Item 1. Financial Statements (Unaudited)

255K characters. Original on sec.gov · Markdown

Item 1. Financial Statements (Unaudited)

REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	June 30, 2022		December 31, 2021
	(In millions, except share data)
Assets
Cash and due from banks	$	2,301	$	1,350
Interest-bearing deposits in other banks	18,199		28,061
Debt securities held to maturity (estimated fair value of $817 and $950, respectively)	836		899
Debt securities available for sale (amortized cost of $31,263 and $28,263, respectively)	29,052		28,481
Loans held for sale (includes $369 and $783 measured at fair value, respectively)	612		1,003
Loans, net of unearned income	93,458		87,784
Allowance for loan losses	(1,425)		(1,479)
Net loans	92,033		86,305
Other earning assets	1,428		1,187
Premises and equipment, net	1,768		1,814
Interest receivable	365		319
Goodwill	5,749		5,744
Residential mortgage servicing rights at fair value	770		418
Other identifiable intangible assets, net	279		305
Other assets	7,516		7,052
Total assets	$	160,908	$	162,938
Liabilities and Equity
Deposits:
Non-interest-bearing	$	58,510	$	58,369
Interest-bearing	79,753		80,703
Total deposits	138,263		139,072
Borrowed funds:




Long-term borrowings	2,319		2,407
Total borrowed funds	2,319		2,407
Other liabilities	3,819		3,133
Total liabilities	144,401		144,612
Equity:
Preferred stock, authorized 10 million shares, par value $1.00 per share:
Non-cumulative perpetual, including related surplus, net of issuance costs; issued— 1,403,500 shares	1,659		1,659
Common stock, authorized 3 billion shares, par value $0.01 per share:
Issued including treasury stock— 975,373,716 and 982,940,601 shares, respectively	10		10
Additional paid-in capital	11,962		12,189
Retained earnings	6,314		5,550
Treasury stock, at cost—41,032,676 shares	(1,371)		(1,371)
Accumulated other comprehensive income (loss), net	(2,067)		289
Total shareholders’ equity	16,507		18,326


Total liabilities and equity	$	160,908	$	162,938

See notes to consolidated financial statements.

REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(In millions, except per share data)
Interest income on:
Loans, including fees	$	932	$	849	$	1,808	$	1,703
Debt securities	157		131		295		264
Loans held for sale	10		12		19		24
Other earning assets	56		14		85		28

Total interest income	1,155		1,006		2,207		2,019
Interest expense on:
Deposits	20		17		33		36

Long-term borrowings	27		26		51		53
Total interest expense	47		43		84		89


Net interest income	1,108		963		2,123		1,930
Provision for (benefit from) credit losses	60		(337)		24		(479)
Net interest income after provision for (benefit from) credit losses	1,048		1,300		2,099		2,409
Non-interest income:
Service charges on deposit accounts	165		163		333		320
Card and ATM fees	133		128		257		243
Capital markets income	112		61		185		161
Mortgage income	47		53		95		143
Investment management and trust fee income	72		69		147		135
Securities gains (losses), net	—		1		—		2
Other	111		144		207		256
Total non-interest income	640		619		1,224		1,260
Non-interest expense:
Salaries and employee benefits	575		532		1,121		1,078
Equipment and software expense	97		89		192		179
Net occupancy expense	75		75		150		152
Other	201		202		418		417
Total non-interest expense	948		898		1,881		1,826
Income before income taxes	740		1,021		1,442		1,843
Income tax expense	157		231		311		411





Net income	$	583	$	790	$	1,131	$	1,432

Net income available to common shareholders	$	558	$	748	$	1,082	$	1,362
Weighted-average number of shares outstanding:
Basic	934		958		936		959
Diluted	940		965		943		967



Earnings per common share:
Basic	$	0.60	$	0.78	$	1.16	$	1.42
Diluted	$	0.59	$	0.77	$	1.15	$	1.41

See notes to consolidated financial statements.

REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


	Three Months Ended June 30
	2022		2021
	(In millions)
Net income	$	583	$	790
Other comprehensive income, 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 and zero tax effect, respectively)	—		—
Less: reclassification adjustments for amortization of unrealized losses on securities transferred to held to maturity (net of zero and zero tax effect, respectively)	(1)		(1)
Net change in unrealized losses on securities transferred to held to maturity, net of tax	1		1
Unrealized gains on securities available for sale:
Unrealized holding gains (losses) arising during the period (net of ($237) and $23 tax effect, respectively)	(694)		71
Less: reclassification adjustments for securities gains (losses) realized in net income (net of zero and zero tax effect, respectively)	—		1
Net change in unrealized gains on securities available for sale, net of tax	(694)		70
Unrealized gains on derivative instruments designated as cash flow hedges:
Unrealized holding gains (losses) on derivatives arising during the period (net of ($34) and $18 tax effect, respectively)	(109)		56
Less: reclassification adjustments for gains (losses) on derivative instruments realized in net income (net of $20 and $26 tax effect, respectively)	58		78
Net change in unrealized gains on derivative instruments, net of tax	(167)		(22)
Defined benefit pension plans and other post employment benefits:
Net actuarial gains (losses) arising during the period (net of zero and zero tax effect, respectively)	—		—
Less: reclassification adjustments for amortization of actuarial loss and settlements realized in net income (net of ($1) and ($4) tax effect, respectively)	(7)		(10)
Net change from defined benefit pension plans and other post employment benefits, net of tax	7		10
Other comprehensive income (loss), net of tax	(853)		59
Comprehensive income (loss)	$	(270)	$	849

	Six Months Ended June 30
	2022		2021
	(In millions)
Net income	$	1,131	$	1,432
Other comprehensive income, 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 and zero tax effect, respectively)	—		—
Less: reclassification adjustments for amortization of unrealized losses on securities transferred to held to maturity (net of zero and ($1) tax effect, respectively)	(2)		(3)
Net change in unrealized losses on securities transferred to held to maturity, net of tax	2		3
Unrealized gains on securities available for sale:
Unrealized holding gains (losses) arising during the period (net of ($618) and ($115) tax effect, respectively)	(1,811)		(339)
Less: reclassification adjustments for securities gains (losses) realized in net income (net of zero and zero tax effect, respectively)	—		2
Net change in unrealized gains on securities available for sale, net of tax	(1,811)		(341)
Unrealized gains on derivative instruments designated as cash flow hedges:
Unrealized holding gains (losses) on derivatives arising during the period (net of ($140) and ($65) tax effect, respectively)	(420)		(192)
Less: reclassification adjustments for gains (losses) on derivative instruments realized in net income (net of $48 and $52 tax effect, respectively)	140		154
Net change in unrealized gains on derivative instruments, net of tax	(560)		(346)
Defined benefit pension plans and other post employment benefits:
Net actuarial gains (losses) arising during the period (net of zero and zero tax effect, respectively)	—		—
Less: reclassification adjustments for amortization of actuarial loss and settlements realized in net income (net of ($3) and ($7) tax effect, respectively)	(13)		(20)
Net change from defined benefit pension plans and other post employment benefits, net of tax	13		20
Other comprehensive income (loss), net of tax	(2,356)		(664)
Comprehensive income (loss)	$	(1,225)	$	768

See notes to consolidated financial statements.

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)
BALANCE AT JANUARY 1, 2021	2	$	1,656	960	$	10	$	12,731	$	3,770	$	(1,371)	$	1,315	$	18,111

Net income	—	—		—	—		—		642		—		—		642
Other comprehensive income (loss), net of tax	—	—		—	—		—		—		—		(723)		(723)

Cash dividends declared	—	—		—	—		—		(149)		—		—		(149)

Preferred stock dividends	—	—		—	—		—		(28)		—		—		(28)


Impact of common stock transactions under compensation plans, net	—	—		1	—		9		—		—		—		9

BALANCE AT MARCH 31, 2021	2	$	1,656	961	$	10	$	12,740	$	4,235	$	(1,371)	$	592	$	17,862





































BALANCE AT APRIL 1, 2021	2	$	1,656	961	$	10	$	12,740	$	4,235	$	(1,371)	$	592	$	17,862

Net income	—	—		—	—		—		790		—		—		790
Other comprehensive income (loss), net of tax	—	—		—	—		—		—		—		59		59
Cash dividends declared	—	—		—	—		—		(147)		—		—		(147)
Preferred stock dividends	—	—		—	—		—		(29)		—		—		(29)
Net proceeds from issuance of Series E preferred stock	—	390		—	—		—		—		—		—		390
Redemption of Series A preferred stock	—	(387)		—	—		(100)		(13)		—		—		(500)
Impact of common share repurchases	—	—		(8)			(167)		—		—		—		(167)
Impact of common stock transactions under compensation plans, net	—	—		2	—		(6)		—		—		—		(6)

BALANCE AT JUNE 30, 2021	2	$	1,659	955	$	10	$	12,467	$	4,836	$	(1,371)	$	651	$	18,252

BALANCE AT JANUARY 1, 2022	2	$	1,659	942	$	10	$	12,189	$	5,550	$	(1,371)	$	289	$	18,326

Net income	—	—		—	—		—		548		—		—		548
Other comprehensive income (loss), net of tax	—	—		—	—		—		—		—		(1,503)		(1,503)
Cash dividends declared	—	—		—	—		—		(159)		—		—		(159)
Preferred stock dividends	—	—		—	—		—		(24)		—		—		(24)


Impact of common stock share repurchases	—	—		(9)	—		(215)		—		—		—		(215)
Impact of common stock transactions under compensation plans, net	—	—		—	—		9		—		—		—		9

BALANCE AT MARCH 31, 2022	2	$	1,659	933	$	10	$	11,983	$	5,915	$	(1,371)	$	(1,214)	$	16,982

BALANCE AT APRIL 1, 2022	2	$	1,659	933	$	10	$	11,983	$	5,915	$	(1,371)	$	(1,214)	$	16,982
Net income	—	—		—	—		—		583		—		—		583
Other comprehensive income (loss), net of tax	—	—		—	—		—		—		—		(853)		(853)
Cash dividends declared	—	—		—	—		—		(159)		—		—		(159)
Preferred stock dividends	—	—		—	—		—		(25)		—		—		(25)
Impact of common stock share repurchases	—	—		1	—		(15)		—		—		—		(15)
Impact of common stock transactions under compensation plans, net	—	—		—	—		(6)		—		—		—		(6)
BALANCE AT JUNE 30, 2022	2	$	1,659	934	$	10	$	11,962	$	6,314	$	(1,371)	$	(2,067)	$	16,507

See notes to consolidated financial statements.

REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Six Months Ended June 30
	2022		2021
	(In millions)
Operating activities:
Net income	$	1,131	$	1,432
Adjustments to reconcile net income to net cash from operating activities:
Provision for (benefit from) credit losses	24		(479)
Depreciation, amortization and accretion, net	201		195

Securities (gains) losses, net	—		(2)

Deferred income tax expense (benefit)	76		180
Originations and purchases of loans held for sale	(2,811)		(3,516)
Proceeds from sales of loans held for sale	3,168		4,143

(Gain) loss on sale of loans, net	(18)		(123)

Net change in operating assets and liabilities:

Other earning assets	(244)		(40)
Interest receivable and other assets	(620)		(313)

Other liabilities	637		(128)
Other	(39)		79
Net cash from operating activities	1,505		1,428
Investing activities:
Proceeds from maturities of debt securities held to maturity	63		129
Proceeds from sales of debt securities available for sale	1,106		45
Proceeds from maturities of debt securities available for sale	2,621		2,961
Purchases of debt securities available for sale	(6,789)		(5,790)

Net (payments for) proceeds from bank-owned life insurance	(1)		1
Proceeds from sales of loans	461		203
Purchases of loans	(571)		(548)
Purchases of residential mortgage servicing rights	(234)		(37)
Net change in loans	(5,602)		1,594
Net purchases of other assets	(41)		(37)

Net cash from investing activities	(8,987)		(1,479)
Financing activities:
Net change in deposits	(809)		9,005


Payments on long-term borrowings	—		(674)
Net proceeds from issuance of preferred stock	—		390
Payment for redemption of preferred stock	—		(500)
Cash dividends on common stock	(319)		(298)
Cash dividends on preferred stock	(49)		(57)
Repurchases of common stock	(230)		(167)
Taxes paid related to net share settlement of equity awards	(22)		(10)

Net cash from financing activities	(1,429)		7,689
Net change in cash and cash equivalents	(8,911)		7,638
Cash and cash equivalents at beginning of year	29,411		17,956
Cash and cash equivalents at end of period	$	20,500	$	25,594

See notes to consolidated financial statements.

REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BASIS OF PRESENTATION

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 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. The accompanying interim financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and notes to the consolidated financial statements necessary for a complete presentation of financial position, results of operations, comprehensive income (loss) and cash flows in conformity with GAAP. In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the consolidated financial statements have been included. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto in Regions’ Annual Report on Form 10-K for the year ended December 31, 2021. Regions has evaluated all subsequent events for potential recognition and disclosure through the filing date of this Form 10-Q.

During 2022, the Company adopted new accounting guidance related to several topics. See Note 12 for related disclosures.

NOTE 2. 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:


	June 30, 2022
			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	$	316	$	—	$	(11)	$	305	$	—	$	(9)	$	296
Commercial agency	532		—		(1)		531		—		(10)		521
	$	848	$	—	$	(12)	$	836	$	—	$	(19)	$	817

Debt securities available for sale:
U.S. Treasury securities	$	1,329	$	6	$	(83)	$	1,252					$	1,252
Federal agency securities	711		—		(28)		683						683
Obligations of states and political subdivisions	3		—		—		3						3
Mortgage-backed securities:
Residential agency	20,700		38		(1,731)		19,007						19,007
Residential non-agency	1		—		—		1						1
Commercial agency	6,961		2		(356)		6,607						6,607
Commercial non-agency	324		—		(9)		315						315
Corporate and other debt securities	1,234		1		(51)		1,184						1,184
	$	31,263	$	47	$	(2,258)	$	29,052					$	29,052


	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

(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 $9.5 billion and $9.2 billion at June 30, 2022 and December 31, 2021, respectively, were pledged to secure public funds, trust deposits and certain borrowing arrangements.

The amortized cost and estimated fair value of debt securities held to maturity and debt securities available for sale at June 30, 2022, 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	$	316	$	296
Commercial agency	532		521
	$	848	$	817
Debt securities available for sale:
Due in one year or less	$	195	$	194
Due after one year through five years	2,277		2,195
Due after five years through ten years	694		636
Due after ten years	111		97
Mortgage-backed securities:
Residential agency	20,700		19,007
Residential non-agency	1		1
Commercial agency	6,961		6,607
Commercial non-agency	324		315
	$	31,263	$	29,052

The following tables present gross unrealized losses and the related estimated fair value of debt securities held to maturity at June 30, 2022 and debt securities available for sale are presented at June 30, 2022 and December 31, 2021. For debt securities transferred to held to maturity from available for sale, the analysis in the tables below compares the securities' original amortized cost to its current estimated fair value; there were no unrealized losses on debt securities held to maturity using this analysis at December 31, 2021. 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.


	June 30, 2022
	Less Than Twelve Months				Twelve Months or More				Total
	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
	(In millions)
Debt securities held to maturity:


Mortgage-backed securities:
Residential agency	$	296	$	(20)	$	—	$	—	$	296	$	(20)
Commercial agency	521		(11)		—		—		521		(11)
	$	817	$	(31)	$	—	$	—	$	817	$	(31)

Debt securities available for sale:
U.S. Treasury securities	$	994	$	(82)	$	5	$	(1)	$	999	$	(83)
Federal agency securities	623		(19)		56		(9)		679		(28)
Mortgage-backed securities:
Residential agency	14,107		(1,077)		4,321		(654)		18,428		(1,731)
Commercial agency	5,214		(225)		1,003		(131)		6,217		(356)
Commercial non-agency	315		(9)		—		—		315		(9)
Corporate and other debt securities	971		(47)		76		(4)		1,047		(51)
	$	22,224	$	(1,459)	$	5,461	$	(799)	$	27,685	$	(2,258)


	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)

The number of individual debt positions in an unrealized loss position in the tables above increased from 479 at December 31, 2021, to 1,652 at June 30, 2022. The increase in the number of securities and the total amount of unrealized losses from year-end 2021 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 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 for the six months ended June 30, 2022 is presented below. Gross realized gains and gross realized losses on sales of debt securities available for sale were immaterial for the three months ended June 30, 2022 and the three and six months ended June 30, 2021. 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 not identify any positions where impairment was believed to exist in either of the three and six months ended June 30, 2022 or 2021.


	Six Months Ended
	June 30, 2022
	(in millions)
Gross realized gains	$	17
Gross realized losses	(17)
Securities gains (losses), net	$	—

NOTE 3. LOANS AND THE ALLOWANCE FOR CREDIT LOSSES

LOANS

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


	June 30, 2022		December 31, 2021
	(In millions)
Commercial and industrial	$	48,492	$	43,758
Commercial real estate mortgage—owner-occupied	5,218		5,287
Commercial real estate construction—owner-occupied	266		264
Total commercial	53,976		49,309
Commercial investor real estate mortgage	5,892		5,441
Commercial investor real estate construction	1,720		1,586
Total investor real estate	7,612		7,027
Residential first mortgage	17,892		17,512
Home equity lines	3,550		3,744
Home equity loans	2,524		2,510
Consumer credit card	1,172		1,184
Other consumer-exit portfolio	775		1,071
Other consumer	5,957		5,427
Total consumer	31,870		31,448
Total loans, net of unearned income	$	93,458	$	87,784

During the six months ended June 30, 2022 and 2021, Regions purchased approximately $563 million and $532 million in other consumer, residential first mortgage and commercial and industrial loans from third parties, respectively.

At June 30, 2022, $15.2 billion in net eligible loans held by Regions were pledged for potential borrowings from the FHLB. At June 30, 2022, an additional $15.1 billion in net eligible loans held by Regions were pledged to the FRB for potential borrowings.

Included in the commercial and industrial loan balance are sales-type and direct financing leases totaling $1.3 billion as of June 30, 2022, with related income of $24 million for the six months ended June 30, 2022.

ALLOWANCE FOR CREDIT LOSSES

Regions determines the appropriate level of the allowance on a quarterly basis. 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, 2021, for a description of the methodology.

ROLLFORWARD OF ALLOWANCE FOR CREDIT LOSSES

The following tables present analyses of the allowance by portfolio segment for the three and six months ended June 30, 2022 and 2021.



	Three Months Ended June 30, 2022
	Commercial		Investor Real Estate		Consumer		Total
	(In millions)
Allowance for loan losses, April 1, 2022	$	620	$	75	$	721	$	1,416
Provision for (benefit from) loan losses	(14)		15		46		47

Loan losses:
Charge-offs	(22)		—		(48)		(70)
Recoveries	13		1		18		32
Net loan (losses) recoveries	(9)		1		(30)		(38)
Allowance for loan losses, June 30, 2022	597		91		737		1,425
Reserve for unfunded credit commitments, April 1, 2022	52		8		16		76
Provision for (benefit from) unfunded credit commitments	5		2		6		13
Reserve for unfunded credit commitments, June 30, 2022	57		10		22		89
Allowance for credit losses, June 30, 2022	$	654	$	101	$	759	$	1,514



	Three Months Ended June 30, 2021
	Commercial		Investor Real Estate		Consumer		Total
	(In millions)
Allowance for loan losses, April 1, 2021	$	1,082	$	150	$	744	$	1,976
Provision for (benefit from) loan losses	(203)		(57)		(72)		(332)

Loan losses:
Charge-offs	(36)		(4)		(43)		(83)
Recoveries	15		2		19		36
Net loan (losses) recoveries	(21)		(2)		(24)		(47)
Allowance for loan losses, June 30, 2021	858		91		648		1,597
Reserve for unfunded credit commitments, April 1, 2021	67		11		14		92
Provision for (benefit from) unfunded credit commitments	(6)		2		(1)		(5)
Reserve for unfunded credit commitments, June 30, 2021	61		13		13		87
Allowance for credit losses, June 30, 2021	$	919	$	104	$	661	$	1,684



	Six Months Ended June 30, 2022
	Commercial		Investor Real Estate		Consumer		Total
	(In millions)


Allowance for loan losses, January 1, 2022	$	682	$	79	$	718	$	1,479
Provision for (benefit from) loan losses	(63)		11		82		30

Loan losses:
Charge-offs	(48)		—		(99)		(147)
Recoveries	26		1		36		63
Net loan (losses) recoveries	(22)		1		(63)		(84)
Allowance for loan losses, June 30, 2022	597		91		737		1,425


Reserve for unfunded credit commitments, January 1, 2022	58		8		29		95
Provision for (benefit from) unfunded credit commitments	(1)		2		(7)		(6)
Reserve for unfunded credit commitments, June 30, 2022	57		10		22		89
Allowance for credit losses, June 30, 2022	$	654	$	101	$	759	$	1,514



	Six Months Ended June 30, 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	(286)		(75)		(79)		(440)

Loan losses:
Charge-offs	(83)		(19)		(95)		(197)
Recoveries	31		2		34		67
Net loan (losses) recoveries	(52)		(17)		(61)		(130)
Allowance for loan losses, June 30, 2021	858		91		648		1,597
Reserve for unfunded credit commitments, January 1, 2021	97		14		15		126
Provision for (benefit from) unfunded commitments	(36)		(1)		(2)		(39)
Reserve for unfunded credit commitments, June 30, 2021	61		13		13		87
Allowance for credit losses, June 30, 2021	$	919	$	104	$	661	$	1,684

PORTFOLIO SEGMENT RISK FACTORS

Regions’ portfolio segments are commercial, investor real estate and consumer. Classes within each segment present unique credit risks. Refer to Note 5 "Allowance for Credit Losses" in the Annual Report on Form 10-K for the year ended December 31, 2021 for information regarding Regions’ portfolio segments and related classes, as well as the risks specific to each.

CREDIT QUALITY INDICATORS

The commercial and investor real estate portfolio segments’ primary credit quality indicator is internal risk ratings which are detailed by categories related to underlying credit quality and probability of default. Regions assigns these risk ratings 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. Regions' ratings are aligned to federal banking regulators’ definitions and are utilized to develop the associated allowance. Refer to Note 5 "Allowance for Credit Losses" in the Annual Report on Form 10-K for the year ended December 31, 2021 for information regarding commercial risk ratings.

Regions' consumer portfolio segment has various classes that present unique credit risks. Regions considers factors such as periodic updates of FICO scores, accrual status, days past due status, unemployment rates, home prices 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 following tables present applicable credit quality indicators for the loan portfolio segments and classes, excluding loans held for sale, by vintage year as of June 30, 2022 and December 31, 2021. Classes in the commercial and investor real estate portfolio segments are disclosed by risk rating. Classes in the consumer portfolio segment are disclosed by current FICO scores. Refer to Note 5 "Allowance for Credit Losses" in the Annual Report on Form 10-K for the year ended December 31, 2021 for more information regarding Regions' credit quality indicators.


	June 30, 2022
Term Loans													Revolving Loans			Revolving Loans Converted to Amortizing			Unallocated (1)			Total
Origination Year
2022	2021		2020		2019		2018		Prior
(In millions)
Commercial and industrial:
Risk Rating:
Pass(2)	$	6,558	$	8,826	$	4,065	$	3,009	$	1,634	$	3,760		$	19,053		$	—		$	51		$	46,956
Special Mention	14		73		11		87		2		35			352			—			—			574
Substandard Accrual	5		59		139		45		44		17			396			—			—			705
Non-accrual	9		43		11		35		42		16			101			—			—			257
Total commercial and industrial	$	6,586	$	9,001	$	4,226	$	3,176	$	1,722	$	3,828		$	19,902		$	—		$	51		$	48,492

Commercial real estate mortgage—owner-occupied:
Risk Rating:
Pass	$	690	$	1,266	$	985	$	557	$	590	$	814		$	114		$	—		$	(5)		$	5,011
Special Mention	2		19		41		10		14		20			1			—			—			107
Substandard Accrual	—		2		9		47		3		9			1			—			—			71
Non-accrual	1		—		4		2		6		15			1			—			—			29
Total commercial real estate mortgage—owner-occupied:	$	693	$	1,287	$	1,039	$	616	$	613	$	858		$	117		$	—		$	(5)		$	5,218


	June 30, 2022
Term Loans													Revolving Loans			Revolving Loans Converted to Amortizing			Unallocated (1)			Total
Origination Year
2022	2021		2020		2019		2018		Prior
(In millions)
Commercial real estate construction—owner-occupied:
Risk Rating:
Pass	$	54	$	84	$	34	$	17	$	19	$	43		$	2		$	—		$	—		$	253
Special Mention	—		—		—		—		2		—			—			—			—			2
Substandard Accrual	—		—		—		—		—		1			—			—			—			1
Non-accrual	—		—		1		1		—		8			—			—			—			10
Total commercial real estate construction—owner-occupied:	$	54	$	84	$	35	$	18	$	21	$	52		$	2		$	—		$	—		$	266
Total commercial	$	7,333	$	10,372	$	5,300	$	3,810	$	2,356	$	4,738		$	20,021		$	—		$	46		$	53,976

Commercial investor real estate mortgage:
Risk Rating:
Pass	$	1,196	$	1,444	$	821	$	799	$	407	$	178		$	550		$	—		$	(7)		$	5,388
Special Mention	65		13		7		—		2		5			—			—			—			92
Substandard Accrual	17		27		69		201		65		23			7			—			—			409
Non-accrual	—		—		—		—		—		3			—			—			—			3
Total commercial investor real estate mortgage	$	1,278	$	1,484	$	897	$	1,000	$	474	$	209		$	557		$	—		$	(7)		$	5,892

Commercial investor real estate construction:
Risk Rating:
Pass	$	170	$	339	$	254	$	257	$	29	$	2		$	632		$	—		$	(13)		$	1,670
Special Mention	—		—		17		33		—		—			—			—			—			50
Substandard Accrual	—		—		—		—		—		—			—			—			—			—
Non-accrual	—		—		—		—		—		—			—			—			—			—
Total commercial investor real estate construction	$	170	$	339	$	271	$	290	$	29	$	2		$	632		$	—		$	(13)		$	1,720
Total investor real estate	$	1,448	$	1,823	$	1,168	$	1,290	$	503	$	211		$	1,189		$	—		$	(20)		$	7,612

Residential first mortgage:
FICO scores:
Above 720	$	1,309	$	4,294	$	4,984	$	961	$	359	$	2,683		$	—		$	—		$	—		$	14,590
681-720	174		441		327		98		46		326			—			—			—			1,412
620-680	95		199		145		53		36		320			—			—			—			848
Below 620	12		67		62		49		41		403			—			—			—			634
Data not available	16		47		46		19		5		103			10			—			162			408
Total residential first mortgage	$	1,606	$	5,048	$	5,564	$	1,180	$	487	$	3,835		$	10		$	—		$	162		$	17,892

Home equity lines:
FICO scores:
Above 720	$	—	$	—	$	—	$	—	$	—	$	—		$	2,626		$	48		$	—		$	2,674
681-720	—		—		—		—		—		—			369			10			—			379
620-680	—		—		—		—		—		—			232			12			—			244
Below 620	—		—		—		—		—		—			112			7			—			119
Data not available	—		—		—		—		—		—			98			6			30			134
Total home equity lines	$	—	$	—	$	—	$	—	$	—	$	—		$	3,437		$	83		$	30		$	3,550


	June 30, 2022
Term Loans													Revolving Loans			Revolving Loans Converted to Amortizing			Unallocated (1)			Total
Origination Year
2022	2021		2020		2019		2018		Prior
(In millions)
Home equity loans
FICO scores:
Above 720	$	278	$	504	$	275	$	132	$	120	$	670		$	—		$	—		$	—		$	1,979
681-720	50		71		31		18		18		81			—			—			—			269
620-680	20		30		13		11		10		64			—			—			—			148
Below 620	3		7		3		7		7		45			—			—			—			72
Data not available	1		2		3		2		4		26			—			—			18			56
Total home equity loans	$	352	$	614	$	325	$	170	$	159	$	886		$	—		$	—		$	18		$	2,524

Consumer credit card:
FICO scores:
Above 720	$	—	$	—	$	—	$	—	$	—	$	—		$	677		$	—		$	—		$	677
681-720	—		—		—		—		—		—			235			—			—			235
620-680	—		—		—		—		—		—			190			—			—			190
Below 620	—		—		—		—		—		—			77			—			—			77
Data not available	—		—		—		—		—		—			9			—			(16)			(7)
Total consumer credit card	$	—	$	—	$	—	$	—	$	—	$	—		$	1,188		$	—		$	(16)		$	1,172

Other consumer—exit portfolios
FICO scores:
Above 720	$	—	$	—	$	—	$	126	$	236	$	143		$	—		$	—		$	—		$	505
681-720	—		—		—		37		53		33			—			—			—			123
620-680	—		—		—		22		38		26			—			—			—			86
Below 620	—		—		—		7		22		17			—			—			—			46
Data not available	—		—		—		2		3		5			—			—			5			15
Total Other consumer—exit portfolios	$	—	$	—	$	—	$	194	$	352	$	224		$	—		$	—		$	5		$	775

Other consumer:
FICO scores:
Above 720	$	1,054	$	1,388	$	624	$	393	$	162	$	108		$	118		$	—		$	—		$	3,847
681-720	214		368		150		90		41		27			59			—			—			949
620-680	133		220		96		54		26		20			47			—			—			596
Below 620	29		75		44		26		16		12			18			—			—			220
Data not available	80		29		6		140		80		6			4			—			—			345
Total other consumer	$	1,510	$	2,080	$	920	$	703	$	325	$	173		$	246		$	—		$	—		$	5,957
Total consumer loans	$	3,468	$	7,742	$	6,809	$	2,247	$	1,323	$	5,118		$	4,881		$	83		$	199		$	31,870
Total Loans	$	12,249	$	19,937	$	13,277	$	7,347	$	4,182	$	10,067		$	26,091		$	83		$	225		$	93,458


	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

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


	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


	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

(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.

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 June 30, 2022 and December 31, 2021. Loans on non-accrual status with no related allowance are comprised of commercial loans and totaled $156 million and $127 million as of June 30, 2022 and December 31, 2021, respectively. Non–accrual loans with no related allowance typically include loans where the underlying collateral is deemed sufficient to recover all remaining principal. Loans that have been fully charged-off do not appear in the tables below.


	June 30, 2022
	Accrual Loans
	30-59 DPD		60-89 DPD		90+ DPD		Total 30+ DPD		Total Accrual		Non-accrual		Total
	(In millions)
Commercial and industrial	$	27	$	10	$	4	$	41	$	48,235	$	257	$	48,492
Commercial real estate mortgage—owner-occupied	3		2		1		6		5,189		29		5,218
Commercial real estate construction—owner-occupied	—		—		—		—		256		10		266
Total commercial	30		12		5		47		53,680		296		53,976
Commercial investor real estate mortgage	—		—		—		—		5,889		3		5,892
Commercial investor real estate construction	—		—		—		—		1,720		—		1,720
Total investor real estate	—		—		—		—		7,609		3		7,612
Residential first mortgage	79		34		78		191		17,865		27		17,892
Home equity lines	11		5		16		32		3,514		36		3,550
Home equity loans	8		3		9		20		2,517		7		2,524
Consumer credit card	8		5		11		24		1,172		—		1,172
Other consumer—exit portfolios	7		3		2		12		775		—		775
Other consumer	32		16		14		62		5,957		—		5,957
Total consumer	145		66		130		341		31,800		70		31,870
	$	175	$	78	$	135	$	388	$	93,089	$	369	$	93,458


	December 31, 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

TROUBLED DEBT RESTRUCTURINGS

Regions regularly modifies commercial and investor real estate loans in order to facilitate a workout strategy. Similarly, Regions works to meet the individual needs of consumer borrowers to stem foreclosure through its CAP. Refer to Note 1 "Summary of Significant Accounting Policies" and Note 5 "Allowance for Credit Losses" in the Annual Report on Form 10-K for the year ended December 31, 2021 for additional information regarding the Company's TDRs, including their impact on the allowance and designation of TDRs in periods subsequent to the modification.

As provided initially in the CARES Act and subsequently extended through the Consolidated Appropriations Act, certain loan modifications related to the COVID-19 pandemic beginning March 1, 2020 through 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 were not considered TDRs and are excluded from the 2021 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.


	Three Months Ended June 30, 2022
				Financial Impact of Modifications Considered TDRs
	Number of Obligors	Recorded Investment		Increase in Allowance at Modification
	(Dollars in millions)
Commercial and industrial	10	$	23	$	—
Commercial real estate mortgage—owner-occupied	6	1		—
Commercial real estate construction—owner-occupied	—	—		—
Total commercial	16	24		—
Commercial investor real estate mortgage	1	27		—
Commercial investor real estate construction	—	—		—
Total investor real estate	1	27		—
Residential first mortgage	368	48		1
Home equity lines	32	2		1
Home equity loans	68	5		—
Consumer credit card	—	—		—
Other consumer—exit portfolios	—	—		—
Other consumer	2	—		—
Total consumer	470	55		2
	487	$	106	$	2


	Three Months Ended June 30, 2021
				Financial Impact of Modifications Considered TDRs
	Number of Obligors	Recorded Investment		Increase in Allowance at Modification
	(Dollars in millions)
Commercial and industrial	15	$	20	$	—
Commercial real estate mortgage—owner-occupied	8	2		—
Commercial real estate construction—owner-occupied	1	1		—
Total commercial	24	23		—
Commercial investor real estate mortgage	4	69		—
Commercial investor real estate construction	—	—		—
Total investor real estate	4	69		—
Residential first mortgage	161	26		2
Home equity lines	3	1		—
Home equity loans	6	1		—
Consumer credit card	—	—		—
Other consumer—exit portfolios	—	—		—
Other consumer	4	—		—
Total consumer	174	28		2
	202	$	120	$	2



	Six Months Ended June 30, 2022
				Financial Impact of Modifications Considered TDRs
	Number of Obligors	Recorded Investment		Increase in Allowance at Modification
	(Dollars in millions)
Commercial and industrial	20	$	60	$	—
Commercial real estate mortgage—owner-occupied	9	3		—
Commercial real estate construction—owner-occupied	—	—		—
Total commercial	29	63		—
Commercial investor real estate mortgage	2	35		—
Commercial investor real estate construction	—	—		—
Total investor real estate	2	35		—
Residential first mortgage	725	100		4
Home equity lines	54	4		2
Home equity loans	110	8		—
Consumer credit card	2	—		—
Other consumer-exit portfolios	—	—		—
Other consumer	4	—		—
Total consumer	895	112		6
	926	$	210	$	6



	Six Months Ended June 30, 2021
				Financial Impact of Modifications Considered TDRs
	Number of Obligors	Recorded Investment		Increase in Allowance at Modification
	(Dollars in millions)
Commercial and industrial	41	$	50	$	—
Commercial real estate mortgage—owner-occupied	14	3		—
Commercial real estate construction—owner-occupied	1	1		—
Total commercial	56	54		—
Commercial investor real estate mortgage	6	76		—
Commercial investor real estate construction	—	—		—
Total investor real estate	6	76		—
Residential first mortgage	336	61		5
Home equity lines	5	1		—
Home equity loans	7	1		—
Consumer credit card	—	—		—
Other consumer-exit portfolios	—	—		—
Other consumer	52	1		—
Total consumer	400	64		5
	462	$	194	$	5

NOTE 4. 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:


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(In millions)
Carrying value, beginning of period	$	542	$	401	$	418	$	296
Additions	10		19		29		40
Purchases(1)	181		26		256		37
Increase (decrease) in fair value:
Due to change in valuation inputs or assumptions	52		(38)		99		52
Economic amortization associated with borrower repayments(2)	(15)		(16)		(32)		(33)
Carrying value, end of period	$	770	$	392	$	770	$	392

(1)Purchases of residential MSRs can be structured with cash hold back provisions, therefore the timing of payment may be made in future periods.

(2)Includes both total loan payoffs as well as partial paydowns. Regions' MSR decay methodology is a discounted net cash flow approach.

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) are as follows:


	June 30
	2022			2021
	(Dollars in millions)
Unpaid principal balance	$	52,965		$	35,519
Weighted-average CPR (%)	7.9		%	10.5		%
Estimated impact on fair value of a 10% increase	$	(66)		$	(27)
Estimated impact on fair value of a 20% increase	$	(107)		$	(49)
Option-adjusted spread (basis points)	480			571
Estimated impact on fair value of a 10% increase	$	(17)		$	(9)
Estimated impact on fair value of a 20% increase	$	(34)		$	(19)
Weighted-average coupon interest rate	3.4		%	3.7		%
Weighted-average remaining maturity (months)	309			292
Weighted-average servicing fee (basis points)	27.1			27.3

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

Servicing related fees, which includes contractually specified servicing fees, late fees and other ancillary income resulting from the servicing of residential mortgage loans totaled $28 million and $25 million for the three months ended June 30, 2022 and 2021, respectively and $55 million and $49 million for the six months ended June 30, 2022 and 2021, respectively.

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

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

COMMERCIAL MORTGAGE BANKING ACTIVITIES

Regions is an approved DUS lender. The DUS program provides liquidity to the multi-family housing market. In connection with the DUS program, Regions services commercial mortgage loans, retains commercial MSRs and intangible assets associated with the DUS license, and assumes a loss share guarantee associated with the loans. See Note 1 "Summary of Significant Accounting Policies" in the 2021 Annual Report on Form 10-K for additional information. Also see Note 11 for additional information.

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


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(In millions)				(In millions)
Carrying value, beginning of period	$	82	$	82	$	86	$	74
Additions	5		8		5		19
Economic amortization associated with borrower repayments(1)	(5)		(4)		(9)		(7)
Carrying value, end of period	$	82	$	86	$	82	$	86

(1)Includes both total loan payoffs as well as partial paydowns.

Regions periodically evaluates the commercial MSRs for impairment based on fair value. The estimated fair value of the commercial MSRs was approximately $109 million at June 30, 2022 and $96 million at December 31, 2021.

Servicing related fees, which includes contractually specified servicing fees, late fees and other ancillary income resulting from the servicing of commercial mortgage loans totaled $7 million and $5 million for the three months ended June 30, 2022 and 2021, respectively and $14 million and $10 million for the six months ended June 30, 2022 and 2021, respectively.

NOTE 5. SHAREHOLDERS’ EQUITY AND ACCUMULATED OTHER COMPREHENSIVE INCOME

PREFERRED STOCK

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


											June 30, 2022		December 31, 2021
	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 B	4/29/2014	9/15/2024	6.375	%	(2)	$	500	1,000	25	1/40th	$	433	$	433
Series C	4/30/2019	5/15/2029	5.700	%	(3)	500		1,000	25	1/40th	490		490
Series D	6/5/2020	9/15/2025	5.750	%	(4)	350		100,000	1,000	1/100th	346		346
Series E	5/4/2021	6/15/2026	4.450	%		400		1,000	25	1/40th	390		390
						$	1,750				$	1,659	$	1,659

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

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

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

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

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

The Board declared a total of $41 million in cash dividends on Series B, Series C and Series D preferred stock during both the first six months of 2022 and 2021. The Board declared cash dividends of $8 million on Series E preferred stock for the first six months of 2022; the initial quarterly dividend on Series E was declared in the third quarter of 2021. Additionally, total cash dividends for the first six months of 2021 includes $16 million in cash dividends on Series A preferred stock, which were fully redeemed during the second quarter of 2021. Therefore, a total of $49 million in cash dividends on total preferred stock was declared in the first six months of 2022 compared to the total of $57 million in cash dividends on total preferred stock for the same period in 2021.

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

As a result of Regions' voluntary participation in 2021 CCAR, effective October 1, 2021, Regions' SCB requirement for the fourth quarter of 2021 through the third quarter of 2022 will be floored at 2.5 percent. On June 27, 2022, Regions announced the Company received the results of the 2022 stress test from the FRB, reflecting that the Company exceeded all minimum capital levels and inclusive of a preliminary SCB floored at 2.5 percent. On August 4, 2022, the FRB finalized Regions’ SCB requirement, and as a result for the fourth quarter of 2022 through the third quarter of 2023 the SCB requirement will continue to be floored at 2.5 percent.

As part of the Company's 2021 capital plan, 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. During the three months ended March 31, 2022, Regions repurchased approximately 9.1 million shares of common stock at a total cost of $215 million and concluded the plan in the first quarter of 2022. All of these shares were immediately retired upon repurchase and therefore were not included in treasury stock.

On April 20, 2022, the Board authorized the repurchase of up to $2.5 billion of the Company's common stock, permitting purchases from the second quarter of 2022 through the fourth quarter of 2024. As of June 30, 2022, Regions had repurchased approximately 725 thousand shares of common stock at a total cost of $15 million under this plan. All of these shares were immediately retired upon repurchase and therefore were not included in treasury stock.

The Board declared a cash dividend for both the first and second quarter of 2022 for $0.17 per share, totaling $0.34 per common share for the first six months of 2022 as compared to $0.155 per common share for the same periods of 2021, totaling $0.31 for the first six months of 2021.

On July 20, 2022, the Board approved an 18 percent increase to the quarterly common stock dividend to $0.20 which will be payable on October 3, 2022, to stockholders of record as of September 2, 2022.

ACCUMULATED OTHER COMPREHENSIVE INCOME

The following tables present the balances and activity in AOCI on a pre-tax and net of tax basis for the three and six months ended June 30, 2022 and 2021:


	Three Months Ended June 30, 2022
	Pre-tax AOCI Activity		Tax Effect (1)		Net AOCI Activity
	(In millions)
Total accumulated other comprehensive income (loss), beginning of period	$	(1,629)	$	415	$	(1,214)

Unrealized losses on securities transferred to held to maturity:
Beginning balance	$	(13)	$	3	$	(10)

Reclassification adjustments for amortization of unrealized losses (2)	1		—		1
Ending balance	$	(12)	$	3	$	(9)
Unrealized gains (losses) on securities available for sale:
Beginning balance	$	(1,280)	$	326	$	(954)
Unrealized gains (losses) arising during the period	(931)		237		(694)


Ending balance	$	(2,211)	$	563	$	(1,648)
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Beginning balance	$	303	$	(75)	$	228
Unrealized holding gains (losses) on derivatives arising during the period	(143)		34		(109)

Reclassification adjustments for (gains) losses realized in net income (2)	(78)		20		(58)
Change in AOCI from derivative activity in the period	(221)		54		(167)
Ending balance	$	82	$	(21)	$	61
Defined benefit pension plans and other post employment benefit plans:
Beginning balance	$	(639)	$	161	$	(478)

Reclassification adjustments for amortization of actuarial gains (losses) and settlements realized in net income (4)	8		(1)		7

Ending balance	$	(631)	$	160	$	(471)

Total other comprehensive income (loss)	(1,143)		290		(853)
Total accumulated other comprehensive income (loss), end of period	$	(2,772)	$	705	$	(2,067)


	Three Months Ended June 30, 2021
	Pre-tax AOCI Activity		Tax Effect (1)		Net AOCI Activity
	(In millions)
Total accumulated other comprehensive income (loss), beginning of period	$	793	$	(201)	$	592

Unrealized losses on securities transferred to held to maturity:
Beginning balance	$	(18)	$	4	$	(14)

Reclassification adjustments for amortization of unrealized losses (2)	1		—		1
Ending balance	$	(17)	$	4	$	(13)
Unrealized gains (losses) on securities available for sale:
Beginning balance	$	513	$	(130)	$	383
Unrealized gains (losses) arising during the period	94		(23)		71
Reclassification adjustments for securities (gains) losses realized in net income(3)	(1)		—		(1)
Change in AOCI from securities available for sale activity in the period	93		(23)		70
Ending balance	$	606	$	(153)	$	453
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Beginning balance	$	1,177	$	(297)	$	880
Unrealized holding gains (losses) on derivatives arising during the period	74		(18)		56
Reclassification adjustments for (gains) losses realized in net income (2)	(104)		26		(78)
Change in AOCI from derivative activity in the period	(30)		8		(22)
Ending balance	$	1,147	$	(289)	$	858
Defined benefit pension plans and other post employment benefit plans:
Beginning balance	$	(879)	$	222	$	(657)

Reclassification adjustments for amortization of actuarial gains (losses) and settlements realized in net income (4)	14		(4)		10

Ending balance	$	(865)	$	218	$	(647)

Total other comprehensive income (loss)	78		(19)		59
Total accumulated other comprehensive income (loss), end of period	$	871	$	(220)	$	651



	Six Months Ended June 30, 2022
	Pre-tax AOCI Activity		Tax Effect (1)		Net AOCI Activity
	(In millions)
Total accumulated other comprehensive income (loss), beginning of period	$	387	$	(98)	$	289

Unrealized losses on securities transferred to held to maturity:
Beginning balance	$	(14)	$	3	$	(11)

Reclassification adjustments for amortization of unrealized losses (2)	2		—		2
Ending balance	$	(12)	$	3	$	(9)
Unrealized gains (losses) on securities available for sale:
Beginning balance	$	218	$	(55)	$	163
Unrealized gains (losses) arising during the period	(2,429)		618		(1,811)


Ending balance	$	(2,211)	$	563	$	(1,648)
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Beginning balance	$	830	$	(209)	$	621
Unrealized holding gains (losses) on active hedges arising during the period	(560)		140		(420)
Reclassification adjustments for (gains) losses realized in net income (2)	(188)		48		(140)
Change in AOCI from derivative activity in the period	(748)		188		(560)
Ending balance	$	82	$	(21)	$	61
Defined benefit pension plans and other post employment benefit plans:
Beginning balance	$	(647)	$	163	$	(484)

Reclassification adjustments for amortization of actuarial gains (losses) and settlements realized in net income (4)	16		(3)		13

Ending balance	$	(631)	$	160	$	(471)

Total other comprehensive income (loss)	(3,159)		803		(2,356)
Total accumulated other comprehensive income (loss), end of period	$	(2,772)	$	705	$	(2,067)



	Six Months Ended June 30, 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 of unrealized losses (2)	4		(1)		3
Ending balance	$	(17)	$	4	$	(13)
Unrealized gains (losses) on securities available for sale:
Beginning balance	$	1,062	$	(268)	$	794
Unrealized gains (losses) arising during the period	(454)		115		(339)
Reclassification adjustments for securities (gains) losses realized in net income(3)	(2)		—		(2)
Change in AOCI from securities available for sale activity in the period	(456)		115		(341)
Ending balance	$	606	$	(153)	$	453
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	(257)		65		(192)

Reclassification adjustments for (gains) losses realized in net income (2)	(206)		52		(154)
Change in AOCI from derivative activity in the period	(463)		117		(346)
Ending balance	$	1,147	$	(289)	$	858
Defined benefit pension plans and other post employment benefit plans:
Beginning balance	$	(892)	$	225	$	(667)

Amounts reclassified for amortization of actuarial gains (losses) and settlements realized in net income (4)	27		(7)		20

Ending balance	$	(865)	$	218	$	(647)

Total other comprehensive income	(888)		224		(664)
Total accumulated other comprehensive income, end of period	$	871	$	(220)	$	651

(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 7 for additional details).

NOTE 6. EARNINGS PER COMMON SHARE

The following table sets forth the computation of basic earnings per common share and diluted earnings per common share:


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(In millions, except per share amounts)
Numerator:
Net income	$	583	$	790	$	1,131	$	1,432
Preferred stock dividends and other (1)	(25)		(42)		(49)		(70)


Net income available to common shareholders	$	558	$	748	$	1,082	$	1,362
Denominator:
Weighted-average common shares outstanding—basic	934		958		936		959
Potential common shares	6		7		7		8
Weighted-average common shares outstanding—diluted	940		965		943		967






Earnings per common share:
Basic	$	0.60	$	0.78	$	1.16	$	1.42
Diluted	0.59		0.77		1.15		1.41

(1)Preferred stock dividends and other for the three and six months ended June 30, 2021 includes $13 million of issuance costs associated with the redemption of Series A preferred shares.

The effects from the assumed exercise of 6 million and 4 million in restricted stock units and awards and performance stock units for the three and six months ended June 30, 2022, respectively, 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.

The effects from the assumed exercise of 4 million in restricted stock units and awards and performance stock units for both the three and six months ended June 30, 2021 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 7. PENSION AND OTHER POSTRETIREMENT BENEFITS

Regions' defined benefit pension plans cover certain employees as the pension plans are closed to new entrants. 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.

Net periodic pension cost (credit) includes the following components:


	Qualified Plans				Non-qualified Plans				Total
	Three Months Ended June 30
	2022		2021		2022		2021		2022		2021
	(In millions)
Service cost	$	9	$	10	$	1	$	2	$	10	$	12
Interest cost	14		12		—		—		14		12
Expected return on plan assets	(35)		(36)		—		—		(35)		(36)
Amortization of actuarial loss	7		12		1		2		8		14

Net periodic pension cost (credit)	$	(5)	$	(2)	$	2	$	4	$	(3)	$	2



	Qualified Plans				Non-qualified Plans				Total
	Six Months Ended June 30
	2022		2021		2022		2021		2022		2021
	(In millions)
Service cost	$	18	$	19	$	1	$	3	$	19	$	22
Interest cost	28		24		1		1		29		25
Expected return on plan assets	(70)		(71)		—		—		(70)		(71)
Amortization of actuarial loss	13		23		3		4		16		27


Net periodic pension cost (credit)	$	(11)	$	(5)	$	5	$	8	$	(6)	$	3

The service cost component of net periodic pension cost (credit) 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.

Regions' funding policy for the qualified plans is to contribute annually at least the amount required by IRS minimum funding standards. Regions made no contributions during the first six months of 2022.

Regions also provides other postretirement benefits, such as defined benefit health care plans and life insurance plans, that cover certain retired employees. There was no material impact from other postretirement benefits on the consolidated financial statements for the six months ended June 30, 2022 or 2021.

NOTE 8. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

The following tables present the notional amount and estimated fair value of derivative instruments on a gross basis.


	June 30, 2022						December 31, 2021
	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	$	7,923	$	36	$	120	$	7,900	$	—	$	32
Derivatives in cash flow hedging relationships:
Interest rate swaps(2)	33,100		76		543		20,650		171		29


Total derivatives designated as hedging instruments	$	41,023	$	112	$	663	$	28,550	$	171	$	61
Derivatives not designated as hedging instruments:
Interest rate swaps	$	83,544	$	1,378	$	1,428	$	81,327	$	748	$	794
Interest rate options	17,040		87		64		15,990		48		19
Interest rate futures and forward commitments	1,747		11		4		2,739		11		3
Other contracts	10,561		301		267		9,456		133		135
Total derivatives not designated as hedging instruments	$	112,892	$	1,777	$	1,763	$	109,512	$	940	$	951
Total derivatives	$	153,915	$	1,889	$	2,426	$	138,062	$	1,111	$	1,012

Total gross derivative instruments, before netting			$	1,889	$	2,426			$	1,111	$	1,012



Less: Netting adjustments(3)			1,680		1,542				699		932
Total gross derivative instruments, after netting			$	209	$	884			$	412	$	80

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

(2)Includes no accrued interest at June 30, 2022 and $12 million at December 31, 2021.

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

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. See Note 1 "Summary of Significant Accounting Policies" of the Annual Report on Form 10-K for the year ended December 31, 2021, for additional information regarding accounting policies for derivatives.

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 debt securities available for sale. 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 swaps, floors, and agreements with a combination of these instruments to manage overall cash flow changes related to interest rate risk exposure on variable rate loans. The agreements effectively modify the Company’s exposure to interest rate risk by utilizing receive fixed/pay LIBOR or SOFR interest rate swaps and interest rate floors. As of June 30, 2022, Regions is hedging its exposure to the variability in future cash flows through 2029.

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


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(In millions)
Unrealized gains on terminated hedges included in AOCI- beginning of period	$	624	$	279	$	700	$	121
Unrealized gains on terminated hedges arising during the period	—		249		—		415
Reclassification adjustments for amortization of unrealized (gains) into net income	(76)		(34)		(152)		(42)
Unrealized gains on terminated hedges included in AOCI - end of period	$	548	$	494	$	548	$	494

Regions expects to reclassify into earnings approximately $5 million in pre-tax income due to the net receipt/payment of interest payments and amortization on cash flow hedges within the next twelve months. Included in this amount is $262 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 effected:


	Three Months Ended June 30, 2022
	Interest Income				Interest Expense
	Debt Securities		Loans, Including Fees		Long-term Borrowings
	(In millions)
Total income (expense) presented in the consolidated statements of income	$	157	$	932	(27		)

Gains/(losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements on derivatives	$	—	$	—	$	(1)
Recognized on derivatives	14		—		(24)
Recognized on hedged items	(14)		—		24
Income (expense) recognized on fair value hedges	$	—	$	—	$	(1)

Gains/(losses) on cash flow hedging relationships:(1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income(2)	$	—	$	78	$	—
Income (expense) recognized on cash flow hedges	$	—	$	78	$	—


	Three Months Ended June 30, 2021
	Interest Income		Interest Expense
	Loans, Including Fees		Long-term Borrowings
	(In millions)
Total income (expense) presented in the consolidated statements of income	$	849	(26		)

Gains/(losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements on derivatives	$	—	$	7
Recognized on derivatives	—		(4)
Recognized on hedged items	—		4
Income (expense) recognized on fair value hedges	$	—	$	7

Gains/(losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income(2)	$	104	$	—
Income (expense) recognized on cash flow hedges	$	104	$	—


	Six Months Ended June 30, 2022
	Interest Income				Interest Expense
	Debt Securities		Loans, Including Fees		Long-term Borrowings
	(In millions)
Total income (expense) presented in the consolidated statements of income	$	295	$	1,808	(51		)

Gains/(losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements on derivatives	$	—	$	—	$	1
Recognized on derivatives	36		—		(88)
Recognized on hedged items	(36)		—		88
Income (expense) recognized on fair value hedges	$	—	$	—	$	1

Gains/(losses) on cash flow hedging relationships:(1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income(2)	$	—	$	188	$	—
Income (expense) recognized on cash flow hedges	$	—	$	188	$	—


	Six Months Ended June 30, 2021
	Interest Income		Interest Expense
	Loans, Including Fees		Long-term Borrowings
	(In millions)
Total income (expense) presented in the consolidated statements of income	$	1,703	(53		)

Gains/(losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements on derivatives	$	—	$	14
Recognized on derivatives	—		(26)
Recognized on hedged items	—		26
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)	$	206	$	—
Income (expense) recognized on cash flow hedges	$	206	$	—

(1)See Note 5 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.


	June 30, 2022				December 31, 2021
	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)
Debt securities available for sale(1)(2)	$	9,076	$	(36)	$	9,901	$	—
Long-term borrowings	(1,275)		122		(1,363)		34

(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 portfolio layer method, which are included in this amount. At both June 30, 2022 and December 31, 2021, the Company had designated $5.8 billion as the hedged amount from a closed portfolio of prepayable financial assets with an associated carrying amount of $8.3 billion at June 30, 2022 and $9.1 billion at December 31, 2021.

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 fee 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 June 30, 2022 and December 31, 2021, Regions had $331 million and $419 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 June 30, 2022 and December 31, 2021, Regions had $524 million and $987 million, respectively, in total notional amounts related to these forward sale commitments. Changes in mark-to-market from both interest rate lock commitments and corresponding forward sale commitments related to residential mortgage loans are included in mortgage income. Changes in mark-to-market from both interest rate lock commitments and corresponding forward sale commitments related to commercial mortgage loans are included in capital markets income.

Regions has elected to account for residential MSRs at fair 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 June 30, 2022 and December 31, 2021, the total notional amount related to these contracts was $3.9 billion and $4.5 billion, respectively.

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


	Three Months Ended June 30				Six Months Ended June 30
Derivatives Not Designated as Hedging Instruments	2022		2021		2022		2021
	(In millions)
Capital markets income:
Interest rate swaps	$	36	$	(3)	$	67	$	20
Interest rate options	5		2		16		17
Interest rate futures and forward commitments	3		3		(1)		12
Other contracts	5		2		8		7
Total capital markets income	49		4		90		56
Mortgage income:
Interest rate swaps	(38)		29		(84)		(38)
Interest rate options	1		(2)		(9)		(15)
Interest rate futures and forward commitments	(21)		(19)		(5)		11
Total mortgage income	(58)		8		(98)		(42)
	$	(9)	$	12	$	(8)	$	14

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 June 30, 2022 was approximately $426 million. This scenario would occur if variable interest rates were at zero percent and all counterparties defaulted with zero recovery. The fair value of sold protection at June 30, 2022 and 2021 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 June 30, 2022 and December 31, 2021, were $99 million and $81 million, respectively, for which Regions had posted collateral of $113 million and $84 million, respectively, in the normal course of business.

NOTE 9. FAIR VALUE MEASUREMENTS

See Note 1 "Summary of Significant Accounting Policies" to the consolidated financial statements of the Annual Report on Form 10-K for the year ended December 31, 2021 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:


	June 30, 2022								December 31, 2021
	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	$	1,252	$	—	$	—	$	1,252	$	1,132	$	—	$	—	$	1,132
Federal agency securities	—		683		—		683		—		92		—		92
Obligations of states and political subdivisions	—		3		—		3		—		4		—		4
Mortgage-backed securities (MBS):
Residential agency	—		19,007		—		19,007		—		18,962		—		18,962
Residential non-agency	—		—		1		1		—		—		1		1
Commercial agency	—		6,607		—		6,607		—		6,373		—		6,373
Commercial non-agency	—		315		—		315		—		536		—		536
Corporate and other debt securities	—		1,183		1		1,184		—		1,380		1		1,381
Total debt securities available for sale	$	1,252	$	27,798	$	2	$	29,052	$	1,132	$	27,347	$	2	$	28,481
Loans held for sale	$	—	$	312	$	57	$	369	$	—	$	693	$	90	$	783
Marketable equity securities	$	583	$	—	$	—	$	583	$	464	$	—	$	—	$	464
Residential mortgage servicing rights	$	—	$	—	$	770	$	770	$	—	$	—	$	418	$	418
Derivative assets(2):
Interest rate swaps	$	—	$	1,490	$	—	$	1,490	$	—	$	919	$	—	$	919
Interest rate options	—		77		10		87		—		36		12		48
Interest rate futures and forward commitments	—		11		—		11		—		11		—		11
Other contracts	—		301		—		301		—		132		1		133
Total derivative assets	$	—	$	1,879	$	10	$	1,889	$	—	$	1,098	$	13	$	1,111

Derivative liabilities(2):
Interest rate swaps	$	—	$	2,091	$	—	$	2,091	$	—	$	855	$	—	$	855
Interest rate options	—		63		1		64		—		19		—		19
Interest rate futures and forward commitments	—		4		—		4		—		3		—		3
Other contracts	—		264		3		267		—		132		3		135
Total derivative liabilities	$	—	$	2,422	$	4	$	2,426	$	—	$	1,009	$	3	$	1,012

(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.

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 present an analysis for residential MSRs for the three and six months ended June 30, 2022 and 2021, respectively. An analysis of commercial mortgage loans held for sale is also presented for the three and six months ended June 30, 2022.


	Residential mortgage servicing rights
	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(In millions)
Carrying value, beginning of period	$	542	$	401	$	418	$	296
Total realized/unrealized gains (losses) included in earnings(1)	37		(54)		67		19
Additions	10		19		29		40
Purchases	181		26		256		37
Carrying value, end of period	$	770	$	392	$	770	$	392

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



	Commercial mortgage loans held for sale
	Three Months Ended June 30		Six Months Ended June 30
	2022		2022
	(In millions)
Carrying value, beginning of period	$	12	$	90

Total realized/unrealized gains (losses) included in earnings(1)	(2)		(5)
Additions	47		97
Sales	—		(125)
Carrying value, end of period	$	57	$	57

(1)Included in capital markets income.

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 4.

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.

The following tables present detailed information regarding material assets and liabilities measured at fair value using significant unobservable inputs (Level 3) as of June 30, 2022, and December 31, 2021. 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 June 30, 2022, and December 31, 2021, are included. Following the tables are descriptions of the valuation techniques and the sensitivity of the techniques to changes in the significant unobservable inputs.


	June 30, 2022
	Level 3 Estimated Fair Value at June 30, 2022	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)	$770	Discounted cash flow	Weighted-average CPR (%)	6.2% - 18.1% (7.9%)
			OAS (%)	4.4% - 8.2% (4.8%)

(1)See Note 4 for additional disclosures related to assumptions used in the fair value calculation for residential mortgage servicing rights.


	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%)

(1)See Note 6 to the consolidated financial statements of the Annual Report on Form 10-K for the year ended December 31, 2021 for additional disclosures related to assumptions used in the fair value calculation for residential mortgage servicing rights.

FAIR VALUE OPTION

As discussed above, the Company elected the option to measure certain commercial mortgage loans held for sale at fair value. At June 30, 2022, the balance of these loans was immaterial. At December 31, 2021, commercial mortgage loans held for sale at fair value had both an aggregate fair value and unpaid principal balance of $90 million.

The Company has elected the option 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 June 30, 2022 and December 31, 2021.

Regions has elected the fair value option for all eligible agency residential first 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 first 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.

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


	June 30, 2022						December 31, 2021
	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 first mortgage loans held for sale, at fair value	$	292	$	287	$	5	$	680	$	659	$	21

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 residential mortgage loans held for sale, which were recorded in mortgage income in the consolidated statements of income during the three and six months ended June 30, 2022 and 2021. 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.


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(In millions)
Net gains (losses) resulting for the change in fair value of residential first mortgage loans held for sale	$	(16)	$	10	$	(39)	$	(40)

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, 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 June 30, 2022 and December 31, 2021.

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 June 30, 2022 are as follows:


	June 30, 2022
	Carrying Amount		Estimated Fair Value(1)		Level 1		Level 2		Level 3
	(In millions)
Financial assets:
Cash and cash equivalents	$	20,500	$	20,500	$	20,500	$	—	$	—
Debt securities held to maturity	836		817		—		817		—
Debt securities available for sale	29,052		29,052		1,252		27,798		2
Loans held for sale	612		612		—		552		60
Loans (excluding leases), net of unearned income and allowance for loan losses(2)(3)	90,576		86,989		—		—		86,989
Other earning assets	1,428		1,428		583		845		—
Derivative assets	1,889		1,889		—		1,879		10
Financial liabilities:
Derivative liabilities	2,426		2,426		—		2,422		4
Deposits(4)	138,263		138,213		—		138,213		—

Long-term borrowings	2,319		2,462		—		2,460		2
Loan commitments and letters of credit	119		119		—		—		119

(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 discount on the loan portfolio's net carrying amount at June 30, 2022 was $3.6 billion or 4.0 percent.

(3)Excluded from this table is the sales-type, direct financing, and leveraged lease carrying amount of $1.5 billion at June 30, 2022.

(4)The fair value of non-interest-bearing demand accounts, interest-bearing checking 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.

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:


	December 31, 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(5)	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

(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.

(5)The fair value of non-interest-bearing demand accounts, interest-bearing checking 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.

NOTE 10. 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. Additional information about the Company's reportable segments is included in Regions' Annual Report on Form 10-K for the year ended December 31, 2021.

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 period was updated to reflect these enhancements.

The following tables present financial information for each reportable segment for the period indicated.


	Three Months Ended June 30, 2022
	Corporate Bank		Consumer Bank		Wealth Management		Other		Consolidated
	(In millions)
Net interest income	$	467	$	600	$	41	$	—	$	1,108
Provision for (benefit from) credit losses	67		69		2		(78)		60
Non-interest income (loss)	235		311		105		(11)		640
Non-interest expense (benefit)	286		567		100		(5)		948
Income before income taxes	349		275		44		72		740
Income tax expense (benefit)	87		69		11		(10)		157
Net income	$	262	$	206	$	33	$	82	$	583
Average assets	$	63,311	$	36,266	$	2,167	$	60,082	$	161,826


	Three Months Ended June 30, 2021
	Corporate Bank		Consumer Bank		Wealth Management		Other		Consolidated
	(In millions)
Net interest income	$	441	$	488	$	34	$	—	$	963
Provision for (benefit from) credit losses	75		59		3		(474)		(337)
Non-interest income	164		314		100		41		619
Non-interest expense	260		533		94		11		898
Income before income taxes	270		210		37		504		1,021
Income tax expense	68		53		9		101		231
Net income	$	202	$	157	$	28	$	403	$	790
Average assets	$	59,843	$	33,433	$	2,036	$	59,366	$	154,678


	Six Months Ended June 30, 2022
	Corporate Bank		Consumer Bank		Wealth Management		Other		Consolidated

	(In millions)
Net interest income	$	899	$	1,147	$	77	$	—	$	2,123
Provision for (benefit from) credit losses	135		140		5		(256)		24
Non-interest income (loss)	419		615		207		(17)		1,224
Non-interest expense (benefit)	564		1,124		197		(4)		1,881
Income before income taxes	619		498		82		243		1,442
Income tax expense	155		124		20		12		311
Net income	464		374		62		231		1,131
Average assets	$	61,810	$	36,265	$	2,153	$	61,550	$	161,778


	Six Months Ended June 30, 2021
	Corporate Bank		Consumer Bank		Wealth Management		Other		Consolidated

	(In millions)
Net interest income	$	875	$	987	$	68	$	—	$	1,930
Provision for (benefit from) credit losses	150		124		5		(758)		(479)
Non-interest income	357		645		192		66		1,260
Non-interest expense	530		1,066		186		44		1,826
Income before income taxes	552		442		69		780		1,843
Income tax expense	138		111		17		145		411
Net income	414		331		52		635		1,432
Average assets	$	59,657	$	33,749	$	2,041	$	55,191	$	150,638

NOTE 11. 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 is represented in unused commitments to extend credit, standby letters of credit and commercial letters of credit. Refer to Note 23 "Commitments, Contingencies and Guarantees" in the Annual Report on Form 10-K for the year ended December 31, 2021 for more information regarding these instruments.

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


	June 30, 2022		December 31, 2021
	(In millions)
Unused commitments to extend credit	$	64,688	$	60,935
Standby letters of credit	1,862		1,779
Commercial letters of credit	54		97
Liabilities associated with standby letters of credit	30		28
Assets associated with standby letters of credit	31		29
Reserve for unfunded credit commitments	89		95

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 that 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 June 30, 2022, with it also being reasonably possible that Regions could incur no losses in excess of amounts accrued. See related discussion with respect to the CFPB matter described below. 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

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 matters, and the aggregated estimated amount discussed above may not include an estimate for every pending matter.

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’ historical overdraft practices and policies. While Regions believes that its practices and policies at issue are lawful, Regions has commenced discussions with the CFPB regarding a potential resolution of the investigation. Regions cannot provide assurance that these discussions will result in a resolution or that the CFPB will not ultimately commence legal proceedings seeking civil monetary penalties, restitution or other relief. Although Regions continues to believe that a loss in excess of amounts accrued for this matter is reasonably possible, the total amount of such possible loss or range of possible loss cannot currently be estimated. However, any possible loss, whether a result of a resolution directly with the CFPB or legal proceedings, could be material to Regions’ results of operations.

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' business, 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 outcomes of litigation, claims, investigations and legal and administrative cases and proceedings are inherently unpredictable, management is currently of the opinion that the outcomes of pending and threatened matters 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 such matter could be material to Regions’ business, consolidated financial position, results of operations or cash flows as a whole 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 commercial servicing portfolio. At June 30, 2022 and December 31, 2021, the Company's DUS servicing portfolio totaled approximately $4.8 billion and $4.7 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 June 30, 2022 and December 31, 2021 these serviced loans totaled approximately $491 million and $400 million, respectively. Regions' maximum quantifiable contingent liability related to all loans subject to a loss share guarantee was approximately $1.7 billion at both June 30, 2022 and December 31, 2021. 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 at both June 30, 2022 and December 31, 2021. Refer to Note 1 "Summary of Significant Accounting Policies" in the Annual Report on Form 10-K for the year ended December 31, 2021, for additional information.

NOTE 12. RECENT ACCOUNTING PRONOUNCEMENTS


Standard	Description	Required Date of Adoption	Effect on Regions' financial statements or other significant matters
Standards Adopted (or partially adopted) in 2022
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	The adoption of this guidance did not have a 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)	This Update clarifies 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	The adoption of this guidance did not have a material impact.
ASU 2021-05 Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments	This Update amends the lessor lease classification guidance under ASC 842. 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 loss at a lease commencement. The amendments address concerns raised during the FASB’s post implementation review regarding recognition of an immediate loss for these leases, as would otherwise be required.	January 1, 2022	The adoption of this guidance did not have a material impact.


Standard	Description	Required Date of Adoption	Effect on Regions' financial statements or other significant matters
Standards Adopted (or partially adopted) in 2022
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.	The early adoption of this guidance did not have a material impact.
ASU 2022-01—Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method	This Update represents the final amended guidance to the ‘last-of-layer’ hedge model for fair value hedge relationships. The last-of-layer method allowed for essentially a single hedge for a given portfolio of only prepayable assets. The ‘portfolio layer’ method will make the hedging asset side of the balance sheet easier as it allows for more flexibility in the use of derivatives and structures that best align with management's objectives for hedging purposes. Multiple hedged layers are permitted in fair value hedge relationships for a closed portfolio of financial assets. Both prepayable and non-prepayable financial instruments may be used and included. The Update permits reclassification of debt securities from held-to-maturity to available-for-sale upon adoption with restrictions. Portfolio layer method hedging must be applied to those debt securities. Also, the decision to reclassify must be within 30 days after the date of adoption, and securities would need to be included in a closed portfolio that is designed in a portfolio layer method hedge within that 30-day period.	January 1, 2023 Early adoption is permitted.	The early adoption of this guidance on June 30, 2022 did not have a material impact.


Standard	Description	Required Date of Adoption	Effect on Regions' financial statements or other significant matters
Standards Not Yet Adopted
ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures	This Update is intended to improve the decision usefulness of information provided to investors about certain loan refinancings, restructurings, and write-offs. The amendments in the Update eliminate the accounting guidance for TDRs by creditors that have adopted CECL while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors made to borrowers experiencing financial difficulty. The Update also requires that a public business entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases. The amendments in this Update should be applied prospectively, except for the transition method related to the recognition and measurement of TDRs for which there is an option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption.	January 1, 2023 Early adoption is permitted for those entities that have adopted CECL.	Regions is evaluating the impact upon adoption; however, the impact is not expected to be material.
2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions	This Update clarifies how the fair value of equity securities subject to contractual sale restrictions is determined. ASU 2022-03 clarifies that a contractual sale restriction should not be considered in measuring fair value. It also requires entities with investments in equity securities subject to contractual sale restrictions to disclose certain qualitative and quantitative information about such securities.	January 1, 2023 Early adoption is permitted.	Regions is evaluating the impact upon adoption; however, the impact is not expected to be material.

Previous: Cover and table of contents · Next: Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations