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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
 
ýQuarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended June 30, 20172018
or
¨Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from to                               
Commission File Number: 001-34034
   
Regions Financial Corporation
(Exact name of registrant as specified in its charter)
   
 
   
Delaware 63-0589368
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
  
1900 Fifth Avenue North
Birmingham, Alabama
 35203
(Address of principal executive offices) (Zip Code)
(800) 734-4667
(Registrant’s telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ý  Yes    ¨  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ý  Yes    ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ý Accelerated filer ¨ Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company  ¨ 
Emerging growth company  ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    ý  No
The number of shares outstanding of each of the issuer’s classes of common stock was 1,195,080,1931,102,470,189 shares of common stock, par value $.01, outstanding as of August 2, 2017.6, 2018.

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REGIONS FINANCIAL CORPORATION
FORM 10-Q
INDEX
 
    Page
Part I. Financial Information
Item 1. Financial Statements (Unaudited)  
  
Consolidated Balance Sheets—June 30, 20172018 and December 31, 20162017
 
8
  
Consolidated Statements of Income—Three and six months ended June 30, 20172018 and 20162017
 
9
  
Consolidated Statements of Comprehensive Income—Three and six months ended June 30, 20172018 and 20162017
 
10
  
Consolidated Statements of Changes in Stockholders’ Equity—Six months ended June 30, 20172018 and 20162017
 
11
  
Consolidated Statements of Cash Flows—Six months ended June 30, 20172018 and 20162017
 
12
  
Notes to Consolidated Financial Statements
 
13
Item 2. 
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
6259
Item 3. 
Quantitative and Qualitative Disclosures about Market Risk
 
9491
Item 4. 
Controls and Procedures
 
9491
   
Part II. Other Information  
Item 1. 
Legal Proceedings
 
9592
Item 2. 
Unregistered Sales of Equity Securities and Use of Proceeds
 
9592
Item 6. 
Exhibits
 
9793
   
Signatures
 
9894

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Glossary of Defined Terms
Agencies - collectively, FNMA, FHLMC and GNMA.
ALCO - Asset/Liability Management Committee.
AOCI - Accumulated other comprehensive income.income (loss).
ASU - Accounting Standards Update.
ATM - Automated teller machine.
Bank - Regions Bank.
Basel I - Basel Committee's 1988 Regulatory Capital Framework (First Accord).
Basel III - Basel Committee's 2010 Regulatory Capital Framework (Third Accord).
Basel III Rules - Final capital rules adopting the Basel III capital framework approved by U.S. federal
regulators in 2013.
Basel Committee - Basel Committee on Banking Supervision.
BHC - Bank Holding Company.
BITS - Technology arm of the Financial Services Roundtable.
Bank - Regions Bank.
Board - The Company’s Board of Directors.
CAP - Customer Assistance Program.
CCAR - Comprehensive Capital Analysis and Review.
CD - Certificate of deposit.
CECL - Current expected credit loss.
CEO - Chief Executive Officer.
CET1 - Common Equity Tier 1.
CFPB - Consumer Financial Protection Bureau.
Company - Regions Financial Corporation and its subsidiaries.
CPR - Constant (or Conditional) Prepayment Rate.
CRA - Community Reinvestment Act of 1977.
Dodd-Frank Act - The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
DPD - Days Past Due.
DUS - Fannie Mae Delegated Underwriting & Servicing.
EGRRCPA - The Economic Growth, Regulatory Relief, and Consumer Protection Act.
EPS - Earnings (loss) per common share.
FASB - Financial Accounting Standards Board.
FDIC - Federal Deposit Insurance Corporation.
Federal Reserve - Board of Governors of the Federal Reserve System.
FHA - Federal Housing Administration.
FHLB - Federal Home Loan Bank.
FHLMC - Federal Home Loan Mortgage Corporation, known as Freddie Mac.
FNMA - Federal National Mortgage Association, known as Fannie Mae.
FRB - Federal Reserve Bank.
FS-ISAC - Financial Services - Information Sharing & Analysis Center.
FRB - Federal Reserve Bank.
GAAP - Generally Accepted Accounting Principles in the United States.

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GCM - Guideline Public Company Method.
GDP - Gross Domestic Product.
GNMA - Government National Mortgage Association.

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GTM - Guideline Transaction Method.
HUD - U.S. Department of Housing and Urban Development.
HVCRE - High Volatility Commercial Real Estate.
IP - Intellectual Property.
IPO - Initial public offering.
LCR - Liquidity coverage ratio.
LIBOR - London InterBank Offered Rates.
LTIP - Long-term incentive plan.
LTV - Loan to value.
MBS - Mortgage-backed securities.
Morgan Keegan - Morgan Keegan & Company, Inc.
MSAs - Metropolitan Statistical Areas.
MSR - Mortgage servicing right.
NM - Not meaningful.
NPR - Notice of Proposed Rulemaking.
OAS - Option-Adjusted Spread.
OCC - Office of the Comptroller of the Currency.
OCI - Other comprehensive income.
OIS - Overnight indexed swap.
OTTI - Other-than-temporary impairment.
Raymond James - Raymond James Financial, Inc.
RICO - Racketeer Influenced and Corrupt Organizations Act.
SEC - U.S. Securities and Exchange Commission.
SERP - Supplemental Executive Retirement Plan.
SSFA - Simplified Supervisory Formula Approach.
Tax Reform - H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution
on the Budget for Fiscal Year 2018.
TDR - Troubled debt restructuring.
U.S. - United States.
U.S. Treasury - United States Department of the Treasury.
UTB - Unrecognized tax benefits.
VIE - Variable interest entity.



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Forward-Looking Statements
This Quarterly Report on Form 10-Q, other periodic reports filed by Regions Financial Corporation under the Securities Exchange Act of 1934, as amended, and any other written or oral statements made by us or on our behalf to analysts, investors, the media and others, may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The terms “Regions,” the “Company,” “we,” “us” and “our” used herein mean collectively Regions Financial Corporation, a Delaware corporation, andtogether with its subsidiaries when or where appropriate. The words “future,” “anticipates,” “assumes,” “intends,” “plans,” “seeks,” “believes,” “predicts,” “potential,” “objectives,” “estimates,” “expects,” “targets,” “projects,” “outlook,” “forecast,” “would,” “will,” “may,” “might,” “could,” “should,” “can,” and similar terms and expressions often signify forward-looking statements. Forward-looking statements are not based on historical information, but rather are related to future operations, strategies, financial results or other developments. Forward-looking statements are based on management’s current expectations as well as certain assumptions and estimates made by, and information available to, management at the time the statements are made. Those statements are based on general assumptions and are subject to various risks, and because they also relate to the future they are likewise subject to inherent uncertainties and other factors that may cause actual results to differ materially from the views, beliefs and projections expressed in such statements. Therefore, we caution you against relying on any of these forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, those described below:
Current and future economic and market conditions in the United States generally or in the communities we serve, including the effects of possible declines in property values, increases in unemployment rates and potential reductions of economic growth, which may adversely affect our lending and other businesses and our financial results and conditions.
Possible changes in trade, monetary and fiscal policies of, and other activities undertaken by, governments, agencies, central banks and similar organizations, which could have a material adverse effect on our earnings.
The effects of a possible downgrade in the U.S. government’s sovereign credit rating or outlook, which could result in risks to us and general economic conditions that we are not able to predict.
Possible changes in market interest rates or capital markets could adversely affect our revenue and expense, the value of assets and obligations, and the availability and cost of capital and liquidity.
Any impairment of our goodwill or other intangibles, any repricing of assets, or any adjustment of valuation allowances on our deferred tax assets due to changes in law, adverse changes in the economic environment, declining operations of the reporting unit or other factors.
The effect of changes in tax laws, including the effect of Tax Reform and any future interpretations of or amendments to Tax Reform, which may impact our earnings, capital ratios and our ability to return capital to shareholders.
Possible changes in the creditworthiness of customers and the possible impairment of the collectability of loans and leases, including operating leases.
Changes in the speed of loan prepayments, loan origination and sale volumes, charge-offs, loan loss provisions or actual loan losses where our allowance for loan losses may not be adequate to cover our eventual losses.
Possible acceleration of prepayments on mortgage-backed securities due to low interest rates, and the related acceleration of premium amortization on those securities.
Our ability to effectively compete with other financial services companies, some of whom possess greater financial resources than we do and are subject to different regulatory standards than we are.
Loss of customer checking and savings account deposits as customers pursue other, higher-yield investments, which could increase our funding costs.
Possible changes in consumer and business spending and saving habits and the related effect on our ability to increase assets and to attract deposits, which could adversely affect our net income.
Our ability to effectively compete with other traditional and non-traditional financial services companies, some of whom possess greater financial resources than we do or are subject to different regulatory standards than we are.
Our inability to develop and gain acceptance from current and prospective customers for new products and services and the enhancement of existing products and services to meet customers’ needs and respond to emerging technological trends in a timely manner could have a negative impact on our revenue.
The effects of any developments,Our inability to keep pace with technological changes or actions relatingcould result in losing business to any litigation or regulatory proceedings brought against us or any of our subsidiaries.competitors.
Changes in laws and regulations affecting our businesses, such as the Dodd-Frank Act and otherincluding legislation and regulations relating to bank products and services, as well as changes in the enforcement and interpretation of such laws and regulations by applicable governmental and self-regulatory agencies, which could require us to change certain business practices, increase compliance risk, reduce our revenue, impose additional costs on us, or otherwise negatively affect our businesses.
Our ability to obtain a regulatory non-objection (as part of the CCAR process or otherwise) to take certain capital actions, including paying dividends and any plans to increase common stock dividends, repurchase common stock under current

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or future programs, or redeem preferred stock or other regulatory capital instruments, may impact our ability to return capital to stockholders and market perceptions of us.
Our ability to comply with stress testing and capital planning requirements (as part of the CCAR process or otherwise) may continue to require a significant investment of our managerial resources due to the importance and intensity of such tests and requirements.

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Our ability to comply with applicable capital and liquidity requirements (including, among other things, the Basel III capital standards and the LCR rule), including our ability to generate capital internally or raise capital on favorable terms, and if we fail to meet requirements, our financial condition could be negatively impacted.
The Basel III framework calls for additional risk-based capital surcharges for globally systemically important banks. Although we are not subjecteffects of any developments, changes or actions relating to such surcharges, it is possible that in the future we may become subject to similar surcharges.any litigation or regulatory proceedings brought against us or any of our subsidiaries.
The costs, including possibly incurring fines, penalties, or other negative effects (including reputational harm) of any adverse judicial, administrative, or arbitral rulings or proceedings, regulatory enforcement actions, or other legal actions to which we or any of our subsidiaries are a party, and which may adversely affect our results.
Our ability to manage fluctuations in the value of assets and liabilities and off-balance sheet exposure so as to maintain sufficient capital and liquidity to support our business.
Our ability to execute on our strategic and operational plans, including our ability to fully realize the financial and non-financial benefits relating to our strategic initiatives.
The risks and uncertainties related to our acquisition or divestiture of businesses.
The success of our marketing efforts in attracting and retaining customers.
Possible changes in consumer and business spending and saving habits and the related effect on our ability to increase assets and to attract deposits, which could adversely affect our net income.
Our ability to recruit and retain talented and experienced personnel to assist in the development, management and operation of our products and services may be affected by changes in laws and regulations in effect from time to time.
Fraud or misconduct by our customers, employees or business partners.
Any inaccurate or incomplete information provided to us by our customers or counterparties.
The risks and uncertainties related to our acquisition and integration of other companies.
Inability of our framework to manage risks associated with our business such as credit risk and operational risk, including third-party vendors and other service providers, which could, among other things, result in a breach of operating or security systems as a result of a cyber attack or similar act.act or failure to deliver our services effectively.
Dependence on key suppliers or vendors to obtain equipment and other supplies for our business on acceptable terms.
The inability of our internal disclosure controls and procedures to prevent, detect or mitigate any material errors or fraudulent acts.
The effects of geopolitical instability, including wars, conflicts and terrorist attacks and the potential impact, directly or indirectly, on our businesses.
The effects of man-made and natural disasters, including fires, floods, droughts, tornadoes, hurricanes, and environmental damage, which may negatively affect our operations and/or our loan portfolios and increase our cost of conducting business.
Changes in commodity market prices and conditions could adversely affect the cash flows of our borrowers operating in industries that are impacted by changes in commodity prices (including businesses indirectly impacted by commodities prices such as businesses that transport commodities or manufacture equipment used in the production of commodities), which could impair their ability to service any loans outstanding to them and/or reduce demand for loans in those industries.
Our inability to keep pace with technological changes could result in losing business to competitors.
Our ability to identify and address cyber-security risks such as data security breaches, malware, “denial of service” attacks, “hacking” and identity theft, a failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information;information, disruption or damage to our systems;systems, increased costs; losses;costs, losses, or adverse effects to our reputation.
Our ability to realize our adjusted efficiency ratio target as part of our expense management initiatives.
Significant disruption of, or loss of public confidence in, the Internet and services and devices used to access the Internet could affect the ability of our customers to access their accounts and conduct banking transactions.
Possible downgrades in our credit ratings or outlook could increase the costs of funding from capital markets.
The effects of problems encountered by other financial institutions that adversely affect us or the banking industry generally could require us to change certain business practices, reduce our revenue, impose additional costs on us, or otherwise negatively affect our businesses.
The effects of the failure of any component of our business infrastructure provided by a third party could disrupt our businesses;businesses, result in the disclosure of and/or misuse of confidential information or proprietary information;information, increase our costs;costs, negatively affect our reputation;reputation, and cause losses.
Our ability to receive dividends from our subsidiaries could affect our liquidity and ability to pay dividends to stockholders.

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Changes in accounting policies or procedures as may be required by the FASB or other regulatory agencies could materially affect how we report our financial results.
Other risks identified from time to time in reports that we file with the SEC.
Fluctuations in the price of our common stock and inability to complete stock repurchases in the time frame and/or on the terms anticipated.
The effects of any damage to our reputation resulting from developments related to any of the items identified above.
You should not place undue reliance on any forward-looking statements, which speak only as of the date made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible to predict all of them. We assume no obligation and do not intend to update or revise any forward-looking statements that are made from time to time, either as a result of future developments, new information or otherwise, except as may be required by law.
See also the reports filed with the Securities and Exchange Commission, including the discussion under the “Risk Factors” section of Regions’ Annual Report on Form 10-K for the year ended December 31, 20162017 as filed with the Securities and Exchange Commission and available on its website at www.sec.gov.

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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
June 30, 2017 December 31, 2016June 30, 2018 December 31, 2017
(In millions, except share data)(In millions, except share data)
Assets      
Cash and due from banks$1,873
 $1,853
$1,844
 $2,012
Interest-bearing deposits in other banks2,258
 3,583
2,442
 1,899
Federal funds sold and securities purchased under agreements to resell—
 15
—
 70
Trading account securities178
 124
Securities held to maturity (estimated fair value of $1,770 and $1,369, respectively)1,754
 1,362
Securities available for sale23,608
 23,781
Loans held for sale (includes $379 and $447 measured at fair value, respectively)573
 718
Debt securities held to maturity (estimated fair value of $1,530 and $1,667, respectively)1,568
 1,658
Debt securities available for sale22,935
 23,403
Loans held for sale (includes $343 and $325 measured at fair value, respectively)490
 348
Loans, net of unearned income80,127
 80,095
80,478
 79,947
Allowance for loan losses(1,041) (1,091)(838) (934)
Net loans79,086
 79,004
79,640
 79,013
Other earning assets1,537
 1,644
1,672
 1,891
Premises and equipment, net2,060
 2,096
2,050
 2,064
Interest receivable313
 319
347
 337
Goodwill4,904
 4,904
4,904
 4,904
Residential mortgage servicing rights at fair value346
 324
362
 336
Other identifiable intangible assets198
 221
156
 177
Other assets5,955
 6,020
6,147
 6,182
Total assets$124,643
 $125,968
$124,557
 $124,294
Liabilities and Stockholders’ Equity      
Deposits:      
Non-interest-bearing$37,119
 $36,046
$36,055
 $36,127
Interest-bearing60,974
 62,989
59,228
 60,762
Total deposits98,093
 99,035
95,283
 96,889
Borrowed funds:      
Short-term borrowings:      
Other short-term borrowings600
 —
1,400
 500
Total short-term borrowings600
 —
1,400
 500
Long-term borrowings6,765
 7,763
9,890
 8,132
Total borrowed funds7,365
 7,763
11,290
 8,632
Other liabilities2,292
 2,506
2,207
 2,581
Total liabilities107,750
 109,304
108,780
 108,102
Stockholders’ equity:      
Preferred stock, authorized 10 million shares, par value $1.00 per share      
Non-cumulative perpetual, liquidation preference $1,000.00 per share, including related surplus, net of issuance costs; issued—1,000,000 shares820
 820
820
 820
Common stock, authorized 3 billion shares, par value $.01 per share:      
Issued including treasury stock—1,240,526,496 and 1,255,839,866 shares, respectively12
 13
Issued including treasury stock—1,155,415,500 and 1,175,327,565 shares, respectively12
 12
Additional paid-in capital16,828
 17,092
15,389
 15,858
Retained earnings1,089
 666
2,182
 1,628
Treasury stock, at cost—41,259,320 and 41,259,319 shares, respectively(1,377) (1,377)
Treasury stock, at cost—41,032,676 and 41,259,320 shares, respectively(1,371) (1,377)
Accumulated other comprehensive income (loss), net(479) (550)(1,255) (749)
Total stockholders’ equity16,893
 16,664
15,777
 16,192
Total liabilities and stockholders’ equity$124,643
 $125,968
$124,557
 $124,294

See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 Three Months Ended
June 30		 Six Months Ended June 30
 2018 2017 2018 2017
 (In millions, except per share data)
Interest income, including other financing income on:       
Loans, including fees$881
 $801
 $1,732
 $1,574
Debt securities - taxable156
 150
 310
 297
Loans held for sale4
 4
 7
 8
Other earning assets17
 10
 36
 25
Operating lease assets18
 24
 38
 51
Total interest income, including other financing income1,076
 989
 2,123
 1,955
Interest expense on:       
Deposits57
 37
 106
 72
Short-term borrowings6
 2
 7
 2
Long-term borrowings73
 50
 145
 100
Total interest expense136
 89
 258
 174
Depreciation expense on operating lease assets14
 18
 30
 40
Total interest expense and depreciation expense on operating lease assets150
 107
 288
 214
Net interest income and other financing income926
 882
 1,835
 1,741
Provision for loan losses60
 48
 50
 118
Net interest income and other financing income after provision for loan losses866
 834
 1,785
 1,623
Non-interest income:       
Service charges on deposit accounts175
 169
 346
 337
Card and ATM fees112
 104
 216
 208
Investment management and trust fee income58
 57
 116
 113
Capital markets income57
 38
 107
 70
Mortgage income37
 40
 75
 81
Securities gains (losses), net1
 1
 1
 1
Other72
 81
 158
 154
Total non-interest income512
 490
 1,019
 964
Non-interest expense:       
Salaries and employee benefits511
 470
 1,006
 931
Net occupancy expense84
 85
 167
 168
Furniture and equipment expense81
 84
 162
 163
Other235
 236
 460
 456
Total non-interest expense911
 875
 1,795
 1,718
Income from continuing operations before income taxes467
 449
 1,009
 869
Income tax expense89
 133
 217
 260
Income from continuing operations378
 316
 792
 609
Discontinued operations:       
Income (loss) from discontinued operations before income taxes(3) —
 (3) 13
Income tax expense (benefit)—
 —
 —
 5
Income (loss) from discontinued operations, net of tax(3) —
 (3) 8
Net income$375
 $316
 $789
 $617
Net income from continuing operations available to common shareholders$362
 $300
 $760
 $577
Net income available to common shareholders$359
 $300
 $757
 $585
Weighted-average number of shares outstanding:       
Basic1,119
 1,202
 1,123
 1,205
Diluted1,128
 1,212
 1,135
 1,218
Earnings per common share from continuing operations:       
Basic$0.32
 $0.25
 $0.68
 $0.48
Diluted0.32
 0.25
 0.67
 0.47
Earnings per common share:       
Basic$0.32
 $0.25
 $0.67
 $0.49
Diluted0.32
 0.25
 0.67
 0.48
Cash dividends declared per common share0.09
 0.07
 0.18
 0.135
 Three Months Ended June 30 Six Months Ended June 30
 2017 2016 2017 2016
 (In millions, except per share data)
Interest income, including other financing income on:       
Loans, including fees$801
 $762
 $1,574
 $1,530
Securities - taxable151
 145
 299
 292
Loans held for sale4
 4
 8
 7
Trading account securities—
 1
 2
 4
Other earning assets9
 8
 21
 18
Operating lease assets24
 32
 51
 64
Total interest income, including other financing income989
 952
 1,955
 1,915
Interest expense on:       
Deposits37
 28
 72
 55
Short-term borrowings2
 —
 2
 —
Long-term borrowings50
 50
 100
 97
Total interest expense89
 78
 174
 152
Depreciation expense on operating lease assets18
 26
 40
 53
Total interest expense and depreciation expense on operating lease assets107
 104
 214
 205
Net interest income and other financing income882
 848
 1,741
 1,710
Provision for loan losses48
 72
 118
 185
Net interest income and other financing income after provision for loan losses834
 776
 1,623
 1,525
Non-interest income:       
Service charges on deposit accounts169
 166
 337
 325
Card and ATM fees104
 99
 208
 194
Investment management and trust fee income57
 52
 113
 102
Mortgage income40
 46
 81
 84
Securities gains (losses), net1
 6
 1
 1
Other154
 157
 295
 326
Total non-interest income525
 526
 1,035
 1,032
Non-interest expense:       
Salaries and employee benefits497
 480
 975
 955
Net occupancy expense86
 86
 171
 172
Furniture and equipment expense85
 79
 165
 157
Other241
 270
 475
 500
Total non-interest expense909
 915
 1,786
 1,784
Income from continuing operations before income taxes450
 387
 872
 773
Income tax expense133
 115
 261
 228
Income from continuing operations317
 272
 611
 545
Discontinued operations:       
Income (loss) from discontinued operations before income taxes(1) 5
 10
 5
Income tax expense (benefit)—
 2
 4
 2
Income (loss) from discontinued operations, net of tax(1) 3
 6
 3
Net income$316
 $275
 $617
 $548
Net income from continuing operations available to common shareholders$301
 $256
 $579
 $513
Net income available to common shareholders$300
 $259
 $585
 $516
Weighted-average number of shares outstanding:       
Basic1,202
 1,265
 1,205
 1,275
Diluted1,212
 1,268
 1,218
 1,279
Earnings per common share from continuing operations:       
Basic$0.25
 $0.20
 $0.48
 $0.40
Diluted0.25
 0.20
 0.48
 0.40
Earnings per common share:       
Basic$0.25
 $0.20
 $0.49
 $0.40
Diluted0.25
 0.20
 0.48
 0.40
Cash dividends declared per common share0.07
 0.065
 0.135
 0.125
See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three Months Ended June 30Three Months Ended June 30
2017 20162018 2017
(In millions)(In millions)
Net income$316
 $275
$375
 $316
Other comprehensive income (loss), net of tax:      
Unrealized losses on securities transferred to held to maturity:      
Unrealized losses on securities transferred to held to maturity during the period (net of zero and zero tax effect, respectively)—
 —
—
 —
Less: reclassification adjustments for amortization of unrealized losses on securities transferred to held to maturity (net of ($1) and ($3) tax effect, respectively)(1) (5)
Less: reclassification adjustments for amortization of unrealized losses on securities transferred to held to maturity (net of zero and ($1) tax effect, respectively)(1) (1)
Net change in unrealized losses on securities transferred to held to maturity, net of tax1
 5
1
 1
Unrealized gains (losses) on securities available for sale:      
Unrealized holding gains (losses) arising during the period (net of $30 and $62 tax effect, respectively)51
 103
Less: reclassification adjustments for securities gains (losses) realized in net income (net of zero and $2 tax effect, respectively)1
 4
Unrealized holding gains (losses) arising during the period (net of ($23) and $30 tax effect, respectively)(66) 51
Less: reclassification adjustments for securities gains (losses) realized in net income (net of zero and zero tax effect, respectively)1
 1
Net change in unrealized gains (losses) on securities available for sale, net of tax50
 99
(67) 50
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:      
Unrealized holding gains (losses) on derivatives arising during the period (net of $21 and $51 tax effect, respectively)37
 84
Less: reclassification adjustments for gains (losses) on derivative instruments realized in net income (net of $8 and $13 tax effect, respectively)14
 22
Unrealized holding gains (losses) on derivatives arising during the period (net of ($14) and $21 tax effect, respectively)(42) 37
Less: reclassification adjustments for gains (losses) on derivative instruments realized in net income (net of $1 and $8 tax effect, respectively)4
 14
Net change in unrealized gains (losses) on derivative instruments, net of tax23
 62
(46) 23
Defined benefit pension plans and other post employment benefits:      
Net actuarial gains (losses) arising during the period (net of zero and $1 tax effect, respectively)—
 —
Less: reclassification adjustments for amortization of actuarial loss and settlements realized in net income (net of ($7) and ($3) tax effect, respectively)(12) (5)
Net actuarial gains (losses) arising during the period (net of zero and zero tax effect, respectively)—
 —
Less: reclassification adjustments for amortization of actuarial loss and settlements realized in net income (net of ($2) and ($7) tax effect, respectively)(8) (12)
Net change from defined benefit pension plans and other post employment benefits, net of tax12
 5
8
 12
Other comprehensive income (loss), net of tax86
 171
(104) 86
Comprehensive income$402
 $446
$271
 $402
      
Six Months Ended June 30Six Months Ended June 30
2017 20162018 2017
(In millions)(In millions)
Net income$617
 $548
$789
 $617
Other comprehensive income (loss), net of tax:      
Unrealized losses on securities transferred to held to maturity:      
Unrealized losses on securities transferred to held to maturity during the period (net of zero and zero tax effect, respectively)—
 —
—
 —
Less: reclassification adjustments for amortization of unrealized losses on securities transferred to held to maturity (net of ($2) and ($4) tax effect, respectively)(3) (7)
Less: reclassification adjustments for amortization of unrealized losses on securities transferred to held to maturity (net of ($1) and ($2) tax effect, respectively)(3) (3)
Net change in unrealized losses on securities transferred to held to maturity, net of tax3
 7
3
 3
Unrealized gains (losses) on securities available for sale:      
Unrealized holding gains (losses) arising during the period (net of $31 and $187 tax effect, respectively)52
 308
Unrealized holding gains (losses) arising during the period (net of ($127) and $31 tax effect, respectively)(376) 52
Less: reclassification adjustments for securities gains (losses) realized in net income (net of zero and zero tax effect, respectively)1
 1
1
 1
Net change in unrealized gains (losses) on securities available for sale, net of tax51
 307
(377) 51
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:      
Unrealized holding gains (losses) on derivatives arising during the period (net of $20 and $153 tax effect, respectively)33
 249
Less: reclassification adjustments for gains (losses) on derivative instruments realized in net income (net of $20 and $28 tax effect, respectively)33
 46
Unrealized holding gains (losses) on derivatives arising during the period (net of ($45) and $20 tax effect, respectively)(134) 33
Less: reclassification adjustments for gains (losses) on derivative instruments realized in net income (net of $4 and $20 tax effect, respectively)12
 33
Net change in unrealized gains (losses) on derivative instruments, net of tax—
 203
(146) —
Defined benefit pension plans and other post employment benefits:      
Net actuarial gains (losses) arising during the period (net of zero and $1 tax effect, respectively)(1) —
Less: reclassification adjustments for amortization of actuarial loss and settlements realized in net income (net of ($10) and ($6) tax effect, respectively)(18) (11)
Net actuarial gains (losses) arising during the period (net of zero and zero tax effect, respectively)(1) (1)
Less: reclassification adjustments for amortization of actuarial loss and settlements realized in net income (net of ($4) and ($10) tax effect, respectively)(15) (18)
Net change from defined benefit pension plans and other post employment benefits, net of tax17
 11
14
 17
Other comprehensive income (loss), net of tax71
 528
(506) 71
Comprehensive income$688
 $1,076
$283
 $688
See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
 
Preferred Stock Common Stock 
Additional
Paid-In
Capital
 
Retained
Earnings
(Deficit)
 
Treasury
Stock,
At Cost
 
Accumulated
Other
Comprehensive
Income (Loss), Net
 TotalPreferred Stock Common Stock 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Treasury
Stock,
At Cost
 
Accumulated
Other
Comprehensive
Income (Loss), Net
 Total
Shares Amount Shares Amount Shares Amount Shares Amount 
(In millions, except per share data)(In millions, except per share data)
BALANCE AT JANUARY 1, 20161
 $820
 1,297
 $13
 $17,883
 $(115) $(1,377) $(380) $16,844
Net income—
 —
 —
 —
 —
 548
 —
 —
 548
Amortization of unrealized losses on securities transferred to held to maturity, net of tax—
 —
 —
 —
 —
 —
 —
 7
 7
Net change in unrealized gains and losses on securities available for sale, net of tax and reclassification adjustment—
 —
 —
 —
 —
 —
 —
 307
 307
Net change in unrealized gains and losses on derivative instruments, net of tax and reclassification adjustment—
 —
 —
 —
 —
 —
 —
 203
 203
Net change from employee benefit plans, net of tax—
 —
 —
 —
 —
 —
 —
 11
 11
Cash dividends declared—$0.125 per share—
 —
 —
 —
 —
 (159) —
 —
 (159)
Preferred stock dividends—
 —
 —
 —
 —
 (32) —
 —
 (32)
Common stock transactions:                 
Impact of share repurchases—
 —
 (42) —
 (354) —
 —
 —
 (354)
Impact of stock transactions under compensation plans, net and other—
 —
 4
 —
 10
 —
 —
 —
 10
BALANCE AT JUNE 30, 20161
 $820
 1,259
 $13
 $17,539
 $242
 $(1,377) $148
 $17,385
                 
BALANCE AT JANUARY 1, 20171
 $820
 1,214
 $13
 $17,092
 $666
 $(1,377) $(550) $16,664
1
 $820
 1,214
 $13
 $17,092
 $666
 $(1,377) $(550) $16,664
Net income—
 —
 —
 —
 —
 617
 —
 —
 617
—
 —
 —
 —
 —
 617
 —
 —
 617
Amortization of unrealized losses on securities transferred to held to maturity, net of tax—
 —
 —
 —
 —
 —
 —
 3
 3
Net change in unrealized gains and losses on securities available for sale, net of tax and reclassification adjustment—
 —
 —
 —
 —
 —
 —
 51
 51
Net change in unrealized gains and losses on derivative instruments, net of tax and reclassification adjustment—
 —
 —
 —
 —
 —
 —
 —
 —
Net change from employee benefit plans, net of tax—
 —
 —
 —
 —
 —
 —
 17
 17
Other comprehensive income (loss), net of tax—
 —
 —
 —
 —
 —
 —
 71
 71
Cash dividends declared—$0.135 per share—
 —
 —
 —
 —
 (162) —
 —
 (162)—
 —
 —
 —
 —
 (162) —
 —
 (162)
Preferred stock dividends—
 —
 —
 —
 —
 (32) —
 —
 (32)—
 —
 —
 —
 —
 (32) —
 —
 (32)
Common stock transactions:                                  
Impact of share repurchases—
 —
 (19) (1) (274) —
 —
 —
 (275)—
 —
 (19) (1) (274) —
 —
 —
 (275)
Impact of stock transactions under compensation plans, net and other—
 —
 4
 —
 10
 —
 —
 —
 10
—
 —
 4
 —
 10
 —
 —
 —
 10
BALANCE AT JUNE 30, 20171
 $820
 1,199
 $12
 $16,828
 $1,089
 $(1,377) $(479) $16,893
1
 $820
 1,199
 $12
 $16,828
 $1,089
 $(1,377) $(479) $16,893
                 
BALANCE AT JANUARY 1, 20181
 $820
 1,133
 $12
 $15,858
 $1,628
 $(1,377) $(749) $16,192
Cumulative effect from change in accounting guidance—
 —
 —
 —
 —
 (2) —
 —
 (2)
Net income—
 —
 —
 —
 —
 789
 —
 —
 789
Other comprehensive income (loss), net of tax—
 —
 —
 —
 —
 —
 —
 (506) (506)
Cash dividends declared—$0.18 per share—
 —
 —
 —
 —
 (201) —
 —
 (201)
Preferred stock dividends—
 —
 —
 —
 —
 (32) —
 —
 (32)
Common stock transactions:                 
Impact of share repurchases—
 —
 (25) —
 (470) —
 —
 —
 (470)
Impact of stock transactions under compensation plans, net and other—
 —
 6
 —
 1
 —
 6
 —
 7
BALANCE AT JUNE 30, 20181
 $820
 1,114
 $12
 $15,389
 $2,182
 $(1,371) $(1,255) $15,777

See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30Six Months Ended June 30
2017 20162018 2017
(In millions)(In millions)
Operating activities:      
Net income$617
 $548
$789
 $617
Adjustments to reconcile net income to net cash from operating activities:      
Provision for loan losses118
 185
50
 118
Depreciation, amortization and accretion, net274
 267
239
 274
Securities (gains) losses, net(1) (1)(1) (1)
Deferred income tax expense62
 10
109
 62
Originations and purchases of loans held for sale(1,729) (1,837)(1,645) (1,729)
Proceeds from sales of loans held for sale1,922
 1,823
1,525
 1,922
(Gain) loss on sale of loans, net(54) (59)(33) (54)
Net change in operating assets and liabilities:      
Trading account securities(54) 26
Other earning assets67
 83
189
 11
Interest receivable and other assets(21) (126)(92) (22)
Other liabilities(88) 197
(439) (88)
Other42
 28
(31) 42
Net cash from operating activities1,155
 1,144
660
 1,152
Investing activities:      
Proceeds from maturities of securities held to maturity101
 305
Proceeds from sales of securities available for sale592
 1,527
Proceeds from maturities of securities available for sale1,755
 1,983
Purchases of securities available for sale(2,208) (4,092)
Purchases of securities held to maturity(494) —
Proceeds from maturities of debt securities held to maturity89
 101
Proceeds from sales of debt securities available for sale67
 576
Proceeds from maturities of debt securities available for sale1,680
 1,741
Net proceeds from bank-owned life insurance2
 1
Purchases of debt securities available for sale(1,774) (2,176)
Purchases of debt securities held to maturity—
 (494)
Proceeds from sales of loans13
 47
280
 13
Purchases of loans(147) (579)(215) (147)
Purchases of mortgage servicing rights(18) (24)(2) (18)
Net change in loans(110) (202)(767) (110)
Net purchases of other assets(45) (41)(74) (45)
Net cash from investing activities(561) (1,076)(714) (558)
Financing activities:      
Net change in deposits(942) (1,185)(1,606) (942)
Net change in short-term borrowings600
 (8)900
 600
Proceeds from long-term borrowings1,250
 1,607
8,100
 1,250
Payments on long-term borrowings(2,252) (1,000)(6,301) (2,252)
Cash dividends on common stock(241) (154)(203) (241)
Cash dividends on preferred stock(32) (32)(32) (32)
Repurchases of common stock(275) (354)(470) (275)
Taxes paid related to net share settlement of equity awards(22) (14)(32) (22)
Other—
 (5)3
 —
Net cash from financing activities(1,914) (1,145)359
 (1,914)
Net change in cash and cash equivalents(1,320) (1,077)305
 (1,320)
Cash and cash equivalents at beginning of year5,451
 5,314
3,981
 5,451
Cash and cash equivalents at end of period$4,131
 $4,237
$4,286
 $4,131

See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three and Six Months Ended June 30, 20172018 and 20162017
NOTE 1. BASIS OF PRESENTATION
Regions Financial Corporation (“Regions” or the "Company”) provides a full range of banking and bank-related services to individual and corporate customers through its subsidiaries and branch offices located across the South, Midwest and Texas. The Company competes with other financial institutions located in the states in which it operates, as well as other adjoining states. Regions is subject to the regulations of certain government agencies and undergoes periodic examinations by certain regulatory authorities.
The accounting and reporting policies of Regions and the methods of applying those policies that materially affect the consolidated financial statements conform with GAAP and with general financial services industry practices. The accompanying interim financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and notes to the consolidated financial statements necessary for a complete presentation of financial position, results of operations, comprehensive income and cash flows in conformity with GAAP. In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the consolidated financial statements have been included. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto in Regions’ Annual Report on Form 10-K for the year ended December 31, 2016.2017. Regions has evaluated all subsequent events for potential recognition and disclosure through the filing date of this Form 10-Q.
On January 11, 2012,April 4, 2018, Regions entered into ana stock purchase agreement to sell Regions Insurance Group, Inc. and related affiliates to BB&T Holdings, Inc. The transaction closed on July 2, 2018. Regions sold Morgan Keegan and related affiliates. The transaction closed onaffiliates in April 2, 2012. See Note 2 and Note 1413 for further details. Resultsrelated disclosure.
Effective January 1, 2018, the Company adopted new guidance related to several accounting topics. The cumulative effect of operationsthe retrospective application was a total reduction to retained earnings of $2 million, of which the individual components were immaterial. All prior period amounts impacted by guidance that required retrospective application have been revised. See Note 15 for the entities sold are presented separately as discontinued operations for all periods presented on the consolidated statements of income. This presentation is consistent with the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2016.related disclosure.
NOTE 2. DISCONTINUED OPERATIONS
On April 4, 2018, Regions entered into a stock purchase agreement to sell Regions Insurance Group, Inc. and related affiliates to BB&T Insurance Holdings, Inc. The transaction closed on July 2, 2018. The after-tax gain associated with the transaction was approximately $200 million and Common Equity Tier 1 capital generated was approximately $300 million. The after-tax gain will be reflected in the Company's third quarter consolidated statements of income as a component of discontinued operations. See Note 16 for related discussion.
In connection with the agreement, the results of the entities being sold are reported in the Company's consolidated statements of income separately as discontinued operations for all periods presented because the pending sale met all of the criteria for reporting as discontinued operations at June 30, 2018.
On January 11, 2012, Regions entered into a stock purchase agreement to sell Morgan Keegan and related affiliates to Raymond James. The transaction closed on April 2, 2012. Regions Investment Management, Inc. (formerly known as Morgan Asset Management, Inc.) and Regions Trust were not included in the sale. In connection with the closing of the sale, Regions agreed to indemnify Raymond James for all litigation matters related to pre-closing activities. See Note 1413 for related disclosure.
Results of operations for the Morgan Keegan entities sold are presented separately as discontinued operations for all periods presented on the consolidated statements of income. This presentation is consistent with the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2017.
The condensed balance sheets for the Regions Insurance Group, Inc. entities being sold are immaterial for disclosure as discontinued operations. The following table represents the condensed results of operations for the Regions Insurance Group, Inc. entities being sold as discontinued operations:

13

Table of Contents


 Three Months Ended
June 30		 Six Months Ended
June 30
 2018 2017 2018 2017
 (In millions)
Non-interest income:       
Insurance commissions and fees$35
 $35
 $69
 $71
Other—
 1
 —
 1
Total non-interest income35
 36
 69
 72
Non-interest expense:       
Salaries and employee benefits25
 25
 49
 49
Net occupancy expense2
 1
 3
 3
Furniture and equipment expense1
 1
 2
 2
Other8
 8
 15
 15
Total non-interest expense36
 35
 69
 69
Income (loss) from discontinued operations before income taxes(1) 1
 —
 3
Income tax expense (benefit)—
 —
 —
 1
Income (loss) from discontinued operations, net of tax$(1) $1
 $—
 $2

The following table represents the condensed results of operations for both the Regions Insurance Group, Inc. entities being sold and Morgan Keegan and Company, Inc. and related affiliates as discontinued operations:
Three Months Ended June 30 Six Months Ended June 30Three Months Ended
June 30		 Six Months Ended
June 30
2017 2016 2017 20162018 2017 2018 2017
(In millions, except per share data)(In millions, except per share data)
Non-interest expense:       
Professional and legal expenses/(recoveries)$—
 $(5) $(11) $(5)
Other1
 —
 1
 —
Total non-interest expense1
 (5) (10) (5)
Income (loss) from discontinued operations before income taxes(1) 5
 10
 5
$(3) $—
 $(3) $13
Income tax expense (benefit)—
 2
 4
 2
—
 —
 —
 5
Income (loss) from discontinued operations, net of tax$(1) $3
 $6
 $3
$(3) $—
 $(3) $8
Earnings (loss) per common share from discontinued operations:              
Basic$(0.00) $0.00
 $0.00
 $0.00
$(0.00) $0.00
 $(0.00) $0.01
Diluted$(0.00) $0.00
 $0.00
 $0.00
$(0.00) $0.00
 $(0.00) $0.01

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NOTE 3. SECURITIES
DEBT SECURITIES
The amortized cost, gross unrealized gains and losses, and estimated fair value of debt securities held to maturity and debt securities available for sale are as follows:
June 30, 2017June 30, 2018
  
Recognized in OCI (1)
   Not Recognized in OCI    
Recognized in OCI (1)
   Not Recognized in OCI  
Amortized
Cost
 Gross Unrealized Gains Gross Unrealized Losses Carrying Value 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
Amortized
Cost
 Gross Unrealized Gains Gross Unrealized Losses Carrying Value 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
(In millions)(In millions)
Securities held to maturity:             
Debt securities held to maturity:             
Mortgage-backed securities:                          
Residential agency$1,149
 $—
 $(45) $1,104
 $14
 $(2) $1,116
$967
 $—
 $(37) $930
 $—
 $(18) $912
Commercial agency654
 —
 (4) 650
 6
 (2) 654
641
 —
 (3) 638
 —
 (20) 618
$1,803
 $—
 $(49) $1,754
 $20
 $(4) $1,770
$1,608
 $—
 $(40) $1,568
 $—
 $(38) $1,530
                          
Securities available for sale:             
Debt securities available for sale:             
U.S. Treasury securities$313
 $1
 $—
 $314
     $314
$313
 $—
 $(6) $307
     $307
Federal agency securities25
 —
 —
 25
     25
48
 —
 —
 48
     48
Mortgage-backed securities:                          
Residential agency17,648
 87
 (211) 17,524
     17,524
17,424
 18
 (587) 16,855
     16,855
Residential non-agency3
 —
 —
 3
     3
2
 —
 —
 2
     2
Commercial agency3,475
 17
 (18) 3,474
     3,474
3,835
 1
 (99) 3,737
     3,737
Commercial non-agency811
 6
 (1) 816
     816
803
 2
 (13) 792
     792
Corporate and other debt securities1,226
 29
 (6) 1,249
     1,249
1,216
 2
 (24) 1,194
     1,194
Equity securities194
 9
 —
 203
     203
$23,695
 $149
 $(236) $23,608
     $23,608
$23,641
 $23
 $(729) $22,935
     $22,935
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December 31, 2016December 31, 2017
  
Recognized in OCI (1)
   Not Recognized in OCI    
Recognized in OCI (1)
   Not Recognized in OCI  
Amortized
Cost		 Gross Unrealized Gains Gross Unrealized Losses Carrying Value Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 Estimated
Fair
Value		Amortized
Cost		 Gross Unrealized Gains Gross Unrealized Losses Carrying Value Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 Estimated
Fair
Value
(In millions)(In millions)
Securities held to maturity:             
Debt securities held to maturity:             
Mortgage-backed securities:                          
Residential agency$1,249
 $—
 $(49) $1,200
 $12
 $(3) $1,209
$1,051
 $—
 $(40) $1,011
 $12
 $(4) $1,019
Commercial agency167
 —
 (5) 162
 —
 (2) 160
651
 —
 (4) 647
 5
 (4) 648
$1,416
 $—
 $(54) $1,362
 $12
 $(5) $1,369
$1,702
 $—
 $(44) $1,658
 $17
 $(8) $1,667
                          
Securities available for sale:             
Debt securities available for sale:             
U.S. Treasury securities$303
 $1
 $(1) $303
     $303
$333
 $—
 $(2) $331
     $331
Federal agency securities35
 —
 —
 35
     35
28
 —
 —
 28
     28
Obligations of states and political subdivisions1
 —
 —
 1
     1
Mortgage-backed securities:                          
Residential agency17,531
 95
 (255) 17,371
     17,371
17,622
 53
 (244) 17,431
     17,431
Residential non-agency4
 —
 —
 4
     4
3
 —
 —
 3
     3
Commercial agency3,486
 9
 (32) 3,463
     3,463
3,739
 5
 (30) 3,714
     3,714
Commercial non-agency1,124
 8
 (3) 1,129
     1,129
787
 4
 (3) 788
     788
Corporate and other debt securities1,272
 19
 (17) 1,274
     1,274
1,093
 20
 (5) 1,108
     1,108
Equity securities194
 7
 —
 201
     201
$23,950
 $139
 $(308) $23,781
     $23,781
$23,605
 $82
 $(284) $23,403
     $23,403
_________
(1) The gross unrealized losses recognized in OCI on securities held to maturity resulted from a transfer of securities available for sale to held to maturity in the second quarter of 2013.

Securities
15

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Debt securities with carrying values of $9.3$8.0 billion and $11.6$8.1 billion at June 30, 20172018 and December 31, 2016,2017, respectively, were pledged to secure public funds, trust deposits and certain borrowing arrangements. Included within total pledged securities is approximately $49 million and $50 million of encumbered U.S. Treasury securities at both June 30, 20172018 and December 31, 2016.2017, respectively.
The amortized cost and estimated fair value of debt securities held to maturity and debt securities available for sale at June 30, 2017,2018, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

15

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Amortized
Cost
 
Estimated
Fair Value
Amortized
Cost
 
Estimated
Fair Value
(In millions)(In millions)
Securities held to maturity:   
Debt securities held to maturity:   
Mortgage-backed securities:      
Residential agency$1,149
 $1,116
$967
 $912
Commercial agency654
 654
641
 618
$1,803
 $1,770
$1,608
 $1,530
Securities available for sale:   
Debt securities available for sale:   
Due in one year or less$75
 $75
$41
 $41
Due after one year through five years722
 731
1,040
 1,022
Due after five years through ten years556
 566
368
 358
Due after ten years211
 216
128
 128
Mortgage-backed securities:      
Residential agency17,648
 17,524
17,424
 16,855
Residential non-agency3
 3
2
 2
Commercial agency3,475
 3,474
3,835
 3,737
Commercial non-agency811
 816
803
 792
Equity securities194
 203
$23,695
 $23,608
$23,641
 $22,935
The following tables present gross unrealized losses and the related estimated fair value of debt securities held to maturity and debt securities available for sale at June 30, 20172018 and December 31, 2016.2017. For debt securities transferred to held to maturity from available for sale, the analysis in the tables below is comparing the securities' original amortized cost to its current estimated fair value. These securities are segregated between investments that have been in a continuous unrealized loss position for less than twelve months and for twelve months or more.
June 30, 2017June 30, 2018
Less Than Twelve Months Twelve Months or More TotalLess Than Twelve Months Twelve Months or More Total
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
(In millions)(In millions)
Securities held to maturity:           
Debt securities held to maturity:           
Mortgage-backed securities:                      
Residential agency$786
 $(21) $330
 $(12) $1,116
 $(33)$—
 $—
 $912
 $(55) $912
 $(55)
Commercial agency29
 (1) 155
 (5) 184
 (6)480
 (13) 138
 (10) 618
 (23)
$815
 $(22) $485
 $(17) $1,300
 $(39)$480
 $(13) $1,050
 $(65) $1,530
 $(78)
                      
Securities available for sale:           
Debt securities available for sale:           
U.S. Treasury securities$86
 $—
 $18
 $—
 $104
 $—
$218
 $(3) $83
 $(3) $301
 $(6)
Mortgage-backed securities:                      
Residential agency11,593
 (202) 539
 (9) 12,132
 (211)7,569
 (196) 7,451
 (391) 15,020
 (587)
Commercial agency1,318
 (18) 44
 —
 1,362
 (18)2,688
 (64) 839
 (35) 3,527
 (99)
Commercial non-agency261
 (1) 29
 —
 290
 (1)590
 (11) 58
 (2) 648
 (13)
All other securities154
 (1) 132
 (5) 286
 (6)
Corporate and other debt securities920
 (20) 64
 (4) 984
 (24)
$13,412
 $(222) $762
 $(14) $14,174
 $(236)$11,985
 $(294) $8,495
 $(435) $20,480
 $(729)

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December 31, 2016December 31, 2017
Less Than Twelve Months Twelve Months or More TotalLess Than Twelve Months Twelve Months or More Total
Estimated
Fair
Value		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Gross
Unrealized
Losses		Estimated
Fair
Value		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Gross
Unrealized
Losses
(In millions)(In millions)
Securities held to maturity:           
Debt securities held to maturity:           
Mortgage-backed securities:                      
Residential agency$850
 $(26) $359
 $(14) $1,209
 $(40)$—
 $—
 $1,019
 $(32) $1,019
 $(32)
Commercial agency—
 —
 160
 (7) 160
 (7)—
 —
 150
 (7) 150
 (7)
$850
 $(26) $519
 $(21) $1,369
 $(47)$—
 $—
 $1,169
 $(39) $1,169
 $(39)
                      
Securities available for sale:           
Debt securities available for sale:           
U.S. Treasury securities$112
 $(1) $18
 $—
 $130
 $(1)$221
 $(1) $84
 $(1) $305
 $(2)
Mortgage-backed securities:                      
Residential agency12,071
 (245) 570
 (10) 12,641
 (255)5,157
 (40) 8,195
 (204) 13,352
 (244)
Commercial agency2,199
 (31) 45
 (1) 2,244
 (32)1,666
 (10) 904
 (20) 2,570
 (30)
Commercial non-agency402
 (2) 176
 (1) 578
 (3)393
 (2) 61
 (1) 454
 (3)
All other securities382
 (6) 218
 (11) 600
 (17)
Corporate and other debt securities306
 (2) 105
 (3) 411
 (5)
$15,166
 $(285) $1,027
 $(23) $16,193
 $(308)$7,743
 $(55) $9,349
 $(229) $17,092
 $(284)
The number of individual debt positions in an unrealized loss position in the tables above decreasedincreased from 1,6131,059 at December 31, 20162017 to 1,4581,448 at June 30, 2017.2018. The decreaseincrease in the number of securities and the total amount of unrealized losses from year-end 20162017 was primarily due to changes in market interest rates. In instances where an unrealized loss existed, there was no indication of an adverse change in credit on the underlying positions in the tables above. As it relates to these positions, management believes no individual unrealized loss, other than those discussed below, represented an OTTI as of those dates. The Company does not intend to sell, and it is not more likely than not that the Company will be required to sell, the positions before the recovery of their amortized cost basis, which may be at maturity.
As part of the Company's normal process for evaluating OTTI, management did identify a limited number of positions where an OTTI was believed to exist as of June 30, 2017. For the six months ended June 30, 2017, such impairments were immaterial.2018.
Gross realized gains and gross realized losses on sales of debt securities available for sale as well as OTTI losses, are shown in the table below. The cost of securities sold is based on the specific identification method.
 Three Months Ended June 30 Six Months Ended June 30
 2017 2016 2017 2016
 (In millions)
Gross realized gains$3
 $13
 $4
 $29
Gross realized losses(2) (7) (3) (27)
OTTI—
 —
 —
 (1)
Securities gains (losses), net$1
 $6
 $1

$1
 Three Months Ended June 30 Six Months Ended June 30
 2018 2017 2018 2017
 (In millions)
Gross realized gains$3
 $3
 $3
 $4
Gross realized losses—
 (2) —
 (3)
OTTI(2) —
 (2) —
Debt securities available for sale gains (losses), net$1
 $1
 $1

$1

EQUITY INVESTMENTS
Effective January 1, 2018, Regions adopted new accounting guidance that requires equity investments to be recorded at fair value with changes in fair value reported in net income. Regions elected a measurement alternative to fair value for certain equity investments without a readily determinable fair value. See Note 15 for related disclosure.
Marketable equity securities carried at fair value, which primarily consist of assets held for certain employee benefits and money market funds, are reported in other earning assets in the consolidated balance sheets. Total marketable equity securities were $423 million and $414 million at June 30, 2018 and December 31, 2017, respectively. Unrealized holding gains and losses for marketable equity securities were immaterial at June 30, 2018.

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Equity investments without a readily determinable fair value primarily consist of investments in strategic partners and certain CRA projects. The carrying amount of equity investments measured under the measurement alternative, downward and upward adjustments for impairments and price changes from observable transactions are as follows:
 Three Months Ended Six Months Ended
 June 30, 2018
 (In millions)
Carrying value, beginning of period$38
 $31
Net additions—
 —
Downward adjustments for price changes and impairment—
 —
Upward adjustments for price changes1
 8
Carrying value, end of period$39
 $39
Total cumulative downward adjustments for equity investments without a determinable fair value for impairments and observable price changes were $4 million. Total cumulative upward adjustments for price changes from observable transactions were $8 million as of June 30, 2018.
NOTE 4. LOANS AND THE ALLOWANCE FOR CREDIT LOSSES
LOANS
The following table presents the distribution of Regions' loan portfolio by segment and class, net of unearned income:
June 30, 2017 December 31, 2016June 30, 2018 December 31, 2017
(In millions, net of unearned income)(In millions, net of unearned income)
Commercial and industrial$35,656
 $35,012
$37,079
 $36,115
Commercial real estate mortgage—owner-occupied6,445
 6,867
6,006
 6,193
Commercial real estate construction—owner-occupied388
 334
304
 332
Total commercial42,489
 42,213
43,389
 42,640
Commercial investor real estate mortgage4,126
 4,087
3,882
 4,062
Commercial investor real estate construction2,163
 2,387
1,879
 1,772
Total investor real estate6,289
 6,474
5,761
 5,834
Residential first mortgage13,765
 13,440
14,111
 14,061
Home equity10,419
 10,687
9,679
 10,164
Indirect—vehicles3,653
 4,040
3,219
 3,326
Indirect—other consumer1,188
 920
1,889
 1,467
Consumer credit card1,183
 1,196
1,264
 1,290
Other consumer1,141
 1,125
1,166
 1,165
Total consumer31,349
 31,408
31,328
 31,473
$80,127
 $80,095
$80,478
 $79,947
During the three months ended June 30, 2018 and 2017, Regions purchased approximately $144 million and $143 million in indirect-other consumer loans from third parties. During the three months ended June 30, 2016, Regions purchased approximately $300 million in indirect-vehicles and indirect-other consumer loans from third parties.parties, respectively. During the six months ended June 30, 20172018 and 2016,2017, the comparable loan purchase amounts were approximately $147$215 million and $579$147 million, respectively.
At June 30, 2017, $18.22018, $21.8 billion in securities and net eligible loans held by Regions were pledged to secure current and potential borrowings from the FHLB. At June 30, 2017,2018, an additional $22.2$22.9 billion in net eligible loans held by Regions were pledged to the FRB for potential borrowings.

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ALLOWANCE FOR CREDIT LOSSES
Regions determines the appropriate level of the allowance on a quarterly basis. Refer to Note 1 “Summary of Significant Accounting Policies” to the consolidated financial statements to the Annual Report on Form 10-K for the year ended December 31, 2016,2017, for a description of the methodology.
ROLLFORWARD OF ALLOWANCE FOR CREDIT LOSSES
The following tables present analyses of the allowance for credit losses by portfolio segment for the three and six months ended June 30, 20172018 and 2016.2017. The total allowance for loan losses and the related loan portfolio ending balances are disaggregated to detail the amounts derived through individual evaluation and collective evaluation for impairment. The allowance for loan losses related to individually evaluated loans is attributable to reserves for non-accrual commercial and investor real estate loans and all TDRs. The allowance for loan losses and the loan portfolio ending balances related to collectively evaluated loans is attributable to the remainder of the portfolio.

18

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 Three Months Ended June 30, 2018
 Commercial 
Investor Real
Estate
 Consumer Total
 (In millions)
Allowance for loan losses, April 1, 2018$547
 $54
 $239
 $840
Provision (credit) for loan losses24
 (8) 44
 60
Loan losses:       
Charge-offs(34) —
 (61) (95)
Recoveries14
 2
 17
 33
Net loan (losses) recoveries(20) 2
 (44) (62)
Allowance for loan losses, June 30, 2018551
 48
 239
 838
Reserve for unfunded credit commitments, April 1, 201845
 4
 —
 49
Provision (credit) for unfunded credit losses(1) —
 —
 (1)
Reserve for unfunded credit commitments, June 30, 201844
 4
 —
 48
Allowance for credit losses, June 30, 2018$595
 $52
 $239
 $886
 Three Months Ended June 30, 2017
 Commercial 
Investor Real
Estate
 Consumer Total
 (In millions)
Allowance for loan losses, April 1, 2017$727
 $87
 $247
 $1,061
Provision (credit) for loan losses7
 (9) 50
 48
Loan losses:       
Charge-offs(38) (1) (60) (99)
Recoveries11
 5
 15
 31
Net loan losses(27) 4
 (45) (68)
Allowance for loan losses, June 30, 2017707
 82
 252
 1,041
Reserve for unfunded credit commitments, April 1, 201766
 4
 —
 70
Provision (credit) for unfunded credit losses(3) —
 —
 (3)
Reserve for unfunded credit commitments, June 30, 201763
 4
 —
 67
Allowance for credit losses, June 30, 2017$770
 $86
 $252
 $1,108
 Three Months Ended June 30, 2016
 Commercial 
Investor Real
Estate
 Consumer Total
 (In millions)
Allowance for loan losses, April 1, 2016$821
 $91
 $239
 $1,151
Provision (credit) for loan losses38
 (4) 38
 72
Loan losses:       
Charge-offs(42) (1) (55) (98)
Recoveries8
 1
 17
 26
Net loan losses(34) —
 (38) (72)
Allowance for loan losses, June 30, 2016825
 87
 239
 1,151
Reserve for unfunded credit commitments, April 1, 201648
 5
 —
 53
Provision (credit) for unfunded credit losses11
 —
 —
 11
Reserve for unfunded credit commitments, June 30, 201659
 5
 —
 64
Allowance for credit losses, June 30, 2016$884
 $92
 $239
 $1,215
 Six Months Ended June 30, 2017
 Commercial 
Investor Real
Estate
 Consumer Total
 (In millions)
Allowance for loan losses, January 1, 2017$753
 $85
 $253
 $1,091
Provision (credit) for loan losses33
 (8) 93
 118
Loan losses:       
Charge-offs(96) (2) (125) (223)
Recoveries17
 7
 31
 55
Net loan losses(79) 5
 (94) (168)
Allowance for loan losses, June 30, 2017707
 82
 252
 1,041
Reserve for unfunded credit commitments, January 1, 201764
 5
 —
 69
Provision (credit) for unfunded credit losses(1) (1) —
 (2)
Reserve for unfunded credit commitments, June 30, 201763
 4
 —
 67
Allowance for credit losses, June 30, 2017$770
 $86
 $252
 $1,108
Portion of ending allowance for loan losses:       
Individually evaluated for impairment$228
 $17
 $57
 $302
Collectively evaluated for impairment479
 65
 195
 739
Total allowance for loan losses$707
 $82
 $252
 $1,041
Portion of loan portfolio ending balance:       
Individually evaluated for impairment$1,052
 $120
 $747
 $1,919
Collectively evaluated for impairment41,437
 6,169
 30,602
 78,208
Total loans evaluated for impairment$42,489
 $6,289
 $31,349
 $80,127
 Three Months Ended June 30, 2017
 Commercial 
Investor Real
Estate
 Consumer Total
 (In millions)
Allowance for loan losses, April 1, 2017$727
 $87
 $247
 $1,061
Provision (credit) for loan losses7
 (9) 50
 48
Loan losses:       
Charge-offs(38) (1) (60) (99)
Recoveries11
 5
 15
 31
Net loan (losses) recoveries(27) 4
 (45) (68)
Allowance for loan losses, June 30, 2017707
 82
 252
 1,041
Reserve for unfunded credit commitments, April 1, 201766
 4
 —
 70
Provision (credit) for unfunded credit losses(3) —
 —
 (3)
Reserve for unfunded credit commitments, June 30, 201763
 4
 —
 67
Allowance for credit losses, June 30, 2017$770
 $86
 $252
 $1,108

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 Six Months Ended June 30, 2018
 Commercial 
Investor Real
Estate
 Consumer Total
 (In millions)
Allowance for loan losses, January 1, 2018$591
 $64
 $279
 $934
Provision (credit) for loan losses—
 (12) 62
 50
Loan losses:       
Charge-offs(64) (8) (135) (207)
Recoveries24
 4
 33
 61
Net loan (losses) recoveries(40) (4) (102) (146)
Allowance for loan losses, June 30, 2018551
 48
 239
 838
Reserve for unfunded credit commitments, January 1, 201849
 4
 —
 53
Provision (credit) for unfunded credit losses(5) —
 —
 (5)
Reserve for unfunded credit commitments, June 30, 201844
 4
 —
 48
Allowance for credit losses, June 30, 2018$595
 $52
 $239
 $886
Portion of ending allowance for loan losses:       
Individually evaluated for impairment$156
 $5
 $27
 $188
Collectively evaluated for impairment395
 43
 212
 650
Total allowance for loan losses$551
 $48
 $239
 $838
Portion of loan portfolio ending balance:       
Individually evaluated for impairment$643
 $43
 $450
 $1,136
Collectively evaluated for impairment42,746
 5,718
 30,878
 79,342
Total loans evaluated for impairment$43,389
 $5,761
 $31,328
 $80,478
Six Months Ended June 30, 2016Six Months Ended June 30, 2017
Commercial 
Investor Real
Estate
 Consumer TotalCommercial 
Investor Real
Estate
 Consumer Total
(In millions)(In millions)
Allowance for loan losses, January 1, 2016$758
 $97
 $251
 $1,106
Allowance for loan losses, January 1, 2017$753
 $85
 $253
 $1,091
Provision (credit) for loan losses123
 (14) 76
 185
33
 (8) 93
 118
Loan losses:              
Charge-offs(71) (1) (122) (194)(96) (2) (125) (223)
Recoveries15
 5
 34
 54
17
 7
 31
 55
Net loan losses(56) 4
 (88) (140)
Allowance for loan losses, June 30, 2016825
 87
 239
 1,151
Reserve for unfunded credit commitments, January 1, 201647
 5
 —
 52
Net loan (losses) recoveries(79) 5
 (94) (168)
Allowance for loan losses, June 30, 2017707
 82
 252
 1,041
Reserve for unfunded credit commitments, January 1, 201764
 5
 —
 69
Provision (credit) for unfunded credit losses12
 —
 —
 12
(1) (1) —
 (2)
Reserve for unfunded credit commitments, June 30, 201659
 5
 —
 64
Allowance for credit losses, June 30, 2016$884
 $92
 $239
 $1,215
Reserve for unfunded credit commitments, June 30, 201763
 4
 —
 67
Allowance for credit losses, June 30, 2017$770
 $86
 $252
 $1,108
Portion of ending allowance for loan losses:              
Individually evaluated for impairment$264
 $20
 $65
 $349
$228
 $17
 $57
 $302
Collectively evaluated for impairment561
 67
 174
 802
479
 65
 195
 739
Total allowance for loan losses$825
 $87
 $239
 $1,151
$707
 $82
 $252
 $1,041
Portion of loan portfolio ending balance:              
Individually evaluated for impairment$1,046
 $156
 $815
 $2,017
$1,052
 $120
 $747
 $1,919
Collectively evaluated for impairment42,615
 6,806
 30,264
 79,685
41,437
 6,169
 30,602
 78,208
Total loans evaluated for impairment$43,661
 $6,962
 $31,079
 $81,702
$42,489
 $6,289
 $31,349
 $80,127

PORTFOLIO SEGMENT RISK FACTORS
The following describe the risk characteristics relevant to each of the portfolio segments.
Commercial—The commercial loan portfolio segment includes commercial and industrial loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases or other expansion projects. Commercial also includes owner-occupied commercial real estate mortgage loans to operating businesses, which are loans for long-term financing of land and buildings, and are repaid by cash flow generated by business operations. Owner-occupied construction loans

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are made to commercial businesses for the development of land or construction of a building where the repayment is derived from revenues generated from the business of the borrower. Collection risk in this portfolio is driven by the creditworthiness of underlying borrowers, particularly cash flow from customers’ business operations, and the sensitivity to market fluctuations in commodity prices.
Investor Real Estate—Loans for real estate development are repaid through cash flow related to the operation, sale or refinance of the property. This portfolio segment includes extensions of credit to real estate developers or investors where repayment is dependent on the sale of real estate or income generated from the real estate collateral. A portion of Regions’ investor real estate portfolio segment consists of loans secured by residential product types (land, single-family and condominium loans) within Regions’ markets. Additionally, these loans are made to finance income-producing properties such as apartment buildings, office and industrial buildings, and retail shopping centers. Loans in this portfolio segment are particularly sensitive to the valuation of real estate.
Consumer—The consumer loan portfolio segment includes residential first mortgage, home equity, indirect-vehicles, indirect-other consumer, consumer credit card, and other consumer loans. Residential first mortgage loans represent loans to consumers to finance a residence. These loans are typically financed over a 15 to 30 year term and, in most cases, are extended to borrowers to finance their primary residence. Home equity lending includes both home equity loans and lines of credit. This type of lending, which is secured by a first or second mortgage on the borrower’s residence, allows customers to borrow against the equity in their home. Real estate market values as of the time the loan or line is secured directly affect the amount of credit extended and, in addition, changes in these values impact the depth of potential losses. Indirect-vehicles lending, which is lending initiated through third-party business partners, largely consists of loans made through automotive dealerships. Indirect-other consumer lending represents other point of sale lending through third parties. Consumer credit card includes Regions branded consumer credit card accounts. Other consumer loans include other revolving consumer accounts, direct consumer loans, and overdrafts. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.

20

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CREDIT QUALITY INDICATORS
The following tables present credit quality indicators for the loan portfolio segments and classes, excluding loans held for sale, as of June 30, 2017,2018, and December 31, 2016.2017. Commercial and investor real estate loan portfolio segments are detailed by categories related to underlying credit quality and probability of default. Regions assigns these categories at loan origination and reviews the relationship utilizing a risk-based approach on, at minimum, an annual basis or at any time management becomes aware of information affecting the borrowers' ability to fulfill their obligations. Both quantitative and qualitative factors are considered in this review process. These categories are utilized to develop the associated allowance for credit losses.
Pass—includes obligations where the probability of default is considered low;
Special Mention—includes obligations that have potential weakness that may, if not reversed or corrected, weaken the credit or inadequately protect the Company’s position at some future date. Obligations in this category may also be subject to economic or market conditions that may, in the future, have an adverse effect on debt service ability;
Substandard Accrual—includes obligations that exhibit a well-defined weakness that presently jeopardizes debt repayment, even though they are currently performing. These obligations are characterized by the distinct possibility that the Company may incur a loss in the future if these weaknesses are not corrected;
Non-accrual—includes obligations where management has determined that full payment of principal and interest is in doubt.
Substandard accrual and non-accrual loans are often collectively referred to as “classified.” Special mention, substandard accrual, and non-accrual loans are often collectively referred to as “criticized and classified.” Classes in the consumer portfolio segment are disaggregated by accrual status.
 June 30, 2017
 Pass Special  Mention 
Substandard
Accrual
 Non-accrual Total
 (In millions)
Commercial and industrial$33,456
 $643
 $1,017
 $540
 $35,656
Commercial real estate mortgage—owner-occupied5,893
 189
 215
 148
 6,445
Commercial real estate construction—owner-occupied372
 7
 6
 3
 388
Total commercial$39,721
 $839
 $1,238
 $691
 $42,489
Commercial investor real estate mortgage$3,712
 $270
 $132
 $12
 $4,126
Commercial investor real estate construction2,065
 53
 45
 —
 2,163
Total investor real estate$5,777
 $323
 $177
 $12
 $6,289
          
     Accrual Non-accrual Total
     (In millions)
Residential first mortgage    $13,719
 $46
 $13,765
Home equity    10,346
 73
 10,419
Indirect—vehicles    3,652
 1
 3,653
Indirect—other consumer    1,188
 —
 1,188
Consumer credit card    1,183
 —
 1,183
Other consumer    1,141
 —
 1,141
Total consumer    $31,229
 $120
 $31,349
         $80,127

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December 31, 2016June 30, 2018
Pass 
Special
Mention
 
Substandard
Accrual
 Non-accrual TotalPass Special  Mention 
Substandard
Accrual
 Non-accrual Total
(In millions)(In millions)
Commercial and industrial$32,619
 $658
 $1,112
 $623
 $35,012
$35,823
 $514
 $358
 $384
 $37,079
Commercial real estate mortgage—owner-occupied6,190
 221
 246
 210
 6,867
5,550
 231
 127
 98
 6,006
Commercial real estate construction—owner-occupied308
 8
 15
 3
 334
282
 7
 10
 5
 304
Total commercial$39,117
 $887
 $1,373
 $836
 $42,213
$41,655
 $752
 $495
 $487
 $43,389
Commercial investor real estate mortgage$3,766
 $190
 $114
 $17
 $4,087
$3,728
 $91
 $59
 $4
 $3,882
Commercial investor real estate construction2,192
 129
 66
 —
 2,387
1,859
 14
 6
 —
 1,879
Total investor real estate$5,958
 $319
 $180
 $17
 $6,474
$5,587
 $105
 $65
 $4
 $5,761
                  
    Accrual Non-accrual Total    Accrual Non-accrual Total
    (In millions)    (In millions)
Residential first mortgage    $13,390
 $50
 $13,440
    $14,073
 $38
 $14,111
Home equity    10,595
 92
 10,687
    9,613
 66
 9,679
Indirect—vehicles    4,040
 —
 4,040
    3,219
 —
 3,219
Indirect—other consumer    920
 —
 920
    1,889
 —
 1,889
Consumer credit card    1,196
 —
 1,196
    1,264
 —
 1,264
Other consumer    1,125
 —
 1,125
    1,166
 —
 1,166
Total consumer    $31,266
 $142
 $31,408
    $31,224
 $104
 $31,328
        $80,095
        $80,478
 December 31, 2017
 Pass 
Special
Mention
 
Substandard
Accrual
 Non-accrual Total
 (In millions)
Commercial and industrial$34,420
 $686
 $605
 $404
 $36,115
Commercial real estate mortgage—owner-occupied5,674
 236
 165
 118
 6,193
Commercial real estate construction—owner-occupied313
 3
 10
 6
 332
Total commercial$40,407
 $925
 $780
 $528
 $42,640
Commercial investor real estate mortgage$3,905
 $63
 $89
 $5
 $4,062
Commercial investor real estate construction1,706
 19
 46
 1
 1,772
Total investor real estate$5,611
 $82
 $135
 $6
 $5,834
          
     Accrual Non-accrual Total
     (In millions)
Residential first mortgage    $14,014
 $47
 $14,061
Home equity    10,095
 69
 10,164
Indirect—vehicles    3,326
 —
 3,326
Indirect—other consumer    1,467
 —
 1,467
Consumer credit card    1,290
 —
 1,290
Other consumer    1,165
 —
 1,165
Total consumer    $31,357
 $116
 $31,473
         $79,947


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AGING ANALYSIS
The following tables include an aging analysis of DPD for each portfolio segment and class as of June 30, 20172018 and December 31, 2016:2017:
June 30, 2017June 30, 2018
Accrual Loans      Accrual Loans      
30-59 DPD 60-89 DPD 90+ DPD 
Total
30+ DPD
 
Total
Accrual
 Non-accrual Total30-59 DPD 60-89 DPD 90+ DPD 
Total
30+ DPD
 
Total
Accrual
 Non-accrual Total
(In millions)(In millions)
Commercial and industrial$17
 $6
 $4
 $27
 $35,116
 $540
 $35,656
$14
 $4
 $4
 $22
 $36,695
 $384
 $37,079
Commercial real estate mortgage—owner-occupied23
 8
 2
 33
 6,297
 148
 6,445
11
 5
 1
 17
 5,908
 98
 6,006
Commercial real estate construction—owner-occupied1
 —
 —
 1
 385
 3
 388
3
 —
 —
 3
 299
 5
 304
Total commercial41
 14
 6
 61
 41,798
 691
 42,489
28
 9
 5
 42
 42,902
 487
 43,389
Commercial investor real estate mortgage12
 5
 —
 17
 4,114
 12
 4,126
6
 —
 —
 6
 3,878
 4
 3,882
Commercial investor real estate construction—
 —
 —
 —
 2,163
 —
 2,163
—
 —
 —
 —
 1,879
 —
 1,879
Total investor real estate12
 5
 —
 17
 6,277
 12
 6,289
6
 —
 —
 6
 5,757
 4
 5,761
Residential first mortgage83
 55
 169
 307
 13,719
 46
 13,765
64
 46
 168
 278
 14,073
 38
 14,111
Home equity57
 19
 30
 106
 10,346
 73
 10,419
56
 21
 31
 108
 9,613
 66
 9,679
Indirect—vehicles42
 12
 8
 62
 3,652
 1
 3,653
39
 10
 8
 57
 3,219
 —
 3,219
Indirect—other consumer5
 4
 —
 9
 1,188
 —
 1,188
7
 4
 —
 11
 1,889
 —
 1,889
Consumer credit card9
 5
 15
 29
 1,183
 —
 1,183
10
 6
 17
 33
 1,264
 —
 1,264
Other consumer11
 3
 3
 17
 1,141
 —
 1,141
12
 4
 5
 21
 1,166
 —
 1,166
Total consumer207
 98
 225
 530
 31,229
 120
 31,349
188
 91
 229
 508
 31,224
 104
 31,328
$260
 $117
 $231
 $608
 $79,304
 $823
 $80,127
$222
 $100
 $234
 $556
 $79,883
 $595
 $80,478
 
 December 31, 2017
 Accrual Loans      
 30-59 DPD 60-89 DPD 90+ DPD 
Total
30+ DPD
 
Total
Accrual
 Non-accrual Total
 (In millions)
Commercial and industrial$28
 $7
 $4
 $39
 $35,711
 $404
 $36,115
Commercial real estate mortgage—owner-occupied18
 8
 1
 27
 6,075
 118
 6,193
Commercial real estate construction—owner-occupied—
 —
 —
 —
 326
 6
 332
Total commercial46
 15
 5
 66
 42,112
 528
 42,640
Commercial investor real estate mortgage1
 1
 1
 3
 4,057
 5
 4,062
Commercial investor real estate construction—
 —
 —
 —
 1,771
 1
 1,772
Total investor real estate1
 1
 1
 3
 5,828
 6
 5,834
Residential first mortgage95
 85
 216
 396
 14,014
 47
 14,061
Home equity53
 27
 37
 117
 10,095
 69
 10,164
Indirect—vehicles48
 13
 9
 70
 3,326
 —
 3,326
Indirect—other consumer9
 5
 —
 14
 1,467
 —
 1,467
Consumer credit card11
 7
 19
 37
 1,290
 —
 1,290
Other consumer13
 4
 4
 21
 1,165
 —
 1,165
Total consumer229
 141
 285
 655
 31,357
 116
 31,473
 $276
 $157
 $291
 $724
 $79,297
 $650
 $79,947


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 December 31, 2016
 Accrual Loans      
 30-59 DPD 60-89 DPD 90+ DPD 
Total
30+ DPD
 
Total
Accrual
 Non-accrual Total
 (In millions)
Commercial and industrial$59
 $11
 $6
 $76
 $34,389
 $623
 $35,012
Commercial real estate mortgage—owner-occupied29
 7
 2
 38
 6,657
 210
 6,867
Commercial real estate construction—owner-occupied1
 —
 —
 1
 331
 3
 334
Total commercial89
 18
 8
 115
 41,377
 836
 42,213
Commercial investor real estate mortgage6
 8
 —
 14
 4,070
 17
 4,087
Commercial investor real estate construction—
 —
 —
 —
 2,387
 —
 2,387
Total investor real estate6
 8
 —
 14
 6,457
 17
 6,474
Residential first mortgage99
 63
 212
 374
 13,390
 50
 13,440
Home equity60
 22
 33
 115
 10,595
 92
 10,687
Indirect—vehicles56
 14
 10
 80
 4,040
 —
 4,040
Indirect—other consumer5
 3
 —
 8
 920
 —
 920
Consumer credit card9
 7
 15
 31
 1,196
 —
 1,196
Other consumer13
 5
 5
 23
 1,125
 —
 1,125
Total consumer242
 114
 275
 631
 31,266
 142
 31,408
 $337
 $140
 $283
 $760
 $79,100
 $995
 $80,095

IMPAIRED LOANS
The following tables present details related to the Company’s impaired loans as of June 30, 20172018 and December 31, 2016.2017. Loans deemed to be impaired include all TDRs and all non-accrual commercial and investor real estate loans, excluding leases. Loans that have been fully charged-off do not appear in the tables below.
Non-accrual Impaired Loans As of June 30, 2017Non-accrual Impaired Loans As of June 30, 2018
    
Book Value(3)
        
Book Value(3)
    
Unpaid
Principal
Balance(1)
 
Charge-offs
and Payments
Applied(2)
 
Total
Impaired
Loans on
Non-accrual
Status
 
Impaired
Loans on
Non-accrual
Status with
No Related
Allowance
 
Impaired
Loans on
Non-accrual
Status with
Related
Allowance
 
Related
Allowance
for Loan
Losses
 
Coverage %(4)
Unpaid
Principal
Balance(1)
 
Charge-offs
and Payments
Applied(2)
 
Total
Impaired
Loans on
Non-accrual
Status
 
Impaired
Loans on
Non-accrual
Status with
No Related
Allowance
 
Impaired
Loans on
Non-accrual
Status with
Related
Allowance
 
Related
Allowance
for Loan
Losses
 
Coverage %(4)
(Dollars in millions)(Dollars in millions)
Commercial and industrial$665
 $130
 $535
 $71
 $464
 $131
 39.2%$469
 $89
 $380
 $108
 $272
 $98
 39.9%
Commercial real estate mortgage—owner-occupied164
 16
 148
 21
 127
 43
 36.0
109
 11
 98
 13
 85
 34
 41.3
Commercial real estate construction—owner-occupied3
 —
 3
 —
 3
 1
 33.3
6
 1
 5
 —
 5
 2
 50.0
Total commercial832
 146
 686
 92
 594
 175
 38.6
584
 101
 483
 121
 362
 134
 40.2
Commercial investor real estate mortgage14
 2
 12
 4
 8
 4
 42.9
4
 —
 4
 1
 3
 1
 25.0
Total investor real estate14
 2
 12
 4
 8
 4
 42.9
4
 —
 4
 1
 3
 1
 25.0
Residential first mortgage27
 1
 26
 —
 26
 3
 14.8
33
 10
 23
 —
 23
 2
 36.4
Home equity11
 1
 10
 —
 10
 —
 9.1
11
 1
 10
 —
 10
 —
 9.1
Total consumer38
 2
 36
 —
 36
 3
 13.2
44
 11
 33
 —
 33
 2
 29.5
$884
 $150
 $734
 $96
 $638
 $182
 37.6%$632
 $112
 $520
 $122
 $398
 $137
 39.4%
 

23

Table of Contents


 Accruing Impaired Loans As of June 30, 2017
 
Unpaid
Principal
Balance(1)
 
Charge-offs
and Payments
Applied(2)
 
Book Value(3)
 
Related
Allowance for
Loan Losses
 
Coverage %(4)
 (Dollars in millions)
Commercial and industrial$297
 $7
 $290
 $46
 17.8%
Commercial real estate mortgage—owner-occupied80
 5
 75
 7
 15.0
Commercial real estate construction—owner-occupied1
 —
 1
 —
 —
Total commercial378
 12
 366
 53
 17.2
Commercial investor real estate mortgage56
 2
 54
 5
 12.5
Commercial investor real estate construction54
 —
 54
 8
 14.8
Total investor real estate110
 2
 108
 13
 13.6
Residential first mortgage429
 1
 428
 50
 11.9
Home equity272
 —
 272
 4
 1.5
Indirect—vehicles1
 —
 1
 —
 —
Consumer credit card1
 —
 1
 —
 —
Other consumer9
 —
 9
 —
 —
Total consumer712
 1
 711
 54
 7.7
 $1,200
 $15
 $1,185
 $120
 11.3%

Total Impaired Loans As of June 30, 2017
    
Book Value(3)
    Accruing Impaired Loans As of June 30, 2018
Unpaid
Principal
Balance(1)
 
Charge-offs
and Payments
Applied(2)
 
Total
Impaired
Loans
 
Impaired
Loans with No
Related
Allowance
 
Impaired
Loans with
Related
Allowance
 
Related
Allowance
for Loan
Losses
 
Coverage %(4)
Unpaid
Principal
Balance(1)
 
Charge-offs
and Payments
Applied(2)
 
Book Value(3)
 
Related
Allowance for
Loan Losses
 
Coverage %(4)
(Dollars in millions)(Dollars in millions)
Commercial and industrial$962
 $137
 $825
 $71
 $754
 $177
 32.6%$127
 $—
 $127
 $19
 15.0%
Commercial real estate mortgage—owner-occupied244
 21
 223
 21
 202
 50
 29.1
35
 2
 33
 3
 14.3
Commercial real estate construction—owner-occupied4
 —
 4
 —
 4
 1
 25.0
Total commercial1,210
 158
 1,052
 92
 960
 228
 31.9
162
 2
 160
 22
 14.8
Commercial investor real estate mortgage70
 4
 66
 4
 62
 9
 18.6
41
 2
 39
 4
 14.6
Commercial investor real estate construction54
 —
 54
 —
 54
 8
 14.8
Total investor real estate124
 4
 120
 4
 116
 17
 16.9
41
 2
 39
 4
 14.6
Residential first mortgage456
 2
 454
 —
 454
 53
 12.1
193
 7
 186
 18
 13.0
Home equity283
 1
 282
 —
 282
 4
 1.8
224
 1
 223
 7
 3.6
Indirect—vehicles1
 —
 1
 —
 1
 —
 —
Consumer credit card1
 —
 1
 —
 1
 —
 —
1
 —
 1
 —
 —
Other consumer9
 —
 9
 —
 9
 —
 —
7
 —
 7
 —
 —
Total consumer750
 3
 747
 —
 747
 57
 8.0
425
 8
 417
 25
 7.8
$2,084
 $165
 $1,919
 $96
 $1,823
 $302
 22.4%$628
 $12
 $616
 $51
 10.0%


24

Table of Contents


 Total Impaired Loans As of June 30, 2018
     
Book Value(3)
    
 
Unpaid
Principal
Balance(1)
 
Charge-offs
and Payments
Applied(2)
 
Total
Impaired
Loans
 
Impaired
Loans with No
Related
Allowance
 
Impaired
Loans with
Related
Allowance
 
Related
Allowance
for Loan
Losses
 
Coverage %(4)
 (Dollars in millions)
Commercial and industrial$596
 $89
 $507
 $108
 $399
 $117
 34.6%
Commercial real estate mortgage—owner-occupied144
 13
 131
 13
 118
 37
 34.7
Commercial real estate construction—owner-occupied6
 1
 5
 —
 5
 2
 50.0
Total commercial746
 103
 643
 121
 522
 156
 34.7
Commercial investor real estate mortgage45
 2
 43
 1
 42
 5
 15.6
Total investor real estate45
 2
 43
 1
 42
 5
 15.6
Residential first mortgage226
 17
 209
 —
 209
 20
 16.4
Home equity235
 2
 233
 —
 233
 7
 3.8
Consumer credit card1
 —
 1
 —
 1
 —
 —
Other consumer7
 —
 7
 —
 7
 —
 —
Total consumer469
 19
 450
 —
 450
 27
 9.8
 $1,260
 $124
 $1,136
 $122
 $1,014
 $188
 24.8%


Non-accrual Impaired Loans As of December 31, 2016Non-accrual Impaired Loans As of December 31, 2017
    
Book Value(3)
        
Book Value(3)
    
Unpaid
Principal
Balance(1)
 
Charge-offs
and Payments
Applied(2)
 
Total
Impaired
Loans on
Non-accrual
Status
 
Impaired
Loans on
Non-accrual
Status with
No Related
Allowance
 
Impaired
Loans on
Non-accrual
Status with
Related
Allowance
 
Related
Allowance
for Loan
Losses
 
Coverage %(4)
Unpaid
Principal
Balance(1)
 
Charge-offs
and Payments
Applied(2)
 
Total
Impaired
Loans on
Non-accrual
Status
 
Impaired
Loans on
Non-accrual
Status with
No Related
Allowance
 
Impaired
Loans on
Non-accrual
Status with
Related
Allowance
 
Related
Allowance
for Loan
Losses
 
Coverage %(4)
(Dollars in millions)(Dollars in millions)
Commercial and industrial$685
 $72
 $613
 $126
 $487
 $138
 30.7%$480
 $80
 $400
 $29
 $371
 $103
 38.1%
Commercial real estate mortgage—owner-occupied231
 21
 210
 39
 171
 53
 32.0
133
 15
 118
 20
 98
 38
 39.8
Commercial real estate construction—owner-occupied4
 1
 3
 —
 3
 2
 75.0
7
 1
 6
 —
 6
 3
 57.1
Total commercial920
 94
 826
 165
 661
 193
 31.2
620
 96
 524
 49
 475
 144
 38.7
Commercial investor real estate mortgage18
 1
 17
 5
 12
 5
 33.3
6
 1
 5
 —
 5
 2
 50.0
Commercial investor real estate construction1
 —
 1
 —
 1
 —
 —
Total investor real estate18
 1
 17
 5
 12
 5
 33.3
7
 1
 6
 —
 6
 2
 42.9
Residential first mortgage41
 12
 29
 —
 29
 4
 39.0
42
 11
 31
 —
 31
 3
 33.3
Home equity12
 1
 11
 —
 11
 —
 8.3
10
 1
 9
 —
 9
 —
 10.0
Total consumer53
 13
 40
 —
 40
 4
 32.1
52
 12
 40
 —
 40
 3
 28.8
$991
 $108
 $883
 $170
 $713
 $202
 31.3%$679
 $109
 $570
 $49
 $521
 $149
 38.0%
 
 Accruing Impaired Loans As of December 31, 2016
 
Unpaid
Principal
Balance(1)
 
Charge-offs
and Payments
Applied(2)
 
Book Value(3)
 
Related
Allowance for
Loan Losses
 
Coverage %(4)
 (Dollars in millions)
Commercial and industrial$187
 $1
 $186
 $33
 18.2%
Commercial real estate mortgage—owner-occupied60
 4
 56
 5
 15.0
Commercial real estate construction—owner-occupied1
 —
 1
 —
 —
Total commercial248
 5
 243
 38
 17.3
Commercial investor real estate mortgage82
 8
 74
 7
 18.3
Commercial investor real estate construction16
 —
 16
 1
 6.3
Total investor real estate98
 8
 90
 8
 16.3
Residential first mortgage435
 10
 425
 51
 14.0
Home equity292
 —
 292
 5
 1.7
Indirect—vehicles1
 —
 1
 —
 —
Consumer credit card2
 —
 2
 —
 —
Other consumer10
 —
 10
 —
 —
Total consumer740
 10
 730
 56
 8.9
 $1,086
 $23
 $1,063
 $102
 11.5%


25

Table of Contents


Total Impaired Loans As of December 31, 2016Accruing Impaired Loans As of December 31, 2017
    
Book Value(3)
        
Book Value(3)
    
Unpaid
Principal
Balance(1)
 
Charge-offs
and Payments
Applied(2)
 
Total
Impaired
Loans
 
Impaired
Loans with No
Related
Allowance
 
Impaired
Loans with
Related
Allowance
 
Related
Allowance for
Loan Losses
 
Coverage %(4)
Unpaid
Principal
Balance(1)
 
Charge-offs
and Payments
Applied(2)
 Total Impaired Loans on Accrual Status Impaired Loans on Accrual Status with No Related Allowance Impaired Loans on Accrual Status with Related Allowance 
Related
Allowance for
Loan Losses
 
Coverage %(4)
(Dollars in millions)(Dollars in millions)
Commercial and industrial$872
 $73
 $799
 $126
 $673
 $171
 28.0%$154
 $8
 $146
 $1
 $145
 $19
 17.5%
Commercial real estate mortgage—owner-occupied291
 25
 266
 39
 227
 58
 28.5
90
 5
 85
 —
 85
 8
 14.4
Commercial real estate construction—owner-occupied5
 1
 4
 —
 4
 2
 60.0
1
 —
 1
 —
 1
 —
 —
Total commercial1,168
 99
 1,069
 165
 904
 231
 28.3
245
 13
 232
 1
 231
 27
 16.3
Commercial investor real estate mortgage100
 9
 91
 5
 86
 12
 21.0
63
 2
 61
 —
 61
 3
 7.9
Commercial investor real estate construction16
 —
 16
 —
 16
 1
 6.3
29
 —
 29
 —
 29
 3
 10.3
Total investor real estate116
 9
 107
 5
 102
 13
 19.0
92
 2
 90
 —
 90
 6
 8.7
Residential first mortgage476
 22
 454
 —
 454
 55
 16.2
419
 13
 406
 —
 406
 39
 12.4
Home equity304
 1
 303
 —
 303
 5
 2.0
251
 1
 250
 —
 250
 5
 2.4
Indirect—vehicles1
 —
 1
 —
 1
 —
 —
Consumer credit card2
 —
 2
 —
 2
 —
 —
1
 —
 1
 —
 1
 —
 —
Other consumer10
 —
 10
 —
 10
 —
 —
9
 —
 9
 —
 9
 —
 —
Total consumer793
 23
 770
 —
 770
 60
 10.5
680
 14
 666
 —
 666
 44
 8.5
$2,077
 $131
 $1,946
 $170
 $1,776
 $304
 20.9%$1,017
 $29
 $988
 $1
 $987
 $77
 10.4%

 Total Impaired Loans As of December 31, 2017
     
Book Value(3)
    
 
Unpaid
Principal
Balance(1)
 
Charge-offs
and Payments
Applied(2)
 
Total
Impaired
Loans
 
Impaired
Loans with No
Related
Allowance
 
Impaired
Loans with
Related
Allowance
 
Related
Allowance for
Loan Losses
 
Coverage %(4)
 (Dollars in millions)
Commercial and industrial$634
 $88
 $546
 $30
 $516
 $122
 33.1%
Commercial real estate mortgage—owner-occupied223
 20
 203
 20
 183
 46
 29.6
Commercial real estate construction—owner-occupied8
 1
 7
 —
 7
 3
 50.0
Total commercial865
 109
 756
 50
 706
 171
 32.4
Commercial investor real estate mortgage69
 3
 66
 —
 66
 5
 11.6
Commercial investor real estate construction30
 —
 30
 —
 30
 3
 10.0
Total investor real estate99
 3
 96
 —
 96
 8
 11.1
Residential first mortgage461
 24
 437
 —
 437
 42
 14.3
Home equity261
 2
 259
 —
 259
 5
 2.7
Consumer credit card1
 —
 1
 —
 1
 —
 —
Other consumer9
 —
 9
 —
 9
 —
 —
Total consumer732
 26
 706
 —
 706
 47
 10.0
 $1,696
 $138
 $1,558
 $50
 $1,508
 $226
 21.5%
________
(1)Unpaid principal balance represents the contractual obligation due from the customer and includes the net book value plus charge-offs and payments applied.
(2)Charge-offs and payments applied represents cumulative partial charge-offs taken, as well as interest payments received that have been applied against the outstanding principal balance.
(3)Book value represents the unpaid principal balance less charge-offs and payments applied; it is shown before any allowance for loan losses.
(4)Coverage % represents charge-offs and payments applied plus the related allowance as a percent of the unpaid principal balance.


26

Table of Contents


The following table presents the average balances of total impaired loans and interest income for the three and six months ended June 30, 20172018 and 2016.2017. Interest income recognized represents interest on accruing loans modified in a TDR.
Three Months Ended June 30 Six Months Ended June 30Three Months Ended June 30 Six Months Ended June 30
2017 2016 2017 20162018 2017 2018 2017
Average
Balance
 
Interest
Income
Recognized
 
Average
Balance
 
Interest
Income
Recognized
 
Average
Balance
 
Interest
Income
Recognized
 
Average
Balance
 
Interest
Income
Recognized
Average
Balance
 
Interest
Income
Recognized
 
Average
Balance
 
Interest
Income
Recognized
 
Average
Balance
 
Interest
Income
Recognized
 
Average
Balance
 
Interest
Income
Recognized
(In millions)(In millions)
Commercial and industrial$846
 $4
 $719
 $2
 $833
 $6
 $597
 $3
$518
 $2
 $846
 $4
 $526
 $5
 $833
 $6
Commercial real estate mortgage—owner-occupied229
 1
 314
 1
 246
 2
 321
 2
138
 2
 229
 1
 152
 5
 246
 2
Commercial real estate construction—owner-occupied4
 —
 3
 —
 5
 —
 3
 —
5
 —
 4
 —
 6
 —
 5
 —
Total commercial1,079
 5
 1,036
 3
 1,084
 8
 921
 5
661
 4
 1,079
 5
 684
 10
 1,084
 8
Commercial investor real estate mortgage76
 1
 126
 1
 84
 2
 134
 3
75
 1
 76
 1
 75
 2
 84
 2
Commercial investor real estate construction53
 1
 28
 —
 43
 1
 28
 —
—
 —
 53
 1
 15
 —
 43
 1
Total investor real estate129
 2
 154
 1
 127
 3
 162
 3
75
 1
 129
 2
 90
 2
 127
 3
Residential first mortgage460
 4
 479
 4
 457
 8
 478
 8
214
 2
 460
 4
 251
 4
 457
 8
Home equity286
 3
 328
 4
 290
 7
 332
 9
238
 4
 286
 3
 245
 7
 290
 7
Indirect—vehicles—
 —
 —
 —
 —
 —
 1
 —
Consumer credit card2
 —
 2
 —
 2
 —
 2
 —
1
 —
 2
 —
 1
 —
 2
 —
Other consumer9
 —
 12
 —
 10
 —
 12
 —
7
 —
 9
 —
 7
 —
 10
 —
Total consumer757
 7
 821
 8
 759
 15
 825
 17
460
 6
 757
 7
 504
 11
 759
 15
Total impaired loans$1,965
 $14
 $2,011
 $12
 $1,970
 $26
 $1,908
 $25
$1,196
 $11
 $1,965
 $14
 $1,278
 $23
 $1,970
 $26
TROUBLED DEBT RESTRUCTURINGS
Regions regularly modifies commercial and investor real estate loans in order to facilitate a workout strategy. Similarly, Regions works to meet the individual needs of consumer borrowers to stem foreclosure through its CAP. Refer to Note 6 "Allowance For Credit Losses" in the 20162017 Annual Report on Form 10-K for additional information regarding the Company's TDRs.
None of the modified consumer loans listed in the following TDR disclosures were collateral-dependent at the time of modification. At June 30, 2017, approximately $18 million in residential first mortgage TDRs were in excess of 180 days past due and were considered collateral-dependent. At June 30, 2017, approximately $5 million in home equity first lien TDRs were in excess of 180 days past due and approximately $2 million in home equity second lien TDRs were in excess of 120 days past due, both of which were considered collateral-dependent.
Further discussion related to TDRs, including their impact on the allowance for loan losses and designation of TDRs in periods subsequent to the modification is included in Note 1 "Summary of Significant Accounting Policies" in the 20162017 Annual Report on Form 10-K.

27

Table of Contents


The following tables present the end of period balance for loans modified in a TDR during the periods presented by portfolio segment and class, and the financial impact of those modifications. The tables include modifications made to new TDRs, as well as renewals of existing TDRs. Loans first reported as TDRs during the six months ended June 30, 20172018 and 20162017 totaled approximately $328$219 million and $211$328 million, respectively.
Three Months Ended June 30, 2017Three Months Ended June 30, 2018
    
Financial Impact
of Modifications
Considered TDRs
    
Financial Impact
of Modifications
Considered TDRs
Number of
Obligors
 
Recorded
Investment
 
Increase in
Allowance at
Modification
Number of
Obligors
 
Recorded
Investment
 
Increase in
Allowance at
Modification
(Dollars in millions)(Dollars in millions)
Commercial and industrial38
 $193
 $4
26
 $50
 $1
Commercial real estate mortgage—owner-occupied30
 37
 1
20
 10
 —
Commercial real estate construction—owner-occupied1
 1
 —
Total commercial69
 231
 5
46
 60
 1
Commercial investor real estate mortgage13
 29
 1
5
 30
 1
Commercial investor real estate construction2
 44
 1
Total investor real estate15
 73
 2
5
 30
 1
Residential first mortgage52
 17
 2
45
 6
 1
Home equity33
 2
 —
30
 2
 —
Consumer credit card24
 —
 —
11
 —
 —
Indirect—vehicles and other consumer40
 —
 —
20
 —
 —
Total consumer149
 19
 2
106
 8
 1
233
 $323
 $9
157
 $98
 $3

27

Table of Contents

 Three Months Ended June 30, 2016
     
Financial Impact
of Modifications
Considered TDRs
 
Number of
Obligors
 
Recorded
Investment
 
Increase in
Allowance at
Modification
 (Dollars in millions)
Commercial and industrial57
 $122
 $4
Commercial real estate mortgage—owner-occupied46
 21
 1
Total commercial103
 143
 5
Commercial investor real estate mortgage24
 17
 —
Commercial investor real estate construction3
 10
 —
Total investor real estate27
 27
 —
Residential first mortgage75
 15
 2
Home equity89
 5
 —
Consumer credit card27
 —
 —
Indirect—vehicles and other consumer47
 —
 —
Total consumer238
 20
 2
 368
 $190
 $7

 Three Months Ended June 30, 2017
     
Financial Impact
of Modifications
Considered TDRs
 
Number of
Obligors
 
Recorded
Investment
 
Increase in
Allowance at
Modification
 (Dollars in millions)
Commercial and industrial38
 $193
 $4
Commercial real estate mortgage—owner-occupied30
 37
 1
Commercial real estate construction—owner-occupied1
 1
 —
Total commercial69
 231
 5
Commercial investor real estate mortgage13
 29
 1
Commercial investor real estate construction2
 44
 1
Total investor real estate15
 73
 2
Residential first mortgage52
 17
 2
Home equity33
 2
 —
Consumer credit card24
 —
 —
Indirect—vehicles and other consumer40
 —
 —
Total consumer149
 19
 2
 233
 $323
 $9
 Six Months Ended June 30, 2018
     Financial Impact
of Modifications
Considered TDRs
 Number of
Obligors		 Recorded
Investment		 Increase in
Allowance at
Modification
 (Dollars in millions)
Commercial and industrial55
 $214
 $3
Commercial real estate mortgage—owner-occupied38
 24
 —
Total commercial93
 238
 3
Commercial investor real estate mortgage15
 49
 2
Total investor real estate15
 49
 2
Residential first mortgage98
 14
 2
Home equity47
 3
 —
Consumer credit card25
 —
 —
Indirect—vehicles and other consumer33
 —
 —
Total consumer203
 17
 2
 311
 $304
 $7

28

Table of Contents


 Six Months Ended June 30, 2017
     Financial Impact
of Modifications
Considered TDRs
 Number of
Obligors		 Recorded
Investment		 Increase in
Allowance at
Modification
 (Dollars in millions)
Commercial and industrial69
 $292
 $7
Commercial real estate mortgage—owner-occupied61
 65
 2
Commercial real estate construction—owner-occupied3
 2
 —
Total commercial133
 359
 9
Commercial investor real estate mortgage25
 48
 1
Commercial investor real estate construction5
 70
 2
Total investor real estate30
 118
 3
Residential first mortgage101
 25
 3
Home equity91
 7
 —
Consumer credit card43
 —
 —
Indirect—vehicles and other consumer87
 1
 —
Total consumer322
 33
 3
 485
 $510
 $15
Six Months Ended June 30, 2016Six Months Ended June 30, 2017
    Financial Impact
of Modifications
Considered TDRs		    Financial Impact
of Modifications
Considered TDRs
Number of
Obligors		 Recorded
Investment		 Increase in
Allowance at
Modification		Number of
Obligors		 Recorded
Investment		 Increase in
Allowance at
Modification
(Dollars in millions)(Dollars in millions)
Commercial and industrial95
 $181
 $6
69
 $292
 $7
Commercial real estate mortgage—owner-occupied76
 34
 1
61
 65
 2
Commercial real estate construction—owner-occupied3
 2
 —
Total commercial171
 215
 7
133
 359
 9
Commercial investor real estate mortgage49
 60
 1
25
 48
 1
Commercial investor real estate construction5
 11
 —
5
 70
 2
Total investor real estate54
 71
 1
30
 118
 3
Residential first mortgage138
 29
 4
101
 25
 3
Home equity206
 11
 —
91
 7
 —
Consumer credit card51
 —
 —
43
 —
 —
Indirect—vehicles and other consumer101
 1
 —
87
 1
 —
Total consumer496
 41
 4
322
 33
 3
721
 $327
 $12
485
 $510
 $15
Defaulted TDRs
The following table presents, by portfolio segment and class, TDRs that defaulted during the three and six months ended June 30, 20172018 and 2016,2017, and that were modified in the previous twelve months (i.e., the twelve months prior to the default). For purposes of this disclosure, default is defined as placement on non-accrual status for the commercial and investor real estate portfolio segments, and 90 days past due and still accruing for the consumer portfolio segment. Consideration of defaults in the calculation of the allowance for loan losses is described in detail in the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2016.

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2017.
       
Three Months Ended June 30 Six Months Ended June 30Three Months Ended June 30 Six Months Ended June 30
2017 2016 2017 20162018 2017 2018 2017
(In millions)(In millions)
Defaulted During the Period, Where Modified in a TDR Twelve Months Prior to Default              
Commercial and industrial$6
 $6
 $8
 $12
$19
 $6
 $21
 $8
Commercial real estate mortgage—owner-occupied—
 —
 —
 1
—
 —
 1
 —
Total commercial6
 6
 8
 13
19
 6
 22
 8
Commercial investor real estate mortgage—
 —
 —
 1
Total investor real estate—
 —
 —
 1
Residential first mortgage2
 8
 5
 11
2
 2
 4
 5
Home equity1
 1
 1
 1
—
 1
 —
 1
Total consumer3
 9
 6
 12
2
 3
 4
 6
$9
 $15
 $14
 $26
$21
 $9
 $26
 $14
Commercial and investor real estate loans that were on non-accrual status at the time of the latest modification are not included in the default table above, as they are already considered to be in default at the time of the restructuring. At June 30, 2017,2018, approximately $57$6 million of commercial and investor real estate loans modified in a TDR during the three months ended June 30, 20172018 were on non-accrual status. Approximately 0.9 percent of this amount was 90 days past due.
At June 30, 2017,2018, Regions had restructured binding unfunded commitments totaling $18$13 million where a concession was granted and the borrower was in financial difficulty.
NOTE 5. SERVICING OF FINANCIAL ASSETS
RESIDENTIAL MORTGAGE BANKING ACTIVITIES
The fair value of residential MSRs is calculated using various assumptions including future cash flows, market discount rates, expected prepayment rates, servicing costs and other factors. A significant change in prepayments of mortgages in the

29

Table of Contents


servicing portfolio could result in significant changes in the valuation adjustments, thus creating potential volatility in the carrying amount of residential MSRs. The Company compares fair value estimates and assumptions to observable market data where available, and also considers recent market activity and actual portfolio experience.
The table below presents an analysis of residential MSRs under the fair value measurement method:
Three Months Ended June 30 Six Months Ended June 30Three Months Ended June 30 Six Months Ended June 30
2017 2016 2017 20162018 2017 2018 2017
(In millions)(In millions)
Carrying value, beginning of period$326
 $239
 $324
 $252
$356
 $326
 $336
 $324
Additions39
 8
 47
 39
9
 39
 17
 47
Increase (decrease) in fair value(1):
       
Increase (decrease) in fair value:       
Due to change in valuation inputs or assumptions(8) (22) (3) (58)10
 (8) 32
 (3)
Economic amortization associated with borrower repayments(1)(11) (9) (22) (17)(13) (11) (23) (22)
Carrying value, end of period$346
 $216
 $346
 $216
$362
 $346
 $362
 $346
________
(1) "Economic amortization associated with borrower repayments" includes both total loan payoffs as well as partial paydowns.

On February 29, 2016, the Company purchased the rights to service approximately $2.6 billion in residential mortgage loans for approximately $24 million.

On April 28, 2017, the Company purchased the rights to service approximately $2.7 billion in residential mortgage loans for approximately $30 million.

On July 31, 2018, the Company purchased the rights to service approximately $3.4 billion in residential mortgage loans for approximately $42 million.

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

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June 30June 30
2017 20162018 2017
(Dollars in millions)(Dollars in millions)
Unpaid principal balance$33,055
 $27,360
$31,140
 $33,055
Weighted-average prepayment speed (CPR; percentage)7.9% 16.5%
Weighted-average CPR (%)8.6% 7.9%
Estimated impact on fair value of a 10% increase$(19) $(12)$(22) $(19)
Estimated impact on fair value of a 20% increase$(35) $(24)$(41) $(35)
Option-adjusted spread (basis points)1,052
 999
825
 1,052
Estimated impact on fair value of a 10% increase$(14) $(8)$(12) $(14)
Estimated impact on fair value of a 20% increase$(28) $(15)$(24) $(28)
Weighted-average coupon interest rate4.2% 4.3%4.2% 4.2%
Weighted-average remaining maturity (months)281
 279
280
 281
Weighted-average servicing fee (basis points)27.4
 27.8
27.5
 27.4
The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, the effect of an adverse variation in a particular assumption on the fair value of residential MSRs is calculated without changing any other assumption, while in reality changes in one factor may result in changes in another, which may either magnify or counteract the effect of the change. The derivative instruments utilized by Regions would serve to reduce the estimated impacts to fair value included in the table above.

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The following table presents servicing related fees, which includes contractually specified servicing fees, late fees and other ancillary income resulting from the servicing of residential mortgage loans:
 Three Months Ended June 30 Six Months Ended June 30
 2017 2016 2017 2016
 (In millions)
Servicing related fees and other ancillary income$24
 $22
 $47
 $42
 Three Months Ended June 30 Six Months Ended June 30
 2018 2017 2018 2017
 (In millions)
Servicing related fees and other ancillary income$23
 $24
 $46
 $47
Residential mortgage loans are sold in the secondary market with standard representations and warranties regarding certain characteristics such as the quality of the loan, the absence of fraud, the eligibility of the loan for sale and the future servicing associated with the loan. Regions may be required to repurchase these loans at par, or make-whole or indemnify the purchasers for losses incurred when representations and warranties are breached.
Regions maintains an immaterial repurchase liability related to residential mortgage loans sold with representations and warranty provisions. This repurchase liability is reported in other liabilities on the consolidated balance sheets and reflects management’s estimate of losses based on historical repurchase and loss trends, as well as other factors that may result in anticipated losses different from historical loss trends. Adjustments to this reserve are recorded in other non-interest expense on the consolidated statements of income.
COMMERCIAL MORTGAGE BANKING ACTIVITIES
On July 18, 2014, Regions wasis an approved as a Fannie Mae DUS lender and acquired a DUS servicing portfolio totaling approximately $1.0 billion.lender. The Fannie Mae DUS program provides liquidity to the multi-family housing market. As part ofIn connection with the transaction,DUS program, Regions recorded $12 million inservices commercial loans, retains commercial MSRs and $15 million in intangible assets associated with the DUS license, purchased. Regions also assumedand assumes a loss share guarantee associated with the purchased portfolio and any future originations. Regions estimated the fair value of the loss share guarantee to be approximately $4 million.loans. See Note 1 "Summary of Significant Accounting Policies" in the 20162017 Annual Report on Form 10-K for additional information. Also see Note 1413 herein for additional information related to the guarantee.
As of June 30, 20172018 and December 31, 2016,2017, the DUS servicing portfolio was approximately $2.0$3.0 billion and $1.8$2.9 billion, respectively. The related commercial MSRs were valued at approximately $35$50 million and $30$48 million at June 30, 20172018 and December 31, 2016,2017, respectively. The estimated fair value of the loss share guarantee was valued at approximately $4 million at both June 30, 20172018 and December 31, 2016.2017.

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NOTE 6. GOODWILL
Goodwill allocated to each reportable segment (each a reporting unit) is presented as follows: 
June 30, 2017 December 31, 2016June 30, 2018 December 31, 2017
(In millions)(In millions)
Corporate Bank$2,474
 $2,474
$2,474
 $2,474
Consumer Bank1,978
 1,978
1,978
 1,978
Wealth Management452
 452
452
 452
$4,904
 $4,904
$4,904
 $4,904
Regions evaluates each reporting unit’s goodwill for impairment on an annual basis in the fourth quarter, or more often if events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. A detailed description of the Company’s methodology and valuation approaches used to determine the estimated fair value of each reporting unit is included in the consolidated financial statements of the Annual Report on Form 10-K for the year ended December 31, 2016.2017. Adverse changes in the economic environment, declining operations, or other factors could result in a decline in the implied fair value of goodwill.

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During the second quarter of 2017,2018, Regions assessed events and circumstances for all three reporting units as of June 30, 2017,2018, and through the date of the filing of this Quarterly Report on Form 10-Q that could potentially indicate goodwill impairment. The indicators assessed included:
Recent operating performance,
Changes in market capitalization,
Regulatory actions and assessments,
Changes in the business climate (including legislation, legal factors, and competition),
Company-specific factors (including changes in key personnel, asset impairments, and business dispositions), and
Trends in the banking industry.
After assessing the indicators noted above, Regions determined that it was not more likely than not that the fair value of each of its reporting units had declined below their carrying value as of June 30, 2017.2018. Therefore, Regions determined that a test of goodwill impairment was not required for each of Regions’ reporting units for the June 30, 20172018 interim period.


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NOTE 7. STOCKHOLDERS’ EQUITY AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
PREFERRED STOCK
The following table presents a summary of the non-cumulative perpetual preferred stock:    
     June 30, 2017 December 31, 2016     June 30, 2018 December 31, 2017
Issuance Date Earliest Redemption Date Dividend Rate Liquidation Amount Carrying Amount Carrying AmountIssuance Date Earliest Redemption Date Dividend Rate Liquidation Amount Carrying Amount Carrying Amount
(Dollars in millions)(Dollars in millions)
Series A11/1/2012 12/15/2017 6.375% $500
 $387
 $387
11/1/2012 12/15/2017 6.375% $500
 $387
 $387
Series B4/29/2014 9/15/2024 6.375%
(1) 
 500
 433
 433
4/29/2014 9/15/2024 6.375%
(1) 
 500
 433
 433
   $1,000
 $820
 $820
   $1,000
 $820
 $820
_________
(1) Dividends, if declared, will be paid quarterly at an annual rate equal to (i) for each period beginning prior to September 15, 2024, 6.375%, and (ii) for each period beginning on or after September 15, 2024, three-month LIBOR plus 3.536%.
For each preferred stock issuance listed above, Regions issued depositary shares, each representing a 1/40th ownership interest in a share of the Company's preferred stock, with a liquidation preference of $1,000.00 per share of preferred stock (equivalent to $25.00 per depositary share). Dividends on the preferred stock, if declared, accrue and are payable quarterly in arrears. The preferred stock has no stated maturity and redemption is solely at Regions' option, subject to regulatory approval, in whole, or in part, after the earliest redemption date or in whole, but not in part, within 90 days following a regulatory capital treatment event for the Series A preferred stock or at any time following a regulatory capital treatment event for the Series B preferred stock.
The Board of Directors declared $16 million in cash dividends on both Series A and Series B Preferred Stock during the first six months of 20172018 and 2016. Series B Preferred Stock dividends were also $16 million for the first six months of 2017 and 2016.2017.
In the event Series A and Series B preferred shares are redeemed at the liquidation amounts, $113 million and $67 million excess of the redemption amount over the carrying amount will be recognized, respectively. Approximately $100 million of Series A preferred dividends that were recorded as a reduction of preferred stock, including related surplus, will be recorded as a reduction to retained earnings, and approximately $13 million of related issuance costs that were recorded as a reduction of preferred stock, including related surplus, will be recorded as a reduction to net income available to common shareholders. Approximately $52 million of Series B preferred dividends that were recorded as a reduction of preferred stock, including related surplus, will be recorded as a reduction to retained earnings, and approximately $15 million of related issuance costs that were recorded as a reduction of preferred stock, including related surplus, will be recorded as a reduction to net income available to common shareholders.

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COMMON STOCK
On June 28, 2017,2018, Regions received no objection from the Federal Reserve to its 20172018 capital plan that was submitted as part of the CCAR process, which included the repurchase of common shares and a common stock dividend increase. As part of the Company's capital plan, the Board authorized a new $1.47$2.031 billion common stock repurchase plan, permitting repurchases from the beginning of the third quarter of 20172018 through the second quarter of 2018.2019. This plan is inclusive of the capital generated from the sale of Regions Insurance Group, Inc. and related affiliates (see Note 2). The capital plan also included a proposed increase of the quarterly common stock dividend to $0.09$0.14 per common share beginning in the third quarter of 2017,2018, subject to quarterly Board approval. The Company began to repurchase shares under this plan in the third quarter of 2017,2018, and as of August 3, 2017,7, 2018, Regions had additional repurchases ofrepurchased approximately 9.916.4 million shares of common stock at a total cost of approximately $144.9$308.8 million. All of these shares were immediately retired upon repurchase and, therefore, will not be included in treasury stock.
Prior to the new common stock repurchase plan, Regions had authorization to repurchase $760 million$1.47 billion in common shares. As of June 30, 2017,2018, Regions had repurchased approximately 65.890.6 million shares of common stock at a total cost of approximately $760 million$1.47 billion under this plan and concluded the plan during the second quarter of 2017.2018.
Regions’ Board declared a cash dividend for both the first and second quarter of 2018 of $0.09 per share, totaling $0.18 per common share for the first six months of 2018. The Board declared $0.07 per common share for the second quarter of 2017 of $0.07 per common shareas compared to $0.065 per common share for the first quarter of 2017, totaling $0.135 per common share for the first six months of 2017. The Board declared a $0.065 per share cash dividend on common stock for the second quarter of 2016 as compared to $0.06 per common share for the first quarter of 2016, totaling $0.125 per common share for the first six months of 2016.
On July 27, 2017,25, 2018, Regions' Board approved an increase of the quarterly common stock dividend to $0.09$0.14 per share.



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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Activity within the balances in accumulated other comprehensive income (loss), net is shown in the following tables:
Three Months Ended June 30, 2017Three Months Ended June 30, 2018
Unrealized losses on securities transferred to held to maturity Unrealized gains (losses) on securities available for sale Unrealized gains (losses) on derivative instruments designated as cash flow hedges 
Defined benefit
pension plans and other post
employment
benefits
 
Accumulated
other
comprehensive
income (loss),
net of tax
Unrealized losses on securities transferred to held to maturity Unrealized gains (losses) on securities available for sale Unrealized gains (losses) on derivative instruments designated as cash flow hedges 
Defined benefit
pension plans and other post
employment
benefits
 
Accumulated
other
comprehensive
income (loss),
net of tax
(In millions)(In millions)
Beginning of period$(31) $(105) $(12) $(417) $(565)$(31) $(463) $(151) $(506) $(1,151)
Net change1
 50
 23
 12
 86
1
 (67) (46) 8
 (104)
End of period$(30) $(55) $11
 $(405) $(479)$(30) $(530) $(197) $(498) $(1,255)
Three Months Ended June 30, 2016Three Months Ended June 30, 2017
Unrealized losses on securities transferred to held to maturity Unrealized gains (losses) on securities available for sale Unrealized gains (losses) on derivative instruments designated as cash flow hedges Defined benefit pension plans and other post employment benefits Accumulated other comprehensive
income (loss), net of tax		Unrealized losses on securities transferred to held to maturity Unrealized gains (losses) on securities available for sale Unrealized gains (losses) on derivative instruments designated as cash flow hedges Defined benefit pension plans and other post employment benefits Accumulated other comprehensive
income (loss), net of tax
(In millions)(In millions)
Beginning of period$(45) $198
 $216
 $(392) $(23)$(31) $(105) $(12) $(417) $(565)
Net change5
 99
 62
 5
 171
1
 50
 23
 12
 86
End of period$(40) $297
 $278
 $(387) $148
$(30) $(55) $11
 $(405) $(479)
 Six Months Ended June 30, 2017
 Unrealized losses on securities transferred to held to maturity Unrealized gains (losses) on securities available for sale Unrealized gains (losses) on derivative instruments designated as cash flow hedges Defined benefit pension plans and other post employment benefits Accumulated other comprehensive
income (loss), net of tax
 (In millions)
Beginning of period$(33) $(106) $11
 $(422) $(550)
Net change3
 51
 —
 17
 71
End of period$(30) $(55) $11
 $(405) $(479)
Six Months Ended June 30, 2016Six Months Ended June 30, 2018
Unrealized losses on securities transferred to held to maturity Unrealized gains (losses) on securities available for sale Unrealized gains (losses) on derivative instruments designated as cash flow hedges Defined benefit pension plans and other post employment benefits Accumulated other comprehensive
income (loss), net of tax		Unrealized losses on securities transferred to held to maturity Unrealized gains (losses) on securities available for sale Unrealized gains (losses) on derivative instruments designated as cash flow hedges Defined benefit pension plans and other post employment benefits Accumulated other comprehensive
income (loss), net of tax
(In millions)(In millions)
Beginning of period$(47) $(10) $75
 $(398) $(380)$(33) $(153) $(51) $(512) $(749)
Net change7
 307
 203
 11
 528
3
 (377) (146) 14
 (506)
End of period$(40) $297
 $278
 $(387) $148
$(30) $(530) $(197) $(498) $(1,255)

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 Six Months Ended June 30, 2017
 Unrealized losses on securities transferred to held to maturity Unrealized gains (losses) on securities available for sale Unrealized gains (losses) on derivative instruments designated as cash flow hedges Defined benefit pension plans and other post employment benefits Accumulated other comprehensive
income (loss), net of tax
 (In millions)
Beginning of period$(33) $(106) $11
 $(422) $(550)
Net change3
 51
 —
 17
 71
End of period$(30) $(55) $11
 $(405) $(479)

The following table presents amounts reclassified out of accumulated other comprehensive income (loss) for the three and six months ended June 30, 20172018 and 2016:2017:
Three Months Ended June 30, 2017 Three Months Ended June 30, 2016 Three Months Ended June 30, 2018 Three Months Ended June 30, 2017 
Details about Accumulated Other Comprehensive Income (Loss) Components
Amount Reclassified from Accumulated Other Comprehensive Income (Loss)(1)
 
Amount Reclassified from Accumulated Other Comprehensive Income (Loss)(1)
 Affected Line Item in the Consolidated Statements of Income
Amount Reclassified from Accumulated Other Comprehensive Income (Loss)(1)
 
Amount Reclassified from Accumulated Other Comprehensive Income (Loss)(1)
 Affected Line Item in the Consolidated Statements of Income
(In millions) (In millions) 
Unrealized losses on securities transferred to held to maturity:        
$(2) $(8) Net interest income and other financing income$(1) $(2) Net interest income and other financing income
1
 3
 Tax (expense) or benefit—
 1
 Tax (expense) or benefit
$(1) $(5) Net of tax$(1) $(1) Net of tax
Unrealized gains and (losses) on available for sale securities:        
$1
 $6
 Securities gains (losses), net$1
 $1
 Securities gains (losses), net
—
 (2) Tax (expense) or benefit—
 —
 Tax (expense) or benefit
$1
 $4
 Net of tax$1
 $1
 Net of tax
        
Gains and (losses) on cash flow hedges:        
Interest rate contracts$22
 $35
 Net interest income and other financing income$5
 $22
 Net interest income and other financing income
(8) (13) Tax (expense) or benefit(1) (8) Tax (expense) or benefit
$14
 $22
 Net of tax$4
 $14
 Net of tax
        
Amortization of defined benefit pension plans and other post employment benefits:        
Actuarial gains (losses) and settlements$(19) $(8) 
(2) 
$(10) $(19) 
(2) 
(19) (8) Total before tax(10) (19) Total before tax
7
 3
 Tax (expense) or benefit2
 7
 Tax (expense) or benefit
$(12) $(5) Net of tax$(8) $(12) Net of tax
        
Total reclassifications for the period$2
 $16
 Net of tax$(4) $2
 Net of tax

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Six Months Ended
June 30, 2017
 
Six Months Ended
June 30, 2016
 Six Months Ended June 30, 2018 
Six Months Ended
June 30, 2017
 
Details about Accumulated Other Comprehensive Income (Loss) Components
Amount Reclassified from Accumulated Other Comprehensive Income (Loss)(1)
 
Amount Reclassified from Accumulated Other Comprehensive Income (Loss)(1)
 Affected Line Item in the Consolidated Statements of Income
Amount Reclassified from Accumulated Other Comprehensive Income (Loss)(1)
 
Amount Reclassified from Accumulated Other Comprehensive Income (Loss)(1)
 Affected Line Item in the Consolidated Statements of Income
(In millions) (In millions) 
Unrealized losses on securities transferred to held to maturity:        
$(5) $(11) Net interest income and other financing income$(4) $(5) Net interest income and other financing income
2
 4
 Tax (expense) or benefit1
 2
 Tax (expense) or benefit
$(3) $(7) Net of tax$(3) $(3) Net of tax
Unrealized gains and (losses) on available for sale securities:        
$1
 $1
 Securities gains (losses), net$1
 $1
 Securities gains (losses), net
—
 —
 Tax (expense) or benefit—
 —
 Tax (expense) or benefit
$1
 $1
 Net of tax$1
 $1
 Net of tax
        
Gains and (losses) on cash flow hedges:        
Interest rate contracts$53
 $74
 Net interest income and other financing income$16
 $53
 Net interest income and other financing income
(20) (28) Tax (expense) or benefit(4) (20) Tax (expense) or benefit
$33
 $46
 Net of tax$12
 $33
 Net of tax
        
Amortization of defined benefit pension plans and other post employment benefits:        
Actuarial gains (losses) and settlements$(28) $(17) 
(2) 
$(19) $(28) 
(2) 
(28) (17) Total before tax(19) (28) Total before tax
10
 6
 Tax (expense) or benefit4
 10
 Tax (expense) or benefit
$(18) $(11) Net of tax$(15) $(18) Net of tax
        
Total reclassifications for the period$13
 $29
 Net of tax$(5) $13
 Net of tax
________
(1) Amounts in parentheses indicate reductions to net income.
(2) TheseThis accumulated other comprehensive income (loss) components arecomponent is included in the computation of net periodic pension cost and areis included in salaries and employee benefitsother non-interest expense on the consolidated statements of income (see Note 109 for additional details).

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NOTE 8. EARNINGS (LOSS) PER COMMON SHARE
The following table sets forth the computation of basic earnings (loss) per common share and diluted earnings (loss) per common share:
Three Months Ended June 30 Six Months Ended June 30Three Months Ended June 30 Six Months Ended June 30
2017 2016 2017 20162018 2017 2018 2017
(In millions, except per share amounts)(In millions, except per share amounts)
Numerator:              
Income from continuing operations$317
 $272
 $611
 $545
$378
 $316
 $792
 $609
Preferred stock dividends(16) (16) (32) (32)(16) (16) (32) (32)
Income from continuing operations available to common shareholders301
 256
 579
 513
362
 300
 760
 577
Income (loss) from discontinued operations, net of tax(1) 3
 6
 3
(3) —
 (3) 8
Net income available to common shareholders$300
 $259
 $585
 $516
$359
 $300
 $757
 $585
Denominator:              
Weighted-average common shares outstanding—basic1,202
 1,265
 1,205
 1,275
1,119
 1,202
 1,123
 1,205
Potential common shares10
 3
 13
 4
9
 10
 12
 13
Weighted-average common shares outstanding—diluted1,212
 1,268
 1,218
 1,279
1,128
 1,212
 1,135
 1,218
Earnings per common share from continuing operations available to common shareholders(1):
              
Basic$0.25
 $0.20
 $0.48
 $0.40
$0.32
 $0.25
 $0.68
 $0.48
Diluted0.25
 0.20
 0.48
 0.40
0.32
 0.25
 0.67
 0.47
Earnings (loss) per common share from discontinued operations(1):
              
Basic$(0.00) $0.00
 $0.00
 $0.00
$(0.00) $0.00
 $(0.00) $0.01
Diluted(0.00) 0.00
 0.00
 0.00
(0.00) 0.00
 (0.00) 0.01
Earnings per common share(1):
              
Basic$0.25
 $0.20
 $0.49
 $0.40
$0.32
 $0.25
 $0.67
 $0.49
Diluted0.25
 0.20
 0.48
 0.40
0.32
 0.25
 0.67
 0.48
________
(1) Certain per share amounts may not appear to reconcile due to rounding.
The effect from the assumed exercise of 6 million stock options, restricted stock units and awards and performance stock units for both the three and six months ended June 30, 2018 was not included in the above computations of diluted earnings per common share because such amounts would have had an antidilutive effect on earnings per common share. The effect from the assumed exercise of 15 million stock options, restricted stock units and awards and performance stock units for both the three months and six months ended June 30, 2017 was not included in the above computations of diluted earnings per common share because such amounts would have had an antidilutive effect on earnings per common share. The effect from the assumed exercise of 30 million for both the three and six months ended June 30, 2016 was not included in the above computations of diluted earnings per common share because such amounts would have had an antidilutive effect on earnings per common share.
NOTE 9. SHARE-BASED PAYMENTS
Regions administers long-term incentive compensation plans that permit the granting of incentive awards in the form of stock options, restricted stock awards, performance awards and stock appreciation rights. While Regions has the ability to issue stock appreciation rights, none have been issued to date. The terms of all awards issued under these plans are determined by the Compensation Committee of the Board; however, no awards may be granted after the tenth anniversary from the date the plans were initially approved by stockholders. Incentive awards usually vest based on employee service, generally within three years from the date of the grant. The contractual lives of options granted under these plans are typically ten years from the date of the grant.
On April 23, 2015, the stockholders of the Company approved the Regions Financial Corporation 2015 LTIP , which permits the Company to grant to employees and directors various forms of incentive compensation. These forms of incentive compensation are similar to the types of compensation approved in prior plans. The 2015 LTIP authorizes 60 million common share equivalents available for grant, where grants of options and grants of full value awards (e.g., shares of restricted stock, restricted stock units and performance stock units) count as one share equivalent. Unless otherwise determined by the Compensation Committee of the Board, grants of restricted stock, restricted stock units, and performance stock units accrue dividends, or their notional equivalent, as they are declared by the Board, and are paid upon vesting of the award. Upon adoption of the 2015 LTIP, Regions closed the prior long-term incentive plan to new grants, and, accordingly, prospective grants must be made under the 2015 LTIP or a successor plan. All existing grants under prior long-term incentive plans are unaffected by adoption of the 2015 LTIP. The number of remaining share equivalents available for future issuance under the 2015 LTIP was approximately 45 million at June 30, 2017.

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STOCK OPTIONS
The following table summarizes the activity related to stock options:
 Six Months Ended June 30
 2017 2016
 
Number of
Options
 
Weighted-Average
Exercise Price
 
Number of
Options
 
Weighted-Average
Exercise Price
Outstanding at beginning of period13,455,047
 $19.37
 19,350,157
 $21.06
Exercised(964,494) 6.61
 (227,492) 6.91
Forfeited or expired(2,656,188) 34.71
 (3,819,783) 34.72
Outstanding at end of period9,834,365
 $16.48
 15,302,882
 $17.86
Exercisable at end of period9,834,365
 $16.48
 15,302,882
 $17.86
RESTRICTED STOCK AWARDS AND PERFORMANCE STOCK AWARDS
Regions periodically grants restricted stock awards that vest upon service conditions. Regions also periodically grants restricted stock awards and performance stock awards that vest based upon service conditions and performance conditions. Incremental shares earned above the performance target associated with previous performance stock awards are included when and if performance targets are achieved. Dividend payments during the vesting period are deferred to the end of the vesting term. The fair value of these restricted shares, restricted stock units and performance stock units was estimated based upon the fair value of the underlying shares on the date of the grant. The valuation was not adjusted for the deferral of dividends.
The following table summarizes the activity related to restricted stock awards and performance stock awards:
 Six Months Ended June 30
 2017 2016
 
Number of
Shares
 
Weighted-Average
Grant Date Fair Value
 
Number of
Shares
 Weighted-Average
Grant Date Fair Value
Non-vested at beginning of period16,558,942
 $9.31
 16,374,242
 $9.51
Granted3,891,181
 14.56
 6,820,768
 7.92
Vested(4,515,854) 11.12
 (5,600,419) 8.21
Forfeited(370,270) 9.96
 (690,623) 9.19
Non-vested at end of period15,563,999
 $10.09
 16,903,968
 $9.31

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NOTE 10.9. PENSION AND OTHER POSTRETIREMENT BENEFITS
Effective January 1, 2016, Regions separated its defined benefit pension plan qualified under the Internal Revenue Code into two plans. The new plan was created primarily for participants who were actively employed on January 1, 2016 and all other participants were retained in the existing plan. Regions' defined benefit pension plans cover only certain employees as the pension plans are closed to new entrants.Theentrants. The Company also sponsors a SERP, which is a non-qualified pension plan that provides certain senior executive officers defined benefits in relation to their compensation.
Net periodic pension cost which(credit) includes the following components:
 Qualified Plans Non-qualified Plans Total
 Three Months Ended June 30
 2018 2017 2018 2017 2018 2017
 (In millions)
Service cost$10
 $9
 $1
 $1
 $11
 $10
Interest cost17
 18
 1
 1
 18
 19
Expected return on plan assets(40) (36) —
 —
 (40) (36)
Amortization of actuarial loss8
 8
 2
 1
 10
 9
Settlement charge—
 —
 —
 10
 —
 10
Net periodic pension cost (credit)$(5) $(1) $4
 $13
 $(1) $12
 Qualified Plans Non-qualified Plans Total
 Six Months Ended June 30
 2018 2017 2018 2017 2018 2017
 (In millions)
Service cost$19
 $17
 $2
 $2
 $21
 $19
Interest cost35
 36
 2
 2
 37
 38
Expected return on plan assets(77) (71) —
 —
 (77) (71)
Amortization of actuarial loss16
 16
 3
 2
 19
 18
Settlement charge—
 —
 —
 10
 —
 10
Net periodic pension cost (credit)$(7) $(2) $7
 $16
 $—
 $14
The service cost component of net periodic pension cost (credit) is recorded in salaries and employee benefits on the consolidated statements of income, includedincome. Components other than service cost are recorded in other non-interest expense on the following components:
 Qualified Plans Non-qualified Plans Total
 Three Months Ended June 30
 2017 2016 2017 2016 2017 2016
 (In millions)
Service cost$9
 $8
 $1
 $1
 $10
 $9
Interest cost18
 18
 1
 2
 19
 20
Expected return on plan assets(36) (36) —
 —
 (36) (36)
Amortization of actuarial loss8
 8
 1
 —
 9
 8
Settlement charge—
 —
 10
 —
 10
 —
Net periodic pension cost (credit)$(1) $(2) $13
 $3
 $12
 $1
 Qualified Plans Non-qualified Plans Total
 Six Months Ended June 30
 2017 2016 2017 2016 2017 2016
 (In millions)
Service cost$17
 $17
 $2
 $2
 $19
 $19
Interest cost36
 36
 2
 3
 38
 39
Expected return on plan assets(71) (72) —
 —
 (71) (72)
Amortization of actuarial loss16
 16
 2
 1
 18
 17
Settlement charge—
 —
 10
 —
 10
 —
Net periodic pension cost (credit)$(2) $(3) $16
 $6
 $14
 $3

The settlement charge relates to the settlementconsolidated statements of liabilities under the SERP for certain plan participants during the second quarter of 2017.income.
Regions' funding policy for the qualified plans is to contribute annually at least the amount required by IRS minimum funding standards. Regions made a contribution of $100 million for the 2017 plan year during the first quarter of 2018 and made no contributioncontributions to the plan during the first six months of 2017.
Regions also provides other postretirement benefits such as defined benefit health care plans and life insurance plans that cover certain retired employees. There was no material impact from other postretirement benefits on the consolidated financial statements for the six months ended June 30, 20172018 or 2016.2017.

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NOTE 11.10. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
The following tables present the notional amount and estimated fair value of derivative instruments on a gross basis as of June 30, 20172018 and December 31, 2016. The2017. Beginning in the first quarter of 2018, variation margin payments made during 2017 for derivatives cleared through the Chicago Mercantile ExchangeLCH Limited are legally characterized as settlements of the derivatives. As a result, these variation margin payments are netted against the fair value of the respective derivative contracts in the balance sheet and related disclosures.Exchange traded derivatives cleared through LCH Limited were not offset prior to January 2018.
June 30, 2017 December 31, 2016June 30, 2018 December 31, 2017
Notional
Amount
 Estimated Fair Value 
Notional
Amount
 Estimated Fair Value
Notional
Amount
 Estimated Fair Value 
Notional
Amount
 Estimated Fair Value
Gain(1)
 
Loss(1)
 
Gain(1)
 
Loss(1)
Gain(1)
 
Loss(1)
 
Gain(1)
 
Loss(1)
(In millions)(In millions)
Derivatives in fair value hedging relationships:                      
Interest rate swaps$2,168
 $1
 $30
 $2,257
 $7
 $40
$3,501
     $3,060
 $1
 $43
Derivatives in cash flow hedging relationships:                      
Interest rate swaps7,400
 20
 158
 9,000
 19
 269
8,825
     6,825
 5
 188
Total derivatives designated as hedging instruments$9,568
 $21
 $188
 $11,257
 $26
 $309
$12,326
     $9,885
 $6
 $231
Derivatives not designated as hedging instruments:                      
Interest rate swaps$40,578
 $337
 $382
 $41,851
 $412
 $467
$44,023
 $134
 $315
 $40,841
 $308
 $342
Interest rate options3,873
 24
 10
 3,877
 24
 12
5,950
 41
 26
 4,598
 23
 15
Interest rate futures and forward commitments21,062
 6
 9
 18,605
 11
 6
31,187
 8
 11
 20,404
 6
 5
Other contracts6,402
 72
 73
 5,813
 106
 93
6,783
 77
 71
 5,721
 51
 48
Total derivatives not designated as hedging instruments$71,915
 $439
 $474
 $70,146
 $553
 $578
$87,943
 $260
 $423
 $71,564
 $388
 $410
Total derivatives$81,483
 $460
 $662
 $81,403
 $579
 $887
$100,269
 $260
 $423
 $81,449
 $394
 $641
           
Total gross derivative instruments, before netting  $260
 $423
   $394
 $641
Less: Legally enforceable master netting agreements  108
 108
   107
 107
Less: Cash collateral received/posted  30
 112
   34
 131
Total gross derivative instruments, after netting (2)
  $122
 $203
   $253
 $403
_________
(1)Derivatives in a gain position are recorded as other assets and derivatives in a loss position are recorded as other liabilities on the consolidated balance sheets. There is no fair value presented for contracts that are characterized as settled daily.
(2)As of June 30, 2018, financial instruments posted of $49 million were not offset in the consolidated balance sheets. As of December 31, 2017, cash collateral posted of $257 million and financial instruments posted of $50 million were not offset in the consolidated balance sheets.
HEDGING DERIVATIVES
Derivatives entered into to manage interest rate risk and facilitate asset/liability management strategies are designated as hedging derivatives. Derivative financial instruments that qualify in a hedging relationship are classified, based on the exposure being hedged, as either fair value hedges or cash flow hedges. See Note 1 "Summary of Significant Accounting Policies" of the Annual Report on Form 10-K for the year ended December 31, 2016,2017, for additional information regarding accounting policies for derivatives.
FAIR VALUE HEDGES
Fair value hedge relationships mitigate exposure to the change in fair value of an asset, liability or firm commitment.
Regions enters into interest rate swap agreements to manage interest rate exposure on the Company’s fixed-rate borrowings, which includes long-term debt and certificates of deposit.borrowings. These agreements involve the receipt of fixed-rate amounts in exchange for floating-rate interest payments over the life of the agreements. Regions enters into interest rate swap agreements to manage interest rate exposure on certain of the Company's fixed-rate available for sale debt securities. These agreements involve the payment of fixed-rate amounts in exchange for floating-rate interest receipts.
CASH FLOW HEDGES
Cash flow hedge relationships mitigate exposure to the variability of future cash flows or other forecasted transactions.
Regions enters into interest rate swap agreements to manage overall cash flow changes related to interest rate risk exposure on LIBOR-based loans. The agreements effectively modify the Company’s exposure to interest rate risk by utilizing receive fixed/pay LIBOR interest rate swaps.
Regions issues long-term fixed-rate debt for various funding needs. Regions may enter into receive LIBOR/pay fixed forward starting swaps to hedge risks of changes in the projected quarterly interest payments attributable to changes in the benchmark interest rate (LIBOR) during the time leading up to the probable issuance date of the new long-term fixed-rate debt.

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Regions recognized an unrealized after-tax gain of $140125 million and $77$140 million in accumulated other comprehensive income (loss) at June 30, 20172018 and 2016,2017, respectively, related to terminated cash flow hedges of loan instruments, which will be

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amortized into earnings in conjunction with the recognition of interest payments through 2025. Regions recognized pre-tax income of $18$14 million and $12$18 million during the three months ended June 30, 20172018 and 2016,2017, respectively, and pre-tax income of $37$29 million and $24$37 million during the six months ended June 30, 20172018 and 2016,2017, respectively, related to the amortization of discontinued cash flow hedges of loan instruments.
Regions expects to reclassify out of accumulated other comprehensive income (loss) and into earnings approximately $60$16 million in pre-tax incomeexpense due to the receipt or payment of interest payments on all cash flow hedges within the next twelve months. Included in this amount is $60$46 million in pre-tax net gainsincome related to the amortization of discontinued cash flow hedges. The maximum length of time over which Regions is hedging its exposure to the variability in future cash flows for forecasted transactions is approximately eightseven years as of June 30, 2017.2018, and a portion of these hedges are forward starting.
The following tables present the effect of hedging derivative instruments on the consolidated statements of income:
 Gain or (Loss) Recognized in Income on Derivatives Location of Amounts Recognized in Income on Derivatives and Related Hedged Item Gain or (Loss) Recognized in Income on Related Hedged Item
 Three Months Ended June 30   Three Months Ended June 30
 2017 2016   2017 2016
 (In millions)   (In millions)
Fair Value Hedges:         
Interest rate swaps on:         
Debt/CDs$—
 $4
 Interest expense $—
 $(1)
Debt/CDs7
 12
 Other non-interest expense (6) (12)
Securities available for sale(1) (2) Interest income —
 —
Securities available for sale(4) (12) Other non-interest expense 4
 12
Total$2
 $2
   $(2) $(1)
 
Effective Portion(3)
 
Gain or (Loss) Recognized in AOCI(1)
 Location of Amounts Reclassified from AOCI into Income 
Gain or (Loss) Reclassified from AOCI into Income(2)
 Three Months Ended June 30   Three Months Ended June 30
 2017 2016   2017 2016
 (In millions)   (In millions)
Cash Flow Hedges:         
Interest rate swaps$23
 $62
 Interest income on loans $22
 $35
Total$23
 $62
   $22
 $35

 Gain or (Loss) Recognized in Income on Derivatives Location of Amounts Recognized in Income on Derivatives and Related Hedged Item Gain or (Loss) Recognized in Income on Related Hedged Item
 Six Months Ended June 30   Six Months Ended June 30
 2017 2016   2017 2016
 (In millions)   (In millions)
Fair Value Hedges:         
Interest rate swaps on:         
Debt/CDs$1
 $8
 Interest expense $—
 $(2)
Debt/CDs5
 27
 Other non-interest expense (4) (27)
Securities available for sale(2) (5) Interest income —
 —
Securities available for sale(2) (38) Other non-interest expense 1
 37
Total$2
 $(8)   $(3) $8
 Three Months Ended June 30, 2018
 Interest Income Interest Expense Non-interest expense
 Debt securities-taxable Loans, including fees Deposits Long-term borrowings Other
Total amounts presented in the consolidated statements of income$156
 $881
 $57
 $73
 $235
          
Gains/(losses) on fair value hedging relationships:         
Interest rate contracts:         
   Amounts related to interest settlements on derivatives$(1) $—
 $—
 $(4) $—
   Recognized on derivatives2
 —
 —
 (9) —
   Recognized on hedged items(2) —
 —
 8
 —
Net income (expense) recognized on fair value hedges$(1) $—
 $—
 $(5) $—
          
Gains/(losses) on cash flow hedging relationships: (1)
         
Interest rate contracts:         
Realized gains (losses) reclassified from AOCI into net income (2)
$—
 $5
 $—
 $—
 $—
Net income (expense) recognized on cash flow hedges$—
 $5
 $—
 $—
 $—

41
 Three Months Ended June 30, 2017
 Interest Income Interest Expense Non-interest expense
 Securities-taxable Loans, including fees Deposits Long-term borrowings Other
Total amounts presented in the consolidated statements of income$150
 $801
 $37
 $50
 $236
          
Gains/(losses) on fair value hedging relationships:         
Interest rate contracts:         
Amounts related to interest settlements on derivatives$(1) $—
 $—
 $—
 $—
Recognized on derivatives—
 —
 —
 —
 3
Recognized on hedged items—
 —
 —
 —
 (2)
Net income (expense) recognized on fair value hedges$(1) $—
 $—
 $—
 $1
          
Gains/(losses) on cash flow hedging relationships: (1)
         
Interest rate contracts:         
Realized gains (losses) reclassified from AOCI into net income (2)
$—
 $22
 $—
 $—
 $—
Net income (expense) recognized on cash flow hedges$—
 $22
 $—
 $—
 $—


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Effective Portion(3)
 
Gain or (Loss) Recognized in AOCI(1)
 Location of Amounts Reclassified from AOCI into Income 
Gain or (Loss) Reclassified from AOCI into Income(2)
 Six Months Ended June 30   Six Months Ended June 30
 2017 2016   2017 2016
 (In millions)   (In millions)
Cash Flow Hedges:         
Interest rate swaps$—
 $203
 Interest income on loans $53
 $74
Total$—
 $203
   $53
 $74
 Six Months Ended June 30, 2018
 Interest Income Interest Expense Non-interest expense
 Debt securities-taxable Loans, including fees Deposits Long-term borrowings Other
Total amounts presented in the consolidated statements of income$310
 $1,732
 $106
 $145
 $460
          
Gains/(losses) on fair value hedging relationships:         
Interest rate contracts:         
   Amounts related to interest settlements on derivatives$(1) $—
 $—
 $(5) $—
   Recognized on derivatives5
 —
 —
 (41) —
   Recognized on hedged items(5) —
 —
 40
 —
Net income (expense) recognized on fair value hedges$(1) $—
 $—
 $(6) $—
          
Gains/(losses) on cash flow hedging relationships: (1)
         
Interest rate contracts:         
Realized gains (losses) reclassified from AOCI into net income (2)
$—
 $16
 $—
 $—
 $—
Net income (expense) recognized on cash flow hedges$—
 $16
 $—
 $—
 $—
______
(1) After-tax
(2) Pre-tax
 Six Months Ended June 30, 2017
 Interest Income Interest Expense Non-interest expense
 Securities-taxable Loans, including fees Deposits Long-term borrowings Other
Total amounts presented in the consolidated statements of income$297
 $1,574
 $72
 $100
 $456
          
Gains/(losses) on fair value hedging relationships:         
Interest rate contracts:         
Amounts related to interest settlements on derivatives$(2) $—
 $—
 $1
 $—
Recognized on derivatives—
 —
 —
 —
 3
Recognized on hedged items—
 —
 —
 —
 (3)
Net income (expense) recognized on fair value hedges$(2) $—
 $—
 $1
 $—
          
Gains/(losses) on cash flow hedging relationships: (1)
         
Interest rate contracts:         
Realized gains (losses) reclassified from AOCI into net income (2)
$—
 $53
 $—
 $—
 $—
Net income (expense) recognized on cash flow hedges$—
 $53
 $—
 $—
 $—
(3) All cash flow hedges were highly effective for all periods presented,_____
(1)See Note 7 for gain or (loss) recognized for cash flow hedges in AOCI.
(2)Pre-tax

The following table presents the carrying amount and associated cumulative basis adjustment related to the changeapplication of hedge accounting that is included in the carrying amount of hedged assets and liabilities in fair value attributed to hedge ineffectiveness was not material.hedging relationships.
 June 30, 2018
 Hedged Items Currently Designated Hedged Items No Longer Designated
 Carrying Amount of Assets/(Liabilities) Hedge Accounting Basis Adjustment Carrying Amount of Assets/(Liabilities) Hedge Accounting Basis Adjustment
 (In millions)
Debt securities available for sale$109
 $(3) $621
 $4
Long-term borrowings(3,313) 89
 —
 —

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
The Company holds a portfolio of interest rate swaps, option contracts, and futures and forward commitments that result from transactions with its commercial customers in which they manage their risks by entering into a derivative with Regions. The Company monitors and manages the net risk in this customer portfolio and enters into separate derivative contracts in order to

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reduce the overall exposure to pre-defined limits. For both derivatives with its end customers and derivatives Regions enters into to mitigate the risk in this portfolio, the Company is subject to market risk and the risk that the counterparty will default. The contracts in this portfolio are not designated as accounting hedges and are marked-to market through earnings (in capital markets fee income and other) and included in other assets and other liabilities, as appropriate.
Regions enters into interest rate lock commitments, which are commitments to originate mortgage loans whereby the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. At June 30, 20172018 and December 31, 2016,2017, Regions had $319$338 million and $274$197 million, respectively, in total notional amount of interest rate lock commitments. Regions manages market risk on interest rate lock commitments and mortgage loans held for sale with corresponding forward sale commitments. Residential mortgage loans held for sale are recorded at fair value with changes in fair value recorded in mortgage income. Commercial mortgage loans held for sale are recorded at either the lower of cost or market or at fair value based on management's election. At June 30, 20172018 and December 31, 2016,2017, Regions had $802$692 million and $786$481 million, respectively, in total notional amounts related to these forward sale commitments. Changes in mark-to-market from both interest rate lock commitments and corresponding forward sale commitments related to residential mortgage loans are included in mortgage income. Changes in mark-to-market from both interest rate lock commitments and corresponding forward sale commitments related to commercial mortgage loans are included in capital markets fee income and other.
Regions has elected to account for residential MSRs at fair value with any changes to fair value being recorded within mortgage income. Concurrent with the election to use the fair value measurement method, Regions began using various derivative instruments, in the form of forward rate commitments, futures contracts, swaps and swaptions to mitigate the effect of changes in the fair value of its residential MSRs in its consolidated statements of income. As of June 30, 20172018 and December 31, 2016,2017, the total notional amount related to these contracts was $7.5$5.3 billion and $7.2$4.8 billion, respectively.
The following table presents the location and amount of gain or (loss) recognized in income on derivatives not designated as hedging instruments in the consolidated statements of income for the three and six months ended June 30, 20172018 and 2016:

2017:
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 Three Months Ended June 30 Six Months Ended June 30
Derivatives Not Designated as Hedging Instruments2017 2016 2017 2016
 (In millions)
Capital markets fee income and other(1):
       
Interest rate swaps$4
 $(1) $6
 $3
Interest rate options8
 4
 10
 14
Interest rate futures and forward commitments3
 2
 5
 3
Other contracts(7) 14
 (15) 2
Total capital markets fee income and other8
 19
 6
 22
Mortgage income:       
Interest rate swaps8
 19
 6
 48
Interest rate options(3) 3
 (1) 8
Interest rate futures and forward commitments1
 (1) (7) 1
Total mortgage income6
 21
 (2) 57
 $14
 $40
 $4
 $79
______
(1) Capital markets fee income and other is included in Other income on the consolidated statements of income.
 Three Months Ended June 30 Six Months Ended June 30
Derivatives Not Designated as Hedging Instruments2018 2017 2018 2017
 (In millions)
Capital markets income:       
Interest rate swaps$5
 $4
 $12
 $6
Interest rate options6
 8
 13
 10
Interest rate futures and forward commitments1
 3
 2
 5
Other contracts2
 (7) 4
 (15)
Total capital markets income14
 8
 31
 6
Mortgage income:       
Interest rate swaps(6) 8
 (24) 6
Interest rate options—
 (3) 3
 (1)
Interest rate futures and forward commitments(1) 1
 (4) (7)
Total mortgage income(7) 6
 (25) (2)
 $7
 $14
 $6
 $4
Credit risk, defined as all positive exposures not collateralized with cash or other assets or reserved for, at June 30, 20172018 and December 31, 2016,2017, totaled approximately $272$111 million and $334$251 million, respectively. These amounts represent the net credit risk on all trading and other derivative positions held by Regions.
CREDIT DERIVATIVES
Regions has both bought and sold credit protection in the form of participations on interest rate swaps (swap participations). These swap participations, which meet the definition of credit derivatives, were entered into in the ordinary course of business to serve the credit needs of customers. Credit derivatives,Swap participations, whereby Regions has purchased credit protection, entitle Regions to receive a payment from the counterparty if the customer fails to make payment on any amounts due to Regions upon early termination of the swap transaction and have maturities between 20172018 and 2024. Credit derivatives2026. Swap participations, whereby Regions has sold credit protection have maturities between 20172018 and 2025.2038. For contracts where Regions sold credit protection, Regions would be required to make payment to the counterparty if the customer fails to make payment on any amounts due to the counterparty upon early termination of the swap transaction. Regions bases the current status of the prepayment/performance risk on bought and sold credit derivatives on recently issued internal risk ratings consistent with the risk management practices of unfunded commitments.
Regions’ maximum potential amount of future payments under these contracts as of June 30, 20172018 was approximately $275 million.$2.7 billion. This scenario would only occur if variable interest rates were at zero percent and all counterparties defaulted with zero recovery. The fair value of sold protection at June 30, 20172018 and 20162017 was immaterial. In transactions where Regions has sold credit protection, recourse to collateral associated with the original swap transaction is available to offset some or all of Regions’ obligation.

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Regions has bought credit protection in the form of credit default indices. These indices, which meet the definition of credit derivatives, were entered into in the ordinary course of business to economically hedge credit spread risk in commercial mortgage loans held for sale whereby the fair value option has been elected. Credit derivatives, whereby Regions has purchased credit protection, entitle Regions to receive a payment from the counterparty if losses on the underlying index exceed a certain threshold, dependent upon the tranche rating of the capital structure.
CONTINGENT FEATURES
Certain of Regions’ derivative instrument contracts with broker-dealers contain credit-related termination provisions and/or credit-related provisions regarding the posting of collateral, allowing those broker-dealers to terminate the contracts in the event that Regions’ and/or Regions Bank’s credit ratings falls below specified ratings from certain major credit rating agencies. The aggregate fair values of all derivative instruments with any credit-risk-related contingent features that were in a liability position on June 30, 20172018 and December 31, 2016,2017, were $114$71 million and $141$91 million, respectively, for which Regions had posted collateral of $114$71 million and $141$90 million, respectively, in the normal course of business.
OFFSETTING
Regions engages in derivatives transactions with dealers and customers. These derivatives transactions are subject to enforceable master netting agreements, which include a right of setoff by the non-defaulting or non-affected party upon early termination of the derivatives transaction. The following table presents the Company's gross derivative positions, including collateral posted or received, as of June 30, 2017 and December 31, 2016.

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 Offsetting Derivative Assets Offsetting Derivative Liabilities
 June 30, 2017 December 31, 2016 June 30, 2017 December 31, 2016
 (In millions)
Gross amounts subject to offsetting$298
 $414
 $396
 $583
Gross amounts not subject to offsetting162
 165
 266
 304
Gross amounts recognized460
 579
 662
 887
Gross amounts offset in the consolidated balance sheets(1)
184
 241
 288
 541
Net amounts presented in the consolidated balance sheets276
 338
 374
 346
Gross amounts not offset in the consolidated balance sheets:       
Financial instruments4
 4
 50
 50
Cash collateral received/posted—
 —
 232
 227
Net amounts$272
 $334
 $92
 $69
________
(1)
At June 30, 2017, gross amounts of derivative assets and liabilities offset in the consolidated balance sheets presented above include cash collateral received of $55 million and cash collateral posted of $159 million. At December 31, 2016, gross amounts of derivative assets and liabilities offset in the consolidated balance sheets presented above include cash collateral received of $48 million and cash collateral posted of $349 million.
Gross amounts of derivatives not subject to offsetting primarily consist of derivatives cleared through a Central Counterparty Clearing House and interest rate lock commitments to originate mortgage loans.
NOTE 12.11. FAIR VALUE MEASUREMENTS
See Note 1 “Summary of Significant Accounting Policies” to the consolidated financial statements of the Annual Report on Form 10-K for the year ended December 31, 20162017 for a description of valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis. Assets and liabilities measured at fair value rarely transfer between Level 1 and Level 2 measurements. There were no such transfers during the six month periods ended June 30, 20172018 and 2016. Trading account2017. Marketable equity securities and debt securities available for sale may be periodically transferred to or from Level 3 valuation based on management’s conclusion regarding the observability of inputs used in valuing the securities. Such transfers are accounted for as if they occur at the beginning of a reporting period.


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The following table presents assets and liabilities measured at estimated fair value on a recurring basis and non-recurring basis as of June 30, 20172018 and December 31, 2016:2017:
June 30, 2017 December 31, 2016June 30, 2018 December 31, 2017
Level 1 Level 2 Level 3 
Total
Estimated Fair Value
  Level 1 Level 2 Level 3 
Total
Estimated Fair Value
Level 1 Level 2 
Level 3(1)
 
Total
Estimated Fair Value
  Level 1 Level 2 
Level 3(1)
 
Total
Estimated Fair Value
(In millions)(In millions)
Recurring fair value measurements                                
Trading account securities$178
 $—
 $—
 $178
  $124
 $—
 $—
 $124
Securities available for sale:                
Debt securities available for sale:                
U.S. Treasury securities$314
 $—
 $—
 $314
  $303
 $—
 $—
 $303
$307
 $—
 $—
 $307
  $331
 $—
 $—
 $331
Federal agency securities—
 25
 —
 25
  —
 35
 —
 35
—
 48
 —
 48
  —
 28
 —
 28
Obligations of states and political subdivisions—
 —
 —
 —
  —
 1
 —
 1
Mortgage-backed securities (MBS):                                
Residential agency—
 17,524
 —
 17,524
  —
 17,371
 —
 17,371
—
 16,855
 —
 16,855
  —
 17,431
 —
 17,431
Residential non-agency—
 —
 3
 3
  —
 —
 4
 4
—
 —
 2
 2
  —
 —
 3
 3
Commercial agency—
 3,474
 —
 3,474
  —
 3,463
 —
 3,463
—
 3,737
 —
 3,737
  —
 3,714
 —
 3,714
Commercial non-agency—
 816
 —
 816
  —
 1,129
 —
 1,129
—
 792
 —
 792
  —
 788
 —
 788
Corporate and other debt securities—
 1,245
 4
 1,249
  —
 1,271
 3
 1,274
—
 1,191
 3
 1,194
  —
 1,105
 3
 1,108
Equity securities203
 —
 —
 203
  201
 —
 —
 201
Total securities available for sale$517
 $23,084
 $7
 $23,608
  $504
 $23,270
 $7
 $23,781
Total debt securities available for sale$307
 $22,623
 $5
 $22,935
  $331
 $23,066
 $6
 $23,403
Loans held for sale$—
 $379
 $—
 $379
  $—
 $414
 $33
 $447
$—
 $319
 $24
 $343
  $—
 $325
 $—
 $325
Marketable equity securities(2)
$423
 $—
 $—
 $423
  $414
 $—
 $—
 $414
Residential mortgage servicing rights$—
 $—
 $346
 $346
  $—
 $—
 $324
 $324
$—
 $—
 $362
 $362
  $—
 $—
 $336
 $336
Derivative assets:                                
Interest rate swaps$—
 $358
 $—
 $358
  $—
 $438
 $—
 $438
$—
 $134
 $—
 $134
  $—
 $314
 $—
 $314
Interest rate options—
 11
 13
 24
  —
 13
 11
 24
—
 31
 10
 41
  —
 18
 5
 23
Interest rate futures and forward commitments—
 6
 —
 6
  —
 11
 —
 11
—
 8
 —
 8
  —
 6
 —
 6
Other contracts2
 70
 —
 72
  2
 104
 —
 106
1
 76
 —
 77
  2
 49
 —
 51
Total derivative assets$2
 $445
 $13
 $460
  $2
 $566
 $11
 $579
$1
 $249
 $10
 $260
  $2
 $387
 $5
 $394
Derivative liabilities:                                
Interest rate swaps$—
 $570
 $—
 $570
  $—
 $776
 $—
 $776
$—
 $315
 $—
 $315
  $—
 $573
 $—
 $573
Interest rate options—
 10
 —
 10
  —
 12
 —
 12
—
 26
 —
 26
  —
 15
 —
 15
Interest rate futures and forward commitments—
 9
 —
 9
  —
 6
 —
 6
—
 11
 —
 11
  —
 5
 —
 5
Other contracts2
 71
 —
 73
  1
 92
 —
 93
1
 68
 2
 71
  2
 46
 —
 48
Total derivative liabilities$2
 $660
 $—
 $662
  $1
 $886
 $—
 $887
$1
 $420
 $2
 $423
  $2
 $639
 $—
 $641
Non-recurring fair value measurements                                
Loans held for sale$—
 $—
 $7
 $7
  $—
 $—
 $7
 $7
$—
 $—
 $10
 $10
  $—
 $—
 $20
 $20
Equity investments without a readily determinable fair value(3)
—
 —
 14
 14
  —
 —
 —
 —
Foreclosed property and other real estate—
 31
 10
 41
  —
 29
 6
 35
—
 21
 9
 30
  —
 24
 9
 33
_________
(1)All following disclosures related to Level 3 recurring and non-recurring assets do not include those deemed to be immaterial.
(2)Marketable equity securities were reclassified from trading account securities and securities available for sale to other earning assets, beginning in the first quarter of 2018, with the adoption of new accounting guidance. Prior periods have been reclassified to conform to current period presentation.

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(3)With the adoption of new accounting guidance, effective January 1, 2018, equity investments without a readily determinable fair value are required to be adjusted prospectively to estimated fair value when an observable price transaction for a same or similar investment with the same issuer occurs.
Assets and liabilities in all levels could result in volatile and material price fluctuations. Realized and unrealized gains and losses on Level 3 assets represent only a portion of the risk to market fluctuations in Regions’ consolidated balance sheets. Further, derivatives included in Levels 2 and 3 are used by the ALCO of the Company in a holistic approach to managing price fluctuation risks.

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The following tables illustrate rollforwards for all material assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2018 and 2017, and 2016. The tables do not reflect the change in fair value attributable to any related economic hedges the Company used to mitigate the interest rate riskassociated with these assets and liabilities.respectively. The net changes in realized gains (losses) included in earnings related to Level 3 assets and liabilities held at June 30, 20172018 and 20162017 are not material.
 Three Months Ended June 30, 2017
                  
 Opening
Balance April 1,
2017		 
Total Realized /
Unrealized
Gains or Losses
 Purchases Sales Issuances Settlements Transfers
into
Level 3		 Transfers
out of
Level 3		 Closing
Balance June 30, 2017
  
Included
in
Earnings
 
Included
in Other
Compre-
hensive
Income
(Loss)
 
 (In millions)
Level 3 Instruments Only                   
Securities available for sale:                   
Residential non-agency MBS$4
 —
  —
 —
 —
 —
 (1) —
 —
 $3
Corporate and other debt securities3
 —
  —
 —
 —
 —
 —
 1
 —
 4
Total securities available for sale$7
 —
  —
 —
 —
 —
 (1) 1
 —
 $7
Commercial mortgage loans held for sale$33
 —
 —
 7
 (40) —
 —
 —
 —
 $—
Residential mortgage servicing rights$326
 (19)
(1)  
—
 39
 —
 —
 —
 —
 —
 $346
Total derivatives, net$12
 33
(2)  
—
 —
 —
 —
 (32) —
 —
 $13
 Three Months Ended June 30, 2018
                  
 Opening
Balance April 1, 2018		 
Total Realized /
Unrealized
Gains or Losses
 Purchases Sales Issuances Settlements Transfers
into
Level 3		 Transfers
out of
Level 3		 Closing
Balance June 30, 2018
  
Included
in
Earnings
 
Included
in Other
Compre-
hensive
Income
(Loss)
 
 (In millions)
Level 3 Instruments Only                   
Residential mortgage servicing rights$356
 (3)
(1)  
—
 9
 —
 —
 —
 —
 —
 $362
 Three Months Ended June 30, 2016
                    
 Opening
Balance April 1, 2016		 Total Realized /
Unrealized
Gains or Losses		 Purchases Sales Issuances Settlements Transfers
into
Level 3		 Transfers
out of
Level 3		 Closing
Balance June 30, 2016
 Included
in Earnings		 Included
in Other
Compre-
hensive
Income
(Loss)		 
 (In millions)
Level 3 Instruments Only                   
Securities available for sale:                   
Residential non-agency MBS$5
 —
  —
 —
 —
 —
 —
 —
 —
 $5
Corporate and other debt securities3
 —
  —
 —
 —
 —
 —
 —
 —
 3
Total securities available for sale$8
 —
  —
 —
 —
 —
 —
 —
 —
 $8
Commercial mortgage loans held for sale$—
 —
 —
 —
 —
 30
 —
 —
 —
 $30
Residential mortgage servicing rights$239
 (31)
(1)  
—
 8
 —
 —
 —
 —
 —
 $216
Total derivatives, net$21
 35
(4)  
—
 —
 —
 —
 (39) —
 —
 $17
 Three Months Ended June 30, 2017
                  
 Opening
Balance April 1, 2017		 Total Realized /
Unrealized
Gains or Losses		 Purchases Sales Issuances Settlements Transfers
into
Level 3		 Transfers
out of
Level 3		 Closing
Balance June 30, 2017
  Included
in Earnings		 Included
in Other
Compre-
hensive
Income
(Loss)		 
 (In millions)
Level 3 Instruments Only                   
Residential mortgage servicing rights$326
 (19)
(1)  
—
 39
 —
 —
 —
 —
 —
 $346

46
 Six Months Ended June 30, 2018
 Opening
Balance
January 1,
2018		 
Total Realized /
Unrealized
Gains or Losses
 Purchases Sales Issuances Settlements Transfers
into
Level 3		 Transfers
out of
Level 3		 Closing
Balance June 30, 2018
  
Included
in
Earnings
 
Included
in Other
Compre-
hensive
Income
(Loss)
 
 (In millions)
Level 3 Instruments Only                   
Residential mortgage servicing rights$336
 9
(1)  
—
 17
 —
 —
 —
 —
 —
 $362

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 Six Months Ended June 30, 2017
 Opening
Balance
January 1,
2017		 
Total Realized /
Unrealized
Gains or Losses
 Purchases Sales Issuances Settlements Transfers
into
Level 3		 Transfers
out of
Level 3		 Closing
Balance June 30, 2017
  
Included
in
Earnings
 
Included
in Other
Compre-
hensive
Income
(Loss)
 
 (In millions)
Level 3 Instruments Only                   
Securities available for sale:                   
Residential non-agency MBS$4
 —
  —
 —
 —
 —
 (1) —
 —
 $3
Corporate and other debt securities3
 —
 —
 —
 —
 —
 —
 1
 —
 4
Total securities available for sale$7
 —
  —
 —
 —
 —
 (1) 1
 —
 $7
Commercial mortgage loans held for sale$33
 —
 —
 7
 (40) —
 —
 —
 —
 $—
Residential mortgage servicing rights$324
 (25)
(1)  
—
 47
 —
 —
 —
 —
 —
 $346
Total derivatives, net$11
 56
(5)  
—
 —
 —
 —
 (54) —
 —
 $13
 Six Months Ended June 30, 2016
 Opening
Balance
January 1,
2016		 
Total Realized /
Unrealized
Gains or Losses
 Purchases Sales Issuances Settlements 
Transfers
into
Level 3
 
Transfers
out of
Level 3
 Closing
Balance June 30, 2016
 
Included
in Earnings
 
Included
in Other
Compre-
hensive
Income
(Loss)
 
 (In millions)
Level 3 Instruments Only                   
Trading account securities$33
 (2)
(3) 
—
 —
 (31) —
 —
 —
 —
 $—
Securities available for sale:                   
Residential non-agency MBS$5
 —
  —
 —
 —
 —
 —
 —
 —
 $5
Corporate and other debt securities3
 —
  —
 —
 —
 —
 —
 —
 —
 3
Total securities available for sale$8
 —
  —
 —
 —
 —
 —
 —
 —
 $8
Commercial mortgage loans held for sale$—
 —
 —
 —
 —
 30
 —
 —
 —
 $30
Residential mortgage servicing rights$252
 (75)
(1)  
—
 39
 —
 —
 —
 —
 —
 $216
Total derivatives, net$10
 73
(6)  
—
 —
 —
 —
 (66) —
 —
 $17
 Six Months Months Ended June 30, 2017
 Opening
Balance
January 1,
2017		 Total Realized /
Unrealized
Gains or Losses		 Purchases Sales Issuances Settlements Transfers
into
Level 3		 Transfers
out of
Level 3		 Closing
Balance June 30, 2017
  Included
in Earnings		 Included
in Other
Compre-
hensive
Income
(Loss)		 
 (In millions)
Level 3 Instruments Only                   
Residential mortgage servicing rights$324
 (25)
(1)  
—
 47
 —
 —
 —
 —
 —
 $346
_________
(1) Included in mortgage income.
(2) Approximately $8 million was included in capital markets fee income and other and $25 million was included in mortgage income.
(3) Included in capitals markets fee income and other.
(4) Approximately $4 million was included in capital markets fee income and other and $31 million was included in mortgage income.
(5) Approximately $10 million was included in capital markets fee income and other and $46 million was included in mortgage income.
(6) Approximately $13 million was included in capital markets fee income and other and $60 million was included in mortgage income.

The following table presents the fair value adjustments related to non-recurring fair value measurements:
 Three Months Ended June 30 Six Months Ended June 30
 2017 2016 2017 2016
 (In millions)
Loans held for sale$(3) $(18) $(7) $(22)
Foreclosed property and other real estate(11) (20) (15) (27)

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 Three Months Ended June 30 Six Months Ended June 30
 2018 2017 2018 2017
 (In millions)
Loans held for sale$(3) $(3) $(6) $(7)
Foreclosed property and other real estate(5) (11) (10) (15)
Equity investments without a readily determinable fair value1
 —
 8
 —
The following tables present detailed information regarding material assets and liabilities measured at fair value using significant unobservable inputs (Level 3) as of June 30, 2017,2018, and December 31, 2016.2017. The tables include the valuation techniques and the significant unobservable inputs utilized. The range of each significant unobservable input as well as the weighted-average within the range utilized at June 30, 2017,2018, and December 31, 2016,2017, are included. Following the tables are descriptions of the valuation techniques and the sensitivity of the techniques to changes in the significant unobservable inputs.
 June 30, 2017
 Level 3
Estimated Fair Value at
June 30, 2017		 
Valuation
Technique
 
Unobservable
Input(s)
 
Quantitative Range of
Unobservable Inputs and
(Weighted-Average)
 (Dollars in millions)
Recurring fair value measurements:       
Securities available for sale:       
Residential non-agency MBS$3 Discounted cash flow Spread to LIBOR 5.4% - 69.9% (22.9%)
     Weighted-average CPR (%) 3.8% - 29.3% (11.4%)
     Probability of default 1.3%
     Loss severity 88.0%
Corporate and other debt securities$4 Market comparable Evaluated quote on same issuer/comparable bond 100.1%
Residential mortgage servicing rights(1)
$346 Discounted cash flow Weighted-average CPR (%) 5.8% - 26.7% (7.9%)
     OAS (%) 8.2% - 13.7% (10.5%)
Derivative assets:       
Interest rate options$9 Interest rate lock commitments on the residential mortgage loans are valued using discounted cash flows Weighted-average CPR (%) 5.8% - 26.7% (7.9%)
     OAS (%) 8.2% - 13.7% (10.5%)
     Pull-through 16.1% - 99.4% (80.0%)
 $4 Interest rate lock commitments on the commercial mortgage loans are valued using discounted cash flows Internal rate of return 7.0% - 17.0% (11.8%)
Nonrecurring fair value measurements:       
Loans held for sale$7 Commercial loans held for sale are valued based on multiple data points, including discount to appraised value of collateral based on recent market activity for sales of similar loans Appraisal comparability adjustment (discount) 31.5% - 93.6% (60.8%)
Foreclosed property and other real estate$2  Property in foreclosure is valued by discount to appraised value of property based on recent market activity for sales of similar properties  Appraisal comparability adjustment (discount) 25.0% - 38.8% (34.0%)
 $8 Bank owned property valuations are based on comparable sales and local broker network estimates provided by a third-party real estate services provider Estimated third-party valuations utilizing available sales data for similar transactions (discount) 6.4% - 72.4% (39.9%)
June 30, 2018
Level 3
Estimated Fair Value at
June 30, 2018
Valuation
Technique
Unobservable
Input(s)
Quantitative Range of
Unobservable Inputs and
(Weighted-Average)
(Dollars in millions)
Recurring fair value measurements:
Residential mortgage servicing rights(1)
$362Discounted cash flowWeighted-average CPR (%)3.5% - 28.0% (8.6%)
OAS (%)7.5% - 15.0% (8.3%)
_________
(1) See Note 5 for additional disclosures related to assumptions used in the fair value calculation for residential mortgage servicing rights.

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 December 31, 2016
 Level 3
Estimated Fair Value at
December 31, 2016		 
Valuation
Technique
 
Unobservable
Input(s)
 
Quantitative Range of
Unobservable Inputs and
(Weighted-Average)
 (Dollars in millions)
Recurring fair value measurements:       
Securities available for sale:       
Residential non-agency MBS$4 Discounted cash flow Spread to LIBOR 5.5% - 70.0% (23.0%)
     Weighted-average CPR (%) 3.5% - 29.5% (12.2%)
     Probability of default 3.1%
     Loss severity 63.6%
Corporate and other debt securities$3 Market comparable Evaluated quote on same issuer/comparable bond 100.3%
Commercial mortgage loans held for sale$33 Market comparable Credit spreads for bonds in the commercial MBS 0.4% - 5.8% (1.3%)
Residential mortgage servicing rights(1)
$324 Discounted cash flow Weighted-average CPR (%) 5.7% - 24.3% (7.6%)
     OAS (%) 8.2% - 13.6% (10.5%)
Derivative assets:       
Interest rate options$8 Interest rate lock commitments on the residential mortgage loans are valued using discounted cash flows Weighted-average CPR (%) 5.7% - 24.3% (7.6%)
     OAS (%) 8.2% - 13.6% (10.5%)
     Pull-through 14.9% - 99.4% (78.3%)
 $3 Interest rate lock commitments on the commercial mortgage loans are valued using discounted cash flows Internal rate of return 7.0% - 17.0% (12.0%)
Nonrecurring fair value measurements:       
Loans held for sale$7 Commercial loans held for sale are valued based on multiple data points, including discount to appraised value of collateral based on recent market activity for sales of similar loans Appraisal comparability adjustment (discount) 26.2% - 69.4% (48.1%)
Foreclosed property and other real estate$1  Property in foreclosure is valued by discount to appraised value of property based on recent market activity for sales of similar properties  Appraisal comparability adjustment (discount) 25.0% - 60.3% (37.0%)
 $5 Bank owned property valuations are based on comparable sales and local broker network estimates provided by a third-party real estate services provider Estimated third-party valuations utilizing available sales data for similar transactions (discount) 5.9% - 29.6% (15.8%)
December 31, 2017
Level 3
Estimated Fair Value at
December 31, 2017
Valuation
Technique
Unobservable
Input(s)
Quantitative Range of
Unobservable Inputs and
(Weighted-Average)
(Dollars in millions)
Recurring fair value measurements:
Residential mortgage servicing rights(1)
$336Discounted cash flowWeighted-average CPR (%)7.9% - 28.1% (9.9%)
OAS (%)8.1% - 15.0% (8.6%)
_________
(1) See Note 7 to the consolidated financial statements of the Annual Report on Form 10-K for the year ended December 31, 20162017 for additional disclosures related to assumptions used in the fair value calculation for residential mortgage servicing rights.


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RECURRING FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS
Securities available for sale
Residential non-agency MBS—The fair value reported in this category relates to retained interests in legacy securitizations. Significant unobservable inputs include the spread to LIBOR, CPR, probability of default, and loss severity in the event of default. Significant increases in spread to LIBOR, probability of default and loss given default in isolation would result in significantly lower fair value. A significant increase in CPR in isolation would result in an increase to fair value.
Corporate and other debt securities—Significant unobservable inputs include evaluated quotes on comparable bonds for the same issuer and management-determined comparability adjustments. Changes in the evaluated quote on comparable bonds would result in a directionally similar change in the fair value of the corporate and other debt securities.
Commercial mortgage loans held for sale
Commercial mortgage loans held for sale are valued based on traded market prices for comparable commercial mortgage-backed securitizations, into which the loans will be placed, adjusted for movements of interest rates and credit spreads. Significant unobservable inputs include credit spreads for bonds in commercial mortgage-backed securitizations. An increase in credit spreads would result in a decrease in fair value.
Residential mortgage servicing rights
The significant unobservable inputs used in the fair value measurement of residential MSRs are OAS and CPR. This valuation requires generating cash flow projections over multiple interest rate scenarios and discounting those cash flows at a risk adjustedrisk-adjusted rate. Additionally, the impact of prepayments and changes in the OAS are based on a variety of underlying inputs such asincluding servicing costs. Increases or decreases to the underlying cash flow inputs will have a corresponding impact on the value of the MSR asset. The net change in unrealized gains (losses) included in earnings related to MSRs held at period end are disclosed as the changes in valuation inputs or assumptions included in the MSR rollforward table in Note 5. See Note 5 for these amounts and additional disclosures related to assumptions used in the fair value calculation for MSRs.
Derivative assets
Residential mortgage interest rate options—These instruments are interest rate lock agreements made in the normal course of originating residential mortgage loans. Significant unobservable inputs in the fair value measurement are OAS, CPR, and pull-through. The impact of OAS and CPR inputs in the valuation of these derivative instruments are consistent with the MSR discussion above. Pull-through is an estimate of the number of interest rate lock commitments that will ultimately become funded loans. Increases or decreases in the pull-through assumption will have a corresponding impact on the value of these derivative assets.
Commercial mortgage interest rate options—These instruments are interest rate lock agreements made in the normal course of originating commercial mortgage loans. The significant unobservable input in the fair value measurement using discounted cash flows is the internal rate of return. The Company's internal rates of return are compared against those of market competitors, and should those rates change the Company's rates would also change in a similar direction and the fair value of the option would change inversely.
NON-RECURRING FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS
Loans held for sale
Commercial loans held for sale are valued based on multiple data points indicating the fair value for each loan. The primary data point for loans held for sale is a discount to the appraised value of the underlying collateral, which considers the return required by potential buyers of the loans. Management establishes this discount or comparability adjustment based on recent sales of loans secured by similar property types. As liquidity in the market increases or decreases, the comparability adjustment and the resulting asset valuation are impacted. These non-recurring fair value measurements are typically recorded on the date an updated appraisal is received.
Foreclosed property and other real estate
Property in foreclosure is valued based on offered quotes as available. If no sales contract is pending for a specific property, management establishes a comparability adjustment to the appraised value based on historical activity considering proceeds for properties sold versus the corresponding appraised value. Increases or decreases in realization for properties sold impact the comparability adjustment for similar assets remaining on the balance sheet. These non-recurring fair value measurements are typically recorded on the date an updated offered quote or appraisal is received.
Bank owned property available for sale is valued based on estimated third-party valuations utilizing recent sales data from similar transactions. A broker's opinion of value is obtained to further support the asset valuations. Updated valuations along with

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actual sales results of similar properties can further impact these values. These non-recurring fair value measurements are typically recorded on the date an updated third-party valuation is received.
FAIR VALUE OPTION
Regions has elected the fair value option for all FNMA and FHLMC eligible residential mortgage loans and certain commercial mortgage loans originated with the intent to sell. These elections allow for a more effective offset of the changes in fair values of the loans and the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting. Regions has not elected the fair value option for other loans held for sale primarily because they are not economically hedged using derivative instruments. Fair values of residential mortgage loans held for sale are based on traded market prices of similar assets where available and/or discounted cash flows at market interest rates, adjusted for securitization activities that include servicing values and market conditions, and are recorded in loans held for sale in the consolidated balance sheets. Fair values of commercial mortgage loans held for sale are based on traded market prices for comparable commercial mortgage-backed securitizations, into which the loans will be placed, adjusted for movements of interest rates and credit spreads.
The Company also elected to measure certain commercial and industrial loans held for sale at fair value, as these loans are actively traded in the secondary market. The Company is able to obtain fair value estimates for substantially all of these loans through a third party valuation service that is broadly used by market participants. While most of the loans are traded in the market, the volume and level of trading activity is subject to variability and the loans are not exchange-traded. Therefore, these loans have been classified as Level 2.
The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for mortgage loans held for sale measured at fair value:
 June 30, 2017 December 31, 2016
 
Aggregate
Fair Value
 
Aggregate
Unpaid
Principal
 
Aggregate Fair
Value Less
Aggregate
Unpaid
Principal
 
Aggregate
Fair Value
 
Aggregate
Unpaid
Principal
 
Aggregate Fair
Value Less
Aggregate
Unpaid
Principal
 (In millions)
Mortgage loans held for sale, at fair value$379
 $365
 $14
 $447
 $443
 $4
 June 30, 2018 December 31, 2017
 
Aggregate
Fair Value
 
Aggregate
Unpaid
Principal
 
Aggregate Fair
Value Less
Aggregate
Unpaid
Principal
 
Aggregate
Fair Value
 
Aggregate
Unpaid
Principal
 
Aggregate Fair
Value Less
Aggregate
Unpaid
Principal
 (In millions)
Mortgage loans held for sale, at fair value$340
 $329
 $11
 $325
 $314
 $11
Commercial and industrial loans held for sale, at fair value3
 3
 —
 —
 —
 —
Interest income on mortgage loans held for sale is recognized based on contractual rates and is reflected in interest income on loans held for sale in the consolidated statements of income. The following table details net gains and losses resulting from changes in fair value of these loans, which were recorded in mortgage and capital markets income in the consolidated statements of income during the three and six months ended June 30, 20172018 and 2016.2017. These changes in fair value are mostly offset by economic hedging activities. An immaterial portion of these amounts was attributable to changes in instrument-specific credit risk.
 Net gains (losses) resulting from changes in fair value
 Three Months Ended June 30 Six Months Ended June 30
 2017 2016 2017 2016
 (In millions)
Mortgage loans held for sale, at fair value$2
 $7
 $8
 $9
 Net gains (losses) resulting from changes in fair value
 Three Months Ended June 30 Six Months Ended June 30
 2018 2017 2018 2017
 (In millions)
Mortgage loans held for sale, at fair value$3
 $2
 $—
 $8
Commercial and industrial loans held for sale, at fair value—
 —
 —
 —

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The carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of the Company’s financial instruments as of June 30, 20172018 are as follows:
June 30, 2017June 30, 2018
Carrying
Amount
 
Estimated
Fair
Value(1)
 Level 1 Level 2 Level 3
Carrying
Amount
 
Estimated
Fair
Value(1)
 Level 1 Level 2 Level 3
(In millions)(In millions)
Financial assets:                  
Cash and cash equivalents$4,131
 $4,131
 $4,131
 $—
 $—
$4,286
 $4,286
 $4,286
 $—
 $—
Trading account securities178
 178
 178
 —
 —
Securities held to maturity1,754
 1,770
 —
 1,770
 —
Securities available for sale23,608
 23,608
 517
 23,084
 7
Debt securities held to maturity1,568
 1,530
 —
 1,530
 —
Debt securities available for sale22,935
 22,935
 307
 22,623
 5
Loans held for sale573
 573
 —
 573
 —
490
 490
 —
 451
 39
Loans (excluding leases), net of unearned income and allowance for loan losses(2)(3)
78,166
 74,429
 —
 —
 74,429
78,586
 77,338
 —
 —
 77,338
Other earning assets(4)
940
 940
 —
 940
 —
1,252
 1,252
 423
 829
 —
Derivative assets460
 460
 2
 445
 13
260
 260
 1
 249
 10
Financial liabilities:                  
Derivative liabilities662
 662
 2
 660
 —
423
 423
 1
 420
 2
Deposits98,093
 98,141
 —
 98,141
 —
95,283
 95,299
 —
 95,299
 —
Short-term borrowings600
 600
 —
 600
 —
1,400
 1,400
 —
 1,400
 —
Long-term borrowings6,765
 7,099
 —
 4,760
 2,339
9,890
 10,158
 —
 9,838
 320
Loan commitments and letters of credit99
 430
 —
 —
 430
75
 405
 —
 —
 405
Indemnification obligation24
 24
 —
 —
 24
_________
(1)Estimated fair values are consistent with an exit price concept. The assumptions used to estimate the fair values are intended to approximate those that a market participant would use in a hypothetical orderly transaction. In estimating fair value, the Company makesmaintains a corporate governance program to make adjustments for estimated changes in interest rates, market liquidity and credit spreads as appropriate.in the periods they are deemed to have occurred.
(2)The estimated fair value of portfolio loans assumes sale of the loans to a third-party financial investor. Accordingly, the value to the Company if the loans were held to maturity is not reflected in the fair value estimate. The fair value discount on the loan portfolio's net carrying amount at June 30, 2018 was $1.3 billion or 1.6 percent.
(3)Excluded from this table is the capital lease carrying amount of $1.1 billion at June 30, 2018.
(4)Excluded from this table is the operating lease carrying amount of $420 million at June 30, 2018.


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The carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of the Company's financial instruments as of December 31, 2017 are as follows:
 December 31, 2017
 
Carrying
Amount
 
Estimated
Fair
Value(1)
 Level 1 Level 2 Level 3
 (In millions)
Financial assets:         
Cash and cash equivalents$3,981
 $3,981
 $3,981
 $—
 $—
Debt securities held to maturity1,658
 1,667
 —
 1,667
 —
Debt securities available for sale23,403
 23,403
 331
 23,066
 6
Loans held for sale348
 348
 —
 328
 20
Loans (excluding leases), net of unearned income and allowance for loan losses(2)(3)
77,942
 76,871
 —
 —
 76,871
Other earning assets(4)
1,402
 1,402
 414
 988
 —
Derivative assets394
 394
 2
 387
 5
Financial liabilities:         
Derivative liabilities641
 641
 2
 639
 —
Deposits96,889
 96,927
 —
 96,927
 —
Short-term borrowings500
 500
 —
 500
 —
Long-term borrowings8,132
 8,517
 —
 7,757
 760
Loan commitments and letters of credit79
 540
 —
 —
 540
_________
(1)Estimated fair values are consistent with an exit price concept. The assumptions used to estimate the fair values are intended to approximate those that a market participant would use in a hypothetical orderly transaction. In estimating fair value, the Company maintains a corporate governance program to make adjustments for estimated changes in interest rates, market liquidity and credit spreads in the periods they are deemed to have occurred.
(2)The estimated fair value of portfolio loans assumes sale of the loans to a third-party financial investor. Accordingly, the value to the Company if the loans were held to maturity is not reflected in the fair value estimate. In the current whole loan market, financial investors are generally requiring a higher rate of return than the return inherent in loans if held to maturity. The fair value discount on the loan portfolio's net carrying amount at June 30,December 31, 2017 was $3.7$1.1 billion or 4.81.4 percent.
(3)Excluded from this table is the capital lease carrying amount of $920 million at June 30, 2017.
(4)Excluded from this table is the operating lease carrying amount of $597 million at June 30, 2017.


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The carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of the Company's financial instruments as of December 31, 2016 are as follows:
 December 31, 2016
 
Carrying
Amount
 
Estimated
Fair
Value(1)
 Level 1 Level 2 Level 3
 (In millions)
Financial assets:         
Cash and cash equivalents$5,451
 $5,451
 $5,451
 $—
 $—
Trading account securities124
 124
 124
 —
 —
Securities held to maturity1,362
 1,369
 —
 1,369
 —
Securities available for sale23,781
 23,781
 504
 23,270
 7
Loans held for sale718
 722
 —
 689
 33
Loans (excluding leases), net of unearned income and allowance for loan losses(2)(3)
78,128
 74,063
 —
 —
 74,063
Other earning assets(4)
956
 956
 —
 956
 —
Derivative assets579
 579
 2
 566
 11
Financial liabilities:         
Derivative liabilities887
 887
 1
 886
 —
Deposits99,035
 99,081
 —
 99,081
 —
Long-term borrowings7,763
 8,008
 —
 5,408
 2,600
Loan commitments and letters of credit102
 484
 —
 —
 484
Indemnification obligation28
 26
 —
 —
 26
_________
(1)Estimated fair values are consistent with an exit price concept. The assumptions used to estimate the fair values are intended to approximate those that a market participant would use in a hypothetical orderly transaction. In estimating fair value, the Company makes adjustments for interest rates, market liquidity and credit spreads as appropriate.
(2)The estimated fair value of portfolio loans assumes sale of the loans to a third-party financial investor. Accordingly, the value to the Company if the loans were held to maturity is not reflected in the fair value estimate. In the current whole loan market, financial investors are generally requiring a higher rate of return than the return inherent in loans if held to maturity. The fair value discount$1.1 billion at December 31, 2016 was $4.1 billion or 5.2 percent.
(3)Excluded from this table is the capital lease carrying amount of $876 million at December 31, 2016.2017.
(4)
Excluded from this table is the operating lease carrying amount of $688489 million at December 31, 2016.2017.

NOTE 13.12. BUSINESS SEGMENT INFORMATION
Each of Regions’ reportable segments is a strategic business unit that serves specific needs of Regions’ customers based on the products and services provided. The segments are based on the manner in which management views the financial performance of the business. The Company has three reportable segments: Corporate Bank, Consumer Bank, and Wealth Management, with the remainder split between Discontinued Operations and Other. Additional information about the Company's reportable segments is included in Regions' Annual Report on Form 10-K for the year ended December 31, 2016.2017.
The application and development of management reporting methodologies is a dynamic process and is subject to periodic enhancements. As these enhancements are made, financial results presented by each reportable segment may be periodically revised.
Discontinued operations includes all brokerage and investment activities associated with the sale of Morgan Keegan which closed on April 2, 2012, as well as the pending sale of Regions Insurance Group, Inc. and related affiliates, which closed on July 2, 2018. See Note 2 for related discussion.
The following tables present financial information for each reportable segment for the period indicated.

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 Three Months Ended June 30, 2018
 Corporate Bank 
Consumer
Bank
 
Wealth
Management
 Other 
Continuing
Operations
 
Discontinued
Operations
 Consolidated
 (In millions)
Net interest income and other financing income (loss)$340
 $565
 $49
 $(28) $926
 $—
 $926
Provision (credit) for loan losses53
 75
 4
 (72) 60
 —
 60
Non-interest income136
 289
 80
 7
 512
 35
 547
Non-interest expense234
 523
 86
 68
 911
 38
 949
Income (loss) before income taxes189
 256
 39
 (17) 467
 (3) 464
Income tax expense (benefit)47
 64
 9
 (31) 89
 —
 89
Net income (loss)$142
 $192
 $30
 $14
 $378
 $(3) $375
Average assets$51,076
 $34,862
 $2,317
 $34,547
 $122,802
 $158
 $122,960
 Three Months Ended June 30, 2017
 Corporate Bank Consumer Bank 
Wealth
Management
 Other 
Continuing
Operations
 
Discontinued
Operations
 Consolidated
 (In millions)
Net interest income and other financing income (loss)$360
 $532
 $47
 $(57) $882
 $—
 $882
Provision (credit) for loan losses66
 71
 5
 (94) 48
 —
 48
Non-interest income126
 287
 74
 3
 490
 36
 526
Non-interest expense219
 516
 82
 58
 875
 36
 911
Income (loss) before income taxes201
 232
 34
 (18) 449
 —
 449
Income tax expense (benefit)76
 88
 14
 (45) 133
 —
 133
Net income (loss)$125
 $144
 $20
 $27
 $316
 $—
 $316
Average assets$52,056
 $34,849
 $2,483
 $34,295
 $123,683
 $160
 $123,843
 Six Months Ended June 30, 2018
 Corporate Bank Consumer Bank 
Wealth
Management
 Other 
Continuing
Operations
 
Discontinued
Operations
 Consolidated
 (In millions)
Net interest income and other financing income (loss)$680
 $1,107
 $98
 $(50) $1,835
 $—
 $1,835
Provision (credit) for loan losses108
 151
 9
 (218) 50
 —
 50
Non-interest income280
 565
 156
 18
 1,019
 69
 1,088
Non-interest expense466
 1,046
 177
 106
 1,795
 72
 1,867
Income (loss) before income taxes386
 475
 68
 80
 1,009
 (3) 1,006
Income tax expense (benefit)96
 119
 17
 (15) 217
 —
 217
Net income (loss)$290
 $356
 $51
 $95
 $792
 $(3) $789
Average assets$51,056
 $34,906
 $2,338
 $34,761
 $123,061
 $165
 $123,226

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 Three Months Ended June 30, 2017
 Corporate Bank 
Consumer
Bank
 
Wealth
Management
 Other 
Continuing
Operations
 
Discontinued
Operations
 Consolidated
 (In millions)
Net interest income and other financing income (loss)$360
 $532
 $48
 $(58) $882
 $—
 $882
Provision (credit) for loan losses66
 71
 5
 (94) 48
 —
 48
Non-interest income118
 287
 109
 11
 525
 —
 525
Non-interest expense221
 515
 120
 53
 909
 1
 910
Income (loss) before income taxes191
 233
 32
 (6) 450
 (1) 449
Income tax expense (benefit)72
 88
 12
 (39) 133
 —
 133
Net income (loss)$119
 $145
 $20
 $33
 $317
 $(1) $316
Average assets$52,056
 $34,911
 $3,135
 $33,741
 $123,843
 $—
 $123,843
 Three Months Ended June 30, 2016
 Corporate Bank Consumer Bank 
Wealth
Management
 Other 
Continuing
Operations
 
Discontinued
Operations
 Consolidated
 (In millions)
Net interest income and other financing income (loss)$361
 $510
 $43
 $(66) $848
 $—
 $848
Provision (credit) for loan losses71
 70
 6
 (75) 72
 —
 72
Non-interest income118
 282
 106
 20
 526
 —
 526
Non-interest expense220
 508
 118
 69
 915
 (5) 910
Income (loss) before income taxes188
 214
 25
 (40) 387
 5
 392
Income tax expense (benefit)71
 81
 10
 (47) 115
 2
 117
Net income (loss)$117
 $133
 $15
 $7
 $272
 $3
 $275
Average assets$54,747
 $34,331
 $3,241
 $33,093
 $125,412
 $—
 $125,412
 Six Months Ended June 30, 2017
 Corporate Bank Consumer Bank 
Wealth
Management
 Other 
Continuing
Operations
 
Discontinued
Operations
 Consolidated
 (In millions)
Net interest income and other financing income (loss)$700
 $1,050
 $94
 $(103) $1,741
 $—
 $1,741
Provision (credit) for loan losses134
 145
 11
 (172) 118
 —
 118
Non-interest income231
 561
 221
 22
 1,035
 —
 1,035
Non-interest expense437
 1,027
 242
 80
 1,786
 (10) 1,776
Income (loss) before income taxes360
 439
 62
 11
 872
 10
 882
Income tax expense (benefit)137
 167
 23
 (66) 261
 4
 265
Net income (loss)$223
 $272
 $39
 $77
 $611
 $6
 $617
Average assets$52,197
 $34,979
 $3,149
 $33,999
 $124,324
 $—
 $124,324

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Six Months Ended June 30, 2016Six Months Ended June 30, 2017
Corporate Bank Consumer Bank 
Wealth
Management
 Other 
Continuing
Operations
 
Discontinued
Operations
 ConsolidatedCorporate Bank Consumer Bank 
Wealth
Management
 Other 
Continuing
Operations
 
Discontinued
Operations
 Consolidated
(In millions)(In millions)
Net interest income and other financing income (loss)$736
 $1,015
 $88
 $(129) $1,710
 $—
 $1,710
$700
 $1,051
 $93
 $(103) $1,741
 $—
 $1,741
Provision (credit) for loan losses144
 141
 11
 (111) 185
 —
 185
134
 145
 11
 (172) 118
 —
 118
Non-interest income249
 540
 213
 30
 1,032
 —
 1,032
249
 562
 148
 5
 964
 73
 1,037
Non-interest expense437
 1,015
 230
 102
 1,784
 (5) 1,779
432
 1,031
 166
 89
 1,718
 60
 1,778
Income (loss) before income taxes404
 399
 60
 (90) 773
 5
 778
383
 437
 64
 (15) 869
 13
 882
Income tax expense (benefit)154
 152
 23
 (101) 228
 2
 230
146
 166
 27
 (79) 260
 5
 265
Net income (loss)$250
 $247
 $37
 $11
 $545
 $3
 $548
$237
 $271
 $37
 $64
 $609
 $8
 $617
Average assets$54,733
 $34,136
 $3,237
 $33,580
 $125,686
 $—
 $125,686
$52,197
 $34,918
 $2,500
 $34,550
 $124,165
 $159
 $124,324
NOTE 14.13. COMMITMENTS, CONTINGENCIES AND GUARANTEES
COMMERCIAL COMMITMENTS
Regions issues off-balance sheet financial instruments in connection with lending activities. The credit risk associated with these instruments is essentially the same as that involved in extending loans to customers and is subject to Regions’ normal credit approval policies and procedures. Regions measures inherent risk associated with these instruments by recording a reserve for unfunded commitments based on an assessment of the likelihood that the guarantee will be funded and the creditworthiness of the customer or counterparty. Collateral is obtained based on management’s assessment of the creditworthiness of the customer.
Credit risk associated with these instruments is represented by the contractual amounts indicated in the following table:
June 30, 2017 December 31, 2016June 30, 2018 December 31, 2017
(In millions)(In millions)
Unused commitments to extend credit$44,078
 $44,408
$49,214
 $45,705
Standby letters of credit1,352
 1,425
1,366
 1,348
Commercial letters of credit58
 46
59
 76
Liabilities associated with standby letters of credit32
 34
27
 26
Assets associated with standby letters of credit33
 34
28
 28
Reserve for unfunded credit commitments67
 69
48
 53
Unused commitments to extend credit—To accommodate the financial needs of its customers, Regions makes commitments under various terms to lend funds to consumers, businesses and other entities. These commitments include (among others) credit card and other revolving credit agreements, term loan commitments and short-term borrowing agreements. Many of these loan commitments have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of these commitments are expected to expire without being funded, the total commitment amounts do not necessarily represent future liquidity requirements.
Standby letters of credit—Standby letters of credit are also issued to customers, which commit Regions to make payments on behalf of customers if certain specified future events occur. Regions has recourse against the customer for any amount required to be paid to a third party under a standby letter of credit. Historically, a large percentage of standby letters of credit expire without being funded. The contractual amount of standby letters of credit represents the maximum potential amount of future payments Regions could be required to make and represents Regions’ maximum credit risk.
Commercial letters of credit—Commercial letters of credit are issued to facilitate foreign or domestic trade transactions for customers. As a general rule, drafts will be drawn when the goods underlying the transaction are in transit.
LEGAL CONTINGENCIES
Regions and its subsidiaries are subject to loss contingencies related to litigation, claims, investigations and legal and administrative cases and proceedings arising in the ordinary course of business. Regions evaluates these contingencies based on information currently available, including advice of counsel. Regions establishes accruals for those matters when a loss contingency is considered probable and the related amount is reasonably estimable. Any accruals are periodically reviewed and may be adjusted

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as circumstances change. Some of Regions' exposure with respect to loss contingencies may be offset by applicable insurance coverage. In determining the amounts of any accruals or estimates of possible loss contingencies however, Regions does not take into account the availability of insurance coverage. To the extent that Regions has an insurance recovery, the proceeds are recorded in the period the recovery is received.
In addition, as previously discussed, Regions has agreed to indemnify Raymond James for all legal matters resulting from pre-closing activities in conjunction with the sale of Morgan Keegan and recorded an indemnification obligation at fair value in the second quarter of 2012. The indemnification obligation had a carrying amount of approximately $24 million and an estimated fair value of approximately $24 million as of June 30, 2017 (see Note 12).
When it is practicable, Regions estimates possible loss contingencies, whether or not there is an accrued probable loss. When Regions is able to estimate such possible losses, and when it is reasonably possible Regions could incur losses in excess of amounts accrued, Regions discloses the aggregate estimation of such possible losses. Regions currently estimates that any suchit is reasonably possible that it may experience losses in excess of what Regions has accrued in an aggregate amount of up to approximately $20 million as of June 30, 2018, with it also being reasonably possible that Regions could incur no losses in excess of amounts accrued, including legal contingencies that are subject to the indemnification agreement with Raymond James, would be immaterial to Regions' financial statements as a whole.accrued. However, as available information changes, the matters for which Regions is able to estimate, as well as the estimates themselves, will be adjusted accordingly. The reasonably possible estimate includes legal contingencies that are subject to the indemnification agreement with Raymond James.
Assessments of litigation and claims exposure are difficult because they involve inherently unpredictable factors including, but not limited to, the following: whether the proceeding is in the early stages; whether damages are unspecified, unsupported, or uncertain; whether there is a potential for punitive or other pecuniary damages; whether the matter involves legal uncertainties, including novel issues of law; whether the matter involves multiple parties and/or jurisdictions; whether discovery has begun or is not complete; whether meaningful settlement discussions have commenced; and whether the lawsuit involves class allegations. Assessments of class action litigation, which is generally more complex than other types of litigation, are particularly difficult, especially in the early stages of the proceeding when it is not known whether a class will be certified or how a potential class, if certified, will be defined. As a result, Regions may be unable to estimate reasonably possible losses with respect to some of the matters disclosed below, and the aggregated estimated amount discussed above may not include an estimate for every matter disclosed below.
In July 2006, Morgan Keegan and a former Morgan Keegan analyst were named as defendants in a lawsuit filed by a Canadian insurance and financial services company and its American subsidiary in the Circuit Court of Morris County, New Jersey. Plaintiffs alleged civil claims under the RICO Act and claims for commercial disparagement, tortious interference with contractual relationships, tortious interference with prospective economic advantage and common law conspiracy. Plaintiffs allege that defendants engaged in a multi-year conspiracy to publish and disseminate false and defamatory information about plaintiffs to improperly drive down plaintiffs’ stock price, so that others could profit from short positions. Plaintiffs allege that defendants’ actions damaged their reputations and harmed their business relationships. Plaintiffs seek monetary damages for a number of categories of alleged damages, including lost insurance business, lost financings and increased financing costs, increased audit fees and directors and officers insurance premiums and lost acquisitions. In September 2012, the trial court dismissed the case with prejudice. Plaintiffs filed an appeal, and in April 2017, the appellate court affirmed the dismissal of the plaintiffs’ claims under the RICO Act. The appellate court reversed the trial court’s dismissal of the commercial disparagement and tortious interference claims and remanded those claims but limited the plaintiffs’ damages. Plaintiffs filed an appeal with the Supreme Court of New Jersey in May 2017.2017, and in October 2017, that court denied the plaintiffs' petition and remanded the case to the trial court. The trial date previously set for early June 2018 has been continued to September 2018. This matter is subject to the indemnification agreement with Raymond James.
Regions is involved in formal and informal information-gathering requests, investigations, reviews, examinations and proceedings by various governmental regulatory agencies, law enforcement authorities and self-regulatory bodies regarding Regions’ business, Regions' business practices and policies, and the conduct of persons with whom Regions does business. Additional inquiries will arise from time to time. In connection with those inquiries, Regions receives document requests, subpoenas and other requests for information. The inquiries, including those described below, could develop into administrative, civil or criminal proceedings or enforcement actions that could result in consequences that have a material effect on Regions' consolidated financial position, results of operations or cash flows as a whole. Such consequences could include adverse judgments, findings, settlements, penalties, fines, orders, injunctions, restitution, or alterations in our business practices, and could result in additional expenses and collateral costs, including reputational damage.    
Regions is cooperating with an investigation by the United States Attorney’s Office for the Eastern District of New York pertaining to Regions 'Regions' banking relationship with a former customer and accounts maintained by related entities and individuals affiliated with the customer who may be involved in criminal activity, as well as related aspects of Regions' Anti-Money Laundering and Bank Secrecy Act compliance program.
While the final outcome of litigation and claims exposures or of any inquiries is inherently unpredictable, management is currently of the opinion that the outcome of pending and threatened litigation and inquiries will not have a material effect on Regions’ business, consolidated financial position, results of operations or cash flows as a whole. However, in the event of unexpected future developments, it is reasonably possible that an adverse outcome in any of the matters discussed above could be

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material to Regions’ business, consolidated financial position, results of operations or cash flows for any particular reporting period of occurrence.

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GUARANTEES
INDEMNIFICATION OBLIGATION
As discussed in Note 2, on April 2, 2012 (“Closing Date”), Regions closed the sale of Morgan Keegan and related affiliates to Raymond James. In connection with the sale, Regions agreed to indemnify Raymond James for all legal matters related to pre-closing activities, including matters filed subsequent to the Closing Date that relate to actions that occurred prior to closing. Losses under the indemnification include legal and other expenses, such as costs for judgments, settlements and awards associated with the defense and resolution of the indemnified matters. The maximum potential amount of future payments that Regions could be required to make under the indemnification is indeterminable due to the indefinite term of some of the obligations. However, Regions expects the majority of ongoing legal matters to be resolved during 2017, except for the July 2006 Morris County, New Jersey, matter which may extend beyond 2017.
As of June 30, 2018, the Closing Date, thecarrying value and fair value of the indemnification obligation which includes defense costs and unasserted claims, was approximately $385 million, of which approximately $256 million was recognized as a reduction to the gain on sale of Morgan Keegan. The fair value was determined through the use of a present value calculation that takes into account the future cash flows that a market participant would expect to receive from holding the indemnification liability as an asset. Regions performed a probability-weighted cash flow analysis and discounted the result at a credit-adjusted risk free rate. The fair value of the indemnification liability includes amounts that Regions had previously determined meet the definition of probable and reasonably estimable. Adjustments to the indemnification obligation are recorded within professional and legal expenses within discontinued operations (see Note 2). As of June 30, 2017, the carrying value of the indemnification obligation was approximately $24 million.were immaterial.
FANNIE MAE DUS LOSS SHARE GUARANTEE
Regions is a Fannie Mae DUS lender. The Fannie Mae DUS program provides liquidity to the multi-family housing market. Regions services loans sold to Fannie Mae and is required to provide a loss share guarantee equal to one-third of the majority of its DUS servicing portfolio. At June 30, 20172018 and December 31, 2016,2017, the Company's DUS servicing portfolio totaled approximately $2.0$3.0 billion and $1.8$2.9 billion, respectively. Regions' maximum quantifiable contingent liability related to its loss share guarantee was approximately $687$967 million and $559$923 million at June 30, 20172018 and December 31, 2016,2017, respectively. The Company would be liable for this amount only if all of the loans it services for Fannie Mae, for which the Company retains some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement. Therefore, the maximum quantifiable contingent liability is not representative of the actual loss the Company would be expected to incur. The estimated fair value of the associated loss share guarantee recorded as a liability on the Company's consolidated balance sheets was approximately $4 million at both June 30, 20172018 and December 31, 2016.2017. Refer to Note 1 "Summary of Significant Accounting Policies" to the consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2016,2017, for additional information.

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NOTE 14. REVENUE RECOGNITION
The Company records revenue when control of the promised products or services is transferred to the customer, in an amount that reflects the consideration Regions expects to be entitled to receive in exchange for those products or services. Refer to Note 1 “Summary of Significant Accounting Policies” to the consolidated financial statements to the Annual Report on Form 10-K for the year ended December 31, 2017, for descriptions of the accounting and reporting policies related to revenue recognition.
The following tables present total non-interest income disaggregated by major product category for each reportable segment for the period indicated.
 Three Months Ended June 30, 2018
 Corporate Bank 
Consumer
Bank
 
Wealth
Management
 Other Segment Revenue 
Other(1)
 
Continuing
Operations
 
Discontinued
Operations
 (In millions)
Service charges on deposit accounts$36
 $135
 $1
 $—
 $3
 $175
 $—
Card and ATM fees14
 102
 —
 —
 (4) 112
 —
Investment management and trust fee income—
 —
 58
 —
 —
 58
 —
Capital markets income26
 —
 —
 —
 31
 57
 —
Mortgage income—
 —
 —
 —
 37
 37
 —
Bank-owned life insurance—
 —
 —
 —
 18
 18
 —
Commercial credit fee income—
 —
 —
 —
 17
 17
 —
Investment services fee income—
 —
 19
 —
 —
 19
 —
Securities gains, net—
 —
 —
 —
 1
 1
 —
Market value adjustments on employee benefit assets—
 —
 —
 —
 (2) (2) —
Insurance commissions and fees—
 —
 —
 1
 —
 1
 35
Other miscellaneous income4
 12
 1
 —
 2
 19
 —
 $80
 $249
 $79

$1
 $103
 $512
 $35
 
Three Months Ended June 30, 2017 (2)
 Corporate Bank 
Consumer
Bank
 
Wealth
Management
 Other Segment Revenue 
Other(1)
 
Continuing
Operations
 
Discontinued
Operations
 (In millions)
Service charges on deposit accounts$35
 $132
 $—
 $—
 $2
 $169
 $—
Card and ATM fees12
 97
 —
 —
 (5) 104
 —
Investment management and trust fee income—
 —
 57
 —
 —
 57
 —
Capital markets income11
 —
 —
 —
 27
 38
 —
Mortgage income—
 —
 —
 —
 40
 40
 —
Bank-owned life insurance—
 —
 —
 —
 22
 22
 —
Commercial credit fee income—
 —
 —
 —
 18
 18
 —
Investment services fee income—
 —
 15
 —
 —
 15
 —
Securities gains, net—
 —
 —
 —
 1
 1
 —
Market value adjustments on employee benefit assets—
 —
 —
 —
 2
 2
 —
Insurance commissions and fees—
 —
 —
 2
 —
 2
 35
Other miscellaneous income3
 11
 1
 —
 7
 22
 —
 $61
 $240
 $73
 $2
 $114
 $490
 $35

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 Six Months Ended June 30, 2018
 Corporate Bank 
Consumer
Bank
 
Wealth
Management
 Other Segment Revenue 
Other(1)
 
Continuing
Operations
 
Discontinued
Operations
 (In millions)
Service charges on deposit accounts$73
 $266
 $2
 $1
 $4
 $346
 $—
Card and ATM fees26
 198
 —
 —
 (8) 216
 —
Investment management and trust fee income—
 —
 116
 —
 —
 116
 —
Capital markets income44
 —
 —
 —
 63
 107
 —
Mortgage income—
 —
 —
 —
 75
 75
 —
Bank-owned life insurance—
 —
 —
 —
 35
 35
 —
Commercial credit fee income—
 —
 —
 —
 34
 34
 —
Investment services fee income—
 —
 36
 —
 —
 36
 —
Securities gains, net—
 —
 —
 —
 1
 1
 —
Market value adjustments on employee benefit assets—
 —
 —
 —
 (3) (3) —
Insurance commissions and fees—
 —
 —
 1
 —
 1
 69
Other miscellaneous income9
 21
 2
 —
 23
 55
 —
 $152
 $485
 $156
 $2
 $224
 $1,019
 $69
 
Six Months Ended June 30, 2017 (2)
 Corporate Bank 
Consumer
Bank
 
Wealth
Management
 Other Segment Revenue 
Other(1)
 
Continuing
Operations
 
Discontinued
Operations
 (In millions)
Service charges on deposit accounts$71
 $259
 $1
 $2
 $4
 $337
 $—
Card and ATM fees24
 190
 —
 —
 (6) 208
 —
Investment management and trust fee income—
 —
 113
 —
 —
 113
 —
Capital markets income20
 —
 —
 —
 50
 70
 —
Mortgage income—
 —
 —
 —
 81
 81
 —
Bank-owned life insurance—
 —
 —
 —
 41
 41
 —
Commercial credit fee income—
 —
 —
 —
 36
 36
 —
Investment services fee income—
 —
 31
 —
 —
 31
 —
Securities gains, net—
 —
 —
 —
 1
 1
 —
Market value adjustments on employee benefit assets—
 —
 —
 —
 7
 7
 —
Insurance commissions and fees—
 —
 —
 2
 —
 2
 70
Other miscellaneous income6
 22
 2
 —
 7
 37
 —
 $121
 $471
 $147
 $4
 $221
 $964
 $70
________
(1)This revenue is not impacted by the new accounting guidance and continues to be recognized when earned in accordance with the Company's existing revenue recognition policy.
(2)Prior period amounts have not been adjusted under the modified retrospective method.
Regions elected the practical expedient related to contract costs and will continue to expense sales commissions and any related contract costs when incurred because the amortization period would have been one year or less.
Regions also elected the practical expedient related to remaining performance obligations and therefore did not disclose the value of unsatisfied performance obligations for 1) contracts with an original expected length of one year or less and 2) contracts for which revenue is recognized at the amount to which Regions has the right to invoice for services performed.

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NOTE 15. RECENT ACCOUNTING PRONOUNCEMENTS    
StandardDescriptionRequired Date of AdoptionEffect on Regions' financial statements or other significant matters
Standards Adopted (or partially adopted) in 2017
ASU 2016-05, Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships
The ASU amends Topic 815, Derivatives and Hedging, and addresses how a change in the counterparty to a derivative contract affects a hedging relationship. The ASU may be adopted either prospectively or on a modified retrospective basis.
January 1, 2017Adopted on a prospective basis January 1, 2017.

No material impact.
ASU 2016-06, Contingent Put and Call Options in Debt Instruments
The ASU amends Topic 815, Derivatives and Hedging, and clarifies that entities should solely use the four-step decision sequence described in current derivatives accounting guidance. This sequence should be used when assessing whether contingent exercise provisions associated with a put or call option are clearly and closely related to their debt hosts. The ASU should be adopted on a modified retrospective basis.
January 1, 2017Adopted January 1, 2017.

No material impact.
ASU 2016-07, Simplifying the Transition to the Equity Method of Accounting
The ASU amends Topic 323, Investments-Equity Method and Joint Ventures, and eliminates the requirement for an investor to retrospectively apply the equity method to investments when its ownership interest (or degree of influence in an investee) increases to a level that triggers the equity method of accounting. This ASU should be adopted prospectively.
January 1, 2017Adopted on a prospective basis January 1, 2017.

No material impact.
ASU 2016-09, Improvements to Employee Share-Based Payment Accounting
This ASU amends Topic 718, Stock Compensation, and intends to improve and simplify accounting for employee share-based payments. The amendments update the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The transition method of accounting application (i.e. prospective, retrospective or modified retrospective application) differs by amendment and is defined in the guidance.
January 1, 2017
Adopted on January 1, 2017.

There was no material impact at adoption related to the reclassification of excess tax benefits previously recognized in additional paid-in capital to income tax expense (prospective basis), cash flow statement reclassification related to excess tax benefits (prospective basis) or cash flow statement reclassification related to taxes paid for employee withholdings on share-based awards (retrospective basis).

Additionally, the Company has no previously unrecognized excess tax benefits; therefore, there was no impact.

The Company elected to retain its existing accounting policy election to estimate award forfeitures.
ASU 2016-17, Interest Held through Related Parties That Are Under Common Control


This ASU amends Topic 810, Consolidation, and prescribes that when determining whether a single decision maker is the primary beneficiary of a variable interest entity (VIE), a single decision maker will no longer be required to consider indirect interests held through related parties that are under common control with the single decision maker to be the equivalent of direct interests in their entirety.
January 1, 2017


Adopted on January 1, 2017.

No material impact.


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StandardDescriptionRequired Date of AdoptionEffect on Regions' financial statements or other significant matters
Standards Not Yet Adopted2018
ASU 2014-09, Revenue from Contracts with Customers

ASU 2015-14, Deferral of the Effective Date

ASU 2016-08, Principal versus Agent Considerations

ASU 2016-10, Identifying Performance Obligations and Licensing

ASU 2016-12, Narrow-Scope Improvements and Practical Expedience

ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers
This ASU supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition,, and most industry-specific guidance throughout the Industry topics of the Codification. The core principle of the ASU is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU may be adopted either retrospectively or on a modified retrospective basis.

January 1, 2018
Early adoption is permitted beginning January 1, 2017.

Regions has established aadopted the new revenue recognition standard implementation team, led byon January 1, 2018 using the Corporate Controller’s group with assistance frommodified retrospective method. The adoption of this guidance did not have a material impact. For the various linessix months ended June 30, 2018, approximately $864 million of business and finance management to evaluate the potential impact of adopting this guidance. The implementation team has substantially completed the initial scoping and determined that approximately $1.7 billion of 2016 non-interest income would beis within the scope of the new revenue recognition standard when adopted. Non-interestand includes service charges on deposit accounts, card and ATM fees, investment management and trust fee income, capital markets fee income, investment services fee income and other components within non-interest income. Income streams that are out of scope of the new standard include interest income, mortgage income, securities gains (losses), bank-owned life insurance and certain other components within non-interest income. Based on the completed contract reviews thus far by the implementation team, any potential changes in revenue recognition for those contracts are not expected to result in a material impact to Regions upon adoption. The implementation team is currently finalizing its reviews of contracts related to investment management and trust fees, insurance commissions and fees and investment services fees. The implementation team is also in process of developingdeveloped additional quantitative and qualitative disclosures that may be required upon the adoption ofby the new revenue recognition standard. See Note 14.


ASU 2016-01, Recognition and Measurement of Financial Assets and Liabilities

ASU 2018-03, Technical Corrections and Improvements to Financial Instruments

ASU 2018-04, Debt Securities and Regulated Operations
This ASU amends ASC Topic 825, Financial Instruments-Overall, and addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Among other minor amendments applicable to Regions, the main provisions require investments in equity securities to be measured at fair value with changes in fair value recognized through net income unless they qualify for a practicability exception (excludes investments accounted for under the equity method of accounting or those that result in consolidation of the investee). Except for disclosure requirements that have been adopted prospectively, the ASU must be adopted on a modified retrospective basis.
January 1, 2018



The adoption of this guidance resulted in trading account assets and equity securities available for sale being reclassified to other earning assets. The adoption of this guidance did not have a material impact. See Note 3.


ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments
This ASU amends Topic 230, Statement of Cash Flows, and provides clarification with respect to classification within the statement of cash flows where current guidance is unclear or silent. The ASU must be adopted retrospectively.

January 1, 2018
The adoption of this guidance did not have a material impact.


ASU 2017-01, Clarifying the Definition of a Business

This ASU amends Topic 805, Business Combinations,, and provides additional accounting guidance to better determine when a set of assets and activities is a business. The ASU shouldmust be adopted prospectively.
January 1, 2018
Early adoption is permitted for certain transactions as described in guidance.
Regions is evaluating the impact upon adoption; however, the impact is not expected to be material.
ASU 2017-04, Simplifying the Test for Goodwill Impairment

This ASU amends Topic 350, Intangibles-Goodwill and Other, and eliminates Step 2 from the goodwill impairment test.
January 1, 2020

Early adoption is permitted.		Regions believes theThe adoption of this guidance willdid not have a material impact. Regions does not plan to early adopt.


ASU 2017-05, Other Income- Gains and Losses from the Derecognition of Nonfinancial Assets



This ASU amends Subtopic 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets,, to clarify the scope and to add guidance for partial sales of nonfinancial assets. The new standard adds a definition for in-substance nonfinancial assets and clarifies that nonfinancial assets within a legal entity are within the scope of ASC 606. This ASU shouldmay be adopted in conjunction with ASU 2014-09 usingeither retrospectively or on a retrospective or modified retrospective approach.
basis.
January 1, 2018


Regions is evaluatingadopted the impact upon adoption; however,guidance using the impact ismodified retrospective method. The adoption of this guidance did not expected to be material.have a material impact.




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StandardDescriptionRequired Date of AdoptionEffect on Regions' financial statements or other significant matters
Standards Adopted (or partially adopted) in 2018 (continued)
ASU 2017-07, Compensation- Retirement Benefits

This ASU amends Topic 715, Retirement Benefits,, and provides more prescriptive guidance around the presentation of net periodperiodic pension and postretirement benefit cost in the income statement. The amendment requires that the service cost component be disaggregated from other components of net periodic benefit cost in the income statement.
The ASU must be adopted retrospectively.		January 1, 2018
Regions is evaluatingrecorded the impact upon adoption; however,service cost component of net periodic pension and postretirement benefit cost in salaries and employee benefits in the impact isincome statement. The other components of net periodic pension and postretirement benefit cost were recorded in other non-interest expense. The second quarter and first six months of 2017 have been revised to conform to this presentation. The adoption of this guidance did not expected to be material. Regions does not plan to early adopt.have a material impact. See Note 9.
2017-08, Receivables- Nonrefundable Fees and Other Costs
ASU 2017-09, Stock Compensation: Scope of Modification Accounting

This ASU amends Subtopic 310-20, Receivables-Nonrefundable FeesTopic 718, Compensation- Stock Compensation, and Other Costs,clarifies when modification accounting should be applied to shortenchanges in terms or conditions of share-based payment awards. The amendments narrow the amortization period for certain purchased callable debt securities held at a premiumscope of modification accounting by clarifying that modification accounting should be applied to awards if the earliest call date. Current guidance generally requires entities to amortize a premium as a yield adjustment overchange affects the contractual lifefair value, vesting conditions, or classification of the instrument. Shortening the amortization period is generally expected to more closely align the recognition of interest income with expectations incorporated into the pricing of the underlying securities.award. The amendments do not affectimpact current disclosure requirements for modifications, regardless of whether modification accounting is required under the accounting treatmentnew guidance. The ASU must be adopted prospectively to modifications that occur on or after the adoption date.
January 1, 2018


The adoption of discounts. this guidance did not have a material impact.


ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities

This ASU shouldamends ASC 815, Derivatives and Hedging to (1) improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers. Except for disclosure requirements that have been adopted prospectively, the ASU must be adopted on a modified retrospective basis.January 1, 2019

Early adoption permitted, including in an interim period.		Regions is evaluating the impact upon adoption; however, the impact is not expected to be material.
ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments


This ASU amends Topic 230, Statement of Cash Flows, and provides clarification with respect to classification within the statement on cash flows where current guidance is unclear or silent. The ASU should be adopted retrospectively.

January 1, 20182019.

Early adoption is permitted.

Regions is evaluatingelected to adopt this ASU for financial reporting as of January 1, 2018. The adoption of this guidance did not have a material impact. See Note 10.


ASU 2018-05, Income Taxes

This ASU amends SEC guidance in the Codification related to income taxes to reflect the guidance in SEC Staff Accounting Bulletin 118, which provides guidance for companies that are not able to complete their accounting for the income tax effects of the Tax Cuts and Jobs Act in the period of enactment. The staff believes that to the extent a company can reasonably estimate the impact of the Tax Cuts and Job Act, such items should be reported in the first reporting period in which the Company is able to determine the reasonable estimate.


Adopted upon adoption; however, the impact is not expected to be material. issuance.

Regions does not planexpect the adoption of this guidance to early adopt.have a material impact.


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StandardDescriptionRequired Date of AdoptionEffect on Regions' financial statements or other significant matters
Standards Not Yet Adopted (continued)
ASU 2016-02, Leases

ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842

This ASU creates ASUASC Topic 842, Leases,, and supersedes Topic 840,Leases.Leases. The new guidance requires lessees to record a right-of-use asset and a corresponding liability equal to the present value of future rental payments on their balance sheets for all leases with a term greater than one year. There are not significant changes to lessor accounting; however, there were certain improvements made to align lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers.Customers. This guidance expands both quantitative and qualitative required disclosures. This ASU should be adopted on a modified retrospective basis.
January 1, 2019

Early adoption is permitted.
This ASU supersedes the lease accounting requirements in Topic 840, Leases. Regions has established a leasing standard implementation team comprised of the Corporate Controller’s group, Corporate Real Estate and other business and finance management to plan and execute the adoption of the new leasing standard. 

The implementation team has substantially completed the identification of Regions’ leases that will need to be measured and reported as a right-of-use asset and corresponding liability for future rental payments. The implementation team is currently working with a lease administration vendor to set up and test the accounting for the lease contracts on the lease administration system. Based on the December 31, 2016 lease portfolio,preliminary estimates that are subject to change, Regions has a range of approximately $761$400-$600 million of future lease obligations that would be measured and recognized when the new guidance is adopted (refer to Note 24 to the 2016 consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2016)2017). While this amount represents a large majority of the leases that are within the scope of the new leasing standard, the implementation team will continue reviewing service contracts up through the effective date and may identify additional leases embedded in those arrangements that will be within the scope of the new standard.

Between now and January 1, 2019, Regions will likely have changes to the lease portfolio as the Company continues to evaluate and execute branch and occupancy optimization initiatives. In addition to final determination of the lease portfolio at the effective date, the initial measurement of the right-of-use asset and the corresponding liability will be affected by certain key assumptions such as expectations of renewals or extensions and the interest rate to be used to discount the future lease obligations.

Up through the date of adoption, the evaluation of the impact of the standard will be adjusted based on new leases that are executed, leases that are terminated prior to the effective date, and any leases with changes to key assumptions or expectations such as renewals and extensions, and discount rates. While there will be some changes to income statement classification, the implementation team does not expect the adoption of the standard to have a material impact to pre-tax income. Regions does not anticipate early adoption of the new standard.
ASU 2016-13, Measurement of Credit Losses on Financial Instruments
This ASU amends Topic 326, Financial Instruments- Credit Losses to replace the current incurred loss accounting model with a current expected credit loss approach (CECL) for financial instruments measured at amortized cost and other commitments to extend credit. The amendments require entities to consider all available relevant information when estimating current expected credit losses, including details about past events, current conditions, and reasonable and supportable forecasts. The resulting allowance for credit losses is to reflect the portion of the amortized cost basis that the entity does not expect to collect. The amendments also eliminate the current accounting model for purchased credit impaired loans and debt securities. Additional quantitative and qualitative disclosures are required upon adoption.

While the CECL model does not apply to AFSavailable for sale debt securities, the ASU does require entities to record an allowance when recognizing credit losses for AFSavailable for sale securities, rather than reduce the amortized cost of the securities by direct write-offs.

The ASU should be adopted on a modified retrospective basis. Entities that have loans accounted for under ASC 310-30 at the time of adoption should prospectively apply the guidance in this amendment for purchase credit deteriorated assets.
January 1, 2020

Early adoption permitted beginning January 1, 2019.
Regions has formed a
Regions’ cross-functional implementation team, which is co-led by Finance and Risk Management. The implementation teamManagement, has developed a high-level project plan that results in running a CECL parallel production during 2019 and is keeping current with the broader industry’s perspectiveadoption of the standard in the first quarter of 2020. Key project implementation activities for 2018 focus on model enhancements, execution and insights, delivering educationalimplementation, continued challenge of model outputs, processes and awareness sessions acrosscontrols, policies, disclosures, and data resolution.

Adoption of the Company, identifying and researching key decision points, and evaluating the financial and operational implications of adoption.

Regions expects the guidance willstandard may result in an overall material increase in the allowance for credit losses given the change from accounting for losses inherent in the loan portfolio to accounting for losses over the remaining expectedcontractual life of the portfolio. The guidance will also result inHowever, the establishment of an allowance for credit loss on held to maturity debt securities. The amount of the increase in these allowancesimpact at adoption will be impactedinfluenced by the portfolioportfolios’ composition and quality at the adoption date as well as economic conditions and forecasts at that time.
ASU 2017-09, Stock Compensation: Scope of Modification Accounting

This ASU amends Topic 718, Compensation- Stock Compensation, and clarifies when modification accounting should be applied Based on initial modeling, loan portfolios expected to changes in terms or conditions of share-based payment awards. The amendments narrowgenerate the scope of modification accounting by clarifying that modification accounting should be applied to awards if the change affects the fair value, vesting conditions, or classificationmajority of the award. The amendments do not impact current disclosure requirements for modifications, regardless of whether modification accounting is required underincrease include longer-dated loans such as residential first mortgages, home equity lending products and indirect-other products. However, there could be increases or decreases in the new guidance.

January 1, 2018allowance in certain other loan portfolios at adoption.

Early adoption permitted, including inRegions expects no material allowance on held to maturity securities since the majority of this portfolio consists of agency-backed securities that inherently have an interim period.

immaterial risk of loss. Additionally, Regions is evaluating theexpects no material allowance impact upon adoption; however, the impact is not expected to be material.

available for sale securities.

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StandardDescriptionRequired Date of AdoptionEffect on Regions' financial statements or other significant matters
Standards Not Yet Adopted (continued)
ASU 2016-01, Recognition and Measurement of Financial Assets and Liabilities

2017-04, Simplifying the Test for Goodwill Impairment
This ASU amends ASC Topic 825, Financial Instruments-Overall,350, Intangibles-Goodwill and addressesOther, and eliminates Step 2 from the goodwill impairment test.
January 1, 2020

Early adoption is permitted.		Regions believes the adoption of this guidance will not have a material impact. Regions does not plan to early adopt.
ASU 2017-08, Receivables- Nonrefundable Fees and Other CostsThis ASU amends Subtopic 310-20, Receivables-Nonrefundable Fees and Other Costs, to shorten the amortization period for certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The main provisions require investments in equitypurchased callable debt securities held at a premium to be measured at fair value with changes in the fair value recognized through net income (except for those accounted for underearliest call date. Current guidance generally requires entities to amortize a premium as a yield adjustment over the equity method of accounting or those that result in consolidationcontractual life of the investee) requires public business entitiesinstrument. Shortening the amortization period is generally expected to usemore closely align the exit price notion when measuringrecognition of interest income with expectations incorporated into the fair value of financial instruments for disclosure purposes and requires an entity to present separately in other comprehensive income, the portionpricing of the total change inunderlying securities. The amendments do not affect the fair valueaccounting treatment of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value. Except for disclosure requirements that will be adopted prospectively, thediscounts. This ASU mustshould be adopted on a modified retrospective basis.January 1, 2019

Early adoption permitted, including in an interim period.		Regions is evaluating the impact upon adoption; however, the impact is not expected to be material.
ASU 2018-07,
Compensation - Stock Compensation

This ASU amends and expands the scope of Topic 718, Compensation- Stock Compensation, to include share-based payment transactions for acquiring goods and services for non-employees. Under this guidance, the accounting for share-based payments to non-employees and employees will be substantially aligned. The measurement of equity-classified non-employee awards will now be fixed at the grant date.
January 1, 20182019

Early adoption permitted beginning January 1, 2016 or 2017 for the amendment related to separate presentation in other comprehensive income.is permitted.

Regions is evaluating the impact upon adoption; however, the impact is not expected to be material. Regions does not plan to early adopt.



NOTE 16. SUBSEQUENT EVENT
On April 4, 2018, Regions entered into a stock purchase agreement to sell Regions Insurance Group, Inc. and related affiliates to BB&T Insurance Holdings, Inc. The transaction closed on July 2, 2018. The after-tax gain associated with the transaction was approximately $200 million and Common Equity Tier 1 capital generated was approximately $300 million. The after-tax gain will be reflected in Regions' third quarter consolidated statements of income as a component of discontinued 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 tofiled with the SEC and updates Regions’ Annual Report on Form 10-K for the year ended December 31, 2016,2017, 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 the Form 10-K. Certain otherEffective January 1, 2018, the Company adopted new accounting guidance and certain prior period amounts presented in this discussion and analysis have been reclassified to conform to current period classifications, except as otherwise noted.classifications. See Note 1 "Basis of Presentation" and Note 15 "Recent Accounting Pronouncements" to the consolidated financial statements for further detail. The emphasis of this discussion will be on the three months and six months ended June 30, 20172018 compared to the three and six months ended June 30, 20162017 for the consolidated statements of income. For the consolidated balance sheets, the emphasis of this discussion will be the balances as of June 30, 20172018 compared to December 31, 2016.2017.
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 5 through 7 for additional information regarding forward-looking statements.
CORPORATE PROFILE
Regions is a financial holding company headquartered in Birmingham, Alabama, that operates in the South, Midwest and Texas. Regions provides traditional commercial, retail and mortgage banking services, as well as other financial services in the fields of asset management, wealth management, securities brokerage, insurance brokerage, trust services, merger and acquisition advisory services and other specialty financing.
Regions conducts its banking operations through Regions Bank, an Alabama state-chartered commercial bank that is a member of the Federal Reserve System. At June 30, 2017,2018, Regions operated 1,4921,476 total branch outlets across the South, Midwest and Texas. Regions operates under three reportable business segments: Corporate Bank, Consumer Bank, and Wealth Management with the remainder split between Discontinued Operations and Other. See Note 1312 “Business Segment Information” to the consolidated financial statements for more information regarding Regions’ segment reporting structure.
On April 4, 2018, Regions also provides full-line insurance brokerage services primarily throughentered into a stock purchase agreement to sell Regions Insurance Group, Inc., which is included in the Wealth Management segment.
and related affiliates to BB&T Insurance Holdings, Inc. The sale closed on July 2, 2018. On January 11, 2012, Regions entered into a stock purchase agreement to sell Morgan Keegan and related affiliates to Raymond James. The sale closed on April 2, 2012. Regions Investment Management, Inc. and Regions Trust were not included in the sale; they are included in the Wealth Management segment. See Note 2 “Discontinued Operations” to the consolidated financial statements for further discussion.
Regions’ profitability, like that of many other financial institutions, is dependent on its ability to generate revenue from net interest income and other financing income as well as non-interest income sources. Net interest income and other financing income is primarily the difference between the interest income Regions receives on interest-earning assets, such as loans and securities, and the interest expense Regions pays on interest-bearing liabilities, principally deposits and borrowings. Regions’ net interest income and other financing 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. Net interest income and other financing income also includes rental income and depreciation expense associated with operating leases for which Regions is the lessor. 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, insurance activities, capital markets and other customer services which Regions provides. Results of operations are also affected by the provision for loan losses and non-interest expenses such as salaries and employee benefits, 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.
Regions’ business strategy has been and continues to be focused on providing a competitive mix of products and services, delivering quality customer service and maintaining a branch distribution network with offices in convenient locations.
SECOND QUARTER OVERVIEW
Regions reported net income available to common shareholders of $359 million, or $0.32 per diluted share, in the second quarter of 2018 compared to $300 million, or $0.25 per diluted share, in the second quarter of 2017 compared to $259 million, or $0.20 per diluted share, in the second quarter of 2016.2017. Net income available to common shareholders from continuing operations was $301$362 million, or $0.25$0.32 per diluted share, compared to $256$300 million, or $0.20$0.25 per diluted share, over these same periods. The primary drivers of the increases in results from the prior year periodsperiod were increased net interest income and other financing income and decreased provision for loan losses.income tax expense.

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For the second quarter of 2017,2018, net interest income and other financing income (taxable-equivalent basis) from continuing operations totaled $904$938 million, up $35$34 million compared to the second quarter of 2016.2017. The net interest margin (taxable-equivalent basis) was 3.323.49 percent for the second quarter of 20172018 and 3.153.32 percent in the second quarter of 2016.2017. Net interest income and other financing income and net interest margin (taxable-equivalent basis) benefited from higher market interest rates and prudent deposit cost management, the impact of balance sheet management strategies, including higher securities balances, and favorable credit-related interest recoveries, partially offset by lower average loan balances.management.
The provision for loan losses totaled $48$60 million in the second quarter of 20172018 compared to $72$48 million during the second quarter of 2016. The decrease is attributable2017. Refer to improvement in credit quality as evidenced by the stability in oil prices"Allowance for Credit Losses" section of Management's Discussion and a reduction in non-performing loans. Volatility in certain credit metrics is to be expected, especially related to large dollar commercial credits and fluctuating commodity prices.Analysis for further detail.
Net charge-offs totaled $68$62 million, or an annualized 0.340.32 percent of average loans, in the second quarter of 2017,2018, compared to $72$68 million, or an annualized 0.350.34 percent for the second quarter of 2016.2017. See Note 4 "Loans and the Allowance for Credit Losses" to the consolidated financial statements for additional information.
The allowance for loan losses at June 30, 2017,2018, was 1.301.04 percent of total loans, net of unearned income, compared to 1.361.17 percent at December 31, 2016.2017. Total non-performing assets were $912 millionloans decreased to 0.74 percent of total loans, net of unearned income, at June 30, 2017,2018, compared to $1.1 billion0.81 percent at December 31, 2016.2017.
Non-interest income from continuing operations was $525$512 million for the second quarter of 20172018 compared to $526$490 million for the second quarter of 2016. Increases2017. The increase was primarily driven by growth in service charges on deposit accounts, card and ATM fees and investment management and trust fee income were offset by decreased mortgage income and securities gains, resulting in non-interest income remaining consistent year-over-year.capital markets income. See Table 20 "Non-Interest Income from Continuing Operations" for more detail.
Total non-interest expense from continuing operations was $909$911 million in the second quarter of 2017,2018, a $6$36 million decreaseincrease from the second quarter of 2016.2017. The decreaseincrease was primarily driven by decreases in branch consolidation, property and equipment charges and the provision for unfunded credit losses, partially offset by higher salaries and employee benefits.benefits, which included severance costs. See Table 21 "Non-Interest Expense from Continuing Operations" for more detail.
Income tax expense from continuing operations for the three months ended June 30, 20172018 was $133$89 million compared to income tax expense of $115$133 million for the same period in 2016.2017. See "Income Taxes" toward the end of the Management’s Discussion and Analysis section of this report for more detail.
On April 4, 2018, Regions entered into a stock purchase agreement to sell Regions Insurance Group, Inc. and related affiliates to BB&T Insurance Holdings, Inc. The transaction closed on July 2, 2018. A discussion of activity within discontinued operations is included at the end of the Management’s Discussion and Analysis section of this report. See Note 2 "Discontinued Operations" to the consolidated financial statements for additional information.
20172018 Expectations
Management expectations for 20172018 are noted below:
ExcludingFull year adjusted average loan growth in the impact of a terminated third-party arrangement within the indirect-vehicle loan portfolio, full year average loans are expected to be flat to slightly downlow single digits compared to the prior year2017 adjusted average balances
Full year average deposit growth relatively stablein the low single digits compared to the prior year2017 average balances, excluding brokered and Wealth Institutional Services deposits
NetAdjusted net interest income and other financing income up 3(non-taxable equivalent basis) growth of 4 to 5 percent6 percent; based on a full year basisrecent performance and market conditions, currently expect to be toward the upper end of the range
Adjusted non-interest income (non-GAAP) growth of 13 to 36 percent on a full year basis
Adjusted non-interest expenses (non-GAAP) flat to up 1 percent on a full year basisrelatively stable
Full year adjustedAdjusted efficiency ratio (non-GAAP) of approximately 62less than 60 percent
Positive adjusted operating leverage (non-GAAP) of 2approximately 3 to 45 percent on a full year basis
Full year effectiveEffective income tax rate expected in the 30 percent20 to 3122 percent range
Full year net charge-offs of 35 to 50 basis pointspoints; based on recent trends and current market conditions, currently expect to be at the lower end of the range
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 20172018 expectations, including additional guidance within the ranges disclosed above, refer to the related sub-sections discussed in more detail within Management's Discussion and Analysis of this Form 10-Q.
BALANCE SHEET ANALYSIS
CASH AND CASH EQUIVALENTS
Cash and cash equivalents decreasedincreased approximately $1.3 billion$305 million from year-end 20162017 to June 30, 2017. This decrease was2018, due primarily to a decreasean increase in interest-bearing deposits in other bankscash on deposit with the FRB, as athe result of normal day-to-day operating variations.

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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
June 30, 2017 December 31, 2016June 30, 2018 December 31, 2017
(In millions)(In millions)
U.S. Treasury securities$314
 $303
$307
 $331
Federal agency securities25
 35
48
 28
Obligations of states and political subdivisions—
 1
Mortgage-backed securities:      
Residential agency18,628
 18,571
17,785
 18,442
Residential non-agency3
 4
2
 3
Commercial agency4,124
 3,625
4,375
 4,361
Commercial non-agency816
 1,129
792
 788
Corporate and other debt securities1,249
 1,274
1,194
 1,108
Equity securities203
 201
$25,362
 $25,143
$24,503
 $25,061
Regions maintains a highly rated securities portfolio consisting primarily of agency mortgage-backed securities. Total securities at June 30, 2017 increased slightly from year-end 2016. See Note 3 "Securities" to the consolidated financial statements for additional information.
SecuritiesDebt securities available for sale, which constitute the majority of the securities portfolio, are an important tool used to manage interest rate sensitivity and provide a primary source of liquidity for the Company. See the "Market Risk-Interest Rate Risk" and "Liquidity Risk" sections for more information.
LOANS HELD FOR SALE
Loans held for sale totaled $573$490 million at June 30, 2017, consisted2018, consisting of $379$320 million of residential real estate mortgage loans, $185$160 million of commercial mortgage and other loans, $8and $10 million of non-performing loans, and $1 million of other loans. At December 31, 2016,2017, loans held for sale totaled $718$348 million, consisting of $505$325 million of residential real estate mortgage loans, $200$6 million of commercial mortgage and other loans, and $13$17 million of non-performing loans. The levellevels of residential real estate and commercial mortgage loans held for sale that are part of the Company's mortgage originations to be sold in the secondary market fluctuatesfluctuate depending on the timing of origination and sale to third parties. The level of commercial mortgage loans held for sale also fluctuates depending on timing.

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LOANS
Loans, net of unearned income, represented approximately 7374 percent of Regions’ interest-earning assets at June 30, 2017.2018. The following table presents the distribution of Regions’ loan portfolio by portfolio segment and class, net of unearned income:
Table 2—Loan Portfolio
June 30, 2017 December 31, 2016June 30, 2018 December 31, 2017
(In millions, net of unearned income)(In millions, net of unearned income)
Commercial and industrial$35,656
 $35,012
$37,079
 $36,115
Commercial real estate mortgage—owner-occupied6,445
 6,867
6,006
 6,193
Commercial real estate construction—owner-occupied388
 334
304
 332
Total commercial42,489
 42,213
43,389
 42,640
Commercial investor real estate mortgage4,126
 4,087
3,882
 4,062
Commercial investor real estate construction2,163
 2,387
1,879
 1,772
Total investor real estate6,289
 6,474
5,761
 5,834
Residential first mortgage13,765
 13,440
14,111
 14,061
Home equity10,419
 10,687
9,679
 10,164
Indirect—vehicles3,653
 4,040
3,219
 3,326
Indirect—other consumer1,188
 920
1,889
 1,467
Consumer credit card1,183
 1,196
1,264
 1,290
Other consumer1,141
 1,125
1,166
 1,165
Total consumer31,349
 31,408
31,328
 31,473
$80,127
 $80,095
$80,478
 $79,947

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PORTFOLIO CHARACTERISTICS
The following sections describe the composition of the portfolio segments and classes disclosed in Table 2, explain changes in balances from 20162017 year-end, 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, certain loan products, or certain regions of the country. See Note 4 “Loans and the Allowance for Credit Losses” to the consolidated financial statements for additional discussion.
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 increased $644$964 million since year-end 20162017 driven primarily by new relationships and expansion of existing relationships in governmentwithin the Company's specialized lending groups, which offset the impact of large corporate customers utilizing the fixed income market to pay down and institutional banking, asset-based lending, financial services, and real estate investment trust portfolios, which more than offset declines in energy balances.pay off bank debt. Commercial also includes owner-occupied commercial real estate mortgage loans to operating businesses, which are loans for long-term financing of land and buildings, and are repaid by cash flows generated by business operations. These loans declined $422$187 million from year-end 2016 as2017, reflecting a resultslowing pace of continued softness in demand and increasing competition for middle market and small business loans.decline. 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 3—Selected Industry Exposure
 June 30, 2018
 Loans Unfunded Commitments Total Exposure
 (In millions)
Administrative, support, waste and repair$1,135
 $761
 $1,896
Agriculture528
 214
 742
Educational services2,430
 416
 2,846
Energy1,848
 2,023
 3,871
Financial services3,695
 3,447
 7,142
Government and public sector2,732
 450
 3,182
Healthcare4,167
 1,720
 5,887
Information1,342
 891
 2,233
Manufacturing4,592
 3,674
 8,266
Professional, scientific and technical services1,620
 1,321
 2,941
Real estate6,385
 6,381
 12,766
Religious, leisure, personal and non-profit services1,751
 710
 2,461
Restaurant, accommodation and lodging2,182
 603
 2,785
Retail trade2,461
 2,086
 4,547
Transportation and warehousing1,851
 888
 2,739
Utilities1,305
 2,475
 3,780
Wholesale goods3,331
 2,276
 5,607
Other (1)
34
 3,116
 3,150
Total commercial$43,389
 $33,452
 $76,841

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Table 3—Selected Industry Exposure
 June 30, 2017
 Loans Unfunded Commitments Total Exposure
 (In millions)
Administrative, support, waste and repair$1,008
 $562
 $1,570
Agriculture585
 252
 837
Educational services2,099
 383
 2,482
Energy1,985
 1,976
 3,961
Financial services3,533
 3,045
 6,578
Government and public sector2,692
 388
 3,080
Healthcare4,178
 1,525
 5,703
Information974
 956
 1,930
Manufacturing (1)
4,420
 3,658
 8,078
Professional, scientific and technical services (1)
1,540
 1,231
 2,771
Real estate (1)
6,382
 5,376
 11,758
Religious, leisure, personal and non-profit services1,926
 536
 2,462
Restaurant, accommodation and lodging2,237
 616
 2,853
Retail trade2,663
 2,244
 4,907
Transportation and warehousing (1)
1,891
 817
 2,708
Utilities1,287
 2,219
 3,506
Wholesale goods (1)
3,095
 2,272
 5,367
Other (2)
(6) 1,064
 1,058
Total commercial$42,489
 $29,120
 $71,609
 
December 31, 2016 (3)
 Loans Unfunded Commitments Total Exposure
 (In millions)
Administrative, support, waste and repair$899
 $481
 $1,380
Agriculture612
 241
 853
Educational services1,929
 307
 2,236
Energy2,097
 1,968
 4,065
Financial services (4)
3,473
 3,228
 6,701
Government and public sector2,485
 246
 2,731
Healthcare4,178
 1,483
 5,661
Information1,111
 817
 1,928
Manufacturing (4)
4,101
 4,024
 8,125
Professional, scientific and technical services (4)
1,701
 1,052
 2,753
Real estate (4)
6,513
 5,445
 11,958
Religious, leisure, personal and non-profit services1,934
 495
 2,429
Restaurant, accommodation and lodging2,436
 650
 3,086
Retail trade2,570
 2,339
 4,909
Transportation and warehousing (4)
2,196
 1,005
 3,201
Utilities1,147
 2,008
 3,155
Wholesale goods (4)
2,795
 2,396
 5,191
Other (2)

36
 1,162
 1,198
Total commercial$42,213
 $29,347
 $71,560

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December 31, 2017 (2)
 Loans Unfunded Commitments Total Exposure
 (In millions)
Administrative, support, waste and repair$976
 $620
 $1,596
Agriculture525
 247
 772
Educational services2,353
 378
 2,731
Energy1,767
 1,877
 3,644
Financial services3,615
 3,336
 6,951
Government and public sector2,785
 394
 3,179
Healthcare4,216
 1,586
 5,802
Information1,294
 813
 2,107
Manufacturing4,181
 3,785
 7,966
Professional, scientific and technical services1,764
 1,266
 3,030
Real estate6,315
 5,772
 12,087
Religious, leisure, personal and non-profit services1,841
 726
 2,567
Restaurant, accommodation and lodging2,224
 642
 2,866
Retail trade2,336
 2,294
 4,630
Transportation and warehousing1,815
 863
 2,678
Utilities1,557
 2,114
 3,671
Wholesale goods3,148
 2,267
 5,415
Other (1)
(72) 1,604
 1,532
Total commercial$42,640
 $30,584
 $73,224
________
(1)Regions' definition of indirect energy-related lending includes certain balances within each of these selected industry categories. As of June 30, 2017, total indirect energy-related loans were approximately $544 million, with approximately $516 million included in commercial loans and $28 million in investor real estate loans. Total unfunded commitments for indirect energy-related lending were $450 million as of June 30, 2017.
(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)(2)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 yearcomparable period changes may be impacted.
(4)Regions' definition of indirect energy-related lending includes certain balances within each of these selected industry categories. As of December 31, 2016, total indirect energy-related loans were approximately $536 million, with approximately $506 million included in commercial loans and $30 million in investor real estate loans. Total unfunded commitments for indirect energy-related lending were $446 million as of December 31, 2016.

Regions continues to monitor the impacts of low oil prices on both its direct and indirect energy lending portfolios. Regions’ direct energy loan balances at June 30, 2017 amounted to approximately $2.0 billion, consisting of loans such as oilfield services, exploration and production, and pipeline transportation of gas and crude oil. Other types of lending are tangentially impacted by the energy portfolio, such as petroleum wholesalers, oil and gas equipment manufacturing, air transportation, and petroleum bulk stations and terminals. These indirect energy loan balances were approximately $544 million at June 30, 2017. The entire energy-related portfolio, combining direct and indirect loans, was approximately $2.5 billion or 3 percent of total loans at June 30, 2017. Regions has $1 million of energy-related loans held for sale. Regions also has $97 million of energy-related operating leases. Regions evaluates the current value of these operating lease assets and tests for impairment when indicators of impairment are present. Economic trends such as volatility in commodity prices and collateral valuations, as well as circumstances related to individually large operating lease assets could result in impairment. If an impairment loss is deemed necessary on operating lease assets, the impairment is recorded through other non-interest income.
Regions’ energy-related portfolio is geographically concentrated primarily in Texas and, to a lesser extent, in southern Louisiana. Regions employs a variety of risk management strategies, including the use of concentration limits and continuous monitoring, as well as utilizing underwriting with borrowing base structures tied to energy commodity reserve bases or other tangible assets. Additionally, heightened credit requirements have been adopted for select segments of the portfolio. Regions also employs experienced lending and underwriting teams including petroleum engineers, all with extensive energy sector experience through multiple economic cycles. Given the recent volatility in oil prices, this energy-related portfolio may be subject to additional pressure on credit quality metrics including past due, criticized, and non-performing loans, as well as net charge-offs. Regions' energy-related portfolio consists of a relatively small number of customers, which provides the Company granular insight into the financial health of those borrowers. Through its on-going portfolio credit quality assessment, Regions will continue to assess the impact to the allowance and make adjustments as appropriate.
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 $185$73 million in comparison to 20162017 year-end balances.
Due to the nature of the cash flows typically used to repay investor real estate loans, these loans are particularly vulnerable to weak economic conditions. As a result, this loan type has a higher risk of non-collection than other loans.
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. These loans experienced a $325$50 million increase in comparison to 20162017 year-end balances. This increase was partially offset by the sale of $254 million of primarily performing troubled debt restructured loans and certain non-restructured interest-only loans during the first quarter of 2018. Approximately $1.4 billion in new loan originations were retained on the balance sheet through the first six months of 2017.2018.
Home Equity
Home equity lending includes both home equity loans and lines of credit. This type of lending, which is secured by a first or second mortgage on the borrower's residence, allows customers to borrow against the equity in their homes. The home equity portfolio totaled $10.4$9.7 billion at June 30, 20172018 as compared to $10.7$10.2 billion at December 31, 2016.2017. Substantially all of this portfolio was originated through Regions’ branch network.

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The following table presents information regarding the future principal payment reset dates for the Company's home equity lines of credit as of June 30, 2017.2018. 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 4—Home Equity Lines of Credit - Future Principal Payment Resets
First Lien % of Total Second Lien % of Total TotalFirst Lien % of Total Second Lien % of Total Total
(Dollars in millions)(Dollars in millions)
2017$4
 0.06% $9
 0.13% $13
20189
 0.13
 16
 0.23
 25
$7
 0.11% $12
 0.20% $19
201969
 1.00
 60
 0.88
 129
58
 0.94
 48
 0.79
 106
2020143
 2.09
 111
 1.63
 254
119
 1.92
 89
 1.45
 208
2021170
 2.48
 148
 2.16
 318
141
 2.29
 121
 1.96
 262
2022-20261,546
 22.58
 1,623
 23.70
 3,169
2027-20311,560
 22.78
 1,379
 20.14
 2,939
2022151
 2.45
 142
 2.30
 293
2023-20271,950
 31.63
 1,995
 32.36
 3,945
2028-2032764
 12.40
 565
 9.16
 1,329
Thereafter—
 —
 1
 0.01
 1
1
 0.02
 2
 0.02
 3
Total$3,501
 51.12% $3,347
 48.88% $6,848
$3,191
 51.76% $2,974
 48.24% $6,165
Of the $10.4$9.7 billion home equity portfolio at June 30, 2017,2018, approximately $6.8$6.2 billion were home equity lines of credit and $3.6$3.5 billion were closed-end home equity loans (primarily originated as amortizing loans). 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 period.term. Prior to May 2009, home equity lines of credit had a 20-year repayment term with a balloon payment upon maturity or a 5-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. As of June 30, 2017, none of Regions' home equity lines of credit have converted to mandatory amortization under the contractual terms. As presented in the table above, the majority of home equity lines of credit will either begin to mature with a balloon payment or convert to amortizing status after fiscal year 2020.
Other 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 and home equity classes of the consumer portfolio segment. Current LTV data for the remaining loans in the portfolio is not available, primarily because some of the loans are serviced by others. Data may also not be 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. The balances in the “Above 100%” category as a percentage of the portfolio balances were 1 percent in the residential first mortgage portfolio and 2 percent in the home equity portfolio at June 30, 2017.
Table 5—Estimated Current Loan to Value Ranges
June 30, 2017 December 31, 2016June 30, 2018 December 31, 2017
Residential
First Mortgage
 Home Equity 
Residential
First Mortgage
 Home Equity
Residential
First Mortgage
 Home Equity 
Residential
First Mortgage
 Home Equity
 1st Lien 2nd Lien 1st Lien 2nd Lien 1st Lien 2nd Lien 1st Lien 2nd Lien
(In millions)(In millions)
Estimated current LTV:                      
Above 100%$117
 $59
 $165
 $139
 $82
 $235
$66
 $37
 $77
 $123
 $49
 $117
80% - 100%1,693
 319
 581
 1,675
 371
 677
1,754
 209
 403
 1,711
 275
 485
Below 80%11,427
 6,277
 2,787
 11,090
 6,248
 2,814
11,769
 6,075
 2,680
 11,639
 6,257
 2,766
Data not available528
 89
 142
 536
 99
 161
522
 75
 123
 588
 85
 130
$13,765
 $6,744
 $3,675
 $13,440
 $6,800
 $3,887
$14,111
 $6,396
 $3,283
 $14,061
 $6,666
 $3,498

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Indirect—Vehicles
Indirect-vehicles lending, which is lending initiated through third-party business partners, largely consists of loans made through automotive dealerships. This portfolio class decreased $387$107 million from year-end 2016,2017, primarily because Regions terminated a third-party purchase arrangement during the fourth quarter of 2016. The balance is expected to continue to decrease during 2017.2018.
Indirect—Other Consumer
Indirect-other consumer lending represents other point of sale lending through third parties. This portfolio class increased $268$422 million from year-end 20162017, primarily due to continued growth in existing point of sale initiatives and the purchase of $138 million in loans during the second quarter of 2017.initiatives.
Consumer Credit Card
Consumer credit card lending represents primarily open-ended variable interest rate consumer credit card loans. These balances decreased $13$26 million from year-end 2016.2017.
Other Consumer
Other consumer loans primarily include direct consumer loans, overdrafts and other revolving loans. Other consumer loans increased $16 million from year-end 2016.
Regions qualitatively 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 as part of Regions' formal underwriting process. Refreshedand refreshed FICO scores are obtained by the Company quarterly for all consumer loans. Residential first mortgage FICO scores are also refreshed quarterly. The following tables present estimated current FICO score data for components of classes of the consumer portfolio segment. Current FICO data is not available for the remaining loans in the portfolio for various reasons; for example, if customers do not use sufficient credit, an updated score may not be available. Residential first mortgage and home equity balances with FICO scores below 620 were 4 percent and 5 percent of the combined portfolios for both June 30, 20172018 and December 31, 2016.2017, respectively.
Table 6—Estimated Current FICO Score Ranges
June 30, 2017June 30, 2018
Residential
First Mortgage
 Home Equity Indirect—Vehicles Indirect—Other Consumer 
Consumer
Credit Card
 
Other
Consumer
Residential
First Mortgage
 Home Equity Indirect—Vehicles Indirect—Other Consumer 
Consumer
Credit Card
 
Other
Consumer
 1st Lien 2nd Lien  1st Lien 2nd Lien 
(In millions)(In millions)
Below 620$779
 $284
 $187
 $371
 $28
 $77
 $77
$662
 $242
 $158
 $296
 $49
 $89
 $69
620-680859
 516
 318
 449
 109
 207
 149
751
 463
 272
 366
 181
 221
 144
681-7201,362
 831
 471
 471
 175
 268
 224
1,305
 730
 386
 397
 340
 278
 219
Above 7209,973
 4,977
 2,638
 2,261
 550
 622
 632
10,778
 4,824
 2,412
 2,077
 1,172
 668
 678
Data not available792
 136
 61
 101
 326
 9
 59
615
 137
 55
 83
 147
 8
 56
$13,765
 $6,744
 $3,675
 $3,653
 $1,188
 $1,183
 $1,141
$14,111
 $6,396
 $3,283
 $3,219
 $1,889
 $1,264
 $1,166
December 31, 2016December 31, 2017
Residential
First Mortgage
 Home Equity Indirect—Vehicles Indirect—Other Consumer 
Consumer
Credit Card
 
Other
Consumer
Residential
First Mortgage
 Home Equity Indirect—Vehicles Indirect—Other Consumer 
Consumer
Credit Card
 
Other
Consumer
 1st Lien 2nd Lien  1st Lien 2nd Lien 
(In millions)(In millions)
Below 620$807
 $301
 $204
 $427
 $19
 $71
 $82
$741
 $261
 $161
 $328
 $43
 $85
 $72
620-680920
 529
 355
 527
 94
 206
 162
829
 492
 300
 396
 153
 220
 146
681-7201,400
 834
 489
 559
 141
 271
 222
1,353
 775
 435
 419
 246
 288
 227
Above 7209,578
 4,988
 2,775
 2,402
 382
 647
 597
10,344
 5,000
 2,546
 2,088
 765
 689
 656
Data not available735
 148
 64
 125
 284
 1
 62
794
 138
 56
 95
 260
 8
 64
$13,440
 $6,800
 $3,887
 $4,040
 $920
 $1,196
 $1,125
$14,061
 $6,666
 $3,498
 $3,326
 $1,467
 $1,290
 $1,165

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ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses (“allowance”) consists of two components: the allowance for loan losses and the reserve for unfunded credit commitments. Discussion of the methodology used to calculate the allowance is included in Note 1 “Summary of Significant Accounting Policies” and Note 6 “Allowance for Credit Losses” to the consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2016,2017, as well as related discussion in Management’s Discussion and Analysis.

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The allowance for loan losses totaled $1.0 billion$838 million at June 30, 20172018 as compared to $1.1 billion in$934 million at December 31, 2016.2017. The allowance for loan losses as a percentage of net loans decreased from 1.361.17 percent at December 31, 20162017 to 1.301.04 percent at June 30, 2017.2018. The decrease in the percentage is primarily attributable to a reductionreductions in non-performing, criticized and criticizedTDR loans, decreased allowance associated with commercial charge-offs and continued improvement in the energy portfolio.as well as total delinquencies.
The provision for loan losses decreased by $68 million for the first six months of 20172018 as compared to the same period in 2016.2017. During the first six months of 2017,2018, the provision for loan losses was less than net charge-offs by approximately $50 million.$96 million, as a result of broad-based improvements in credit metrics, as well as payoffs and paydowns of criticized loans. Net charge-offs for the first six months of 20172018 were approximately $28$22 million higherlower as compared to the same period in 2016,2017, also reflecting broad-based asset quality improvement. Additionally, lower than anticipated losses associated with certain 2017 hurricanes resulted in the release of the Company's $40 million hurricane-specific loan loss allowance during 2018. Lastly, a small number of large-dollar commercial$16 million net reduction to the provision for loan charge-offs within the energy, healthcare, and education sectors.
Although elevated charge-offs were experienced duringlosses from the first six monthsquarter of 2017 associated with larger dollar commercial credits, management2018 sale of $254 million in residential first mortgage loans consisting primarily of performing troubled debt restructured loans also contributed to the results.
Management expects that net loan charge-offs will be in the 0.35 percent to 0.50 percent range for the 2017 year.2018 year; based on recent trends and current market conditions, Regions currently expects to be at the lower end of that range. Economic trends such as interest rates, unemployment, volatility in commodity prices and collateral valuations will impact the future levels of net charge-offs and may result in volatility of certain credit metrics during the remainder of 2017.2018. Additionally, changes in circumstances related to individually large credits or certain portfolios may result in volatility.
Details regarding the allowance and net charge-offs, including an analysis of activity from the previous year’s totals, are included in Table 7 “Allowance for Credit Losses.”

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Activity in the allowance for credit losses is summarized as follows:
Table 7—Allowance for Credit Losses
Six Months Ended June 30Six Months Ended June 30
2017 20162018 2017
(Dollars in millions)(Dollars in millions)
Allowance for loan losses at beginning of year$1,091
 $1,106
$934
 $1,091
Loans charged-off:      
Commercial and industrial83
 57
54
 83
Commercial real estate mortgage—owner-occupied13
 13
10
 13
Commercial real estate construction—owner-occupied—
 1
Commercial investor real estate mortgage2
 1
8
 2
Commercial investor real estate construction—
 —
—
 —
Residential first mortgage6
 7
9
 6
Home equity18
 35
14
 18
Indirect—vehicles
26
 23
21
 26
Indirect—other consumer
11
 6
22
 11
Consumer credit card27
 19
31
 27
Other consumer37
 32
38
 37
223
 194
207
 223
Recoveries of loans previously charged-off:      
Commercial and industrial13
 10
20
 13
Commercial real estate mortgage—owner-occupied4
 5
4
 4
Commercial real estate construction—owner-occupied—
 —
Commercial investor real estate mortgage6
 4
3
 6
Commercial investor real estate construction1
 1
1
 1
Residential first mortgage2
 2
4
 2
Home equity10
 14
9
 10
Indirect—vehicles
10
 9
9
 10
Indirect—other consumer
—
 —
—
 —
Consumer credit card3
 3
4
 3
Other consumer6
 6
7
 6
55
 54
61
 55
Net charge-offs:      
Commercial and industrial70
 47
34
 70
Commercial real estate mortgage—owner-occupied9
 8
6
 9
Commercial real estate construction—owner-occupied—
 1
Commercial investor real estate mortgage(4) (3)5
 (4)
Commercial investor real estate construction(1) (1)(1) (1)
Residential first mortgage4
 5
5
 4
Home equity8
 21
5
 8
Indirect—vehicles
16
 14
12
 16
Indirect—other consumer
11
 6
22
 11
Consumer credit card24
 16
27
 24
Other consumer31
 26
31
 31
168
 140
146
 168
Provision for loan losses118
 185
50
 118
Allowance for loan losses at June 30$1,041
 $1,151
$838
 $1,041
Reserve for unfunded credit commitments at beginning of year$69
 $52
$53
 $69
Provision (credit) for unfunded credit losses(2) 12
(5) (2)
Reserve for unfunded credit commitments at June 30$67
 $64
$48
 $67
Allowance for credit losses at June 30$1,108
 $1,215
$886
 $1,108
Loans, net of unearned income, outstanding at end of period$80,127
 $81,702
$80,478
 $80,127
Average loans, net of unearned income, outstanding for the period$80,144
 $81,735
$79,924
 $80,144
Ratios:      
Allowance for loan losses at end of period to loans, net of unearned income1.30% 1.41%1.04% 1.30%
Allowance for loan losses at end of period to non-performing loans, excluding loans held for sale1.27x
 1.12x
1.41x
 1.27x
Net charge-offs as percentage of average loans, net of unearned income (annualized)0.42% 0.34%0.37% 0.42%

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TROUBLED DEBT RESTRUCTURINGS (TDRs)
TDRs are modified loans in which a concession is provided to a borrower experiencing financial difficulty. Residential first mortgage, home equity, indirect-vehicles, consumer credit card and other consumer TDRs are consumer loans modified under the CAP. Commercial and investor real estate loan modifications are not the result of a formal program, but represent situations where modifications were offered as a workout alternative. Renewals of classified commercial and investor real estate loans are considered to be TDRs, even if no reduction in interest rate is offered, if the existing terms are considered to be below market. More detailed information is included in Note 4 "Loans and the Allowance For Credit Losses" to the consolidated financial statements. The following table summarizes the loan balance and related allowance for accruing and non-accruing TDRs for the periods presented:
Table 8—Troubled Debt Restructurings 
June 30, 2017 December 31, 2016June 30, 2018 December 31, 2017
Loan
Balance
 
Allowance for
Loan Losses
 
Loan
Balance
 
Allowance for
Loan Losses
Loan
Balance
 
Allowance for
Loan Losses
 
Loan
Balance
 
Allowance for
Loan Losses
(In millions)(In millions)
Accruing:              
Commercial$366
 $53
 $241
 $38
$158
 $22
 $232
 $27
Investor real estate108
 14
 90
 8
40
 4
 90
 6
Residential first mortgage388
 45
 380
 46
165
 16
 368
 36
Home equity268
 4
 286
 5
219
 6
 245
 4
Indirect—vehicles1
 —
 1
 —
Consumer credit card1
 —
 2
 —
1
 —
 1
 —
Other consumer9
 —
 10
 —
7
 —
 9
 —
1,141
 116
 1,010
 97
590
 48
 945
 73
Non-accrual status or 90 days past due and still accruing:              
Commercial227
 52
 279
 65
178
 21
 115
 30
Investor real estate2
 1
 5
 2
1
 —
 1
 —
Residential first mortgage66
 8
 74
 9
44
 4
 69
 7
Home equity14
 —
 17
 —
14
 —
 14
 —
309
 61
 375
 76
237
 25
 199
 37
Total TDRs - Loans$1,450
 $177
 $1,385
 $173
$827
 $73
 $1,144
 $110
              
TDRs - Held For Sale3
 —
 3
 —
11
 —
 13
 —
Total TDRs$1,453
 $177
 $1,388
 $173
$838
 $73
 $1,157
 $110
_________
Note: All loans listed in the table above are considered impaired under applicable accounting literature.
The following table provides an analysis of the changes in commercial and investor real estate TDRs. TDRs with subsequent restructurings that meet the definition of a TDR are only reported as TDR inflows in the period they were first modified. Other than resolutions such as charge-offs, foreclosures, payments, sales and transfers to held for sale, Regions may remove loans from TDR classification if the following conditions are met: the borrower's financial condition improves such that the borrower is no longer in financial difficulty, the loan has not had any forgiveness of principal or interest, the loan has not been restructured as an "A" note/"B" note, the loan has been reported as a TDR over one fiscal year-end and the loan is subsequently refinanced or restructured at market terms such that it qualifies as a new loan.
For the consumer portfolio, changes in TDRs are primarily due to inflows from CAP modifications and outflows from payments and charge-offs. Given the types of concessions currently being granted under the CAP, as detailed in Note 4 “Loans and the Allowance for Credit Losses” to the consolidated financial statements, Regions does not expect that the market interest rate condition will be widely achieved. Therefore, Regions expects consumer loans modified through CAP to continue to be identified as TDRs for the remaining term of the loan.

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Table 9—Analysis of Changes in Commercial and Investor Real Estate TDRs
Six Months Ended June 30, 2017  Six Months Ended June 30, 2016Six Months Ended
June 30, 2018		 
Six Months Ended
 June 30, 2017
Commercial Investor
Real Estate		 Commercial Investor
Real Estate		Commercial Investor
Real Estate		 Commercial Investor
Real Estate
(In millions)(In millions)
Balance, beginning of period$520
 $95
 $281
 $179
$347
 $91
 $520
 $95
Inflows272
 50
 177
 11
207
 48
 272
 50
Outflows       
Outflows:       
Charge-offs(10) (1) (12) —
(18) —
 (10) (1)
Foreclosure(1) —
 —
 —
—
 —
 (1) —
Payments, sales and other (1)
(188) (34) (85) (49)(200) (98) (188) (34)
Balance, end of period$593
 $110
 $361
 $141
$336
 $41
 $593
 $110
_________
(1) The majority of this category consists of payments and sales. "Other" outflows include normal amortization/accretion of loan basis adjustments and loans transferred to held for sale. It also includes $8$21 million of commercial loans and none$5 million of investor real estate loans refinanced or restructured as new loans and removed from TDR classification for the six months ended June 30, 2017.2018. During the six months ended June 30, 2016, $222017, $8 million of commercial loans and $6 millionnone of investor real estate loans were refinanced or restructured as new loans and removed from TDR classification.

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NON-PERFORMING ASSETS
Non-performing assets are summarized as follows:
Table 10—Non-Performing Assets
June 30, 2017 December 31, 2016June 30, 2018 December 31, 2017
(Dollars in millions)(Dollars in millions)
Non-performing loans:      
Commercial and industrial$540
 $623
$384
 $404
Commercial real estate mortgage—owner-occupied148
 210
98
 118
Commercial real estate construction—owner-occupied3
 3
5
 6
Total commercial691
 836
487
 528
Commercial investor real estate mortgage12
 17
4
 5
Commercial investor real estate construction—
 —
—
 1
Total investor real estate12
 17
4
 6
Residential first mortgage46
 50
38
 47
Home equity73
 92
66
 69
Indirect - vehicles1
 —
Total consumer120
 142
104
 116
Total non-performing loans, excluding loans held for sale823
 995
595
 650
Non-performing loans held for sale8
 13
10
 17
Total non-performing loans(1)
831
 1,008
605
 667
Foreclosed properties81
 90
61
 73
Total non-performing assets(1)
$912
 $1,098
$666
 $740
Accruing loans 90 days past due:      
Commercial and industrial$4
 $6
$4
 $4
Commercial real estate mortgage—owner-occupied2
 2
1
 1
Total commercial6
 8
5
 5
Commercial investor real estate mortgage—
 1
Total investor real estate—
 1
Residential first mortgage(2)
84
 99
63
 92
Home equity30
 33
31
 37
Indirect—vehicles8
 10
8
 9
Consumer credit card15
 15
17
 19
Other consumer3
 5
5
 4
Total consumer140
 162
124
 161
$146
 $170
$129
 $167
Restructured loans not included in the categories above$1,141
 $1,010
$590
 $945
Non-performing loans(1) to loans and non-performing loans held for sale
1.04% 1.26%0.75% 0.83%
Non-performing assets(1) to loans, foreclosed properties and non-performing loans held for sale
1.14% 1.37%0.83% 0.92%
_________
(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 the GNMA where Regions has the right but not the obligation to repurchase. Total 90 days or more past due guaranteed loans excluded were $85$105 million at June 30, 20172018 and $113$124 million at December 31, 2016.2017.
Non-performing loans at June 30, 20172018 have decreased compared to year-end levels, due to continued broad-based improvement in credit qualityquality. Total commercial and investor real estate non-performing loans, excluding loans held for sale, that were paying as evidenced by stability in oil prices. agreed (e.g., less than 30 days past due) represented approximately 50 percent of the total balance at June 30, 2018.
Economic trends such as interest rates, unemployment, volatility in commodity prices, and collateral valuations will impact the future level of non-performing assets. Circumstances related to individually large credits could also result in volatility throughout 2017.2018.

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Total loans past due 90 days or more and still accruing, excluding government guaranteed loans, were $146$129 million at June 30, 2017,2018, a decrease from $170$167 million at December 31, 2016.2017.
At June 30, 2017,2018, Regions had approximately $125$75 million to $200$150 million of potential problem commercial and investor real estate loans that were not included in non-accrual loans, but for which management had concerns as to the ability of such

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borrowers to comply with their present loan repayment terms. This is a likely estimate of the amount of commercial and investor real estate loans that have the potential to migrate to non-accrual status in the next quarter.
In order to arrive at the estimate of potential problem loans, personnel from geographic regions forecast certain larger dollar loans that may potentially be downgraded to non-accrual at a future time, depending on the occurrence of future events. These personnel consider a variety of factors, including the borrower’s capacity and willingness to meet the contractual repayment terms, make principal curtailments or provide additional collateral when necessary, and provide current and complete financial information including global cash flows, contingent liabilities and sources of liquidity. Based upon the consideration of these factors, a probability weighting is assigned to loans to reflect the potential for migration to the pool of potential problem loans during this specific time period. Additionally, for other loans (for example, smaller dollar loans), a trend analysis is incorporated to determine the estimate of potential future downgrades. Because of the inherent uncertainty in forecasting future events, the estimate of potential problem loans ultimately represents the estimated aggregate dollar amounts of loans as opposed to an individual listing of loans.
The majority of the loans on which the potential problem loan estimate is based are considered criticized and classified. Detailed disclosures for substandard accrual loans (as well as other credit quality metrics) are included in Note 4 “Loans and the Allowance for Credit Losses” to the consolidated financial statements.
The following table provides an analysis of non-accrual loans (excluding loans held for sale) by portfolio segment:
Table 11—Analysis of Non-Accrual Loans
Non-Accrual Loans, Excluding Loans Held for Sale
Six Months Ended June 30, 2017		Non-Accrual Loans, Excluding Loans Held for Sale
Six Months Ended June 30, 2018
Commercial 
Investor
Real Estate
 
Consumer(1)
 TotalCommercial 
Investor
Real Estate
 
Consumer(1)
 Total
(In millions)(In millions)
Balance at beginning of period$836
 $17
 $142
 $995
$528
 $6
 $116
 $650
Additions257
 6
 —
 263
204
 19
 —
 223
Net payments/other activity(231) (4) (22) (257)(145) (3) (9) (157)
Return to accrual(68) (4) —
 (72)(24) (1) —
 (25)
Charge-offs on non-accrual loans(2)
(91) (1) —
 (92)(58) (8) —
 (66)
Transfers to held for sale(3)
(10) (2) —
 (12)(14) —
 (3) (17)
Transfers to foreclosed properties(2) —
 —
 (2)
Transfers to real estate owned(2) —
 —
 (2)
Sales—
 —
 —
 —
(2) (9) —
 (11)
Balance at end of period$691
 $12
 $120
 $823
$487
 $4
 $104
 $595

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Non-Accrual Loans, Excluding Loans Held for Sale
Six Months Ended June 30, 2016		Non-Accrual Loans, Excluding Loans Held for Sale
Six Months Ended June 30, 2017
Commercial 
Investor
Real Estate
 
Consumer(1)
 TotalCommercial 
Investor
Real Estate
 
Consumer(1)
 Total
(In millions)(In millions)
Balance at beginning of period$595
 $31
 $156
 $782
$836
 $17
 $142
 $995
Additions522
 11
 —
 533
257
 6
 —
 263
Net payments/other activity(152) (5) (2) (159)(231) (4) (22) (257)
Return to accrual(21) (2) —
 (23)(68) (4) —
 (72)
Charge-offs on non-accrual loans(2)
(68) (1) —
 (69)(91) (1) —
 (92)
Transfers to held for sale(3)
(30) —
 (1) (31)(10) (2) —
 (12)
Transfers to foreclosed properties(2) —
 —
 (2)(2) —
 —
 (2)
Sales(5) (1) —
 (6)—
 —
 —
 —
Balance at end of period$839
 $33
 $153
 $1,025
$691
 $12
 $120
 $823
________
(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 of $4$6 million and $16$4 million recorded upon transfer for the six months ended June 30, 20172018 and 2016,2017, respectively.

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GOODWILL
Goodwill totaled $4.9 billion at both June 30, 20172018 and December 31, 20162017 and is allocated to each of Regions’ reportable segments (each a reporting unit), at which level goodwill is tested for impairment on an annual basis or more often if events and circumstances indicate the fair value of the reporting unit may have declined below the carrying value (refer to Note 1 “Summary of Significant Accounting Policies” to the 20162017 consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 20162017 for further discussion of when Regions tests goodwill for impairment and the Company's methodology and valuation approaches used to determine the estimated fair value of each reporting unit).
The result of the assessment performed for the second quarter of 20172018 did not indicate that the estimated fair values of the Company’s reporting units (Corporate Bank, Consumer Bank and Wealth Management) had declined below their respective carrying values. Therefore, Regions determined that a test of goodwill impairment was not required for each of Regions’ reporting units for the June 30, 20172018 interim period.
OTHER EARNING ASSETS
Other earning assets totaled $1.7 billion at June 30, 2018, consisting primarily of $778 million of FRB and FHLB stock, $420 million of operating lease assets, and $423 million marketable equity securities. At December 31, 2017, other earning assets totaled $1.9 billion, consisting primarily of $684 million of FRB and FHLB stock, $489 million of operating lease assets, and $414 million of marketable equity securities.

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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 and alternative product delivery channels such as mobile and internet banking.
The following table summarizes deposits by category:
Table 12—Deposits
June 30, 2017 December 31, 2016June 30, 2018 December 31, 2017
(In millions)(In millions)
Non-interest-bearing demand$37,119
 $36,046
$36,055
 $36,127
Savings8,346
 7,840
8,971
 8,413
Interest-bearing transaction19,233
 20,259
19,403
 20,161
Money market—domestic26,384
 27,293
24,255
 25,306
Money market—foreign71
 186
—
 23
Low-cost deposits91,153
 91,624
88,684
 90,030
Time deposits6,940
 7,183
6,599
 6,859
Customer deposits98,093
 98,807
Corporate treasury time deposits—
 228
$98,093
 $99,035
$95,283
 $96,889
Total deposits at June 30, 20172018 decreased approximately $942 million$1.6 billion compared to year-end 20162017 levels. The decrease was driven primarily by declinesdecreases in interest-bearing transaction and domestic money market accounts totaling $1.9 billion.and interest-bearing transaction accounts offset by increases in savings accounts. Interest-bearing transaction accounts have declined primarily due to the Company's continued strategic reductionsreduction of certain trust customer deposits, which require collateralization by securities, and have been shifted into other fee income-producing customer investments. Money market accounts declined since year-endhave continued to decline as a result of a decision to reduce higher-cost retail brokered sweep deposits that were no longer a necessary component of the Company's funding strategy. These decreases were partially offset by continued growth in non-interest-bearing demand and savings accounts totaling $1.6 billion. Customer time deposits declined $243approximately $260 million due to maturities with minimal reinvestment by customers as a result of continuedthe Company's strong liquidity profile providing less need for higher-cost deposits as part of its funding strategy. Also contributing to the decrease was a continuing customer preference for more liquid deposit products as market interest rates remain relatively low. Also, corporate treasury time deposits declined from $228 million to zero as a result of the lack of loan demand decreasing the need for wholesale deposit funding alternatives.
SHORT-TERM BORROWINGS
Short-term borrowings, which consist of FHLB advances, totaled $600 million$1.4 billion at June 30, 20172018 as compared to zero$500 million at December 31, 2016.2017. The levels of these borrowings can fluctuate depending on the Company's funding needs and the sources utilized.
In the near term, Regions expects the use of wholesale unsecured borrowings for its funding needs to remain low. Short-term secured borrowings, such as securities sold under agreements to repurchase and FHLB advances, are a core portion of Regions' funding strategy.
The securities financing market and specifically short-term FHLB advances continue to provide reliable funding at attractive rates. See the "Liquidity Risk" section for further detail of Regions' borrowing capacity with the FHLB.


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LONG-TERM BORROWINGS
Table 13—Long-Term Borrowings
June 30, 2017 December 31, 2016June 30, 2018 December 31, 2017
(In millions)(In millions)
Regions Financial Corporation (Parent):      
2.00% senior notes due May 2018$101
 $100
$—
 $101
3.20% senior notes due February 20211,102
 1,102
1,101
 1,101
2.75% senior notes due August 2022995
 995
7.75% subordinated notes due September 2024100
 100
100
 100
6.75% subordinated debentures due November 2025158
 159
158
 158
7.375% subordinated notes due December 2037297
 297
297
 297
Valuation adjustments on hedged long-term debt(26) (30)(82) (50)
1,732
 1,728
2,569
 2,702
Regions Bank:      
Federal Home Loan Bank advances3,254
 4,254
5,153
 3,653
2.25% senior notes due September 2018748
 748
749
 749
7.50% subordinated notes due May 2018499
 499
—
 500
2.75% senior notes due April 2021548
 —
3 month LIBOR plus 0.38% of floating rate senior notes due April 2021349
 —
6.45% subordinated notes due June 2037495
 495
495
 495
3.80% affiliate subordinated notes due February 2025150
 150
Other long-term debt38
 40
34
 35
Valuation adjustments on hedged long-term debt(1) (1)(7) (2)
5,183
 6,185
7,321
 5,430
Elimination of 3.80% affiliate subordinated notes due February 2025(150) (150)
Total consolidated$6,765
 $7,763
$9,890
 $8,132
Long-term borrowings decreasedincreased approximately $1.0$1.8 billion since year-end 2016. The decrease was2017. FHLB advances increased $1.5 billion. During the resultfirst quarter of a $1.0 billion decrease in2018, Regions issued $550 million of 2.75% senior bank notes due April 1, 2021 and simultaneously entered into an interest rate swap effectively converting the FHLB advances.2.75% senior bank notes to floating rate notes at 1 month LIBOR. Also during the first quarter, Regions issued $350 million of senior floating rate bank notes at 3 month LIBOR plus 38 basis points due April 1, 2021. During the second quarter of 2018, approximately $600 million of senior and subordinated notes matured.
Long-term FHLB advances have a weighted-average interest rate of 1.12.0 percent at June 30, 20172018 and 0.81.4 percent at December 31, 20162017 with remaining maturities ranging from less than one year to fourteenthirteen years and a weighted-average of 0.40.8 years.

On August 2, 2018, Regions provided notice to holders of the 2.25% senior notes due September 14, 2018 issued by Regions Bank of the company's intent to call the notes. Consistent with the terms of the securities, the total amount outstanding of $750 million will be called at par on August 14, 2018.
STOCKHOLDERS’ EQUITY
Stockholders’ equity was $16.9$15.8 billion at June 30, 20172018 as compared to $16.7$16.2 billion billion at December 31, 2016.2017. During the first six months of 2017,2018, net income increased stockholders’ equity by $617$789 million, while cash dividends on common stock reduced stockholders' equity by $162$201 million and cash dividends on preferred stock reduced stockholder's equity by $32 million. Changes in accumulated other comprehensive income increaseddecreased stockholders' equity by $71$506 million, primarily due to the net change in unrealized gains (losses) on securities available for sale.sale and derivative instruments. Common stock repurchased during the first six months of 20172018 reduced stockholders' equity by $275$470 million. These shares were immediately retired and therefore are not included in treasury stock.
On June 28, 2017,2018, Regions received no objection from the Federal Reserve to its 20172018 capital plan that was submitted as part of the CCAR process, which included the repurchase of common shares and a common stock dividend increase.
See Note 7 “Stockholders’ Equity and Accumulated Other Comprehensive Income (Loss)” for additional information.

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REGULATORY REQUIREMENTS
CAPITAL RULES
Regions and Regions Bank are required to comply with regulatory capital requirements established by federalFederal and stateState banking agencies. These regulatory capital requirements involve quantitative measures of the Company's assets, liabilities and certainselected 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 and, as such, began transitioning to the Basel III Rules in January 2015 subject to a phase-in period extending to January 2019. When fully phased in, the Basel III Rules will increase capital requirements through higher minimum capital levels as well as through increases in risk-weights for certain exposures. Additionally, the Basel III Rules place greater emphasis on common equity. The Basel III Rules, among other things,

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(i) introduce a measure called CET1, (ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting specified requirements, (iii) define CET1 narrowly by requiring that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital and (iv) expand the scope of the deductions/adjustments to capital as compared to prior regulations. The Basel III Rules also provide for a number of deductions from and adjustments to CET1.
Additionally, the Basel III Rules introduce a new capital conservation buffer designed to absorb losses during periods of economic stress. The capital conservation buffer is on top of minimum risk-weighted asset ratios. The Basel III Rules also prescribe an expandeda standardized approach for risk weightingsrisk-weightings of assets and off-balance sheet exposures to derive the capital ratios.
In September 2017, the federal banking agencies proposed to revise and simplify the capital treatment for selected categories of deferred tax assets, MSRs, investments in non-consolidated financial entities and minority interests for banking organizations, such as Regions and Regions Bank, that are not subject to the advanced approach. In November 2017, the federal banking agencies revised the Basel III Rules to extend the current transitional treatment of these items for standardized approach banking organizations until the September 2017 proposal is finalized. The September 2017 proposal would also change the capital treatment of high volatility commercial real estate loans under the standardized approach. These changes would have the impact of increasing regulatory capital ratios for some standardized approach banking organizations such as Regions. Regions continues to review the proposal and its impact on the Company’s capital requirements.
In December 2017, the Basel Committee published standards that it described as the finalization of the Basel III post-crisis regulatory reforms (the standards are commonly referred to as “Basel IV”). Among other things, these standards revise the Basel Committee’s standardized approach for credit risk (including by recalibrating risk-weights and introducing new capital requirements for certain “unconditionally cancellable commitments,” such as unused credit card lines of credit) and provide a new standardized approach for operational risk capital. Under the Basel framework, these standards will generally be effective on January 1, 2022, with an aggregate output floor phasing in through January 1, 2027. Under the current U.S. capital rules, operational risk capital requirements and a capital floor apply only to advanced approach institutions, and not to Regions or Regions Bank. The impact of Basel IV on the Company will depend on the manner in which it is implemented by the federal banking regulators.

On April 10, 2018, the federal banking agencies issued a proposal to simplify capital rules for large banks. The proposal introduces a “stress capital buffer," which would replace the existing capital conservation buffer and incorporate forward-looking stress test results into non-stress capital requirements. The proposed stress capital buffer is defined as the greater of the sum of a bank’s degradation in its CET1 capital ratio in CCAR, excluding any planned capital actions, and four quarters of planned common stock dividends or a floor of 2.5% of risk-weighted assets.

On May 14, 2018, the federal banking agencies issued a proposal that would amend regulatory capital rules to provide banks with the option to phase in the day-one effects on regulatory capital that may result from adoption of the new current expected credit losses accounting standard (see Note 15 "Recent Accounting Pronouncements"). Additionally, the agencies are proposing amendments to stress testing regulations which would delay incorporation of the new accounting standard in stress testing until the 2020 stress test cycle.

The Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”) was enacted on May 24, 2018, which provides certain limited amendments to the Dodd-Frank Act as well as other modifications to certain post-crisis regulatory requirements. The EGRRCPA raises the asset threshold for the Systemically Important Financial Institution designations from $50 billion to $250 billion and eliminates the company-run stress tests for institutions with less than $250 billion in assets. The EGRRCPA will likely decrease the overall regulatory burden on institutions like Regions, however the ultimate impact is uncertain at this time and will depend on the implementation of the law by the federal banking agencies. On July 6, 2018, the federal banking agencies issued an interagency statement regarding the impact of the EGRRCPA. The statement provides information on rules and associated reporting requirements that EGRRCPA affected such as company-run stress testing, resolution plans, Volcker Rule, HVCRE exposures, and other provisions. Among other things, the statement permits banks to use current information to estimate

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and report HVCRE acquisition, development and construction loans as defined in the EGRRCPA. Regions implemented this change effective June 30, 2018 and it did not have a material impact.
Additional discussion of the Basel III Rules and their applicability to Regions is included in Note 14 "Regulatory Capital Requirements and Restrictions" to the consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2016,2017, as well as related discussion in Management's Discussion and Analysis.
The following table summarizes the applicable holding company and bank regulatory requirements:
Table 14—Regulatory Capital Requirements
Transitional Basis Basel III Regulatory Capital Rules (1)
June 30, 2017
Ratio (2)
 
December 31, 2016
Ratio
 
Minimum
Requirement
 
To Be Well
Capitalized
June 30, 2018
Ratio (2)
 
December 31, 2017
Ratio
 
Minimum
Requirement
 
To Be Well
Capitalized
Basel III common equity Tier 1 capital:              
Regions Financial Corporation11.47% 11.21% 4.50% N/A
11.00% 11.05% 4.50% N/A
Regions Bank12.49
 12.14
 4.50
 6.50%12.99
 12.49
 4.50
 6.50%
Tier 1 capital:              
Regions Financial Corporation12.27% 11.98% 6.00% 6.00%11.80% 11.86% 6.00% 6.00%
Regions Bank12.49
 12.14
 6.00
 8.00
12.99
 12.49
 6.00
 8.00
Total capital:              
Regions Financial Corporation14.30% 14.15% 8.00% 10.00%13.59% 13.78% 8.00% 10.00%
Regions Bank14.23
 14.00
 8.00
 10.00
14.34
 13.97
 8.00
 10.00
Leverage capital:              
Regions Financial Corporation10.41% 10.20% 4.00% N/A
10.10% 10.01% 4.00% N/A
Regions Bank10.61
 10.34
 4.00
 5.00%11.14
 10.54
 4.00
 5.00%
________
(1)
The 2017 2018 and 20162017 capital ratios were calculated at different points of the phase-in period under the Basel III Rules and therefore are not directly comparable.
(2)The current quarter Basel III CET1 capital, Tier 1 capital, Total capital, and Leverage capital ratios are estimated.
    
LIQUIDITY COVERAGE RATIO
The Federal Reserve, the OCC and the FDIC approved a final rule in 2014 implementing a minimum LCR requirement for certain large BHCs, savings and loan holding companies and depository institutions, and a less stringent LCR requirement (the "modified LCR") for other banking organizations, such as Regions, with $50 billion or more in total consolidated assets. The final rule imposes a monthly calculation requirement. As of January 1, 2017, the LCR calculation rule has been fully phased in. In December 2016, the Federal Reserve issued a final rule on the public disclosure of the LCR calculation that requires BHCs, such as Regions, to disclose publicly, on a quarterly basis, quantitative and qualitative information about certain components of its LCR beginning October 1, 2018.
At June 30, 2017,2018, the Company was fully compliant with the LCR requirements. However, shouldChanges in the mix and size of the Company's cash position orbalance sheet and investment mix changeportfolio are likely to occur in the future, the Company's ability to meet the LCR requirement may be impacted, and additional funding may need to be sourced to remain compliant.
See the “Supervision and Regulation—Liquidity Regulation” subsection of the “Business” section and the “Risk Factors” section of the Company's Annual Report on Form 10-K for the year ended December 31, 20162017 for more information.

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RATINGS
Table 15 “Credit Ratings” reflects the debt ratings information of Regions Financial Corporation and Regions Bank by Standard and Poor's ("S&P"), Moody’s, Fitch and Dominion Bond Rating Service ("DBRS") as of June 30, 20172018 and December 31, 2016.2017.
Table 15—Credit Ratings
 As of June 30, 2018 and December 31, 2017
 S&PMoody’sFitchDBRS
Regions Financial Corporation    
Senior unsecured debtBBBBBB+Baa2BBBBBB+BBBH
Subordinated debtBBB-BBBBaa2BBB-BBBBBB
Regions Bank    
Short-termA-2P-1F2R-1L
Long-term bank depositsN/AA2BBB+A-AL
Long-term ratingBBB+A-A2BBBBBB+N/A
Senior unsecured debtBBB+A-Baa2BBBBBB+AL
Subordinated debtBBBBBB+Baa2BBB-BBBBBBH
OutlookPositiveStableStableStablePositiveStable

 As of December 31, 2016
S&PMoody’sFitchDBRS
Regions Financial Corporation    
Senior unsecured debtBBBBaa2BBBBBBH
Subordinated debtBBB-Baa2BBB-BBB
Regions Bank
Short-termA-2P-1F2R-1L
Long-term bank depositsN/AA2BBB+AL
Long-term ratingBBB+A2BBBN/A
Senior unsecured debtBBB+Baa2BBBAL
Subordinated debtBBBBaa2BBB-BBBH
OutlookStableStablePositiveStable
_______
N/A - Not applicable.
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 in the Annual Report on Form 10-K for the year ended December 31, 20162017 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.

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NON-GAAP MEASURES
The table below presents computations of earnings and certain other financial measures, which exclude certain significant items that are included in the financial results presented in accordance with GAAP. These non-GAAP financial measures include “adjusted allowance for loan losses to non-performingaverage total loans, excluding loans held for sale ratio,” “adjusted efficiency ratio,” “adjusted fee income ratio,” “return on average tangible common stockholders’ equity,” average and end of period “tangible common stockholders’ equity,” and “Basel III CET1, on a fully phased-in basis” and related ratios. Regions believes that expressing earnings and certain other financial measures excluding these significant items provides a meaningful base for period-to-period comparisons, 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 (management only)
Presentations to investors of Company performance
The adjusted allowance for loan losses to non-performingTotal average loans excluding loans held for sale ratio (non-GAAP), which is a measure of credit quality performance, is generally calculated as adjusted allowance for loan losses divided by adjusted total non-accrual loans, excluding loans held for sale. Management believes that excluding the portion of the allowance for loan losses related to direct energy loans and the direct energy non-accrual loans will assist investors in analyzing the Company's credit quality performance absent the volatility that has been experienced by energy businesses. The allowance for loan losses (GAAP) is presented excluding the portionimpact of the allowance related to direct energy loans to arrive atfirst quarter 2018 residential first mortgage loan sale and the adjusted allowance for loan losses (non-GAAP). Total non-accrual loans (GAAP) is presented excluding direct energy non-accrual loansindirect vehicles third-party exit portfolio to arrive at adjusted average total non-accrual loans excluding(non-GAAP). Regions believes adjusting average total loans held for sale (non-GAAP), which isprovides a meaning calculation of loan growth rates and presents them on the denominator for the allowance for loan losses to non-accrual loans ratio.same basis as that applied by management.
The adjusted efficiency ratio (non-GAAP), which is a measure of productivity, is generally calculated as adjusted non-interest expense divided by adjusted total revenue on a taxable-equivalent basis. The adjusted fee income ratio (non-GAAP) is generally calculated as adjusted non-interest income divided by adjusted total revenue on a taxable-equivalent basis. Management uses these ratios to monitor performance and believes these measures provide meaningful information to investors. Non-interest expense (GAAP) is presented excluding adjustments to arrive at adjusted non-interest expense (non-GAAP), which is the numerator for

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the adjusted efficiency ratio. Non-interest income (GAAP) is presented excluding adjustments to arrive at adjusted non-interest income (non-GAAP), which is the numerator for the adjusted fee income ratio. Net interest income and other financing income on a taxable-equivalent basis and non-interest income are added together to arrive at total revenue on a taxable-equivalent basis. Adjustments are made to arrive at adjusted total revenue on a taxable-equivalent basis (non-GAAP), which is the denominator for the adjusted efficiency and adjusted fee income ratios.
Tangible common stockholders’ equity ratios have become a focus of some investors in analyzing the capital position of the Company absent the effects of intangible assets and preferred stock. Traditionally, the Federal Reserve and other banking regulatory bodies have assessed a bank’s capital adequacy based on Tier 1 capital, the calculation of which is codified in federal banking regulations. Analysts and banking regulators have assessed Regions’ capital adequacy using the tangible common stockholders’ equity measure. Because tangible common stockholders’ equity is not formally defined by GAAP, this measure is considered to be a non-GAAP financial measure and other entities may calculate it differently than Regions’ disclosed calculations. Since analysts and banking regulators may assess Regions’ capital adequacy using tangible common stockholders’ equity, Regions believes that it is useful to provide investors the ability to assess Regions’ capital adequacy on this same basis.
The Basel Committee's Basel III framework will strengthen international capital and liquidity regulations. When fully phased-in, Basel III will increase capital requirements through higher minimum capital levels as well as through increases in risk-weights for certain exposures. Additionally, the Basel III Rules place greater emphasis on common equity. The Federal Reserve released its final Basel III Rules detailing the U.S. implementation of Basel III in 2013. Regions, as a standardized approach bank, began transitioning to the Basel III framework in January 2015 subject to a phase-in period extending through January 2019. Because the Basel III implementation regulations will not be fully phased-in until 2019 and, are not formally defined by GAAP, these measures are considered to be non-GAAP financial measures. Since analysts and banking regulators may assess Regions’ capital adequacy using the fully phased-in Basel III framework, Regions believes that it is useful to provide investors information enabling them to assess Regions’ capital adequacy on the same basis.
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

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GAAP. In particular, a measure of earnings that excludes selected items does not represent the amount that effectively accrues directly to stockholders.
The following tables provide: 1) a reconciliation of allowance for loan losses (GAAP)average total loans to adjusted allowance for loan lossesaverage total loans (non-GAAP), 2) a reconciliation of non-accrual loans (GAAP) to adjusted non-accrual loans (non-GAAP), 3) a computation of adjusted allowance for loan losses to non-performing loans, excluding loans held for sale (non-GAAP), 4) a reconciliation of net income (GAAP) to net income available to common shareholders (GAAP), 5)3) a reconciliation of non-interest expense from continuing operations (GAAP) to adjusted non-interest expense from continuing operations (non-GAAP), 6)4) a reconciliation of non-interest income from continuing operations (GAAP) to adjusted non-interest income from continuing operations (non-GAAP), 7)5) a computation of adjusted total revenue (non-GAAP), 8)6) a computation of the adjusted efficiency ratio (non-GAAP), 9)7) a computation of the adjusted fee income ratio (non-GAAP), 10)8) a reconciliation of average and ending stockholders’ equity (GAAP) to average and ending tangible common stockholders’ equity (non-GAAP) and calculations of related ratios (non-GAAP), 11)9) a reconciliation of stockholders’ equity (GAAP) to Basel III CET1, on a fully phased-in basis (non-GAAP), and 10) calculation of the related ratio based on Regions’ current understanding of the Basel III requirements (non-GAAP).
Table 16—GAAP to Non-GAAP ReconciliationReconciliations 
  June 30, 2017 December 31, 2016
  (Dollars in millions)
ADJUSTED NON-ACCRUAL LOANS AND SELECTED RATIOS    
Allowance for loan losses (GAAP)A$1,041
 $1,091
Less: Direct energy portion 136
 147
Adjusted allowance for loan losses (non-GAAP)B$905
 $944
Total non-accrual loans (GAAP)C$823
 $995
Less: Direct energy non-accrual loans 267
 311
Adjusted total non-accrual loans (non-GAAP)D$556
 $684
Allowance for loan losses to non-performing loans, excluding loans held for sale (GAAP)A/C1.27x
 1.10x
Adjusted allowance for loan losses to non-performing loans, excluding loans held for sale (GAAP)B/D1.63x
 1.38x
 Three Months Ended June 30 Six Months Ended June 30
 2018 2017 2018 2017
 (In millions, net of unearned income)
ADJUSTED AVERAGE BALANCES OF LOANS       
Average total loans$79,957
 $80,110
 $79,924
 $80,144
Less: Balances of residential first mortgage loans sold (1)
—
 254
 81
 254
Less: Indirect—vehicles third-party909
 1,611
 984
 1,722
Adjusted average total loans (non-GAAP)$79,048
 $78,245
 $78,859
 $78,168
  Three Months Ended June 30 Six Months Ended June 30
  2017 2016 2017 2016
  (Dollars in millions)
INCOME        
Net income (GAAP) $316
 $275
 $617
 $548
Preferred dividends (GAAP) (16) (16) (32) (32)
Net income available to common shareholders (GAAP)E$300
 $259
 $585
 $516
ADJUSTED EFFICIENCY AND FEE INCOME RATIOS        
Non-interest expense from continuing operations (GAAP)F$909
 $915
 $1,786
 $1,784
Significant items:        
Professional, legal and regulatory expenses (1)
 —
 (3) —
 (3)
   Branch consolidation, property and equipment charges (7) (22) (8) (36)
Salary and employee benefits—severance charges (3) (1) (7) (13)
Adjusted non-interest expense (non-GAAP)G$899
 $889
 $1,771
 $1,732
Net interest income and other financing income (GAAP) $882
 $848
 $1,741
 $1,710
Taxable-equivalent adjustment 22
 21
 44
 42
Net interest income and other financing income from continuing operations, taxable-equivalent basisH904
 869
 1,785
 1,752
Non-interest income from continuing operations (GAAP)I525
 526
 1,035
 1,032
Significant items:        
Securities (gains) losses, net (1) (6) (1) (1)
Insurance proceeds (2)
 —
 —
 —
 (3)
Gain on sale of affordable housing residential mortgage loans (3)
 (5) —
 (5) —
Adjusted non-interest income (non-GAAP)J$519
 $520
 $1,029
 $1,028
Total revenue, taxable-equivalent basisH+I=K$1,429
 $1,395
 $2,820
 $2,784
Adjusted total revenue, taxable-equivalent basis (non-GAAP)H+J=L$1,423
 $1,389
 $2,814
 $2,780
Efficiency ratio (GAAP)F/K63.62% 65.62% 63.34% 64.08%
Adjusted efficiency ratio (non-GAAP)G/L63.18% 63.98% 62.97% 62.30%
Fee income ratio (GAAP)I/K36.75% 37.70% 36.71% 37.07%
Adjusted fee income ratio (non-GAAP)J/L36.48% 37.46% 36.56% 37.00%


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 Three Months Ended June 30 Six Months Ended June 30 Three Months Ended
June 30		 Six Months Ended
June 30
 2017 2016 2017 2016 2018 2017 2018 2017
 (Dollars in millions) (Dollars in millions)
RETURN ON AVERAGE TANGIBLE COMMON STOCKHOLDERS’ EQUITY        
INCOME — CONSOLIDATED
        
Net income (GAAP) $375
 $316
 $789
 $617
Preferred dividends (GAAP) (16) (16) (32) (32)
Net income available to common shareholders (GAAP)A$359
 $300
 $757
 $585
ADJUSTED EFFICIENCY AND FEE INCOME RATIOS — CONTINUING OPERATIONS
        
Non-interest expense (GAAP)B$911
 $875
 $1,795
 $1,718
Significant items:        
Branch consolidation, property and equipment charges (1) (7) (4) (8)
Expenses associated with residential mortgage loan sale —
 —
 (4) —
Salary and employee benefits—severance charges (34) (3) (49) (7)
Adjusted non-interest expense (non-GAAP)C$876
 $865
 $1,738
 $1,703
Net interest income and other financing income (GAAP) $926
 $882
 $1,835
 $1,741
Taxable-equivalent adjustment 12
 22
 25
 44
Net interest income and other financing income, taxable-equivalent basisD938
 904
 1,860
 1,785
Non-interest income (GAAP)E512
 490
 1,019
 964
Significant items:        
Securities (gains) losses, net (1) (1) (1) (1)
Gain on sale of affordable housing residential mortgage loans (2)
 —
 (5) —
 (5)
Leveraged lease termination gains —
 —
 (4) —
Adjusted non-interest income (non-GAAP)F$511
 $484
 $1,014
 $958
Total revenue, taxable-equivalent basisD+E=G$1,450
 $1,394
 $2,879
 $2,749
Adjusted total revenue, taxable-equivalent basis (non-GAAP)D+F=H$1,449
 $1,388
 $2,874
 $2,743
Efficiency ratio (GAAP)B/G62.74% 62.75% 62.33% 62.49%
Adjusted efficiency ratio (non-GAAP)C/H60.41% 62.29% 60.47% 62.10%
Fee income ratio (GAAP)E/G35.31% 35.19% 35.40% 35.10%
Adjusted fee income ratio (non-GAAP)F/H35.24% 34.90% 35.28% 34.94%
RETURN ON AVERAGE TANGIBLE COMMON STOCKHOLDERS’ EQUITY — CONSOLIDATED
        
Average stockholders’ equity (GAAP) $16,803
 $17,151
 $16,727
 $17,119
 $15,682
 $16,803
 $15,765
 $16,727
Less: Average intangible assets (GAAP) 5,108
 5,124
 5,114
 5,127
 5,066
 5,108
 5,071
 5,114
Average deferred tax liability related to intangibles (GAAP) (156) (163) (156) (164) (98) (156) (99) (156)
Average preferred stock (GAAP) 820
 820
 820
 820
 820
 820
 820
 820
Average tangible common stockholders’ equity (non-GAAP)M$11,031
 $11,370
 $10,949
 $11,336
I$9,894
 $11,031
 $9,973
 $10,949
Return on average tangible common stockholders’ equity (non-GAAP) (4)
E/M10.91% 9.15% 10.77% 9.15%
Return on average tangible common stockholders’ equity (non-GAAP(3)
A/I14.54% 10.91% 15.31% 10.77%

  June 30, 2017 December 31, 2016
  (Dollars in millions, except per share data)
TANGIBLE COMMON RATIOS-CONSOLIDATED    
Ending stockholders’ equity (GAAP) $16,893
 $16,664
Less: Ending intangible assets (GAAP) 5,102
 5,125
  Ending deferred tax liability related to intangibles (GAAP) (156) (155)
  Ending preferred stock (GAAP) 820
 820
Ending tangible common stockholders’ equity (non-GAAP)N$11,127
 $10,874
Ending total assets (GAAP) $124,643
 $125,968
Less: Ending intangible assets (GAAP) 5,102
 5,125
  Ending deferred tax liability related to intangibles (GAAP) (155) (155)
Ending tangible assets (non-GAAP)O$119,696
 $120,998
End of period shares outstandingP1,199
 1,215
Tangible common stockholders’ equity to tangible assets (non-GAAP)N/O9.30% 8.99%
Tangible common book value per share (non-GAAP)N/P$9.28
 $8.95
BASEL III COMMON EQUITY TIER 1 RATIO—FULLY PHASED-IN PRO-FORMA (5)
    
Stockholders’ equity (GAAP) $16,893
 $16,664
Non-qualifying goodwill and intangibles (4,932) (4,955)
Adjustments, including all components of accumulated other comprehensive income, disallowed deferred tax assets, threshold deductions and other adjustments 432
 489
Preferred stock (GAAP) (820) (820)
Basel III common equity Tier 1—Fully Phased-In Pro-Forma (non-GAAP)
Q$11,573
 $11,378
Basel III risk-weighted assets—Fully Phased-In Pro-Forma (non-GAAP) (6)
R$101,894
 $102,975
Basel III common equity Tier 1 ratio—Fully Phased-In Pro-Forma (non-GAAP)
Q/R11.36% 11.05%
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  June 30, 2018 December 31, 2017
  (Dollars in millions, except per share data)
TANGIBLE COMMON RATIOS — CONSOLIDATED
    
Ending stockholders’ equity (GAAP) $15,777
 $16,192
Less: Ending intangible assets (GAAP) 5,060
 5,081
  Ending deferred tax liability related to intangibles (GAAP) (97) (99)
  Ending preferred stock (GAAP) 820
 820
Ending tangible common stockholders’ equity (non-GAAP)J$9,994
 $10,390
Ending total assets (GAAP) $124,557
 $124,294
Less: Ending intangible assets (GAAP) 5,060
 5,081
  Ending deferred tax liability related to intangibles (GAAP) (97) (99)
Ending tangible assets (non-GAAP)K$119,594
 $119,312
End of period shares outstandingL1,114
 1,134
Tangible common stockholders’ equity to tangible assets (non-GAAP)J/K8.36% 8.71%
Tangible common book value per share (non-GAAP)J/L$8.97
 $9.16
  June 30, 2018 December 31, 2017
  (Dollars in millions, except per share data)
BASEL III COMMON EQUITY TIER 1 RATIO—FULLY PHASED-IN PRO-FORMA (4)
    
Stockholders’ equity (GAAP) $15,777
 $16,192
Non-qualifying goodwill and intangibles (4,953) (4,972)
Adjustments, including all components of accumulated other comprehensive income, disallowed deferred tax assets, threshold deductions and other adjustments 1,230
 712
Preferred stock (GAAP) (820) (820)
Basel III common equity Tier 1—Fully Phased-In Pro-Forma (non-GAAP)
M$11,234
 $11,112
Basel III risk-weighted assets—Fully Phased-In Pro-Forma (non-GAAP) (5)
N$102,819
 $101,498
Basel III common equity Tier 1 ratio—Fully Phased-In Pro-Forma (non-GAAP)
M/N10.93% 10.95%
_________
(1)Regions recorded $3 million of contingent legal and regulatory accruals during the second quarter of 2016.
(1) Adjustments to average loan balances assume a simple day-weighted average impact for the first six months of 2018, and are equal to the ending balance of the residential first mortgage loans sold for the prior periods.
(2)Insurance proceeds recognized in 2016 are related to the settlement of the previously disclosed 2010 class-action lawsuit.
(3)Gain on sale of affordable housing residential mortgage loans inIn the fourth quarter of 2016, was due to the decision to sell approximately $171 million ofCompany sold affordable housing residential mortgage loans to Freddie Mac. Approximately $91 million were sold with recourse, resulting in a deferred gain of $5 million, which was recognized during the second quarter of 2017.
(4)Income statement amounts have been annualized in calculation.
(3) Income statement amounts have been annualized in calculation.
(4) Current quarter amounts and the resulting ratio are estimated.
(5)Current quarter amounts and the resulting ratio are estimated.
(6)Regions continues to develop systems and internal controls to precisely calculate risk-weighted assets as required by Basel III on a fully phased-in basis. The amounts included above are a reasonable approximation, based on current understanding of the requirements.

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OPERATING RESULTS
NET INTEREST INCOME AND MARGIN
Table 17—Consolidated Average Daily Balances and Yield/Rate Analysis from Continuing Operations
Three Months Ended June 30Three Months Ended June 30
2017 20162018 2017
Average
Balance
 
Income/
Expense
 
Yield/
Rate
 
Average
Balance
 
Income/
Expense
 
Yield/
Rate
Average
Balance
 
Income/
Expense
 
Yield/
Rate
 
Average
Balance
 
Income/
Expense
 
Yield/
Rate
(Dollars in millions; yields on taxable-equivalent basis)(Dollars in millions; yields on taxable-equivalent basis)
Assets                      
Earning assets:                      
Federal funds sold and securities purchased under agreements to resell$1
 $—
 —% $3
 $—
 —%$—
 $—
 —% $1
 $—
 —%
Trading account securities150
 —
 —
 114
 1
 0.99
Securities:           
Taxable25,269
 151
 2.40
 24,682
 145
 2.36
Tax-exempt—
 —
 —
 1
 —
 —
Debt securities—taxable24,386
 156
 2.57
 25,090
 150
 2.40
Loans held for sale509
 4
 3.43
 458
 4
 3.45
388
 4
 4.21
 509
 4
 3.43
Loans, net of unearned income (1)(2)
80,110
 823
 4.10
 81,960
 783
 3.82
79,957
 893
 4.46
 80,110
 823
 4.10
Investment in operating leases, net631
 6
 2.88
 792
 6
 2.81
439
 4
 3.59
 631
 6
 2.88
Other earning assets2,532
 9
 1.54
 2,970
 8
 1.10
2,558
 17
 2.60
 2,861
 10
 1.47
Total earning assets109,202
 993
 3.63
 110,980
 947
 3.41
107,728
 1,074
 3.98
 109,202
 993
 3.63
Allowance for loan losses(1,069)     (1,158)    (848)     (1,069)    
Cash and due from banks1,856
     1,792
    1,953
     1,856
    
Other non-earning assets13,854
     13,798
    14,127
     13,854
    
$123,843
     $125,412
    $122,960
     $123,843
    
Liabilities and Stockholders’ Equity                      
Interest-bearing liabilities:                      
Savings$8,359
 4
 0.15
 $7,794
 2
 0.14
$8,981
 3
 0.15
 $8,359
 4
 0.15
Interest-bearing checking19,272
 8
 0.19
 20,760
 5
 0.09
19,534
 18
 0.38
 19,272
 8
 0.19
Money market26,712
 10
 0.15
 26,585
 7
 0.11
24,235
 19
 0.30
 26,712
 10
 0.15
Time deposits7,005
 15
 0.87
 7,338
 14
 0.73
6,692
 17
 0.98
 7,005
 15
 0.87
Total interest-bearing deposits (3)
61,348
 37
 0.24
 62,477
 28
 0.18
59,442
 57
 0.38
 61,348
 37
 0.24
Federal funds purchased and securities sold under agreements to repurchase41
 1
 1.83
 —
 —
 —
Other short-term borrowings422
 2
 0.99
 —
 —
 —
1,161
 5
 1.90
 422
 2
 0.99
Long-term borrowings6,748
 50
 2.97
 8,523
 50
 2.33
8,742
 73
 3.35
 6,748
 50
 2.97
Total interest-bearing liabilities68,518
 89
 0.52
 71,000
 78
 0.44
69,386
 136
 0.79
 68,518
 89
 0.52
Non-interest-bearing deposits (3)
36,141
 —
 —
 35,020
 —
 —
35,811
 —
 —
 36,141
 —
 —
Total funding sources104,659
 89
 0.34
 106,020
 78
 0.29
105,197
 136
 0.52
 104,659
 89
 0.34
Net interest spread    3.11
     2.97
    3.19
     3.11
Other liabilities2,387
     2,241
    2,081
     2,387
    
Stockholders’ equity16,797
     17,151
    15,682
     16,797
    
$123,843
     $125,412
    $122,960
     $123,843
    
Net interest income and other financing income/margin on a taxable-equivalent basis from continuing operations (4)
  $904
 3.32%   $869
 3.15%
Net interest income and other financing income/margin on a taxable-equivalent basis (4)
  $938
 3.49%   $904
 3.32%
______________
(1)Loans, net of unearned income include non-accrual loans for all periods presented.
(2)Interest income includes net loan fees of $6 million and $8 million for each of the three months ended June 30, 2017 and 2016, respectively.periods presented.
(3)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 equal 0.15%0.24% and 0.12%0.15% for the three months ended June 30, 20172018 and 2016,2017, respectively.
(4)The computation of taxable-equivalent net interest income and other financing income is based on the statutory federal income tax rate of 21% and 35%, for June 30, 2018 and 2017, respectively, adjusted for applicable state income taxes net of the related federal tax benefit.

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 Six Months Ended June 30
 2017 2016
 Average
Balance		 Income/
Expense		 Yield/
Rate		 Average
Balance		 Income/
Expense		 Yield/
Rate
 (Dollars in millions; yields on taxable-equivalent basis)
Assets           
Earning assets:           
Federal funds sold and securities purchased under agreements to resell$1
 $—
 —% $7
 $—
 —%
Trading account securities137
 2
 3.18
 123
 4
 5.93
Securities:           
Taxable25,170
 299
 2.40
 24,650
 292
 2.38
Tax-exempt—
 —
 —
 1
 —
 —
Loans held for sale525
 8
 3.20
 410
 7
 3.38
Loans, net of unearned income (1)(2)
80,144
 1,618
 4.04
 81,735
 1,572
 3.84
Investment in operating leases, net655
 11
 3.07
 809
 11
 2.76
Other earning assets2,988
 21
 1.44
 3,508
 18
 1.03
Total earning assets109,620
 1,959
 3.58
 111,243
 1,904
 3.42
Allowance for loan losses(1,081)     (1,133)    
Cash and due from banks1,877
     1,751
    
Other non-earning assets13,908
     13,825
    
 $124,324
     $125,686
    
Liabilities and Stockholders’ Equity           
Interest-bearing liabilities:           
Savings$8,205
 7
 0.16
 $7,642
 5
 0.15
Interest-bearing checking19,592
 16
 0.17
 21,002
 10
 0.09
Money market26,968
 19
 0.14
 26,703
 14
 0.11
Time deposits7,075
 30
 0.85
 7,353
 26
 0.70
Total interest-bearing deposits (3)
61,840
 72
 0.23
 62,700
 55 0.18
Other short-term borrowings356
 2
 0.86
 4
 —
 —
Long-term borrowings7,103
 100
 2.82
 8,665
 97
 2.23
Total interest-bearing liabilities69,299
 174
 0.51
 71,369
 152 0.43
Non-interest-bearing deposits (3)
35,886
 —
 —
 34,923
 —
 —
Total funding sources105,185
 174
 0.33
 106,292
 152 0.29
Net interest spread    3.07
     2.99
Other liabilities2,416
     2,275
    
Stockholders’ equity16,723
     17,119
    
 $124,324
     $125,686
    
Net interest income and other financing income/margin on a taxable-equivalent basis from continuing operations (4)
  $1,785
 3.28%   $1,752
 3.17%
_________
 Six Months Ended June 30
 2018 2017
 Average Balance Income/
Expense		 Yield/
Rate		 Average
Balance		 Income/
Expense		 Yield/
Rate
 (Dollars in millions; yields on taxable-equivalent basis)
Assets           
Earning assets:           
Federal funds sold and securities purchased under agreements to resell$—
 $—
 —% $1
 $—
 —%
Debt securities—taxable24,486
 310
 2.56
 24,988
 297
 2.40
Loans held for sale373
 7
 3.73
 525
 8
 3.20
Loans, net of unearned income (1)(2)
79,924
 1,757
 4.40
 80,144
 1,618
 4.04
Investment in operating leases, net456
 8
 3.19
 655
 11
 3.07
Other earning assets2,706
 36
 2.66
 3,307
 25
 1.54
Total earning assets107,945
 2,118
 3.93
 109,620
 1,959
 3.58
Allowance for loan losses(890)     (1,081)    
Cash and due from banks1,952
     1,877
    
Other non-earning assets14,219
     13,908
    
 $123,226
     $124,324
    
Liabilities and Stockholders’ Equity           
Interest-bearing liabilities:           
Savings$8,799
 7
 0.16
 $8,205
 7
 0.16
Interest-bearing checking19,734
 34
 0.35
 19,592
 16
 0.17
Money market24,417
 33
 0.27
 26,968
 19
 0.14
Time deposits6,752
 32
 0.94
 7,075
 30
 0.85
Total interest-bearing deposits (3)
59,702
 106
 0.36
 61,840
 72 0.23
Federal funds purchased and securities sold under agreements to repurchase72
 1
 1.55
 —
 —
 —
Other short-term borrowings661
 6
 1.85
 356
 2
 0.86
Long-term borrowings9,135
 145
 3.17
 7,103
 100
 2.82
Total interest-bearing liabilities69,570
 258
 0.75
 69,299
 174 0.51
Non-interest-bearing deposits (3)
35,638
 —
 —
 35,886
 —
 —
Total funding sources105,208
 258
 0.49
 105,185
 174 0.33
Net interest spread    3.18
     3.07
Other liabilities2,253
     2,416
    
Stockholders’ equity15,765
     16,723
    
 $123,226
     $124,324
    
Net interest income and other financing income/margin on a taxable-equivalent basis (4)
  $1,860
 3.48%   $1,785
 3.28%
_______
(1)Loans, net of unearned income include non-accrual loans for all periods presented.
(2)Interest income includes net loan fees of $11 million and $19 million for theboth six months ended June 30, 20172018 and 2016, respectively.2017.
(3)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 equal 0.15%0.22% and 0.11%0.15% for the six months ended June 30, 20172018 and 2016,2017, respectively.
(4)The computation of taxable-equivalent net interest income and other financing income is based on the statutory federal income tax rate of 21% and 35%, for June 30, 2018 and 2017, respectively, adjusted for applicable state income taxes net of the related federal tax benefit.

For the second quarter of 2017,2018, net interest income and other financing income (taxable-equivalent basis) totaled $904$938 million compared to $869$904 million in the second quarter of 2016.2017. The net interest margin (taxable-equivalent basis) was 3.49 percent for the second quarter of 2018 and 3.32 percent for the second quarter of 2017 and 3.15 percent for the second quarter of 2016.2017. Net interest income and other financing income (taxable-equivalent basis) totaled $1.9 billion and $1.8 billion for the first six months of both2018 and 2017, and 2016.respectively. The net interest margin (taxable-equivalent basis) was 3.283.48 percent and 3.173.28 percent for the first six months of 20172018 and 2016,2017, respectively. The increase in net interest margin (taxable-equivalent basis) for the second quarter and first six months of 2017,2018, compared to the same periods of 2016,2017, was primarily due to higher market interest rates and prudent deposit cost management, and the impact of balance sheet management strategies, including higher investment securities balances, partially offset by lower average loan balances.management.

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Management expects to increase adjusted net interest income and other financing income (non-GAAP and non-taxable equivalent) in the range of 34 to 56 percent on a full year basis.basis in 2018. Based on recent performance and market conditions, the Company currently expects to be toward the upper end of the range.
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. To quantify this risk, Regions measures the change in its net interest income and other financing income in various interest rate scenarios compared to a base case scenario. Net interest income and other financing income sensitivity to market rate movements is a useful short-term indicator of Regions’ interest rate risk.
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 and other financing 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 volatility of interest rates, the slope of the yield curve, and the changing composition of the balance sheet that resultresults from both strategic plans and from 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 and other financing income throughout various interest rate cycles. In computing interest rate sensitivity for measurement, Regions compares a set of alternative interest rate scenarios to the results of a base case scenario based onderived using “market forward rates.” The standard set of interest rate scenarios includes the traditional instantaneous parallel rate shifts of plus 100 and 200 basis points. While not presented, up-rate scenarios of greater magnitude are also analyzed. Regions prepares a minus 50 basis points scenario, as minus 100 and 200 basis pointsLarger magnitude down-rate scenarios arecontinue to be of limited use in the current rate environment.environment; however, recent increases in short-term rates have caused Regions to transition to a minus 100 basis point scenario, as opposed to the minus 50 basis point scenario that had been presented in recent years. In addition to parallel curve 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—As of June 30, 2017,2018, Regions was moderately asset sensitive to both gradual and instantaneous parallel yield curve shifts as compared to the base case for the measurement horizon ending June 2018.2019. The estimated exposure associated with the parallel yield curve shift of minus 50100 basis points in the table below reflects the combined impacts of movements in short-term and long-term interest rates. The decline in short-term interest rates (such as the Fed Funds rate, the rate of Interest on Excess Reserves and 1 month LIBOR) will lead to a reduction of yield on assets and liabilities contractually tied to such rates. Recent Fed Funds increases have not resulted in a meaningful increase in deposit costs for Regions. Therefore, it is expected that declines in deposit costs will only partially offset the decline in asset yields. A reduction in intermediate and long-term interest rates (such as intermediate to longer-term U.S. Treasuries, swap and mortgage rates) will drive yields lower on certain fixed rate, newly originated or renewed loans, reduce prospective yields on certain investment portfolio purchases, and increase amortization of premium expense on existing securities in the investment portfolio. At current rate levels, the interest income sensitivity afforded by potential further extension of investment securities and the resulting impact on premium amortization is reduced, making intermediate and long-term interest rate sensitivity primarily attributable to changes in the level of reinvestment yields on fixed rate assets.
With respect to sensitivity to long-term interest rates,along the yield curve, the balance sheet is estimated to be moderately asset sensitive.sensitive to short-term, intermediate-term, and long-term rates individually. Current simulation models estimate that, as compared to the base case, net interest income and other financing income over a 12 month horizon would respond favorably by approximately $83 million if intermediate and longer-term interest rates were to immediately and on a sustained basis exceed the base scenario by 100 basis points. Conversely, if intermediate and longer-term interest rates were to immediately and on a sustained basis underperform the base case by 50100 basis points, then net interest income and other financing income, as compared to the base case, would decline by approximately $50$116 million. While long-term rates have retracted from post-election highs, they remain moderately elevated through the second quarter, reducing the interest income sensitivity afforded by potential further extension of investment securities and the resulting impact on premium amortization. To the extent that interest rates do not materially decline, net interest income sensitivity driven by middle and long-term interest rates will be primarily attributable to changes in the level of reinvestment yields on fixed rate assets.
The table below summarizes Regions' positioning in various parallel yield curve shifts (i.e., including both long-term and short-term interest rates)all yield curve tenors). The scenarios are inclusive of all interest rate risk hedging activities.

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Table 18—Interest Rate Sensitivity
 
Estimated Annual Change
in Net Interest Income
June 30, 20172018
 (In millions)
Gradual Change in Interest Rates 
+ 200 basis points
$231167
+ 100 basis points13496
- 50100 basis points(68125)
  
Instantaneous Change in Interest Rates 
+ 200 basis points
$224159
+ 100 basis points156107
- 50100 basis points(107197)
As discussed above, the interest rate sensitivity analysis presented in Table 18 is informed by a variety of assumptions and estimates regarding the course 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 that affect the estimates for net interest income and other financing income, those pertaining to deposit pricing, deposit mix and overall balance sheet composition are particularly impactful. Given the uncertainties associated with the prolonged period of low interest rates, management evaluates the impact to its sensitivity analysis of these key assumptions. Sensitivity calculations are hypothetical and should not be considered to be predictive of future results.
The Company’s baseline balance sheet growth assumptions include moderate loan and deposit growth reflecting management's best estimate. The behavior of deposits in response to changes in interest rate levels is largely informed by analyses of prior rate cycles, but with suitable adjustments based on management’s expectations in the current rate environment. In the + 200+200 basis point gradual interest rate change scenario in Table 18, the total cumulative interest bearing deposit re-pricing sensitivity is expected to be approximately 60 percent of changes in short-term market rates (e.g., Fed Funds), as compared to approximately 55 percent in the 2004 to 2007 historical timeframe. Recently observed market rate movements have yielded higher levels of asset sensitivity than modeled due primarily to outperformance in deposit betas as compared to the model assumption. A 5 percentage point higherlower sensitivity than the 60 percent baseline would reduceincrease 12 month net interest income and other financing income in the gradual +200 basis points scenario by approximately $56$60 million. While the estimates should be used as a guide, differences may result driven by the pace of rate changes, and other market and competitive factors.
Similarly, management assumes that the change in the mix of deposits in a rising rate environment versus the baseline balance sheet growth assumptions is informed by analyses of prior rate cycles. Management assumes that in rising rate scenarios, some shift from non-interest bearing to interest-bearing products will occur. The magnitude of the shift is rate dependent, but equates to approximately $3.5 billion over 12 months in the gradual +200 basis point scenario in Table 18. In the event this shift increased by an additional $3.0 billion over 12 months, the result would be a reduction of 12 month net interest income and other financing income in the gradual +200 basis points scenario by approximately $25$30 million.
Interest rate movements may also have an impact on the value of Regions’ securities portfolio, which can directly impact the carrying value of stockholders’ equity. Regions from time to time may hedge these price movements with derivatives (as discussed below).
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, Eurodollar futures contracts, interest rate swaps, options on interest rate swaps, interest rate caps and floors, and forward sale commitments.
Forward rate contracts are commitments to buy or sell financial instruments at a future date at a specified price or yield. A Eurodollar futures contract is a future on a Eurodollar deposit. Eurodollar 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 Eurodollar 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

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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.

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Regions has made use of interest rate swaps in balance sheet hedging strategies to effectively convert a portion of its fixed-rate funding position and available for sale securities portfolios to a variable-rate position and to effectively convert a portion of its variable-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 the hedging interest rate derivatives used by Regions to manage interest rate risk:
Table 19—Hedging Derivatives by Interest Rate Risk Management Strategy
June 30, 2017June 30, 2018
  Estimated Fair Value Weighted-Average  Weighted-Average
Notional
Amount		 Gain Loss Maturity (Years) Receive Rate Pay RateNotional
Amount		 Maturity (Years) Receive Rate Pay Rate
(Dollars in millions)(Dollars in millions)
Interest rate swaps:                  
Derivatives in fair value hedging relationships:                  
Receive fixed/pay variable$1,850
 $—
 $21
 2.6
 1.2% 1.2%$3,400
 2.5
 1.6% 2.2%
Receive variable/pay fixed318
 1
 9
 10.3
 1.2
 2.5
101
 8.3
 2.2
 2.4
Derivatives in cash flow hedging relationships:                  
Receive fixed/pay variable7,400
 20
 158
 5.9
 1.4
 1.1
8,825
 5.5
 1.7
 2.2
Total derivatives designated as hedging instruments$9,568
 $21
 $188
 5.4
 1.4% 1.2%$12,326
 4.7
 1.7% 2.2%

A portion of the cash flow hedging relationships designated above in Table 19 are forward starting, and therefore do not impact, or have limited impact to the estimated annual change in net interest income discussed in Table 18.
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. The majorityAll of interest rate 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 Regions’ Annual Report on Form 10-K for the year ended December 31, 20162017 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 1110 “Derivative Financial Instruments and Hedging Activities” to the consolidated financial statements for a tabular summary of Regions’ quarter-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 and balance sheet 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.

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MARKET RISK—PREPAYMENT RISK
Regions, like most financial institutions, is subject to changing prepayment speeds on mortgage-related assets under different interest rate environments. Prepayment risk is a significant risk to earnings and specifically to net interest income and other financing income. For example, mortgage loans and other financial assets may be prepaid by a debtor, so that the debtor may refinance its obligations at lower rates. As loans and other financial assets prepay in a falling rate environment, Regions must reinvest these funds in lower-yielding assets. Prepayments of assets carrying higher rates reduce Regions’ interest income and overall asset yields. Conversely, in a rising rate environment, these assets will prepay at a slower rate, resulting in opportunity cost by not having the cash flow to reinvest at higher rates. Prepayment risk can also impact the value of securities and the carrying value of equity. Regions’ greatest exposures to prepayment risks primarily rest in its mortgage-backed securities portfolio, the mortgage fixed-rate loan portfolio and the residential MSR, all of which tend to be sensitive to interest rate movements. Each of these assets is also exposed to prepayment risk due to factors which are not necessarily the result of interest rates, but rather due to changes in policies or programs related, either directly or indirectly, to the U.S. Government's governance over certain lending and financing within the mortgage market. Such policies can work to either encourage or discourage financing dynamics and represent a risk that is extremely difficult to forecast and may be the result of non-economic factors. The Company attempts to monitor and manage such exposures within reasonable expectations while acknowledging all such risks cannot be foreseen or avoided. Further, Regions has prepayment risk that would be reflected in non-interest income in the form of servicing income on the residential MSR. Regions actively monitors prepayment exposure as part of its overall net interest income and other financing income forecasting and interest rate risk management.
LIQUIDITY RISK
Liquidity is an important factor in the financial condition of Regions and affects Regions’ ability to meet the borrowing needs and deposit withdrawal requirements of its customers. In 2014, the FRB, the OCC and the FDIC released the final version of theThe liquidity coverage ratio rule which is designed to ensure that financial institutions have the necessary assets on hand to withstand short-term liquidity disruptions. See the "Liquidity Coverage Ratio" discussion included in the "Regulatory Requirements" section of Management's Discussion and Analysis for additional information.
Regions intends to fund its obligations primarily through cash generated from normal operations. In addition to these obligations, Regions also has obligations related to potential litigation contingencies. See Note 1413 “Commitments, Contingencies and Guarantees” to the consolidated financial statements for additional discussion of the Company’s funding requirements.
Assets, consisting principally of loans and securities, are funded by customer deposits, borrowed funds and stockholders’ equity. Regions’ goal in liquidity management is to satisfy the cash flow requirements of depositors and borrowers, while at the same time meeting the Company’s cash flow needs. Having and using various sources of liquidity to satisfy the Company’s funding requirements is important.
In order to ensure an appropriate level of liquidity is maintained, Regions performs specific procedures including scenario analyses and stress testing at the bank, holding company, and affiliate levels. 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 $1.0 billion at June 30, 2018. Compliance with the holding company cash requirements is reported to the Risk Committee of the Board on a quarterly basis. Regions also has minimum liquidity requirements for the Bank and subsidiaries. The Bank's funding and contingency planning does not currently include any reliance on short-term unsecured sources. Risk limits are established within the Company's Liquidity Risk Oversight Committee and ALCO, which regularly reviews compliance with the established limits.
The securities portfolio is one of Regions’ primary sources of liquidity. Proceeds from maturities and principal and interest payments of securities provide a constant flow of funds available for cash needs (see Note 3 “Securities”“Debt Securities” to the consolidated financial statements). The agency guaranteed mortgage-backed securities portfolio is another source of liquidity in various secured borrowing capacities.
Maturities in the loan portfolio also provide a steady flow of funds. Additional funds are provided from payments on consumer loans and one-to-four family residential first mortgage loans. Regions’ liquidity is further enhanced by its relatively stable customer deposit base. Liquidity needs can also be met by borrowing funds in state and national money markets, although Regions does not currently rely on short-term unsecured wholesale market funding.
The balance with the FRB is the primary component of the balance sheet line item, “interest-bearing deposits in other banks.” At June 30, 2017,2018, Regions had approximately $2.3$2.4 billion in cash on deposit with the FRB, a decreasean increase from approximately $3.6$1.9 billion at December 31, 2016.2017.
Regions’ borrowing availability with the FRB as of June 30, 2017,2018, based on assets pledged as collateral on that date, was $16.3$17.4 billion.
Regions’ financing arrangement with the FHLB adds additional flexibility in managing the Company's liquidity position. As of June 30, 2017,2018, Regions’ outstanding balance of FHLB borrowings was $3.9$6.6 billion and its total borrowing capacity from the FHLB totaled $14.1$17.1 billion. FHLB borrowing capacity is contingent on the amount of collateral pledged to the FHLB. Regions Bank pledged certain securities, commercial and real estate mortgage loans, residential first mortgage loans on one-to-four family

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dwellings and home equity lines of credit as collateral for the FHLB advances outstanding. Additionally, investment in FHLB stock is required in relation to the level of outstanding borrowings. Refer to Note 8 "Other Earning Assets" to the consolidated financial statements in the 2017 Annual Report on Form 10-K for additional information. The FHLB has been and is expected to continue to be a reliable and economical source of funding.
Regions maintains a shelf registration statement with the SEC that can be utilized by Regions to issue various debt and/or equity securities. Regions may also issue bank notes from time to time, either as part of a bank note program or as stand-alone issuances. Refer to Note 13 "Long-Term Borrowings" to the consolidated financial statements in the 20162017 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.
CREDIT RISK
Regions’ objective regarding credit risk is to maintain a high-quality credit portfolio that provides for stable credit costs with acceptable volatility through an economic cycle. Regions has a diversified loan portfolio in terms of product type, collateral and geography. See Table 2 for further details of each loan portfolio segment. See the “Portfolio Characteristics” section of the Annual Report on Form 10-K for the year ended December 31, 20162017 for a discussion of risk characteristics of each loan type.
INFORMATION SECURITY RISK
Regions faces a variety of operational risks, including information security risks. Information security risks, such as evolving and adaptive cyber-attacks,cyber attacks that are conducted regularly conducted against Regions and other large financial institutions to compromise or disable information systems, have generally increased in recent years. This trend is expected to continue for a number of reasons, including the proliferation of new technologies, the increasing use of mobile devices, more financial transactions conducted online, and the increasedincreasing sophistication and activities of organized crime, hackers, terrorists, nation-states, activists and other external parties or fraud on the part of employees.
Regions devotes significant financial and non-financial resources to identify and mitigate threats to the confidentiality, availability and integrity of its information systems. Regions regularly assesses the threats and vulnerabilities to its environment so it can update and maintain its systems and controls to effectively mitigate these risks. Layered security controls are designed to complement each other to protect customer information and transactions. Regions will continue to commit the resources necessary to mitigate these growing cyber risks, as well as continue to develop and enhance controls, processes and technology to protect its systems from attacks or unauthorized access. In addition, Regions maintains a strong commitment to a comprehensive risk management program that includes oversight of third-party relationships involvingwith vendors. The Board, through its various committees, is briefed at least quarterly on information security matters.
Regions participates in information sharing organizations such as FS-ISAC, to gather and share information amongwith peer banks and other financial institutions to better prepare and protect its information systems from attack. FS-ISAC is a nonprofit organization whose objective is to protect the financial services sector against cyber and physical threats and risk. It acts as a trusted third party that provides anonymity to allow members to submit threat, vulnerability and incident information in a non-attributable and trusted manner so information that would normally not be shared is instead made available to other members for the greater good of the membership. In addition to FS-ISAC, Regions is a member of BITS. BITS serves the financial community and its members by providing industry best practices on a variety of security and fraud topics.
Regions has contracts with vendors to provide denial of service mitigation. These vendors have also continued to commitcommitted the necessary resources to support Regions in the event of an attack.a cyber event. Even though Regions devotes significant resources to combat cyber security risks, there is no guarantee that these measures will provide absolute security. As an additional security measure, Regions has engaged a computer forensics firm and an industry-leading consulting firm on retainer in case of a breachcyber event. Furthermore, some of Regions' exposure with respect to data breaches may be offset by applicable insurance.
Even if Regions successfully prevents data breachescyber attacks on to its own network, the Company may still incur losses that result from customers' account information obtained through breaches of retailers' networks where customers have transacted business. The fraud losses, as well as the costs of investigations and re-issuing new customer cards, may impact Regions' financial results. In addition, Regions also relies on some vendors to provide certain components of its business infrastructure, and although Regions actively assesses and monitors the information security capabilities of these vendors, Regions' reliance on them may also increase exposure to information security risk.
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.

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PROVISION FOR LOAN LOSSES
The provision for loan losses is used to maintain the allowance for loan losses at a level that in management’s judgment is appropriate to absorb probable losses inherent in the portfolio at the balance sheet date. The provision for loan losses totaled $48$60 million in the second quarter of 20172018 compared to $72$48 million during the second quarter of 2016.2017. The provision for loan losses totaled $50 million for the first six months of 2018 compared to $118 million for the first six months of 2017 compared to $185 million for the first six months of 2016.2017. Refer to the “Allowance"Allowance for Credit Losses”Losses" section of Management's Discussion and Analysis for further detail.

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NON-INTEREST INCOME
Table 20—Non-Interest Income from Continuing Operations
Three Months Ended June 30 Quarter-to-Date Change 6/30/2017 vs. 6/30/2016Three Months Ended June 30 Quarter-to-Date Change 6/30/2018 vs. 6/30/2017
2017 2016 Amount Percent2018 2017 Amount Percent
(Dollars in millions)(Dollars in millions)
Service charges on deposit accounts$169
 $166
 $3
 1.8 %$175
 $169
 $6
 3.6 %
Card and ATM fees104
 99
 5
 5.1 %112
 104
 8
 7.7 %
Investment management and trust fee income57
 52
 5
 9.6 %
Investment management and trust income58
 57
 1
 1.8 %
Capital markets income57
 38
 19
 50.0 %
Mortgage income40
 46
 (6) (13.0)%37
 40
 (3) (7.5)%
Capital markets fee income and other38
 38
 —
 NM
Insurance commissions and fees36
 36
 —
 NM
Bank-owned life insurance22
 20
 2
 10.0 %18
 22
 (4) (18.2)%
Commercial credit fee income18
 18
 —
 NM
17
 18
 (1) (5.6)%
Investment services fee income15
 15
 —
 NM
19
 15
 4
 26.7 %
Securities gains (losses), net1
 6
 (5) (83.3)%1
 1
 —
 NM
Market value adjustments on employee benefit assets2
 8
 (6) (75.0)%(2) 2
 (4) (200.0)%
Other miscellaneous income23
 22
 1
 4.5 %20
 24
 (4) (16.7)%
$525
 $526
 $(1) (0.2)%$512
 $490
 $22
 4.5 %
Six Months Ended June 30 Year-to-Date Change 6/30/2017 vs. 6/30/2016Six Months Ended June 30 Year-to-Date Change 6/30/2018 vs. 6/30/2017
2017 2016 Amount Percent2018 2017 Amount Percent
(Dollars in millions)(Dollars in millions)
Service charges on deposit accounts$337
 $325
 $12
 3.7 %$346
 $337
 $9
 2.7 %
Card and ATM fees208
 194
 14
 7.2 %216
 208
 8
 3.8 %
Investment management and trust fee income113
 102
 11
 10.8 %
Investment management and trust income116
 113
 3
 2.7 %
Capital markets income107
 70
 37
 52.9 %
Mortgage income81
 84
 (3) (3.6)%75
 81
 (6) (7.4)%
Capital markets fee income and other70
 79
 (9) (11.4)%
Insurance commissions and fees73
 76
 (3) (3.9)%
Bank-owned life insurance41
 53
 (12) (22.6)%35
 41
 (6) (14.6)%
Commercial credit fee income36
 37
 (1) (2.7)%34
 36
 (2) (5.6)%
Investment services fee income31
 31
 —
 NM
36
 31
 5
 16.1 %
Insurance proceeds—
 3
 (3) (100.0)%
Securities gains (losses), net1
 1
 —
 NM
1
 1
 —
 NM
Market value adjustments on employee benefit assets7
 (4) 11
 (275.0)%(3) 7
 (10) (142.9)%
Other miscellaneous income37
 51
 (14) (27.5)%56
 39
 17
 43.6 %
$1,035
 $1,032
 $3
 0.3 %$1,019
 $964
 $55
 5.7 %
________
NM - Not Meaningful


Service charges on deposit accounts—Service charges on deposit accounts include non-sufficient fund fees and other service charges. The increases during the second quarter of 20172018 and the first six months of 20172018 compared to the same periods of 2016 was2017 were primarily due to checkingcustomer account growth and increases in non-sufficient fund fees.activity.
Card and ATM fees—Card and ATM fees include the combined amounts of credit card/bank card income and debit card and ATM related revenue. The increaseincreases in the second quarter of 2018 and first six months of 20172018 compared to the same periods of 2016 was primarily the result of increased checking accounts and related spending volume resulting in higher interchange income. Additionally, lower processing expenses contributed to the increases.
Investment management and trust fee income—Investment management and trust fee income represents income from asset management services provided to individuals, businesses and institutions. The increases in the second quarter of 2017 and the first six months of 2017 compared to the same periods of 2016 were primarily the result of increasesaccount growth and the related increase in assets under administration.commercial and consumer checkcard interchange income.

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Capital markets fee income and other——Capital markets fee income and other primarily relates to capital raising activities that includes securities underwriting and placement, loan syndication and placement, as well as foreign exchange, derivatives, merger and acquisition and other advisory services. Capital markets fee income and other remained flatfees. The increases in the second quarter of 2017 compared to the same period in 2016, but decreased in2018 and the first six months of 20172018 compared to the same periods in 2016. The decrease was

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2017 were primarily due to a reductionincreases in fees generatedincome from the placement of permanent financing for real estate customers and mergers and acquisitions advisory services. The decrease was partially offset by an increase in fees, obtainedcustomer interest rate swap income, loan syndication fees, and fees generated from debtsecurities underwriting activities.
Bank-owned life insurance—Bank-owned life insurance decreased in the first six months of 2017 compared to the same period in 2016 primarily due to reduced claims benefits and a gain on exchange of policies that was recognized in the first quarter of 2016.
Securities gains (losses), net—Net securities gains (losses) primarily result from the Company's asset/liability management process.placement.
Market value adjustments on employee benefit assets—Market value adjustments on employee benefit assets decreased in the second quarter and increased in the first six months of 20172018 compared to the same periods of 20162017 reflecting market value variations related to assets held for certain employee benefits. These adjustments are offset in salaries and employee benefits expense.
Other miscellaneous income—Other miscellaneous income includes net revenue from affordable housing, 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 decreasedincreased in the first six months of 20172018 compared to the same period of 20162017 primarily due to lower net revenue from affordable housing. In addition, operating lease impairment charges of $7 million in net gains associated with the sale of certain low income housing investments, a $6 million increase to the value of an equity method investment, and $5$4 million were recorded in leveraged lease termination gains, all of which occurred during the second and first quartersquarter of 2017, respectively.2018.

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NON-INTEREST EXPENSE

Table 21—Non-Interest Expense from Continuing Operations
Three Months Ended June 30 Quarter-to-Date Change 6/30/2017 vs. 6/30/2016Three Months Ended June 30 Quarter-to-Date Change 6/30/2018 vs 6/30/2017
2017 2016 Amount Percent2018 2017 Amount Percent
(Dollars in millions)(Dollars in millions)
Salaries and employee benefits$497
 $480
 $17
 3.5 %$511
 $470
 $41
 8.7 %
Net occupancy expense86
 86
 —
 NM
84
 85
 (1) (1.2)%
Furniture and equipment expense85
 79
 6
 7.6 %81
 84
 (3) (3.6)%
Outside services43
 39
 4
 10.3 %48
 43
 5
 11.6 %
Marketing22
 28
 (6) (21.4)%
FDIC insurance assessments26
 17
 9
 52.9 %25
 26
 (1) (3.8)%
Professional, legal and regulatory expenses28
 21
 7
 33.3 %33
 28
 5
 17.9 %
Marketing25
 22
 3
 13.6 %
Branch consolidation, property and equipment charges7
 22
 (15) (68.2)%1
 7
 (6) (85.7)%
Credit/checkcard expenses12
 14
 (2) (14.3)%
Visa class B shares expense10
 1
 9
 NM
Provision (credit) for unfunded credit losses(3) 11
 (14) (127.3)%(1) (3) 2
 (66.7)%
Visa class B shares expense1
 2
 (1) (50.0)%
Other miscellaneous expenses105
 116
 (11) (9.5)%94
 112
 (18) (16.1)%
$909
 $915
 $(6) (0.7)%$911
 $875
 $36
 4.1 %
 Six Months Ended June 30 Year-to-Date Change 6/30/2017 vs. 6/30/2016
 2017 2016 Amount Percent
 (Dollars in millions)
Salaries and employee benefits$975
 $955
 $20
 2.1 %
Net occupancy expense171
 172
 (1) (0.6)%
Furniture and equipment expense165
 157
 8
 5.1 %
Outside services83
 75
 8
 10.7 %
Marketing46
 53
 (7) (13.2)%
FDIC insurance assessments53
 42
 11
 26.2 %
Professional, legal and regulatory expenses50
 34
 16
 47.1 %
Branch consolidation, property and equipment charges8
 36
 (28) (77.8)%
Credit/checkcard expenses26
 27
 (1) (3.7)%
Provision (credit) for unfunded credit losses(2) 12
 (14) (116.7)%
Visa class B shares expense4
 4
 —
 NM
Other miscellaneous expenses207
 217
 (10) (4.6)%
 $1,786
 $1,784
 $2
 0.1 %
________
NM - Not Meaningful

 Six Months Ended June 30 Year-to-Date Change 6/30/2018 vs. 6/30/2017
 2018 2017 Amount Percent
 (Dollars in millions)
Salaries and employee benefits$1,006
 $931
 $75
 8.1 %
Net occupancy expense167
 168
 (1) (0.6)%
Furniture and equipment expense162
 163
 (1) (0.6)%
Outside services95
 83
 12
 14.5 %
FDIC insurance assessments49
 53
 (4) (7.5)%
Professional, legal and regulatory expenses60
 49
 11
 22.4 %
Marketing51
 46
 5
 10.9 %
Branch consolidation, property and equipment charges4
 8
 (4) (50.0)%
Visa class B shares expense12
 4
 8
 200.0 %
Provision (credit) for unfunded credit losses(5) (2) (3) 150.0 %
Other miscellaneous expenses194
 215
 (21) (9.8)%
 $1,795
 $1,718
 $77
 4.5 %
Salaries and employee benefits—Salaries and employee benefits are comprised ofinclude 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 for the second quarter and first six months of 20172018 compared to the same periods in 2016.2017. The primary drivers of the increaseincreases were higher severance charges, annual merit increases and a $10 million pension settlement charge that both occurred during the second quarter of 2017. The increase washigher production-based incentive expenses, partially offset by lower production-based incentivesstaffing reductions. Severance charges totaled $49 million and a reduction in staffing levels.$7 million for the first six months of 2018 and 2017, respectively. Full-time equivalent headcount

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from continuing operations decreased to 22,12620,326 at June 30, 20172018 from 22,44721,412 at June 30, 20162017, reflecting the impact of the Company's efficiency initiatives implemented as part of its three-year strategic plan.
Furniture and equipment expense—Furniture and equipment expense includes depreciation, maintenance and repairs, rent, taxes, and other expenses of equipment utilized by Regions and its affiliates. Furniture and equipment expense increased during the second quarter and the first six months of 2017 compared to the same periods of 2016 primarily due to the completion of certain capital investment projects.

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priorities.
Outside services—Outside services consists of expenses related to routine services provided by third parties, such as contract labor, servicing costs, data processing, loan pricing and research, data license purchases, data subscriptions, and check printing. Outside services increased during the second quarter and the first six months of 20172018 compared to the same periods of 20162017 primarily due to increased servicing costs related to point-of-sale lending through third parties.
FDIC insurance assessments—FDIC insurance assessments increased during the second quarterparties and the first six months of 2017 comparedadditional expenses recorded related to the same periods of 2016 due to the implementation of the FDIC assessment surcharge that went into effect in the third quarter of 2016, as well as the impact of a $6 million refund recognized in the second quarter of 2016.new Wealth Management platform.
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 the second quarter and the first six months of 20172018 compared to the same periods in 20162017 due to an increase in legal settlement expense. Also contributing to the increase was a legal recovery of $7 million that was recognized in the first quarter of 2016.higher consulting fees and litigation-related costs.
Branch consolidation, property and equipment charges—Visa class B shares expense—Branch consolidation, property and equipment charges include valuation adjustments relatedVisa class B share expense is associated with shares sold in a prior year. The Visa class B shares have restrictions tied to owned branches when the decision to close them is made. Accelerated depreciation and lease write-off charges are recorded for leased branches through and at the actual branch close date. Branch consolidation, property and equipment charges also include costs related to occupancy optimization initiatives.
Provision (credit) for unfunded credit losses—Provision (credit) for unfunded credit losses is the adjustment to the reserve for unfunded credit commitments. The provision for unfunded credit losses decreased duringfinalization of certain covered litigation. Visa class B shares expense increased in both the second quarter and the first six months of 20172018 compared to the same periods of 2016. The (credit) for unfunded credit losses was primarily attributable to2017 as a reductionresult of changes in the levelstatus of risk estimated for the unfunded credit commitments in the commercial and industrial portfolio.that litigation.
Other miscellaneous expenses—Other miscellaneous expenses include expenses related to communications, postage, supplies, certain credit-related costs, foreclosed property expenses and mortgage repurchase costs. Other miscellaneous expenses decreased during the second quarter and the first six months of 20172018 compared to the same periods of 20162017 primarily due to decreased valuation charges associated with other real estate and lower foreclosed property expenses.non-service cost related pension and other postretirement benefits expense resulting from a settlement charge recorded in the second quarter of 2017.
INCOME TAXES
The Company’s income tax expense from continuing operations for the three months ended June 30, 20172018 was $133$89 million compared to income tax expense of $115and $133 million for the same period in 2016,three months ended June 30, 2017, resulting in effective taxtaxes rates of 29.519.2 percent and 29.729.5 percent, respectively. Income tax expense from continuing operations for the six months ended June 30, 20172018 was $261$217 million compared to income tax expense of $228$260 million for the same period in 2016,2017, resulting in effective tax rates of 30.021.5 percent and 29.529.9 percent, respectively. BothThe effective tax rate is lower in both current periods were impacted due to Tax Reform enacted in December 2017 that reduced the Company’s permanentfederal statutory rate from 35 percent to 21 percent effective January 1, 2018. The Company expects the full-year effective tax adjustments offsetting a smaller proportionrate will range from 20 percent to 22 percent for 2018 excluding the impact of pre-tax income. This impact was more than offset in the quarter-to-date period and partially offset in the year-to-date period principally by net tax benefits related to share-based payments.unanticipated discrete items.
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, net tax benefits related to affordable housing investments, bank-owned life insurance, tax-exempt interest and tax-exempt interest.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 June 30, 2017,2018, the Company reported a net deferred tax asset of $212$222 million compared to a net deferred tax asset of $308$163 million at December 31, 2016.2017. The change isincrease in the net deferred tax asset was primarily due principally to an increase in the deferred tax asset related to the unrealized losses on available for sale securities and derivative instruments, and was partially offset by an increase in the deferred tax liability related to employee benefits and a decrease in the deferred tax asset related to employee benefits and a decrease in unrealized losses on securities availablethe allowance for sale.
Regions adopted new accounting guidance related to accounting for share-based payments effective January 1, 2017. The guidance eliminates additional paid-in capital pools and designates that all excess tax benefits and deficiencies should be recorded in income tax expense or benefit when the awards vest or are settled. As a result of adoption of the new guidance, expiring stock options resulted in an incremental increase to income tax expense of approximately $5 million in the second quarter of 2017. However, the increase in the second quarter of 2017 was offset by approximately $8 million of income tax benefits from the vesting of restricted and performance stock awards occurring during the quarter.loan losses.
DISCONTINUED OPERATIONS
On April 4, 2018, Regions entered into a stock purchase agreement to sell Regions Insurance Group, Inc. and related affiliates to BB&T Insurance Holdings, Inc. The transaction closed on July 2, 2018. Morgan Keegan was sold on April 2, 2012.
Regions' results from discontinued operations are presented in Note 2 "Discontinued Operations" to the consolidated financial statements. The three and six months ended June 30, 2017 loss2018 losses from discontinued operations waswere immaterial, and the six months ended June 30, 2017 income from discontinued operations was primarily the result of recoveries of legal expenses.expenses related to Morgan Keegan.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk
Reference is made to pages 8583 through 8886 included in Management’s Discussion and Analysis.
Item 4. Controls and Procedures
Based on an evaluation, as of the end of the period covered by this Form 10-Q, under the supervision and with the participation of Regions’ management, including its Chief Executive Officer and Chief Financial Officer, the Chief Executive Officer and Chief Financial Officer have concluded that Regions’ disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) are effective. During the quarter ended June 30, 2017,2018, there have been no changes in Regions’ internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Regions’ internal control over financial reporting.


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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information required by this item is set forth in Note 14,13, “Commitments, Contingencies and Guarantees” in the Notes to the Consolidated Financial Statements (Unaudited) in Part I. Item 1. of this report, which is incorporated by reference.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Information concerning Regions’ repurchases of its outstanding common stock during the three month period ended June 30, 2017,2018, is set forth in the following table:
Issuer Purchases of Equity Securities
Period
Total Number of
Shares Purchased
 
Average Price Paid
Per Share
 Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value of Shares That May Yet Be Purchased Under Publicly Announced Plans or Programs
April 1-30, 20176,400,187
 $13.77
 6,400,187
 $37,195,678
May 1-31, 20172,677,883
 $13.82
 2,677,883
 $146,328
June 1-30, 2017—
 $—
 —
 $146,328
Total 2nd Quarter9,078,070
 $13.78
 9,078,070
 $146,328
Period
Total Number of
Shares Purchased
 
Average Price Paid
Per Share
 Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value of Shares That May Yet Be Purchased Under Publicly Announced Plans or Programs
April 1-30, 20181,000,000
 $18.89
 1,000,000
 $216,625,445
May 1-31, 201811,436,681
 $18.92
 11,436,681
 $30,276
June 1-30, 2018—
 $—
 —
 $30,276
Total 2nd Quarter12,436,681
 $18.92
 12,436,681
 $30,276
On July 14, 2016,June 28, 2017, Regions' Board authorized a $640 million common stock repurchase plan, permitting repurchases from the beginning of the third quarter of 2016 through the second quarter of 2017. On October 12, 2016, Regions' Board authorized an additional $120 million repurchase, which increased the total amount authorized under the plan to $760 million. As of June 30, 2017, Regions had repurchased approximately 65.8 million shares of common stock at a total cost of approximately $760 million under this plan and concluded the plan during the second quarter of 2017.
Regions' Board authorized, effective June 28, 2017, a new $1.47 billion common stock repurchase plan, permitting repurchases from the beginning of the third quarter of 2017 through the second quarter of 2018. As of June 30, 2018, Regions had repurchased approximately 90.6 million shares of common stock at a total cost of approximately $1.5 billion under this plan and concluded the plan during the second quarter of 2018.
Regions' Board authorized, effective June 28, 2018, a new $2.031 billion common stock repurchase plan, permitting repurchases from the beginning of the third quarter of 2018 through the end of the second quarter of 2018.2019. The Company began to repurchase shares under this plan in the third quarter of 2017,2018, and as of August 3, 2017,7, 2018, Regions had additional repurchases ofrepurchased approximately 9.916.4 million shares of common stock at a total cost of approximately $144.9$308.8 million. All of these shares were immediately retired upon repurchase and, therefore, will not be included in treasury stock.
Restrictions on Dividends and Repurchase of Stock
Holders of Regions common stock are only entitled to receive such dividends as Regions’ Board may declare out of funds legally available for such payments. Furthermore, holders of Regions common stock are subject to the prior dividend rights of the holders of Regions preferred stock then outstanding.
Regions understands the importance of returning capital to shareholders. Management will continue to execute the capital planning process, including evaluation of the amount of the common dividend, with the Board and in conjunction with the regulatory supervisors, subject to the Company’s results of operations. Also, Regions is a BHC, and its ability to declare and pay dividends is dependent on certain federal regulatory considerations, including the guidelines of the Federal Reserve regarding capital adequacy and dividends.
On November 1, 2012, Regions completed the sale of 20 million depositary shares, each representing a 1/40th ownership interest in a share of its 6.375% Non-Cumulative Perpetual Preferred Stock, Series A, par value $1.00 per share (“Series A Preferred Stock”), with a liquidation preference of $1,000 per share of Series A Preferred Stock (equivalent to $25 per depositary share). The terms of the Series A Preferred Stock prohibit Regions from declaring or paying any dividends on any junior series of its capital stock, including its common stock, or from repurchasing, redeeming or acquiring such junior stock, unless Regions has declared and paid full dividends on the Series A Preferred Stock for the most recently completed dividend period. The Series A Preferred Stock is redeemable at Regions’ option in whole or in part, from time to time, on any dividend payment date on or after December 15, 2017, or in whole, but not in part, at any time within 90 days following a regulatory capital treatment event (as defined in the certificate of designations establishing the Series A Preferred Stock).
On April 29, 2014, Regions completed the sale of 20 million depositary shares, each representing a 1/40th ownership interest in a share of its 6.375% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series B, par value $1.00 per share (“Series B Preferred Stock”), with a liquidation preference of $1,000 per share of Series B Preferred Stock (equivalent to $25 per depositary share). The terms of the Series B Preferred Stock prohibit Regions from declaring or paying any dividends on any junior series of its capital stock, including its common stock, or from repurchasing, redeeming or acquiring such junior stock, unless Regions has declared and paid full dividends on the Series B Preferred Stock for the most recently completed dividend period. The Series B Preferred Stock is redeemable at Regions’ option in whole or in part, from time to time, on any dividend payment

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date on or after September 15, 2024, or in whole but not in part, at any time following a regulatory capital treatment event (as defined in the certificate of designations establishing the Series B Preferred Stock).

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Item 6. Exhibits
The following is a list of exhibits including items incorporated by reference
3.1 
Amended and Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to Form 10-Q Quarterly Report filed by registrant on August 6, 2012.
  
3.2 
Certificate of Designations, incorporated by reference to Exhibit 3.3 to Form 8-A filed by registrant on November 1, 2012.
   
3.3 
Certificate of Designations, incorporated by reference to Exhibit 3.3 to the Form 8-A filed by registrant on April 28, 2014.
  
3.4 
By-laws as amended and restated, incorporated by reference to Exhibit 3.2 to Form 8-K Current Report filed by registrant on July 27, 2017.25, 2018.
   
10.1 Amendment Number Three to the Regions Financial Corporation Post 2006 Supplemental Executive Retirement Plan Restated as of January 1, 2014.
10.2Amendment Number Two to the Regions Financial Corporation Supplemental 401(k) Plan Restated as of January 1, 2014.
10.32017
2018 Form of Notice and Form of Restricted Stock Unit Award Agreement under Regions Financial Corporation 2015 Long Term Incentive Plan.
   
10.410.2 2017
2018 Form of Notice and Form of Performance Stock Unit Award Agreement under Regions Financial Corporation 2015 Long Term Incentive Plan.
   
10.510.3 2017
2018 Form of Notice and Form of Performance Unit Award Agreement under Regions Financial Corporation 2015 Long Term Incentive Plan.
10.4
Form of Change-in-Control Agreement with executive officer John M. Turner, Jr., incorporated by reference to Exhibit 99.3 to Form 8-K Current Report filed by registrant on June 19, 2018.
10.5
Amendment Number Three to the Regions Financial Corporation Supplemental 401(k) Plan Restated as of January 1, 2014.
10.6
Form of Aircraft Time Sharing Agreement, incorporated by reference to Exhibit 99.2 to Form 8-K Current Report filed by registrant on June 19, 2018.
10.7
Regions Financial Corporation Use of Corporate Aircraft Policy, amended and restated June 2018.
   
12 
Computation of Ratio of Earnings to Fixed Charges.
  
31.1 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  
31.2 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  
32 
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  
101 Interactive Data File


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
   
DATE: August 4, 20178, 2018 Regions Financial Corporation
  
  
/S/    HARDIE B. KIMBROUGH, JR.        
  
Hardie B. Kimbrough, Jr.
Executive Vice President and Controller
(Chief Accounting Officer and Authorized Officer)


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