Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

The following discussion and analysis is part of Regions Financial Corporation’s (“Regions” or the “Company”) Quarterly Report on Form 10-Q filed with the SEC and updates Regions’ Annual Report on Form 10-K for the year ended December 31, 2023, which was previously filed with the SEC. This financial information is presented to aid in understanding Regions’ financial position and results of operations and should be read together with the financial information contained in Regions’ Annual Report on Form 10-K. See Note 1 "Basis of Presentation" and Note 13 "Recent Accounting Pronouncements" to the consolidated financial statements for further detail. The emphasis of this discussion will be on the three months ended March 31, 2024 compared to the three months ended March 31, 2023 for the consolidated statements of income. For the consolidated balance sheets, the emphasis of this discussion will be on the balances as of March 31, 2024 compared to December 31, 2023.

This discussion and analysis contains statements that may be considered “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. See pages 6 through 8 for additional information regarding forward-looking statements.

CORPORATE PROFILE

Regions is a financial holding company headquartered in Birmingham, Alabama operating in the South, Midwest and Texas. In addition, Regions operates several offices delivering specialty capabilities in New York, Washington D.C., Chicago and other locations nationwide. Regions provides financial solutions for a wide range of clients including retail and mortgage banking services, commercial banking services and wealth and investment services. Further, Regions and its subsidiaries deliver specialty capabilities including merger and acquisition advisory services, capital markets solutions, home improvement lending and others.

Regions conducts its banking operations through Regions Bank, an Alabama state-chartered commercial bank that is a member of the Federal Reserve System. At March 31, 2024, Regions operated 1,263 total branch outlets. Regions carries out its strategies and derives its profitability from three reportable business segments: Corporate Bank, Consumer Bank, and Wealth Management, with the remainder in Other. See Note 11 "Business Segment Information" to the consolidated financial statements for more information regarding Regions’ segment reporting structure.

Regions’ business strategy is focused on providing a competitive mix of products and services, delivering quality customer service, and continuing to develop and optimize distribution channels that include a branch distribution network with offices in convenient locations, as well as electronic and mobile banking.

Regions’ profitability, like that of many other financial institutions, is dependent on its ability to generate revenue from net interest income as well as non-interest income sources. Net interest income is primarily the difference between the interest income Regions receives on interest-earning assets, such as loans, leases, investment securities and cash balances held at the Federal Reserve Bank, and the interest expense Regions pays on interest-bearing liabilities, principally deposits and borrowings. Regions’ net interest income is impacted by the size and mix of its balance sheet components and the interest rate spread between interest earned on its assets and interest paid on its liabilities. Non-interest income includes fees from service charges on deposit accounts, card and ATM fees, mortgage servicing and secondary marketing, investment management and trust activities, capital markets and other customer services which Regions provides. Results of operations are also affected by the provision for credit losses and non-interest expenses such as salaries and employee benefits, equipment and software expenses, occupancy, professional, legal and regulatory expenses, FDIC insurance assessments, and other operating expenses, as well as income taxes.

Economic conditions, competition, new legislation and related rules impacting regulation of the financial services industry and the monetary and fiscal policies of the Federal government significantly affect most, if not all, financial institutions, including Regions. Lending and deposit activities and fee income generation are influenced by levels of business spending and investment, consumer income, consumer spending and savings, capital market activities, and competition among financial institutions, as well as customer preferences, interest rate conditions and prevailing market rates on competing products in Regions’ market areas.

FIRST QUARTER OVERVIEW

First Quarter Results

Regions reported net income available to common shareholders of $343 million or $0.37 per diluted share in the first quarter of 2024 compared to net income available to common shareholders of $588 million or $0.62 per diluted share in the first quarter of 2023.

Net interest income (taxable-equivalent basis) totaled $1.2 billion in the first quarter of 2024 which decreased $233 million compared to the first quarter of 2023. The net interest margin (taxable-equivalent basis) was 3.55 percent in the first quarter of 2024, reflecting a 67 basis point decrease from the same period in 2023. The decreases in net interest income and net

interest margin were primarily driven by increases in deposit and funding costs due to market interest rates, including the impact of deposit remixing. This was partially offset by higher asset yields benefiting from the maturity and replacement of lower-yielding, fixed rate loans and securities.

The provision for credit losses totaled $152 million in the first quarter of 2024 compared to $135 million in the first quarter of 2023. The current quarter provision reflects continued normalization of asset quality, adverse risk migration and incrementally higher qualitative adjustments for risk in certain portfolios previously identified as under stress. Net charge-offs totaled $121 million, or 0.50 percent of average loans, in the first quarter of 2024, compared to $83 million, or 0.35 percent in the first quarter of 2023. Charge-offs increased reflecting higher commercial and other consumer net charge-offs. The allowance as a percent of total loans, net, increased to 1.79 percent at March 31, 2024, compared to 1.73 percent at December 31, 2023. Refer to the "Allowance for Credit Losses" section for further detail.

Non-interest income was $563 million in the first quarter of 2024 compared to $534 million in first quarter of 2023. The increase was primarily driven by increases in capital markets income, mortgage income and positive market valuation adjustments on employee benefit assets. The increases were partially offset by securities losses associated with portfolio repositioning executed in the first quarter of 2024. See Table 23 "Non-Interest Income" for further details.

Non-interest expense was $1.1 billion in the first quarter of 2024 compared to $1.0 billion in first quarter of 2023. The increase was driven by an increase in salaries and benefits, operational losses, FDIC assessment expense due to an industry-wide special assessment and other miscellaneous expenses. See Table 24 "Non-Interest Expense" for further details.

Regions' effective tax rate was 20.7 percent in the first quarter of 2024 compared to 22.4 percent in the first quarter of 2023. See the "Income Taxes" section for further details.

Capital

Regions and Regions Bank are required to comply with regulatory capital requirements established by Federal and State banking agencies, which include quantitative requirements including the CET1 ratio. At March 31, 2024, Regions’ CET1 ratio was estimated to be 10.32 percent. For additional information on Regions' regulatory capital requirements see the "Regulatory Requirements" section.

Regions participates in supervisory stress testing conducted by the Federal Reserve and its SCB is currently floored at 2.5 percent. See Note 6 "Shareholders' Equity and Accumulated Other Comprehensive Income (Loss)" to the consolidated financial statements for further details.

The Board authorized, on April 20, 2022, 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. In the first three months of 2024, the Company repurchased 6 million shares of common stock totaling $102 million.

Expectations


2024 Expectations (1)
Category						Expectation
Net Interest Income(2)						$4.7-$4.8 billion
Adjusted Non-Interest Income						$2.3-$2.4 billion
Adjusted Non-Interest Expense						approximately $4.1 billion
Average Loans						stable to down modestly
Average Deposits						stable to down modestly
Net Charge-Offs / Average Loans						40-50 basis points
Effective Tax Rate						approximately 21%

(1)Expectation for CET1 is to continue to manage consistent with current levels over the near term.

(2)Expectation for net interest income assumes stable or lower short-term interest rates; flat long-term rate held at March 31, 2024 levels.

The reconciliation with respect to these forward-looking non-GAAP measures is expected to be consistent with the actual non-GAAP reconciliations within Management's Discussion and Analysis of this Form 10-Q. For more information related to the Company's 2024 expectations, refer to the related sub-sections discussed in more detail within Management's Discussion and Analysis of this Form 10-Q.

BALANCE SHEET ANALYSIS

The following sections provide expanded discussion of significant changes in certain line items in asset, liability, and shareholders' equity categories.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents increased approximately $4.4 billion from year-end 2023 to March 31, 2024 resulting from an increase in cash balances on deposit with the Federal Reserve Bank driven partly by FHLB advances utilized in the first quarter of 2024. Cash balances were also impacted by a decline in loans and an increase in deposits. See the "Loans" "Liquidity", "Deposits", and "Borrowed Funds" sections for more information.

DEBT SECURITIES

The following table details the carrying values of debt securities, including both available for sale and held to maturity:

Table 1—Debt Securities


	March 31, 2024		December 31, 2023
	(In millions)
U.S. Treasury securities	$	1,110	$	1,223
Federal agency securities	545		1,043
Obligations of states and political subdivisions	2		2
Mortgage-backed securities:
Residential agency	18,579		17,611

Commercial agency	7,291		7,822
Commercial non-agency	82		83
Corporate and other debt securities	1,015		1,074
	$	28,624	$	28,858

Debt securities available for sale, comprising 20 percent of earning assets, constitute approximately 97 percent of the securities portfolio. They are an important tool used to manage interest rate sensitivity and provide a primary source of liquidity for the Company, as much of the portfolio is highly liquid. Additionally, some of the securities portfolio is eligible to be used as collateral for funding of various types of borrowings. See the "Liquidity" section for more information on these arrangements. Regions maintains a highly-rated securities portfolio consisting primarily of agency MBS. See Note 3 "Debt Securities" to the consolidated financial statements for additional information. Also see the "Market Risk-Interest Rate Risk" section for more information.

Debt securities decreased $234 million from December 31, 2023 to March 31, 2024 driven by market value adjustments. Additionally, in the first quarter the Company sold approximately $1.3 billion of debt securities available for sale, realizing $50 million in pre-tax losses. The proceeds were reinvested at yields approximately 190 basis points higher. The duration of the entire securities portfolio was extended 0.15 years. The portfolio mix and liquidity were largely unchanged.

The average life of the debt securities portfolio at March 31, 2024 was estimated to be 5.6 years, with a duration of approximately 4.6 years. These metrics compare with an estimated average life of 5.5 years and a duration of approximately 4.5 years for the portfolio at December 31, 2023.

LOANS HELD FOR SALE

The following table presents Regions’ loans held for sale by type:

Table 2—Loans Held for Sale


	March 31, 2024		December 31, 2023
	(In millions)
Commercial	$	182	$	208
Residential first mortgage	232		184
Consumer and other performing	—		5
Non-performing	3		3
	$	417	$	400

Commercial loans held for sale include commercial mortgage loans originated for sale to third parties and commercial loans originally recorded as held for investment when management has the intent to sell. Levels of commercial loans held for sale fluctuate based on timing of sale to third parties. The levels of residential first mortgage loans held for sale that are part of the Company's mortgage originations fluctuate depending on the timing of origination and sale to third parties.

LOANS

Loans, net of unearned income, represented 71 percent of interest-earning assets as of March 31, 2024. The following table presents the distribution of Regions' loan portfolio segment and class, net of unearned income:

Table 3—Loan Portfolio


	March 31, 2024		December 31, 2023
	(In millions, net of unearned income)
Commercial and industrial	$	49,701	$	50,865
Commercial real estate mortgage—owner-occupied	4,788		4,887
Commercial real estate construction—owner-occupied	306		281
Total commercial	54,795		56,033
Commercial investor real estate mortgage	6,422		6,605
Commercial investor real estate construction	2,341		2,245
Total investor real estate	8,763		8,850
Residential first mortgage	20,199		20,207
Home equity lines	3,155		3,221
Home equity loans	2,415		2,439
Consumer credit card	1,314		1,341
Other consumer—exit portfolios	28		43
Other consumer	6,193		6,245
Total consumer	33,304		33,496
	$	96,862	$	98,379

PORTFOLIO CHARACTERISTICS

The following sections describe the composition of the portfolio segments and classes disclosed in Table 3, explain changes in balances from year-end 2023 and highlight the related risk characteristics. Regions believes that its loan portfolio is well diversified by product, client, and geography throughout its footprint. However, the loan portfolio may be exposed to certain concentrations of credit risk which exist in relation to individual borrowers or groups of borrowers, certain types of collateral, certain types of industries and certain loan products. See Note 4 "Loans and the Allowance for Credit Losses" to the consolidated financial statements for additional discussion. See the "First Quarter Overview" section for details on expectations for loans in 2024.

Commercial

The commercial portfolio segment includes commercial and industrial loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases and other expansion projects. Commercial and industrial loans decreased $1.2 billion since year-end 2023, driven by approximately $870 million in commercial loans refinanced off the Company's balance sheet through the debt capital markets. In the first three months of 2024, the decline in commercial and industrial loans was broad-based as shown in Table 4.

The commercial portfolio also includes owner-occupied commercial real estate mortgage loans to operating businesses, which are loans for long-term financing on land and buildings, and are repaid by cash generated by business operations. Owner-occupied commercial real estate construction loans are made to commercial businesses for the development of land or construction of a building where the repayment is derived from revenues generated from the business of the borrower.

Over half of the Company’s total loans are included in the commercial portfolio segment. These balances are spread across numerous industries, as noted in the table below. The Company manages the related risks to this portfolio by setting certain lending limits for each significant industry.

The following tables provide detail of Regions' commercial lending balances in selected industries.

Table 4—Commercial Industry Exposure


	March 31, 2024
	Loans		Unfunded Commitments		Total Exposure
	(In millions)
Administrative, support, waste and repair	$	1,525	$	782	$	2,307
Agriculture	239		179		418
Educational services	3,463		827		4,290
Energy	1,572		3,363		4,935
Financial services	7,370		9,195		16,565
Government and public sector	3,053		463		3,516
Healthcare	3,313		2,356		5,669
Information	2,527		1,360		3,887
Manufacturing	4,881		4,818		9,699
Professional, scientific and technical services	2,286		1,730		4,016
Real estate (1)	9,017		8,651		17,668
Religious, leisure, personal and non-profit services	1,572		717		2,289
Restaurant, accommodation and lodging	1,352		283		1,635
Retail trade	2,613		2,103		4,716
Transportation and warehousing	3,496		1,813		5,309
Utilities	2,408		3,218		5,626
Wholesale goods	4,112		3,515		7,627
Other (2)	(4)		1,899		1,895
Total commercial	$	54,795	$	47,272	$	102,067


	December 31, 2023 (3)
	Loans		Unfunded Commitments		Total Exposure
	(In millions)
Administrative, support, waste and repair	$	1,461	$	916	$	2,377
Agriculture	239		208		447
Educational services	3,502		827		4,329
Energy	1,484		3,349		4,833
Financial services	7,562		8,428		15,990
Government and public sector	3,161		414		3,575
Healthcare	3,216		2,478		5,694
Information	2,791		1,250		4,041
Manufacturing	4,789		5,122		9,911
Professional, scientific and technical services	2,328		1,799		4,127
Real estate (1)	9,166		9,219		18,385
Religious, leisure, personal and non-profit services	1,562		630		2,192
Restaurant, accommodation and lodging	1,408		289		1,697
Retail trade	2,764		2,327		5,091
Transportation and warehousing	3,486		1,858		5,344
Utilities	3,044		2,732		5,776
Wholesale goods	4,006		3,768		7,774
Other (2)	64		1,511		1,575
Total commercial	$	56,033	$	47,125	$	103,158

(1)"Real estate" includes REITs, which are unsecured commercial and industrial products that are real estate related. This portfolio, which accounts for

approximately 17 percent and 18 percent of the total commercial exposure at March 31, 2024 and December 31, 2023, respectively, is well diversified, generally has low leverage with strong access to liquidity, and the REITs

included in this portfolio are primarily investment or near investment grade.

(2)"Other" contains balances related to non-classifiable and invalid business industry codes offset by payments in process and fee accounts that are not available at the loan level.

(3)As customers' businesses evolve (e.g. up or down the vertical manufacturing chain), Regions may need to change the assigned business industry code used to define the customer relationship. When these changes occur, Regions does not recast the customer history for prior periods into the new classification because the business industry code used in the prior period was deemed appropriate. As a result, year over year changes may be impacted.

Investor Real Estate

Loans for real estate development are repaid through cash flows related to the operation, sale or refinance of the property. This portfolio segment includes extensions of credit to real estate developers or investors where repayment is dependent on the sale of real estate or income generated from the real estate collateral. A portion of Regions’ investor real estate portfolio segment consists of loans secured by residential product types (land, single-family and condominium loans) within Regions’ markets. Additionally, this category includes loans made to finance income-producing properties such as apartment buildings, office and industrial buildings, and retail shopping centers. Total investor real estate loans decreased $87 million in comparison to year-end 2023 balances.

The Company's total non-owner-occupied commercial real estate lending consists of both unsecured commercial and industrial loans that are real estate related (including REITs) and investor real estate loans and are considered to be well diversified across property types. The following table provides detail of these loans:

Table 5— Unsecured Commercial Real Estate and Investor Real Estate Exposure


	March 31, 2024
	Loan Balance		Percent of Total (1)
	(In millions)
Residential homebuilders	$	992	6.5	%
Apartments	4,052		26.4	%
Industrial	2,229		14.5	%
Data center	314		2.0	%
Diversified	2,034		13.2	%
Business offices	1,504		9.8	%
Residential land	93		0.6	%
Retail	1,396		9.1	%
Healthcare	1,382		9.0	%
Hotel	785		5.1	%
Commercial land	17		0.1	%
Other	564		3.7	%
Total (2)	$	15,362	100	%

(1)Amounts calculated based on whole dollar values.

(2)Owner-occupied commercial real estate is not included as the principal source of repayment is individual businesses, which more closely aligns with the commercial portfolio credit performance.

Within the commercial real estate lending exposures detailed in Table 5 above, the multi-family (listed as apartments), business offices, and senior housing (listed as healthcare) portfolios have been previously identified as under stress due to conditions such as inflationary pressures, higher interest rates, and adverse underlying market fundamentals resulting in rising vacancies and reductions in net effective rents. See also the allowance discussion following Table 8. The following paragraphs provide more detail on these portfolios.

Multi-family loans represent loans to finance a residence to two or more tenants. The multi-family portfolio represented 4.2 percent of total loans at March 31, 2024. The portfolio is predominantly secured and largely located within the south, and expectations are that the portfolio stress will be temporary absent exogenous factors related to the economy or interest rates. As of March 31, 2024, approximately 86 percent of the multi-family portfolio was secured and approximately 83 percent was located in the Sunbelt region of the U.S. Additionally, the IRE multi-family portfolio had a weighted-average LTV of approximately 50 percent of committed balances at March 31, 2024, based upon appraisal at origination or most recent received, and a stressed weighted-average LTV of approximately 70 percent as of April 4, 2024, based upon GreenStreet's Commercial Property Price Index. Approximately 45 percent of the multi-family portfolio will mature in the next 12 months, including matured balances.

Business office loans represent loans to finance office buildings. The office portfolio represented 1.6 percent of total loans at March 31, 2024. Demonstrating client selectivity, approximately 93 percent of IRE office balances were comprised of Class A properties with approximately 76 percent of IRE office balances in suburban locations. Approximately 61 percent of the IRE office portfolio was comprised of multi-tenant buildings, and of the 39 percent that was single-tenant, approximately 80 percent were investment grade tenants. As of March 31, 2024, approximately 94 percent of the office portfolio was secured with approximately 61 percent of secured balances located in the Sunbelt region of the U.S. Additionally, the IRE office portfolio had a weighted-average LTV of approximately 65 percent of committed balances at March 31, 2024, based upon appraisal at origination or most recent received, and a stressed weighted-average LTV of approximately 105 percent as of April 4, 2024, based upon GreenStreet's Commercial Property Price Index. Approximately 51 percent of the office portfolio will mature in the next 12 months, including matured balances.

Senior housing loans represent loans to finance properties built to meet the housing needs of older adults such as independent living, assisted living and nursing homes. The senior housing sector has faced many challenges unique to it during and since the pandemic; however, market fundamentals continue to bounce back from lows experienced in the pandemic. The portfolio represented 1.4 percent of total loans at March 31, 2024.

Residential First Mortgage

Residential first mortgage loans represent loans to consumers to finance a residence. These loans are typically financed over a 15 to 30 year term and, in most cases, are extended to borrowers to finance their primary residence. Total residential first mortgage loans decreased $8 million in comparison to year-end 2023 balances.

Home Equity Lines

Home equity lines are secured by a first or second mortgage on the borrower's residence and allow customers to borrow against the equity in their homes. Home equity lines decreased $66 million in comparison to year-end 2023 balances, as payoffs and paydowns continue to outpace production. Substantially all of this portfolio was originated through Regions’ branch network.

Beginning in December 2016, new home equity lines of credit have a 10-year draw period and a 20-year repayment term. During the 10-year draw period customers do not have an interest-only payment option, except on a very limited basis. From May 2009 to December 2016, home equity lines of credit had a 10-year draw period and a 10-year repayment term. Prior to May 2009, the predominant structure was a 20-year draw period with a balloon payment upon maturity. The term “balloon payment” means there are no principal payments required until the balloon payment is due for interest-only lines of credit.

The following table presents information regarding the future principal payment reset dates for the Company's home equity lines of credit as of March 31, 2024. The balances presented are based on maturity date for lines with a balloon payment and draw period expiration date for lines that convert to a repayment period.

Table 6—Home Equity Lines of Credit - Future Principal Payment Resets


	First Lien		% of Total		Second Lien		% of Total		Total
	(Dollars in millions)
2024	$	70	2.22	%	$	46	1.46	%	$	116
2025	81		2.57	%	83		2.63	%	164
2026	110		3.49	%	118		3.75	%	228
2027	283		8.98	%	234		7.41	%	517
2028	273		8.64	%	181		5.73	%	454
2029-2033	643		20.37	%	884		28.01	%	1,527
2034-2038	24		0.76	%	42		1.32	%	66
>=2039	4		0.14	%	3		0.11	%	7
Revolving Loans Converted to Amortizing	44		1.40	%	32		1.01	%	76
Total	$	1,532	48.57	%	$	1,623	51.43	%	$	3,155

Home Equity Loans

Home equity loans are also secured by a first or second mortgage on the borrower's residence, are primarily originated as amortizing loans, and allow customers to borrow against the equity in their homes. Substantially all of this portfolio was originated through Regions’ branch network.

Consumer Credit Quality Data

The Company calculates an estimate of the current value of property secured as collateral for both residential first mortgage and home equity lending products (“current LTV”). The estimate is based on home price indices compiled by a third party. The third party data indicates trends for MSAs. Regions uses the third party valuation trends from the MSAs in the Company's footprint in its estimate. The trend data is applied to the loan portfolios taking into account the age of the most recent valuation and geographic area.

The following table presents current LTV data for components of the residential first mortgage, home equity lines and home equity loans classes of the consumer portfolio segment. Current LTV data for some loans in the portfolio is not available due to mergers and systems integrations. The amounts in the table represent the entire loan balance. For purposes of the table below, if the loan balance exceeds the current estimated collateral the entire balance is included in the “Above 100%” category, regardless of the amount of collateral available to partially offset the shortfall.

Table 7—Estimated Current Loan to Value Ranges


	March 31, 2024
	Residential First Mortgage			Home Equity Lines of Credit						Home Equity Loans
			1st Lien			2nd Lien			1st Lien			2nd Lien
	(In millions)
Estimated current LTV:
Above 100%	$	74		$	2		$	—		$	2		$	—
Above 80% - 100%	1,898			3			4			5			11
80% and below	17,887			1,512			1,608			2,003			390
Data not available	340			15			11			4			—
	$	20,199		$	1,532		$	1,623		$	2,014		$	401


	December 31, 2023
	Residential First Mortgage			Home Equity Lines of Credit						Home Equity Loans
			1st Lien			2nd Lien			1st Lien			2nd Lien
	(In millions)
Estimated current LTV:													`
Above 100%	$	57		$	2		$	—		$	2		$	—
Above 80% - 100%	1,822			3			2			5			7
80% and below	17,981			1,567			1,619			2,055			365
Data not available	347			15			13			5			—
	$	20,207		$	1,587		$	1,634		$	2,067		$	372

Consumer Credit Card

Consumer credit card lending represents primarily open-ended variable interest rate consumer credit card loans.

Other Consumer—Exit Portfolios

Exit portfolios primarily include include lending initiatives through third parties consisting of loans made through automotive dealerships. Regions ceased originating new loans related to these businesses prior to 2020 and therefore the portfolio balances have been in run-off.

Other Consumer

Other consumer loans primarily include indirect and direct consumer loans, overdrafts and other revolving loans. Other consumer loans decreased $52 million from year-end 2023.

Regions considers factors such as periodic updates of FICO scores, unemployment, home prices, and geography as credit quality indicators for consumer loans. FICO scores are obtained at origination and refreshed FICO scores are obtained by the Company quarterly for most consumer loans. For more information on credit quality indicators refer to Note 4 "Loans and the Allowance for Credit Losses".

ALLOWANCE

The allowance consists of two components: the allowance for loan losses and the reserve for unfunded credit commitments. Unfunded credit commitments includes items such as letters of credit, financial guarantees and binding unfunded loan commitments. The allowance totaled $1.7 billion at March 31, 2024 and December 31, 2023, which represents management's best estimate of expected losses over the life of the loan and credit commitment portfolios.

The table below reflects a range of macroeconomic factors utilized in the Base forecast over the two-year R&S forecast period as of March 31, 2024. The unemployment rate is the most significant macroeconomic factor among the allowance models and is expected to remain relatively consistent over the forecast period.

Table 8— Macroeconomic Factors in the Forecast


	Pre-R&S Period			Base R&S Forecast
March 31, 2024
1Q2024			2Q2024			3Q2024			4Q2024			1Q2025			2Q2025			3Q2025			4Q2025			1Q2026
Real GDP, annualized % change	1.9	%		1.8	%		2.2	%		2.5	%		2.6	%		2.7	%		2.4	%		2.4	%		2.2	%
Unemployment rate	3.8	%		3.9	%		3.9	%		4.0	%		4.1	%		4.1	%		4.0	%		4.0	%		3.9	%
HPI, year-over-year % change	5.7	%		5.2	%		3.7	%		2.6	%		2.5	%		3.0	%		3.8	%		4.4	%		4.7	%
CPI, year-over-year % change	3.2	%		3.1	%		2.8	%		2.7	%		2.5	%		2.4	%		2.4	%		2.4	%		2.4	%

In deriving any forecast, Regions benchmarks its internal forecast with external forecasts and external data available. Regions' March 2024 baseline forecast was generally improved compared to the December 2023 forecast. Lower interest rates and slow inflation will support consumer spending, while business investment in machinery and equipment will remain uneven over the first half of 2024 before recovering. The trend of job growth is slowing, and the baseline forecast anticipates further deceleration into 2024. The labor force participation rate remaining below pre-pandemic levels will limit increases in the unemployment rate. As measured by CPI, inflation is expected to slow further but remain above the FOMC's 2.0 percent target through 2024. The risks to the baseline forecast are considered to be balanced.

Credit metrics are monitored throughout each quarter in order to understand external macro-views, trends and industry outlooks, as well as Regions' internal specific views of credit metrics and trends. In the first quarter of 2024, asset quality continued to normalize, as expected. Commercial and investor real estate criticized balances increased approximately $319 million, which included an increase in classified balances of $406 million compared to the fourth quarter of 2023. Non-performing loans, excluding held for sale, increased approximately $101 million compared to the fourth quarter of 2023. The increases in criticized and non-performing loans were due to downgrades within loan categories previously identified as under stress. Total net charge-offs decreased by four basis points to 0.50% of average loans compared to the fourth quarter of 2023. See Table 11 for more details regarding non-performing assets.

While it is the intent of Regions' quantitative allowance methodologies to reflect all risk factors, any estimate involves assumptions and uncertainties resulting in some level of imprecision. The qualitative framework has a general imprecision component which is meant to acknowledge that model and forecast errors are inherent in any modeling estimate. In the first quarter of 2024, the general imprecision remained stable.

Based upon the factors discussed above, the March 31, 2024 allowance increased 1.8% compared to the fourth quarter of 2023 due to adverse risk migration and continued credit normalization, as well as a build in qualitative adjustments for incremental risk in portfolios previously identified as under stress. Based on the overall analysis performed, management deemed an allowance of $1.7 billion to be appropriate to absorb expected credit losses in the loan and credit commitment portfolios as of March 31, 2024.

Details regarding the allowance and net charge-offs, including an analysis of activity from previous year's totals, are included in Table 9 "Allowance for Credit Losses". Net charge-offs increased $38 million year-over-year, primarily driven by increases in commercial and industrial and other consumer net charge-offs resulting from continued expected normalization. As noted, economic trends such as interest rates, unemployment, volatility in commodity prices, collateral valuations and inflationary pressure will impact the future levels of net charge-offs and may result in volatility of certain credit metrics in 2024 and beyond. See the "First Quarter Overview" section for details on expectations for net charge-offs in 2024.

Table 9—Allowance for Credit Losses


	Three Months Ended March 31
	2024			2023
	(Dollars in millions)
Allowance for loan losses at January 1	$	1,576		$	1,464
Cumulative effect from change in accounting guidance (1)	—			(38)
Allowance for loan losses, January 1 (as adjusted for change in accounting guidance) (1)	1,576			1,426

Loans charged-off:
Commercial and industrial	62			49


Commercial investor real estate mortgage	5			—

Residential first mortgage	1			—
Home equity lines	1			1

Consumer credit card	16			12
Other consumer—exit portfolios	1			5
Other consumer	55			38
	141			105
Recoveries of loans previously charged-off:
Commercial and industrial	8			10


Commercial investor real estate mortgage	1			—

Residential first mortgage	1			—
Home equity lines	2			3

Consumer credit card	2			2
Other consumer—exit portfolios	1			1
Other consumer	5			6
	20			22


Net charge-offs (recoveries):
Commercial and industrial	54			39


Commercial investor real estate mortgage	4			—

Residential first mortgage	—			—
Home equity lines	(1)			(2)

Consumer credit card	14			10
Other consumer—exit portfolios	—			4
Other consumer	50			32
	121			83
Provision for loan losses	162			129

Allowance for loan losses at March 31	1,617			1,472

Reserve for unfunded credit commitments at January 1	124			118


Provision for (benefit from) unfunded credit losses	(10)			6
Reserve for unfunded credit commitments at March 31	114			124
Allowance for credit losses at March 31	$	1,731		$	1,596
Loans, net of unearned income, outstanding at end of period	$	96,862		$	98,057
Average loans, net of unearned income, outstanding for the period	$	97,420		$	97,277


Net loan charge-offs (recoveries) as a % of average loans, annualized (2):
Commercial and industrial	0.43		%	0.31		%
Commercial real estate mortgage—owner-occupied	0.02		%	(0.02)		%
Commercial real estate construction—owner-occupied	(0.01)		%	(0.05)		%
Total commercial	0.40		%	0.28		%
Commercial investor real estate mortgage	0.21		%	—		%

Total investor real estate	0.15		%	—		%
Residential first mortgage	(0.01)		%	—		%
Home equity lines	(0.10)		%	(0.22)		%
Home equity loans	(0.02)		%	(0.03)		%
Consumer credit card	4.39		%	3.47		%
Other consumer—exit portfolios	(4.03)		%	2.69		%
Other consumer	3.24		%	2.26		%
Total consumer	0.76		%	0.55		%
Total	0.50		%	0.35		%
Ratios (2):
Allowance for credit losses at end of period to loans, net of unearned income	1.79		%	1.63		%

Allowance for loan losses to loans, net of unearned income	1.67		%	1.50		%
Allowance for credit losses at end of period to non-performing loans, excluding loans held for sale	191		%	288		%
Allowance for loan losses to non-performing loans, excluding loans held for sale	179		%	266		%

(1)See Note 1 "Summary of Significant Accounting Policies" in the Annual Report on Form 10-K for the year ended December 31, 2023 for additional information.

(2)Amounts have been calculated using whole dollar values.

Allocation of the allowance for credit losses by portfolio segment and class is summarized as follows:

Table 10—Allowance Allocation


	March 31, 2024						December 31, 2023
	Loan Balance		Allowance Allocation		Allowance to Loans %(1)			Loan Balance		Allowance Allocation		Allowance to Loans %(1)
	(Dollars in millions)
Commercial and industrial	$	49,701	$	730	1.47	%		$	50,865	$	697	1.37	%
Commercial real estate mortgage—owner-occupied	4,788		106		2.21			4,887		110		2.25
Commercial real estate construction—owner-occupied	306		7		2.36			281		7		2.38
Total commercial	54,795		843		1.54			56,033		814		1.45
Commercial investor real estate mortgage	6,422		187		2.91			6,605		169		2.56
Commercial investor real estate construction	2,341		34		1.44			2,245		36		1.63
Total investor real estate	8,763		221		2.52			8,850		205		2.32
Residential first mortgage	20,199		102		0.51			20,207		100		0.50
Home equity lines	3,155		79		2.51			3,221		80		2.49
Home equity loans	2,415		23		0.95			2,439		23		0.94
Consumer credit card	1,314		134		10.17			1,341		138		10.24
Other consumer—exit portfolios	28		1		3.81			43		1		3.09
Other consumer	6,193		328		5.29			6,245		339		5.43
Total consumer	33,304		667		2.00			33,496		681		2.03
Total	$	96,862	$	1,731	1.79	%		$	98,379	$	1,700	1.73	%

(1)Amounts have been calculated using whole dollar values.

NON-PERFORMING ASSETS

The following table presents non-performing assets as of March 31, 2024 and December 31, 2023:

Table 11—Non-Performing Assets


	March 31, 2024			December 31, 2023
	(Dollars in millions)
Non-performing loans:
Commercial and industrial	$	556		$	471
Commercial real estate mortgage—owner-occupied	40			36
Commercial real estate construction—owner-occupied	10			8
Total commercial	606			515
Commercial investor real estate mortgage	241			233

Total investor real estate	241			233
Residential first mortgage	22			22
Home equity lines	31			29
Home equity loans	6			6

Total consumer	59			57

Total non-performing loans, excluding loans held for sale	906			805
Non-performing loans held for sale	3			3
Total non-performing loans(1)	909			808
Foreclosed properties	13			15

Total non-performing assets(1)	$	922		$	823
Accruing loans 90+ days past due:
Commercial and industrial	7			11


Total commercial	7			11
Commercial investor real estate mortgage	—			23

Total investor real estate	—			23
Residential first mortgage(2)	69			61
Home equity lines	19			20
Home equity loans	7			7
Consumer credit card	19			20

Other consumer	26			29
Total consumer	140			137
Total accruing loans 90+ days past due	$	147		$	171

Non-performing loans(1) to loans and non-performing loans held for sale	0.94		%	0.82		%
Non-performing loans, excluding loans held for sale(1) to loans	0.94		%	0.82		%
Non-performing assets(1) to loans, foreclosed properties and non-performing loans held for sale	0.95		%	0.84		%

(1)Excludes accruing loans 90+ days past due.

(2)Excludes residential first mortgage loans that are 100% guaranteed by the FHA and all guaranteed loans sold to Ginnie Mae where Regions has the right but not the obligation to repurchase. Total 90+ days or more past due guaranteed loans excluded were $44 million at March 31, 2024 and $34 million at December 31, 2023.

Non-performing loans at March 31, 2024 increased $101 million as compared to year-end 2023 levels as a result of continued asset quality normalization and downgrades within industries previously identified as higher risk such as office, professional services, transportation, and manufacturing. The same economic trends that impact net charge-offs, as discussed above, will impact the future level of non-performing assets. Circumstances related to individually large credits could also result in volatility.

The following tables provide an analysis of non-accrual loans (excluding loans held for sale) by portfolio segment:

Table 12— Analysis of Non-Accrual Loans


	Non-Accrual Loans, Excluding Loans Held for Sale for the Three Months Ended March 31, 2024
	Commercial		Investor Real Estate		Consumer(1)		Total
	(In millions)
Balance at beginning of period	$	515	$	233	$	57	$	805
Additions	231		48		—		279
Net payments/other activity	(76)		(36)		2		(110)
Return to accrual	(2)		—		—		(2)
Charge-offs on non-accrual loans(2)	(60)		(4)		—		(64)
Transfers to held for sale(3)	(2)		—		—		(2)


Balance at end of period	$	606	$	241	$	59	$	906


	Non-Accrual Loans, Excluding Loans Held for Sale for the Three Months Ended March 31, 2023
	Commercial		Investor Real Estate		Consumer(1)		Total
	(In millions)
Balance at beginning of period	$	382	$	53	$	65	$	500
Additions	109		17		—		126
Net payments/other activity	—		(3)		(3)		(6)
Return to accrual	(18)		—		—		(18)
Charge-offs on non-accrual loans(2)	(47)		—		—		(47)
Transfers to held for sale(3)	(1)		—		—		(1)


Balance at end of period	$	425	$	67	$	62	$	554

(1)All net activity within the consumer portfolio segment other than sales and transfers to held for sale (including related charge-offs) is included as a single net number within the net payments/other activity line.

(2)Includes charge-offs on loans on non-accrual status and charge-offs taken upon sale and transfer of non-accrual loans to held for sale.

(3)Transfers to held for sale are shown net of charge-offs recorded upon transfer.

GOODWILL

Goodwill totaled $5.7 billion at both March 31, 2024 and December 31, 2023. Refer to Note 1 "Summary of Significant Accounting Policies" and Note 9 "Intangible Assets" to the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2023 for the methodologies and assumptions used in the goodwill impairment analysis.

DEPOSITS

Regions competes with other banking and financial services companies for a share of the deposit market. Regions’ ability to compete in the deposit market depends heavily on the pricing of its deposits and how effectively the Company meets customers’ needs. Regions employs various means to meet those needs and enhance competitiveness, such as providing a high level of customer service, competitive pricing and convenient branch locations for its customers. Regions also serves customers through providing centralized, high-quality banking services through the Company's digital channels and contact center.

The following table summarizes deposits by category and by segment:

Table 13—Deposits by Category and by Segment


	March 31, 2024		December 31, 2023
	(In millions)
Non-interest-bearing demand	$	41,824	$	42,368
Interest-bearing checking	24,668		24,480
Savings	12,786		12,604
Money market—domestic	34,251		33,364

Time deposits	15,453		14,972



	$	128,982	$	127,788

Consumer Bank segment	$	81,129	$	80,031
Corporate Bank segment	37,043		36,883
Wealth Management segment	7,792		7,694
Other (1)(2)	3,018		3,180
	$	128,982	$	127,788

(1) Other deposits represent non-customer balances primarily consisting of wholesale funding (for example, Eurodollar trade deposits, selected deposits and brokered time deposits).

(2) Includes brokered deposits totaling $2.3 billion at March 31, 2024 and $2.4 billion at December 31, 2023.

Total deposits at March 31, 2024 increased approximately $1.2 billion across most segments and categories compared to year-end 2023 levels, which is typical for first quarter tax refund season. While the pace has slowed, balances reflect continued remixing out of non-interest-bearing into interest-bearing products.

Regions' deposits are granular and diversified including insured and collateralized deposits, with consumer deposits making up more than 60 percent of the total deposit base. Furthermore, corporate deposits include those that are operational in nature (where the primary use is certain operational services such as clearing, custody, payments or other cash management activities). A significant amount of the Company's deposit base is insured by the FDIC or collateralized, with approximately $11.1 billion in deposits collateralized in public funds or in trusts at March 31, 2024. The amount of estimated uninsured deposits totaled $48.7 billion at March 31, 2024, therefore over 60 percent of total deposits are insured by the FDIC. The granularity of the Company's deposits is evidenced by an average deposit account balance of approximately $18 thousand at March 31, 2024. The estimates of uninsured deposits and average account size were based on methodologies used in the Company's Call Report, which is prepared on an unconsolidated bank basis.

See the "First Quarter Overview" section for details on expectations for deposits in 2024. See also the "Liquidity" and "Market Risk-Interest Rate Risk" sections for further discussion.

BORROWED FUNDS

Short-Term Borrowings

Short-term borrowings, which consist of FHLB advances, were $1.0 billion at March 31, 2024, and there were no short-term borrowings outstanding at December 31, 2023. The levels of these borrowings can fluctuate depending on the Company's funding needs and the sources utilized.

Short-term secured borrowings, such as securities sold under agreements to repurchase and FHLB advances, are a portion of Regions' funding strategy. See the "Liquidity" section for further detail of Regions' borrowing capacity with the FHLB.

Table 14—Long-Term Borrowings


	March 31, 2024		December 31, 2023
	(In millions)
Regions Financial Corporation (Parent):
2.25% senior notes due May 2025	$	748	$	747
1.80% senior notes due August 2028	647		646
7.75% subordinated notes due September 2024	100		100
6.75% subordinated debentures due November 2025	152		153
7.375% subordinated notes due December 2037	298		298
Valuation adjustments on hedged long-term debt	(116)		(112)
	1,829		1,832
Regions Bank:
FHLB advances	1,000		—
6.45% subordinated notes due June 2037	496		496
Other long-term debt	2		2
	1,498		498
Total consolidated	$	3,327	$	2,330

Long-term borrowings increased by approximately $1.0 billion from year-end 2023 as the Company utilized FHLB advances in the first quarter of 2024.

Funding from the FHLB and Federal Reserve Bank is secured by pledged assets, primarily certain loan portfolios which are also subject to blanket lien arrangements with the FHLB and Federal Reserve Bank. As of March 31, 2024, Regions' blanket lien arrangements with these entities covered a total loan balance of approximately $93.5 billion and included loans from various loan portfolios. However, borrowing capacity with the FHLB and Federal Reserve Bank is contingent on a subset of the blanket lien portfolios which are eligible and pledged according to the parameters for each counterparty.

REGULATORY REQUIREMENTS

CAPITAL RULES

Regions and Regions Bank are required to comply with regulatory capital requirements established by Federal and State banking agencies. These regulatory capital requirements involve quantitative measures of the Company's assets, liabilities and selected off-balance sheet items, and also qualitative judgments by the regulators. Failure to meet minimum capital requirements can subject the Company to a series of increasingly restrictive regulatory actions. Under the Basel III Rules, Regions is designated as a standardized approach bank. Regions is a "Category IV" institution under the Federal Reserve's Tailoring Rules.

Federal banking agencies allowed a phase-in of the impact of CECL on regulatory capital. At December 31, 2021, the add-back to regulatory capital was calculated as the impact of initial adoption, adjusted for 25 percent of subsequent changes in the allowance. The amount is phased-in over a three-year period beginning in 2022 and will conclude in the first quarter of 2025. At March 31, 2024, the net impact of the addback on CET1 was approximately $102 million or approximately 8 basis points.

Regions participates in supervisory stress testing conducted by the Federal Reserve and its SCB is currently floored at 2.5 percent. See Note 6 "Shareholders' Equity and Accumulated Other Comprehensive Income" to the consolidated financial statements for further details regarding CCAR results.

The following table summarizes the applicable holding company and bank regulatory requirements:

Table 15—Regulatory Capital Requirements


	March 31, 2024 Ratio(1)		December 31, 2023 Ratio		Minimum Requirement		Minimum Requirement plus SCB (2)		To Be Well Capitalized

Common equity Tier 1 capital:
Regions Financial Corporation	10.32	%	10.26	%	4.50	%	7.00	%	N/A
Regions Bank	11.20		11.22		4.50		7.00		6.50	%
Tier 1 capital:
Regions Financial Corporation	11.64	%	11.57	%	6.00	%	8.50	%	6.00	%
Regions Bank	11.20		11.22		6.00		8.50		8.00
Total capital:
Regions Financial Corporation	13.55	%	13.35	%	8.00	%	10.50	%	10.00	%
Regions Bank	12.85		12.74		8.00		10.50		10.00
Leverage capital:
Regions Financial Corporation	9.76	%	9.72	%	4.00	%	4.00	%	N/A
Regions Bank	9.41		9.44		4.00		4.00		5.00

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

(2) Reflects Regions' SCB of 2.5 percent. SCB does not apply to leverage capital ratios.

See the "First Quarter Overview" section for details on expectations for CET1.

In the third quarter of 2023, proposals were issued by the U.S federal banking regulators that, if adopted, would impact the Company related to long-term debt requirements and U.S. implementation of capital requirements under Basel IV rules, more recently referred to as the Basel III "Endgame". The Company is studying the proposals and evaluating their impacts. Additional discussion of the Basel III Rules, their applicability to Regions, recent proposals and final rules issued by the federal banking agencies and recent laws enacted that impact regulatory requirements is included in the "Supervision and Regulation" subsection of the "Business" section in Regions’ Annual Report on Form 10-K for the year ended December 31, 2023.

LIQUIDITY

Regions maintains a robust liquidity management framework designed to effectively manage liquidity risk in accordance with sound risk management principals and regulatory expectations. The framework establishes sustainable processes and tools to effectively identify, measure, mitigate, monitor, and report liquidity risks beginning with Regions’ Liquidity Management Policy and the Liquidity Risk Appetite Statements approved by the Board. Processes within the liquidity management framework include, but are not limited to, liquidity risk governance, cash management, liquidity stress testing, liquidity risk limits, contingency funding plans, and collateral management. While the framework is designed to comply with liquidity regulations, the processes are further tailored to be commensurate with Regions’ operating model and risk profile.

See the "Liquidity" section for more information. Also, see the “Supervision and Regulation—Liquidity Requirements” subsection of the “Business” section and the "Risk Factors" section in the 2023 Annual Report on Form 10-K for additional information.

RATINGS

Table 16 "Credit Ratings" reflects the debt ratings information of Regions Financial Corporation and Regions Bank by S&P, Moody’s, Fitch and DBRS.

Table 16—Credit Ratings


	As of March 31, 2024
	S&P	Moody’s	Fitch	DBRS (1)
Regions Financial Corporation
Senior unsecured debt	BBB+	Baa1	A-	A
Subordinated debt	BBB	Baa1	BBB+	WR
Regions Bank
Short-term	A-2	P-1	F1	R-1M
Long-term bank deposits	N/A	A1	A	AH

Senior unsecured debt	A-	Baa1	A-	AH
Subordinated debt	BBB+	Baa1	BBB+	A
Outlook	Stable	Negative	Stable	Stable

(1) On February 1, 2024, DBRS announced plans to withdraw the credit ratings on Regions Financial Corporation and its bank subsidiary, Regions Bank, on or about March 4, 2024 due to business reasons; however, DBRS may elect to continue coverage based on investor feedback. As of March 31, 2024, DBRS withdrew their rating on Regions Financial Corporations' subordinated debt.

In general, ratings agencies base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity, asset quality, business mix, probability of government support, and level and quality of earnings. Any downgrade in credit ratings by one or more ratings agencies may impact Regions in several ways, including, but not limited to, Regions’ access to the capital markets or short-term funding, borrowing cost and capacity, collateral requirements, and acceptability of its letters of credit, thereby potentially adversely impacting Regions’ financial condition and liquidity. See the “Risk Factors” section of Regions' Annual Report on Form 10-K for the year ended December 31, 2023 for more information.

A security rating is not a recommendation to buy, sell or hold securities, and the ratings are subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. Additional information on the credit rating ranking within the overall classification system is located on the website of each credit rating agency.

SHAREHOLDERS' AND TOTAL EQUITY

Shareholders’ equity was $17.0 billion at March 31, 2024 as compared to $17.4 billion at December 31, 2023. During first three months of 2024, net income increased shareholders' equity by $368 million, cash dividends on common stock reduced shareholders' equity by $220 million, and cash dividends on preferred stock reduced shareholders' equity by $25 million. Changes in AOCI decreased shareholders' equity by $412 million, primarily due to available for sale securities and derivative instruments as a result of changes in market interest rates during three months ended March 31, 2024. Common stock repurchased during the first three months of 2024 decreased shareholders' equity by $102 million. These shares were immediately retired upon repurchase and therefore were not included in treasury stock. The cumulative effect from the adoption of new accounting guidance related to the accounting for tax credit investments decreased shareholders' equity by $5 million.

Total equity included noncontrolling interest of $34 million and $64 million at March 31, 2024 and December 31, 2023, respectively. The noncontrolling interest represents the unowned portion of a low income housing tax credit fund syndication, of which Regions held the majority interest at March 31, 2024 and December 31, 2023.

Subsequent to March 31, 2024, the Company purchased 3.7 million shares of common stock for $72 million through May 6, 2024. These shares were immediately retired upon repurchase and therefore were not included in treasury stock.

See Note 6 "Shareholders' Equity and Accumulated Other Comprehensive Income (Loss)" section for additional information.

NON-GAAP MEASURES

The table below presents computations of earnings and certain other financial measures, which excludes certain adjustments that are included in the financial results presented in accordance with GAAP. These non-GAAP financial measures include "adjusted non-interest expense", "adjusted non-interest income", "adjusted total revenue", and "adjusted total revenue, taxable-equivalent basis". Regions believes that excluding certain items provides a meaningful base for period-to-period comparison, which management believes will assist investors in analyzing the operating results of the Company and predicting future performance. These non-GAAP financial measures are also used by management to assess the performance of Regions’ business because management does not consider the activities related to the adjustments to be indications of ongoing operations. Regions believes that presentation of these non-GAAP financial measures will permit investors to assess the

performance of the Company on the same basis as that applied by management. Management and the Board utilize these non-GAAP financial measures as follows:

Preparation of Regions’ operating budgets
Monthly financial performance reporting
Monthly close-out reporting of consolidated results
Presentations to investors of Company performance
Metrics for incentive compensation

Non-interest expense (GAAP) is presented excluding adjustments to arrive at adjusted non-interest expense (non-GAAP). Net interest income (GAAP) is presented with taxable-equivalent adjustments to arrive at net interest income on a taxable-equivalent basis (GAAP). Non-interest income (GAAP) is presented excluding adjustments to arrive at adjusted non-interest income (non-GAAP). Net interest income (GAAP) and adjusted non-interest income (non-GAAP) are added together to arrive at adjusted total revenue (non-GAAP). Net interest income on a taxable-equivalent basis (GAAP) and adjusted non-interest income (non-GAAP) are added together to arrive at adjusted total revenue on a taxable-equivalent basis (non-GAAP).

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. Although these non-GAAP financial measures are frequently used by stakeholders in the evaluation of a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP. In particular, a measure of earnings that excludes selected items does not represent the amount that effectively accrues directly to shareholders.

The following table provides: 1) a reconciliation of non-interest expense (GAAP) to adjusted non-interest expense (non-GAAP), 2) a reconciliation of non-interest income (GAAP) to adjusted non-interest income (non-GAAP), 3) a computation of adjusted total revenue (non-GAAP), and 4) a computation of adjusted total revenue on a taxable-equivalent basis (non-GAAP).

Table 17—GAAP to Non-GAAP Reconciliations



		Three Months Ended March 31
			2024		2023
			(Dollars in millions)






ADJUSTED EXPENSES AND REVENUES (1)
Non-interest expense (GAAP)	A		$	1,131	$	1,027
Adjustments:

Professional, legal and regulatory expenses			(2)		—
FDIC insurance special assessment			(18)		—
Branch consolidation, property and equipment charges			(1)		(2)


Salaries and employee benefits—severance charges			(13)		—
Adjusted non-interest expense (non-GAAP)	B		$	1,097	$	1,025
Net interest income (GAAP)	C		$	1,184	$	1,417
Taxable-equivalent adjustment (GAAP)			13		13
Net interest income, taxable-equivalent basis (GAAP)	D		$	1,197	$	1,430
Non-interest income (GAAP)	E		$	563	$	534
Adjustments:
Securities (gains) losses, net			50		2


Leveraged lease termination gains			—		(1)

Adjusted non-interest income (non-GAAP)	F		$	613	$	535
Total revenue (GAAP)	C+E=G		$	1,747	$	1,951
Adjusted total revenue (non-GAAP)	C+F=H		$	1,797	$	1,952
Total revenue, taxable-equivalent basis (GAAP)	D+E=I		$	1,760	$	1,964
Adjusted total revenue, taxable-equivalent basis (non-GAAP)	D+F=J		$	1,810	$	1,965

(1)See the "First Quarter Overview" for expectations for adjusted non-interest expense and non-interest income.

Table 18 "Consolidated Average Daily Balances and Yield/Rate Analysis" presents a detail of net interest income (on a taxable-equivalent basis), the net interest margin, and the net interest spread.

Table 18—Consolidated Average Daily Balances and Yield/Rate Analysis



	Three Months Ended March 31
	2024						2023
	Average Balance		Income/ Expense		Yield/ Rate (1)		Average Balance		Income/ Expense		Yield/ Rate (1)
	(Dollars in millions; yields on taxable-equivalent basis)
Assets
Earning assets:
Federal funds sold and securities purchased under agreements to resell	$	1	$	—	5.44	%	$	—	$	—	—	%
Debt securities (2)(3)	31,494		209		2.66		32,044		187		2.33
Loans held for sale	499		8		6.40		389		7		7.23
Loans, net of unearned income (4)(5)	97,420		1,434		5.88		97,277		1,373		5.68
Interest-bearing deposits in other banks	4,754		68		5.69		6,508		72		4.49
Other earning assets	1,339		18		5.49		1,340		15		4.70
Total earning assets	135,507		1,737		5.12		137,558		1,654		4.84
Unrealized gains/(losses) on securities available for sale, net (2)	(3,042)						(3,081)
Allowance for loan losses	(1,596)						(1,427)
Cash and due from banks	2,581						2,360
Other non-earning assets	17,994						17,672
	$	151,444					$	153,082
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Savings	$	12,594	4		0.13		$	15,418	4		0.11
Interest-bearing checking	24,682		106		1.72		24,697		54		0.89
Money market	33,646		227		2.72		32,522		91		1.13
Time deposits	15,278		158		4.16		6,813		30		1.80
Total interest-bearing deposits (6)	86,200		495		2.31		79,450		179		0.91
Federal funds purchased and securities sold under agreements to repurchase	8		—		5.40		—		—		—
Short-term borrowings	77		1		5.56		400		5		4.92
Long-term borrowings	2,405		44		7.26		2,286		40		6.91
Total interest-bearing liabilities	88,690		540		2.45		82,136		224		1.10
Non-interest-bearing deposits (6)	40,926		—		—		49,592		—		—
Total funding sources	129,616		540		1.67		131,728		224		0.69
Net interest spread (2)					2.68						3.73
Other liabilities	4,663						4,891
Shareholders’ equity	17,121						16,457
Noncontrolling interest	44						6
	$	151,444					$	153,082
Net interest income /margin on a taxable-equivalent basis (7)			$	1,197	3.55	%			$	1,430	4.22	%

(1)Amounts have been calculated using whole dollar values.

(2)Debt securities are included on an amortized cost basis with yield and net interest margin calculated accordingly.

(3)Interest income on debt securities includes hedging income of $2 million for the three months ended March 31, 2024 and zero for the three months ended March 31, 2023.

(4)Loans, net of unearned income include non-accrual loans for all periods presented.

(5)Interest income on loans, net of unearned income, includes hedging expense of $117 million and $15 million for the three months ended March 31, 2024 and 2023, respectively. Interest income on loans, net of unearned income, also includes net loan fees of $35 million and $29 million for the three months ended March 31, 2024 and 2023, respectively.

(6)Total deposit costs may be calculated by dividing total interest expense on deposits by the sum of interest-bearing deposits and non-interest-bearing deposits. The rates for total deposit costs equaled 1.56% and 0.56% for the three months ended March 31, 2024 and 2023, respectively.

(7)The computation of taxable-equivalent net interest income is based on the statutory federal income tax rate of 21%, adjusted for applicable state income taxes net of the related federal tax benefit.

Net interest income is Regions’ principal source of income and is one of the most important elements of Regions’ ability to meet its overall performance goals. Both net interest income and net interest margin are influenced by market interest rates and although interest rates are expected to decline in 2024, long-term and short-term interest rates remain higher as compared to the first quarter of 2023.

Net interest income (taxable-equivalent basis) decreased by $233 million and net interest margin decreased by 67 basis points to 3.55 percent in the first quarter of 2024 compared to the same period in 2023. These decreases were driven primarily by increases in deposit and funding costs due to remixing. Partially offsetting the increase in funding cost is higher asset yields benefiting from the maturity and replacement of lower-yielding, fixed rate loans and securities.

MARKET RISK—INTEREST RATE RISK

Regions’ primary market risk is interest rate risk. This includes uncertainty with respect to absolute interest rate levels as well as relative interest rate levels, which are impacted by both the shape and the slope of the various yield curves that affect the financial products and services that the Company offers. As its primary tool to analyze this risk, Regions measures the change in its net interest income in various interest rate scenarios compared to a base case scenario. Net interest income sensitivity to market rate movements is a useful short-term indicator of Regions’ interest rate risk.

In addition to net interest income simulations, Regions also utilizes an EVE analysis as a measurement tool to estimate risk exposure over a longer-term horizon. EVE measures the extent to which the economic value of assets, liabilities and derivative instruments may change in response to fluctuations in interest rates. Importantly, EVE values only the current balance sheet, excluding the growth assumptions used in net interest income sensitivity analyses. Additionally, the results are highly dependent on imprecise assumptions for products with embedded prepay optionality and indeterminate maturities. The uncertainty surrounding important assumptions used in EVE analysis may limit its efficacy.

Sensitivity Measurement—Financial simulation models are Regions’ primary tools used to measure interest rate exposure. Using a wide range of sophisticated simulation techniques provides management with extensive information on the potential impact to net interest income caused by changes in interest rates. Models are structured to simulate cash flows and accrual characteristics of Regions’ balance sheet. Assumptions are made about the direction and magnitude of interest rate movements, the slope of the yield curve, and the changing composition of the balance sheet that results from both strategic plans and customer behavior. Among the assumptions are expectations of balance sheet growth and composition, the pricing and maturity characteristics of existing business and the characteristics of future business. Interest rate-related risks are expressly considered, such as pricing spreads, the pricing of deposit accounts, prepayments and other option risks. Regions considers these factors, as well as the degree of certainty or uncertainty surrounding their future behavior.

The primary objective of asset/liability management at Regions is to coordinate balance sheet composition with interest rate risk management to sustain reasonable and stable net interest income throughout various interest rate cycles. In computing interest rate sensitivity, Regions compares a set of alternative interest rate scenarios to the results of a base case scenario derived using “market forward rates.” See the "First Quarter Overview" section for details on expectations for net interest income in 2024. The set of alternative interest rate scenarios includes instantaneous parallel rate shifts of various magnitudes. In addition to parallel rate shifts, multiple curve steepening and flattening scenarios are contemplated. Regions includes simulations of gradual interest rate movements phased in over a six-month period that may more realistically mimic the speed of potential interest rate movements.

Exposure to Interest Rate Movements—Regions' balance sheet is naturally asset sensitive, with net interest income increasing with higher interest rates, and decreasing with lower interest rates. This is the result of approximately half of the loan portfolio floating contractually with market rate indices, and funding from a large, mostly stable retail deposit portfolio. Importantly, the stability and rate sensitivity of Regions' deposit portfolio has been proven over multiple interest rate cycles. With this natural balance sheet profile, the ability to utilize discretionary asset duration strategies within the investment portfolio and through derivative hedges is critical in mitigating the Bank’s naturally asset sensitive position.

As of March 31, 2024, Regions evidenced a mostly balanced, or "neutral" asset/liability position, with an asset duration of approximately 2.6 years and a liability duration of approximately 2.6 years, using historically-informed approximations. The securities portfolio duration was approximately 4.6 years and is appropriate for Regions' risk profile in order to offset the long-duration deposit liabilities. While the derivative hedging portfolio is recorded on the balance sheet including current unrealized losses, deposit value increases have more than offset these losses through the rising rate environment. The additional value of deposits in a higher rate environment is realized in the form of lower-cost funding when compared with wholesale sources. While balance sheet analysis, particularly EVE analysis, does contemplate the economic value of deposits, the estimated fair value of deposits is equal to their carrying value for certain financial statement footnote disclosures, consistent with industry practices. See Note 10 "Fair Value Measurements" to the consolidated financial statements for additional information.

As of March 31, 2024, Regions' net interest income profile was mostly neutral to both gradual and instantaneous parallel yield curve shifts as compared to the base case for the 12-month measurement horizon ending March 2024. The estimated exposure associated with the rising and falling rate scenarios in Table 19 below reflects the combined impacts of movements in short-term and long-term interest rates. An increase or reduction in short-term interest rates (such as the Fed Funds rate, the rate

of Interest on Excess Reserves, and SOFR) will drive the yield on assets and liabilities contractually tied to such rates higher or lower. In either scenario, it is expected that changes in funding costs and balance sheet hedging income will offset the change in asset yields, resulting in little change to net interest income.

Net interest income remains exposed to intermediate and long-term yield curve tenors. While this was a headwind to net interest income during a low rate environment, it represents a tailwind to net interest income growth as the yield curve rises and remains elevated. Elevated, or increasing intermediate and long-term interest rates (such as intermediate to longer-term U.S. Treasuries, swaps and mortgage rates) will drive yields higher on certain fixed-rate, newly originated or renewed loans, increase prospective yields on certain investment portfolio purchases, and reduce amortization of premium expense on existing securities in the investment portfolio. The opposite is true in an environment where intermediate and long-term interest rates fall.

The interest rate sensitivity analysis presented below in Table 19 is informed by a variety of assumptions and estimates regarding the progression of the balance sheet in both the baseline scenario as well as the scenarios of instantaneous and gradual shifts in the yield curve. Though there are many assumptions which affect the estimates for net interest income, those pertaining to deposit pricing, deposit mix and overall balance sheet composition are particularly impactful. Given the uncertainties associated with monetary policy on industry liquidity levels and the cost of that liquidity, management evaluates the impacts from these key assumptions through sensitivity analysis. Sensitivity calculations are hypothetical and should not be considered predictive of future results.

The Company’s baseline balance sheet assumptions include management's best estimate for balance sheet changes in the coming 12 months. In the first quarter of 2024, Regions experienced a slight increase in deposits due to seasonality. The baseline scenario projects deposit balances to decline modestly over the forecast horizon. Additional deposit balance outflow of $1 billion would reduce net interest income by $22 million over 12 months in the parallel, instantaneous +100 basis point scenario in Table 19. Conversely, if an additional $1 billion are retained, a positive benefit of $22 million would be expected over 12 months in the parallel, instantaneous +100 basis point scenario Table 19.

In rising rate scenarios only, management assumes that the mix of deposits will further change versus the base case as informed by analyses of prior rate cycles. Currently, however, much of the anticipated mix shift has already occurred or is expected to occur within the baseline scenario, mitigating the amount of additional remixing in higher rate scenarios. The magnitude of the remixing shift is rate dependent and equates to approximately $1.6 billion over 12 months in the parallel, instantaneous +100 basis point scenario in Table 19. Furthermore, over the 12 month horizon, an increase of $1 billion in deposit remixing would decrease net interest income by approximately $26 million, and a decrease of $1 billion in deposit remixing would increase net interest income by $26 million in the parallel, instantaneous +100 basis point scenario.

The interest-bearing deposit beta is calibrated using the experience from prior rate cycles and is dynamic across both interest rate level and time. The base case scenario anticipates a peak in deposit rates by mid-year 2024. The parallel, instantaneous +100 basis point shock scenario in Table 19 incorporates an incremental beta between 40 and 45 percent when compared to the base case scenario, while the parallel, instantaneous -100 basis point shock scenario incorporates an incremental beta between 35 and 40 percent when compared to the base case scenario. Incremental deposit pricing outperformance or underperformance of 5 percent in a parallel, instantaneous 100 basis point shock would increase or decrease net interest income by approximately $43 million.

The table below summarizes Regions' positioning over the next 12 months in various parallel yield curve shifts (i.e., including all yield curve tenors). The scenarios are inclusive of all interest rate hedging activities. More information regarding hedges is disclosed in Table 20 and its accompanying description.

Table 19—Interest Rate Sensitivity


	Estimated Annual Change in Net Interest Income March 31, 2024(1)(2)
	(in millions)
Gradual Change in Interest Rates
+ 200 basis points	$	44
+ 100 basis points	26
- 100 basis points	(41)
- 200 basis points	(88)

Instantaneous Change in Interest Rates
+ 200 basis points	$	(34)
+ 100 basis points	(3)
- 100 basis points	(38)
- 200 basis points	(85)

(1)Disclosed interest rate sensitivity levels represent the 12-month forward looking net interest income changes as compared to market forward rate cases and include expected balance sheet growth and remixing.

(2)All active cash flow hedges, including forward starting hedges, are reflected within the measurement horizon. See Table 21 for additional information regarding hedge start and maturity dates.

Regions' comprehensive interest rate risk management approach uses derivatives and debt securities to manage its interest rate risk position.

During the first quarter of 2024, the Company terminated approximately $500 million of receive-fixed cash flow swaps with a fixed rate of 2.86% and original maturity of January 2025. The Company also added $2.0 billion of forward-starting swaps, which will become active in 2026 and 2027 and mature 4 years from their start date.

Subsequent to March 31, 2024, the Company added $750 million in forward-starting swaps with a fixed rate of 3.84%, which will become active in 2028 and mature 3 years from their start date.

Interest rate movements may also have an impact on the value of Regions’ securities portfolio, which can directly impact the carrying value of shareholders’ equity.

Derivatives—Regions uses financial derivative instruments for management of interest rate sensitivity. ALCO, which consists of members of Regions’ senior management team, in its oversight role for the management of interest rate sensitivity, approves the use of derivatives in balance sheet hedging strategies. Derivatives are also used to offset the risks associated with customer derivatives, which include interest rate, credit, and foreign exchange risks. The most common derivatives Regions employs are forward rate contracts, forward sale commitments, futures contracts, interest rate swaps, interest rate options (caps, floors and collars), and contracts with a combination of these instruments.

Forward rate contracts are commitments to buy or sell financial instruments at a future date at a specified price or yield. Futures contracts subject Regions to market risk associated with changes in interest rates. Because futures contracts are cash settled daily, there is minimal credit risk associated with futures. Interest rate swaps are contractual agreements typically entered into to exchange fixed for variable (or vice versa) streams of interest payments. The notional principal is not exchanged but is used as a reference for the size of interest settlements. Interest rate options are contracts that allow the buyer to purchase or sell a financial instrument at a predetermined price and time. Forward sale commitments are contractual obligations to sell market instruments at a future date for an already agreed-upon price. Foreign currency contracts involve the exchange of one currency for another on a specified date and at a specified rate. These contracts are executed on behalf of the Company's customers and are used by customers to manage fluctuations in foreign exchange rates. The Company is subject to the credit risk that another party will fail to perform.

Regions has made use of interest rate swaps and options in balance sheet hedging strategies to effectively convert a portion of its fixed-rate funding position to a variable-rate position, to effectively convert a portion of its fixed-rate debt securities available for sale portfolio to a variable-rate position, and to effectively convert a portion of its floating-rate loan portfolios to fixed-rate. Regions also uses derivatives to economically manage interest rate and pricing risk associated with its mortgage origination business. In the period of time that elapses between the origination and sale of mortgage loans, changes in interest rates have the potential to cause a decline in the value of the loans in this held-for-sale portfolio. Futures contracts and forward sale commitments are used to protect the value of the loan pipeline and loans held for sale from changes in interest rates and pricing.

The following table presents additional information about hedging interest rate derivatives used by Regions to manage interest rate risk:

Table 20—Hedging Derivatives by Interest Rate Risk Management Strategy


	March 31, 2024
	Notional Amount		Weighted-Average
			Maturity (Years)	Receive Rate	Pay Rate
	(Dollars in millions)
Derivatives in fair value hedging relationships:
Receive variable/pay fixed swaps - debt securities available for sale(1)(2)(3)	$	1,323		1.1	5.3	%	4.8	%
Receive fixed/pay variable swaps - borrowings and time deposits(3)	1,662			2.2	1.3	%	5.4	%
Derivatives in cash flow hedging relationships:
Receive fixed/pay variable swaps - floating-rate loans(1)(2)(3)	$	31,050		3.1	3.0	%	4.9	%
Interest rate options(4)	2,000			4.3
Total derivatives designated as hedging instruments	$	36,035

(1)Floating rates represent the most recent fixing for active derivatives and the first forward fixing for future starting derivatives.

(2)Includes forward starting notional. For more information on notional by year, see Table 21.

(3)All floating rates are SOFR based and may include SOFR conversion spread.

(4)Interest rate options have an average cap strike of 6.22% and a floor of 1.86%.

The following table presents the average asset hedge notional amounts that are active during each of the remaining quarterly and annual periods. Asset hedge notional amounts mature prior to the end of 2032, with an immaterial amount of notional maturing in early 2032.

Table 21—Schedule of Notional for Asset Hedging Derivatives


	Average Active Notional Amount
	Quarters Ended						Years Ended
	6/30/2024		9/30/2024		12/31/2024		2025		2026		2027		2028		2029		2030		2031

Asset Hedging Relationships:
Receive fixed/pay variable swaps	$	20,550	$	19,572	$	19,019	$	18,988	$	16,905	$	14,197	$	8,611	$	2,636	$	2,000	$	10
Receive variable/pay fixed swaps	1,300		1,251		531		300		249		15		23		23		23		23

Net receive fixed/pay variable swaps	$	19,250	$	18,321	$	18,488	$	18,688	$	16,656	$	14,182	$	8,588	$	2,613	$	1,977	$	(13)

Interest rate options	$	500	$	1,500	$	1,500	$	1,999	$	2,000	$	2,000	$	999	$	1	$	—	$	—

(1)All cash flow hedges are reflected within the 12-month measurement horizon and included in income sensitivity levels as disclosed in Table 19.

Regions manages the credit risk of these instruments in much the same way as it manages credit risk of the loan portfolios by establishing credit limits for each counterparty and through collateral agreements for dealer transactions. For non-dealer transactions, the need for collateral is evaluated on an individual transaction basis and is primarily dependent on the financial strength of the counterparty. Credit risk is also reduced significantly by entering into legally enforceable master netting agreements. When there is more than one transaction with a counterparty and there is a legally enforceable master netting agreement in place, the exposure represents the net of the gain and loss positions with and collateral received from and/or posted to that counterparty. Most hedging interest rate swap derivatives traded by Regions are subject to mandatory clearing. The counterparty risk for cleared trades effectively moves from the executing broker to the clearinghouse allowing Regions to benefit from the risk mitigation controls in place at the respective clearinghouse. The “Credit Risk” section in this report contains more information on the management of credit risk.

Regions also uses derivatives to meet the needs of its customers. Interest rate swaps, interest rate options and foreign exchange forwards are the most common derivatives sold to customers. Other derivative instruments with similar characteristics are used to hedge market risk and minimize volatility associated with this portfolio. Instruments used to service customers are held in the trading account, with changes in value recorded in the consolidated statements of income.

The primary objective of Regions’ hedging strategies is to mitigate the impact of interest rate changes, from an economic perspective, on net interest income and other financing income and the net present value of its balance sheet. The overall effectiveness of these hedging strategies is subject to market conditions, the quality of Regions’ execution, the accuracy of its valuation assumptions, counterparty credit risk and changes in interest rates.

See Note 9 "Derivative Financial Instruments and Hedging Activities" to the consolidated financial statements for a tabular summary of Regions’ year-end derivatives positions and further discussion.

Regions accounts for residential MSRs at fair market value with any changes to fair value being recorded within mortgage income. Regions enters into derivative transactions to economically mitigate the impact of market value fluctuations related to residential MSRs. Derivative instruments entered into in the future could be materially different from the current risk profile of Regions’ current portfolio.

REFERENCE RATE REFORM

In the fourth quarter of 2023, Bloomberg Index Services Limited announced the permanent cessation of the BSBY index and all tenors effective November 15, 2024. Regions is in the process of evaluating exposure to BSBY and planning for cessation, and will not rely on accounting relief during transition.

LIQUIDITY

Liquidity is an important factor in the financial condition of Regions and affects Regions’ ability to meet the needs of the Company and its customers. Regions’ goal in liquidity management is to maintain diverse liquidity sources and reserves sufficient to satisfy the cash flow requirements of depositors and borrowers, under normal and stressed conditions. Accordingly, Regions maintains a variety of liquidity sources to fund its obligations, as further described below. See also Note 12 "Commitments, Contingencies and Guarantees" to the consolidated financial statements for additional discussion of the Company’s funding requirements. Furthermore, Regions performs specific procedures, including scenario analyses and stress testing to evaluate and maintain appropriate levels of available liquidity in alignment with liquidity risk.

Regions' operation of its business provides a generally balanced liquidity base which is comprised of customer assets, consisting principally of loans, and funding provided by customer deposits and borrowed funds. Maturities in the loan portfolio provide a steady flow of funds, and are supplemented by Regions' deposit base.

Cash reserves, liquid assets and secured borrowing capabilities aid in the management of liquidity in normal and stressed conditions, and/or meeting the need of contingent events such as obligations related to potential litigation. As part of its normal management practice, Regions maintains collateral and operational readiness to utilize secured funding sources such as the FHLB and the Federal Reserve Bank on a same-day basis (subject to any practical constraints affecting these market participants). While the securities portfolio is a primary source of liquidity, the secured borrowing capabilities, in addition to cash reserves on hand, assist in alleviating the Company's need to sell securities for funding purposes. Liquidity needs can also be met by borrowing funds in national money markets, though Regions does maintain limits on short-term unsecured funding due to the volatility that can affect such markets.

The following table summarizes the Company's available sources of liquidity as of March 31, 2024:

Table 22—Liquidity Sources


	Availability as of March 31, 2024
	(in billions)
Cash at the Federal Reserve Bank(1)	$	8.7
Unencumbered investment securities(2)	20.8


FHLB borrowing availability	11.2
Federal Reserve Bank borrowing availability through the discount window	20.1
Total liquidity sources	$	60.8

(1) Includes small in transit items that may not yet be reflected in the Fed master account closing balance.

(2) Unencumbered investment securities comprise securities that are eligible as collateral for secured transactions through market channels or are eligible to be pledged to the FHLB or the Federal Reserve Discount Window.

The balance with the Federal Reserve Bank is the primary component of the balance sheet line item “interest-bearing deposits in other banks.” At March 31, 2024, Regions had approximately $8.7 billion in cash on deposit with the Federal Reserve Bank and other depository institutions, an increase from approximately $4.2 billion at December 31, 2023, driven by FHLB utilization in the first quarter of 2024 in order to optimize collateral and increase cash balances.

The securities portfolio also serves as a primary source and storehouse of liquidity. Proceeds from maturities and principal and interest payments of securities provide a continual flow of funds available for cash needs (see Note 3 "Debt Securities" to the consolidated financial statements). Furthermore, the highly liquid nature of the available for sale securities portfolio (for example, the agency guaranteed MBS portfolio) can be readily used as a source of cash through various secured borrowing arrangements. Regions' securities portfolio consists of U.S. Treasury securities, federal agency securities, MBS and corporate and other debt. In evaluating the liquidity within the securities portfolio, unencumbered investment securities are primarily comprised of U.S Treasury securities and agency MBS. Unencumbered investment securities also includes certain corporate bonds considered to be highly liquid and other securities, primarily non-agency commercial MBS.

Regions’ financing arrangement with the FHLB adds additional flexibility in managing the Company's liquidity position. As of March 31, 2024, Regions had $1.0 billion in short-term FHLB borrowings, $1.0 billion in long-term FHLB borrowings and had borrowing capacity as shown in Table 22. FHLB borrowing capacity was determined based on eligible securities and

loan amounts, as of March 31, 2024, that were pledged as collateral for future borrowing capacity. Additionally, investment in FHLB stock is required in relation to the level of outstanding borrowings. The FHLB has been and is expected to continue to be a reliable and economical source of funding.

Regions has additional borrowing availability with the Federal Reserve Bank through the discount window as shown in Table 22. Federal Reserve Bank borrowing capacity is determined based on eligible loan amounts that were pledged as collateral for future borrowing capacity.

Regions maintains a shelf registration statement with the SEC that can be utilized by Regions to issue various debt and/or equity securities. Additionally, Regions' Board has authorized Regions Bank to issue up to $10 billion in aggregate principal amount of bank notes outstanding at any one time. Refer to Note 11 "Borrowed Funds" to the consolidated financial statements in the 2023 Annual Report on Form 10-K for additional information.

Regions may, from time to time, consider opportunistically retiring outstanding issued securities, including subordinated debt in privately negotiated or open market transactions for cash or common shares. Regulatory approval would be required for retirement of some instruments. See Note 6 "Shareholders' Equity and Accumulated Other Comprehensive Income (Loss)" to the consolidated financial statements for additional information.

Regions' liquidity policy requires the holding company to maintain cash sufficient to cover the greater of (1) 18 months of debt service and other cash needs or (2) a minimum cash balance of $500 million. Cash and cash equivalents at the holding company totaled $1.9 billion at March 31, 2024. Overall liquidity risk limits are established by the Board through its Risk Appetite Statement and Liquidity Policy. The Company's Board, LROC and ALCO regularly review compliance with the established limits.

CREDIT RISK

Regions’ objective regarding credit risk is to maintain a credit portfolio that provides for stable credit costs with acceptable volatility through an economic cycle. Regions has various processes to manage credit risk as described below. In order to assess the risk profile of the loan portfolio, Regions considers risk factors within the loan portfolio segments and classes, the current U.S. economic environment and that of its primary banking markets, as well as counterparty risk. See the "Portfolio Characteristics" section found earlier in this report for further information regarding the risk characteristics of each loan type.

INFORMATION SECURITY RISK

Regions faces information security risks, such as evolving and adaptive cyber-attacks that are conducted regularly against financial institutions in attempts to compromise or disable information systems. In the event of a cyber-attack or other data breach, Regions may be required to incur significant expenses, including with respect to remediation costs, costs of implementing additional preventative measures, addressing any reputational harm and addressing any related regulatory inquiries or civil litigation arising from the event.

Refer to Part 1 Item1C. Cybersecurity in the Annual Report on Form 10-K for the year ended December 31, 2023 for further discussion of Regions' risk identification and assessment, risk management and governance of information security risk.

PROVISION FOR CREDIT LOSSES

The provision for credit losses is used to maintain the allowance for loan losses and the reserve for unfunded credit losses at a level that in management's judgment is appropriate to absorb expected credit losses over the contractual life of the loan and credit commitment portfolio at the balance sheet date. The provision for credit losses totaled $152 million and net charge-offs were $121 million during the first quarter of 2024. This compares to a provision for credit losses of $135 million and net charge-offs of $83 million in the first quarter of 2023. Refer to the "Allowance" section for further detail.

NON-INTEREST INCOME

Table 23—Non-Interest Income


	Three Months Ended March 31				Quarter-to-Date Change 3/31/2024 vs. 3/31/2023
	2024		2023			Amount		Percent
	(Dollars in millions)
Service charges on deposit accounts	$	148	$	155		$	(7)	(4.5)	%
Card and ATM fees	116		121			(5)		(4.1)	%
Capital markets income	91		42			49		116.7	%
Investment management and trust fee income	81		76			5		6.6	%
Mortgage income	41		24			17		70.8	%
Investment services fee income	38		36			2		5.6	%
Commercial credit fee income	27		26			1		3.8	%
Bank-owned life insurance	23		17			6		35.3	%
Market valuation adjustments on employee benefit assets	15		(1)			16		NM

Securities gains (losses), net	(50)		(2)			(48)		NM

Other miscellaneous income	33		40			(7)		(17.5)	%
	$	563	$	534		$	29	5.4	%

NM - Not Meaningful

Service Charges on Deposit Accounts

Service charges on deposit accounts include overdraft fees, treasury management fees and other customer transaction-related service charges. Service charges decreased modestly in the three months ended March 31, 2024 compared to the same period in 2023, primarily as a result of recent overdraft-related policy enhancements which contributed to a decline in overdraft fees. An increase in fees from treasury management services partially offset the overall decline in service charges.

On October 25, 2023, the Federal Reserve issued a proposal for public comment that, if finalized, would lower the maximum interchange fee that a large debit card issuer can receive for a debit card transaction. Under the proposed rule the maximum interchange fee would be subject to adjustments every other year based upon issuer cost data. The Company is studying the proposal and evaluating its impact.

On January 17, 2024, the CFPB issued a proposal for public comment that, if finalized, would cap overdraft fees in line with established benchmarks ranging between $3-$14 or their actual costs. Alternatively, an institution could calculate its own fee to break even. The Company is studying the proposal and evaluating its impact.

Capital Markets Income

Capital markets income primarily relates to capital raising activities that include securities underwriting and placement, loan syndication, as well as foreign exchange, derivatives, merger and acquisition and other advisory services. Capital markets income increased in the three months ended March 31, 2024 compared to the same period in 2023, driven primarily by less negative credit/debit valuation adjustments in 2024 due to rate and spread movements, increased real estate transactions, and increased securities underwriting and placement fees.

Mortgage Income

Mortgage income is generated through the origination and servicing of residential mortgage loans for long-term investors and sales of residential mortgage loans in the secondary market. The increase in mortgage income in the three months ended March 31, 2024 compared to the same period in 2023 was due primarily to a valuation adjustment on the Company's mortgage pipeline and an increase in servicing income due to a bulk purchase of the rights to service $6.2 billion of residential mortgage loans in the third quarter of 2023.

Bank-owned Life Insurance

Bank-owned life insurance income primarily represents income earned from the appreciation of the cash surrender value of insurance contracts held and the proceeds of insurance benefits. Bank-owned life insurance income increased during the three months ended March 31, 2024 compared to the same period in 2023 driven primarily by improvement in underlying crediting rates as a result of an overall increase in interest rates.

Market Value Adjustments on Employee Benefit Assets

Market value adjustments on employee benefit assets are the reflection of market value variations related to assets held for certain employee benefits. The adjustments are offset in salaries and benefits and other non-interest expense.

Securities Gains (Losses)

Net securities gains (losses) primarily result from the Company's asset/liability management process. In the first quarter of 2024, the Company sold debt securities and reinvested the proceeds at higher current market yields, incurring $50 million in pre-tax losses. See Table 1 "Debt Securities" section for more information.

Other Miscellaneous Income

Other miscellaneous income includes net revenue from affordable housing, valuation adjustments to equity investments, fees from safe deposit boxes, check fees and other miscellaneous income. Net revenue from affordable housing includes actual gains and losses resulting from the sale of affordable housing investments, cash distributions from the investments and any related impairment charges. Other miscellaneous income decreased in the three months ended March 31, 2024 compared to the same period in 2023 due to negative valuation adjustments on certain equity investments.

NON-INTEREST EXPENSE

Table 24—Non-Interest Expense


	Three Months Ended March 31				Quarter-to-Date Change 3/31/2024 vs. 3/31/2023
	2024		2023			Amount		Percent
	(Dollars in millions)
Salaries and employee benefits	$	658	$	616		$	42	6.8	%
Equipment and software expense	101		102			(1)		(1.0)	%
Net occupancy expense	74		73			1		1.4	%
Outside services	39		39			—		NM
Marketing	27		27			—		NM
Professional, legal and regulatory expenses	28		19			9		47.4	%
Credit/checkcard expenses	14		14			—		NM
FDIC insurance assessments	43		25			18		72.0	%
Visa class B shares expense	4		8			(4)		(50.0)	%
Operational losses	42		13			29		223.1	%


Branch consolidation, property and equipment charges	1		2			(1)		(50.0)	%

Other miscellaneous expenses	100		89			11		12.4	%
	$	1,131	$	1,027		$	104	10.1	%

NM - Not Meaningful

Salaries and Employee Benefits

Salaries and employee benefits consist of salaries, incentive compensation, long-term incentives, payroll taxes, and other employee benefits such as 401(k), pension, and medical, life and disability insurance, as well as, expenses from liabilities held for employee benefit purposes. Salaries and employee benefits increased in the three months ended March 31, 2024 compared to the same period in 2023 primarily due to increases in base salaries, severance costs incurred in the first quarter of 2024, higher benefit expenses, and, to a lesser degree, an increase in long-term incentives. These increases were partially offset by a decline in production-based incentive compensation. Full-time equivalent headcount decreased to 19,641 at March 31, 2024 from 20,113 at March 31, 2023.

Professional, Legal and Regulatory Expenses

Professional, legal, and regulatory expenses consist of amounts related to legal, consulting, other professional fees and regulatory charges. Professional, legal, and regulatory expenses increased during three months ended March 31, 2024 compared to the same period in 2023 due to accruals for legal and regulatory matters in the first quarter of 2024.

FDIC Insurance Assessments

FDIC insurance assessments increased in the three months ended March 31, 2024 compared to the same period in 2023 primarily resulting from a special assessment recorded in the first quarter of 2024 as discussed below.

Federal law requires that any losses to the FDIC’s DIF related to the protection of uninsured depositors under the Systemic Risk Exception be repaid by a special assessment on IDIs. In the fourth quarter of 2023, the FDIC finalized a special assessment related to the two March 2023 bank failures, which was required to be recognized as the accrual of a liability and related expense in the fourth quarter of 2023 pursuant to accounting guidance. In late February 2024, the FDIC published

revised loss estimates related to the failures, increasing the estimated loss to the DIF. Regions adjusted the special assessment accrual by $18 million during the first quarter.

The total assessment is to be paid in eight quarterly installments beginning with the invoice for the first quarter of 2024 that will be received in June 2024 and should be deductible for income taxes.

Operational Losses

Operational losses include losses related to fraud, execution, delivery and process management, and damage to physical assets. Operational losses increased in the three months ended March 31, 2024 compared to the same period in 2023 primarily due to check-related warranty claims from deposits that occurred last year.

Other Miscellaneous Expenses

Other miscellaneous expenses include expenses related to communications, postage, supplies, certain credit-related costs, foreclosed property expenses, mortgage repurchase costs, and other costs (benefits) related to employee benefit plans. Other miscellaneous expenses increased in the three months ended March 31, 2024 compared to the same period in 2023 primarily due to higher expenses from non-service related benefits.

INCOME TAXES

The Company’s income tax expense for the three months ended March 31, 2024 was $96 million compared to $177 million for the three months ended March 31, 2023, resulting in effective tax rates of 20.7% and 22.4%, respectively. The decrease in the effective tax rate for 2024 is primarily due to expectations of lower pre-tax income in 2024 as compared to 2023, causing tax preferential items to have a more favorable impact on the effective tax rate for the three months ended March 31, 2024. See the "First Quarter Overview" section for the Company's expectations for the 2024 effective tax rate.

The effective tax rate is affected by many factors including, but not limited to, the level of pre-tax income, the mix of income between various tax jurisdictions with differing tax rates, enacted tax legislation, net tax benefits related to affordable housing investments, bank-owned life insurance income, tax-exempt interest and nondeductible expenses. In addition, the effective tax rate is affected by items that may occur in any given period but are not consistent from period-to-period, such as the termination of certain leveraged leases, share-based payments, valuation allowance changes and changes to unrecognized tax benefits. Accordingly, the comparability of the effective tax rate between periods may be impacted.

At March 31, 2024, the Company reported a net deferred tax asset of $848 million compared to $741 million at December 31, 2023. The change in the net deferred tax position was due primarily to the deferred tax impact of increases in unrealized losses on securities for sale and derivative instruments arising during the first quarter of 2024.

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