Item 8. Financial Statements and Supplementary Data

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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, 2021. 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, 2021, the Company’s internal control over financial reporting is effective based on those criteria.

Our assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls over the operations of EnerBank USA or Sabal Capital Partners LLC, which are included in the Company's 2021 consolidated financial statements. EnerBank USA constituted approximately 2 percent of both the Company's total assets and total liabilities as of December 31, 2021, and less than 1 percent of total revenue for the year then ended. Sabal Capital Partners LLC constituted less than 1 percent of the Company's total assets and total liabilities as of December 31, 2021 and less than 1 percent of total revenue for the year then ended.

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

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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, 2021, 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, 2021, based on the COSO criteria.

As indicated in the accompanying Report of Management on Internal Control over Financial Reporting, management’s assessment of and conclusions on the effectiveness of internal control over financial reporting did not include the internal controls of EnerBank USA or Sabal Capital Partners LLC, which are included in the 2021 consolidated financial statements. EnerBank USA constituted approximately 2 percent of both the Company’s total assets and total liabilities as of December 31, 2021, and less than 1 percent of the Company’s total revenue for the year then ended. Sabal Capital Partners LLC constituted less than 1 percent of the Company’s total assets and total liabilities as of December 31, 2021, and less than 1 percent of the Company’s total revenue for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of EnerBank USA or Sabal Capital Partners LLC.

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, 2021 and 2020, 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, 2021, and the related notes and our report dated February 24, 2022 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.

/s/ Ernst & Young LLP

Birmingham, Alabama

February 24, 2022

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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, 2021 and 2020, 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, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, 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, 2021, 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, 2022 expressed an unqualified opinion thereon.

Adoption of New Accounting Standard

As discussed in Notes 1 and 5 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 account or disclosures to which it relates.

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						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, 2021, the allowance for credit losses (ACL) was $1.6 billion. The provision for (benefit from) credit losses was ($524 million) for the year ended December 31, 2021. As discussed in Notes 1 and 5 to the consolidated financial statements, 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 replicated 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 the potential impact of imprecision in the quantitative models and hence the need to consider a qualitative adjustment to the ACL. 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.

/s/ Ernst & Young LLP

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

Birmingham, Alabama

February 24, 2022

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	December 31
	2021		2020
	(In millions, except share data)
Assets
Cash and due from banks	$	1,350	$	1,558
Interest-bearing deposits in other banks	28,061		16,398

Debt securities held to maturity (estimated fair value of $950 and $1,215 respectively)	899		1,122
Debt securities available for sale (amortized cost of $28,263 and $26,092, respectively)	28,481		27,154
Loans held for sale (includes $783 and $1,446 measured at fair value, respectively)	1,003		1,905
Loans, net of unearned income	87,784		85,266
Allowance for loan losses	(1,479)		(2,167)
Net loans	86,305		83,099
Other earning assets	1,187		1,217
Premises and equipment, net	1,814		1,897
Interest receivable	319		346
Goodwill	5,744		5,190
Residential mortgage servicing rights at fair value	418		296
Other identifiable intangible assets, net	305		122
Other assets	7,052		7,085
Total assets	$	162,938	$	147,389
Liabilities and Equity
Deposits:
Non-interest-bearing	$	58,369	$	51,289
Interest-bearing	80,703		71,190
Total deposits	139,072		122,479
Borrowed funds:




Long-term borrowings	2,407		3,569
Total borrowed funds	2,407		3,569
Other liabilities	3,133		3,230
Total liabilities	144,612		129,278
Equity:
Preferred stock, authorized 10 million shares, par value $1.00 per share:
Non-cumulative perpetual, including related surplus, net of issuance costs; issued—1,750,000 and 1,850,000 shares, respectively	1,659		1,656
Common stock, authorized 3 billion shares, par value $0.01 per share:
Issued including treasury stock—982,940,601and 1,001,507,052 shares, respectively	10		10
Additional paid-in capital	12,189		12,731
Retained earnings	5,550		3,770
Treasury stock, at cost— 41,032,676 shares	(1,371)		(1,371)
Accumulated other comprehensive income, net	289		1,315
Total shareholders’ equity	18,326		18,111


Total liabilities and equity	$	162,938	$	147,389

See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME


	Year Ended December 31
		2021		2020		2019
		(In millions, except per share data)
Interest income, including other financing income on:
Loans, including fees		$	3,452	$	3,610	$	3,866
Debt securities		533		582		643
Loans held for sale		37		28		17
Other earning assets		59		42		70
Total interest income		4,081		4,262		4,596
Interest expense on:
Deposits		64		180		447
Short-term borrowings		—		10		53
Long-term borrowings		103		178		351
Total interest expense		167		368		851


Net interest income		3,914		3,894		3,745
Provision for (benefit from) credit losses (1)		(524)		1,330		387
Net interest income after provision for credit losses (1)		4,438		2,564		3,358
Non-interest income:
Service charges on deposit accounts		648		621		729
Card and ATM fees		499		438		455
Investment management and trust fee income		278		253		243
Capital markets income		331		275		178
Mortgage income		242		333		163
Securities gains (losses), net		3		4		(28)
Other		523		469		376
Total non-interest income		2,524		2,393		2,116
Non-interest expense:
Salaries and employee benefits		2,205		2,100		1,916
Net occupancy expense		303		313		321
Equipment and software expense		365		348		325
Other		874		882		927
Total non-interest expense		3,747		3,643		3,489
Income before income taxes		3,215		1,314		1,985
Income tax expense		694		220		403





Net income		$	2,521	$	1,094	$	1,582

Net income available to common shareholders		$	2,400	$	991	$	1,503
Weighted-average number of shares outstanding:
Basic		956		959		995
Diluted		963		962		999



Earnings per common share:
Basic		$	2.51	$	1.03	$	1.51
Diluted		2.49		1.03		1.50

(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.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Year Ended December 31
	2021		2020		2019
	(In millions)
Net income	$	2,521	$	1,094	$	1,582
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 ($2) tax effect, respectively)	(5)		(6)		(5)
Net change in unrealized losses on securities transferred to held to maturity, net of tax	5		6		5
Unrealized gains (losses) on securities available for sale:
Unrealized holding gains (losses) arising during the period (net of ($212), $200 and $196 tax effect, respectively)	(629)		592		581
Less: reclassification adjustments for securities gains (losses) realized in net income (net of $1, $1 and ($7) tax effect, respectively)	2		3		(21)
Net change in unrealized gains (losses) on securities available for sale, net of tax	(631)		589		602
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Unrealized holding gains (losses) on derivatives arising during the period (net of ($89), $363 and $123 tax effect, respectively)	(265)		1,077		367
Less: reclassification adjustments for gains (losses) on derivative instruments realized in net income (net of $108, $65 and ($6) tax effect, respectively)	318		195		(18)
Net change in unrealized gains (losses) on derivative instruments, net of tax	(583)		882		385
Defined benefit pension plans and other post employment benefits:
Net actuarial gains (losses) arising during the period (net of $46, ($36) and ($50) tax effect, respectively)	134		(108)		(150)
Less: reclassification adjustments for amortization of actuarial loss and settlements realized in net income (net of ($16), ($11) and ($11) tax effect, respectively)	(49)		(36)		(32)
Net change from defined benefit pension plans and other post employment benefits, net of tax	183		(72)		(118)
Other comprehensive income (loss), net of tax	(1,026)		1,405		874
Comprehensive income	$	1,495	$	2,499	$	2,456

See notes to consolidated financial statements.

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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, 2019	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 500 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

Net income	—	—		—	—		—		2,521		—		—		2,521

Other comprehensive income (loss), net of tax	—	—		—	—		—		—		—		(1,026)		(1,026)
Cash dividends declared	—	—		—	—		—		(620)		—		—		(620)
Preferred stock dividends	—	—		—	—		—		(108)		—		—		(108)
Preferred stock transactions:
Net proceeds from issuance of Series E preferred stock	—	390		—	—		—		—		—		—		390
Redemption of Series A preferred stock		(387)		—			(100)		(13)						(500)

Impact of common stock share repurchases	—	—		(21)	—		(467)		—		—		—		(467)
Impact of stock transactions under compensation plans, net and other	—	—		3	—		25		—		—		—		25

BALANCE AT DECEMBER 31, 2021	2	$	1,659	942	$	10	$	12,189	$	5,550	$	(1,371)	$	289	$	18,326

See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended December 31
	2021		2020		2019
	(In millions)
Operating activities:
Net income	$	2,521	$	1,094	$	1,582
Adjustments to reconcile net income to net cash from operating activities:
Provision for (benefit from) credit losses (1)	(524)		1,330		387
Depreciation, amortization and accretion, net	371		421		426

Securities (gains) losses, net	(3)		(4)		28

Deferred income tax expense (benefit)	165		(158)		62
Originations and purchases of loans held for sale	(6,747)		(6,634)		(4,381)
Proceeds from sales of loans held for sale	7,728		5,865		4,144

(Gain) loss on sale of loans, net	(273)		(241)		(124)
Loss on early extinguishment of debt	20		22		16

Net change in operating assets and liabilities:
Other earning assets	13		313		158
Interest receivable and other assets	(231)		(246)		(347)
Other liabilities	(76)		459		453
Other	66		103		177
Net cash from operating activities	3,030		2,324		2,581
Investing activities:
Proceeds from maturities of debt securities held to maturity	222		209		148
Proceeds from sales of debt securities available for sale	83		304		5,372
Proceeds from maturities of debt securities available for sale	5,848		4,921		3,532
Purchases of debt securities available for sale	(8,360)		(8,956)		(8,102)
Net proceeds from (payments for) bank-owned life insurance	(2)		(1)		(8)

Proceeds from sales of loans	522		256		471
Purchases of loans	(1,314)		(1,558)		(1,561)
Net change in loans	1,481		546		859
Purchases of mortgage servicing rights	(72)		(59)		(24)
Net purchases of other assets	(91)		(134)		(178)
Payment for acquisition of businesses, net of cash received	(1,182)		(381)		—
Net cash from investing activities	(2,865)		(4,853)		509
Financing activities:
Net change in deposits	13,836		25,004		2,984
Net change in short-term borrowings	(102)		(2,050)		450
Proceeds from long-term borrowings	647		4,698		21,274
Payments on long-term borrowings	(1,779)		(10,918)		(25,926)

Cash dividends on common stock	(608)		(595)		(577)
Cash dividends on preferred stock	(108)		(103)		(79)
Net proceeds from issuance of preferred stock	390		346		490
Payment for redemption of preferred stock	(500)		—		—
Repurchases of common stock	(467)		—		(1,101)
Taxes paid related to net share settlement of equity awards	(22)		(8)		(29)
Other	3		(3)		—
Net cash from financing activities	11,290		16,371		(2,514)
Net change in cash and cash equivalents	11,455		13,842		576
Cash and cash equivalents at beginning of year	17,956		4,114		3,538
Cash and cash equivalents at end of year	$	29,411	$	17,956	$	4,114

(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, the provision for unfunded commitments is included in other non-interest expense.

See notes to consolidated financial statements.

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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 as well as delivering specialty capabilities nationwide. 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 2021, the Company adopted new accounting guidance related to several topics. 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.

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 more than minor influence over the operating and financial policies, 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. 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.

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:


	2021		2020		2019
	(In millions)
Cash paid during the period for:
Interest on deposits and borrowed funds	$	185	$	408	$	851
Income taxes, net	367		132		85
Non-cash transfers:

Loans held for sale and loans transferred to other real estate	14		31		63
Loans transferred to loans held for sale	240		275		66
Loans held for sale transferred to loans	277		1		3
Properties transferred to held for sale	38		33		62

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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 3 for further detail and information on securities.

LOANS HELD FOR SALE

Regions’ loans held for sale may include commercial loans, investor real estate loans, residential real estate mortgage loans and consumer 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 that were originally recorded as held for investment 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 or non-interest income (dependent on loan type) 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

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commercial portfolio segment. See Note 4 for further detail and information on loans and Note 13 for further detail and information 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. Certain equipment finance loans are subject to charge-off at 120 days past due.

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. 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 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 non-accrual 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

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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 5). 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, and subsequently extended through the Consolidated Appropriations Act signed into law on December 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 January 1, 2022, were eligible for relief from TDR classification. Regions elected this provision of both Acts; therefore, modified loans that met the required guidelines for relief are not considered TDRs.

ALLOWANCE

Regions adopted CECL on January 1, 2020, which replaced the incurred loss methodology to estimate the allowance with the expected loss methodology. Regions elected not to estimate an allowance on interest receivable balances because the Company has non-accrual polices in place that provide for the accrual of interest to cease on a timely basis when all contractual amounts due are not expected. 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 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.

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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 time 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 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.

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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 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 5 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.

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 13 "Leases" for additional information.

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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 13 "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 7 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 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 8 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, 2) relationship assets, 3) amounts capitalized related to the value of PCCR, and 4) agency commercial real estate licenses. Other identifiable intangibles assets are primarily amortized over their expected useful lives while agency commercial real estate licenses are non-amortizing.

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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 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 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, loss of relationships, 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 9 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.

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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 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.

Refer to Note 6 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.

OTHER INVESTMENT ASSETS

Regions has investments of approximately $207 million and $162 million at December 31, 2021 and 2020, respectively, that are recognized in other assets and accounted for using either the equity method of accounting or the measurement alternative to fair value for equity investments without a readily determinable fair value.

Equity method investments consist primarily of investments in SBICs. Under the equity method of accounting, Regions records its proportionate share of the profits or losses of the investment entity as an adjustment to the carrying value of the investment and as a component of non-interest income. Dividends received or receivable from these investments are recorded as reductions to the carrying value of the investments. The net balances of equity method investments were approximately $136 million and $100 million at December 31, 2021 and 2020, respectively.

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 to fair value with adjustments for impairment and observable price changes as applicable. Dividends received or receivable and observable price changes from these investments are included as components of other non-interest income.These investments consist primarily of investments in strategic partners and certain CRA projects. The carrying amounts of these investments at December 31, 2021 and 2020, were $71 million and $62 million, respectively.

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, options including interest rate caps and floors, Eurodollar futures, forward rate contracts and forward sale commitments. All derivative financial instruments are recognized 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. 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

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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. Certain fair value hedges have been entered into using the last-of-layer method, which allows the Company to hedge the interest rate risk of prepayable financial assets by designating as the hedged item a stated amount of a closed portfolio that is not expected to be affected by prepayments, defaults or other factors impacting the timing and amount of cash flows.

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.

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.

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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 20 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 19 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.

SHARE-BASED PAYMENTS

Regions sponsors stock plans which most commonly include restricted stock (i.e., unvested common stock) units, restricted stock awards and performance stock units. 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. 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

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tax expense depending on the market price of the Company’s common stock. Prior to 2021, Regions' sponsored plans also included stock options. Refer to Note 1 "Summary of Significant Accounting Policies" of the Annual Report on Form 10-K for the year ended December 31, 2020, for additional information regarding the accounting and reporting policies related to stock options.

See Note 16 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. The other components of net periodic pension and postretirement benefit cost are recorded in other non-interest expense. 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 17 for further discussion and details of employee benefit plans.

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. Related to contract costs, Regions expenses sales commissions and any related contract costs when incurred because the amortization period would be one year or less. Related to remaining performance obligations, Regions does 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.

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, overdraft fees and other service charges. When a depositor presents an item for payment in excess of available funds, non-sufficient fund fees are earned when an item is returned unpaid, and overdraft fees are earned when 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.

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.

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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 and unused commercial commitment fees over time.

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.

Other Miscellaneous Income

Other miscellaneous income includes miscellaneous revenue from affordable housing, income from SBIC investments, valuation adjustments to equity investments, commercial loan and leasing related income, 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.

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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 15 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, relevant trade data, 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-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

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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 21). 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 6 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 consist of the Company's holdings in equity investees that are traded on an active exchange, are 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 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

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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. The fair values of certain other earning assets are estimated using quoted market prices of identical instruments in active markets and are considered Level 1 measurements.

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, and are considered 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 the counterparty. Because the valuation inputs are not observable in the market and are considered Company specific, these are Level 3 valuations.

See Note 21 for additional information related to fair value measurements.

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RECENT ACCOUNTING PRONOUNCEMENTS

The following table provides a brief description of accounting standards adopted in 2021 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 2021
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	The adoption of this guidance did not have a 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	The adoption of this guidance did not have a material impact.
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	The adoption of this guidance did not have a 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	The adoption of this guidance did not have a material impact.

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Standard	Description	Required Date of Adoption	Effect on Regions' financial statements or other significant matters
Standards Adopted (or partially adopted) in 2021 (continued)
ASU 2021-01 Reference Rate Reform (Topic 848)	The Update was issued to clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to contracts that are affected by the discounting transition. Specifically, certain provisions in Topic 848, if elected by an entity, would apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. Amendments in this ASU to the expedients and exceptions in Topic 848 are included to capture the incremental consequences of the scope refinement and to tailor the existing guidance to derivative instruments affected by the discounting transition.	The Update is effective upon issuance and can be applied through December 31, 2022	The adoption of this guidance did not have a material impact.
ASU 2021-06 Presentation of Financial Statements (Topic 205), Financial Services—Depository and Lending (Topic 942), and Financial Services— Investment Companies (Topic 946)	The FASB issued this Update to amend certain guidance pursuant to SEC rulemaking, including amendments to financial disclosures about acquired and disposed businesses and updates of statistical disclosures required for banking and savings loan registrants.	The Update is effective upon issuance	The adoption of this guidance did not have a material impact.

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Standard	Description	Required Date of Adoption	Effect on Regions' financial statements or other significant matters
Standards Not Yet Adopted
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 adopted this guidance as of January 1, 2022 with no material impact.
ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40)	The Update clarified how an issuer should account for modifications made to equity-classified written call options (i.e. a warrant to purchase the issuer’s common stock). The guidance in the Update requires the issuer to treat a modification of an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a new warrant. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the warrant or as termination of the original warrant and issuance of a new warrant.	January 1, 2022	Regions adopted this guidance as of January 1, 2022 with no material impact.
ASU 2021-05 Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments	The Board issued this ASU to amend the lessor lease classification guidance under Topic 842, Leases. Under the amendments, a lessor must classify a lease that includes variable lease payments that do not depend on an index or rate as an operating lease if it would otherwise be classified as a sales-type or direct financing lease and would result in the recognition of a selling loss at a lease commencement. The amendments address concerns raised during the FASB’s post implementation review that recognizing an immediate loss for these leases, as would otherwise be required	January 1, 2022	Regions adopted this guidance as of January 1, 2022 with no material impact.
ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers	The amendments in this Update require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers, rather than using fair value. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts.	January 1, 2023 Early adoption is permitted.	Regions is evaluating the impact upon adoption; however, the impact is not expected to be material.

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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 4.

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:


	2021		2020
	(In millions)
Affordable housing tax credit investments included in other assets	$	1,045	$	975
Unfunded affordable housing tax credit commitments included in other liabilities	348		249
Loans and letters of credit commitments	410		243
Funded portion of loans and letters of credit commitments	148		130


	2021		2020		2019
	(In millions)
Tax credits and other tax benefits recognized	$	165	$	164	$	165
Tax credit amortization expense included in provision for income taxes	139		133		131

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, 2021 and 2020, the value of Regions’ general partnership interest in affordable housing investments was immaterial.

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NOTE 3. 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, 2021
			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	$	370	$	—	$	(13)	$	357	$	20	$	—	$	377
Commercial agency	543		—		(1)		542		31		—		573
	$	913	$	—	$	(14)	$	899	$	51	$	—	$	950

Debt securities available for sale:
U.S. Treasury securities	$	1,137	$	2	$	(7)	$	1,132					$	1,132
Federal agency securities	94		1		(3)		92						92
Obligations of states and political subdivisions	4		—		—		4						4
Mortgage-backed securities:
Residential agency	18,873		287		(198)		18,962						18,962
Residential non-agency	1		—		—		1						1
Commercial agency	6,271		163		(61)		6,373						6,373
Commercial non-agency	532		4		—		536						536
Corporate and other debt securities	1,351		36		(6)		1,381						1,381
	$	28,263	$	493	$	(275)	$	28,481					$	28,481


	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

(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 $9.2 billion and $10.3 billion at December 31, 2021 and 2020, respectively, were pledged to secure public funds, trust deposits and certain borrowing arrangements. There were no encumbered U.S. Treasury securities included within total pledged securities at December 31, 2021, compared to approximately $24 million at December 31, 2020.

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The amortized cost and estimated fair value of debt securities held to maturity and debt securities available for sale at December 31, 2021, 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	$	370	$	377
Commercial agency	543		573
	$	913	$	950
Debt securities available for sale:
Due in one year or less	$	325	$	328
Due after one year through five years	1,289		1,304
Due after five years through ten years	855		860
Due after ten years	117		117
Mortgage-backed securities:
Residential agency	18,873		18,962
Residential non-agency	1		1
Commercial agency	6,271		6,373
Commercial non-agency	532		536
	$	28,263	$	28,481

The following tables present gross unrealized losses and the related estimated fair value of debt securities available for sale at December 31, 2021 and 2020. 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, 2021
	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:
U.S Treasury securities	$	1,010	$	(7)	$	—	$	—	$	1,010	$	(7)
Federal agency securities	63		(3)		—		—		63		(3)
Mortgage-backed securities:
Residential agency	$	9,528	$	(171)	$	686	$	(27)	$	10,214	$	(198)

Commercial agency	1,333		(29)		760		(32)		2,093		(61)

Corporate and other debt securities	444		(6)		—		—		444		(6)
	$	12,378	$	(216)	$	1,446	$	(59)	$	13,824	$	(275)


	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)

The number of individual debt positions in an unrealized loss position in the tables above increased from 129 at December 31, 2020 to 479 at December 31, 2021. The increase in the number of securities and the total amount of gross

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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 were immaterial for both 2021 and 2020, and are shown in the table below for 2019. 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 2019, as shown in the table below.


	Year Ended December 31
	2019
	(In millions)
Gross realized gains	$	16
Gross realized losses	(43)
Impairment	(1)
Securities gains (losses), net	$	(28)

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NOTE 4. LOANS

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


	2021		2020
	(In millions)
Commercial and industrial	$	43,758	$	42,870
Commercial real estate mortgage—owner-occupied	5,287		5,405
Commercial real estate construction—owner-occupied	264		300
Total commercial	49,309		48,575
Commercial investor real estate mortgage	5,441		5,394
Commercial investor real estate construction	1,586		1,869
Total investor real estate	7,027		7,263
Residential first mortgage	17,512		16,575
Home equity lines	3,744		4,539
Home equity loans	2,510		2,713
Consumer credit card	1,184		1,213
Other consumer—exit portfolio (1)	1,071		2,035
Other consumer	5,427		2,353
Total consumer	31,448		29,428
Total loans, net of unearned income (2)	$	87,784	$	85,266

(1)Regions ceased originating indirect vehicle lending in the second quarter of 2019 and decided not to renew a third party relationship in the fourth quarter of 2019.

(2)Loans are presented net of unearned income, unamortized discounts and premiums and deferred loan fees and costs of $630 million and $678 million at December 31, 2021 and 2020, respectively.

During 2021 and 2020, Regions purchased approximately $1.3 billion and $1.6 billion in other consumer, residential first mortgage and commercial and industrial loans from third parties, respectively. Purchases do not include loans obtained from acquisitions of businesses.

At December 31, 2021, $19.7 billion in net eligible loans held by Regions were pledged to secure current and potential borrowings from the FHLB. At December 31, 2021, an additional $17.5 billion in net eligible loans held by Regions were pledged to the FRB for potential borrowings.

See Note 13 for details regarding Regions’ investment in sales-type, direct financing, and leveraged leases included within the commercial and industrial loan portfolio.

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NOTE 5. ALLOWANCE FOR CREDIT LOSSES

Regions determines the appropriate level of the allowance on a quarterly basis. The methodology is described in Note 1. 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, 2021, Regions' total loans included $748 million 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

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 following tables present analyses of the allowance for credit losses by portfolio segment for the years ended December 31, 2021, 2020 and 2019. The total allowance for loan losses and the related loan portfolio ending balance for the year ended 2019 is 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.


	2021
	Commercial		Investor Real Estate		Consumer		Total
	(In millions)
Allowance for loan losses, January 1, 2021	$	1,196	$	183	$	788	$	2,167
Provision for (benefit from) loan losses	(445)		(87)		39		(493)
Initial allowance on acquired PCD loans	—		—		9		9
Loan losses:
Charge-offs	(128)		(20)		(180)		(328)
Recoveries	59		3		62		124
Net loan losses	(69)		(17)		(118)		(204)
Allowance for loan losses, December 31, 2021	682		79		718		1,479
Reserve for unfunded credit commitments, January 1, 2021	97		14		15		126
Provision for (benefit from) unfunded credit losses	(39)		(6)		14		(31)
Reserve for unfunded credit commitments, December 31, 2021	58		8		29		95
Allowance for credit losses, December 31, 2021	$	740	$	87	$	747	$	1,574


	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	77		17		14		108
Provision for (benefit from) 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

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	2019
	Commercial		Investor Real Estate		Consumer		Total
	(In millions)
Allowance for loan losses, January 1, 2019	$	520	$	58	$	262	$	840
Provision for (benefit from) 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 for (benefit from) 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

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 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, consumer credit card, other consumer—exit portfolios 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. Consumer credit card lending includes Regions branded consumer credit card accounts. Other consumer—exit portfolios includes lending initiatives through third parties consisting of loans made through automotive dealerships and other point of sale lending. Regions ceased originating new loans related to these businesses prior to 2020. Other consumer loans include other revolving consumer accounts, indirect and direct consumer loans, and overdrafts. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.

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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, 2021 and 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.

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, 2021 and 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.


	December 31, 2021
Term Loans													Revolving Loans			Revolving Loans Converted to Amortizing			Unallocated (1)			Total
Origination Year
2021	2020		2019		2018		2017		Prior
(In millions)
Commercial and industrial:
Risk Rating:
Pass(2)	$	11,098	$	5,231	$	3,711	$	1,781	$	1,625	$	2,611		$	15,794		$	—		$	(60)		$	41,791
Special Mention	54		43		177		147		25		77			383			—			—			$	906
Substandard Accrual	83		76		57		90		17		12			421			—			—			756
Non-accrual	70		22		45		9		11		15			133			—			—			305
Total commercial and industrial	$	11,305	$	5,372	$	3,990	$	2,027	$	1,678	$	2,715		$	16,731		$	—		$	(60)		$	43,758

Table of Contents


	December 31, 2021
Term Loans													Revolving Loans			Revolving Loans Converted to Amortizing			Unallocated (1)			Total
Origination Year
2021	2020		2019		2018		2017		Prior
(In millions)
Commercial real estate mortgage—owner-occupied:
Risk Rating:
Pass	$	1,404	$	1,095	$	671	$	663	$	381	$	724		$	122		$	—		$	(7)		$	5,053
Special Mention	7		48		12		11		12		16			1			—			—			$	107
Substandard Accrual	3		8		34		11		6		12			1			—			—			$	75
Non-accrual	3		6		7		10		12		14			—			—			—			52
Total commercial real estate mortgage—owner-occupied:	$	1,417	$	1,157	$	724	$	695	$	411	$	766		$	124		$	—		$	(7)		$	5,287

Commercial real estate construction—owner-occupied:
Risk Rating:
Pass	$	68	$	61	$	24	$	30	$	20	$	42		$	1		$	—		$	—		$	246
Special Mention	—		—		—		2		1		2			—			—			—			5
Substandard Accrual	—		—		—		2		—		—			—			—			—			2
Non-accrual	1		1		—		—		1		8			—			—			—			11
Total commercial real estate construction—owner-occupied:	$	69	$	62	$	24	$	34	$	22	$	52		$	1		$	—		$	—		$	264
Total commercial	$	12,791	$	6,591	$	4,738	$	2,756	$	2,111	$	3,533		$	16,856		$	—		$	(67)		$	49,309

Commercial investor real estate mortgage:
Risk Rating:
Pass	$	1,783	$	808	$	900	$	580	$	144	$	95		$	487		$	—		$	(4)		$	4,793
Special Mention	23		84		223		21		1		9			—			—			—			361
Substandard Accrual	52		85		94		31		15		—			7			—			—			284
Non-accrual	—		—		—		1		—		2			—			—			—			3
Total commercial investor real estate mortgage	$	1,858	$	977	$	1,217	$	633	$	160	$	106		$	494		$	—		$	(4)		$	5,441

Commercial investor real estate construction:
Risk Rating:
Pass	$	135	$	343	$	404	$	82	$	1	$	1		$	593		$	—		$	(11)		$	1,548
Special Mention	—		12		26		—		—		—			—			—			—			38
Substandard Accrual	—		—		—		—		—		—			—			—			—			—
Non-accrual	—		—		—		—		—		—			—			—			—			—
Total commercial investor real estate construction	$	135	$	355	$	430	$	82	$	1	$	1		$	593		$	—		$	(11)		$	1,586
Total investor real estate	$	1,993	$	1,332	$	1,647	$	715	$	161	$	107		$	1,087		$	—		$	(15)		$	7,027

Table of Contents


	December 31, 2021
Term Loans													Revolving Loans			Revolving Loans Converted to Amortizing			Unallocated (1)			Total
Origination Year
2021	2020		2019		2018		2017		Prior
(In millions)
Residential first mortgage:
FICO scores
Above 720	$	4,020	$	5,280	$	1,106	$	426	$	612	$	2,601		$	—		$	—		$	—		$	14,045
681-720	449		366		108		57		69		353			—			—			—			1,402
620-680	246		161		78		50		44		378			—			—			—			957
Below 620	39		58		49		47		47		451			—			—			—			691
Data not available	56		46		20		7		11		111			9			—			157			417
Total residential first mortgage	$	4,810	$	5,911	$	1,361	$	587	$	783	$	3,894		$	9		$	—		$	157		$	17,512

Home equity lines:
FICO scores
Above 720	$	—	$	—	$	—	$	—	$	—	$	—		$	2,761		$	49		$	—		$	2,810
681-720	—		—		—		—		—		—			380			12			—			392
620-680	—		—		—		—		—		—			254			11			—			265
Below 620	—		—		—		—		—		—			132			8			—			140
Data not available	—		—		—		—		—		—			105			5			27			137
Total home equity lines	$	—	$	—	$	—	$	—	$	—	$	—		$	3,632		$	85		$	27		$	3,744

Home equity loans
FICO scores
Above 720	$	544	$	320	$	155	$	144	$	217	$	588		$	—		$	—		$	—		$	1,968
681-720	82		35		26		22		23		71			—			—			—			259
620-680	34		14		13		12		15		59			—			—			—			147
Below 620	6		3		6		7		11		46			—			—			—			79
Data not available	2		3		3		4		5		22			—			—			18			57
Total home equity loans	$	668	$	375	$	203	$	189	$	271	$	786		$	—		$	—		$	18		$	2,510

Consumer credit card:
FICO scores
Above 720	$	—	$	—	$	—	$	—	$	—	$	—		$	675		$	—		$	—		$	675
681-720	—		—		—		—		—		—			240			—			—			240
620-680	—		—		—		—		—		—			194			—			—			194
Below 620	—		—		—		—		—		—			81			—			—			81
Data not available	—		—		—		—		—		—			8			—			(14)			(6)
Total consumer credit card	$	—	$	—	$	—	$	—	$	—	$	—		$	1,198		$	—		$	(14)		$	1,184

Other consumer—exit portfolios:
FICO scores
Above 720	$	—	$	—	$	157	$	318	$	135	$	81		$	—		$	—		$	—		$	691
681-720	—		—		47		71		32		20			—			—			—			170
620-680	—		—		28		50		24		17			—			—			—			119
Below 620	—		—		10		31		16		13			—			—			—			70
Data not available	—		—		2		5		4		3			—			—			7			21
Total Other consumer- exit portfolios	$	—	$	—	$	244	$	475	$	211	$	134		$	—		$	—		$	7		$	1,071

Table of Contents


	December 31, 2021
Term Loans													Revolving Loans			Revolving Loans Converted to Amortizing			Unallocated (1)			Total
Origination Year
2021	2020		2019		2018		2017		Prior
(In millions)
Other consumer:
FICO scores
Above 720	$	1,555	$	844	$	543	$	222	$	66	$	76		$	116		$	—		$	—		$	3,422
681-720	381		203		131		58		19		18			56			—			—			866
620-680	232		125		72		37		15		13			40			—			—			534
Below 620	66		50		33		20		8		7			17			—			—			201
Data not available	62		7		156		91		4		4			2			—			78			404
Total other consumer	$	2,296	$	1,229	$	935	$	428	$	112	$	118		$	231		$	—		$	78		$	5,427
Total consumer loans	$	7,774	$	7,515	$	2,743	$	1,679	$	1,377	$	4,932		$	5,070		$	85		$	273		$	31,448
Total Loans	$	22,558	$	15,438	$	9,128	$	5,150	$	3,649	$	8,572		$	23,013		$	85		$	191		$	87,784


	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(2)	$	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

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 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

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

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)
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- exit portfolios:
FICO scores
Above 720	$	—	$	256	$	555	$	258	$	152	$	71		$	—		$	—		$	—		$	1,292
681-720	—		79		127		57		34		17			—			—			—			314
620-680	—		46		92		47		30		15			—			—			—			230
Below 620	—		16		58		35		29		16			—			—			—			154
Data not available	—		3		6		8		5		4			—			—			19			45
Total other consumer- exit portfolios	$	—	$	400	$	838	$	405	$	250	$	123		$	—		$	—		$	19		$	2,035

Other consumer:
FICO scores
Above 720	$	506	$	646	$	226	$	47	$	7	$	3		$	117		$	—		$	—		$	1,552
681-720	100		143		59		11		1		1			52			—			—			367
620-680	43		59		28		7		1		—			42			—			—			180
Below 620	12		20		12		3		1		—			19			—			—			67
Data not available	46		1		1		—		—		1			3			—			135			187
Total other consumer	$	707	$	869	$	326	$	68	$	10	$	5		$	233		$	—		$	135		$	2,353
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.

(2)Commercial and industrial lending includes PPP lending in the 2021 and 2020 vintage years.

Table of Contents

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, 2021 and December 31, 2020. Loans on non-accrual status with no related allowance included $127 million and $112 million of commercial and industrial loans as of December 31, 2021 and 2020, respectively. Non–accrual loans with no related allowance typically include loans where the underlying collateral is deemed sufficient to recover all remaining principal.


	2021
	Accrual Loans
	30-59 DPD		60-89 DPD		90+ DPD		Total 30+ DPD		Total Accrual		Non-accrual		Total
	(In millions)
Commercial and industrial	$	35	$	29	$	5	$	69	$	43,453	$	305	$	43,758
Commercial real estate mortgage—owner-occupied	3		1		1		5		5,235		52		5,287
Commercial real estate construction—owner-occupied	—		—		—		—		253		11		264
Total commercial	38		30		6		74		48,941		368		49,309
Commercial investor real estate mortgage	—		—		—		—		5,438		3		5,441
Commercial investor real estate construction	—		—		—		—		1,586		—		1,586
Total investor real estate	—		—		—		—		7,024		3		7,027
Residential first mortgage	73		31		123		227		17,479		33		17,512
Home equity lines	15		6		21		42		3,704		40		3,744
Home equity loans	7		4		12		23		2,503		7		2,510
Consumer credit card	9		6		12		27		1,184		—		1,184
Other consumer—exit portfolios	10		4		2		16		1,071		—		1,071
Other consumer	31		15		13		59		5,427		—		5,427
Total consumer	145		66		183		394		31,368		80		31,448
	$	183	$	96	$	189	$	468	$	87,333	$	451	$	87,784


	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
Consumer credit card	8		6		14		28		1,213		—		1,213
Other consumer—exit portfolios	22		7		4		33		2,035		—		2,035
Other consumer	17		8		7		32		2,353		—		2,353
Total consumer	185		80		213		478		29,321		107		29,428
	$	230	$	103	$	221	$	554	$	84,521	$	745	$	85,266

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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 initially in the CARES Act passed into law on March 27, 2020 and subsequently extended through the Consolidated Appropriations Act signed into law on December 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 January 1, 2022 were eligible for relief from TDR classification. Regions elected this provision of both Acts; therefore, modified loans that met the required guidelines for relief are not considered TDRs and are excluded from the disclosures below.

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.


	2021
			Financial Impact of Modifications Considered TDRs
	Number of Obligors	Recorded Investment	Increase in Allowance at Modification
	(Dollars in millions)
Commercial and industrial	65	116	—
Commercial real estate mortgage—owner-occupied	28	11	—
Commercial real estate construction—owner-occupied	2	2	—
Total commercial	95	129	—
Commercial investor real estate mortgage	8	77	—
Commercial investor real estate construction	—	—	—
Total investor real estate	8	77	—
Residential first mortgage	492	85	8
Home equity lines	7	1	—
Home equity loans	72	6	—
Consumer credit card	1	—	—
Other consumer—exit portfolios	—	—	—
Other consumer	80	3	—
Total consumer	652	95	8
	755	301	8

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	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	—		—
Other consumer- exit portfolios	17	—		—
Other consumer	49	1		—
Total consumer	501	90		11
	689	$	440	$	11

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NOTE 6. 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:


	2021		2020		2019
	(In millions)
Carrying value, beginning of year	$	296	$	345	$	418
Additions	149		108		42
Increase (decrease) in fair value:
Due to change in valuation inputs or assumptions	43		(89)		(62)
Economic amortization associated with borrower repayments (1)	(70)		(68)		(53)
Carrying value, end of year	$	418	$	296	$	345

(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.

The Company purchases rights to service residential mortgages on a flow basis which totaled approximately $72 million, $59 million and $13 million in the twelve months ended 2021, 2020 and 2019, respectively.

In 2019, the Company purchased the rights to service approximately $409 million in residential mortgage loans for approximately $4 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.

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:


	2021			2020
	(Dollars in millions)
Unpaid principal balance	$	36,769		$	34,454
Weighted-average CPR (%)	10.5		%	15.6		%
Estimated impact on fair value of a 10% increase	$	(29)		$	(23)
Estimated impact on fair value of a 20% increase	$	(52)		$	(42)
Option-adjusted spread (basis points)	451			560
Estimated impact on fair value of a 10% increase	$	(8)		$	(7)
Estimated impact on fair value of a 20% increase	$	(16)		$	(13)
Weighted-average coupon interest rate	3.5		%	3.9		%
Weighted-average remaining maturity (months)	295			287
Weighted-average servicing fee (basis points)	27.3			27.5

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:


	2021		2020		2019
	(In millions)
Servicing related fees and other ancillary income	$	102	$	95	$	102

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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. Regions' related DUS commercial MSRs, presented in the table below, are recorded in other assets 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. See Note 1 for additional information. Also see Note 23 for additional information related to the guarantee.

The table below presents an analysis of commercial MSRs under the amortization measurement method:


	2021		2020		2019
	(In millions)
Carrying value, beginning of the year	$	74	$	59	$	56
Additions	29		25		13
Economic amortization associated with borrower repayments (1)	(17)		(10)		(10)
Carrying value, end of the year	$	86	$	74	$	59

(1)Economic amortization associated with borrower repayments includes both total loan payoffs as well as partial paydowns.

Regions periodically evaluates the DUS commercial MSRs for impairment based on fair value. The estimated fair value of the DUS commercial MSRs was approximately $96 million and $81 million at December 31, 2021 and 2020, respectively.

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


	2021		2020		2019
	(In millions)
Servicing related fees and other ancillary income	$	25	$	19	$	16

NOTE 7. OTHER EARNING ASSETS

Other earning assets consist primarily of investments in FRB stock, FHLB stock, marketable equity securities and operating lease assets. See Note 13 for information related to operating leases.

FRB AND FHLB STOCK

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


	2021		2020
	(In millions)
Federal Reserve Bank	$	492	$	492
Federal Home Loan Bank	16		15

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. Total marketable equity securities were $464 million and $388 million at December 31, 2021 and 2020, respectively. Unrealized gains recognized in earnings for marketable equity securities still being held by the Company were $20 million at December 31, 2021.

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NOTE 8. PREMISES AND EQUIPMENT

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


	2021		2020
	(In millions)
Land	$	419	$	434
Premises and improvements	1,651		1,678
Furniture and equipment	1,056		1,041
Software	926		836
Leasehold improvements	434		413
Construction in progress	152		208
	4,638		4,610
Accumulated depreciation and amortization	(2,824)		(2,713)
	$	1,814	$	1,897

NOTE 9. INTANGIBLE ASSETS

GOODWILL

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


	2021		2020
	(In millions)
Corporate Bank	$	3,012	$	2,819
Consumer Bank	2,339		1,978
Wealth Management	393		393
	$	5,744	$	5,190

The goodwill allocated to the Corporate Bank reporting unit increased due to the acquisitions of Sabal and Clearsight in the fourth quarter of 2021. The goodwill allocated to the Consumer Bank reporting unit increased due to the acquisition of EnerBank in the fourth quarter of 2021.

Regions assessed the indicators of goodwill impairment for all three reporting units as part of its annual impairment test, as of October 1, 2021, 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.

OTHER INTANGIBLES

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


	2021		2020		2021		2020		2021		2020
	Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
	(In millions)
Core deposit intangibles	$	1,011	$	1,011	$	1,000	$	991	$	11	$	20
Purchased credit card relationship assets	175		175		157		149		18		26
Relationship assets (1)	267		57		22		8		245		49
Other—amortizing (2)	26		25		18		16		8		9
Agency commercial real estate licenses (3)									20		15
Other—non-amortizing (4)									3		3
	$	1,479	$	1,268	$	1,197	$	1,164	$	305	$	122

(1)Includes intangible assets related to broker and contractor origination networks, vendor networks, and customer relationships.

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

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(3)Includes a DUS license acquired in 2014 and commercial real estate licenses acquired in 2021 that are non-amortizing intangible assets. Refer to Note 6 for additional information related to the DUS license.

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

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

The aggregate amount of amortization expense for amortizing intangible assets is estimated as follows:


	Year Ended December 31
	(In millions)
2022	$	52
2023	44
2024	36
2025	30
2026	25

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 identifiable intangible assets occurred during 2021, 2020 or 2019.

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NOTE 10. DEPOSITS

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


	2021		2020
	(In millions)

Interest-bearing checking	$	28,018	$	24,484
Savings	15,134		11,635
Money market—domestic	31,408		29,719
Time deposits	6,143		5,341

Corporate treasury time deposits	—		11

Total interest-bearing deposits	$	80,703	$	71,190

At December 31, 2021, 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, 2021
	(In millions)
2022	$	3,471
2023	1,113
2024	650
2025	420
2026	299
Thereafter	190
	$	6,143

NOTE 11. BORROWED FUNDS

LONG-TERM BORROWINGS

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


	2021		2020
	(In millions)
Regions Financial Corporation (Parent):
3.20% senior notes due February 2021	$	—	$	360

3.80% senior notes due August 2023	—		997
2.25% senior notes due May 2025	746		744
1.80% senior notes due August 2028	645		—
7.75% subordinated notes due September 2024	100		100
6.75% subordinated debentures due November 2025	154		155
7.375% subordinated notes due December 2037	298		298
Valuation adjustments on hedged long-term debt	(34)		64
	1,909		2,718
Regions Bank:

2.75% senior notes due April 2021	—		190
3 month LIBOR plus 0.38% of floating rate senior notes due April 2021	—		66


6.45% subordinated notes due June 2037	496		496
Ascentium note securitizations	—		97
Other long-term debt	2		2

	498		851
Total consolidated	$	2,407	$	3,569

As of December 31, 2021, Regions had three issuances and Regions Bank had one issuance of subordinated notes totaling $552 million and $496 million, respectively, with stated interest rates ranging from 6.45% to 7.75%. All issuances of these

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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 first quarter of 2021, Regions and Regions Bank redeemed the senior notes due February 2021 and April 2021 in their entirety. In the third quarter of 2021, Regions issued $650 million of 1.80% senior notes due August 2028. Also in the third quarter of 2021, Regions redeemed the senior notes due August 2023 in their entirety. In conjunction with the redemption, Regions incurred related early extinguishment pre-tax charges totaling $20 million.

In the second quarter of 2020, Regions issued $750 million of 2.25% senior notes due 2025. Also in the second quarter of 2020, Regions executed a partial tender of the two senior bank notes due April 2021. In the third quarter of 2020, Regions redeemed the two senior bank notes due August 2021 in their entirety. In the fourth quarter of 2020, 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 that were fully redeemed as of December 31, 2021. As of December 31, 2020, the Ascentium note securitizations had two classes and had a weighted-average interest rate of 2.12%, with remaining maturities ranging from 3 years to 5 years and a weighted-average of approximately 4 years.

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 3.6 percent, 2.7 percent, and 3.4 percent for the years ended December 31, 2021, 2020 and 2019, respectively. Further discussion of derivative instruments is included in Note 20.

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)
2022	$	—	$	—
2023	—		—
2024	100		—
2025	879		—
2026	—		—
Thereafter	930		498
	$	1,909	$	498

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 expects to file a new shelf registration statement on or about February 24, 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.

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NOTE 12. 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, 2021 and 2020, 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, 2021 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 on 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, 2021, the impact of the add-back on CET1 was approximately $408 million, or approximately 36 basis points.

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


	December 31, 2021 (1)				Minimum Requirement		To Be Well Capitalized
	Amount		Ratio
	(Dollars in millions)
Common equity Tier 1 capital:
Regions Financial Corporation	$	10,844	9.57	%	4.50	%	N/A
Regions Bank	12,478		11.05		4.50		6.50	%
Tier 1 capital:
Regions Financial Corporation	$	12,503	11.03	%	6.00	%	6.00	%
Regions Bank	12,478		11.05		6.00		8.00
Total capital:
Regions Financial Corporation	$	14,441	12.74	%	8.00	%	10.00	%
Regions Bank	13,985		12.38		8.00		10.00
Leverage capital:
Regions Financial Corporation	$	12,503	8.08	%	4.00	%	N/A
Regions Bank	12,478		8.09		4.00		5.00	%


	December 31, 2020				Minimum Requirement		To Be Well Capitalized
	Amount		Ratio
	(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	%

(1)The 2021 Basel III CET1 capital, Tier 1 capital, Total capital, and Leverage capital ratios are estimated.

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During the third quarter of 2020, and in connection with the results of its supervisory stress test released in June 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. In the second quarter of 2021, Regions received the results of the Company's voluntary participation in 2021 CCAR. The FRB communicated that the Company exceeded all minimum capital levels under the supervisory stress test and the Company's stress capital buffer for the fourth quarter of 2021 through the third quarter of 2022 is floored at 2.5 percent.

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, 2021, Regions was in compliance with HUD guidelines. Regions is also subject to various capital requirements by secondary market investors.

NOTE 13. LEASES

LESSEE

As of December 31, 2021, assets and liabilities recorded under operating leases for properties were $459 million and $529 million, respectively, and $475 million and $545 million, respectively, as of December 31, 2020. 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, was $87 million and $85 million for the years ended December 31, 2021 and 2020, respectively.

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


	2021		2020
Weighted-average remaining lease term (years)	9.9 years		9.6 years
Weighted-average discount rate (%)	2.5	%	2.7	%

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


	December 31, 2021
	(In millions)
2022	$	97
2023	91
2024	78
2025	66
2026	51
Thereafter	246
Total lease payments	629
Less: Imputed interest	100
Total present value of lease liabilities	$	529

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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
	2021		2020
	(In millions)
Sales-Type and Direct Financing	$	58	$	59
Operating	1		8
Leveraged(1)	14		14
	$	73	$	81

(1)Leveraged lease income is shown pre-tax with related tax expense of $8 million for both December 31, 2021 and December 31, 2020. Leveraged lease termination gains excluded from amounts presented above were immaterial at both December 31, 2021 and 2020.


	As of December 31, 2021
	Sales-Type and Direct Financing		Operating		Leveraged		Total
	(In millions)
Lease receivable	$	1,199	$	32	$	159	$	1,390
Unearned income	(183)		(15)		(76)		(274)
Guaranteed residual	49		—		—		49
Unguaranteed residual	147		66		137		350
Total net investment	$	1,212	$	83	$	220	$	1,515


	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

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


	December 31, 2021
	Sales-Type and Direct Financing		Operating		Total
	(In millions)
2022	$	283	$	12	$	295
2023	223		6		229
2024	162		5		167
2025	100		3		103
2026	71		2		73
Thereafter	360		4		364
	$	1,199	$	32	$	1,231

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NOTE 14. 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:


													2021		2020
	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(2)	11/1/2012	12/15/2017	6.375	%		$	—	$	1,000	$	25	1/40th	$	—	$	387
Series B	4/29/2014	9/15/2024	6.375	%	(3)	500		1,000		25		1/40th	433		433
Series C	4/30/2019	5/15/2029	5.700	%	(4)	500		1,000		25		1/40th	490		490
Series D	6/5/2020	9/15/2025	5.750	%	(5)	350		100,000		1,000		1/100th	346		346
Series E	5/4/2021	6/15/2026	4.450	%		400		1,000		25		1/40th	390		—
						$	1,750						$	1,659	$	1,656

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

(2)The shares were fully redeemed on June 15, 2021.

(3)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%.

(4)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%.

(5)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, at any time following a regulatory capital treatment event for the Series B, Series C, Series D, and Series E preferred stock.

Regions completed the issuance of Series E preferred stock during the second quarter of 2021. The Company incurred $10 million of issuance costs associated with the transaction. The Company began paying quarterly dividends on September 15, 2021. The Series A preferred stock was redeemed in the second quarter of 2021.

The Board of Directors declared a total of $77 million and $92 million in cash dividends on Series A, Series B, and Series C Preferred Stock during 2021 and 2020, respectively. The Board declared $20 million and $11 million in cash dividends on Series D preferred stock during 2021 and 2020, respectively; the initial quarterly dividend for Series D was declared in the third quarter of 2020. In 2021, the Board of Directors declared a total of $11 million in cash dividends on Series E preferred stock; the initial quarterly dividend for the Series E preferred stock was declared in the third quarter of 2021. In total the Board of Directors declared $108 million and $103 million in cash dividends on preferred stock in 2021 and 2020, respectively.

In the event Series B, Series C, Series D or Series E preferred shares are redeemed at the liquidation amounts, $67 million, $10 million, $4 million, or $10 million in excess of the redemption amount over the carrying amount will be recognized, respectively. 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 common shareholders' equity. The remaining amounts listed represent issuance costs that were recorded as reductions to preferred stock, including related surplus, and will be recorded as reductions to net income available to common shareholders.

COMMON STOCK

Regions was not required to participate in the 2021 CCAR; but the Company chose to participate in part to have the Federal Reserve re-evaluate Regions' SCB. Regions received the results of the voluntary test on June 28, 2021. The Federal Reserve communicated that the Company exceeded all minimum capital levels under the Federal Reserve's Supervisory Stress Test. Effective October 1, 2021, Regions' preliminary SCB requirement for the fourth quarter of 2021 through the third quarter of 2022 will be floored at 2.5 percent.

As part of the Company's capital plan, on April 21, 2021, the Board authorized the repurchase of up to $2.5 billion of the Company's common stock, permitting purchases from the second quarter of 2021 through the first quarter of 2022. As of December 31, 2021, Regions had repurchased approximately 20.8 million shares of common stock under this plan which reduced stockholder's equity by $467 million. Included in these share repurchases were approximately 1.0 million shares that were repurchased as part of the amendment to the Company’s deferred investment plan for its directors. All of these shares were immediately retired upon repurchase and therefore, were not be included in treasury stock. The Company did not repurchase shares in all of 2020.

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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 second quarter of 2021, but was lifted in the third quarter of 2021.

Regions declared $0.65 per share in cash dividends for 2021, $0.62 for 2020, and $0.59 for 2019.

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:


	2021
	Pre-tax AOCI Activity		Tax Effect (1)		Net AOCI Activity
	(In millions)
Total accumulated other comprehensive income (loss), beginning of period	$	1,759	$	(444)	$	1,315

Unrealized losses on securities transferred to held to maturity:
Beginning balance	$	(21)	$	5	$	(16)
Reclassification adjustments for amortization on unrealized losses (2)	7		(2)		5
Ending balance	$	(14)	$	3	$	(11)
Unrealized gains (losses) on securities available for sale:
Beginning balance	$	1,062	$	(268)	$	794
Unrealized holding gains (losses) arising during the period	(841)		212		(629)
Reclassification adjustments for securities (gains) losses realized in net income (3)	(3)		1		(2)
Change in AOCI from securities available for sale activity in the period	(844)		213		(631)
Ending balance	$	218	$	(55)	$	163
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Beginning balance	$	1,610	$	(406)	$	1,204
Unrealized holding gains (losses) on derivatives arising during the period	(354)		89		(265)
Reclassification adjustments for (gains) losses realized in net income (2)	(426)		108		(318)
Change in AOCI from derivative activity in the period	(780)		197		(583)
Ending balance	$	830	$	(209)	$	621
Defined benefit pension plans and other post employment benefit plans:
Beginning balance	$	(892)	$	225	$	(667)
Net actuarial gains (losses) arising during the period	180		(46)		134
Reclassification adjustments for amortization of actuarial (gains) losses and settlements realized in net income (4)	65		(16)		49
Change in AOCI from defined benefit pension plans and other post employment benefits activity in the period	245		(62)		183
Ending balance	$	(647)	$	163	$	(484)

Total other comprehensive income	(1,372)		346		(1,026)
Total accumulated other comprehensive income, end of period	$	387	$	(98)	$	289

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	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 (loss), end of period	$	1,759	$	(444)	$	1,315


	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)

(1)The impact of all AOCI activity is shown net of the related tax impact, 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 17 for additional details).

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NOTE 15. 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:



	2021		2020		2019
	(In millions, except per share data)
Numerator:
Net income	$	2,521	$	1,094	$	1,582
Preferred stock dividends and other(1)	(121)		(103)		(79)


Net income available to common shareholders	$	2,400	$	991	$	1,503
Denominator:
Weighted-average common shares outstanding—basic	956		959		995
Potential common shares	7		3		4
Weighted-average common shares outstanding—diluted	963		962		999






Earnings per common share:
Basic	$	2.51	$	1.03	$	1.51
Diluted	2.49		1.03		1.50

(1)Preferred stock dividends and other for the year ended December 31, 2021 includes $13 million of issuance costs associated with the redemption of Series A preferred shares in the second quarter of 2021.

The effect from the assumed exercise of 4 million in restricted stock units and awards and performance stock units for the year ended December 31, 2021 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. The effects from the assumed exercise of 7 million in stock options, restricted stock units and awards and performance stock units for both years ended December 31, 2020 and 2019 were 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 16. SHARE-BASED PAYMENTS

Regions administers long-term incentive compensation plans that permit the granting of incentive awards in the form of restricted stock awards, performance awards, stock options and stock appreciation rights. While Regions has the ability to issue stock appreciation rights, none has 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 three years from the date of the grant. The contractual lives of options granted under these plans were typically ten years 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 30 million at December 31, 2021.

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 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.

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


	2021		2020		2019
	(In millions)
Compensation cost of share-based compensation awards:
Restricted and performance stock awards	$	57	$	53	$	51
Tax benefits related to share-based compensation cost	(14)		(13)		(13)
Compensation cost of share-based compensation awards, net of tax	$	43	$	40	$	38

STOCK OPTIONS

The following table summarizes the activity for 2021, 2020 and 2019 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, 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
Granted	—	—
Exercised	(26,671)	6.54
Forfeited or expired	—	—
Outstanding at December 31, 2021	—	$	—	$	—	0.00 years
Exercisable at December 31, 2021	—	$	—	$	—	0.00 years

In 2021, all of Regions' outstanding stock options were exercised. The aggregate intrinsic value of options exercised, the cash received from options exercised, as well as the actual tax benefits realized for the tax deductions from options exercised were immaterial for all periods presented.

RESTRICTED STOCK AWARDS AND PERFORMANCE STOCK AWARDS

During 2021, 2020 and 2019, 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.

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Activity related to restricted stock awards and performance stock awards for 2021, 2020 and 2019 is summarized as follows:


	Number of Shares/Units	Weighted-Average Grant Date Fair Value
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
Granted	2,984,065	21.18
Vested	(3,227,513)	15.91
Forfeited	(231,818)	13.24
Non-vested at December 31, 2021	11,206,894	$	13.39

As of December 31, 2021, the pre-tax amount of non-vested restricted stock, restricted stock units and performance stock units not yet recognized was $62 million, which will be recognized over a weighted-average period of 1.34 years. The total fair value of shares vested during the years ended December 31, 2021, 2020, and 2019, was $75 million, $35 million, and $89 million, respectively. No share-based compensation costs were capitalized during the years ended December 31, 2021, 2020, or 2019.

NOTE 17. 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.

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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
	2021		2020		2021		2020		2021		2020
	(In millions)
Change in benefit obligation
Projected benefit obligation, beginning of year	$	2,435	$	2,192	$	188	$	172	$	2,623	$	2,364
Service cost	38		34		3		5		41		39
Interest cost	49		64		2		4		51		68
Actuarial (gains) losses	(73)		278		—		21		(73)		299
Benefit payments	(165)		(130)		(8)		(14)		(173)		(144)
Administrative expenses	(3)		(3)		—		—		(3)		(3)
Plan settlements	—		—		(29)		—		(29)		—
Projected benefit obligation, end of year	$	2,281	$	2,435	$	156	$	188	$	2,437	$	2,623
Change in plan assets
Fair value of plan assets, beginning of year	$	2,469	$	2,299	$	—	$	—	$	2,469	$	2,299
Actual return on plan assets	253		303		—		—		253		303
Company contributions	—		—		37		14		37		14
Benefit payments	(165)		(130)		(8)		(14)		(173)		(144)
Administrative expenses	(3)		(3)		—		—		(3)		(3)
Plan settlements	—		—		(29)		—		(29)		—
Fair value of plan assets, end of year	$	2,554	$	2,469	$	—	$	—	$	2,554	$	2,469
Funded status and accrued benefit (cost) at measurement date	$	273	$	34	$	(156)	$	(188)	$	117	$	(154)
Amount recognized in the Consolidated Balance Sheets:

Other assets	$	273	$	34	$	—	$	—	$	273	$	34
Other liabilities	—		—		(156)		(188)		(156)		(188)
	$	273	$	34	$	(156)	$	(188)	$	117	$	(154)
Pre-tax amounts recognized in Accumulated Other Comprehensive (Income) Loss:
Net actuarial loss	$	590	$	819	$	62	$	80	$	652	$	899

The accumulated benefit obligation for the qualified plans was $2.1 billion and $2.3 billion as of December 31, 2021 and 2020, respectively. Total plan assets exceeded the corresponding accumulated benefit obligation for the qualified plans as of both December 31, 2021 and 2020. The accumulated benefit obligation for the non-qualified plans was $155 million and $188 million as of December 31, 2021 and 2020, respectively, which exceeded all corresponding plan assets for each period. As of December 31, 2021 and 2020, the actuarial (gains) losses related to the change in the benefit obligation were primarily driven by changes in the discount rate.

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


	Qualified Plans						Non-qualified Plans						Total
	2021		2020		2019		2021		2020		2019		2021		2020		2019
	(In millions)
Service cost	$	38	$	34	$	28	$	3	$	5	$	3	$	41	$	39	$	31
Interest cost	49		64		75		2		4		5		51		68		80
Expected return on plan assets	(142)		(148)		(137)		—		—		—		(142)		(148)		(137)
Amortization of actuarial loss	46		39		36		8		8		5		54		47		41

Settlement charge	—		—		—		11		—		2		11		—		2
Net periodic pension (benefit) cost	$	(9)	$	(11)	$	2	$	24	$	17	$	15	$	15	$	6	$	17

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
	2021		2020		2021		2020
Discount rate	2.85	%	2.48	%	2.64	%	2.07	%
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
	2021		2020		2019		2021		2020		2019
Discount rate	2.48	%	3.37	%	4.39	%	2.20	%	3.00	%	4.18	%
Expected long-term rate of return on plan assets	5.87	%	6.65	%	6.84	%	N/A		N/A		N/A
Rate of annual compensation increase	4.00	%	4.00	%	3.75	%	3.00	%	3.00	%	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 2022, the expected long-term rate of return on plan assets is 5.59 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 34 percent equities, 60 percent fixed income securities and 6 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, 2021, the plans held 2,855,618 shares, which represents a total market value of approximately $62 million, or approximately 2 percent of the plans' assets.

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


	2021								2020
	Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3		Fair Value
	(In millions)
Cash and cash equivalents	$	116	$	—	$	—	$	116	$	50	$	—	$	—	$	50
Fixed income securities:
U.S. Treasury securities	$	346	$	—	$	—	$	346	$	299	$	—	$	—	$	299
Federal agency securities	—		36		—		36		—		18		—		18
Corporate bonds	—		509		—		509		—		490		—		490
Total fixed income securities	$	346	$	545	$	—	$	891	$	299	$	508	$	—	$	807
Equity securities:
Domestic	$	146	$	—	$	—	$	146	$	130	$	—	$	—	$	130
International	142		—		—		142		164		—		—		164
Total equity securities	$	288	$	—	$	—	$	288	$	294	$	—	$	—	$	294
International mutual funds	$	148	$	—	$	—	$	148	$	179	$	—	$	—	$	179
Total assets in the fair value hierarchy	$	898	$	545	$	—	$	1,443	$	822	$	508	$	—	$	1,330
Collective trust funds:
Fixed income fund(1)							$	468							$	408
Common stock fund(1)							204								217
International fund(1)							45								46
Total collective trust funds							$	717							$	671

Real estate funds measured at NAV(1)							$	167							$	188
Private equity funds measured at NAV(1)							$	227							$	280
							$	2,554							$	2,469

(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.

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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:
2022	$	—	$	35
Expected Benefit Payments:
2022	$	137	$	35
2023	134		13
2024	137		10
2025	135		11
2026	134		11
Next five years	650		50

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 $22 million for 2021, $19 million for 2020 and $17 million for 2019. For 2021, 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. Regions’ match to the 401(k) plan on behalf of employees totaled $63 million in 2021, $62 million in 2020, and $58 million in 2019. Regions’ 401(k) plan held 17 million shares and 20 million shares of Regions' common stock at December 31, 2021 and 2020, respectively. The 401(k) plan received approximately $11 million, $12 million and $13 million in dividends on Regions' common stock for the years ended December 31, 2021, 2020 and 2019, 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 18. OTHER NON-INTEREST INCOME AND EXPENSE

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


	2021		2020		2019
	(In millions)
Bank-owned life insurance	$	82	$	95	$	78
Investment services fee income	104		84		79
Commercial credit fee income	91		77		73
Gain on equity investment(1)	3		50		—
Market value adjustments on employee benefit assets - defined benefit	—		—		5
Market value adjustments on employee benefit assets - other	20		12		11
Other miscellaneous income	223		151		130
	$	523	$	469	$	376

(1)The 2021 amount is a gain on the sale of an equity investment, whereas the 2020 amount is a valuation gain on the investment that was sold in the first quarter of 2021.

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


	2021		2020		2019
	(In millions)
Outside services	$	156	$	170	$	189
Marketing	106		94		97
Professional, legal and regulatory expenses	98		89		95
Credit/checkcard expenses	62		50		68
FDIC insurance assessments	45		48		48
Branch consolidation, property and equipment charges	5		31		25
Visa class B shares expense	22		24		14
Loss on early extinguishment of debt	20		22		16
Provision (credit) for unfunded credit losses(1)	—		—		(6)
Other miscellaneous expenses	360		354		381
	$	874	$	882	$	927

(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 19. INCOME TAXES

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


	2021		2020		2019
	(In millions)
Current income tax expense:
Federal	$	456	$	312	$	279
State	73		66		62
Total current expense	$	529	$	378	$	341
Deferred income tax expense (benefit):
Federal	$	132	$	(142)	$	29
State	33		(16)		33
Total deferred expense (benefit)	$	165	$	(158)	$	62
Total income tax expense	$	694	$	220	$	403

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 14 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 $64 million, $94 million and $59 million for 2021, 2020, and 2019, respectively.

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Income taxes for financial reporting purposes differs from the amount computed by applying the statutory federal income tax rate of 21 percent as shown in the following table:


	2021			2020			2019
	(Dollars in millions)
Tax on income computed at statutory federal income tax rate	$	675		$	276		$	417
Increase (decrease) in taxes resulting from:
State income tax, net of federal tax effect	83			42			71
Tax-exempt interest	(30)			(34)			(39)
Affordable housing credits, net of amortization	(25)			(31)			(34)
Bank-owned life insurance	(20)			(22)			(19)
Non-deductible expenses	18			22			19
Impact of change in unrecognized tax benefits	—			(23)			24




Other, net	(7)			(10)			(36)
Income tax expense(1)	$	694		$	220		$	403
Effective tax rate	21.6		%	16.8		%	20.3		%

(1) Income tax expense includes gross amortization of affordable housing investments of $139 million, $133 million, and $131 million for 2021, 2020 and 2019, respectively.

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


	2021		2020
	(In millions)
Deferred tax assets:
Allowance for credit losses(1)	$	400	$	573
Right of use liability	132		137
Federal and State net operating losses, net of federal tax effect	53		58

Accrued expenses	32		35

Other	15		13
Total deferred tax assets	632		816
Less: valuation allowance	(29)		(31)
Total deferred tax assets less valuation allowance	603		785
Deferred tax liabilities:
Lease financing	369		413
Right of use asset	123		128
Goodwill and intangibles	100		106
Unrealized gains included in shareholders' equity	98		444
Mortgage servicing rights	78		45
Fixed assets	67		54
Employee benefits and deferred compensation	31		54
Other	43		46

Total deferred tax liabilities	909		1,290
Net deferred tax liability	$	(306)	$	(505)

(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.

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The following table provides details of the Company’s tax carryforwards at December 31, 2021, including the expiration dates and related valuation allowance:


	Expiration Dates	Deferred Tax Asset Balance (1)		Valuation Allowance		Net Deferred Tax Asset Balance
	(In millions)
Net operating losses-federal	2037	$	10	$	—	$	10
Net operating losses-federal	None	11		—		11
Net operating losses-states	2022-2026	19		19		—
Net operating losses-states	2027-2033	8		7		1
Net operating losses-states	2034-2041	4		2		2
Net operating losses-states	None	1		1		—
		$	53	$	29	$	24

(1) Federal and state deferred tax assets of $21 million and $1 million, respectively, related to net operating losses were acquired as part of the Company’s April 2020 equipment finance acquisition and the December 2021 commercial real estate lender acquisition. While the federal and certain state net operating losses may be 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 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 $29 million against such benefits at December 31, 2021 compared to $31 million at December 31, 2020.

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


	2021		2020		2019
	(In millions)
Balance at beginning of year	$	12	$	37	$	13
Additions based on tax positions taken in a prior period	—		2		25

Reductions based on tax positions taken in a prior period	—		(25)		—
Settlements	(2)		(1)		—
Expiration of statute of limitations	(1)		(1)		(1)
Balance at end of year	$	9	$	12	$	37

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 2019 have been completed. Also, with some exceptions for non-footprint states, the Company is no longer subject to state and local tax examinations for tax years before 2017. 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.

It is reasonably possible that the liability for UTBs could decrease by approximately $1 million during the next twelve months due to completion of tax authority examinations and expirations of statutes of limitations. It is uncertain how much, if any, of this potential decrease will impact the Company's effective tax rate.

As of December 31, 2021, 2020 and 2019, the balances of the Company’s UTBs that would reduce the effective tax rates, if recognized, were $7 million, $9 million and $34 million, respectively.

Interest and penalties related to UTBs are recorded in the provision for income taxes. During the years ended December 31, 2021, 2020 and 2019, the Company recognized an immaterial expense (benefit) for gross interest and penalties. As of December 31, 2021 and 2020, the Company had an immaterial gross liability for interest and penalties related to UTBs.

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NOTE 20. 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:


	2021						2020
	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	$	7,900	$	—	$	32	$	2,100	$	77	$	—

Derivatives in cash flow hedging relationships:
Interest rate swaps (2)	20,650		171		29		16,000		1,181		—
Interest rate floors (3)	—		—		—		5,750		430		—
Total derivatives in cash flow hedging relationships	20,650		171		29		21,750		1,611		—
Total derivatives designated as hedging instruments	$	28,550	$	171	61		$	23,850	$	1,688	$	—
Derivatives not designated as hedging instruments:
Interest rate swaps	$	81,327	$	748	$	794	$	76,764	$	1,492	$	1,464
Interest rate options	15,990		48		19		13,806		90		28
Interest rate futures and forward commitments	2,739		11		3		4,270		11		26
Other contracts	9,456		133		135		9,924		68		80
Total derivatives not designated as hedging instruments	$	109,512	$	940	$	951	$	104,764	$	1,661	$	1,598
Total derivatives	$	138,062	$	1,111	$	1,012	$	128,614	$	3,349	$	1,598

Total gross derivative instruments, before netting			$	1,111	$	1,012			$	3,349	$	1,598
Less: Netting adjustments (4)			699		932				2,428		1,545
Total gross derivative instruments, after netting (5)			$	412	$	80			$	921	$	53

(1)Derivatives in a gain position are recorded as other assets and derivatives in a loss position are recorded as other liabilities.

(2)Includes accrued interest of $12 million as of December 31, 2021 and $28 million at December 31, 2020, respectively.

(3)Includes accrued interest of $12 million and premium of approximately $83 million at December 31, 2020.

(4)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.

(5)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, 2021, there were no financial instruments posted that were not offset in the consolidated balance sheets, compared to $24 million as of December 31, 2020.

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 also enters into interest rate swap agreements to manage interest rate exposure on certain of the Company's fixed-rate prepayable and non-prepayable 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, 2021, Regions is hedging its exposure to the variability in future cash flows through 2025.

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In 2021, the Company terminated all $5.8 billion in remaining floor hedges and $13.1 billion in cash flow swap hedges. 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
	2021		2020
	(In millions)
Unrealized gains on terminated hedges included in AOCI - January 1	$	121	$	78
Unrealized gains on terminated hedges arising during the period	739		55
Reclassification adjustments for amortization of unrealized (gains) into net income	(160)		(12)
Unrealized gains on terminated hedges included in AOCI - December 31	$	700	$	121

Regions expects to reclassify into earnings approximately $372 million in pre-tax income due to the receipt or payment of interest payments on cash flow hedges within the next twelve months. Included in this amount is $293 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:


	2021
	Interest Income		Interest Expense
	Loans, including fees		Long-term borrowings
	(In millions)
Total income (expense) presented in the consolidated statements of income	$	3,452	(103		)

Gains/(losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements on derivatives	$	—	$	19
Recognized on derivatives	—		(51)
Recognized on hedged items	—		51
Income (expense) recognized on fair value hedges	$	—	$	19

Gains/(losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income (2)	$	426	$	—
Income (expense) recognized on cash flow hedges (2)	$	426	$	—


	2020
	Interest Income		Interest Expense
	Loans, including fees		Long-term borrowings
	(In millions)
Total income (expense) presented in the consolidated statements of income	$	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)
Income (expense) 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	$	—

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	2019
	Interest Income				Interest Expense
	Debt securities		Loans, including fees		Long-term borrowings
	(In millions)
Total income (expense) 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)
Income (expense) 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)	$	—

(1)See Note 14 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:


	2021				2020
	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)
Debt securities available for sale(1)(2)	$	9,901	$	—			$	—	$	—
Long-term borrowings	(1,363)		34				(2,171)		(64)

(1) Carrying amount represents amortized cost.

(2) In the fourth quarter of 2021, the Company designated interest rate swaps as fair value hedges of debt securities available for sale under the last-of-layer method, which are included in this amount. As of December 31, 2021, the Company has designated $5.8 billion as the hedged amount from a closed portfolio of prepayable financial assets with a carrying amount of $9.1 billion.

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, 2021 and 2020, Regions had $419 million and $924 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, 2021 and 2020, Regions had $987 million and $1.9 billion, 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.

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Regions has elected to account for residential MSRs at fair value with any changes to fair value 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, 2021 and 2020, the total notional amount related to these contracts was $4.5 billion and $4.1 billion, respectively.

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


Derivatives Not Designated as Hedging Instruments	2021		2020		2019
	(In millions)
Capital markets income:
Interest rate swaps	$	46	$	21	$	13
Interest rate options	28		36		23
Interest rate futures and forward commitments	15		14		10
Other contracts	4		1		(1)
Total capital markets income	93		72		45
Mortgage income:
Interest rate swaps	(45)		83		68
Interest rate options	(32)		30		(1)
Interest rate futures and forward commitments	13		(2)		5
Total mortgage income	(64)		111		72
	$	29	$	183	$	117

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 2022 and 2029. Swap participations, whereby Regions has sold credit protection have maturities between 2022 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.

Regions’ maximum potential amount of future payments under these contracts as of December 31, 2021 was approximately $441 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, 2021 and 2020 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, 2021 and 2020, were $81 million and $74 million, respectively, for which Regions had posted collateral of $84 million and $74 million, respectively, in the normal course of business.

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NOTE 21. 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 as of December 31:


	2021								2020
	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	$	1,132	$	—	$	—	$	1,132	$	183	$	—	$	—	$	183
Federal agency securities	—		92		—		92		—		105		—		105
Obligations of states and political subdivisions	—		4		—		4		—		—		—		—
Mortgage-backed securities (MBS):
Residential agency	—		18,962		—		18,962		—		19,076		—		19,076
Residential non-agency	—		—		1		1		—		—		1		1
Commercial agency	—		6,373		—		6,373		—		5,999		—		5,999
Commercial non-agency	—		536		—		536		—		586		—		586
Corporate and other debt securities	—		1,380		1		1,381		—		1,200		4		1,204
Total debt securities available for sale	$	1,132	$	27,347	$	2	$	28,481	$	183	$	26,966	$	5	$	27,154
Loans held for sale	$	—	$	693	$	90	$	783	$	—	$	1,446	$	—	$	1,446
Marketable equity securities	$	464	$	—	$	—	$	464	$	388	$	—	$	—	$	388
Residential mortgage servicing rights	$	—	$	—	$	418	$	418	$	—	$	—	$	296	$	296
Derivative assets (2):
Interest rate swaps	$	—	$	919	$	—	$	919	$	—	$	2,750	$	—	$	2,750
Interest rate options	—		36		12		48		—		477		43		520
Interest rate futures and forward commitments	—		11		—		11		—		11		—		11
Other contracts	—		132		1		133		2		65		1		68
Total derivative assets	$	—	$	1,098	$	13	$	1,111	$	2	$	3,303	$	44	$	3,349
Equity investments	$	—	$	—	$	—	$	—	$	—	$	74	$	—	$	74
Derivative liabilities (2):
Interest rate swaps	$	—	$	855	$	—	$	855	$	—	$	1,464	$	—	$	1,464
Interest rate options	—		19		—		19		—		28		—		28
Interest rate futures and forward commitments	—		3		—		3		—		26		—		26
Other contracts	—		132		3		135		2		72		6		80
Total derivative liabilities	$	—	$	1,009	$	3	$	1,012	$	2	$	1,590	$	6	$	1,598

(1)All following disclosures related to Level 3 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.

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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 additional information for residential MSRs and commercial mortgage loans held for sale, which are the only material assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

The following table shows a rollforward of residential MSRs for the years ended December 31, 2021, 2020 and 2019, respectively.


	Residential mortgage servicing rights
	For the Years Ended December 31
	2021		2020		2019
	(In millions)
Carrying value, beginning of period	$	296	$	345	$	418
Total realized/unrealized gains (losses) included in earnings (1)	(27)		(157)		(115)
Additions	149		108		42
Carrying value, end of period	$	418	$	296	$	345

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

In the fourth quarter of 2021, the Company acquired commercial mortgage loans held for sale that are considered Level 3 fair value measurements. The following table provides a rollfoward for the year ended December 31, 2021.


	Commercial mortgage loans held for sale
	For the Year Ended December 31, 2021
	(In millions)
Carrying value, beginning of period	$	—
Purchases	47

Additions (1)	43
Carrying value, end of period	$	90

(1) Additions represent originations after the initial fourth quarter 2021 acquisition of commercial mortgage loans held for sale.

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, 2021, 2020 and 2019. 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, 2021, 2020 and 2019 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, 2021
	Level 3 Estimated Fair Value at December 31, 2021	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 (%)	7.2% - 22.2% (10.5%)
			OAS (%)	3.7% - 7.7% (4.5%)
Commercial mortgage loans held for sale	$90	Discounted cash flow	Credit spreads for bonds in the commercial MBS	0.2% - 19.4% (1.3%)

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	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%)

(1)See Note 6 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 6.

Commercial mortgage loans held for sale

The significant unobservable inputs used in the fair value measurement of commercial mortgage loans held for sale are credit spreads for bonds in commercial mortgage-backed securitization. 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. Increases or decreases in credit spreads would result in an inverse impact to fair value.

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FAIR VALUE OPTION

Regions has elected the fair value option for all eligible agency residential mortgage loans originated with the intent to sell. This election allows 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. 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.

As discussed above, the Company elected the option to measure certain commercial mortgage loans held for sale at fair value.

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 both December 31, 2021 and 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:


	2021						2020
	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)
Residential mortgage loans held for sale, at fair value	$	680	$	659	$	21	$	1,439	$	1,362	$	77
Commercial mortgage loans held for sale, at fair value	$	90	$	90	$	—	$	—	$	—	$	—

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. The following table details net gains and losses resulting from changes in fair value of these loans, which were recorded in mortgage 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.


	2021		2020
	(In millions)
Net gains (losses) resulting from changes in fair value of residential mortgage loans held for sale	$	(56)	$	63

NON-RECURRING FAIR VALUE MEASUREMENTS

Items measured at fair value on a non-recurring basis include loans held for sale for which the fair value option has not been elected, foreclosed property and other real estate and equity investments without a readily determinable fair value; all of which may be considered either Level 2 or Level 3 valuation measurements. Non-recurring fair value adjustments related to loans held for sale and foreclosed property and other real estate are typically a result of the application of lower of cost or fair value accounting during the period. Non-recurring fair value adjustments related to equity investments without readily determinable fair values are the result of impairments or price changes from observable transactions. The balances of each of these assets, as well as the related fair value adjustments during the periods, were immaterial at both December 31, 2021 and 2020.

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FAIR VALUE OF FINANCIAL INSTRUMENTS

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, 2021 are as follows:


	2021
	Carrying Amount		Estimated Fair Value(1)		Level 1		Level 2		Level 3
	(In millions)
Financial assets:
Cash and cash equivalents	$	29,411	$	29,411	$	29,411	$	—	$	—
Debt securities held to maturity	899		950		—		950		—
Debt securities available for sale	28,481		28,481		1,132		27,347		2
Loans held for sale	1,003		1,003		—		899		104
Loans (excluding leases), net of unearned income and allowance for loan losses(2)(3)	84,866		85,086		—		—		85,086
Other earning assets(4)	1,104		1,104		464		640		—
Derivative assets	1,111		1,111		—		1,098		13

Financial liabilities:
Derivative liabilities	1,012		1,012		—		1,009		3
Deposits	139,072		139,101		—		139,101		—

Long-term borrowings	2,407		2,847		—		2,845		2
Loan commitments and letters of credit	123		123		—		—		123

(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, 2021 was $220 million or 0.3 percent.

(3)Excluded from this table is the sales-type, direct financing, and leveraged lease carrying amount of $1.4 billion at December 31, 2021.

(4)Excluded from this table is the operating lease carrying amount of $83 million at December 31, 2021.

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

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(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.

NOTE 22. 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 in 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. Accordingly, the prior periods were updated to reflect these enhancements. In the first quarter of 2021, the net interest income allocation methodology was enhanced. All net interest income including the FTP offset, activities of the treasury function, securities portfolio and interest rate risk activities is allocated to the three reporting segments.

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, 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.

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.
Provision for (benefit from) credit losses is allocated to each segment based on an estimated loss methodology. The difference between the consolidated provision for (benefit from) 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. 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.

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


	2021
	Corporate Bank		Consumer Bank		Wealth Management		Other		Consolidated
	(In millions)
Net interest income	$	1,762	$	2,013	$	139	$	—	$	3,914
Provision for (benefit from) credit losses (1)	303		254		10		(1,091)		(524)
Non-interest income	752		1,266		390		116		2,524
Non-interest expense	1,091		2,173		387		96		3,747
Income before income taxes	1,120		852		132		1,111		3,215
Income tax expense	280		213		33		168		694
Net income	$	840	$	639	$	99	$	943	$	2,521
Average assets	$	59,132	$	34,309	$	2,046	$	58,782	$	154,269


	2020
	Corporate Bank		Consumer Bank		Wealth Management		Other		Consolidated
	(In millions)
Net interest income	$	1,688	$	2,066	$	140	$	—	$	3,894
Provision for credit losses (1)	290		305		11		724		1,330
Non-interest income	656		1,267		344		126		2,393
Non-interest expense	1,024		2,057		346		216		3,643
Income (loss) before income taxes	1,030		971		127		(814)		1,314
Income tax expense (benefit)	257		242		32		(311)		220
Net income (loss)	$	773	$	729	$	95	$	(503)	$	1,094
Average assets	$	61,218	$	34,530	$	2,021	$	40,326	$	138,095


	2019
	Corporate Bank		Consumer Bank		Wealth Management		Other		Consolidated
	(In millions)
Net interest income	$	1,395	$	2,184	$	166	$	—	$	3,745
Provision for (benefit from) credit losses (1)	192		320		13		(138)		387
Non-interest income	538		1,215		331		32		2,116
Non-interest expense	938		2,121		342		88		3,489
Income before income taxes	803		958		142		82		1,985
Income tax expense (benefit)	201		240		36		(74)		403
Net income	$	602	$	718	$	106	$	156	$	1,582
Average assets	$	53,846	$	35,063	$	2,183	$	34,018	$	125,110

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NOTE 23. 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:


	2021		2020
	(In millions)
Unused commitments to extend credit	$	60,935	$	56,644
Standby letters of credit	1,779		1,742
Commercial letters of credit	97		132
Liabilities associated with standby letters of credit	28		25
Assets associated with standby letters of credit	29		25
Reserve for unfunded credit commitments	95		126

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, 2021, with it also being reasonably possible that Regions could incur no losses in excess of amounts accrued. With respect to the CFPB investigation described below, Regions believes that a loss is reasonably possible; however, the amount of such possible loss, if any, cannot currently be estimated. As available information changes, the matters for which Regions is able to estimate, as well as the estimates themselves, will be adjusted accordingly.

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

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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 from such governmental regulatory agencies, law enforcement authorities and self-regulatory bodies 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

FANNIE MAE LOSS SHARE GUARANTEE

Regions sells commercial loans to Fannie Mae through the DUS lending program and through other platforms. 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 the servicing portfolio. At December 31, 2021 and 2020, the Company's DUS servicing portfolio totaled approximately $4.7 billion and $4.5 billion, respectively. Regions has additional loans sold to Fannie Mae outside of the DUS program that are also subject to a loss share guarantee and at December 31, 2021 these serviced loans totaled approximately $400 million. Regions' maximum quantifiable contingent liability related to all loans subject to a loss share guarantee was approximately $1.7 billion and $1.5 billion at December 31, 2021 and 2020, 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 $7 million and $5 million at December 31, 2021 and 2020, 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.

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NOTE 24. REVENUE RECOGNITION

The following tables present total non-interest income disaggregated by major product category for each reportable segment for the period indicated (refer to Note 1 for descriptions of the accounting and reporting policies related to revenue recognition):


	Year Ended December 31, 2021
	Corporate Bank		Consumer Bank		Wealth Management		Other Segment Revenue		Other(2)		Total
	(In millions)
Service charges on deposit accounts	$	160	$	480	$	3	$	—	$	5	$	648
Card and ATM fees	41		448		—		(1)		11		499
Investment management and trust fee income	—		—		278		—		—		278
Capital markets income	149		—		—		—		182		331
Mortgage income	—		—		—		—		242		242
Investment services fee income	—		—		104		—		—		104
Commercial credit fee income	—		—		—		—		91		91
Bank-owned life insurance	—		—		—		—		82		82
Securities gains (losses), net	—		—		—		—		3		3

Market value adjustments on employee benefit assets - other	—		—		—		—		20		20
Gain on equity investment (1)	—		—		—		—		3		3
Other miscellaneous income	39		55		4		3		122		223
	$	389	$	983	$	389	$	2	$	761	$	2,524


	Year Ended December 31, 2020
	Corporate Bank		Consumer Bank		Wealth Management		Other Segment Revenue		Other(2)		Total
	(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
Gain on equity investment (1)	—		—		—		—		50		50
Other miscellaneous income	33		49		3		2		64		151
	$	354	$	893	$	343	$	3	$	800	$	2,393

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	Year Ended December 31, 2019
	Corporate Bank		Consumer Bank		Wealth Management		Other Segment Revenue		Other(2)		Total
	(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

(1)The 2021 amount is a gain on the sale of an equity investment, whereas the 2020 amount is a valuation gain on the investment that was sold in the first quarter of 2021.

(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.

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NOTE 25. PARENT COMPANY ONLY FINANCIAL STATEMENTS

Presented below are condensed financial statements of Regions Financial Corporation:

Balance Sheets


	December 31
	2021		2020
	(In millions)
Assets
Interest-bearing deposits in other banks	$	1,543	$	1,526
Loans to subsidiaries	—		20
Debt securities available for sale	20		22
Premises and equipment, net	36		38
Investments in subsidiaries:
Banks	18,237		18,872
Non-banks	343		250
	18,580		19,122
Other assets	280		313
Total assets	$	20,459	$	21,041
Liabilities and Shareholders’ Equity
Long-term borrowings	$	1,909	$	2,718
Other liabilities	224		212
Total liabilities	2,133		2,930
Shareholders’ equity:
Preferred stock	1,659		1,656
Common stock	10		10
Additional paid-in capital	12,189		12,731
Retained earnings	5,550		3,770
Treasury stock, at cost	(1,371)		(1,371)
Accumulated other comprehensive income, net	289		1,315
Total shareholders’ equity	18,326		18,111
Total liabilities and shareholders’ equity	$	20,459	$	21,041

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Statements of Income


	Year Ended December 31
	2021		2020		2019
	(In millions)
Income:
Dividends received from subsidiaries	$	2,250	$	280	$	1,675
Interest from subsidiaries	8		8		4
Other	22		53		7
	2,280		341		1,686
Expenses:
Salaries and employee benefits	61		56		54
Interest expense	68		93		153
Equipment and software expense	4		4		5
Other	96		79		84
	229		232		296
Income before income taxes and equity in undistributed earnings of subsidiaries	2,051		109		1,390
Income tax benefit	(43)		(36)		(68)





Income before equity in undistributed earnings of subsidiaries and preferred stock dividends	2,094		145		1,458
Equity in undistributed earnings of subsidiaries:
Banks	372		905		110
Non-banks	55		44		14
	427		949		124
Net income	2,521		1,094		1,582
Preferred stock dividends	(121)		(103)		(79)
Net income available to common shareholders	$	2,400	$	991	$	1,503

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Statements of Cash Flows


	Year Ended December 31
	2021		2020		2019
	(In millions)
Operating activities:
Net income	$	2,521	$	1,094	$	1,582
Adjustments to reconcile net cash from operating activities:
Equity in undistributed earnings of subsidiaries	(427)		(949)		(124)
Provision for (benefit from) deferred income taxes	(21)		29		20
Depreciation, amortization and accretion, net	3		3		4
Loss on sale of assets	—		1		—
Loss on early extinguishment of debt	20		14		16

Net change in operating assets and liabilities:
Other assets	61		3		18
Other liabilities	1		—		(7)
Other	(51)		44		102
Net cash from operating activities	2,107		239		1,611
Investing activities:
(Investment in) / repayment of investment in subsidiaries	(21)		—		(18)
Proceeds from sales and maturities of debt securities available for sale	5		4		5
Purchases of debt securities available for sale	(3)		(4)		(6)




Net cash from investing activities	(19)		—		(19)
Financing activities:

Proceeds from long-term borrowings	646		748		500
Payments on long-term borrowings	(1,424)		(1,039)		(751)
Cash dividends on common stock	(608)		(595)		(577)
Cash dividends on preferred stock	(108)		(103)		(79)
Net proceeds from issuance of preferred stock	390		346		490
Payment for redemption of preferred stock	(500)		—		—
Repurchases of common stock	(467)		—		(1,101)
Other	—		(5)		(2)
Net cash from financing activities	(2,071)		(648)		(1,520)
Net change in cash and cash equivalents	17		(409)		72
Cash and cash equivalents at beginning of year	1,526		1,935		1,863
Cash and cash equivalents at end of year	$	1,543	$	1,526	$	1,935

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