2	$	5	$	621	$	—
Card and ATM fees	43		385		—		(1)		11		438		—
Investment management and trust fee income	—		—		253		—		—		253		—
Capital markets income	126		—		—		—		149		275		—
Mortgage income	—		—		—		—		333		333		—
Investment services fee income	—		—		84		—		—		84		—
Commercial credit fee income	—		—		—		—		77		77		—
Bank-owned life insurance	—		—		—		—		95		95		—
Securities gains (losses), net	—		—		—		—		4		4		—

Market value adjustments on employee benefit assets - other	—		—		—		—		12		12		—
Valuation gain on equity investment (1)	—		—		—		—		50		50		—
Other miscellaneous income	33		49		3		2		64		151		—
	$	354	$	893	$	343	$	3	$	800	$	2,393	$	—


	Year Ended December 31, 2019
	Corporate Bank		Consumer Bank		Wealth Management		Other Segment Revenue		Other(2)		Continuing Operations		Discontinued Operations
	(In millions)
Service charges on deposit accounts	$	154	$	565	$	3	$	—	$	7	$	729	$	—
Card and ATM fees	54		422		1		—		(22)		455		—
Investment management and trust fee income	—		—		243		—		—		243		—
Capital markets income	69		—		—		—		109		178		—
Mortgage income	—		—		—		—		163		163		—
Investment services fee income	—		—		79		—		—		79		—
Commercial credit fee income	—		—		—		—		73		73		—
Bank-owned life insurance	—		—		—		—		78		78		—
Securities gains (losses), net	—		—		—		—		(28)		(28)		—
Market value adjustments on employee benefit assets - defined benefit	—		—		—		—		5		5		—
Market value adjustments on employee benefit assets - other	—		—		—		—		11		11		—
Other miscellaneous income	18		58		5		(2)		51		130		—
	$	295	$	1,045	$	331	$	(2)	$	447	$	2,116	$	—

Table of Contents


	Year Ended December 31, 2018
	Corporate Bank		Consumer Bank		Wealth Management		Other Segment Revenue		Other(2)		Continuing Operations		Discontinued Operations
	(In millions)
Service charges on deposit accounts	$	145	$	554	$	3	$	—	$	8	$	710	$	—
Card and ATM fees	52		404		1		(1)		(18)		438		—
Investment management and trust fee income	—		—		235		—		—		235		—
Capital markets income	76		—		—		—		126		202		—
Mortgage income	—		—		—		—		137		137		—
Investment services fee income	—		—		71		—		—		71		—
Commercial credit fee income	—		—		—		—		71		71		—
Bank-owned life insurance	—		—		—		—		65		65		—
Securities gains (losses), net	—		—		—		—		1		1		(1)
Market value adjustments on employee benefit assets - defined benefit	—		—		—		—		(6)		(6)		—
Market value adjustments on employee benefit assets - other	—		—		—		—		(5)		(5)		—
Insurance commissions and fees	—		—		1		3		—		4		69
Gain on sale of business (2)	—		—		—		—		—		—		281
Other miscellaneous income	13		42		3		(1)		39		96		—
	$	286	$	1,000	$	314	$	1	$	418	$	2,019	$	349

(2)This revenue is not impacted by the accounting guidance adopted in 2018 and continues to be recognized when earned in accordance with the Company's prior revenue recognition policy.

Regions elected the practical expedient related to contract costs and will continue to expense sales commissions and any related contract costs when incurred because the amortization period would have been one year or less.

Regions also elected the practical expedient related to remaining performance obligations and therefore did not disclose the value of unsatisfied performance obligations for 1) contracts with an original expected length of one year or less and 2) contracts for which revenue is recognized at the amount to which Regions has the right to invoice for services performed.

Table of Contents

NOTE 26. PARENT COMPANY ONLY FINANCIAL STATEMENTS

Presented below are condensed financial statements of Regions Financial Corporation:

Balance Sheets


	December 31
	2020		2019
	(In millions)
Assets
Interest-bearing deposits in other banks	$	1,526	$	1,935
Loans to subsidiaries	20		20
Debt securities available for sale	22		21
Premises and equipment, net	38		41
Investments in subsidiaries:
Banks	18,872		16,939
Non-banks	250		207
	19,122		17,146
Other assets	313		295
Total assets	$	21,041	$	19,458
Liabilities and Shareholders’ Equity
Long-term borrowings	$	2,718	$	2,950
Other liabilities	212		213
Total liabilities	2,930		3,163
Shareholders’ equity:
Preferred stock	1,656		1,310
Common stock	10		10
Additional paid-in capital	12,731		12,685
Retained earnings	3,770		3,751
Treasury stock, at cost	(1,371)		(1,371)
Accumulated other comprehensive income (loss), net	1,315		(90)
Total shareholders’ equity	18,111		16,295
Total liabilities and shareholders’ equity	$	21,041	$	19,458

Table of Contents

Statements of Income


	Year Ended December 31
	2020		2019		2018
	(In millions)
Income:
Dividends received from subsidiaries	$	280	$	1,675	$	2,190
Interest from subsidiaries	8		4		3
Other	53		7		7
	341		1,686		2,200
Expenses:
Salaries and employee benefits	56		54		52
Interest	93		153		123
Furniture and equipment expense	4		5		4
Other	79		84		76
	232		296		255
Income before income taxes and equity in undistributed earnings of subsidiaries	109		1,390		1,945
Income tax benefit	(36)		(68)		(64)
Income from continuing operations	145		1,458		2,009
Discontinued operations:
Income (loss) from discontinued operations before income taxes	—		—		271
Income tax expense	—		—		80
Income (loss) from discontinued operations, net of tax	—		—		191
Income before equity in undistributed earnings of subsidiaries and preferred dividends	145		1,458		2,200
Equity in undistributed earnings of subsidiaries:
Banks	905		110		(454)
Non-banks	44		14		13
	949		124		(441)
Net income	1,094		1,582		1,759
Preferred stock dividends	(103)		(79)		(64)
Net income available to common shareholders	$	991	$	1,503	$	1,695

Table of Contents

Statements of Cash Flows


	Year Ended December 31
	2020		2019		2018
	(In millions)
Operating activities:
Net income	$	1,094	$	1,582	$	1,759
Adjustments to reconcile net cash from operating activities:
Equity in undistributed earnings of subsidiaries	(949)		(124)		441
Provision for deferred income taxes	29		20		8
Depreciation, amortization and accretion, net	3		4		3
Loss on sale of assets	1		—		—
Loss on early extinguishment of debt	14		16		—
(Gain) on sale of business	—		—		(281)
Net change in operating assets and liabilities:
Other assets	3		18		(35)
Other liabilities	—		(7)		(8)
Other	44		102		23
Net cash from operating activities	239		1,611		1,910
Investing activities:
(Investment in) / repayment of investment in subsidiaries	—		(18)		146
Proceeds from sales and maturities of debt securities available for sale	4		5		8
Purchases of debt securities available for sale	(4)		(6)		(10)

Proceeds from disposition of business, net of cash transferred	—		—		357

Net cash from investing activities	—		(19)		501
Financing activities:
Net change in short-term borrowings	—		—		(101)
Proceeds from long-term borrowings	748		500		500
Payments on long-term borrowings	(1,039)		(751)		—
Cash dividends on common stock	(595)		(577)		(452)
Cash dividends on preferred stock	(103)		(79)		(64)
Net proceeds from issuance of preferred stock	346		490		—
Repurchase of common stock	—		(1,101)		(2,122)
Other	(5)		(2)		(2)
Net cash from financing activities	(648)		(1,520)		(2,241)
Net change in cash and cash equivalents	(409)		72		170
Cash and cash equivalents at beginning of year	1,935		1,863		1,693
Cash and cash equivalents at end of year	$	1,526	$	1,935	$	1,863

Table of Contents

Previous: Item 7A. Quantitative and Qualitative Disclosures about Market Risk · Next: Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure