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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
  
Form10-Q
  
☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended
September 30, 2019March 31, 2020
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 every Interactive Data File required to be submitted 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 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 ☐ 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
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.01 par valueRFNew York Stock Exchange
Depositary Shares, each representing a 1/40th Interest in a Share of  
6.375% Non-Cumulative Perpetual Preferred Stock, Series ARF PRANew York Stock Exchange
Depositary Shares, each representing a 1/40th Interest in a Share of  
6.375% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series BRF PRBNew York Stock Exchange
Depositary Shares, each representing a 1/40th Interest in a Share of  
5.700% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series CRF PRCNew York Stock Exchange

The number of shares outstanding of each of the issuer’s classes of common stock was 964,639,091959,679,611 shares of common stock, par value $.01, outstanding as of November 4, 2019.May 5, 2020.

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REGIONS FINANCIAL CORPORATION
FORM 10-Q
INDEX
 
    Page
Forward-Looking Statements
Part I. Financial Information
Item 1. Financial Statements (Unaudited)  
  
Consolidated Balance Sheets
 
89
  
Consolidated Statements of Income
 
910
  
Consolidated Statements of Comprehensive Income
 
1011
  
Consolidated Statements of Changes in Equity
 
1112
  
Consolidated Statements of Cash Flows
 
1213
  
Notes to Consolidated Financial Statements
 
1314
Item 2. 
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
5752
Item 3. 
Quantitative and Qualitative Disclosures about Market Risk
 
9186
Item 4. 
Controls and Procedures
 
9186
   
Part II. Other Information  
Item 1. 
Legal Proceedings
 
9287
Item 1A.Risk Factors
87
Item 2. 
Unregistered Sales of Equity Securities and Use of Proceeds
 
9288
Item 6. 
Exhibits
 
9389
   
Signatures
 
9490

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Glossary of Defined Terms
Agencies - collectively, FNMA, FHLMC and GNMA.
ACL - Allowance for credit losses.
ALCO - Asset/Liability Management Committee.
Allowance - Allowance for credit losses.
ALLL - Allowance for loan and lease losses.
AOCI - Accumulated other comprehensive income.
ASC - Accounting Standards Codification.
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 policy division of the Bank Policy Institute.
Board - The Company’s Board of Directors.
CAP - Customer Assistance Program.
CARES Act - Coronavirus Aid, Relief, and Economic Security Act 
CCAR - Comprehensive Capital Analysis and Review.
CECL - Accounting Standards Update 2016-13, Measurement of Credit Losses on Financial Instruments ("Current Expected Credit Loss Approach.Losses")
CEO - Chief Executive Officer.
CET1 - Common Equity Tier 1.
CFPB - Consumer Financial Protection Bureau.
Company - Regions Financial Corporation and its subsidiaries.
COVID-19 - Coronavirus Disease 2019
CPI - Consumer price index.
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.
DFAST- Dodd-Frank Act Stress Test.
DPD - Days Past Due.
DUS - Fannie Mae Delegated Underwriting & Servicing.
EAD - Exposure-at-default.
EGRRCPA - The Economic Growth, Regulatory Relief, and Consumer Protection Act.
ERI - Eligible Retained Income.
FASB - Financial Accounting Standards Board.

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FDIC - The Federal Deposit Insurance Corporation.
Federal Reserve - The 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.
FICO - The Financing Corporation, established by the Competitive Equality Banking Act of
1987.
FICO scores - Personal credit scores based on the model introduced by the Fair Isaac Corporation.
FNMA - Federal National Mortgage Association, known as Fannie Mae.

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FRB - Federal Reserve Bank.
FS-ISAC - Financial Services - Information Sharing & Analysis Center.
GAAP - Generally Accepted Accounting Principles in the United States.
GDP - Gross Domestic Product.
GNMA - Government National Mortgage Association.
G-SIB- Globally Systematically Important Bank Holding Company.
HPI- Housing price index.
HUD - U.S. Department of Housing and Urban Development.
IPO - Initial public offering.
IRS - Internal Revenue Service.
LCR - Liquidity coverage ratio.
LGD- Loss given default.
LIBOR - London InterBank Offered Rate.
LLC - Limited Liability Company.
LROC - Liquidity Risk Oversight Committee.
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 Public Ruling.
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.
PD- Probability of default.
PPP - Paycheck Protection Program.
R&S- Reasonable and supportable.

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Raymond James - Raymond James Financial, Inc.
Regions Securities - Regions Securities LLC.
RETDR - Reasonable expectation of a troubled debt restructuring.
S&P 500- a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States.
SBA - Small Business Administration.
SCB - Stress Capital Buffer.
SEC - U.S. Securities and Exchange Commission.
SERP - Supplemental Executive Retirement Plan.
SLB- Stress leverage buffer.
SOFR - Secured Overnight Funding Rate.
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.
TTC- Through-the-cycle.
U.S. - United States.
U.S. Treasury - The United States Department of the Treasury.
UTB - Unrecognized tax benefits.
VIE - Variable interest entity.
Visa - The Visa, U.S.A. Inc. card association or its affiliates, collectively.
Volker Rule- Section 619 of the Dodd-Frank Act and regulations promulgated thereunder, as applicable.
wSTWF- Weighted short-term wholesale funding.

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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” as used herein mean collectively Regions Financial Corporation, a Delaware corporation, together 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. Further, statements about the potential effects of the COVID-19 pandemic on our businesses and financial results and conditions may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, third parties and us. 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, the risk identified in Part II Item 1A. "Risk Factors" of this Form 10-Q and those described below:
Current and future economic and market conditions in the United States generally or in the communities we serve (in particular the Southeastern United States), including the effects of possible declines in property values, increases in unemployment rates, financial market disruptions 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.
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.
The impact of pandemics, including the COVID-19 pandemic, on our businesses and financial results and conditions.
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 any future interpretations of or amendments to Tax Reform, which may impact our earnings, capital ratios and our ability to return capital to stockholders.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.
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.
Our inability to keep pace with technological changes could result in losing business to competitors.

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Changes in laws and regulations affecting our businesses, including 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 or future programs, or redeem preferred stock or other regulatory capital instruments, may impact our ability to return capital to stockholdersshareholders and market perceptions of us.

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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 of such tests and requirements.
Our ability to comply with applicable capital and liquidity requirements (including, among other things, the Basel III capital standards and the LCR rule)standards), 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 effects of any developments, changes or actions relating to 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.
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.
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 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 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 (specifically in the Southeastern United States), which may negatively affect our operations and/or our loan portfolios and increase our cost of conducting business. The severity and impact of future earthquakes, fires, hurricanes, tornadoes, droughts, floods and other weather-related events are difficult to predict and may be exacerbated by global climate change.
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 ability to identify and address cyber-security risks such as data security breaches, malware, “denial of service” attacks, “hacking” and identity theft, including account take-overs, a failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage to our systems, increased costs, losses, or adverse effects to our reputation.
Our ability to realize our adjusted efficiency ratio target as part ofachieve our expense management initiatives.

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Possible cessation or market replacement of LIBOR and the related effect on our LIBOR-based financial products and contracts, including, but not limited to, hedgingderivative products, debt obligations, deposits, investments, and loans.
Possible downgrades in our credit ratings or outlook could increase the costs of funding from capital markets.
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.
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.

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The effects of the failure of any component of our business infrastructure provided by a third party could disrupt our businesses, result in the disclosure of and/or misuse of confidential information or proprietary information, increase our costs, negatively affect our reputation, and cause losses.
Our ability to receive dividends from our subsidiaries could affect our liquidity and ability to pay dividends to shareholders.
Changes in accounting policies or procedures as may be required by the FASB or other regulatory agencies could materially affect our financial statements and how we report those results, and expectations and preliminary analyses relating to how such changes will affect our financial results could prove incorrect.
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 SEC, including the discussion under the “Risk Factors” section of Regions’ Annual Report on Form 10-K for the year ended December 31, 20182019 as filed with the SEC 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
 
 September 30, 2019 December 31, 2018
 (In millions, except share data)
Assets   
Cash and due from banks$1,966
 $2,018
Interest-bearing deposits in other banks3,101
 1,520
Debt securities held to maturity (estimated fair value of $1,424 and $1,460, respectively)1,375
 1,482
Debt securities available for sale22,986
 22,729
Loans held for sale (includes $497 and $251 measured at fair value, respectively)548
 304
Loans, net of unearned income82,786
 83,152
Allowance for loan losses(869) (840)
Net loans81,917
 82,312
Other earning assets1,760
 1,719
Premises and equipment, net1,944
 2,045
Interest receivable377
 375
Goodwill4,845
 4,829
Residential mortgage servicing rights at fair value307
 418
Other identifiable intangible assets, net111
 115
Other assets6,910
 5,822
Total assets$128,147
 $125,688
Liabilities and Equity   
Deposits:   
Non-interest-bearing$34,360
 $35,053
Interest-bearing59,945
 59,438
Total deposits94,305
 94,491
Borrowed funds:   
Short-term borrowings5,401
 1,600
Long-term borrowings9,128
 12,424
Total borrowed funds14,529
 14,024
Other liabilities2,732
 2,083
Total liabilities111,566
 110,598
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—1,500,000 and 1,000,000 shares, respectively1,310
 820
Common stock, authorized 3 billion shares, par value $.01 per share:   
Issued including treasury stock— 1,005,503,640 and 1,065,858,925 shares, respectively10
 11
Additional paid-in capital12,803
 13,766
Retained earnings3,534
 2,828
Treasury stock, at cost—41,032,676 and 41,032,676 shares, respectively(1,371) (1,371)
Accumulated other comprehensive income (loss), net295
 (964)
Total stockholders’ equity16,581
 15,090
Total liabilities and equity$128,147
 $125,688

 March 31, 2020 December 31, 2019
 (In millions, except share data)
Assets   
Cash and due from banks$2,101
 $1,598
Interest-bearing deposits in other banks3,154
 2,516
Debt securities held to maturity (estimated fair value of $1,380 and $1,372, respectively)1,296
 1,332
Debt securities available for sale (amortized cost of $22,905 and $22,332, respectively)23,775
 22,606
Loans held for sale (includes $500 and $439 measured at fair value, respectively)566
 637
Loans, net of unearned income88,098
 82,963
Allowance for loan losses(1,560) (869)
Net loans86,538
 82,094
Other earning assets1,722
 1,518
Premises and equipment, net1,935
 1,960
Interest receivable349
 362
Goodwill4,845
 4,845
Residential mortgage servicing rights at fair value254
 345
Other identifiable intangible assets, net98
 105
Other assets6,909
 6,322
Total assets$133,542
 $126,240
Liabilities and Equity   
Deposits:   
Non-interest-bearing$37,133
 $34,113
Interest-bearing62,897
 63,362
Total deposits100,030
 97,475
Borrowed funds:   
Short-term borrowings3,150
 2,050
Long-term borrowings10,105
 7,879
Total borrowed funds13,255
 9,929
Other liabilities2,925
 2,541
Total liabilities116,210
 109,945
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—1,500,000 shares1,310
 1,310
Common stock, authorized 3 billion shares, par value $.01 per share:   
Issued including treasury stock— 998,506,905 and 998,278,188 shares, respectively10
 10
Additional paid-in capital12,695
 12,685
Retained earnings3,364
 3,751
Treasury stock, at cost—41,032,676 shares at 2020 and 2019(1,371) (1,371)
Accumulated other comprehensive income (loss), net1,324
 (90)
Total shareholders’ equity17,332
 16,295
Total liabilities and equity$133,542
 $126,240
See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 Three Months Ended September 30 Nine Months Ended September 30
 2019 2018 2019 2018
 (In millions, except per share data)
Interest income, including other financing income on:       
Loans, including fees$970
 $919
 $2,943
 $2,651
Debt securities - taxable160
 155
 488
 465
Loans held for sale5
 4
 12
 11
Other earning assets12
 17
 46
 53
Operating lease assets13
 17
 42
 55
Total interest income, including other financing income1,160
 1,112
 3,531
 3,235
Interest expense on:       
Deposits116
 64
 349
 170
Short-term borrowings14
 8
 41
 15
Long-term borrowings83
 84
 281
 229
Total interest expense213
 156
 671
 414
Depreciation expense on operating lease assets10
 14
 33
 44
Total interest expense and depreciation expense on operating lease assets223
 170
 704
 458
Net interest income and other financing income937
 942
 2,827
 2,777
Provision for loan losses108
 84
 291
 134
Net interest income and other financing income after provision for loan losses829
 858
 2,536
 2,643
Non-interest income:       
Service charges on deposit accounts186
 179
 542
 525
Card and ATM fees114
 111
 343
 327
Investment management and trust fee income63
 59
 179
 175
Capital markets income36
 45
 117
 152
Mortgage income56
 32
 114
 107
Securities gains (losses), net—
 —
 (26) 1
Other103
 93
 285
 251
Total non-interest income558
 519
 1,554
 1,538
Non-interest expense:       
Salaries and employee benefits481
 473
 1,428
 1,479
Net occupancy expense80
 82
 242
 249
Furniture and equipment expense83
 81
 243
 243
Other227
 286
 679
 746
Total non-interest expense871
 922
 2,592
 2,717
Income from continuing operations before income taxes516
 455
 1,498
 1,464
Income tax expense107
 85
 305
 302
Income from continuing operations409
 370
 1,193
 1,162
Discontinued operations:       
Income (loss) from discontinued operations before income taxes—
 274
 —
 271
Income tax expense (benefit)—
 80
 —
 80
Income (loss) from discontinued operations, net of tax—
 194
 —
 191
Net income$409
 $564
 $1,193
 $1,353
Net income from continuing operations available to common shareholders$385
 $354
 $1,137
 $1,114
Net income available to common shareholders$385
 $548
 $1,137
 $1,305
Weighted-average number of shares outstanding:       
Basic988
 1,086
 1,005
 1,111
Diluted991
 1,095
 1,010
 1,121
Earnings per common share from continuing operations:       
Basic$0.39
 $0.33
 $1.13
 $1.00
Diluted$0.39
 $0.32
 $1.13
 $0.99
Earnings per common share:       
Basic$0.39
 $0.50
 $1.13
 $1.18
Diluted$0.39
 $0.50
 $1.13
 $1.16
See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 Three Months Ended September 30
 2019 2018
 (In millions)
Net income$409
 $564
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 ($1) tax effect, respectively)(1) (2)
Net change in unrealized losses on securities transferred to held to maturity, net of tax1
 2
Unrealized gains (losses) on securities available for sale:   
Unrealized holding gains (losses) arising during the period (net of $45 and ($35) tax effect, respectively)133
 (103)
Less: reclassification adjustments for securities gains (losses) realized in net income (net of zero and zero tax effect, respectively)—
 (1)
Net change in unrealized gains (losses) on securities available for sale, net of tax133
 (102)
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:   
Unrealized holding gains (losses) on derivatives arising during the period (net of $56 and ($15) tax effect, respectively)167
 (44)
Less: reclassification adjustments for gains (losses) on derivative instruments realized in net income (net of ($2) and zero tax effect, respectively)(5) —
Net change in unrealized gains (losses) on derivative instruments, net of tax172
 (44)
Defined benefit pension plans and other post employment benefits:   
Net actuarial gains (losses) arising during the period (net of zero and zero tax effect, respectively)(1) (1)
Less: reclassification adjustments for amortization of actuarial loss and settlements realized in net income (net of ($3) and ($2) tax effect, respectively)(11) (6)
Net change from defined benefit pension plans and other post employment benefits, net of tax10
 5
Other comprehensive income (loss), net of tax316
 (139)
Comprehensive income$725
 $425
    
 Nine Months Ended September 30
 2019 2018
 (In millions)
Net income$1,193
 $1,353
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 ($2) tax effect, respectively)(4) (5)
Net change in unrealized losses on securities transferred to held to maturity, net of tax4
 5
Unrealized gains (losses) on securities available for sale:   
Unrealized holding gains (losses) arising during the period (net of $209 and ($162) tax effect, respectively)618
 (479)
Less: reclassification adjustments for securities gains (losses) realized in net income (net of ($6) and zero tax effect, respectively)(20) —
Net change in unrealized gains (losses) on securities available for sale, net of tax638
 (479)
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:   
Unrealized holding gains (losses) on derivatives arising during the period (net of $194 and ($60) tax effect, respectively)576
 (178)
Less: reclassification adjustments for gains (losses) on derivative instruments realized in net income (net of ($6) and $4 tax effect, respectively)(17) 12
Net change in unrealized gains (losses) on derivative instruments, net of tax593
 (190)
Defined benefit pension plans and other post employment benefits:   
Net actuarial gains (losses) arising during the period (net of zero and zero tax effect, respectively)(1) (2)
Less: reclassification adjustments for amortization of actuarial loss and settlements realized in net income (net of ($8) and ($6) tax effect, respectively)(25) (21)
Net change from defined benefit pension plans and other post employment benefits, net of tax24
 19
Other comprehensive income (loss), net of tax1,259
 (645)
Comprehensive income$2,452
 $708
 Three Months Ended March 31
 2020 2019
 (In millions, except per share data)
Interest income on:   
Loans, including fees$903
 $981
Debt securities158
 165
Loans held for sale5
 3
Other earning assets13
 22
Total interest income1,079
 1,171
Interest expense on:   
Deposits84
 108
Short-term borrowings8
 13
Long-term borrowings59
 102
Total interest expense151
 223
Net interest income928
 948
Provision for credit losses (1)
373
 91
Net interest income after provision for credit losses (1)
555
 857
Non-interest income:   
Service charges on deposit accounts178
 175
Card and ATM fees105
 109
Investment management and trust fee income62
 57
Capital markets income9
 42
Mortgage income68
 27
Securities gains (losses), net—
 (7)
Other63
 99
Total non-interest income485
 502
Non-interest expense:   
Salaries and employee benefits467
 478
Net occupancy expense79
 82
Furniture and equipment expense83
 76
Other207
 224
Total non-interest expense836
 860
Income before income taxes204
 499
Income tax expense42
 105
Net income$162
 $394
Net income available to common shareholders$139
 $378
Weighted-average number of shares outstanding:   
Basic957
 1,019
Diluted961
 1,028
Earnings per common share:   
Basic$0.15
 $0.37
Diluted$0.14
 $0.37
_________
(1) Upon adoption of CECL on January 1, 2020, the provision for credit losses is the sum of the provision for loans losses and the provision for unfunded credit commitments. Prior to the adoption of CECL, the provision for unfunded commitments was included in other non-interest expense.

See notes to consolidated financial statements.

10

Table of Contents


REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITYCOMPREHENSIVE INCOME
 Stockholders' Equity  
 Preferred Stock Common Stock 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Treasury
Stock,
At Cost
 
Accumulated
Other
Comprehensive
Income (Loss), Net
 Total 
Non-
controlling
Interest
 Shares Amount Shares Amount      
 (In millions, except per share data)
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—
 —
 —
 —
 —
 414
 —
 —
 414
 —
Other comprehensive income (loss), net of tax—
 —
 —
 —
 —
 —
 —
 (402) (402) —
Cash dividends declared—
 —
 —
 —
 —
 (101) —
 —
 (101) —
Preferred stock dividends—
 —
 —
 —
 —
 (16) —
 —
 (16) —
Common stock transactions:                   
Impact of share repurchases—
 —
 (12) —
 (235) —
 —
 —
 (235) —
Impact of stock transactions under compensation plans, net—
 —
 1
 —
 16
 —
 —
 —
 16
 —
BALANCE AT MARCH 31, 20181
 $820
 1,122
 $12
 $15,639
 $1,923
 $(1,377) $(1,151) $15,866
 $—
                    
BALANCE AT APRIL 1, 20181
 $820
 1,122
 $12
 $15,639
 $1,923
 $(1,377) $(1,151) $15,866
 $—
Net income—
 —
 —
 —
 —
 375
 —
 —
 375
 —
Other comprehensive income (loss), net of tax—
 —
 —
 —
 —
 —
 —
 (104) (104) —
Cash dividends declared—
 —
 —
 —
 —
 (100) —
 —
 (100) —
Preferred stock dividends—
 —
 —
 —
 —
 (16) —
 —
 (16) —
Common stock transactions:                   
Impact of share repurchases—
 —
 (13) —
 (235) —
 —
 —
 (235) —
Impact of stock transactions under compensation plans, net and other—
 —
 5
 —
 (15) —
 6
 —
 (9) —
BALANCE AT JUNE 30, 20181
 $820
 1,114
 $12
 $15,389
 $2,182
 $(1,371) $(1,255) $15,777
 $—
                    
BALANCE AT JULY 1, 20181
 $820
 1,114
 $12
 $15,389
 $2,182
 $(1,371) $(1,255) $15,777
 $—
Net income—
 —
 —
 —
 —
 564
 —
 —
 564
 —
Other comprehensive income (loss), net of tax—
 —
 —
 —
 —
 —
 —
 (139) (139) —
Cash dividends declared—
 —
 —
 —
 —
 (148) —
 —
 (148) —
Preferred stock dividends—
 —
 —
 —
 —
 (16) —
 —
 (16) —
Common stock transactions:                  —
Impact of share repurchases—
 —
 (59) (1) (1,281) —
 —
 —
 (1,282) —
Impact of stock transactions under compensation plans, net and other—
 —
 —
 —
 14
 —
 —
 —
 14
 —
BALANCE AT SEPTEMBER 30, 20181
 $820
 1,055
 $11
 $14,122
 $2,582
 $(1,371) $(1,394) $14,770
 $—
                    
BALANCE AT JANUARY 1, 20191
 $820
 1,025
 $11
 $13,766
 $2,828
 $(1,371) $(964) $15,090
 $—
Cumulative effect from change in accounting guidance—
 —
 —
 —
 —
 2
 —
 —
 2
 —
Net income—
 —
 —
 —
 —
 394
 —
 —
 394
 —
Other comprehensive income (loss), net of tax—
 —
 —
 —
 —
 —
 —
 366
 366
 —
Cash dividends declared—
 —
 —
 —
 —
 (142) —
 —
 (142) —
Preferred stock dividends—
 —
 —
 —
 —
 (16) —
 —
 (16) —
Common stock transactions:                   
Impact of share repurchases—
 —
 (12) —
 (190) —
 —
 —
 (190) —
Impact of stock transactions under compensation plans, net—
 —
 —
 —
 8
 —
 —
 —
 8
 —
Other—
 —
 —
 —
 —
 —
 —
 —
 —
 11
BALANCE AT MARCH 31, 20191
 $820
 1,013
 $11
 $13,584
 $3,066
 $(1,371) $(598) $15,512
 $11
                    
BALANCE AT APRIL 1, 20191
 $820
 1,013
 $11
 $13,584
 $3,066
 $(1,371) $(598) $15,512
 $11
Net income—
 —
 —
 —
 —
 390
 —
 —
 390
 —
Other comprehensive income (loss), net of tax—
 —
 —
 —
 —
 —
 —
 577
 577
 —
Cash dividends declared—
 —
 —
 —
 —
 (141) —
 —
 (141) —
Preferred stock dividends—
 —
 —
 —
 —
 (16) —
 —
 (16) —
Preferred stock transactions:                   
Net proceeds from issuance of 500 thousand shares of Series C, fixed to floating rate, non-cumulative perpetual preferred stock, including related surplus1
 490
 —
 —
 —
 —
 —
 —
 490
 —
Common stock transactions:                   
Impact of share repurchases—
 —
 (13)   (190) —
 —
 —
 (190) —
Impact of stock transactions under compensation plans, net—
 —
 4
 —
 (14) —
 —
 —
 (14) —
Other—
 —
 —
 —
 —
 —
 —
 —
 —
 (11)
BALANCE AT JUNE 30, 20192
 $1,310
 1,004
 $11
 $13,380
 $3,299
 $(1,371) $(21) $16,608
 $—
                    
BALANCE AT JULY 1, 20192
 $1,310
 1,004
 $11
 $13,380
 $3,299
 $(1,371) $(21) $16,608
 $—
Net income—
 —
 —
 —
 —
 409
 —
 —
 409
 —
Other comprehensive income (loss), net of tax—
 —
 —
 —
 —
 —
 —
 316
 316
 —
Cash dividends declared—
 —
 —
 —
 —
 (150) —
 —
 (150) —
Preferred stock dividends—
 —
 —
 —
 —
 (24) —
 —
 (24) —
Common stock transactions:                   
Impact of share repurchases—
 —
 (40) (1) (588) —
 —
 —
 (589) —
Impact of stock transactions under compensation plans, net—
 —
 —
 —
 11
 —
 —
 —
 11
 —
BALANCE AT SEPTEMBER 30, 20192
 $1,310
 964
 $10
 $12,803
 $3,534
 $(1,371) $295
 $16,581
 $—


 Three Months Ended March 31
 2020 2019
 (In millions)
Net income$162
 $394
Other comprehensive income, net of tax:   
Unrealized losses on securities transferred to held to maturity:   
Unrealized losses on securities transferred to held to maturity during the period (net of zero and zero tax effect, respectively)—
 —
Less: reclassification adjustments for amortization of unrealized losses on securities transferred to held to maturity (net of zero and zero tax effect, respectively)(1) (1)
Net change in unrealized losses on securities transferred to held to maturity, net of tax1
 1
Unrealized gains (losses) on securities available for sale:   
Unrealized holding gains (losses) arising during the period (net of $151 and $77 tax effect, respectively)446
 240
Less: reclassification adjustments for securities gains (losses) realized in net income (net of zero and ($2) tax effect, respectively)—
 (5)
Net change in unrealized gains (losses) on securities available for sale, net of tax446
 245
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:   
Unrealized holding gains (losses) on derivatives arising during the period (net of $325 and $36 tax effect, respectively)966
 107
Less: reclassification adjustments for gains (losses) on derivative instruments realized in net income (net of $2 and ($2) tax effect, respectively)7
 (6)
Net change in unrealized gains (losses) on derivative instruments, net of tax959
 113
Defined benefit pension plans and other post employment benefits:   
Net actuarial gains (losses) arising during the period (net of zero and zero tax effect, respectively)—
 —
Less: reclassification adjustments for amortization of actuarial loss and settlements realized in net income (net of ($3) and ($2) tax effect, respectively)(8) (7)
Net change from defined benefit pension plans and other post employment benefits, net of tax8
 7
Other comprehensive income, net of tax1,414
 366
Comprehensive income$1,576
 $760
See notes to consolidated financial statements.

11

Table of Contents


REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

CHANGES IN SHAREHOLDERS’ EQUITY
 Shareholders' Equity  
 Preferred Stock Common Stock 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Treasury
Stock,
At Cost
 
Accumulated
Other
Comprehensive
Income (Loss), Net
 Total 
Non-
controlling
Interest
 Shares Amount Shares Amount      
 (In millions, except per share data)
BALANCE AT JANUARY 1, 20191
 $820
 1,025
 $11
 $13,766
 $2,828
 $(1,371) $(964) $15,090
 $—
Cumulative effect from change in accounting guidance—
 —
 —
 —
 —
 2
 —
 —
 2
 —
Net income—
 —
 —
 —
 —
 394
 —
 —
 394
 —
Other comprehensive income (loss), net of tax—
 —
 —
 —
 —
 —
 —
 366
 366
 —
Cash dividends declared—
 —
 —
 —
 —
 (142) —
 —
 (142) —
Preferred stock dividends—
 —
 —
 —
 —
 (16) —
 —
 (16) —
Common stock transactions:                   
Impact of share repurchases—
 —
 (12) —
 (190) —
 —
 —
 (190) —
Impact of stock transactions under compensation plans, net—
 —
 —
 —
 8
 —
 —
 —
 8
 —
Other—
 —
 —
 —
 —
 —
 —
 —
 —
 11
BALANCE AT MARCH 31, 20191
 $820
 1,013
 $11
 $13,584
 $3,066
 $(1,371) $(598) $15,512
 $11
                    
BALANCE AT JANUARY 1, 20202
 $1,310
 957
 $10
 $12,685
 $3,751
 $(1,371) $(90) $16,295
 $—
Cumulative effect from change in accounting guidance—
 —
 —
 —
 —
 (377) —
 —
 (377) —
Net income—
 —
 —
 —
 —
 162
 —
 —
 162
 —
Other comprehensive income (loss), net of tax—
 —
 —
 —
 —
 —
 —
 1,414
 1,414
 —
Cash dividends declared—
 —
 —
 —
 —
 (149) —
 —
 (149) —
Preferred stock dividends—
 —
 —
 —
 —
 (23) —
 —
 (23) —
Common stock transactions:                   
Impact of stock transactions under compensation plans, net—
 —
 —
 —
 10
 —
 —
 —
 10
 —
BALANCE AT MARCH 31, 20202
 $1,310
 957
 $10
 $12,695
 $3,364
 $(1,371) $1,324
 $17,332
 $—
 Nine Months Ended September 30
 2019 2018
 (In millions)
Operating activities:   
Net income$1,193
 $1,353
Adjustments to reconcile net income to net cash from operating activities:   
Provision for loan losses291
 134
Depreciation, amortization and accretion, net321
 355
Securities (gains) losses, net26
 (1)
(Gain) on sale of business—
 (281)
Deferred income tax expense7
 146
Originations and purchases of loans held for sale(2,594) (2,419)
Proceeds from sales of loans held for sale2,428
 2,480
(Gain) loss on sale of loans, net(92) (55)
Net change in operating assets and liabilities:   
Other earning assets(74) 46
Interest receivable and other assets(129) (39)
Other liabilities551
 (432)
Other156
 (16)
Net cash from operating activities2,084
 1,271
Investing activities:   
Proceeds from maturities of debt securities held to maturity105
 132
Proceeds from sales of debt securities available for sale4,762
 186
Proceeds from maturities of debt securities available for sale2,619
 2,569
Purchases of debt securities available for sale(7,165) (2,760)
Net proceeds from (payments for) bank-owned life insurance(4) (3)
Proceeds from sales of loans405
 290
Purchases of loans(810) (403)
Purchases of mortgage servicing rights(19) (37)
Net change in loans456
 (2,036)
Net purchases of other assets(127) (129)
Proceeds from disposition of business, net of cash transferred—
 357
Net cash from investing activities222
 (1,834)
Financing activities:   
Net change in deposits(186) (3,634)
Net change in short-term borrowings3,801
 2,750
Proceeds from long-term borrowings21,274
 10,800
Payments on long-term borrowings(24,675) (7,700)
Net proceeds from issuance of preferred stock490
 —
Cash dividends on common stock(426) (304)
Cash dividends on preferred stock(56) (48)
Repurchases of common stock(969) (1,752)
Taxes paid related to net share settlement of equity awards(29) (34)
Other(1) (1)
Net cash from financing activities(777) 77
Net change in cash and cash equivalents1,529
 (486)
Cash and cash equivalents at beginning of year3,538
 3,981
Cash and cash equivalents at end of period$5,067
 $3,495


See notes to consolidated financial statements.

12

Table of Contents


REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months Ended March 31
 2020 2019
 (In millions)
Operating activities:   
Net income$162
 $394
Adjustments to reconcile net income to net cash from operating activities:   
Provision for credit losses (1)
373
 91
Depreciation, amortization and accretion, net100
 105
Securities (gains) losses, net—
 7
Deferred income tax (benefit) expense(69) 19
Originations and purchases of loans held for sale(1,034) (510)
Proceeds from sales of loans held for sale1,140
 515
(Gain) loss on sale of loans, net(33) (25)
Net change in operating assets and liabilities:   
Other earning assets(212) 90
Interest receivable and other assets41
 (381)
Other liabilities221
 222
Other98
 51
Net cash from operating activities787
 578
Investing activities:   
Proceeds from maturities of debt securities held to maturity36
 30
Proceeds from sales of debt securities available for sale31
 139
Proceeds from maturities of debt securities available for sale844
 799
Purchases of debt securities available for sale(1,308) (1,241)
Net proceeds from (payments for) bank-owned life insurance(1) (2)
Proceeds from sales of loans85
 185
Purchases of loans(447) (171)
Purchases of mortgage servicing rights(4) (8)
Net change in loans(4,473) (1,383)
Net purchases of other assets(43) (36)
Net cash from investing activities(5,280) (1,688)
Financing activities:   
Net change in deposits2,555
 1,229
Net change in short-term borrowings1,100
 —
Proceeds from long-term borrowings3,950
 12,025
Payments on long-term borrowings(1,799) (11,525)
Cash dividends on common stock(149) (143)
Cash dividends on preferred stock(23) (16)
Repurchases of common stock—
 (190)
Other—
 (1)
Net cash from financing activities5,634
 1,379
Net change in cash and cash equivalents1,141
 269
Cash and cash equivalents at beginning of year4,114
 3,538
Cash and cash equivalents at end of period$5,255
 $3,807
_________
(1) Upon adoption of CECL on January 1, 2020, the provision for credit losses is now the sum of the provision for loans losses and the provision for unfunded credit commitments. Prior to the adoption, the provision for unfunded commitments is included in other non-interest expense.
See notes to consolidated financial statements.

13

Table of Contents


REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three andNine Months Ended September 30,March 31, 2020 and 2019 and 2018
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, 2018.2019. Regions has evaluated all subsequent events for potential recognition and disclosure through the filing date of this Form 10-Q.
During 2019,2020, the Company adopted new accounting guidance related to several topics.topics, including CECL. See Note 512 and Note 14below for related disclosures.
CECL
On January 1, 2020, the Company adopted CECL, which replaces the incurred loss methodology with an expected loss methodology. The measurement of expected losses under CECL is applicable to financial assets measured at amortized cost, including loan receivables and debt securities held to maturity. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with accounting guidance on leases. In addition, CECL required changes to the accounting for debt securities available for sale. The adoption of CECL had a material impact to the allowance for credit losses (see below). The cumulative effect of the retrospective application for all items in scope was a reduction to retained earnings of $377 million, net of taxes, $375 million of which was attributable to the allowance and $2 million of which was attributable to other financial assets.
DEBT SECURITIES
The company adopted CECL using the prospective transition approach for debt securities for which OTTI had previously been recognized. As a result, the amortized cost basis remained the same before and after adoption. Recoveries of amounts previously written off relating to improvements in cash flows after January 1, 2020 will be recorded in earnings when received.
For debt securities available for sale, CECL eliminates the concept of OTTI and instead requires entities to determine if impairment is related to credit loss or non-credit loss. In making the assessment of whether a loss is from credit or other factors, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows is less than the amortized cost basis, a credit loss exists and an allowance is created, limited by the amount that the fair value is less than the amortized cost basis.
Subsequent activity related to the credit loss component (e.g. write-offs, recoveries) is recognized as part of the allowance for credit losses on debt securities available for sale. Securities held to maturity are evaluated under the allowance for credit losses model. For securities which have an expectation of zero nonpayment of the amortized cost basis (e.g. U.S. Treasury securities or agency securities), the expected credit loss is zero.
LOANS
Loans held for investment are carried at amortized cost (the principal amount outstanding, net of premiums, discounts, unearned income and deferred loan fees and costs). Regions elected to exclude accrued interest receivable balances from the amortized cost basis. Interest receivable is included as a separate line item on the balance sheets. Additionally, Regions elected to not estimate an allowance on interest receivable balances because the Company has non-accrual policies in place that provide for the accrual of interest to cease on a timely basis when all contractual amounts due are not expected. See more information about Regions' non-accrual policies in Note 1 of Regions' Annual Report on Form 10-K for the year ended December 31, 2019.

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TDRs are loans in which the borrower is experiencing financial difficulty at the time of restructuring, and Regions has granted a concession to the borrower. TDRs are undertaken in order to improve the likelihood of recovery on the loan and may take the form of modifications to the stated interest rate such that it is lower than the current market rate for new debt with similar risk, other modifications to the structure of the loan that fall outside of normal underwriting policies and procedures, or in limited circumstances forgiveness of principal and/or interest. Insignificant delays in payments are not considered TDRs. Prior to the adoption of CECL on January 1, 2020, all loans with the TDR designation were considered to be impaired, even if they were accruing. With the adoption of CECL on January 1, 2020, the definition of impaired loans was removed from accounting guidance.
ALLOWANCE
Regions adopted CECL using the modified retrospective method for loans held for investment, net investment in lease assets, and off-balance sheet credit exposures. Results for reporting periods beginning January 1, 2020 are presented under CECL while prior periods' amounts continue to be reported in accordance with previously applicable GAAP. The cumulative effect of the retrospective application for loans and unfunded commitments was an increase in the allowance of $501 million and a reduction to retained earnings of $375 million, with the difference being an increase to deferred tax assets.
Upon the adoption of CECL, the allowance is intended to cover expected credit losses over the contractual life of loans measured at amortized cost, including unfunded commitments. Management’s measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and R&S forecasts that affect the collectability of the reported amount. For periods beyond which Regions makes or obtains such R&S forecasts, Regions reverts to historical credit loss information. Regions maintains an appropriate and prudent level of allowance that falls within an acceptable range of estimated losses, measured in accordance with GAAP. Management's determination of the appropriateness of the allowance is based on many factors, including, but not limited to, an evaluation and rating of the loan portfolio; historical loan loss experience; current economic conditions; collateral values securing loans; levels of problem loans; volume, growth, quality and composition of the loan portfolio; regulatory guidance; R&S economic forecasts; and other relevant factors. Changes in any of these factors, assumptions, or the availability of new information, could require that the allowance be adjusted in future periods, perhaps materially. Loss forecasting models are built on historical loss information and then applied to the current portfolio. Outputs from the loss forecasting models in combination with Regions' qualitative framework, and other analyses are used to inform management in its estimation of Regions' expected credit losses. Actual losses could vary, perhaps materially, from management’s estimates. The entire allowance is available to cover all charge-offs that arise from the loan portfolio.
Regions' allowance calculation is a significant estimate. Regions uses its best judgment to assess economic conditions and loss data in estimating the CECL allowance and these estimates are subject to periodic refinement based on changes in underlying external or internal data. Therefore, assumptions and decisions driving the estimate may change as conditions change. These assumptions and estimates are detailed below.
R & S forecast period
During the two-year R&S forecast period, Regions incorporates forward-looking information by utilizing its internally developed and approved Base economic forecast. The scenario is developed by the Chief Economist and approved through a formal governance process. The Base forecast considers market forward/consensus information and is consistent with the Company's organization-wide economic outlook. When appropriate, additional scenarios, including externally created scenarios, are considered as part of the qualitative framework.
Reversion period
Regions utilizes an exponential reversion approach that reverts to TTC rates derived from the simple average of all historical quarterly observations for PD, LGD, EAD and prepayment rates. The length of the reversion period differs by class of financing receivable.
Historical loss period
Regions does not adjust historical loss information for existing economic conditions or expectations of future economic conditions for periods that are beyond the R&S period. Regions utilizes internal historical loss information; however, there are certain loan portfolios that also benefit from the use of external or other reference data due to identified limitations with internal historical data.
Contractual life
Regions estimates expected credit losses over the contractual life of a loan. Regions defines contractual life for non-revolving loans as contractual maturity, net of estimated prepayments and excluding expected extensions, renewals and modifications unless 1) Regions has a reasonable expectation at the reporting date that it will execute a TDR with the borrower ("RETDR") or 2) extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by Regions.


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RETDR
Regions individually identifies commercial and investor real estate loans for inclusion as RETDRs. The identification criteria are based on internal risk ratings and time to maturity. Regions typically does not identify consumer loans as RETDRs due to the insignificant period between initial contact with a customer regarding a loan modification and when a TDR modification is consummated.
The RETDR status extends the life of the loan past the contractual maturity and includes the allowance impact of interest rate concessions. Loans identified as RETDRs will be treated consistently from a modeling/reserving perspective as loans identified as TDRs.
Contractual term extensions (borrower versus lender option to renew)
Regions' consumer loan contracts do not permit automatic extensions or unilateral customer extensions, and Regions retains the right to approve or deny any extension requested from the borrower. As a result, extensions and renewal options are not included in the life of consumer loans for the purposes of calculating the allowance. Similarly, Regions does not include extension and renewal options in the life of commercial loans for the purposes of calculating the allowance, unless it is a RETDR. Most commercial products do not offer borrowers a unilateral right to renew or extend.
Contractual life of credit card receivables
Regions estimates the life of credit card receivables based on the amount and timing of payments expected to be collected. Regions' credit card allowance estimate only considers the amount of debt outstanding at the reporting date (the current position) because undrawn balances are unconditionally cancellable and therefore are not considered. Regions classifies credit card accounts into one of three payment patterns: dormant, transacting or revolving. The dormant accounts are idle, carry no balance, and do not contribute to the allowance. The transacting account holders tend to pay the entire balance due every month and are, therefore, subject to practically no interest charges. For transactor accounts, the current position balance is expected to be paid off in one quarter. The revolving accounts tend to be subject to interest charges, and their current position balance liquidates over time. Regions' credit card portfolio is comprised primarily of revolvers.
Collateral-dependent loans
Regions' collateral-dependent consumer loans are loans secured by collateral (primarily real estate) that meet the partial charge-down requirements disclosed in Note 1 of Regions' Annual Report on Form 10-K for the year ended December 31, 2019. Regions evaluates significant commercial and investor loans that are in financial difficulty and secured by collateral to determine if they are collateral dependent.
For collateral-dependent loans, CECL requires an entity to measure the expected credit losses based on the fair value of the collateral at the reporting date when the entity determines that foreclosure is probable. Additionally, CECL allows a fair value of collateral practical expedient as a measurement approach for loans when the repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty ("collateral dependent”). For any collateral-dependent loans that meet Regions' specific allowance criteria (see below), Regions will calculate the CECL allowance based on the fair value of collateral methodology. For collateral-dependent consumer, commercial and investor real estate loans that do not meet Regions' specific allowance criteria (as described below), Regions considers the value of the collateral through the LGD component of the loss model based on collateral type.
Credit enhancements
Regions' estimate of credit losses reflects how credit enhancements, other than those that are freestanding contracts, mitigate expected credit losses on financial assets. In the event that a credit enhancement arrangement is considered to be a freestanding contract, Regions excludes the credit enhancement from the related loan when estimating expected credit losses.
Unfunded commitments and other off-balance sheet items
CECL requires an entity to record a liability or reserve for credit losses for the unfunded portion of a loan commitment in the event that the issuer does not have the unconditional right to cancel the commitment. For an unfunded commitment to be considered unconditionally cancellable, Regions must be able to, at any time, with or without cause, refuse to extend credit. The liability is measured over the full contractual period for which Regions is exposed to credit risk through a current obligation to extend credit. In determining the liability, management considers the likelihood that funding will occur, and if funded, the related expected credit losses under the CECL model.
Regions' off-balance sheet unfunded commitments in the form of home equity lines, standby letters of credit, commercial letters of credit and commercial revolving products that are deemed to be conditionally cancellable will include unfunded balances within the allowance estimate. Future advances from certain unfunded commitments and other revolving products where Regions does have the unconditional right to cancel these agreements will not be included.


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CALCULATION OF THE ALLOWANCE FOR CREDIT LOSSES
Pooled allowances
The allowance is measured on a collective (pool) basis when similar risk characteristics exist. Segmentation variables for Commercial and Investor Real estate segments include product, loan size, collateral type, risk rating and term. Segmentation variables considered for Consumer segments include product, FICO, LTV, age, TDR status, etc. The allowance is calculated for most portfolios and classes using econometric models (i.e., models that include macro-economic forecasts).
Specific allowances
Due to their size, complexity and individualized risk characteristics and monitoring, the allowance for significant non-accrual commercial and investor real estate loans (including TDRs) and unfunded commitments is measured on an individual basis. Loans evaluated individually are not included in the collective evaluation. Regions generally measures the allowance for these loans based on the present value of estimated cash flows, considering all facts and circumstances specific to the borrower and market and economic conditions. The allowance measurement for collateral-dependent loans that meet the individually evaluated threshold is based on the fair value of collateral methodology.
TDRs and RETDRs
Loans identified as TDRs and RETDRs are treated consistently in CECL loss models. These loans are included in their respective loan pools (if they do not qualify for specific evaluation) and losses are determined by CECL models. The effect of the interest rate concession on these loans is considered through a post-model adjustment.
Qualitative framework
While quantitative allowance methodologies strive to reflect all risk factors, any estimate involves assumptions and uncertainties resulting in some level of imprecision. Imprecision exists in the estimation process due to the inherent time lag between obtaining information, performing the calculation, as well as variations between estimates and actual outcomes. Regions adjusts the allowance considering quantitative and qualitative factors which may not be directly measured in the modeled calculations. Regions' qualitative framework provides for specific model adjustments and general imprecision adjustments. Specific model adjustments capture highly specific issues or events that Regions believes are not adequately captured in model outcomes. General imprecision adjustments address other sources of imprecision that are not specifically identifiable or quantifiable to a particular loan portfolio and have not been captured by the model or by a specific model adjustment. Regions considers general imprecision in three dimensions; economic forecast imprecision, model error imprecision, and process imprecision.

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NOTE 2. DEBT SECURITIES
The amortized cost, gross unrealized gains and losses, and estimated fair value of debt securities held to maturity and debt securities available for sale are as follows:
September 30, 2019March 31, 2020
  
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)
Debt securities held to maturity:                          
Mortgage-backed securities:                          
Residential agency$776
 $—
 $(28) $748
 $23
 $—
 $771
$701
 $—
 $(25) $676
 $38
 $—
 $714
Commercial agency630
 —
 (3) 627
 28
 (2) 653
623
 —
 (3) 620
 47
 (1) 666
$1,406
 $—
 $(31) $1,375
 $51
 $(2) $1,424
$1,324
 $—
 $(28) $1,296
 $85
 $(1) $1,380
                          
Debt securities available for sale:                          
U.S. Treasury securities$179
 $3
 $—
 $182
     $182
$176
 $8
 $—
 $184
     $184
Federal agency securities43
 2
 —
 45
     45
41
 2
 —
 43
     43
Mortgage-backed securities:                          
Residential agency15,564
 210
 (43) 15,731
     15,731
15,893
 567
 (7) 16,453
     16,453
Residential non-agency2
 —
 —
 2
     2
1
 —
 —
 1
     1
Commercial agency4,789
 116
 (10) 4,895
     4,895
4,814
 282
 (2) 5,094
     5,094
Commercial non-agency654
 9
 —
 663
     663
619
 5
 (2) 622
     622
Corporate and other debt securities1,431
 38
 (1) 1,468
     1,468
1,361
 29
 (12) 1,378
     1,378
$22,662
 $378
 $(54) $22,986
     $22,986
$22,905
 $893
 $(23) $23,775
     $23,775


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December 31, 2018December 31, 2019
  
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)
Debt securities held to maturity:                          
Mortgage-backed securities:                          
Residential agency$883
 $—
 $(32) $851
 $1
 $(10) $842
$736
 $—
 $(26) $710
 $22
 $—
 $732
Commercial agency634
 —
 (3) 631
 —
 (13) 618
625
 —
 (3) 622
 20
 (2) 640
$1,517
 $—
 $(35) $1,482
 $1
 $(23) $1,460
$1,361
 $—
 $(29) $1,332
 $42
 $(2) $1,372
                          
Debt securities available for sale:                          
U.S. Treasury securities$284
 $—
 $(4) $280
     $280
$180
 $2
 $—
 $182
     $182
Federal agency securities43
 —
 —
 43
     43
42
 1
 —
 43
     43
Mortgage-backed securities:                          
Residential agency17,064
 26
 (466) 16,624
     16,624
15,336
 218
 (38) 15,516
     15,516
Residential non-agency2
 —
 —
 2
     2
1
 —
 —
 1
     1
Commercial agency3,891
 8
 (64) 3,835
     3,835
4,720
 77
 (31) 4,766
     4,766
Commercial non-agency768
 2
 (10) 760
     760
639
 8
 —
 647
     647
Corporate and other debt securities1,206
 2
 (23) 1,185
     1,185
1,414
 38
 (1) 1,451
     1,451
$23,258
 $38
 $(567) $22,729
     $22,729
$22,332
 $344
 $(70) $22,606
     $22,606
_________
(1) The gross unrealized losses recognized in OCI on securities held to maturity resulted from a transfer of securities available for sale to held to maturity in the second quarter of 2013.

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Debt securities with carrying values of $7.9$8.6 billion and $8.3 billion at both September 30, 2019,March 31, 2020, and December 31, 20182019, respectively, were pledged to secure public funds, trust deposits and certain borrowing arrangements. Included within total pledged securities is approximately $25 million and $24 million of encumbered U.S. Treasury securities at both September 30, 2019,March 31, 2020, and December 31, 2018.2019, respectively.
The amortized cost and estimated fair value of debt securities held to maturity and debt securities available for sale at September 30, 2019,March 31, 2020, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Amortized
Cost
 
Estimated
Fair Value
Amortized
Cost
 
Estimated
Fair Value
(In millions)(In millions)
Debt securities held to maturity:      
Mortgage-backed securities:      
Residential agency$776
 $771
$701
 $714
Commercial agency630
 653
623
 666
$1,406
 $1,424
$1,324
 $1,380
Debt securities available for sale:      
Due in one year or less$68
 $68
$87
 $87
Due after one year through five years1,100
 1,120
1,109
 1,122
Due after five years through ten years431
 450
338
 347
Due after ten years54
 57
44
 49
Mortgage-backed securities:      
Residential agency15,564
 15,731
15,893
 16,453
Residential non-agency2
 2
1
 1
Commercial agency4,789
 4,895
4,814
 5,094
Commercial non-agency654
 663
619
 622
$22,662
 $22,986
$22,905
 $23,775

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 September 30, 2019,March 31, 2020, and December 31, 2018.2019. For debt securities transferred to held to

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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.
September 30, 2019March 31, 2020
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)
Debt securities held to maturity:                      
Mortgage-backed securities:                      
Residential agency$64
 $—
 $526
 $(7) $590
 $(7)
Commercial agency—
 —
 133
 (4) 133
 (4)$9
 $—
 $117
 $(3) $126
 $(3)
$64
 $—
 $659
 $(11) $723
 $(11)$9
 $—
 $117
 $(3) $126
 $(3)
                      
Debt securities available for sale:                      
Mortgage-backed securities:                      
Residential agency$2,160
 $(7) $3,071
 $(36) $5,231
 $(43)$204
 $(2) $347
 $(5) $551
 $(7)
Commercial agency966
 (9) 146
 (1) 1,112
 (10)69
 (2) 5
 —
 74
 (2)
Commercial non-agency161
 (2) —
 —
 161
 (2)
Corporate and other debt securities27
 —
 41
 (1) 68
 (1)537
 (12) 4
 —
 541
 (12)
$3,153
 $(16) $3,258
 $(38) $6,411
 $(54)$971
 $(18) $356
 $(5) $1,327
 $(23)


 December 31, 2018
 Less Than Twelve Months Twelve Months or More Total
 Estimated
Fair
Value		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Gross
Unrealized
Losses
 (In millions)
Debt securities held to maturity:           
Mortgage-backed securities:           
Residential agency$—
 $—
 $842
 $(42) $842
 $(42)
Commercial agency486
 (7) 132
 (9) 618
 (16)
 $486
 $(7) $974
 $(51) $1,460
 $(58)
            
Debt securities available for sale:           
U.S. Treasury securities$—
 $—
 $261
 $(4) $261
 $(4)
Mortgage-backed securities:           
Residential agency2,830
 (37) 11,010
 (429) 13,840
 (466)
Commercial agency1,073
 (13) 2,254
 (51) 3,327
 (64)
Commercial non-agency229
 (1) 404
 (9) 633
 (10)
Corporate and other debt securities659
 (11) 310
 (12) 969
 (23)
 $4,791
 $(62) $14,239
 $(505) $19,030
 $(567)
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 December 31, 2019
 Less Than Twelve Months Twelve Months or More Total
 Estimated
Fair
Value		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Gross
Unrealized
Losses
 (In millions)
Debt securities held to maturity:           
Mortgage-backed securities:           
Residential agency$82
 $—
 $501
 $(5) $583
 $(5)
Commercial agency—
 —
 127
 (5) 127
 (5)
 $82
 $—
 $628
 $(10) $710
 $(10)
            
Debt securities available for sale:           
Mortgage-backed securities:           
Residential agency$2,402
 $(11) $2,505
 $(27) $4,907
 $(38)
Commercial agency1,449
 (31) 73
 —
 1,522
 (31)
Corporate and other debt securities19
 —
 32
 (1) 51
 (1)
 $3,870
 $(42) $2,610
 $(28) $6,480
 $(70)

The number of individual debt positions in an unrealized loss position in the tables above decreased from 1,379500 at December 31, 2018,2019, to 569243 at September 30, 2019.March 31, 2020. The decrease in the number of securities and the total amount of unrealized losses from year-end 20182019 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 OTTIcredit impairment as of those dates. The Company does not intend to sell, and it is not more likely than not that the Company will be required to sell, the positions before the recovery of their amortized cost basis, which may be at maturity.
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 in certain periods, as shown in the table below.

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Gross realized gains and gross realized losses on sales of debt securities available for sale are shown in the table below. The cost of securities sold is based on the specific identification method. As part of the Company's normal process for evaluating impairment, management did identify a limited number of positions where impairment was believed to exist in certain periods, as shown in the table below.
Three Months Ended September 30 Nine Months Ended September 30Three Months Ended March 31
2019 2018 2019 20182020 2019
(In millions)(In millions)
Gross realized gains$6
 $1
 $14
 $4
$—
 $—
Gross realized losses(6) (1) (39) (1)—
 (6)
OTTI—
 —
 (1) (2)
Impairment—
 (1)
Debt securities available for sale gains (losses), net$—
 $—
 $(26)
$1
$—
 $(7)



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NOTE 3. LOANS AND THE ALLOWANCE FOR CREDIT LOSSES
LOANS
The following table presents the distribution of Regions' loan portfolio by segment and class, net of unearned income:
September 30, 2019 December 31, 2018March 31, 2020 December 31, 2019
(In millions, net of unearned income)(In millions, net of unearned income)
Commercial and industrial$40,179
 $39,282
$45,388
 $39,971
Commercial real estate mortgage—owner-occupied5,532
 5,549
5,550
 5,537
Commercial real estate construction—owner-occupied365
 384
309
 331
Total commercial46,076
 45,215
51,247
 45,839
Commercial investor real estate mortgage4,769
 4,650
5,079
 4,936
Commercial investor real estate construction1,475
 1,786
1,784
 1,621
Total investor real estate6,244
 6,436
6,863
 6,557
Residential first mortgage14,397
 14,276
14,535
 14,485
Home equity8,597
 9,257
Home equity lines5,201
 5,300
Home equity loans3,000
 3,084
Indirect—vehicles2,095
 3,053
1,557
 1,812
Indirect—other consumer2,821
 2,349
3,202
 3,249
Consumer credit card1,322
 1,345
1,303
 1,387
Other consumer1,234
 1,221
1,190
 1,250
Total consumer30,466
 31,501
29,988
 30,567
$82,786
 $83,152
$88,098
 $82,963

During the ninethree months ended September 30,March 31, 2020 and 2019, and 2018, Regions purchased approximately $810$447 million and $403$171 million in indirect-other consumer and commercial and industrial loans from third parties, respectively.
In January 2019, Regions decided to discontinue its indirect auto lending business due to competition-based margin compression impacting overall returns on the portfolio. Regions ceased originating new indirect auto loans in the first quarter of 2019 and completed any in-process indirect auto loan closings at the end of the second quarter of 2019. The Company will remainremains in the direct auto lending business.
At September 30, 2019, $21.6March 31, 2020, $21.7 billion in securities and net eligible loans held by Regions were pledged to secure current and potential borrowings from the FHLB. At September 30, 2019,March 31, 2020, an additional $23.2$21.1 billion in net eligible loans held by Regions were pledged to the FRB for potential borrowings.

16

TableIncluded in the commercial and industrial loan balance are sales-type and direct financing leases totaling $1.0 billion as of Contents


March 31, 2020, with related income of $8 million for the three months ended March 31, 2020.
ALLOWANCE FOR CREDIT LOSSES
On January 1, 2020, Regions determinesadopted CECL, which replaces the appropriate level of the allowance on a quarterly basis.incurred loss methodology with an expected loss methodology. Refer to Note 1 “Summary"Basis of Presentation" and Note 12 "Recent Accounting Pronouncements" for description of the adoption of CECL and Regions' allowance methodology. Additionally, refer to Note 1 "Summary of Significant Accounting Policies”Policies" to the consolidated financial statements to the Annual Report on Form 10-K for the year ended December 31, 2018,2019, for a description of the methodology.methodology prior to the adoption of CECL on January 1, 2020.
ROLLFORWARD OF ALLOWANCE FOR CREDIT LOSSES
The cumulative effect of the adoption of CECL on January 1, 2020 for loans and unfunded commitments was an increase in the allowance of $501 million. During the first quarter of 2020, Regions increased the allowance by an additional $250 million to $1.7 billion which represents management's best estimate of expected losses over the life of the portfolio. The increase was due primarily to higher expected credit losses due to the economic uncertainty of COVID-19 since initial adoption of CECL. Macroeconomic factors utilized in the CECL loss models include, but are not limited to, unemployment rate, GDP, HPI and the S&P 500 index, with unemployment being the most significant macroeconomic factor within the CECL models. Declines in the macroeconomic environment were incorporated into the March 31, 2020 macroeconomic forecast utilized in the CECL loss models. Additionally, the risks to the March 31, 2020 economic forecast utilized in the allowance were weighted to the downside through the qualitative framework, given the high degree of uncertainty around how widely the COVID-19 pandemic could spread and

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how long it could persist. The effectiveness of government relief programs and debt payment relief provided by the Bank as well as the potential for any offsetting future stimulus was also considered, which the Company believes could be significant mitigating factors.
The following tables present analyses of the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 2019March 31, 2020 and 2018.2019. The total allowance for loan losses and the related loan portfolio ending balances for the three months ended March 31, 2019 are disaggregated to detail the amounts derived through individual evaluation and collective evaluation for impairment. ThePrior to 2020, the allowance for loan losses related to individually evaluated loans iswas attributable to reservesallowances for non-accrual commercial and investor real estate loans and all TDRs. TheTDRs ("impaired loans") and the allowance for loan losses and the loan portfolio ending balances related to collectively evaluated loans iswas attributable to the remainder of the portfolio. With the adoption of CECL on January 1, 2020, the impaired loan designation and disclosures related to impaired loans are no longer required.
        
 Three Months Ended September 30, 2019
 Commercial 
Investor Real
Estate
 Consumer Total
 (In millions)
Allowance for loan losses, July 1, 2019$525
 $54
 $274
 $853
Provision (credit) for loan losses57
 (6) 57
 108
Loan losses:       
Charge-offs(39) —
 (75) (114)
Recoveries9
 —
 13
 22
Net loan (losses) recoveries(30) —
 (62) (92)
Allowance for loan losses, September 30, 2019552
 48
 269
 869
Reserve for unfunded credit commitments, July 1, 201946
 4
 —
 50
Provision (credit) for unfunded credit losses(2) —
 —
 (2)
Reserve for unfunded credit commitments, September 30, 201944
 4
 —
 48
Allowance for credit losses, September 30, 2019$596
 $52
 $269
 $917
        
 Three Months Ended September 30, 2018
 Commercial 
Investor Real
Estate
 Consumer Total
 (In millions)
Allowance for loan losses, July 1, 2018$551
 $48
 $239
 $838
Provision (credit) for loan losses12
 (1) 73
 84
Loan losses:       
Charge-offs(41) (1) (65) (107)
Recoveries10
 2
 13
 25
Net loan (losses) recoveries(31) 1
 (52) (82)
Allowance for loan losses, September 30, 2018532
 48
 260
 840
Reserve for unfunded credit commitments, July 1, 201844
 4
 —
 48
Provision (credit) for unfunded credit losses2
 —
 —
 2
Reserve for unfunded credit commitments, September 30, 201846
 4
 —
 50
Allowance for credit losses, September 30, 2018$578
 $52
 $260
 $890
 Three Months Ended March 31, 2020
 Commercial 
Investor Real
Estate
 Consumer Total
 (In millions)
Allowance for loan losses, December 31, 2019$537
 $45
 $287
 $869
Cumulative change in accounting guidance (Note 1)(3)
7

434

438
Allowance for loan losses, January 1, 2020 (adjusted for change in accounting guidance)534
 52
 721
 1,307
Provision for loan losses251
 10
 115
 376
Loan losses:       
Charge-offs(71) —
 (73) (144)
Recoveries7
 1
 13
 21
Net loan (losses) recoveries(64) 1
 (60) (123)
Allowance for loan losses, March 31, 2020721
 63
 776
 1,560
Reserve for unfunded credit commitments, December 31, 201941
 4
 —
 45
Cumulative change in accounting guidance (Note 1)36

13

14

63
Reserve for unfunded credit commitments, January 1, 2020 (adjusted for change in accounting guidance)77
 17
 14
 108
Provision (credit) for unfunded credit losses(4) 1
 —
 (3)
Reserve for unfunded credit commitments, March 31, 202073
 18
 14
 105
Allowance for credit losses, March 31, 2020$794
 $81
 $790
 $1,665


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 Nine Months Ended September 30, 2019
 Commercial 
Investor Real
Estate
 Consumer Total
 (In millions)
Allowance for loan losses, January 1, 2019$520
 $58
 $262
 $840
Provision (credit) for loan losses121
 (12) 182
 291
Loan losses:       
Charge-offs(113) —
 (216) (329)
Recoveries24
 2
 41
 67
Net loan (losses) recoveries(89) 2
 (175) (262)
Allowance for loan losses, September, 2019552
 48
 269
 869
Reserve for unfunded credit commitments, January 1, 201947
 4
 —
 51
Provision (credit) for unfunded credit losses(3) —
 —
 (3)
Reserve for unfunded credit commitments, September, 201944
 4
 —
 48
Allowance for credit losses, September 30, 2019$596
 $52
 $269
 $917
Portion of ending allowance for loan losses:       
Individually evaluated for impairment$115
 $5
 $31
 $151
Collectively evaluated for impairment437
 43
 238
 718
Total allowance for loan losses$552
 $48
 $269
 $869
Portion of loan portfolio ending balance:       
Individually evaluated for impairment$475
 $38
 $393
 $906
Collectively evaluated for impairment45,601
 6,206
 30,073
 81,880
Total loans evaluated for impairment$46,076
 $6,244
 $30,466
 $82,786
Nine Months Ended September 30, 2018Three Months Ended March 31, 2019
Commercial 
Investor Real
Estate
 Consumer TotalCommercial 
Investor Real
Estate
 Consumer Total
(In millions)(In millions)
Allowance for loan losses, January 1, 2018$591
 $64
 $279
 $934
Allowance for loan losses, January 1, 2019$520
 $58
 $262
 $840
Provision (credit) for loan losses12
 (13) 135
 134
38
 (5) 58
 91
Loan losses:              
Charge-offs(105) (9) (200) (314)(30) —
 (72) (102)
Recoveries34
 6
 46
 86
9
 1
 14
 24
Net loan (losses) recoveries(71) (3) (154) (228)(21) 1
 (58) (78)
Allowance for loan losses, September 30, 2018532
 48
 260
 840
Reserve for unfunded credit commitments, January 1, 201849
 4
 —
 53
Allowance for loan losses, March 31, 2019537
 54
 262
 853
Reserve for unfunded credit commitments, January 1, 201947
 4
 —
 51
Provision (credit) for unfunded credit losses(3) —
 —
 (3)(1) —
 —
 (1)
Reserve for unfunded credit commitments, September 30, 201846
 4
 —
 50
Allowance for credit losses, September 30, 2018$578
 $52
 $260
 $890
Reserve for unfunded credit commitments, March 31, 201946
 4
 —
 50
Allowance for credit losses, March 31, 2019$583
 $58
 $262
 $903
Portion of ending allowance for loan losses:              
Individually evaluated for impairment$119
 $5
 $26
 $150
$119
 $3
 $29
 $151
Collectively evaluated for impairment413
 43
 234
 690
418
 51
 233
 702
Total allowance for loan losses$532
 $48
 $260
 $840
$537
 $54
 $262
 $853
Portion of loan portfolio ending balance:              
Individually evaluated for impairment$599
 $51
 $438
 $1,088
$523
 $22
 $411
 $956
Collectively evaluated for impairment43,706
 5,992
 31,035
 80,733
46,418
 6,564
 30,492
 83,474
Total loans evaluated for impairment$44,305
 $6,043
 $31,473
 $81,821
$46,941
 $6,586
 $30,903
 $84,430


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

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

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Table of Contents


CREDIT QUALITY INDICATORS
The following tables present credit quality indicators for portfolio segments and classes, excluding loans held for sale, as of September 30, 2019,March 31, 2020, and December 31, 2018. 2019.
Commercial and investor real estate portfolio segments are detailed by categories related to underlying credit quality and probability of default. Regions assigns these categories at loan origination and reviews the relationship utilizing a risk-based approach on, at minimum, an annual basis or at any time management becomes aware of information affecting the borrowers' ability to fulfill their obligations. Both quantitative and qualitative factors are considered in this review process. These categories are utilized to develop the associated allowance for credit losses.
Pass—includes obligations where the probability of default is considered low;
Special Mention—includes obligations that have potential weakness that may, if not reversed or corrected, weaken the credit or inadequately protect the Company’s position at some future date. Obligations in this category may also be subject to economic or market conditions that may, in the future, have an adverse effect on debt service ability;
Substandard Accrual—includes obligations that exhibit a well-defined weakness that presently jeopardizes debt repayment, even though they are currently performing. These obligations are characterized by the distinct possibility that the Company may incur a loss in the future if these weaknesses are not corrected;
Non-accrual—includes obligations where management has determined that full payment of principal and interest is in doubt.
Substandard accrual and non-accrual loans are often collectively referred to as “classified.” Special mention, substandard accrual, and non-accrual loans are often collectively referred to as “criticized and classified.”
Regions considers factors such as periodic updates of FICO scores, unemployment rates, home prices, accrual status and geography as credit quality indicators for the consumer loan portfolio. FICO scores are obtained at origination as part of Regions' formal underwriting process. Refreshed FICO scores are obtained by the Company quarterly for all consumer loans, including residential first mortgage loans. Current FICO data is not available for certain loans in the portfolio for various reasons; for example, if customers do not use sufficient credit, an updated score may not be available. These categories are utilized to develop the associated allowance for credit losses. The higher the FICO score the less probability of default and vice versa.
With the adoption of CECL in 2020, the disclosure of credit quality indicators for loan portfolio segments and classes, excluding loans held for sale, is presented by credit quality indicator by vintage year. Regions defines the vintage date for the purposes of disclosure as the date of the most recent credit decision. In general, renewals are categorized as new credit decisions and reflect the renewal date as the vintage date. Loans that are modified as a TDR are considered to be a continuation of the original loan, therefore the origination date of the original loan is reflected as the vintage date. The following tables present applicable credit quality indicators for the loan portfolio segments and classes, excluding loans held for sale, as of March 31, 2020. Classes in the commercial and investor real estate portfolio segments are disclosed by risk rating. Classes in the consumer portfolio segment are disaggregateddisclosed by accrual status.

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current FICO scores. Refer to Note 6 "Allowance for Credit Losses" in the Annual Report on Form 10-K for the year ended December 31, 2019, for the December 31, 2019 Credit Quality Indicator tables.
 September 30, 2019
 Pass Special  Mention 
Substandard
Accrual
 Non-accrual Total
 (In millions)
Commercial and industrial$38,489
 $540
 $858
 $292
 $40,179
Commercial real estate mortgage—owner-occupied5,176
 117
 171
 68
 5,532
Commercial real estate construction—owner-occupied327
 8
 15
 15
 365
Total commercial$43,992
 $665
 $1,044
 $375
 $46,076
Commercial investor real estate mortgage$4,565
 $167
 $28
 $9
 $4,769
Commercial investor real estate construction1,444
 8
 23
 —
 1,475
Total investor real estate$6,009
 $175
 $51
 $9
 $6,244
          
     Accrual Non-accrual Total
     (In millions)
Residential first mortgage    $14,368
 $29
 $14,397
Home equity    8,548
 49
 8,597
Indirect—vehicles    2,095
 —
 2,095
Indirect—other consumer    2,821
 —
 2,821
Consumer credit card    1,322
 —
 1,322
Other consumer    1,234
 —
 1,234
Total consumer    $30,388
 $78
 $30,466
         $82,786
 December 31, 2018
 Pass 
Special
Mention
 
Substandard
Accrual
 Non-accrual Total
 (In millions)
Commercial and industrial$37,963
 $666
 $346
 $307
 $39,282
Commercial real estate mortgage—owner-occupied5,193
 208
 81
 67
 5,549
Commercial real estate construction—owner-occupied356
 7
 13
 8
 384
Total commercial$43,512
 $881
 $440
 $382
 $45,215
Commercial investor real estate mortgage$4,444
 $52
 $143
 $11
 $4,650
Commercial investor real estate construction1,773
 6
 7
 —
 1,786
Total investor real estate$6,217
 $58
 $150
 $11
 $6,436
          
     Accrual Non-accrual Total
     (In millions)
Residential first mortgage    $14,236
 $40
 $14,276
Home equity    9,194
 63
 9,257
Indirect—vehicles    3,053
 —
 3,053
Indirect—other consumer    2,349
 —
 2,349
Consumer credit card    1,345
 —
 1,345
Other consumer    1,221
 —
 1,221
Total consumer    $31,398
 $103
 $31,501
         $83,152



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AGING ANALYSIS
The following tables include an aging analysis of DPD for each portfolio segment and class as of September 30, 2019 and December 31, 2018:
 September 30, 2019
 Accrual Loans      
 30-59 DPD 60-89 DPD 90+ DPD 
Total
30+ DPD
 
Total
Accrual
 Non-accrual Total
 (In millions)
Commercial and industrial$37
 $13
 $10
 $60
 $39,887
 $292
 $40,179
Commercial real estate mortgage—owner-occupied25
 6
 2
 33
 5,464
 68
 5,532
Commercial real estate construction—owner-occupied—
 —
 —
 —
 350
 15
 365
Total commercial62
 19
 12
 93
 45,701
 375
 46,076
Commercial investor real estate mortgage2
 —
 —
 2
 4,760
 9
 4,769
Commercial investor real estate construction—
 —
 —
 —
 1,475
 —
 1,475
Total investor real estate2
 —
 —
 2
 6,235
 9
 6,244
Residential first mortgage79
 49
 128
 256
 14,368
 29
 14,397
Home equity48
 24
 41
 113
 8,548
 49
 8,597
Indirect—vehicles31
 9
 7
 47
 2,095
 —
 2,095
Indirect—other consumer14
 8
 3
 25
 2,821
 —
 2,821
Consumer credit card10
 8
 19
 37
 1,322
 —
 1,322
Other consumer15
 5
 5
 25
 1,234
 —
 1,234
Total consumer197
 103
 203
 503
 30,388
 78
 30,466
 $261
 $122
 $215
 $598
 $82,324
 $462
 $82,786
 December 31, 2018
 Accrual Loans      
 30-59 DPD 60-89 DPD 90+ DPD 
Total
30+ DPD
 
Total
Accrual
 Non-accrual Total
 (In millions)
Commercial and industrial$80
 $22
 $8
 $110
 $38,975
 $307
 $39,282
Commercial real estate mortgage—owner-occupied12
 7
 —
 19
 5,482
 67
 5,549
Commercial real estate construction—owner-occupied—
 —
 —
 —
 376
 8
 384
Total commercial92
 29
 8
 129
 44,833
 382
 45,215
Commercial investor real estate mortgage6
 —
 —
 6
 4,639
 11
 4,650
Commercial investor real estate construction—
 —
 —
 —
 1,786
 —
 1,786
Total investor real estate6
 —
 —
 6
 6,425
 11
 6,436
Residential first mortgage85
 53
 150
 288
 14,236
 40
 14,276
Home equity47
 26
 34
 107
 9,194
 63
 9,257
Indirect—vehicles40
 11
 9
 60
 3,053
 —
 3,053
Indirect—other consumer13
 7
 1
 21
 2,349
 —
 2,349
Consumer credit card12
 9
 20
 41
 1,345
 —
 1,345
Other consumer15
 5
 5
 25
 1,221
 —
 1,221
Total consumer212
 111
 219
 542
 31,398
 103
 31,501
 $310
 $140
 $227
 $677
 $82,656
 $496
 $83,152



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IMPAIRED LOANS
The following tables present details related to the Company’s impaired loans as of September 30, 2019 and December 31, 2018. 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 September 30, 2019
     
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)
 (Dollars in millions)
Commercial and industrial$370
 $78
 $292
 $68
 $224
 $76
 41.6%
Commercial real estate mortgage—owner-occupied75
 7
 68
 9
 59
 23
 40.0
Commercial real estate construction—owner-occupied16
 1
 15
 3
 12
 5
 37.5
Total commercial461
 86
 375
 80
 295
 104
 41.2
Commercial investor real estate mortgage9
 —
 9
 —
 9
 2
 22.2
Total investor real estate9
 —
 9
 —
 9
 2
 22.2
Residential first mortgage26
 7
 19
 —
 19
 2
 34.6
Home equity6
 1
 5
 —
 5
 —
 16.7
Total consumer32
 8
 24
 —
 24
 2
 31.3
 $502
 $94
 $408
 $80
 $328
 $108
 40.2%
 Accruing Impaired Loans As of September 30, 2019
 
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$82
 $—
 $82
 $10
 12.2%
Commercial real estate mortgage—owner-occupied18
 —
 18
 1
 5.6
Total commercial100
 —
 100
 11
 11.0
Commercial investor real estate mortgage22
 4
 18
 1
 22.7
Commercial investor real estate construction11
 —
 11
 2
 18.2
Total investor real estate33
 4
 29
 3
 21.2
Residential first mortgage206
 8
 198
 20
 13.6
Home equity166
 1
 165
 9
 6.0
Consumer credit card1
 —
 1
 —
 —
Other consumer5
 —
 5
 —
 —
Total consumer378
 9
 369
 29
 10.1
 $511
 $13
 $498
 $43
 11.0%


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 Total Impaired Loans As of September 30, 2019
     
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$452
 $78
 $374
 $68
 $306
 $86
 36.3%
Commercial real estate mortgage—owner-occupied93
 7
 86
 9
 77
 24
 33.3
Commercial real estate construction—owner-occupied16
 1
 15
 3
 12
 5
 37.5
Total commercial561
 86
 475
 80
 395
 115
 35.8
Commercial investor real estate mortgage31
 4
 27
 —
 27
 3
 22.6
Commercial investor real estate construction11
 —
 11
 —
 11
 2
 18.2
Total investor real estate42
 4
 38
 —
 38
 5
 21.4
Residential first mortgage232
 15
 217
 —
 217
 22
 15.9
Home equity172
 2
 170
 —
 170
 9
 6.4
Consumer credit card1
 —
 1
 —
 1
 —
 —
Other consumer5
 —
 5
 —
 5
 —
 —
Total consumer410
 17
 393
 —
 393
 31
 11.7
 $1,013
 $107
 $906
 $80
 $826
 $151
 25.5%



 Non-accrual Impaired Loans As of December 31, 2018
     
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)
 (Dollars in millions)
Commercial and industrial$384
 $77
 $307
 $113
 $194
 $62
 36.2%
Commercial real estate mortgage—owner-occupied76
 9
 67
 13
 54
 23
 42.1
Commercial real estate construction—owner-occupied9
 1
 8
 —
 8
 3
 44.4
Total commercial469
 87
 382
 126
 256
 88
 37.3
Commercial investor real estate mortgage11
 —
 11
 4
 7
 1
 9.1
Total investor real estate11
 —
 11
 4
 7
 1
 9.1
Residential first mortgage31
 8
 23
 —
 23
 2
 32.3
Home equity11
 2
 9
 —
 9
 —
 18.2
Total consumer42
 10
 32
 —
 32
 2
 28.6
 $522
 $97
 $425
 $130
 $295
 $91
 36.0%

23

Table of Contents


 Accruing Impaired Loans As of December 31, 2018
 
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$84
 $—
 $84
 $14
 16.7%
Commercial real estate mortgage—owner-occupied26
 2
 24
 2
 15.4
Total commercial110
 2
 108
 16
 16.4
Commercial investor real estate mortgage15
 1
 14
 1
 13.3
Total investor real estate15
 1
 14
 1
 13.3
Residential first mortgage194
 9
 185
 18
 13.9
Home equity195
 —
 195
 6
 3.1
Consumer credit card1
 —
 1
 —
 —
Other consumer6
 —
 6
 —
 —
Total consumer396
 9
 387
 24
 8.3
 $521
 $12
 $509
 $41
 10.2%

 Total Impaired Loans As of December 31, 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$468
 $77
 $391
 $113
 $278
 $76
 32.7%
Commercial real estate mortgage—owner-occupied102
 11
 91
 13
 78
 25
 35.3
Commercial real estate construction—owner-occupied9
 1
 8
 —
 8
 3
 44.4
Total commercial579
 89
 490
 126
 364
 104
 33.3
Commercial investor real estate mortgage26
 1
 25
 4
 21
 2
 11.5
Total investor real estate26
 1
 25
 4
 21
 2
 11.5
Residential first mortgage225
 17
 208
 —
 208
 20
 16.4
Home equity206
 2
 204
 —
 204
 6
 3.9
Consumer credit card1
 —
 1
 —
 1
 —
 —
Other consumer6
 —
 6
 —
 6
 —
 —
Total consumer438
 19
 419
 —
 419
 26
 10.3
 $1,043
 $109
 $934
 $130
 $804
 $132
 23.1%
________
(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.

 March 31, 2020
Term Loans Revolving Loans Revolving Loans Converted to Amortizing 
Unallocated (1)
 Total
Origination Year
20202019201820172016Prior
(In millions)
Commercial and industrial:
   Risk Rating:              
   Pass$2,109
$7,546
$5,137
$3,425
$1,544
$3,169
 $20,559
 $—
 $(77) $43,412
   Special Mention7
109
136
54
30
27
 388
 —
 —
 751
   Substandard Accrual17
27
20
10
26
89
 540
 —
 —
 729
   Non-accrual5
68
86
25
48
78
 186
 —
 —
 496
Total commercial and industrial$2,138
$7,750
$5,379
$3,514
$1,648
$3,363

$21,673

$—

$(77)
$45,388
 

24

Table of Contents


 March 31, 2020
Term Loans Revolving Loans Revolving Loans Converted to Amortizing 
Unallocated (1)
 Total
Origination Year
20202019201820172016Prior
(In millions)
Commercial real estate mortgage—owner-occupied:
   Risk Rating:              
   Pass$370
$1,034
$1,180
$704
$493
$1,239
 $196
 $—
 $(3) $5,213
   Special Mention4
24
8
23
10
29
 3
 —
 —
 101
   Substandard Accrual4
11
48
39
12
60
 4
 —
 —
 178
   Non-accrual—
3
13
13
8
18
 3
 —
 —
 58
Total commercial real estate mortgage—owner-occupied:$378
$1,072
$1,249
$779
$523
$1,346

$206

$—

$(3) $5,550
               
Commercial real estate construction—owner-occupied:
   Risk Rating:              
   Pass$21
$95
$50
$28
$32
$52
 $8
 $—
 $—
 $286
   Special Mention—
—
2
2
—
—
 —
 —
 —
 4
   Substandard Accrual—
3
—
1
4
—
 —
 —
 —
 8
   Non-accrual—
—
—
—
2
9
 —
 —
 —
 11
Total commercial real estate construction—owner-occupied:$21
$98
$52
$31
$38
$61

$8

$—

$—

$309
Total commercial$2,537
$8,920
$6,680
$4,324
$2,209
$4,770

$21,887

$—

$(80)
$51,247
               
Commercial investor real estate mortgage:
   Risk Rating:              
   Pass$339
$1,484
$1,435
$763
$89
$400
 $403
 $—
 $(4) $4,909
   Special Mention8
77
1
2
3
2
 71
 —
 —
 164
   Substandard Accrual—
4
1
—
—
—
 —
 —
 —
 5
   Non-accrual—
—
—
—
—
1
 —
 —
 —
 1
Total commercial investor real estate mortgage$347
$1,565
$1,437
$765
$92
$403

$474

$—

$(4)
$5,079
               
Commercial investor real estate construction:
   Risk Rating:              
   Pass$40
$410
$532
$2
$—
$12
 $785
 $—
 $(14) $1,767
   Special Mention—
—
2
—
—
—
 3
 —
 —
 5
   Substandard Accrual—
—
3
—
—
—
 9
 —
 —
 12
   Non-accrual—
—
—
—
—
—
 —
 —
 —
 —
Total commercial investor real estate construction$40
$410
$537
$2
$—
$12

$797

$—

$(14)
$1,784
Total investor real estate$387
$1,975
$1,974
$767
$92
$415

$1,271

$—

$(18)
$6,863
               

25

Table of Contents


 March 31, 2020
Term Loans Revolving Loans Revolving Loans Converted to Amortizing 
Unallocated (1)
 Total
Origination Year
20202019201820172016Prior
(In millions)
Residential first mortgage:
FICO scores              
   Above 720$579
$2,266
$1,461
$1,653
$1,793
$3,704
 $—
 $—
 $—
 $11,456
   681-72071
258
178
152
141
442
 —
 —
 —
 1,242
   620-68026
113
82
77
66
362
 —
 —
 —
 726
   Below 6202
28
38
42
61
535
 —
 —
 —
 706
   Data not available12
32
21
30
26
165
 10
 —
 109
 405
Total residential first mortgage$690
$2,697
$1,780
$1,954
$2,087
$5,208

$10

$—

$109

$14,535
               
Home equity lines:
FICO scores              
   Above 720$—
$—
$—
$—
$—
$—
 $3,808
 $22
 $—
 $3,830
   681-720—
—
—
—
—
—
 571
 7
 —
 578
   620-680—
—
—
—
—
—
 392
 4
 —
 396
   Below 620—
—
—
—
—
—
 223
 5
 —
 228
   Data not available—
—
—
—
—
—
 131
 2
 36
 169
Total home equity lines$—
$—
$—
$—
$—
$—

$5,125

$40

$36

$5,201
               
Home equity loans
FICO scores              
   Above 720$87
$327
$316
$420
$388
$766
 $—
 $—
 $—
 $2,304
   681-72017
56
50
53
50
99
 —
 —
 —
 325
   620-6805
25
24
31
29
80
 —
 —
 —
 194
   Below 6201
5
10
16
19
68
 —
 —
 —
 119
   Data not available—
2
2
4
5
21
 —
 —
 24
 58
Total home equity loans$110
$415
$402
$524
$491
$1,034

$—

$—

$24

$3,000
               
Indirect—vehicles:
FICO scores              
   Above 720$—
$26
$448
$218
$177
$111
 $—
 $—
 $—
 $980
   681-720—
7
79
39
30
20
 —
 —
 —
 175
   620-680—
6
67
36
31
22
 —
 —
 —
 162
   Below 620—
4
56
40
43
35
 —
 —
 —
 178
   Data not available—
—
5
10
8
7
 —
 —
 32
 62
Total indirect- vehicles$—
$43
$655
$343
$289
$195

$—

$—

$32

$1,557
               
Indirect—other consumer:
FICO scores              
   Above 720$141
$1,150
$549
$182
$83
$45
 $—
 $—
 $—
 $2,150
   681-72017
249
171
60
27
15
 —
 —
 —
 539
   620-6801
100
93
39
18
10
 —
 —
 —
 261
   Below 620—
23
33
15
8
5
 —
 —
 —
 84
   Data not available—
4
3
2
1
1
 —
 —
 157
 168
Total indirect- other consumer$159
$1,526
$849
$298
$137
$76

$—

$—

$157

$3,202
               

26

Table of Contents


 March 31, 2020
Term Loans Revolving Loans Revolving Loans Converted to Amortizing 
Unallocated (1)
 Total
Origination Year
20202019201820172016Prior
(In millions)
Consumer credit card:
FICO scores              
   Above 720$—
$—
$—
$—
$—
$—
 $676
 $—
 $—
 $676
   681-720—
—
—
—
—
—
 280
 —
 —
 280
   620-680—
—
—
—
—
—
 239
 —
 —
 239
   Below 620—
—
—
—
—
—
 112
 —
 —
 112
   Data not available—
—
—
—
—
—
 6
 —
 (10) (4)
Total consumer credit card$—
$—
$—
$—
$—
$—

$1,313

$—

$(10)
$1,303
               
Other consumer:
FICO scores              
   Above 720$78
$257
$143
$61
$20
$7
 $120
 $—
 $—
 $686
   681-72024
77
38
14
4
1
 59
 —
 —
 217
   620-68012
50
26
9
3
1
 48
 —
 —
 149
   Below 6203
18
13
6
2
1
 25
 —
 —
 68
   Data not available58
1
1
1
—
—
 2
 —
 7
 70
Total other consumer$175
$403
$221
$91
$29
$10

$254

$—
 $7

$1,190
Total consumer loans$1,134
$5,084
$3,907
$3,210
$3,033
$6,523

$6,702

$40

$355

$29,988
Total Loans$4,058
$15,979
$12,561
$8,301
$5,334
$11,708

$29,860

$40

$257

$88,098
_________
(1) These amounts consist of fees that are not allocated at the loan level and loans serviced by third parties wherein Regions does not receive FICO or vintage information.



27

Table of Contents


AGING AND NON-ACCRUAL ANALYSIS
The following table presentstables include an aging analysis of DPD and loans on non-accrual status for each portfolio segment and class as of March 31, 2020 and December 31, 2019. Loans on non-accrual status with no related allowance included $36 million of commercial and industrial loans and $1 million of commercial real estate mortgage-owner-occupied loans as of March 31, 2020. Non–accrual loans with no related allowance typically include loans where the average balancesunderlying collateral is deemed sufficient to recover all remaining principle. Prior to the adoption of totalCECL on January 1, 2020, all TDRs and all non-accrual commercial and investor real estate loans, excluding leases, were deemed to be impaired. The definition of impairment and the required impaired loan disclosures were removed with CECL. Refer to Note 6 "Allowance for Credit Losses" in the Annual Report on Form 10-K for the year ended December 31, 2019 for disclosure of Regions' impaired loans and interest income foras of December 31, 2019. Loans that have been fully charged-off do not appear in the three and nine months ended September 30, 2019 and 2018. Interest income recognized represents interest on accruing loans modified in a TDR.tables below.
 Three Months Ended September 30 Nine Months Ended September 30
 2019 2018 2019 2018
 
Average
Balance
 
Interest
Income
Recognized
 
Average
Balance
 
Interest
Income
Recognized
 
Average
Balance
 
Interest
Income
Recognized
 
Average
Balance
 
Interest
Income
Recognized
 (In millions)
Commercial and industrial$382
 $2
 $471
 $2
 $407
 $4
 $507
 $7
Commercial real estate mortgage—owner-occupied84
 —
 120
 1
 86
 1
 141
 6
Commercial real estate construction—owner-occupied15
 —
 6
 —
 15
 —
 6
 —
Total commercial481
 2
 597
 3
 508
 5
 654
 13
Commercial investor real estate mortgage23
 —
 52
 1
 21
 1
 68
 3
Commercial investor real estate construction6
 —
 —
 —
 3
 —
 10
 —
Total investor real estate29
 —
 52
 1
 24
 1
 78
 3
Residential first mortgage215
 3
 210
 2
 213
 6
 237
��6
Home equity173
 2
 222
 2
 186
 7
 238
 9
Consumer credit card1
 —
 1
 —
 1
 —
 1
 —
Other consumer5
 —
 7
 —
 5
 —
 7
 —
Total consumer394
 5
 440
 4
 405
 13
 483
 15
Total impaired loans$904
 $7
 $1,089
 $8
 $937
 $19
 $1,215
 $31
 March 31, 2020
 Accrual Loans      
 30-59 DPD 60-89 DPD 90+ DPD 
Total
30+ DPD
 
Total
Accrual
 Non-accrual Total
 (In millions)
Commercial and industrial$43
 $15
 $9
 $67
 $44,892
 $496
 $45,388
Commercial real estate mortgage—owner-occupied7
 5
 1
 13
 5,492
 58
 5,550
Commercial real estate construction—owner-occupied—
 —
 —
 —
 298
 11
 309
Total commercial50
 20
 10
 80
 50,682
 565
 51,247
Commercial investor real estate mortgage2
 —
 —
 2
 5,078
 1
 5,079
Commercial investor real estate construction—
 —
 —
 —
 1,784
 —
 1,784
Total investor real estate2
 —
 —
 2
 6,862
 1
 6,863
Residential first mortgage77
 48
 128
 253
 14,508
 27
 14,535
Home equity lines29
 14
 26
 69
 5,161
 40
 5,201
Home equity loans11
 5
 11
 27
 2,995
 5
 3,000
Indirect—vehicles25
 8
 6
 39
 1,557
 —
 1,557
Indirect—other consumer15
 9
 4
 28
 3,202
 —
 3,202
Consumer credit card11
 7
 19
 37
 1,303
 —
 1,303
Other consumer11
 5
 5
 21
 1,190
 —
 1,190
Total consumer179
 96
 199
 474
 29,916
 72
 29,988
 $231
 $116
 $209
 $556
 $87,460
 $638
 $88,098

28

Table of Contents


 December 31, 2019
 Accrual Loans      
 30-59 DPD 60-89 DPD 90+ DPD 
Total
30+ DPD
 
Total
Accrual
 Non-accrual Total
 (In millions)
Commercial and industrial$30
 $21
 $11
 $62
 $39,624
 $347
 $39,971
Commercial real estate mortgage—owner-occupied11
 3
 1
 15
 5,464
 73
 5,537
Commercial real estate construction—owner-occupied2
 —
 —
 2
 320
 11
 331
Total commercial43
 24
 12
 79
 45,408
 431
 45,839
Commercial investor real estate mortgage1
 1
 —
 2
 4,934
 2
 4,936
Commercial investor real estate construction—
 —
 —
 —
 1,621
 —
 1,621
Total investor real estate1
 1
 —
 2
 6,555
 2
 6,557
Residential first mortgage83
 47
 136
 266
 14,458
 27
 14,485
Home equity lines30
 12
 32
 74
 5,259
 41
 5,300
Home equity loans12
 6
 10
 28
 3,078
 6
 3,084
Indirect—vehicles31
 10
 7
 48
 1,812
 —
 1,812
Indirect—other consumer16
 9
 3
 28
 3,249
 —
 3,249
Consumer credit card11
 8
 19
 38
 1,387
 —
 1,387
Other consumer13
 5
 5
 23
 1,250
 —
 1,250
Total consumer196
 97
 212
 505
 30,493
 74
 30,567
 $240
 $122
 $224
 $586
 $82,456
 $507
 $82,963


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 Forfor Credit Losses" in the 2018 Annual Report on Form 10-K for the year ended December 31, 2019 for additional information regarding the Company's TDRs.
Further discussion related to TDRs, including their impact on the allowance for loan lossesupon adoption of CECL is included in Note 1 "Basis of Presentation." Additional discussion related to TDRs, including their impact on the allowance and designation of TDRs in periods subsequent to the modification prior to the adoption of CECL is included in Note 1 "Basis of Presentation" and discussion in Note 1 "Summary of Significant Accounting Policies" in the 2018 Annual Report on Form 10-K.10-K for the year ended December 31, 2019.
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 ninethree months ended September 30,March 31, 2020 and 2019 and 2018 totaled approximately $185$65 million and $330$85 million, respectively.

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Three Months Ended September 30, 2019Three Months Ended March 31, 2020
    
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 industrial28
 $72
 $1
$26
 $74
 $—
Commercial real estate mortgage—owner-occupied9
 4
 —
5
 2
 —
Commercial real estate construction—owner-occupied1
 1
 —
Total commercial37
 76
 1
32
 77
 —
Commercial investor real estate mortgage4
 1
 —
4
 1
 —
Commercial investor real estate construction5
 9
 1
1
 —
 —
Total investor real estate9
 10
 1
5
 1
 —
Residential first mortgage48
 8
 1
52
 7
 1
Home equity17
 1
 —
Home equity lines—
 —
 —
Home equity loans15
 1
 —
Consumer credit card8
 —
 —
10
 —
 —
Indirect—vehicles and other consumer13
 —
 —
10
 —
 —
Total consumer86
 9
 1
87
 8
 1
132
 $95
 $3
$124
 $86
 $1
      
 Three Months Ended September 30, 2018
     
Financial Impact
of Modifications
Considered TDRs
 
Number of
Obligors
 
Recorded
Investment
 
Increase in
Allowance at
Modification
 (Dollars in millions)
Commercial and industrial27
 $94
 $1
Commercial real estate mortgage—owner-occupied16
 13
 —
Total commercial43
 107
 1
Commercial investor real estate mortgage5
 16
 1
Total investor real estate5
 16
 1
Residential first mortgage43
 11
 1
Home equity28
 2
 —
Consumer credit card14
 —
 —
Indirect—vehicles and other consumer22
 1
 —
Total consumer107
 14
 1
 155
 $137
 $3

 Three Months Ended March 31, 2019
     Financial Impact
of Modifications
Considered TDRs
 Number of
Obligors		 Recorded
Investment		 Increase in
Allowance at
Modification
 (Dollars in millions)
Commercial and industrial$26
 $78
 $1
Commercial real estate mortgage—owner-occupied17
 12
 —
Commercial real estate construction—owner-occupied1
 2
 —
Total commercial44
 92
 1
Commercial investor real estate mortgage3
 11
 —
Commercial investor real estate construction2
 —
 —
Total investor real estate5
 11
 —
Residential first mortgage34
 10
 1
Home equity lines—
 —
 —
Home equity loans34
 3
 —
Consumer credit card18
 —
 —
Indirect—vehicles and other consumer30
 —
 —
Total consumer116
 13
 1
 $165
 $116
 $2

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 Nine Months Ended September 30, 2019
     Financial Impact
of Modifications
Considered TDRs
 Number of
Obligors		 Recorded
Investment		 Increase in
Allowance at
Modification
 (Dollars in millions)
Commercial and industrial77
 $182
 $2
Commercial real estate mortgage—owner-occupied42
 24
 —
Commercial real estate construction—owner-occupied1
 2
 —
Total commercial120
 208
 2
Commercial investor real estate mortgage8
 12
 —
Commercial investor real estate construction9
 10
 1
Total investor real estate17
 22
 1
Residential first mortgage116
 26
 3
Home equity81
 6
 —
Consumer credit card34
 —
 —
Indirect—vehicles and other consumer62
 1
 —
Total consumer293
 33
 3
 430
 $263
 $6
 Nine Months Ended September 30, 2018
     Financial Impact
of Modifications
Considered TDRs
 Number of
Obligors		 Recorded
Investment		 Increase in
Allowance at
Modification
 (Dollars in millions)
Commercial and industrial82
 $308
 $4
Commercial real estate mortgage—owner-occupied54
 37
 —
Total commercial136
 345
 4
Commercial investor real estate mortgage20
 65
 3
Total investor real estate20
 65
 3
Residential first mortgage141
 25
 3
Home equity75
 5
 —
Consumer credit card39
 —
 —
Indirect—vehicles and other consumer55
 1
 —
Total consumer310
 31
 3
 466
 $441
 $10

        

TDRs that defaulted during the three and nine months ended September 30, 2019 and 2018, and that were modified in the previous twelve months (i.e., the twelve months prior to default) were immaterial. At September 30, 2019, $4 million of commercial and investor real estate loans modified as TDRs during the three months ended September 30, 2019 were on non-accrual status.
At September 30, 2019, Regions had restructured binding unfunded commitments totaling $6 million where a concession was granted and the borrower was in financial difficulty.
NOTE 4. SERVICING OF FINANCIAL ASSETS
RESIDENTIAL MORTGAGE BANKING ACTIVITIES
The fair value of residential MSRs is calculated using various assumptions including future cash flows, market discount rates, expected prepayment rates, servicing costs and other factors. A significant change in prepayments of mortgages in the servicing portfolio could result in significant changes in the valuation adjustments, thus creating potential volatility in the carrying amount of residential MSRs. The Company compares fair value estimates and assumptions to observable market data where available, and also considers recent market activity and actual portfolio experience.

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The table below presents an analysis of residential MSRs under the fair value measurement method:

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Three Months Ended September 30 Nine Months Ended September 30Three Months Ended March 31
2019 2018 2019 20182020 2019
(In millions)(In millions)
Carrying value, beginning of period$337
 $362
 $418
 $336
$345
 $418
Additions15
 50
 30
 67
11
 7
Increase (decrease) in fair value:          
Due to change in valuation inputs or assumptions(31) 6
 (102) 38
(83) (28)
Economic amortization associated with borrower repayments (1)
(14) (12) (39) (35)(19) (11)
Carrying value, end of period$307
 $406
 $307
 $406
$254
 $386
________
(1) "Economic amortization associated with borrower repayments" includes both total loan payoffs as well as partial paydowns. In the first quarter of 2020, Regions revised its MSR decay methodology from a passage of time approach to a discounted net cash flow approach. The change in methodology results in shifts between decay and hedge impacts, but does not impact the overall valuation.

On March 27, 2019, the Company sold $167 million of affordable housing residential mortgage loans and as part of the transaction kept the rights to service the loans, which resulted in athe retained residential MSR of approximately $2 million.

On September 30, 2019, the Company purchased the rights to service approximately $409 million in residential mortgage loans for approximately $4 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:
September 30March 31
2019 20182020 2019
(Dollars in millions)(Dollars in millions)
Unpaid principal balance$35,132
 $34,142
$33,787
 $36,050
Weighted-average CPR (%)14.6% 8.3%18.1% 10.4%
Estimated impact on fair value of a 10% increase$(19) $(23)$(26) $(21)
Estimated impact on fair value of a 20% increase$(34) $(44)$(49) $(38)
Option-adjusted spread (basis points)600
 802
629
 759
Estimated impact on fair value of a 10% increase$(6) $(13)$(5) $(12)
Estimated impact on fair value of a 20% increase$(13) $(26)$(10) $(23)
Weighted-average coupon interest rate4.2% 4.1%4.2% 4.2%
Weighted-average remaining maturity (months)279
 280
278
 279
Weighted-average servicing fee (basis points)27.3
 27.3
27.4
 27.1

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, the effect of an adverse variation in a particular assumption on the fair value of the residential MSRs is calculated without changing any other assumption, while in reality changes in one factor may result in changes in another, which may either magnify or counteract the effect of the change. The derivative financial instruments and other hedging instruments utilized by Regions would serve to reduce the estimated impacts to fair value included in the table above.
The following table presents servicing related fees, which includeincludes contractually specified servicing fees, late fees and other ancillary income resulting from the servicing of residential mortgage loans:
 Three Months Ended September 30 Nine Months Ended September 30
 2019 2018 2019 2018
 (In millions)
Servicing related fees and other ancillary income$25
 $24
 $77
 $70
 Three Months Ended March 31
 2020 2019
 (In millions)
Servicing related fees and other ancillary income$25
 $26

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.

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Regions maintains an immaterial repurchase liability related to residential mortgage loans sold with representations and warranty provisions. This repurchase liability is reported in other liabilities on the consolidated balance sheets and reflects management’s estimate of losses based on historical repurchase and loss trends, as well as other factors that may result in anticipated losses different from historical loss trends. Adjustments to this reserve are recorded in other non-interest expense on the consolidated statements of income.
COMMERCIAL MORTGAGE BANKING ACTIVITIES
Regions is an approved DUS lender. The DUS program provides liquidity to the multi-family housing market. In connection with the DUS program, Regions services commercial mortgage loans, retains commercial MSRs and intangible assets associated with the DUS license, and assumes a loss share guarantee associated with the loans. See Note 1 "Summary of Significant Accounting Policies" in the 20182019 Annual Report on Form 10-K for additional information. Also see Note 12 for additional information related to the guarantee.
As of September 30, 2019March 31, 2020 and December 31, 2018,2019, the DUS servicing portfolio was approximately $3.7 billion and $3.6 billion, respectively.$3.9 billion. The related commercial MSRs were approximately $56$59 million at both September 30, 2019March 31, 2020 and December 31, 2018,2019, respectively. The estimated fair value of the commercial MSRs was approximately $61$65 million at September 30, 2019March 31, 2020 and $59$64 million at December 31, 2018.2019.
NOTE 5. LEASES
LESSEE
Regions' lease portfolio is primarily composed of property leases that are classified as either operating or finance leases with the majority classified as operating leases. Property leases, which primarily include office locations and retail branches, typically have original lease terms ranging from 1 year to 20 years, some of which may also include an option to extend the lease beyond the original lease term. In some circumstances, Regions may also have an option to terminate the lease early with advance notice. Regions includes renewal and termination options within the lease term if deemed reasonably certain of exercise. As most leases do not state an implicit rate, Regions utilizes the incremental borrowing rate based on information available at the lease commencement date to determine the present value of lease payments. Leases with a term of 12 months or less are not recorded on the balance sheet. Regions continues to recognize lease payments as an expense over the lease term as appropriate. The remainder of the lease portfolio is comprised of equipment leases that have remaining lease terms of 1 year to 4 years.
As of September 30, 2019, assets and liabilities recorded under operating leases for properties were $449 million and $523 million, respectively. The difference between the asset and liability balance is largely the result of lease liabilities that existed prior to the January 1, 2019 adoption of the new accounting guidance for leases. The asset is recorded within other assets and the lease liability is recorded within other liabilities on the consolidated balance sheet.
Lease expense is comprised of the following:
 Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
 (In millions)
Operating lease cost$20
 $61
Other information related to operating leases is as follows:
September 30, 2019
Weighted-average remaining lease term (years)9.3
Weighted-average discount rate (%)3.2%











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Future, undiscounted minimum lease payments on operating leases are as follows:
 September 30, 2019
 (In millions)
2019 (excluding the nine months ended September 30, 2019)$24
202093
202185
202277
202368
Thereafter284
Total lease payments$631
Less: Imputed interest108
Total present value of lease liabilities$523

LESSOR
Regions engages in both direct financing and sales-type leasing. Regions also has portfolios of leveraged and operating leases. These arrangements provide equipment financing for leased assets, such as vehicles and aircraft. At the commencement date, Regions (lessor) enters into an agreement with the customer (lessee) to lease the underlying equipment for a specified lease term. The lease agreements may provide customers the option to terminate the lease by buying the equipment at fair market value at the time of termination or at the end of the lease term. Regions' equipment finance asset management group performs due diligence procedures on the lease residual and overall equipment values as part of the origination process. Regions performs lease residual value reviews on an ongoing basis. In order to manage the residual value risk inherent in some of its direct financing leases, Regions purchases residual value insurance from an independent third party. The sales-type, direct financing and leveraged leases are recorded within loans and operating leases are recorded within other earning assets on the consolidated balance sheet.
The following tables present a summary of Regions' sales-type, direct financing, operating, and leveraged leases:
 Net Interest Income and Other Financing Income
 Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
 (In millions)
Sales-Type and Direct Financing$8
 $24
Operating3
 9
Leveraged4
 11
 $15
 $44


 As of September 30, 2019
 Sales-Type and Direct Financing Operating Leveraged Total
 (In millions)
Lease receivable$1,067
 $125
 $182
 $1,374
Unearned income(225) (31) (116) (372)
Guaranteed residual43
 —
 —
 43
Unguaranteed residual164
 216
 147
 527
Total net investment$1,049
 $310
 $213
 $1,572









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The following table presents the minimum future payments due from customers for sales-type, direct financing, and operating leases:
 September 30, 2019
 Sales-Type and Direct Financing Operating Total
 (In millions)
2019 (excluding the nine months ended September 30, 2019)$54
 $11
 $65
2020173
 42
 215
2021140
 30
 170
2022119
 18
 137
202397
 9
 106
Thereafter484
 15
 499
 $1,067
 $125
 $1,192

NOTE 6. STOCKHOLDERS’SHAREHOLDERS’ EQUITY AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
PREFERRED STOCK
The following table presents a summary of the non-cumulative perpetual preferred stock:    
     September 30, 2019 December 31, 2018     March 31, 2020 December 31, 2019
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
Series C4/30/2019 5/15/2029 5.700%
(2) 
 500
 490
 —
4/30/2019 5/15/2029 5.700%
(2) 
 500
 490
 490
   $1,500
 $1,310
 $820
   $1,500
 $1,310
 $1,310
_________
(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%.
(2) Dividends, if declared, will be paid quarterly at an annual rate equal to (i) for each period beginning prior to August 15, 2029, 5.700%, and (ii) for each period beginning on or after August 15, 2029, three-month LIBOR plus 3.148%.
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 and Series C preferred stock.
The Board of Directors declared $24$8 million in cash dividends on both Series A and Series B Preferred Stock during both the first ninethree months of 20192020 and 2018.2019. In the third quarterfirst three months of 2019,2020, the Board of Directors declared the initial $8$7 million in cash dividends on Series C Preferred Stock. Therefore, a total of $56$23 million in cash dividends on total preferred stock was declared in the first ninethree months of 20192020 compared to the total of $48$16 million in cash dividends on total preferred stock declared in the first ninethree months of 2018.2019.
In the event Series A, Series B, or Series C preferred shares are redeemed at the liquidation amounts, $113 million, $67 million, or $10 million in excess of the redemption amount over the carrying amount will be recognized, respectively. Approximately $100 million of Series A preferred dividends that were recorded as a reduction of preferred stock, including related surplus, will be recorded as a reduction to retained earnings, and approximately $13 million of related issuance costs that were recorded as a reduction of preferred stock, including related surplus, will be recorded as a reduction to net income available to common shareholders. Approximately $52 million of Series B preferred dividends that were recorded as a reduction of preferred stock, including related surplus, will be recorded as a reduction to retained earnings, and approximately $15 million of related issuance costs that were recorded as a reduction of preferred stock, including related surplus, will be recorded as a reduction to net income

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available to common shareholders. Approximately $10 million of Series C issuance costs that were recorded as a reduction of preferred stock, including related surplus, will be recorded as a reduction to net income available to common shareholders.

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COMMON STOCK
Regions was not required to participate in the 2019 CCAR; however, as required, the Company did submit its planned capital actions to the Federal Reserve for the third quarter of 2019 through the second quarter of 2020. DuringAs part of the second quarter of 2019,Company's capital plan, the Board authorized thea new $1.370 billion common stock repurchase of up to $1.37 billion of the Company's common stock,plan, permitting repurchases from the beginning of the third quarter of 2019 through the second quarter of 2020. As
The Company did not repurchase shares in the first quarter of September 30, 2019, 2020, and given the uncertainty in the overall economic environment as a result of the COVID-19 pandemic, no share repurchases are currently anticipated for 2020.
Regions had repurchased approximately 39.7 million shares ofdeclared a $0.155 per share dividend on the common stock at a total cost of approximately $589 million under this plan. All of these shares were 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 $2.031 billion in common shares. As of June 30, 2019, Regions had repurchased approximately 115.38 million shares of common stock, through open market purchases and a contractual repurchase agreement, at a total cost of $2.031 billion under this plan and concluded the plan during the second quarter of 2019.
Regions' Board declared a cash dividend for the thirdfirst quarter of 2019 of $0.155 per common share and $0.14 per common share for both the first and second quarters of 2019, totaling $0.4352020 as compared to $0.140 per common share for the first nine months ofquarter 2019. The Board declared a cash dividend for the third quarter of 2018 of $0.14 per share and $0.09 per common share for both the first and second quarters of 2018, totaling $0.32 per common share for the first nine months of 2018.
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 September 30, 2019Three Months Ended March 31, 2020
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$(24) $108
 $358
 $(463) $(21)$(22) $205
 $322
 $(595) $(90)
Net change1
 133
 172
 10
 316
1
 446
 959
 8
 1,414
End of period$(23) $241
 $530
 $(453) $295
$(21) $651
 $1,281
 $(587) $1,324
Three Months Ended September 30, 2018Three Months Ended March 31, 2019
Unrealized losses on securities transferred to held to maturity Unrealized gains (losses) on securities available for sale Unrealized gains (losses) on derivative instruments designated as cash flow hedges Defined benefit pension plans and other post employment benefits Accumulated other comprehensive
income (loss), net of tax		Unrealized losses on securities transferred to held to maturity Unrealized gains (losses) on securities available for sale Unrealized gains (losses) on derivative instruments designated as cash flow hedges Defined benefit pension plans and other post employment benefits Accumulated other comprehensive
income (loss), net of tax
(In millions)(In millions)
Beginning of period$(30) $(530) $(197) $(498) $(1,255)$(27) $(397) $(63) $(477) $(964)
Net change2
 (102) (44) 5
 (139)1
 245
 113
 7
 366
End of period$(28) $(632) $(241) $(493) $(1,394)$(26) $(152) $50
 $(470) $(598)

 Nine Months Ended September 30, 2019
 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$(27) $(397) $(63) $(477) $(964)
Net change4
 638
 593
 24
 1,259
End of period$(23) $241
 $530
 $(453) $295



32












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 Nine Months Ended September 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
 (In millions)
Beginning of period$(33) $(153) $(51) $(512) $(749)
Net change5
 (479) (190) 19
 (645)
End of period$(28) $(632) $(241) $(493) $(1,394)


The following tables present amounts reclassified out of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2019March 31, 2020 and 2018:2019:
        
Three Months Ended September 30, 2019 Three Months Ended September 30, 2018 Three Months Ended March 31, 2020 Three Months Ended March 31, 2019 
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) $(3) Net interest income and other financing income$(1) $(1)Net interest income
1
 1
 Tax (expense) or benefit—
 —
Tax (expense) or benefit
$(1) $(2) Net of tax$(1) $(1)Net of tax
Unrealized gains and (losses) on available for sale securities:        
$—
 $(1) Securities gains (losses), net$—
 $(7)Securities gains (losses), net
—
 —
 Tax (expense) or benefit—
 2
Tax (expense) or benefit
$—
 $(1) Net of tax$—
 $(5)Net of tax
        
Gains and (losses) on cash flow hedges:        
Interest rate contracts$(7) $—
 Net interest income and other financing income$9
 $(8)Net interest income
2
 —
 Tax (expense) or benefit(2) 2
Tax (expense) or benefit
$(5) $—
 Net of tax$7
 $(6)Net of tax
        
Amortization of defined benefit pension plans and other post employment benefits:        
Actuarial gains (losses) and settlements(2)
$(14) $(8) Total before tax$(11) $(9)Other non-interest expense
3
 2
 Tax (expense) or benefit3
 2
Tax (expense) or benefit
$(11) $(6) Net of tax$(8) $(7)Net of tax
        
Total reclassifications for the period$(17) $(9) Net of tax$(2) $(19)Net of tax


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 Nine Months Ended September 30, 2019 Nine Months Ended September 30, 2018  
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
 (In millions)  
Unrealized losses on securities transferred to held to maturity:     
 $(5) $(7) Net interest income and other financing income
 1
 2
 Tax (expense) or benefit
 $(4) $(5) Net of tax
Unrealized gains and (losses) on available for sale securities:     
 $(26) $—
 Securities gains (losses), net
 6
 —
 Tax (expense) or benefit
 $(20) $—
 Net of tax
      
Gains and (losses) on cash flow hedges:     
Interest rate contracts$(23) $16
 Net interest income and other financing income
 6
 (4) Tax (expense) or benefit
 $(17) $12
 Net of tax
      
Amortization of defined benefit pension plans and other post employment benefits:     
                 Actuarial gains (losses) and settlements(2)
$(33) $(27) Total before tax
 8
 6
 Tax (expense) or benefit
 $(25) $(21) Net of tax
      
Total reclassifications for the period$(66) $(14) Net of tax
________
(1) Amounts in parentheses indicate reductions to net income.
(2) These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension cost and are included in other non-interest expense on the consolidated statements of income (See(see Note 87 for additional details).

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NOTE 7.6. EARNINGS PER COMMON SHARE
The following table sets forth the computation of basic earnings per common share and diluted earnings per common share:
Three Months Ended September 30 Nine Months Ended September 30Three Months Ended March 31
2019 2018 2019 20182020 2019
(In millions, except per share amounts)(In millions, except per share amounts)
Numerator:          
Income from continuing operations$409
 $370
 $1,193
 $1,162
Net income$162
 $394
Preferred stock dividends(24) (16) (56) (48)(23) (16)
Income from continuing operations available to common shareholders385
 354
 1,137
 1,114
Income from discontinued operations, net of tax—
 194
 —
 191
Net income available to common shareholders$385
 $548
 $1,137
 $1,305
$139
 $378
Denominator:          
Weighted-average common shares outstanding—basic988
 1,086
 1,005
 1,111
957
 1,019
Potential common shares3
 9
 5
 10
4
 9
Weighted-average common shares outstanding—diluted991
 1,095
 1,010
 1,121
961
 1,028
Earnings per common share from continuing operations available to common shareholders(1):
       
Earnings per common share:   
Basic$0.39
 $0.33
 $1.13
 $1.00
$0.15
 $0.37
Diluted0.39
 0.32
 1.13
 0.99
0.14
 0.37
Earnings per common share from discontinued operations(1)(2)(3):
       
Basic$0.00
 $0.18
 $0.00
 $0.17
Diluted0.00
 0.18
 0.00
 0.17
Earnings per common share(1):
       
Basic$0.39
 $0.50
 $1.13
 $1.18
Diluted0.39
 0.50
 1.13
 1.16
_________
(1)Certain per share amounts may not appear to reconcile due to rounding.
(2)On April 4, 2018, Regions entered into a stock purchase agreement to sell Regions Insurance Group, Inc to BB&T Insurance Holdings, Inc. The transaction closed on July 2, 2018. The transaction generated an after-tax gain of $196 million. On January 11, 2012, Regions entered into a stock purchase agreement to sell Morgan Keegan and Company and related affiliates to Raymond James Financial Inc. The sale closed on April 2, 2012.
(3)In a period where there is a loss from discontinued operations, basic weighted-average common shares outstanding are used to determine both basic and diluted earnings per share.

The effects from the assumed exercise of 83 million and 75 million stock options, restricted stock units and awards and performance stock units for the three and nine months ended September 30,March 31, 2020 and 2019, respectively, were not included in the above computations of diluted earnings per common share because such amounts would have had an antidilutive effect on earnings per common share. The effects from the assumed exercise of 5 million and 6 million stock options, restricted stock units and awards and performance stock units for the three and nine months ended September 30, 2018, respectively, was not included in the above computations of diluted earnings per common share because such amounts would have had an antidilutive effect on earnings per common share.

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NOTE 8.7. PENSION AND OTHER POSTRETIREMENT BENEFITS
Regions' defined benefit pension plans cover certain employees as the pension plans are closed to new entrants. The Company also sponsors a SERP, which is a non-qualified pension plan that provides certain senior executive officers defined benefits in relation to their compensation.
Net periodic pension cost (credit) includes the following components:
             
 Qualified Plans Non-qualified Plans Total
 Three Months Ended September 30
 2019 2018 2019 2018 2019 2018
 (In millions)
Service cost$6
 $7
 $1
 $—
 $7
 $7
Interest cost19
 18
 1
 2
 20
 20
Expected return on plan assets(34) (38) —
 —
 (34) (38)
Amortization of actuarial loss10
 7
 2
 1
 12
 8
Settlement charge—
 —
 2
 —
 2
 —
Net periodic pension cost (credit)$1
 $(6) $6
 $3
 $7
 $(3)

Qualified Plans Non-qualified Plans Total Qualified Plans Non-qualified Plans Total
Nine Months Ended September 30 Three Months Ended March 31
2019 2018 2019 2018 2019 2018 2020 2019 2020 2019 2020 2019
(In millions) (In millions)
Service costService cost$21
 $26
 $3
 $2
 $24
 $28
Service cost$9
 $8
 $1
 $1
 $10
 $9
Interest costInterest cost57
 53
 4
 4
 61
 57
Interest cost16
 19
 1
 1
 17
 20
Expected return on plan assetsExpected return on plan assets(103) (115) —
 —
 (103) (115)Expected return on plan assets(37) (34) —
 —
 (37) (34)
Amortization of actuarial lossAmortization of actuarial loss27
 23
 4
 4
 31
 27
Amortization of actuarial loss9
 8
 2
 1
 11
 9
Settlement charge—
 —
 2
 —
 2
 —
Net periodic pension cost (credit)Net periodic pension cost (credit)$2
 $(13) $13
 $10
 $15
 $(3)Net periodic pension cost (credit)$(3) $1
 $4
 $3
 $1
 $4

The service cost component of net periodic pension cost (credit) is recorded in salaries and employee benefits on the consolidated statements of income. Components other than service cost are recorded in other non-interest expense on the consolidated statements of income.
Regions' funding policy for the qualified plans is to contribute annually at least the amount required by IRS minimum funding standards. Regions made no contributions during the first ninethree months of 2019.2020.
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 ninethree months ended September 30, 2019March 31, 2020 or 2018.2019.

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NOTE 9.8. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
The following tables present the notional amount and estimated fair value of derivative instruments on a gross basis as of September 30, 2019March 31, 2020 and December 31, 2018.2019.
September 30, 2019 December 31, 2018March 31, 2020 December 31, 2019
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$3,682
     $3,231
    $2,900
     $2,900
    
Derivatives in cash flow hedging relationships:                      
Interest rate swaps12,750
     8,750
    16,000
     17,250
    
Interest rate floors (2)
6,750
 $279
   3,250
 $72
  6,750
 $533
   6,750
 $208
  
Total derivatives designated as hedging instruments$23,182
 $279
   $15,231
 $72
  $25,650
 $533
   $26,900
 $208
  
Derivatives not designated as hedging instruments:                      
Interest rate swaps$67,054
 $506
 $165
 $49,737
 $193
 $237
$74,340
 $1,060
 $211
 $68,075
 $376
 $164
Interest rate options8,118
 26
 10
 7,178
 29
 20
13,368
 84
 27
 11,347
 27
 9
Interest rate futures and forward commitments36,319
 8
 17
 7,961
 4
 9
12,354
 17
 27
 27,324
 10
 11
Other contracts8,769
 53
 70
 7,287
 72
 74
10,317
 223
 278
 10,276
 48
 58
Total derivatives not designated as hedging instruments$120,260
 $593
 $262
 $72,163
 $298
 $340
$110,379
 $1,384
 $543
 $117,022
 $461
 $242
Total derivatives$143,442
 $872
 $262
 $87,394
 $370
 $340
$136,029
 $1,917
 $543
 $143,922
 $669
 $242
                      
Total gross derivative instruments, before netting  $872
 $262
   $370
 $340
  $1,917
 $543
   $669
 $242
Less: Legally enforceable master netting agreements  102
 102
   108
 108
  219
 219
   105
 105
Less: Cash collateral received/posted  314
 104
   135
 71
  707
 133
   229
 90
Total gross derivative instruments, after netting (3)
  $456
 $56
   $127
 $161
  $991
 $191
   $335
 $47
_________
(1)Derivatives in a gain position are recorded as other assets and derivatives in a loss position are recorded as other liabilities on the consolidated balance sheets. There is no fair value presented for contracts that are characterized as settled daily.
(2)Estimated fair value includes premium and change in fair value of the interest rate floors.
(3)The gain amounts,which are not collateralized with cash or other assets or reserved for, represent the net credit risk on all trading and other derivative positions. As of both September 30, 2019March 31, 2020 and December 31, 2018,2019, financial instruments posted of $25 million and $24 million, respectively, were not offset in the consolidated balance sheets.
Subsequent to September 30, 2019 the Company entered into approximately $2.5 billion of notional value forward starting cash flow hedging relationships.
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, 2018,2019, for additional information regarding accounting policies for derivatives.
FAIR VALUE HEDGES
Fair value hedge relationships mitigate exposure to the change in fair value of an asset, liability or firm commitment.
Regions enters into interest rate swap agreements to manage interest rate exposure on the Company’s fixed-rate borrowings. These agreements involve the receipt of fixed-rate amounts in exchange for floating-rate interest payments over the life of the agreements. Regions 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 and floor agreements to manage overall cash flow changes related to interest rate risk exposure on LIBOR-based loans. The agreements effectively modify the Company’s exposure to interest rate risk by utilizing receive fixed/pay LIBOR interest rate swaps and interest rate floors.
Regions recognized an unrealized after-tax gain of $52 million and $47 million in accumulated other comprehensive income (loss) at March 31, 2020 and 2019, respectively, related to discontinued cash flow hedges of loan instruments, which will be

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Regions recognized an unrealized after-tax gain of $60 million and $55 million in accumulated other comprehensive income (loss) at September 30, 2019 and 2018, respectively, related to discontinued cash flow hedges of loan instruments, which will be amortized into earnings in conjunction with the recognition of interest payments through 2025.2026. Regions recognized pre-tax income of $3$2 million and $10$5 million during the three months ended September 30,March 31, 2020 and 2019, and 2018, respectively, and pre-tax income of $11 million and $39 million during the nine months ended September 30, 2019 and 2018, respectively, related to the amortization of discontinued cash flow hedges of loan instruments.
Regions expects to reclassify into earnings approximately $41$289 million in pre-tax income due to the receipt or payment of interest payments and floor premium amortization on all cash flow hedges within the next twelve months. Included in this amount is $9$7 million in pre-tax net gains 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 seven years as of September 30, 2019,March 31, 2020, 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 and the total amounts for the respective line items effected:

Three Months Ended September 30, 2019Three Months Ended March 31, 2020
Interest Income Interest ExpenseInterest Income Interest Expense
Debt securities-taxable Loans, including fees Long-term borrowingsDebt securities Loans, including fees Long-term borrowings
��(In millions)
(In millions)
Total amounts presented in the consolidated statements of income$160
 $970
 $83
$158
 $903
 $59
          
Gains/(losses) on fair value hedging relationships:          
Interest rate contracts:          
Amounts related to interest settlements on derivatives$—
 $—
 $(4)$—
 $—
 $4
Recognized on derivatives(1) —
 15
—
 —
 77
Recognized on hedged items1
 —
 (15)—
 —
 (76)
Income (expense) recognized on fair value hedges$—
 $—
 $(4)
Net income (expense) recognized on fair value hedges$—
 $—
 $5
          
Gains/(losses) on cash flow hedging relationships: (1)
          
Interest rate contracts:          
Realized gains (losses) reclassified from AOCI into net income (2)
$—
 $(7) $—
$—
 $9
 $—
Income (expense) recognized on cash flow hedges$—
 $(7) $—
$—
 $9
 $—


Three Months Ended September 30, 2018Three Months Ended March 31, 2019
Interest Income Interest ExpenseInterest Income Interest Expense
Debt securities-taxable Loans, including fees Long-term borrowingsDebt securities Loans, including fees Long-term borrowings
(In millions)(In millions)
Total amounts presented in the consolidated statements of income$155
 $919
 $84
$165
 $981
 $102
          
Gains/(losses) on fair value hedging relationships:          
Interest rate contracts:          
Amounts related to interest settlements on derivatives$—
 $—
 $(5)$—
 $—
 $(6)
Recognized on derivatives—
 —
 (6)(1) —
 33
Recognized on hedged items—
 —
 5
1
 —
 (33)
Income (expense) recognized on fair value hedges$—
 $—
 $(6)
Net income (expense) recognized on fair value hedges$—
 $—
 $(6)
          
Gains/(losses) on cash flow hedging relationships: (1)
          
Interest rate contracts:          
Realized gains (losses) reclassified from AOCI into net income (2)
$—
 $—
 $—
$—
 $(8) $—
Income (expense) recognized on cash flow hedges$—
 $—
 $—
$—
 $(8) $—

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 Nine Months Ended September 30, 2019
 Interest Income Interest Expense
 Debt securities-taxable Loans, including fees Long-term borrowings
 (In millions)
Total amounts presented in the consolidated statements of income$488
 $2,943
 $281
      
Gains/(losses) on fair value hedging relationships:     
Interest rate contracts:     
   Amounts related to interest settlements on derivatives$—
 $—
 $(15)
   Recognized on derivatives(3) —
 105
   Recognized on hedged items3
 —
 (105)
Income (expense) recognized on fair value hedges$—
 $—
 $(15)
      
Gains/(losses) on cash flow hedging relationships: (1)
     
Interest rate contracts:     
Realized gains (losses) reclassified from AOCI into net income (2)
$—
 $(23) $—
Income (expense) recognized on cash flow hedges$—
 $(23) $—
 Nine Months Ended September 30, 2018
 Interest Income Interest Expense
 Debt securities-taxable Loans, including fees Long-term borrowings
 (In millions)
Total amounts presented in the consolidated statements of income$465
 $2,651
 $229
      
Gains/(losses) on fair value hedging relationships:     
Interest rate contracts:     
Amounts related to interest settlements on derivatives$(1) $—
 $(10)
Recognized on derivatives5
 —
 (47)
Recognized on hedged items(5) —
 45
Income (expense) recognized on fair value hedges$(1) $—
 $(12)
      
Gains/(losses) on cash flow hedging relationships: (1)
     
Interest rate contracts:     
Realized gains (losses) reclassified from AOCI into net income (2)
$—
 $16
 $—
Income (expense) recognized on cash flow hedges$—
 $16
 $—
________
(1)See Note 65 for gain or (loss) recognized for cash flow hedges in AOCI.
(2)Pre-tax




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The following table presentstables present the carrying amount and associated cumulative basis adjustment related to the application of hedge accounting that is included in the carrying amount of hedged assets and liabilities in fair value hedging relationships.
 September 30, 2019
 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$36
 $2
 $312
 $1
Long-term borrowings(3,706) (55) —
 —
 March 31, 2020 December 31, 2019
 Hedged Items Currently Designated Hedged Items Currently Designated
 Carrying Amount of Assets/(Liabilities) Hedge Accounting Basis Adjustment Carrying Amount of Assets/(Liabilities) Hedge Accounting Basis Adjustment
 (In millions) (In millions)
Long-term borrowings$(3,033) $(125) $(2,954) $(49)



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 December 31, 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$85
 $—
 $604
 $4
Long-term borrowings(3,103) 50
 —
 —


As of March 31, 2020 and December 31, 2019, the Company had terminated fair value hedges related to available for sale debt securities with carrying values of $312 million and $337 million, respectively. The remaining basis adjustments related to these terminated hedges were $2 million and $3 million, respectively.
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
The Company holds a portfolio of interest rate swaps, option contracts, and futures and forward commitments that result from transactions with its commercial customers in which they manage their risks by entering into a derivative with Regions. The Company monitors and manages the net risk in this customer portfolio and enters into separate derivative contracts in order to reduce the overall exposure to pre-defined limits. For both derivatives with its end customers and derivatives Regions enters into to mitigate the risk in this portfolio, the Company is subject to market risk and the risk that the counterparty will default. The contracts in this portfolio are not designated as accounting hedges and are marked-to market through earnings (in capital markets fee income) and included in other assets and other liabilities, as appropriate.
Regions enters into interest rate lock commitments, which are commitments to originate mortgage loans whereby the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. At September 30, 2019March 31, 2020 and December 31, 2018,2019, Regions had $478 million$1.1 billion and $191$366 million, respectively, in total notional amount of interest rate lock commitments. Regions manages market risk on interest rate lock commitments and mortgage loans held for sale with corresponding forward sale commitments. Residential mortgage loans held for sale are recorded at fair value with changes in fair value recorded in mortgage income. Commercial mortgage loans held for sale are recorded at either the lower of cost or market or at fair value based on management's election. At September 30, 2019March 31, 2020 and December 31, 2018,2019, Regions had $845 million$1.1 billion and $429$622 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.
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 September 30, 2019March 31, 2020 and December 31, 2018,2019, the total notional amount related to these contracts was $5.4$4.3 billion and $5.7$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 periods presented below:
Three Months Ended September 30 Nine Months Ended September 30Three Months Ended March 31
Derivatives Not Designated as Hedging Instruments2019 2018 2019 20182020 2019
(In millions)(In millions)
Capital markets income:          
Interest rate swaps$2
 $5
 $(1) $17
$(37) $1
Interest rate options10
 6
 17
 19
16
 2
Interest rate futures and forward commitments1
 1
 6
 3
5
 2
Other contracts—
 —
 (1) 4
(10) —
Total capital markets income13
 12
 21
 43
(26) 5
Mortgage income:          
Interest rate swaps44
 (9) 98
 (33)98
 20
Interest rate options(2) (4) 2
 (1)24
 3
Interest rate futures and forward commitments8
 4
 7
 —
(16) 2
Total mortgage income50
 (9) 107
 (34)106
 25
$63
 $3
 $128
 $9
$80
 $30


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CREDIT DERIVATIVES
Regions has both bought and sold credit protection in the form of participations on interest rate swaps (swap participations). These swap participations, which meet the definition of credit derivatives, were entered into in the ordinary course of business to serve the credit needs of customers. Swap participations, whereby Regions has purchased credit protection, entitle Regions to receive a payment from the counterparty if the customer fails to make payment on any amounts due to Regions upon early termination of the swap transaction and have maturities between 20192020 and 2026.2029. Swap participations, whereby Regions has sold credit protection have maturities between 20192020 and 2038. For contracts where Regions sold credit protection, Regions would be required to make payment to the counterparty if the customer fails to make payment on any amounts due to the counterparty upon early termination of the swap transaction. Regions bases the current status of the prepayment/performance risk on bought and sold credit derivatives on recently issued internal risk ratings consistent with the risk management practices of unfunded commitments.
Regions’ maximum potential amount of future payments under these contracts as of September 30, 2019March 31, 2020 was approximately $587$572 million. This scenario occurs if variable interest rates were at zero percent and all counterparties defaulted with zero recovery. The fair value of sold protection at September 30,March 31, 2020 and 2019 and 2018 was immaterial. In transactions where Regions has sold credit protection, recourse to collateral associated with the original swap transaction is available to offset some or all of Regions’ obligation.
Regions has bought credit protection in the form of credit default indices. These indices, which meet the definition of credit derivatives, were entered into in the ordinary course of business to economically hedge credit spread risk in commercial mortgage loans held for sale whereby the fair value option has been elected. Credit derivatives, whereby Regions has purchased credit protection, entitle Regions to receive a payment from the counterparty if losses on the underlying index exceed a certain threshold, dependent upon the tranche rating of the capital structure.
CONTINGENT FEATURES
Certain of Regions’ derivative instrument contracts with broker-dealers contain credit-related termination provisions and/or credit-related provisions regarding the posting of collateral, allowing those broker-dealers to terminate the contracts in the event that Regions’ and/or Regions Bank’s credit ratings falls below specified ratings from certain major credit rating agencies. The aggregate fair values of all derivative instruments with any credit-risk-related contingent features that were in a liability position on September 30, 2019March 31, 2020 and December 31, 2018,2019, were $58$75 million and $45$64 million, respectively, for which Regions had posted collateral of $58$68 million and $43$67 million, respectively, in the normal course of business.

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NOTE 10.9. FAIR VALUE MEASUREMENTS
See Note 1 “Summary"Summary of Significant Accounting Policies”Policies" to the consolidated financial statements of the Annual Report on Form 10-K for the year ended December 31, 20182019 for a description of valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis. Assets and liabilities measured at fair value rarely transfer between Level 1 and Level 2 measurements. Marketable equity securities and debt securities available for sale may be periodically transferred to or from Level 3 valuation based on management’s conclusion regarding the observability of inputs used in valuing the securities. Such transfers are accounted for as if they occur at the beginning of a reporting period.
The following table presents assets and liabilities measured at estimated fair value on a recurring basis and non-recurring basis as of September 30, 2019March 31, 2020 and December 31, 2018:2019:
September 30, 2019 December 31, 2018March 31, 2020 December 31, 2019
Level 1 Level 2 
Level 3(1)
 
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
  Level 1 Level 2 
Level 3(1)
 
Total
Estimated Fair Value
(In millions)(In millions)
Recurring fair value measurements                                
Debt securities available for sale:                                
U.S. Treasury securities$182
 $—
 $—
 $182
  $280
 $—
 $—
 $280
$184
 $—
 $—
 $184
  $182
 $—
 $—
 $182
Federal agency securities—
 45
 —
 45
  —
 43
 —
 43
—
 43
 —
 43
  —
 43
 —
 43
Mortgage-backed securities (MBS):                                
Residential agency—
 15,731
 —
 15,731
  —
 16,624
 —
 16,624
—
 16,453
 —
 16,453
  —
 15,516
 —
 15,516
Residential non-agency—
 —
 2
 2
  —
 —
 2
 2
—
 —
 1
 1
  —
 —
 1
 1
Commercial agency—
 4,895
 —
 4,895
  —
 3,835
 —
 3,835
—
 5,094
 —
 5,094
  —
 4,766
 —
 4,766
Commercial non-agency—
 663
 —
 663
  —
 760
 —
 760
—
 622
 —
 622
  —
 647
 —
 647
Corporate and other debt securities—
 1,467
 1
 1,468
  —
 1,182
 3
 1,185
—
 1,376
 2
 1,378
  —
 1,450
 1
 1,451
Total debt securities available for sale$182
 $22,801
 $3
 $22,986
  $280
 $22,444
 $5
 $22,729
$184
 $23,588
 $3
 $23,775
  $182
 $22,422
 $2
 $22,606
Loans held for sale$—
 $488
 $9
 $497
  $—
 $251
 $—
 $251
$—
 $480
 $20
 $500
  $—
 $436
 $3
 $439
Marketable equity securities$514
 $—
 $—
 $514
  $429
 $—
 $—
 $429
$571
 $—
 $—
 $571
  $450
 $—
 $—
 $450
Residential mortgage servicing rights$—
 $—
 $307
 $307
  $—
 $—
 $418
 $418
$—
 $—
 $254
 $254
  $—
 $—
 $345
 $345
Derivative assets:                                
Interest rate swaps$—
 $506
 $—
 $506
  $—
 $193
 $—
 $193
$—
 $1,060
 $—
 $1,060
  $—
 $376
 $—
 $376
Interest rate options—
 293
 12
 305
  —
 96
 5
 101
—
 581
 36
 617
  —
 227
 8
 235
Interest rate futures and forward commitments—
 8
 —
 8
  —
 4
 —
 4
—
 17
 —
 17
  —
 4
 6
 10
Other contracts1
 51
 1
 53
  2
 70
 —
 72
4
 214
 5
 223
  —
 47
 1
 48
Total derivative assets$1
 $858
 $13
 $872
  $2
 $363
 $5
 $370
$4
 $1,872
 $41
 $1,917
  $—
 $654
 $15
 $669
Derivative liabilities:                                
Interest rate swaps$—
 $165
 $—
 $165
  $—
 $237
 $—
 $237
$—
 $211
 $—
 $211
  $—
 $164
 $—
 $164
Interest rate options—
 10
 —
 10
  —
 20
 —
 20
—
 27
 —
 27
  —
 9
 —
 9
Interest rate futures and forward commitments—
 17
 —
 17
  —
 9
 —
 9
—
 27
 —
 27
  —
 11
 —
 11
Other contracts1
 62
 7
 70
  2
 69
 3
 74
3
 253
 22
 278
  —
 53
 5
 58
Total derivative liabilities$1
 $254
 $7
 $262
  $2
 $335
 $3
 $340
$3
 $518
 $22
 $543
  $—
 $237
 $5
 $242
Non-recurring fair value measurements                                
Loans held for sale$—
 $—
 $8
 $8
  $—
 $—
 $10
 $10
$—
 $—
 $11
 $11
  $—
 $—
 $14
 $14
Equity investments without a readily determinable fair value—
 —
 2
 2
  —
 —
 32
 32
Foreclosed property and other real estate—
 22
 1
 23
  —
 16
 3
 19
—
 —
 13
 13
  —
 —
 42
 42
Equity investments without a readily determinable fair value

—
 —
 32
 32
  —
 —
 27
 27

_________
(1)All following disclosures related to Level 3 recurring and non-recurring assets do not include those deemed to be immaterial.
Assets and liabilities in all levels could result in volatile and material price fluctuations. Realized and unrealized gains and losses on Level 3 assets represent only a portion of the risk to market fluctuations in Regions’ consolidated balance sheets. Further, derivatives included in Levels 2 and 3 are used by ALCO in a holistic approach to managing price fluctuation risks.

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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 nine months ended September 30,March 31, 2020 and 2019, and 2018, respectively. The net changes in realized gains (losses) included in earnings related to Level 3 assets and liabilities held at September 30, 2019 and 2018 are not material.
Three Months Ended September 30, 2019
                 Three Months Ended March 31, 2020
Opening
Balance July 1, 2019		 
Total Realized /
Unrealized
Gains or Losses
 Purchases Sales Issuances Settlements Transfers
into
Level 3		 Transfers
out of
Level 3		 Closing
Balance September 30, 2019		Opening
Balance January 1, 2020		 
Total Realized /
Unrealized
Gains or Losses
 Purchases Sales Issuances Settlements Transfers
into
Level 3		 Transfers
out of
Level 3		 Closing
Balance March 31, 2020
 
Included
in
Earnings
 
Included
in Other
Compre-
hensive
Income
(Loss)
  
Included
in
Earnings
 
Included
in Other
Compre-
hensive
Income
(Loss)
 
(In millions)(In millions)
Level 3 Instruments Only                                      
Residential mortgage servicing rights$337
 (45)
(1) 
—
 15
 —
 —
 —
 —
 —
 $307
$345
 (102)
(1) 
—
 11
 —
 —
 —
 —
 —
 $254

Three Months Ended September 30, 2018
                 Three Months Ended March 31, 2019
Opening
Balance July 1, 2018		 Total Realized /
Unrealized
Gains or Losses		 Purchases Sales Issuances Settlements Transfers
into
Level 3		 Transfers
out of
Level 3		 Closing
Balance September 30, 2018		Opening
Balance January 1, 2019		 Total Realized /
Unrealized
Gains or Losses		 Purchases Sales Issuances Settlements Transfers
into
Level 3		 Transfers
out of
Level 3		 Closing
Balance March 31, 2019
 Included
in Earnings		 Included
in Other
Compre-
hensive
Income
(Loss)		  Included
in Earnings		 Included
in Other
Compre-
hensive
Income
(Loss)		 
(In millions)(In millions)
Level 3 Instruments Only                                      
Residential mortgage servicing rights$362
 (6)
(1) 
—
 50
 —
 —
 —
 —
 —
 $406
$418
 (39)
(1) 
7
 —
 —
 —
 —
 —
 —
 $386

 Nine Months Ended September 30, 2019
 Opening
Balance
January 1,
2019		 
Total Realized /
Unrealized
Gains or Losses
 Purchases Sales Issuances Settlements Transfers
into
Level 3		 Transfers
out of
Level 3		 Closing
Balance September 30, 2019
  
Included
in
Earnings
 
Included
in Other
Compre-
hensive
Income
(Loss)
 
 (In millions)
Level 3 Instruments Only                   
Residential mortgage servicing rights$418
 (141)
(1)  
—
 30
 —
 —
 —
 —
 —
 $307

 Nine Months Ended September 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 September 30, 2018
  Included
in Earnings		 Included
in Other
Compre-
hensive
Income
(Loss)		 
 (In millions)
Level 3 Instruments Only                   
Residential mortgage servicing rights$336
 3
(1)  
—
 67
 —
 —
 —
 —
 —
 $406
_________
(1) Included in mortgage income.

 Amounts presented exclude offsetting impact from related derivatives.
The following table presents the fair value adjustments related to non-recurring fair value measurements:

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Three Months Ended September 30 Nine Months Ended September 30Three Months Ended March 31
2019 2018 2019 20182020 2019
(In millions)(In millions)
Loans held for sale$(3) $(4) $(9) $(10)$(3) $(2)
Equity investments without a readily determinable fair value(3) —
Foreclosed property and other real estate(2) (3) (41) (13)(9) (8)
Equity investments without a readily determinable fair value7
 5
 1
 13

The following tables present detailed information regarding material assets and liabilities measured at fair value using significant unobservable inputs (Level 3) as of September 30, 2019,March 31, 2020, and December 31, 2018.2019. The tables include the valuation techniques and the significant unobservable inputs utilized. The range of each significant unobservable input as well as the weighted-average within the range utilized at September 30, 2019,March 31, 2020, and December 31, 2018,2019, are included. Following the tables are descriptions of the valuation techniques and the sensitivity of the techniques to changes in the significant unobservable inputs.
 September 30,March 31, 2020
Level 3
Estimated Fair Value at
March 31, 2020
Valuation
Technique
Unobservable
Input(s)
Quantitative Range of
Unobservable Inputs and
(Weighted-Average)
(Dollars in millions)
Recurring fair value measurements:
Residential mortgage servicing rights(1)
$254Discounted cash flowWeighted-average CPR (%)8.7% - 35.3% (18.1%)
OAS (%)5.2% - 10.2% (6.3%)
_________
(1) See Note 4 for additional disclosures related to assumptions used in the fair value calculation for residential mortgage servicing rights.

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December 31, 2019
 Level 3
Estimated Fair Value at
September 30,December 31, 2019		 
Valuation
Technique
 
Unobservable
Input(s)
 
Quantitative Range of
Unobservable Inputs and
(Weighted-Average)
 (Dollars in millions)
Recurring fair value measurements:       
Residential mortgage servicing rights(1)
$307345 Discounted cash flow Weighted-average CPR (%) 8.0%7.4% - 31.3% (14.6%26.1% (12.0%)
     OAS (%) 5.2% - 9.2% (6.0%10.2% (6.18%)
_________
(1) See Note 4 for additional disclosures related to assumptions used in the fair value calculation for residential mortgage servicing rights.

December 31, 2018
Level 3
Estimated Fair Value at
December 31, 2018
Valuation
Technique
Unobservable
Input(s)
Quantitative Range of
Unobservable Inputs and
(Weighted-Average)
(Dollars in millions)
Recurring fair value measurements:
Residential mortgage servicing rights(1)
$418Discounted cash flowWeighted-average CPR (%)4.4% - 42.6% (9.0%)
OAS (%)5.7% - 15.0% (7.6%)
_________
(1) See Note 7 to the consolidated financial statements of the Annual Report on Form 10-K for the year ended December 31, 20182019 for additional disclosures related to assumptions used in the fair value calculation for residential mortgage servicing rights.

RECURRING FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS
Residential mortgage servicing rights
The significant unobservable inputs used in the fair value measurement of residential MSRs are OAS and CPR. This valuation requires generating cash flow projections over multiple interest rate scenarios and discounting those cash flows at a risk-adjusted rate. Additionally, the impact of prepayments and changes in the OAS are based on a variety of underlying inputs including servicing costs. Increases or decreases to the underlying cash flow inputs will have a corresponding impact on the value of the MSR asset. The net change in unrealized gains (losses) included in earnings related to MSRs held at period end are disclosed as the changes in valuation inputs or assumptions included in the MSR rollforward table in Note 4. See Note 4 for these amounts and additional disclosures related to assumptions used in the fair value calculation for MSRs.

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FAIR VALUE OPTION
Regions has elected the fair value option for all FNMA and FHLMC eligible agency 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.
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:
 September 30, 2019 December 31, 2018
 
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$497
 $483
 $14
 $251
 $242
 $9
 March 31, 2020 December 31, 2019
 
Aggregate
Fair Value
 
Aggregate
Unpaid
Principal
 
Aggregate Fair
Value Less
Aggregate
Unpaid
Principal
 
Aggregate
Fair Value
 
Aggregate
Unpaid
Principal
 
Aggregate Fair
Value Less
Aggregate
Unpaid
Principal
 (In millions)
Mortgage loans held for sale, at fair value$498
 $475
 $23
 $439
 $425
 $14
Interest income on mortgage loans held for sale is recognized based on contractual rates and is reflected in interest income on loans held for sale in the consolidated statements of income. The following table details net gains and losses resulting from changes in fair value of these loans, which were recorded in mortgage income in the consolidated statements of income during the three and nine months ended September 30, 2019March 31, 2020 and 2018.2019. These changes in fair value are mostly offset by economic hedging activities. An immaterial portion of these amounts was attributable to changes in instrument-specific credit risk.
 Net gains (losses) resulting from changes in fair value
 Three Months Ended September 30 Nine Months Ended September 30
 2019 2018 2019 2018
 (In millions)
Mortgage loans held for sale, at fair value$(1) $(4) $4
 $(4)
 Three Months Ended March 31
 2020 2019
 (In millions)
Net gains (losses) resulting for the change in fair value of mortgage loans held for sale$10
 $—


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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 September 30, 2019March 31, 2020 are as follows:
 September 30, 2019
 
Carrying
Amount
 
Estimated
Fair
Value(1)
 Level 1 Level 2 Level 3
 (In millions)
Financial assets:         
Cash and cash equivalents$5,067
 $5,067
 $5,067
 $—
 $—
Debt securities held to maturity1,375
 1,424
 —
 1,424
 —
Debt securities available for sale22,986
 22,986
 182
 22,801
 3
Loans held for sale548
 548
 —
 515
 33
Loans (excluding leases), net of unearned income and allowance for loan losses(2)(3)
80,655
 80,422
 —
 —
 80,422
Other earning assets(4)
1,450
 1,450
 514
 936
 —
Derivative assets872
 872
 1
 858
 13
Financial liabilities:         
Derivative liabilities262
 262
 1
 254
 7
Deposits94,305
 94,360
 —
 94,360
 —
Short-term borrowings5,401
 5,401
 —
 5,401
 —
Long-term borrowings9,128
 9,499
 —
 7,960
 1,539
Loan commitments and letters of credit71
 506
 —
 —
 506

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Table of Contents


 March 31, 2020
 
Carrying
Amount
 
Estimated
Fair
Value(1)
 Level 1 Level 2 Level 3
 (In millions)
Financial assets:         
Cash and cash equivalents$5,255
 $5,255
 $5,255
 $—
 $—
Debt securities held to maturity1,296
 1,380
 —
 1,380
 —
Debt securities available for sale23,775
 23,775
 184
 23,588
 3
Loans held for sale566
 566
 —
 542
 24
Loans (excluding leases), net of unearned income and allowance for loan losses(2)(3)
85,270
 82,747
 —
 —
 82,747
Other earning assets(4)
1,475
 1,475
 571
 904
 —
Derivative assets1,917
 1,917
 4
 1,872
 41
Financial liabilities:         
Derivative liabilities543
 543
 3
 518
 22
Deposits100,030
 100,099
 —
 100,099
 —
Short-term borrowings3,150
 3,150
 —
 3,150
 —
Long-term borrowings10,105
 10,285
 —
 8,520
 1,765
Loan commitments and letters of credit127
 721
 —
 —
 721
_________
(1)Estimated fair values are consistent with an exit price concept. The assumptions used to estimate the fair values are intended to approximate those that a market participant would use in a hypothetical orderly transaction. In estimating fair value, the Company makes adjustments for estimated changes in interest rates, market liquidity and credit spreads in the periods they are deemed to have occurred.
(2)The estimated fair value of portfolio loans assumes sale of the loans to a third-party financial investor. Accordingly, the value to the Company if the loans were held to maturity is not reflected in the fair value estimate. The fair value discount on the loan portfolio's net carrying amount at September 30, 2019March 31, 2020 was $233 million$2.5 billion or 0.3 percent.3.0 percent, reflecting significant widening of credit spreads as of March 31, 2020.
(3)Excluded from this table is the capital lease carrying amount of $1.3 billion at September 30, 2019.March 31, 2020.
(4)Excluded from this table is the operating lease carrying amount of $310$247 million at September 30, 2019.March 31, 2020.


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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, 20182019 are as follows:
December 31, 2018December 31, 2019
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$3,538
 $3,538
 $3,538
 $—
 $—
$4,114
 $4,114
 $4,114
 $—
 $—
Debt securities held to maturity1,482
 1,460
 —
 1,460
 —
1,332
 1,372
 —
 1,372
 —
Debt securities available for sale22,729
 22,729
 280
 22,444
 5
22,606
 22,606
 182
 22,422
 2
Loans held for sale304
 304
 —
 287
 17
637
 637
 —
 620
 17
Loans (excluding leases), net of unearned income and allowance for loan losses(2)(3)
81,054
 79,386
 —
 —
 79,386
80,841
 80,799
 —
 —
 80,799
Other earning assets(4)
1,350
 1,350
 429
 921
 —
1,221
 1,221
 450
 771
 —
Derivative assets370
 370
 2
 363
 5
669
 669
 —
 654
 15
Financial liabilities:                  
Derivative liabilities340
 340
 2
 335
 3
242
 242
 —
 237
 5
Deposits94,491
 94,531
 —
 94,531
 —
97,475
 97,516
 —
 97,516
 —
Short-term borrowings1,600
 1,600
 —
 1,600
 —
2,050
 2,050
 —
 2,050
 —
Long-term borrowings12,424
 12,610
 —
 12,408
 202
7,879
 8,275
 —
 7,442
 833
Loan commitments and letters of credit79
 435
 —
 —
 435
67
 471
 —
 —
 471
_________
(1)Estimated fair values are consistent with an exit price concept. The assumptions used to estimate the fair values are intended to approximate those that a market participant would use in a hypothetical orderly transaction. In estimating fair value, the Company makes adjustments for estimated changes in interest rates, market liquidity and credit spreads in the periods they are deemed to have occurred.
(2)The estimated fair value of portfolio loans assumes sale of the loans to a third-party financial investor. Accordingly, the value to the Company if the loans were held to maturity is not reflected in the fair value estimate. In the 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 December 31, 20182019 was $1.7 billion$42 million or 2.10.1 percent.
(3)Excluded from this table is the capital lease carrying amount of $1.1$1.3 billion at December 31, 2018.2019.
(4)Excluded from this table is the operating lease carrying amount of $369$297 million at December 31, 2018.2019.

NOTE 11.10. BUSINESS SEGMENT INFORMATION
Each of Regions’ reportable segments is a strategic business unit that serves specific needs of Regions’ customers based on the products and services provided. The segments are based on the manner in which management views the financial performance of the business. The Company has 3 reportable segments: Corporate Bank, Consumer Bank, and Wealth Management, with the remainder split between Discontinued Operations andin 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, 2018.2019.
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 sale of Regions Insurance Group, Inc. and related affiliates, which closed on July 2, 2018. See Note 3 "Discontinued Operations" to the consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2018 for further discussion.

46

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The following tables present financial information for each reportable segment for the period indicated.
 Three Months Ended September 30, 2019
 Corporate Bank 
Consumer
Bank
 
Wealth
Management
 Other 
Continuing
Operations
 
Discontinued
Operations
 Consolidated
 (In millions)
Net interest income and other financing income (loss)$359
 $586
 $45
 $(53) $937
 $—
 $937
Provision (credit) for loan losses47
 85
 4
 (28) 108
 —
 108
Non-interest income126
 324
 85
 23
 558
 —
 558
Non-interest expense228
 525
 87
 31
 871
 —
 871
Income (loss) before income taxes210
 300
 39
 (33) 516
 —
 516
Income tax expense (benefit)53
 75
 10
 (31) 107
 —
 107
Net income (loss)$157
 $225
 $29
 $(2) $409
 $—
 $409
Average assets$53,798
 $34,931
 $2,191
 $33,743
 $124,663
 $—
 $124,663
 Three Months Ended September 30, 2018
 Corporate Bank Consumer Bank 
Wealth
Management
 Other 
Continuing
Operations
 
Discontinued
Operations
 Consolidated
 (In millions)
Net interest income and other financing income (loss)$345
 $560
 $49
 $(12) $942
 $1
 $943
Provision (credit) for loan losses43
 80
 4
 (43) 84
 —
 84
Non-interest income137
 287
 80
 15
 519
 280
 799
Non-interest expense225
 518
 84
 95
 922
 7
 929
Income (loss) before income taxes214
 249
 41
 (49) 455
 274
 729
Income tax expense (benefit)53
 62
 10
 (40) 85
 80
 165
Net income (loss)$161
 $187
 $31
 $(9) $370
 $194
 $564
Average assets$51,694
 $35,142
 $2,257
 $34,433
 $123,526
 $—
 $123,526
Nine Months Ended September 30, 2019Three Months Ended March 31, 2020
Corporate Bank Consumer Bank 
Wealth
Management
 Other 
Continuing
Operations
 
Discontinued
Operations
 ConsolidatedCorporate Bank 
Consumer
Bank
 
Wealth
Management
 Other Consolidated
(In millions)(In millions)
Net interest income and other financing income (loss)$1,077
 $1,748
 $136
 $(134) $2,827
 $—
 $2,827
Provision (credit) for loan losses133
 251
 12
 (105) 291
 —
 291
Net interest income (loss)$354
 $544
 $38
 $(8) $928
Provision for credit losses (1)
53
 88
 4
 228
 373
Non-interest income391
 898
 245
 20
 1,554
 —
 1,554
104
 315
 87
 (21) 485
Non-interest expense693
 1,561
 262
 76
 2,592
 —
 2,592
235
 499
 87
 15
 836
Income (loss) before income taxes642
 834
 107
 (85) 1,498
 —
 1,498
170
 272
 34
 (272) 204
Income tax expense (benefit)161
 209
 27
 (92) 305
 —
 305
43
 68
 8
 (77) 42
Net income (loss)$481
 $625
 $80
 $7
 $1,193
 $—
 $1,193
$127
 $204
 $26
 $(195) $162
Average assets$53,975
 $35,137
 $2,191
 $34,134
 $125,437
 $—
 $125,437
$55,083
 $34,599
 $2,060
 $33,029
 $124,771

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 Nine Months Ended September 30, 2018
 Corporate Bank Consumer Bank 
Wealth
Management
 Other 
Continuing
Operations
 
Discontinued
Operations
 Consolidated
 (In millions)
Net interest income and other financing income (loss)$1,019
 $1,643
 $146
 $(31) $2,777
 $1
 $2,778
Provision (credit) for loan losses132
 233
 12
 (243) 134
 —
 134
Non-interest income417
 852
 236
 33
 1,538
 349
 1,887
Non-interest expense685
 1,551
 260
 221
 2,717
 79
 2,796
Income (loss) before income taxes619
 711
 110
 24
 1,464
 271
 1,735
Income tax expense (benefit)155
 178
 28
 (59) 302
 80
 382
Net income (loss)$464
 $533
 $82
 $83
 $1,162
 $191
 $1,353
Average assets$51,271
 $34,985
 $2,311
 $34,651
 $123,218
 $109
 $123,327
 Three Months Ended March 31, 2019
 Corporate Bank Consumer Bank 
Wealth
Management
 Other Consolidated
 (In millions)
Net interest income (loss)$359
 $579
 $47
 $(37) $948
Provision (credit) for credit losses (1)
48
 83
 4
 (44) 91
Non-interest income131
 281
 78
 12
 502
Non-interest expense236
 520
 84
 20
 860
Income (loss) before income taxes206
 257
 37
 (1) 499
Income tax expense (benefit)52
 65
 9
 (21) 105
Net income (loss)$154
 $192
 $28
 $20
 $394
Average assets$53,851
 $35,401
 $2,203
 $34,088
 $125,543
_____
(1) Upon adoption of CECL on January 1, 2020, the provision for credit losses is the sum of the provision for loans losses and the provision for unfunded credit commitments. Prior to the adoption of CECL, the provision for unfunded commitments was included in other non-interest expense. See Note 23 "Business Segment Information" in the Annual Report on Form 10-K for the year ended December 31, 2019 for information on how the provision is allocated to each reportable segment.

NOTE 12.11. COMMITMENTS, CONTINGENCIES AND GUARANTEES
COMMERCIAL COMMITMENTS
Regions issues off-balance sheet financial instruments in connection with lending activities. The credit risk associated with these instruments is essentially the same as that involved in extending loans to customers and is subject to Regions’ normal credit approval policies and procedures. Regions measures inherent risk associated with these instruments by recording a reserve for unfunded commitments based on an assessment of the likelihood that the guarantee will be funded and the creditworthiness of the customer or counterparty. Collateral is obtained based on management’s assessment of the creditworthiness of the customer.
Credit risk associated with these instruments is represented by the contractual amounts indicated in the following table:
September 30, 2019 December 31, 2018March 31, 2020 December 31, 2019
(In millions)(In millions)
Unused commitments to extend credit$52,622
 $51,406
$51,398
 $52,976
Standby letters of credit1,500
 1,428
1,434
 1,521
Commercial letters of credit69
 44
59
 59
Liabilities associated with standby letters of credit23
 28
22
 22
Assets associated with standby letters of credit25
 29
22
 23
Reserve for unfunded credit commitments48
 51
105
 45

Unused commitments to extend credit—To accommodate the financial needs of its customers, Regions makes commitments under various terms to lend funds to consumers, businesses and other entities. These commitments include (among others) credit card and other revolving credit agreements, term loan commitments and short-term borrowing agreements. Many of these loan commitments have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of these commitments are expected to expire without being funded, the total commitment amounts do not necessarily represent future liquidity requirements.
Standby letters of credit—Standby letters of credit are also issued to customers, which commit Regions to make payments on behalf of customers if certain specified future events occur. Regions has recourse against the customer for any amount required to be paid to a third party under a standby letter of credit. The credit risk involved in the issuance of these guarantees is essentially the same as that involved in extending loans to clients and as such, the instruments are collateralized when necessary. Historically, a large percentage of standby letters of credit expire without being funded. The contractual amount of standby letters of credit represents the maximum potential amount of future payments Regions could be required to make and represents Regions’ maximum credit risk.
Commercial letters of credit—Commercial letters of credit are issued to facilitate foreign or domestic trade transactions for customers. As a general rule, drafts will be drawn when the goods underlying the transaction are in transit.



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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, 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.
When it is practicable, Regions estimates possible loss contingencies, whether or not there is an accrued probable loss. When Regions is able to estimate such possible losses, and when it is reasonably possible Regions could incur losses in excess of amounts accrued, Regions discloses the aggregate estimation of such possible losses. Regions currently estimates that it is reasonably possible that it may experience losses in excess of what Regions has accrued in an aggregate amount of up to approximately $20 million as of September 30, 2019,March 31, 2020, with it also being reasonably possible that Regions could incur no losses in excess of amounts accrued. However, as available information changes, the matters for which Regions is able to estimate, as well as the estimates themselves will be adjusted accordingly. The reasonably possible estimate includes a legal contingenciescontingency that areis subject to thean indemnification agreement with Raymond James.agreement.
Assessments of litigation and claims exposure are difficult because they involve inherently unpredictable factors including, but not limited to, the following: whether the proceeding is in the early stages; whether damages are unspecified, unsupported, or uncertain; whether there is a potential for punitive or other pecuniary damages; whether the matter involves legal uncertainties, including novel issues of law; whether the matter involves multiple parties and/or jurisdictions; whether discovery has begun or is not complete; whether meaningful settlement discussions have commenced; and whether the lawsuit involves class allegations. Assessments of class action litigation, which is generally more complex than other types of litigation, are particularly difficult, especially in the early stages of the proceeding when it is not known whether a class will be certified or how a potential class, if certified, will be defined. As a result, Regions may be unable to estimate reasonably possible losses with respect to some of the matters disclosed below, and the aggregated estimated amount discussed above may not include an estimate for every matter disclosed below.
Regions is involved in formal and informal information-gathering requests, investigations, reviews, examinations and proceedings by various governmental regulatory agencies, law enforcement authorities and self-regulatory bodies regarding Regions’ business, Regions' business practices and policies, and the conduct of persons with whom Regions does business. 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 the one 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' 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 material to Regions’ business, consolidated financial position, results of operations or cash flows for any particular reporting period of occurrence.
GUARANTEES
INDEMNIFICATION OBLIGATION
As discussed in Note 3 in the Annual Report on Form 10-K for the year ended December 31, 2018, on April 2, 2012 (“Closing Date”), Regions closed the sale of Morgan Keegan and related affiliates to Raymond James. In connection with the sale, Regions agreed to indemnify Raymond James for all legal matters related to pre-closing activities, including matters filed subsequent to the Closing Date that relate to actions that occurred prior to closing. Losses under the indemnification include legal and other expenses, such as costs for judgments, settlements and awards associated with the defense and resolution of the indemnified matters. The maximum potential amount of future payments that Regions could be required to make under the indemnification is indeterminable due to the indefinite term of some of the obligations. As of September 30, 2019, the carrying value and fair value of the indemnification obligation were immaterial.

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GUARANTEES
FANNIE MAE DUS LOSS SHARE GUARANTEE
Regions is a DUS lender. The DUS program provides liquidity to the multi-family housing market. Regions services loans sold to Fannie Mae and is required to provide a loss share guarantee equal to one-third for the majority of its DUS servicing portfolio. At September 30, 2019both March 31, 2020 and December 31, 2018,2019, the Company's DUS servicing portfolio totaled approximately $3.7 billion and $3.6 billion, respectively.$3.9 billion. Regions' maximum quantifiable contingent liability related to its loss share guarantee was approximately $1.2$1.3 billion at both September 30, 2019March 31, 2020 and December 31, 2018.2019. The Company would be liable for this amount only if all of the loans it services for Fannie Mae, for which the Company retains some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement. Therefore, the maximum quantifiable contingent liability is not representative of the actual loss the Company would be expected to incur. The estimated fair value of the associated loss share guarantee recorded as a liability on the Company's consolidated balance sheets was approximately $5 million at September 30, 2019 and $4 million at both March 31, 2020 and December 31, 2018.2019. 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, 2018,2019, for additional information.

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NOTE 13. 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, 2018, 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 September 30, 2019
 Corporate Bank 
Consumer
Bank
 
Wealth
Management
 Other Segment Revenue 
Other(1)
 
Continuing
Operations
 
Discontinued
Operations
 (In millions)
Service charges on deposit accounts$38
 $146
 $1
 $(1) $2
 $186
 $—
Card and ATM fees13
 108
 —
 (1) (6) 114
 —
Investment management and trust fee income—
 —
 63
 —
 —
 63
 —
Capital markets income13
 —
 —
 —
 23
 36
 —
Mortgage income—
 —
 —
 —
 56
 56
 —
Investment services fee income—
 —
 20
 —
 —
 20
 —
Commercial credit fee income—
 —
 —
 —
 19
 19
 —
Bank-owned life insurance—
 —
 —
 —
 18
 18
 —
Securities gains (losses), net—
 —
 —
 —
 —
 —
 —
Market value adjustments on employee benefit assets - defined benefit—
 —
 —
 —
 —
 —
 —
Market value adjustments on employee benefit assets - other—
 —
 —
 —
 7
 7
 —
Other miscellaneous income6
 13
 1
 2
 17
 39
 —
 $70
 $267
 $85
 $—
 $136
 $558
 $—
 Three Months Ended September 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
 $142
 $1
 $(2) $2
 $179
 $—
Card and ATM fees13
 102
 —
 1
 (5) 111
 —
Investment management and trust fee income—
 —
 59
 —
 —
 59
 —
Capital markets income15
 —
 —
 —
 30
 45
 —
Mortgage income—
 —
 —
 —
 32
 32
 —
Investment services fee income—
 —
 18
 —
 —
 18
 —
Commercial credit fee income—
 —
 —
 —
 18
 18
 —
Bank-owned life insurance—
 —
 —
 —
 18
 18
 —
Securities gains (losses), net—
 —
 —
 —
 —
 —
 (1)
Market value adjustments on employee benefit assets - defined benefit—
 —
 —
 —
 2
 2
 —
Market value adjustments on employee benefit assets - other—
 —
 —
 —
 5
 5
 —
Insurance commissions and fees—
 —
 1
 1
 —
 2
 —
Gain on sale of business—
 —
 —
 —
 —
 —
 $281
Other miscellaneous income4
 11
 1
 (1) 15
 30
 —
 $68
 $255
 $80
 $(1) $117
 $519
 $280


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 Nine Months Ended September 30, 2019
 Corporate Bank 
Consumer
Bank
 
Wealth
Management
 Other Segment Revenue 
Other(1)
 
Continuing
Operations
 
Discontinued
Operations
 (In millions)
Service charges on deposit accounts$116
 $419
 $2
 $—
 $5
 $542
 $—
Card and ATM fees44
 315
 —
 —
 (16) 343
 —
Investment management and trust fee income—
 —
 179
 —
 —
 179
 —
Capital markets income51
 —
 —
 —
 66
 117
 —
Mortgage income—
 —
 —
 —
 114
 114
 —
Investment services fee income—
 —
 59
 —
 —
 59
 —
Commercial credit fee income—
 —
 —
 —
 55
 55
 —
Bank-owned life insurance—
 —
 —
 —
 60
 60
 —
Securities gains (losses), net—
 —
 —
 —
 (26) (26) —
Market value adjustments on employee benefit assets - defined benefit—
 —
 —
 —
 5
 5
 —
Market value adjustments on employee benefit assets - other—
 —
 —
 —
 4
 4
 —
Other miscellaneous income13
 46
 3
 (2) 42
 102
 —
 $224
 $780
 $243
 $(2) $309
 $1,554
 $—
 Nine Months Ended September 30, 2018
 Corporate Bank 
Consumer
Bank
 
Wealth
Management
 Other Segment Revenue 
Other(1)
 
Continuing
Operations
 
Discontinued
Operations
 (In millions)
Service charges on deposit accounts$109
 $408
 $3
 $(1) $6
 $525
 $—
Card and ATM fees39
 300
 —
 1
 (13) 327
 —
Investment management and trust fee income—
 —
 175
 —
 —
 175
 —
Capital markets income59
 —
 —
 —
 93
 152
 —
Mortgage income—
 —
 —
 —
 107
 107
 —
Investment services fee income—
 —
 54
 —
 —
 54
 —
Commercial credit fee income—
 —
 —
 —
 52
 52
 —
Bank-owned life insurance—
 —
 —
 —
 53
 53
 —
Securities gains (losses), net—
 —
 —
 —
 1
 1
 (1)
Market value adjustments on employee benefit assets - defined benefit—
 —
 —
 —
 1
 1
 —
Market value adjustments on employee benefit assets - other—
 —
 —
 —
 3
 3
 —
Insurance commissions and fees—
 —
 1
 2
 —
 3
 69
Gain on sale of business—
 —
 —
 —
 —
 —
 281
Other miscellaneous income13
 32
 3
 (1) 38
 85
 —
 $220
 $740
 $236
 $1
 $341
 $1,538
 $349
________
(1)This revenue is not impacted by the accounting guidance related to revenue from contracts with customers and continues to be recognized when earned in accordance with the Company's existing revenue recognition policy.


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NOTE 14.12. RECENT ACCOUNTING PRONOUNCEMENTS
StandardDescriptionRequired Date of AdoptionEffect on Regions' financial statements or other significant matters
Standards Adopted (or partially adopted) in 2019
ASU 2016-02, Leases

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

ASU 2018-10, Narrow Amendments to Topic 842

ASU 2018-11, Targeted Improvements to Topic 842

ASU 2018-20, Narrow-Scope Improvements for Lessors

ASU 2019-01, Codification Improvements
This ASU creates ASC Topic 842, Leases, and supersedes Topic 840, 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. This guidance expands both quantitative and qualitative required disclosures.January 1, 2019
Regions adopted the standard on January 1, 2019 using the optional transition method, which allowed for a modified retrospective method of adoption with an immaterial cumulative effect adjustment to retained earnings without restating comparable periods. Regions elected the relief package of practical expedients for which there is no requirement to reassess existence of leases, their classification, and initial direct costs. Regions also applied the exemption for short-term leases with a term of less than one year, whereby Regions does not recognize a lease liability or right-of-use asset on the balance sheet but instead recognizes lease payments as an expense over the lease term as appropriate. For property leases, Regions did not elect the practical expedient to combine lease and non-lease components.

The standard resulted in recognition of right-of-use assets and lease liabilities for operating leases, while accounting for finance leases remains largely unchanged. Adoption of the standard resulted in the recognition of additional right-of-use assets and lease liabilities for operating leases of approximately $451 million as of January 1, 2019.

Operating lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most leases do not state an implicit rate, Regions utilizes the incremental borrowing rate based on information available at the commencement date to determine the present value of the lease payments. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Lease expenses are recognized on a straight-line basis over the lease term.
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 purchased callable debt securities held at a premium to the earliest call date. Current guidance generally requires entities to amortize a premium as a yield adjustment over the contractual life 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. The amendments do not affect the accounting treatment of discounts. This ASU should be adopted on a modified retrospective basis.January 1, 2019

The adoption of this guidance did not 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 2019
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 purchased callable debt securities held at a premium to the earliest call date. Current guidance generally requires entities to amortize a premium as a yield adjustment over the contractual life 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. The amendments do not affect the accounting treatment of discounts. This ASU should be adopted on a modified retrospective basis.January 1, 2019

The adoption of this guidance did not have a material impact.
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, 2019


The adoption of this guidance did not have a material impact.
ASU 2018-09, Codification Improvements
The FASB issued this ASU to clarify, improve, and correct errors in the Codification. The ASU covers nine amendments, which affect a wide variety of Topics including business combinations, debt, derivatives and hedging, and defined contribution pension plans. Some amendments do not require transition guidance and are effective upon issuance, while others will be applicable for Regions starting in 2019.January 1, 2019

The adoption of this guidance did not have a material impact.
ASU 2018-16, Derivatives and Hedging
This ASU amends Topic 815, Derivatives and Hedging, to expand the list of U.S. benchmark interest rates permitted in applying hedge accounting. The amendments permit all entities that elect to apply hedge accounting to benchmark interest rate hedges under ASC 815, Derivatives and Hedging, to use the OIS rate based on the SOFR as a U.S. benchmark interest rate in addition to the four eligible U.S. benchmark interest rates. The amendments should be applied prospectively for qualifying new or redesignated hedging relationships entered into on or after the date of adoption.January 1, 2019The adoption of this guidance did not have a material impact.
ASU 2019-07, Codification Improvements in Response to the SEC's Disclosure Update and Simplification Initiative

This ASU incorporates the SEC's final rules on Disclosure Update and Simplification and Investment Company Reporting Modernization. In 2018, the SEC issued Release No. 33-10532, Disclosure Update and Simplification, which amended certain disclosure requirements that had become redundant, outdated or superseded.
July 19, 2019

Effective upon issuance.
The adoption of this guidance did not have a material impact.

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StandardDescriptionRequired Date of AdoptionEffect on Regions' financial statements or other significant matters
Standards Not Yet Adopted2020
ASU 2016-13, Measurement of Credit Losses on Financial Instruments

ASU 2018-19, Codification Improvements to Topic 326

ASU 2019-04, Codification Improvements to Topic 326

ASU 2019-05, Targeted Transition Relief to Topic 326

ASU 2019-11, Financial Instruments- Credit Losses

ASU 2020-02, Financial Instruments - Credit Losses

This ASU amends Topic 326, Financial Instruments- Credit Losses to replace the current incurred loss accounting model with a current expected credit loss approach (CECL) for financial instruments measured at amortized cost and other commitments to extend credit. The amendments require entities to consider all available relevant information when estimating current expected credit losses, including details about past events, current conditions, and reasonable and supportableR&S forecasts. The resulting allowance for credit losses is to reflect the portion of the amortized cost basis that the entity does not expect to collect.

The amendmentsASU also eliminateeliminates the current accounting model for purchased credit-impaired loans, but requires an allowance to be recognized for purchased-credit-deteriorated (PCD) assets (those that have experienced more-than-insignificant deterioration in credit impairedquality since origination). Entities that had loans and debt securities. accounted for under ASC 310-30 at the time of adoption should prospectively apply the guidance in this amendment for purchase credit deteriorated assets.

Additional quantitative and qualitative disclosures are required upon adoption.

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

The ASU should be adopted on a modified retrospective basis. 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 is permitted.
Regions’ cross-functional implementation team, which is co-ledThe allowance increased by Finance$501 million based on loan exposure balances and Risk Management, hasRegions' internally developed a project plan that results in running a CECL parallel production during 2019 and themacroeconomic forecast upon adoption of the standardCECL on January 1, 2020.

The increase in the allowance at adoption was primarily the result of significant increases within the consumer portfolio segment, specifically residential first quartermortgages, home equity loans, home equity lines, and indirect-other consumer. The impact to the residential first mortgage and home equity classes was mainly driven by their longer time to maturity. Additionally, a significant portion of 2020. Key project implementation activities for the remainderindirect-other consumer class is unsecured lending through third parties which yielded higher loss rates. Under CECL these higher loss rates compounded over a life of 2019 include continued challenge of CECL assumptions and estimated results; continued development of supporting analytics; production and reporting efficiencies; completion of documentation, policies and disclosures; and end-to-end process and control testing.loan estimate result in a significantly larger allowance estimate.
The project implementation plan establishes a parallel processing timeline which began with a limited parallel run in the first quarter of 2019. Parallel runs will continue to be enhanced throughout the year. The third quarter (using data and assumptions as of June 30, 2019) parallel run included enhanced analytics, the qualitative framework and a parallel governance/decisioning process.
A suite of controls including governance, data, forecast and model controls iswas in place to support the parallel process; however, controls will continue to be refined over the remainder of 2019.at adoption.
Regions provides updates to senior management and to the Audit Committee and Risk Committee of the Board of Directors. These communications provide an update on the status of the implementation as discussed above.
Regions expects that the September 30, 2019 allowance for credit losses of $917 million may increase by approximately $500 million to $600 million upon adoption. This estimate is based on loan exposure balances and Regions' internally developed macroeconomic forecast as of June 30, 2019, which provides for a relatively stable macroeconomic environment over a two year reasonable and supportable forecast period. After the forecast period, the Company reverts to longer term historical loss experience, adjusted for prepayments, to estimate losses over the remaining life.
The estimated increase in the allowance at adoption is primarily the result of significant increases within residential first mortgage, home equity lending, consumer credit card and indirect-other consumer loan classes. Residential first mortgage and home equity lending products are impacted by having the longest time to maturity. Additionally, home equity lines of credit have the majority of future principal payment resets not beginning until 2023 and beyond with approximately 48% of the portfolio in a second lien position. Both consumer credit card and a significant portion of indirect-other consumer point of sale lending through third parties are unsecured. Regions' credit card accounts are primarily revolving, as opposed to accounts in which customers pay off their balances monthly.
The disclosed estimate is subject to change based on continuous review and challenge of the models, resulting analytics, assumptions, methodologies and judgments. The impact at adoption will also be influenced by the loan portfolio composition and quality at the adoption date, as well as, macroeconomic conditions and forecasts at that time.
The impact will bewas reflected as an adjustmenta reduction of approximately $375 million to beginning retained earnings netand an increase of income taxes, at adoption.approximately $126 million to deferred tax assets. In late March 2020, the Federal banking regulatoryBanking agencies have provided relief forpublished an initial capital decrease at adoption by allowing the impactinterim final rule related to be phased-in, such that 25%a revised transition of the transitional amounts are phased-in with the impact of adoption completely recognized byCECL on regulatory capital.  The rule allows an add-back to regulatory capital for the beginningimpacts of CECL for a two-year period.  At the end of the fourth year.two years, the impact is then phased in over the following three years. The add-back is calculated as the impact of initial adoption, plus 25 percent of subsequent changes in allowance.  At March 31, 2020 this amount is approximately $438 million.  The impact on CET1 is approximately 40 basis points.  The interim final rule has been published for comment, but has an immediate effective date
There was no material impact to available for sale or held to maturity securities upon adoption of CECL, nor to any other financial assets in 2020 will also impactscope. Most of the held to maturity portfolio consists of agency-backed securities that inherently have an immaterial risk of loss. Additionally, Regions ongoing earnings, perhaps materially, due in parthad no PCI assets that were converted to changes in the macroeconomic forecast.PCD upon adoption.


See Note 1 Basis of Presentation for additional information about Regions' CECL methodologies and assumptions.

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StandardDescriptionRequired Date of AdoptionEffect on Regions' financial statements or other significant matters
Standards Not Yet Adopted
ASU 2017-04, Simplifying the Test for Goodwill ImpairmentThis 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.

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StandardDescriptionRequired Date of AdoptionEffect on Regions' financial statements or other significant matters
Standards Adopted (or partially adopted) in 2020
ASU 2018-15, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement
This ASU amends Topic 350-40, Intangibles-Goodwill and Other-Internal-Use Software, regarding a customer's accounting for implementation, set-up, and other upfront costs incurred in a cloud computing arrangement that is hosted by the vendor, i.e. a service contract. Customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license. The amendments also prescribe the balance sheet, income statement, and cash flow classification of the capitalized implementation costs and related amortization expense, and require additional quantitative and qualitative disclosures.
January 1, 2020

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 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities
This ASU amends Topic 810, Consolidation, guidance on how all reporting entities evaluate indirect interests held through related parties in common control arrangements when determining whether fees paid to decision makers and service providers are variable interests.
January 1, 2020

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 2019-04, Codification Improvements to Topics 815 and 825

This ASU amends Topic 815, Derivatives and Hedging, by providing clarification on ASU 2017-12, which the Company previously adopted. The amendment provides clarity on the term used to measure the change in fair value on a partial term hedge of interest rate risk. The amendment also provides additional guidance on the amortization of the basis adjustment on partial term hedges.

This ASU also amends Topic 825, Financial Instruments, by providing clarification on ASU 2016-01, which the Company previously adopted. The amendment clarifies that an entity must remeasure a security without a readily determinable fair value at fair value in accordance with Topic 820 when an orderly transaction is identified for an identical or similar investment.

January 1, 2020The adoption of this guidance did not 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 2020
ASU 2019-08 Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606)

The amendments in this Update require that an entity measure and classify share-based payment awards granted to a customer by applying the guidance in Topic 718. The amount recorded as a reduction of the transaction price is required to be measured on the basis of the grant-date fair value of the share-based payment award measured in accordance with Topic 718. The grant date is the date at which a grantor (supplier) and grantee (customer) reach a mutual understanding of the key terms and conditions of a share-based payment award. The classification and subsequent measurement of the award are subject to the guidance in Topic 718 unless the share-based payment award is subsequently modified and the grantee is no longer a customer.

January 1, 2020The adoption of this guidance did not have a material impact.


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StandardDescriptionRequired Date of AdoptionEffect on Regions' financial statements or other significant matters
Standards Not Yet Adopted
ASU 2019-12 Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes
The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

January 1, 2021Regions is evaluating the impact upon adoption; however, the impact is not expected to be material.
ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)The amendments clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815.
January 1, 20202021

Early adoption is permitted.
Regions is evaluating the impact upon adoption; however, the impact is not expected to be material.

ASU 2020-04, Reference Rate Reform - Topic 848This Update provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications, hedge accounting, and other transactions affected that reference LIBOR or another reference rate expected to be discontinued.The Update is effective upon issuance and can be applied through December 31, 2022.Regions believesis evaluating the adoptionoverall impact of this guidance will not have a material impact.ASU. To the extent available, Regions does not planexpects to early adopt.
adopt optional relief expedients related to the effects of LIBOR transition.



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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
INTRODUCTION
The following discussion and analysis is part of Regions Financial Corporation’s (“Regions” or the “Company”) Quarterly Report on Form 10-Q filed with the SEC and updates Regions’ Annual Report on Form 10-K for the year ended December 31, 2018,2019, 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. See Note 1 "Basis of Presentation" and Note 1412 "Recent Accounting Pronouncements" to the consolidated financial statements for further detail. The emphasis of this discussion will be on the three and nine months ended September 30, 2019March 31, 2020 compared to the three and nine months ended September 30, 2018March 31, 2019 for the consolidated statements of income. For the consolidated balance sheets, the emphasis of this discussion will be the balances as of September 30, 2019March 31, 2020 compared to December 31, 2018.2019.
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 67 through 89 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, 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 September 30, 2019,March 31, 2020, Regions operated 1,4251,427 total branch outlets. Regions carries out its strategies and derives its profitability from three reportable business segments: Corporate Bank, Consumer Bank, and Wealth Management, with the remainder split between Discontinued Operations andin Other. See Note 11 “Business10 "Business Segment Information”Information" to the consolidated financial statements for more information regarding Regions’ segment reporting structure.
On May 31, 2019, Regions entered into an agreement to acquire Highland Associates, Inc., an institutional investment firm based in Birmingham, Alabama. The transaction closed on August 1, 2019.
On April 4, 2018,February 27, 2020, Regions entered into a stock purchasean agreement to sell Regions Insurance Group, Inc. and related affiliates to BB&T Insurance Holdings, Inc.acquire Ascentium Capital LLC, an independent equipment financing company headquartered in Kingwood, Texas. The transaction closed on July 2, 2018. The transaction resultedApril 1, 2020, and includes approximately $2 billion in a $281 million gain ($196 million after tax). On January 11, 2012, Regions entered into a stock purchase agreementloans and leases 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 3 “Discontinued Operations” to the consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2018 for further discussion.small businesses.
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, capital markets and other customer services which Regions provides. Results of operations are also affected by the provision for loancredit 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 is focused on providing a competitive mix of products and services, delivering quality customer service, and continuing to develop and optimize distribution channels that include a branch distribution network with offices in convenient locations, as well as electronic and mobile banking.
FIRST QUARTER OVERVIEW
Economic Environment in Regions’ Banking Markets
One of the primary factors influencing the credit performance of Regions’ loan portfolio is the overall economic environment in the U.S. and the primary markets in which it operates. The COVID-19 pandemic and the efforts to stem its spread have led to a sudden, violent contraction in economic activity. As the second quarter of 2020 began, expectations regarding the economic environment continued to develop and change. As the second quarter of 2020 unfolds, Regions currently expects a significant contraction in real GDP over the first half of 2020 followed by a recovery beginning in the third quarter. For full-year 2020, real GDP is expected to contract by 5.4 percent and to grow by 2.6 percent in 2021.

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THIRD QUARTER OVERVIEWWith shelter in place orders and mandated closings of “non-essential" businesses spreading across the U.S. during March and early April, there were sharp and rapid declines in consumer spending on services, including travel, tourism, lodging, restaurants, and cultural and sporting events, with firms in consumer facing services industries quickly placing workers on furlough. As spending on services accounts for roughly 70 percent of all consumer spending, the effects on the broader economy were both rapid and severe. The industrial sector of the economy followed, with manufacturing activity largely having shut down.
Over the four week period covering the second half of March and the first half of April, over 20 million Americans filed claims for unemployment insurance, and the unemployment rate is expected to peak at over 15 percent. With shelter in place orders and shutdowns of “non-essential” businesses likely to extend into May or beyond, it is likely that economic activity will not normalize to a meaningful degree until the third quarter of 2020, though this is contingent on the degree of progress made in stemming the spread of the COVID-19 pandemic. There has been an unprecedented fiscal and monetary policy response to the sharp and sudden economic downturn. The aim of policy is to preserve as much of the basic economic infrastructure as possible, but the longer the mandated shutdowns persist, the greater the likelihood additional policy measures will be needed.
There is, however, a considerable degree of uncertainty regarding the economy, as the health outcomes cannot be predicted with any degree of certainty. At present, the most likely outcome is that the normalization of economic activity will be gradual, with differences in timing across geographies and, by extension, across industries. While the rate of real GDP growth in the initial quarter of recovery may imply a rapid recovery, GDP growth is reported in annualized terms, exaggerating quarter-to-quarter changes. It is more instructive to look at the path of the level of real GDP when assessing the speed of the recovery. For instance, the April 2020 baseline forecast anticipates that it will be 10 to 12 quarters before the level of real GDP returns to the fourth quarter 2019 level (the last actual observation available).
The effects within the Regions footprint will be broadly similar to those seen in the U.S. as a whole. Florida’s economy has an above-average exposure to leisure and hospitality services, while Texas and Louisiana have above-average exposure to energy, so these economies could be more prone to lasting effects if the recovery does prove to be more gradual.
The continued economic downturn and uncertainty, as described above, differs from the R&S forecast utilized to record the allowance for credit losses as of March 31, 2020 and is expected to impact factors used in estimating the allowance in future periods, perhaps materially. See the "Allowance" section for further information.
COVID-19 Pandemic
Regions' business operations and financial results are influenced by the economic environment in which the Company operates. The adverse economic conditions and uncertainty in the economic outlook as of March 31, 2020 driven by the COVID-19 pandemic impacted first quarter 2020 financial results in the areas as described below. Regions expects that the pandemic will continue to influence economic conditions and the Company's financial results in future quarters.
The initial impacts of the COVID-19 pandemic in mid-March 2020 were manifested in how Regions altered operations in the branches, such as limiting in-person branch activity to drive-through and converting in-office services to appointment only. As of April 30, 2020, Regions has been able keep approximately 98 percent of branches open. The safety of Regions' associates was also of utmost priority. As of April 30, 2020, approximately 90 percent of the Company's non-branch associates are working remotely.
Late in the first quarter of 2020, the Company began offering special financial assistance to support customers who were experiencing financial hardships related to the COVID-19 pandemic. This assistance included offering customer payment deferrals for existing loans. As of May 4, 2020, Regions had processed approximately 16,000 consumer payment deferral requests totaling $1.7 billion, including approximately 5,300 related to residential mortgages totaling approximately $1.4 billion. In addition, payment deferral requests for approximately 17,200 mortgage loans serviced for others have been processed totaling approximately $2.9 billion. Regions has also processed approximately 14,400 requests for business customers totaling approximately $3.7 billion. As provided in the CARES Act passed into law on March 27, 2020, certain loan modifications related to COVID-19 beginning March 1, 2020 through the earlier of 60 days after the national emergency concerning the COVID-19 outbreak ends or December 31, 2020 are eligible for relief from TDR classification. Refer to Table 10 "Troubled Debt Restructurings" for further information.
As mentioned above, the CARES Act was signed into law as a response to the economic uncertainty amid the COVID-19 pandemic. A focus of the Act is the establishment of federally guaranteed loans for small businesses under the PPP. As a certified SBA lender, Regions has experienced, and expects to continue to experience, an increase in lending activity as the Company assists customers through the loan process under the new PPP. As of May 4, 2020, Regions has received SBA authorization for over 37,200 applications totaling approximately $4.8 billion. Of the authorized SBA applications, Regions has funded over 19,600 applications from business customers totaling approximately $3.6 billion.

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Regions continues to have strong liquidity and capital levels, which have the Company well prepared to respond to the increase in customer borrowing needs. The Company has ample sources of liquidity that include a granular and stable deposit base, cash balances held at the Federal Reserve, borrowing capacity at the Federal Home Loan Bank, unencumbered highly liquid securities, and borrowing availability at the Federal Reserve's discount window. Furthermore, additional liquidity is available through the Federal Reserve's Paycheck Protection Program Liquidity Facility. From a capital perspective, the Company's estimated capital ratios remain well above current regulatory requirements under the Basel III capital rules. Further, Regions currently has no plans to reduce the level of or eliminate cash dividends in consideration of the COVID-19 pandemic. See the "Liquidity", Shareholders' Equity, and "Regulatory Capital" sections for further information.
The Company did not repurchase shares in the first quarter of 2020, and given the uncertainty in the overall economic environment as a result of the COVID-19 pandemic, no share repurchases are currently anticipated for 2020.
The COVID-19 pandemic affected the first quarter provision for credit losses, which was $373 million and $250 million in excess of net charge-offs (see below and the "Allowance for Credit Losses" section of Management's Discussion and Analysis for further detail). It also impacted ending loan and deposit levels as customers increased their line utilization in response to the current economic environment, while keeping the majority of the excess cash in their deposit accounts. See Table 2 "Loan Portfolio" and Table 14 "Deposits" for further information.
The COVID-19 pandemic also affected non-interest income. At the end of the first quarter of 2020, consumer spending activity decreased in response to COVID-19, which negatively impacted non-interest income by approximately $12 million. If current spending levels persist, the Company estimates non-interest income will be negatively impacted by $20 million to $25 million per month from pre-March 2020 levels. See Table 23 "Non-Interest Income" for more detail.
Regions assessed goodwill in light of the onset of the COVID-19 pandemic and concluded that it was not more likely than not that the fair value of each of the Company's reporting units was less than its carrying value. Refer to the "Goodwill" section for further detail.
Regions has experienced a modest increase in cyber events as a result of the COVID-19 pandemic, however the Company's layered control environment has effectively detected and prevented any material impact related to these events. Refer to the "Information Security" section for further detail.
Subsequent to March 31, 2020, Moody's and Fitch ratings agencies changed the outlook for Regions' credit ratings to stable from positive due to concerns over the negative financial and economic impacts to the bank sector from COVID-19, as well as the direct negative impact on banks' asset quality and profitability from a contracting economy in 2020. See Table 17 "Credit Ratings" for further information.
First Quarter Results
Regions reported net income available to common shareholders of $385$139 million, or $0.39$0.14 per diluted share, in the thirdfirst quarter of 20192020 compared to $548$378 million, or $0.50$0.37 per diluted share, in the thirdfirst quarter of 2018. Net income available to common shareholders from continuing operations was $385 million, or $0.39 per diluted share, in the third quarter of 2019 compared to $354 million, or $0.32 per diluted share, in the third quarter of 2018. The primary driver of the decrease in net income from the prior year period was the $196 million after-tax gain from the sale of the Regions Insurance Group, which was reflected in discontinued operations in the third quarter of 2018. The primary drivers of the increase in results from continuing operations from the prior year period were higher non-interest income and lower non-interest expense, which were partially offset by increases in the provision for loan losses and income taxes. The increase in earnings per share from continuing operations was also driven by lower share repurchases period over period.2019.
For the thirdfirst quarter of 2019,2020, net interest income and other financing income (taxable-equivalent basis) totaled $950$940 million, down $6$21 million compared to the thirdfirst quarter of 2018.2019. The net interest margin (taxable-equivalent basis) was 3.44 percent for the thirdfirst quarter of 20192020 and 3.473.51 percent in the thirdfirst quarter of 2018. Net2019. The decreases in net interest income and other financing income and net interest margin were negatively impactedprimarily driven by higher funding costs. This was mostlythe impact of lower market interest rates on asset yields, partially offset by the impact of higher short-term market interest rates, benefits from securities repositioning, higher average loan balances and favorable loan remixing.lower funding costs.
The provision for credit losses totaled $373 million in the first quarter of 2020, after the adoption of CECL at the beginning of the year, as compared to the provision for loan losses totaled $108 million in the third quarter of 2019 compared to $84$91 million during the thirdfirst quarter of 2018.2019. The current quarter provision covered $123 million in net charge-offs, as well as $250 million of additional provision reflecting an increase in the expected losses over the contractual lives of the loan and credit commitment portfolios. The increase in the provision for credit losses during the first quarter was driven primarily by adverse economic conditions and uncertainty in the economic outlook resulting from the COVID-19 pandemic. Also contributing to the increase were higher specific reserves associated with downgrades primarily in the energy and restaurant portfolios. Refer to the "Allowance for Credit Losses" section of Management's Discussion and Analysis for further detail.
Net charge-offs totaled $92$123 million, or an annualized 0.440.59 percent of average loans, in the thirdfirst quarter of 2019,2020, compared to $82$78 million, or an annualized 0.400.38 percent for the thirdfirst quarter of 2018.2019. See Note 3 "Loans and the Allowance for Credit Losses" to the consolidated financial statements for additional information.
The allowance for loan losses was 1.051.89 percent of total loans, net of unearned income at September 30, 2019March 31, 2020 compared to 1.011.10 percent at December 31, 2018.2019. The increase was a result of the adoption of CECL and the provision as discussed above. The allowance for loan losses was 188261 percent of total non-performing loans at September 30, 2019March 31, 2020 compared to 169180 percent at December 31, 20182019. Total non-performing loans decreasedincreased to 0.560.72 percent of total loans, net of unearned income, at September 30, 2019,March 31, 2020, compared to 0.600.61 percent at December 31, 2018.2019. The increase in non-performing loans was driven primarily by energy-related credits. Refer to the "Allowance for Credit Losses" section of Management's Discussion and Analysis for further detail.

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Non-interest income from continuing operations was $558$485 million for the thirdfirst quarter of 2019,2020, a $39$17 million increasedecrease from the thirdfirst quarter of 2018.2019. The increasedecrease was primarily driven by increased service charges on deposit accounts, mortgagelower capital markets income and other non-interest income, partially offset by a decrease in capital marketshigher mortgage income. See Table 2123 "Non-Interest Income from Continuing Operations"Income" for more detail.
Total non-interest expense from continuing operations was $871$836 million in the thirdfirst quarter of 2019,2020, a $51$24 million decrease from the thirdfirst quarter of 2018.2019. The decrease was primarily driven by lower salaries and employee benefits and other miscellaneous expenses, FDIC insurance assessments, and professional and legal fees, partially offset by an increase in salariesfurniture and employee benefits, and Visa Class B sharesequipment expense. See Table 2224 "Non-Interest Expense from Continuing Operations"Expense" for more detail.
Income tax expense from continuing operations for the three months ended September 30, 2019March 31, 2020 was $107$42 million compared to $85$105 million for the same period in 2018.2019. See "Income Taxes" toward the end of the Management’s Discussion and Analysis section of this report for more detail.
Expectations
2019 Expectations
CategoryExpectation
Full year adjusted average loan growthLow to mid-single digits
Full year adjusted total revenue growth
Approximately 2 percent (1)
Full year adjusted non-interest expense
Relatively stable (2)
Net charge-offs / average loans40-50 basis points
Effective tax rate
20%-21%(3)
Expect to generate positive adjusted operating leverage.
________
(1)Revised from previous expectation of lower end of 2%-4%.
(2)Revised from previous expectation of stable to down slightly.
(3)Revised from previous expectation of 20%-22%.
The reconciliation with respectDue to these forward-looking non-GAAP measures is expectedthe current economic uncertainty, the Company has rescinded previously issued financial targets for 2020, as well as the three-year targets previously announced in 2019. Regions' expectations will continue to evolve in response to the changing economic conditions presented amidst the COVID-19 pandemic, as the Company expects that the financial results of subsequent quarters will continue 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 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.impacted.

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BALANCE SHEET ANALYSIS
The following sections provide expanded discussion of significant changes in certain line items in asset, liability, and equity categories.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents increased approximately $1.5$1.1 billion from year-end 20182019 to September 30, 2019,March 31, 2020, due primarily to an increase in cash on deposit with the FRB,FRB. In response to the economic environment and as a part of Regions' liquidity management, the result of normal day-to-day operating variations.Company borrowed additional advances at the FHLB which were used to increase cash at the FRB. See the "Liquidity" section for more information.
DEBT SECURITIES
The following table details the carrying values of debt securities, including both available for sale and held to maturity:
Table 1—Debt Securities
 September 30, 2019 December 31, 2018
 (In millions)
U.S. Treasury securities$182
 $280
Federal agency securities45
 43
Mortgage-backed securities:   
Residential agency16,479
 17,475
Residential non-agency2
 2
Commercial agency5,522
 4,466
Commercial non-agency663
 760
Corporate and other debt securities1,468
 1,185
 $24,361
 $24,211
Regions maintains a highly rated securities portfolio consisting primarily of agency mortgage-backed securities. See Note 2 "Debt Securities" to the consolidated financial statements for additional information.
 March 31, 2020 December 31, 2019
 (In millions)
U.S. Treasury securities$184
 $182
Federal agency securities43
 43
Mortgage-backed securities:   
Residential agency17,129
 16,226
Residential non-agency1
 1
Commercial agency5,714
 5,388
Commercial non-agency622
 647
Corporate and other debt securities1,378
 1,451
 $25,071
 $23,938
Debt 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. Regions maintains a highly rated securities portfolio consisting primarily of agency mortgage-backed securities. See Note 2 "Debt Securities" to the consolidated financial statements for additional information. Also see the "Market Risk-Interest Rate Risk" and "Liquidity Risk""Liquidity" sections for more information.
DuringDebt securities increased $1.1 billion from December 31, 2019 to March 31, 2020. Despite the interest rate volatility during the quarter, Regions' comprehensive securities repositioning executed in the second and third quarterquarters of 2019 the Company continued to execute its securities portfolio optimization strategy which included repositioning agency MBS into prepayment protected securities, primarily agency commercial MBS in an effort reduce future net interest income and other financing income variability to the long end of the yield curve. The portfolio was reduced on an amortized cost basis; however, changes in the market rate environment have increased the fair value ofpositioned the portfolio to a level that is greater thanreact favorably to the value at December 31, 2018.

current economic environment. The increase during the first quarter of 2020 was the result of improved market valuation and additional purchases of mortgage-backed securities.

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LOANS HELD FOR SALE
Loans held for sale totaled $548$566 million at September 30, 2019,March 31, 2020, consisting of $488$478 million of residential real estate mortgage loans, $52$85 million of commercial mortgage and other loans, and $8$3 million of non-performing loans. At December 31, 2018,2019, loans held for sale totaled $304$637 million, consisting of $256$436 million of residential real estate mortgage loans, $38$188 million of commercial mortgage and other loans, and $10$13 million of non-performing loans. The levels of residential real estate and commercial mortgage loans held for sale that are part of the Company's mortgage originations to be sold fluctuate depending on the timing of origination and sale to third parties.
LOANS
Loans, net of unearned income, represented approximately 74 percent of Regions’ interest-earning assets at September 30, 2019.March 31, 2020. The following table presents the distribution of Regions’ loan portfolio by portfolio segment and class, net of unearned income:
Table 2—Loan Portfolio
September 30, 2019 December 31, 2018March 31, 2020 December 31, 2019
(In millions, net of unearned income)(In millions, net of unearned income)
Commercial and industrial$40,179
 $39,282
$45,388
 $39,971
Commercial real estate mortgage—owner-occupied5,532
 5,549
5,550
 5,537
Commercial real estate construction—owner-occupied365
 384
309
 331
Total commercial46,076
 45,215
51,247
 45,839
Commercial investor real estate mortgage4,769
 4,650
5,079
 4,936
Commercial investor real estate construction1,475
 1,786
1,784
 1,621
Total investor real estate6,244
 6,436
6,863
 6,557
Residential first mortgage14,397
 14,276
14,535
 14,485
Home equity8,597
 9,257
Home equity lines5,201
 5,300
Home equity loans3,000
 3,084
Indirect—vehicles2,095
 3,053
1,557
 1,812
Indirect—other consumer2,821
 2,349
3,202
 3,249
Consumer credit card1,322
 1,345
1,303
 1,387
Other consumer1,234
 1,221
1,190
 1,250
Total consumer30,466
 31,501
29,988
 30,567
$82,786
 $83,152
$88,098
 $82,963
PORTFOLIO CHARACTERISTICS
The following sections describe the composition of the portfolio segments and classes disclosed in Table 2, explain changes in balances from 20182019 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 3 “Loans"Loans and the Allowance for Credit Losses”Losses" to the consolidated financial statements for additional discussion.
Most classes within Regions' portfolio segments are experiencing the impact of the COVID-19 pandemic. In particular, Regions' energy and restaurant portfolios have experienced significant operational challenges as a result of COVID-19 and are at the highest risk. Energy credits have been stressed by the recent significant drop in oil prices. The restaurant portfolio, particularly credits in the casual dining space, have come under stress as shelter in place orders began and continue. Small business sectors of the portfolio, as well as consumer portfolios, are also impacted by shelter in place and social distancing rules created by the COVID-19 pandemic along with the fact that these types of borrowers tend to have limited liquidity or access to alternate liquidity sources. The extent to which Regions' borrowers are ultimately impacted will be a factor of the duration and severity of the economic impact as well as the effectiveness of the various government programs in place to support individuals and businesses. See Table 3 "Selected Industry Exposure" for more detail.
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 $897 million$5.4 billion since year-end 2018.2019. This expansion was due primarily to an increase in line utilization late in the first quarter as customers responded to the uncertain current economic environment (see the "First Quarter Overview" section for more

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information). The increaseexpansion was broad-based across industry sectors and geographic markets, driven primarily by increases in line utilization, expansion of existing customer relationshipsthe real estate, retail trade, financial services, manufacturing, healthcare and the addition of new relationships. utilities industry sectors.
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. 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.
On April 1, 2020, the Company closed a transaction to acquire Ascentium Capital LLC, an independent equipment finance leader. The acquisition included approximately $2 billion in loans and leases to small businesses.
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
 March 31, 2020
 Loans Unfunded Commitments Total Exposure
 (In millions)
Administrative, support, waste and repair$1,558
 $810
 $2,368
Agriculture422
 250
 672
Educational services2,801
 778
 3,579
Energy2,375
 2,262
 4,637
Financial services5,000
 3,970
 8,970
Government and public sector2,975
 545
 3,520
Healthcare4,015
 1,587
 5,602
Information1,586
 668
 2,254
Manufacturing4,750
 3,690
 8,440
Professional, scientific and technical services2,098
 1,233
 3,331
Real estate8,805
 5,525
 14,330
Religious, leisure, personal and non-profit services1,842
 712
 2,554
Restaurant, accommodation and lodging1,911
 243
 2,154
Retail trade3,080
 1,263
 4,343
Transportation and warehousing2,096
 1,116
 3,212
Utilities2,255
 2,306
 4,561
Wholesale goods3,667
 2,395
 6,062
Other (1)
11
 2,903
 2,914
Total commercial$51,247
 $32,256
 $83,503

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Table 3—Selected Industry Exposure
 September 30, 2019
 Loans Unfunded Commitments Total Exposure
 (In millions)
Administrative, support, waste and repair$1,344
 $931
 $2,275
Agriculture513
 211
 724
Educational services2,743
 501
 3,244
Energy2,286
 2,460
 4,746
Financial services4,161
 4,060
 8,221
Government and public sector2,807
 498
 3,305
Healthcare3,783
 1,909
 5,692
Information1,583
 919
 2,502
Manufacturing4,405
 3,903
 8,308
Professional, scientific and technical services1,803
 1,356
 3,159
Real estate6,849
 6,884
 13,733
Religious, leisure, personal and non-profit services1,716
 770
 2,486
Restaurant, accommodation and lodging1,862
 470
 2,332
Retail trade2,566
 1,830
 4,396
Transportation and warehousing1,965
 1,146
 3,111
Utilities1,895
 2,382
 4,277
Wholesale goods3,431
 2,579
 6,010
Other (1)
364
 2,701
 3,065
Total commercial$46,076
 $35,510
 $81,586
December 31, 2018 (2)
December 31, 2019 (2)
Loans Unfunded Commitments Total ExposureLoans Unfunded Commitments Total Exposure
(In millions)(In millions)
Administrative, support, waste and repair$1,353
 $882
 $2,235
$1,402
 $888
 $2,290
Agriculture550
 235
 785
456
 225
 681
Educational services2,500
 606
 3,106
2,724
 676
 3,400
Energy2,275
 2,408
 4,683
2,172
 2,528
 4,700
Financial services4,063
 3,670
 7,733
4,588
 4,257
 8,845
Government and public sector2,826
��506
 3,332
2,825
 522
 3,347
Healthcare3,854
 1,869
 5,723
3,646
 1,802
 5,448
Information1,446
 1,002
 2,448
1,394
 847
 2,241
Manufacturing4,543
 4,061
 8,604
4,347
 3,912
 8,259
Professional, scientific and technical services1,730
 1,434
 3,164
1,970
 1,299
 3,269
Real estate6,696
 6,567
 13,263
7,067
 7,224
 14,291
Religious, leisure, personal and non-profit services1,735
 766
 2,501
1,748
 769
 2,517
Restaurant, accommodation and lodging2,071
 590
 2,661
1,780
 420
 2,200
Retail trade2,362
 2,267
 4,629
2,439
 2,039
 4,478
Transportation and warehousing1,869
 974
 2,843
1,885
 1,250
 3,135
Utilities1,729
 2,287
 4,016
1,774
 2,437
 4,211
Wholesale goods3,356
 2,549
 5,905
3,335
 2,637
 5,972
Other (1)
257
 2,458
 2,715
287
 2,095
 2,382
Total commercial$45,215
 $35,131
 $80,346
$45,839
 $35,827
 $81,666
________
(1)"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.
(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, comparable period changes may be impacted.

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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 $192increased $306 million in comparison to 20182019 year-end balances. Due to the nature of the cash flows typically used to repaybalances reflecting new fundings and draws on investor real estate loans, these loans are particularly vulnerable to weak economic conditions.construction lines.
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 increased $121$50 million in comparison to 20182019 year-end balances. During the first quarter 2019, $167Approximately $842 million of affordable housing residential mortgage loans were sold, which generated an $8 million pre-tax gain. Approximately $2.2 billion in new loan originations were retained on the balance sheet through the first ninethree months of 2019.2020.
Home Equity Lines
Home equity lending includes both home equity loans and lines of credit. This type of lending, which isare secured by a first or second mortgage on the borrower's residence allowsand allow customers to borrow against the equity in their homes. The homeHome equity portfoliolines decreased by $660$99 million in comparison to 20182019 year-end balances. Substantially all of this portfolio was originated through Regions’ branch network.
The following table presents information regarding the future principal payment reset dates for the Company's home equity lines of credit as of September 30, 2019. 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 Total
 (Dollars in millions)
2019$28
 0.52% $27
 0.49% $55
202086
 1.58
 62
 1.15
 148
2021108
 2.00
 98
 1.80
 206
2022118
 2.17
 116
 2.15
 234
2023152
 2.79
 132
 2.44
 284
2024-20282,130
 39.23
 1,991
 36.65
 4,121
2029-2033213
 3.91
 167
 3.08
 380
Thereafter1
 0.02
 1
 0.02
 2
Total$2,836
 52.22% $2,594
 47.78% $5,430
Of the $8.6 billion home equity portfolio at September 30, 2019, approximately $5.4 billion were home equity lines of credit and $3.2 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 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.

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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 March 31, 2020. 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 Total
 (Dollars in millions)
          
202084
 1.61% 67
 1.28% 151
202197 1.87% 90 1.73% 187
2022111 2.14% 106 2.04% 217
2023136 2.62% 118 2.26% 254
2024195 3.74% 157 3.03% 352
2025-20292,073 39.84% 1,871 35.99% 3,944
2030-203457 1.10% 35 0.67% 92
Thereafter2 0.04% 2 0.04% 4
Total2,755
 52.96% 2,446
 47.04% 5,201
Home Equity Loans
Home equity loans are also secured by a first or second mortgage on the borrower's residence, are primarily originated as amortizing loans, and allow customers to borrow against the equity in their homes. Home equity loans decreased by $84 million in comparison to 2019 year-end balances. Substantially all of this portfolio was originated through Regions’ branch network.
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, home equity lines and home equity loans classes of the consumer portfolio segment. Current LTV data for some loans in the portfolio is not available due to mergers and systems integrations. The amounts in the table represent the entire loan balance. For purposes of the table below, if the loan balance exceeds

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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.

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Table 5—Estimated Current Loan to Value Ranges
September 30, 2019 December 31, 2018March 31, 2020
Residential
First Mortgage
 Home Equity 
Residential
First Mortgage
 Home Equity
Residential
First Mortgage
 Home Equity Lines of Credit Home Equity Loans
 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%$36
 $17
 $24
 $64
 $28
 $52
$50
 $7
 $17
 $8
 $5
80% - 100%2,031
 125
 241
 1,720
 168
 346
1,775
 80
 195
 41
 26
Below 80%12,060
 5,501
 2,526
 12,117
 5,852
 2,627
12,465
 2,626
 2,145
 2,658
 244
Data not available270
 60
 103
 375
 66
 118
245
 42
 89
 13
 5
$14,397
 $5,703
 $2,894
 $14,276
 $6,114
 $3,143
$14,535
 $2,755
 $2,446
 $2,720
 $280
 December 31, 2019
 
Residential
First Mortgage
 Home Equity Lines of Credit Home Equity Loans
  1st Lien 2nd Lien 1st Lien 2nd Lien
  
Estimated current LTV:         
Above 100%$32
 $8
 $18
 $9
 $5
80% - 100%1,745
 86
 208
 39
 29
Below 80%12,438
 2,659
 2,195
 2,731
 252
Data not available270
 35
 91
 14
 5
 $14,485
 $2,788
 $2,512
 $2,793
 $291
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 $958$255 million from year-end 2018.2019. The decrease is due to the termination of a third-party arrangement during the fourth quarter of 2016 and Regions' decision in January 2019 to discontinue its indirect auto lending business due to competition-based margin compression impacting overall returns on the portfolio.business. Regions ceased originating new indirect auto loans in the first quarter of 2019 and completed any in-process indirect auto loan closings at the end of the second quarter of 2019. The Company will remain in the direct auto lending business.
Indirect—Other Consumer
Indirect-other consumer lending represents other lending initiatives through third parties, including point of sale lending. This portfolio class increased $472decreased $47 million from year-end 2018, primarily2019 due to continued growth in existing arrangements with third parties. The Company has decided to exitexiting a third party relationship during the fourth quarter of 2019.
Consumer Credit Card
Consumer credit card lending represents primarily open-ended variable interest rate consumer credit card loans. These balances decreased $23$84 million from year-end 2018.2019 reflecting seasonality.
Other Consumer
Other consumer loans primarily include direct consumer loans, overdrafts and other revolving loans. Other consumer loans increased $13decreased $60 million from year-end 2018.2019.
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 and refreshed FICO scores are obtained by the Company quarterly for all consumer loans. 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 sufficientFor more information on credit an updated score may not be available. Residential first mortgage and home equity balances with FICO scores below 620 were 5 percent of the combined portfolios for both September 30, 2019 and December 31, 2018.

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Table 6—Estimated Current FICO Score Ranges
 September 30, 2019
 
Residential
First Mortgage
 Home Equity Indirect—Vehicles Indirect—Other Consumer 
Consumer
Credit Card
 
Other
Consumer
  1st Lien 2nd Lien    
 (In millions)
Below 620$702
 $243
 $129
 $215
 $69
 $100
 $67
620-680740
 396
 218
 218
 249
 230
 148
681-7201,249
 635
 337
 249
 498
 282
 227
Above 72011,384
 4,307
 2,163
 1,371
 1,874
 702
 719
Data not available322
 122
 47
 42
 131
 8
 73
 $14,397
 $5,703
 $2,894
 $2,095
 $2,821
 $1,322
 $1,234
 December 31, 2018
 
Residential
First Mortgage
 Home Equity Indirect—Vehicles Indirect—Other Consumer 
Consumer
Credit Card
 
Other
Consumer
  1st Lien 2nd Lien    
 (In millions)
Below 620$700
 $239
 $142
 $272
 $56
 $98
 $69
620-680747
 429
 259
 332
 212
 229
 148
681-7201,270
 708
 376
 384
 405
 288
 223
Above 72011,104
 4,610
 2,316
 1,992
 1,474
 721
 704
Data not available455
 128
 50
 73
 202
 9
 77
 $14,276
 $6,114
 $3,143
 $3,053
 $2,349
 $1,345
 $1,221
quality indicators refer to Note 3 "Loans".
ALLOWANCE FOR CREDIT LOSSES
In preparing financial information, management is required to make significant estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses for the periods shown. The accounting principles followed by Regions and the methods of applying these principles conform with GAAP, regulatory guidances, where applicable, and general banking practices. The allowance for credit losses (“allowance”)is one of the most significant estimates and assumptions to Regions. The allowance consists of two components: the allowance for loan losses and the reserve for unfunded credit commitments. DiscussionUnfunded credit commitments include items such as letters of credit, financial guarantees and binding unfunded loan commitments.

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On January 1, 2020, Regions adopted CECL, which replaced the incurred loss allowance methodology with an expected loss allowance methodology. See Note 1 "Basis of Presentation", Note 3 "Loans and the Allowance for Credit Losses" and Note 12 "Recent Accounting Pronouncements" for information about CECL adoption, areas of judgment and methodologies used in establishing the allowance.
The allowance is sensitive to a number of internal factors, such as modifications in the mix and level of loan balances outstanding, portfolio performance and assigned risk ratings. The allowance is also sensitive to external factors such as the general health of the methodology usedeconomy, as evidenced by changes in interest rates, GDP, unemployment rates, changes in real estate demand and values, volatility in commodity prices, bankruptcy filings, health pandemics, government stimulus, and the effects of weather and natural disasters such as droughts, floods and hurricanes.
Management considers these variables and all other available information when establishing the final level of the allowance. These variables and others have the ability to calculateresult in actual credit losses that differ from the originally estimated amounts.
Since January 1, 2020, Regions increased the allowance is includedby $250 million to $1.7 billion, which represents management's best estimate of expected losses over the life of the loan and credit commitment portfolios. Key drivers of the change in Note 1 “Summary of Significant Accounting Policies” and Note 6 “Allowancethe allowance for Credit Losses”credit losses are presented below:
Table 6— Allowance Changes
 Three months ended March 31, 2020
 (In millions)
Allowance for credit losses at January 1 (as adjusted for change in accounting guidance) (1)
$1,415
    Economic uncertainty and specific model adjustments207
    Increase in specific allowances36
    Model parameters/other adjustments16
    Consumer portfolio segment balance run-off(9)
Total changes250
Allowance for credit losses at March 31$1,665
_______
(1)Regions adopted the CECL accounting guidance on January 1, 2020 and recorded the cumulative effect of the change in accounting guidance as a reduction to retained earnings and an increase to deferred tax assets. See Note 1 for additional details.

Changes in the macroeconomic environment can be extremely impactful to the consolidated financial statementsallowance estimate under CECL. When compared to January 1, 2020, which was based on a benign economic environment, Regions' economic forecast utilized in the Annual Report on Form 10-K forMarch 31, 2020 allowance models had deteriorated as a result of the year ended December 31, 2018,COVID-19 pandemic. Regions benchmarked its internal forecast with external forecasts and external data available. While various data points and alternative viewpoints were considered, the risks to the economic forecast utilized in the allowance were weighted to the downside through the qualitative framework, given the high degree of uncertainty around how widely the COVID-19 pandemic could spread and how long it could persist. The effectiveness of government relief programs and debt payment relief being provided by the Company as well as related discussionthe potential for any future stimulus was also considered, which the Company believes could be significant mitigating factors.
Regions' quantitative allowance methodologies strive to reflect all risk factors; however, any estimate involves assumptions and uncertainties resulting in Management’s Discussionsome level of imprecision. The qualitative framework has a general imprecision component which is meant to acknowledge that model and Analysis.forecast errors are inherent in any modeling estimate. Given that credit deterioration from COVID-19 had not fully materialized at March 31, 2020 and that the models are not calibrated for such a pandemic, the impact of COVID-19 on the allowance was primarily captured through the economic uncertainty component of the qualitative framework.
As part of the qualitative framework, Regions ran an Updated/More Severe forecast through the allowance models for sensitivity purposes. The Updated/More Severe forecast reflects an abrupt halt to the economy. Management also benchmarked the Updated/More Severe forecast to external forecasts, noting overall alignment and comparability of results.
The tables below reflect a range of macroeconomic factors utilized in the Base (utilized in the allowance models) and Updated/More Severe (utilized in the qualitative framework) forecasts over the R&S forecast period, with unemployment being the most significant macroeconomic factor among the CECL models. First quarter 2020 forecast information is also included.

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Table 7— Macroeconomic Factors in the Forecast
 Pre-R&S period Base R&S forecast
March 31, 2020
1Q2020 2Q2020 3Q2020 4Q2020 1Q2021 2Q2021 3Q2021 4Q2021 1Q2022
Real GDP, annualized % change0.55% (3.08)% 1.64% 3.82% 3.38% 2.22% 2.09% 1.82% 1.78%
Unemployment rate3.55% 4.26 % 4.07% 3.78% 3.70% 3.70% 3.70% 3.71% 3.73%
HPI, cumulative % change from last actual0.98% 1.60 % 1.95% 2.27% 2.96% 3.80% 4.76% 5.85% 7.02%
S&P 5003,070
 2,482
 2,662
 2,879
 3,118
 3,185
 3,215
 3,244
 3,270
 Pre-R&S period Updated/More Severe forecast
March 31, 2020
1Q2020 2Q2020 3Q2020 4Q2020 1Q2021 2Q2021 3Q2021 4Q2021 1Q2022
Real GDP, annualized % change(4.70)% (17.55)% 5.04 % 6.20 % 4.41 % 4.61 % 3.99 % 2.91 % 2.16 %
Unemployment rate3.69 % 8.90 % 6.51 % 6.18 % 5.92 % 5.72 % 5.57 % 5.44 % 5.31 %
HPI, cumulative % change from last actual0.96 % (1.57)% (3.25)% (4.65)% (5.00)% (4.74)% (4.30)% (3.74)% (3.07)%
S&P 5003,059
 2,282
 2,422
 2,681
 2,835
 2,906
 2,942
 2,974
 3,005

As noted above, the March 31, 2020 allowance includes additional qualitative amounts in addition to the modeled Base forecast to capture economic uncertainties. As such, the Base forecast factors (listed in the table above) do not specifically align with Regions' allowance.
There were several points of analysis used to inform an appropriate qualitative overlay for loan losses totaled $869economic uncertainty. In addition to running the Updated/More Severe forecast, industry-level stress analyses were also performed on industries most acutely impacted by COVID-19. Refer to the "Portfolio Characteristics" section for more information about COVID-19 impacted industries. The overall range from these collective, alternative analyses resulted in potential increases of approximately $100 million at September 30, 2019 as compared to $840$500 million at December 31, 2018. The allowance for loan losses as a percentage of net loans was 1.05% at September 30, 2019 compared to 1.01% at December 31, 2018.
The provision for loan losses increased by $157 million for the first nine months of 2019 as compared to the same period in 2018. DuringJanuary 1, 2020 allowance. These analytically-derived ranges however, are not able to fully take into consideration the first nine months of 2018, lower than anticipated losses associated with certain 2017 hurricanes resulted in the releasespecifics of the Company's $40 million hurricane-specific loanCARES Act and other policy accommodations, which could materially impact loss allowance, andexpectations. Based on the sale of $254 million in residential first mortgage loans consisting primarily of performing troubled debt restructured loans resulted in a $16 million net reduction to the provision for loan losses. Both of these factors, combined with broad-based improved credit metrics, resulted in a lower provision for loan losses for the first nine months of 2018. Contributing to theoverall analysis performed, management deemed an increase in the provision forallowance of $250 million as compared to January 1, 2020 to be appropriate to absorb expected credit losses in the loan and credit commitment portfolios as of March 31, 2020.
Subsequent to March 31, 2020, additional economic forecasts indicated continued rapid deterioration in certain macroeconomic factors, primarily real GDP and unemployment rates. The level of uncertainty related to how these forecasts will impact expected credit losses during 2019 were higher loan balances, higher net charge-offs, and future credit loss provisions remains high due to uncertainty concerning the length and depth of the COVID-19 pandemic and related shelter in place orders, as well as, the offsetting impacts of current and future government stimulus and lending programs. Due to the unprecedented nature of the uncertainties discussed above, an estimate of the expected increase in the allowance cannot be made at this time. However, if the current trends continue, it is likely that increases in classified loans during the first nine monthsallowance, which could be material, will be required in future periods. As a point of 2019. The provision for loanreference, in 2018 the Federal Reserve disclosed their estimation of modeled credit losses for the first nine monthsRegions as part of 2019 was $29 million greater than net charge-offs. Net charge-offs for the first nine months of 2019 were $34 million higher compared to the same period in 2018.
Management expects that net loan charge-offs will beDFAST. This included two scenarios, an adverse and a severely adverse economic environment. Modeled losses in the 0.40 percentscenarios were $3.0 billion in the adverse and $5.3 billion in the severely adverse scenarios. Whereas these stress tests assumed a different macroeconomic outlook, they may represent a possible range of potential credit losses assuming a longer-term, widespread pandemic with no offsetting benefits from government stimulus or lending programs, which as noted above the Company believes could be significant mitigating factors. See the "First Quarter Overview" section for further information regarding the Company's economic outlook as the second quarter of 2020 began to 0.50 percent range forunfold.
As noted above, changes in the 2019 yearfactors used by management to determine the appropriateness of the allowance or the availability of new information could cause the allowance to be increased or decreased in future periods. In addition, bank regulatory agencies, as part of their examination process, may require changes in the level of allowance based on recent trendstheir judgments and current market conditions. Economic trends such as interest rates, unemployment, volatilityestimates. 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 2019.is to be expected. Additionally, changes in circumstances related to individually large credits, commodity prices, or certain portfoliosmacroeconomic forecast assumptions may result in volatility. The scenarios discussed above, or other scenarios, have the ability to result in actual credit losses that differ, perhaps materially, from the originally estimated amounts. In addition, it is difficult to predict how changes in economic conditions, the impact of government stimulus, or other relief programs could affect borrower behavior. This analysis is not intended to estimate changes in the overall allowance, which would also be influenced by the judgment management applies to the modeled loss estimates to reflect uncertainty and imprecision based on then-current circumstances and conditions.
Details regarding the allowance and net charge-offs, including an analysis of activity from the previous year’s totals, are included in Table 7 “Allowance8 "Allowance for Credit Losses.”
Refer to Note 14 "Recent Accounting Pronouncements" to the consolidated financial statements for discussion regarding the pending accounting pronouncement that will replace the current incurred loss accounting model for the allowance for credit losses with a CECL approach, which will be effective for Regions on January 1, 2020." As noted above, economic trends such as interest rates, unemployment,

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volatility in commodity prices and collateral valuations as well as the length and depth of the COVID-19 pandemic and the impact of the CARES Act and other policy accommodations will impact the future levels of net charge-offs and may result in volatility of certain credit metrics during the remainder of 2020.
Table 7—8—Allowance for Credit Losses
Nine Months Ended September 30Three Months Ended March 31
2019 20182020 2019
(Dollars in millions)(Dollars in millions)
Allowance for loan losses at beginning of year$840
 $934
Allowance for loan losses at January 1$869
 $840
Cumulative change in accounting guidance (1)
438
 —
Allowance for loan losses, January 1 (as adjusted for change in accounting guidance) (1)
$1,307
 $840
   
Loans charged-off:      
Commercial and industrial105
 91
68
 27
Commercial real estate mortgage—owner-occupied8
 14
3
 3
Commercial investor real estate mortgage—
 9
Commercial investor real estate construction—
 —
Residential first mortgage4
 12
1
 1
Home equity17
 21
Home equity lines4
 5
Home equity loans1
 1
Indirect—vehicles
22
 29
6
 9
Indirect—other consumer
54
 33
23
 17
Consumer credit card51
 45
16
 17
Other consumer68
 60
22
 22
329
 314
144
 102
Recoveries of loans previously charged-off:      
Commercial and industrial19
 28
5
 6
Commercial real estate mortgage—owner-occupied5
 6
2
 3
Commercial investor real estate mortgage1
 4
1
 1
Commercial investor real estate construction1
 2
Residential first mortgage3
 5
1
 1
Home equity12
 13
Home equity lines3
 3
Home equity loans1
 1
Indirect—vehicles
9
 12
2
 4
Indirect—other consumer
—
 —
—
 —
Consumer credit card7
 6
2
 2
Other consumer10
 10
4
 3
67
 86
21
 24
Net charge-offs:      
Commercial and industrial86
 63
63
 21
Commercial real estate mortgage—owner-occupied3
 8
1
 —
Commercial investor real estate mortgage(1) 5
(1) (1)
Commercial investor real estate construction(1) (2)
Residential first mortgage1
 7
—
 —
Home equity5
 8
Home equity lines1
 2
Home equity loans—
 —
Indirect—vehicles
13
 17
4
 5
Indirect—other consumer
54
 33
23
 17
Consumer credit card44
 39
14
 15
Other consumer58
 50
18
 19
262
 228
123
 78
Provision (credit) for loan losses291
 134
Allowance for loan losses at September 30$869
 $840
Provision for loan losses376
 91
Allowance for loan losses at March 31$1,560
 $853
Reserve for unfunded credit commitments at beginning of year$51
 $53
$45
 $51
Cumulative change in accounting guidance (1)
63
 —
Provision (credit) for unfunded credit losses(3) (3)(3) (1)
Reserve for unfunded credit commitments at September 30$48
 $50
Allowance for credit losses at September 30$917
 $890
Reserve for unfunded credit commitments at March 31$105
 $50
Allowance for credit losses at March 31$1,665
 $903
Loans, net of unearned income, outstanding at end of period$82,786
 $81,821
$88,098
 $84,430
Average loans, net of unearned income, outstanding for the period$83,536
 $80,294
$83,249
 $83,725
Ratios:   
Allowance for loan losses at end of period to loans, net of unearned income1.05% 1.03%
Allowance for loan losses at end of period to non-performing loans, excluding loans held for sale188% 156%
Net charge-offs as percentage of average loans, net of unearned income (annualized)0.42% 0.38%

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 Three Months Ended March 31
 2020 2019
 (Dollars in millions)
Ratios:   
Allowance for credit losses at end of period to loans, net of unearned income1.89% 1.07%
Allowance for loan losses at end of period to loans, net of unearned income1.77% 1.01%
Allowance for credit losses at end of period to non-performing loans, excluding loans held for sale261% 173%
Allowance for loan losses at end of period to non-performing loans, excluding loans held for sale244% 163%
Net charge-offs as percentage of average loans, net of unearned income (annualized)0.59% 0.38%
_______
(1)Regions adopted the CECL accounting guidance on January 1, 2020 and recorded the cumulative effect of the change in accounting guidance as a reduction to retained earnings and an increase to deferred tax assets. See Note 1 for additional details.

Allocation of the allowance for credit losses by portfolio segment and class is summarized as follows:
Table 9—Allowance Allocation
 March 31, 2020 January 1, 2020
 Loan balance Allowance allocation Allowance to loans % Loan balance Allowance allocation Allowance to loans %
Commercial and industrial$45,388
 $597
 1.32% $39,971
 $443
 1.11%
Commercial real estate mortgage—owner-occupied5,550
 180
 3.24% 5,537
 153
 2.76%
Commercial real estate construction—owner-occupied309
 17
 5.50% 331
 14
 4.23%
Total commercial51,247
 794
 1.55% 45,839
 610
 1.33%
Commercial investor real estate mortgage5,079
 58
 1.14% 4,936
 54
 1.09%
Commercial investor real estate construction1,784
 23
 1.29% 1,621
 16
 0.99%
Total investor real estate6,863
 81
 1.18% 6,557
 70
 1.07%
Residential first mortgage14,535
 96
 0.66% 14,485
 86
 0.59%
Home equity lines5,201
 142
 2.73% 5,300
 144
 2.72%
Home equity loans3,000
 33
 1.10% 3,084
 32
 1.04%
Indirect—vehicles1,557
 24
 1.54% 1,812
 26
 1.43%
Indirect—other consumer3,202
 300
 9.37% 3,249
 267
 8.22%
Consumer credit card1,303
 121
 9.29% 1,387
 112
 8.07%
Other consumer1,190
 74
 6.22% 1,250
 68
 5.44%
Total consumer29,988
 790
 2.63% 30,567
 735
 2.40%
 $88,098
 $1,665
 1.89% $82,963
 $1,415
 1.71%

TROUBLED DEBT RESTRUCTURINGS (TDRs)
TDRs are modified loans in which a concession is provided to a borrower experiencing financial difficulty. As provided in the CARES Act passed into law on March 27, 2020, certain loan modifications related to the COVID-19 pandemic beginning March 1, 2020 are eligible for relief from TDR classification. Regions elected this provision of the CARES Act; therefore, modified loans that met the required guidelines for relief are not considered TDRs and are excluded from the disclosures below.
Residential first mortgage, home equity, 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. Insignificant modifications are not considered TDRs. More detailed information is included in Note 3 "Loans and the Allowance Forfor 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:

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Table 10—Troubled Debt Restructurings
September 30, 2019 December 31, 2018March 31, 2020 December 31, 2019
Loan
Balance
 
Allowance for
Loan Losses
 
Loan
Balance
 
Allowance for
Loan Losses
Loan
Balance
 Allowance for Credit Losses 
Loan
Balance
 Allowance for Credit Losses
(In millions)(In millions)
Accruing:              
Commercial$99
 $11
 $108
 $17
$56
 $3
 $106
 $15
Investor real estate30
 4
 14
 1
14
 1
 32
 3
Residential first mortgage182
 19
 170
 16
181
 22
 177
 18
Home equity161
 8
 189
 6
Home equity lines40
 5
 42
 2
Home equity loans98
 10
 109
 5
Consumer credit card1
 —
 1
 —
1
 —
 1
 —
Other consumer5
 —
 6
 —
4
 —
 4
 —
478
 42
 488
 40
394
 41
 471
 43
Non-accrual status or 90 days past due and still accruing:              
Commercial130
 16
 183
 18
159
 15
 139
 20
Investor real estate5
 1
 5
 —
1
 —
 1
 —
Residential first mortgage35
 4
 38
 4
37
 5
 40
 4
Home equity9
 —
 15
 —
Home equity lines2
 —
 2
 —
Home equity loans6
 1
 6
 —
179
 21
 241
 22
205
 21
 188
 24
Total TDRs - Loans$657
 $63
 $729
 $62
$599
 $62
 $659
 $67
              
TDRs - Held For Sale4
 —
 5
 —
—
 —
 1
 —
Total TDRs$661
 $63
 $734
 $62
$599
 $62
 $660
 $67
_________
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 additions 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 additions 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 3 “Loans"Loans and the Allowance for Credit Losses”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—11—Analysis of Changes in Commercial and Investor Real Estate TDRs

Nine Months Ended September 30, 2019 Nine Months Ended September 30, 2018Three Months Ended March 31, 2020 Three Months Ended March 31, 2019
Commercial Investor
Real Estate		 Commercial Investor
Real Estate		Commercial Investor
Real Estate		 Commercial Investor
Real Estate
(In millions)(In millions)
Balance, beginning of period$291
 $19
 $347
 $91
$245
 $33
 $291
 $19
Additions147
 11
 329
 59
81
 1
 74
 1
Charge-offs(26) —
 (35) —
(35) —
 (8) —
Other Activity, inclusive of payments and removals (1)(183) 5
 (276) (101)
Other activity, inclusive of payments and removals (1)
(76) (19) (31) (1)
Balance, end of period$229
 $35
 $365
 $49
$215
 $15
 $326
 $19
_________
(1) The majority of this category consists of payments and sales. It also includes normal amortization/accretion of loan basis adjustments, loans transferred to held for sale, removals and reclassifications between portfolio segments. Additionally, it includes $4$11 million of commercial loans

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and $1$12 million of investor real estate loans refinanced or restructured as new loans and removed from TDR classification for the ninethree months ended September 30, 2019.March 31, 2020. During the ninethree months ended September 30, 2018, $30March 31, 2019, less than $1 million of both commercial loans and $5 million 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—12—Non-Performing Assets
September 30, 2019 December 31, 2018March 31, 2020 December 31, 2019
(Dollars in millions)(Dollars in millions)
Non-performing loans:      
Commercial and industrial$292
 $307
$496
 $347
Commercial real estate mortgage—owner-occupied68
 67
58
 73
Commercial real estate construction—owner-occupied15
 8
11
 11
Total commercial375
 382
565
 431
Commercial investor real estate mortgage9
 11
1
 2
Total investor real estate9
 11
1
 2
Residential first mortgage29
 40
27
 27
Home equity49
 63
Home equity lines40
 41
Home equity loans5
 6
Total consumer78
 103
72
 74
Total non-performing loans, excluding loans held for sale462
 496
638
 507
Non-performing loans held for sale8
 10
3
 13
Total non-performing loans(1)
470
 506
641
 520
Foreclosed properties59
 52
54
 53
Non-marketable investments received in foreclosure5
 8
—
 5
Total non-performing assets(1)
$534
 $566
$695
 $578
Accruing loans 90 days past due:      
Commercial and industrial$10
 $8
$9
 $11
Commercial real estate mortgage—owner-occupied2
 —
1
 1
Total commercial12
 8
10
 12
Residential first mortgage(2)
62
 66
69
 70
Home equity41
 34
Home equity lines26
 32
Home equity loans11
 10
Indirect—vehicles7
 9
6
 7
Indirect—other consumer3
 1
4
 3
Consumer credit card19
 20
19
 19
Other consumer5
 5
5
 5
Total consumer137
 135
140
 146
$149
 $143
$150
 $158
Restructured loans not included in the categories above$478
 $488
Non-performing loans(1) to loans and non-performing loans held for sale
0.57% 0.61%0.73% 0.63%
Non-performing assets(1) to loans, foreclosed properties, non-marketable investments, and non-performing loans held for sale
0.65% 0.68%0.79% 0.70%
_________
(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 $66$59 million at September 30, 2019March 31, 2020 and $84$66 million at December 31, 2018.2019.
Non-performing loans at September 30, 2019March 31, 2020 have decreasedincreased compared to year-end levels. Total commercial and investor real estate non-performing loans, excluding loans held for sale,levels, primarily driven by energy credits that were paying as agreed (e.g., less than 30 days past due) represented approximately 63 percent of the total balance at September 30, 2019.have experienced stress due to recent declines in oil prices.
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.
Total loans past due 90 days or more and still accruing, excluding government guaranteed loans, were $149 million at September 30, 2019, an increase from $143 million at December 31, 2018.

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At September 30, 2019,March 31, 2020, Regions had approximately $130 million to $210 million of potential problem commercial and investor real estate loansestimates that were not included in non-accrual loans, but for which management had concerns as to the ability of such 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.quarter is within the range of $225 million to $350 million.
In order to arrive at the estimateestimated range of potential problem loans for the next quarter, credit personnel forecast certain larger dollar loans that may potentially be downgraded to non-accrual at a future time, depending onupon the occurrence of future events. These personnel consider aA variety of factors are included in the assessment of potential problem loans, including thea 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, forFor other loans (for example, smaller dollar loans), a trend analysis is also incorporated to determine thean estimate of potential future downgrades. In addition, the economic environment and industry trends are evaluated in the establishment of the estimated range of potential problem loans for the next quarter. Current trends will additionally influence the size of the estimated range. Because of the inherent uncertainty in forecasting future events, the estimateestimated range of potential problem loans ultimately represents the estimated aggregate dollar amounts of loans, as opposed to an individual listing of loans.
The majorityMany 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 3 “Loans"Loans and the Allowance for Credit Losses”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—13— Analysis of Non-Accrual Loans
 
Non-Accrual Loans, Excluding Loans Held for Sale
Nine Months Ended September 30, 2019
 Commercial 
Investor
Real Estate
 
Consumer(1)
 Total
 (In millions)
Balance at beginning of period$382
 $11
 $103
 $496
Additions310
 4
 —
 314
Net payments/other activity(153) (4) (25) (182)
Return to accrual(16) —
 —
 (16)
Charge-offs on non-accrual loans(2)
(96) (1) —
 (97)
Transfers to held for sale(3)
(29) (1) —
 (30)
Transfers to real estate owned(3) —
 —
 (3)
Sales(20) —
 —
 (20)
Balance at end of period$375
 $9
 $78
 $462

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Non-Accrual Loans, Excluding Loans Held for Sale
Three Months Ended March 31, 2020
 Commercial 
Investor
Real Estate
 
Consumer(1)
 Total
 (In millions)
Balance at beginning of period$431
 $2
 $74
 $507
Additions258
 —
 —
 258
Net payments/other activity(52) (1) (2) (55)
Return to accrual(2) —
 —
 (2)
Charge-offs on non-accrual loans(2)
(60) —
 —
 (60)
Transfers to held for sale(3)
(3) —
 —
 (3)
Transfers to real estate owned(2) —
 —
 (2)
Sales(5) —
 —
 (5)
Balance at end of period$565
 $1
 $72
 $638
Non-Accrual Loans, Excluding Loans Held for Sale
Nine Months Ended September 30, 2018
Non-Accrual Loans, Excluding Loans Held for Sale
Three Months Ended March 31, 2019
Commercial 
Investor
Real Estate
 
Consumer(1)
 TotalCommercial 
Investor
Real Estate
 
Consumer(1)
 Total
(In millions)(In millions)
Balance at beginning of period$528
 $6
 $116
 $650
$382
 $11
 $103
 $496
Additions278
 19
 —
 297
104
 —
 —
 104
Net payments/other activity(209) (3) (5) (217)(29) (3) (5) (37)
Return to accrual(38) (2) —
 (40)(1) —
 —
 (1)
Charge-offs on non-accrual loans(2)
(97) (8) —
 (105)(25) —
 —
 (25)
Transfers to held for sale(3)
(28) (1) (3) (32)(12) —
 —
 (12)
Transfers to real estate owned(3) —
 —
 (3)(1) —
 —
 (1)
Sales(2) (9) —
 (11)(1) —
 —
 (1)
Balance at end of period$429
 $2
 $108
 $539
$417
 $8
 $98
 $523
________
(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 $8$1 million and $11$2 million recorded upon transfer for the ninethree months ended September 30,March 31, 2020 and 2019, and 2018, respectively.

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GOODWILL
Goodwill totaled 4.8$4.8 billion at both September 30, 2019March 31, 2020 and December 31, 20182019 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"Summary of Significant Accounting Policies”Policies" to the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 20182019 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 resultDuring the first quarter of 2020, Regions assessed events and circumstances for all three reporting units as of March 31, 2020, and through the date of the assessment performed forfiling of this Form 10-Q that could potentially indicate goodwill impairment including analyzing the third quarter 2019 didimpacts from the onset of the COVID-19 pandemic. The indicators assessed included:
•Recent operating performance,
•Changes in market capitalization,
•Regulatory actions and assessments,
•Changes in the business climate (including legislation, legal factors, competition and impacts from COVID-19),
•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 indicatemore likely than not that the estimated fair valuesvalue of the Company’seach of its reporting units (Corporate Bank, Consumer Bank and Wealth Management) had declined below their respective carrying values.value as of March 31, 2020. Therefore, Regions determined that a test of goodwill impairment was not required for each of Regions’ reporting units for the September 30, 2019March 31, 2020 interim period. Regions will continue to monitor for indicators of impairment throughout 2020.

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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—14—Deposits
September 30, 2019 December 31, 2018March 31, 2020 December 31, 2019
(In millions)(In millions)
Non-interest-bearing demand$34,360
 $35,053
$37,133
 $34,113
Savings8,588
 8,788
9,199
 8,640
Interest-bearing transaction18,107
 19,175
19,992
 20,046
Money market—domestic25,329
 24,111
26,328
 25,326
Time deposits7,639
 7,122
7,122
 7,442
Customer deposits94,023
 94,249
99,774
 95,567
Corporate treasury time deposits282
 242
256
 108
Corporate treasury other deposits—
 1,800
$94,305
 $94,491
$100,030
 $97,475
Total deposits at September 30, 2019 decreasedMarch 31, 2020 increased approximately $186 million$2.6 billion compared to year-end 20182019 levels, due to decreasesincreases in non-interest-bearing demand, interest-bearing transactiondomestic money market and savings accounts. These decreasesincreases were partially offset by increasesdecreases in corporate treasury other deposits and customer time deposits. Non-interest-bearing demand deposits increased as customers reacted to the uncertainly in the economic environment, driven by the COVID-19 pandemic, by increasing line of credit draws and keeping excess cash in deposit accounts. Domestic money market timeand savings accounts also increased as customers seek the safety of a regulated and insured financial institution in times of economic uncertainty. Corporate treasury other deposits anddecreased as these deposits were used to a lesser extent, corporate treasury time deposits. The non-interest-bearing demand decline was primarily due to customers using liquidity to pay down debt or invest in their businesses, as well as portfolio remixing. The decline in interest-bearing deposits was due tosupplement incremental balance sheet funding at year-end 2019, but were no longer being utilized at the Company's intentional reductionend of certain higher cost deposits, a deposit optimization initiative that was executed by the Company during the secondfirst quarter of 2019, and seasonal declines in public fund accounts during the third quarter2020.


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Table of 2019. Money market and time deposits increased due to the offering of higher acquisition rates, portfolio remixing, and overall account growth.Contents


SHORT-TERM BORROWINGS
Short-term borrowings, which consist of FHLB advances, totaled $5.4$3.2 billion at September 30, 2019March 31, 2020 as compared to $1.6$2.1 billion at December 31, 2018.2019. The levels of these borrowings can fluctuate depending on the Company's funding needs and the sources utilized. The increaseFHLB borrowings increased from December 31, 20182019 to September 30, 2019 is partially offset by a declineMarch 31, 2020 as additional FHLB advances were used to increase cash held at the FRB, in long–term borrowings related primarilyresponse to maturities of long-term FHLB advances.the current economic environment.
Short-term secured borrowings, such as securities sold under agreements to repurchase and FHLB advances, are a core portion of Regions'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""Liquidity" section for further detail of Regions' borrowing capacity with the FHLB.


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LONG-TERM BORROWINGS
Table 13—15—Long-Term Borrowings
September 30, 2019 December 31, 2018March 31, 2020 December 31, 2019
(In millions)(In millions)
Regions Financial Corporation (Parent):      
3.20% senior notes due February 2021$1,101
 $1,101
$359
 $358
2.75% senior notes due August 2022997
 996
997
 997
3.80% senior notes due August 2023996
 497
996
 996
7.75% subordinated notes due September 2024100
 100
100
 100
6.75% subordinated debentures due November 2025156
 157
156
 156
7.375% subordinated notes due December 2037298
 298
298
 298
Valuation adjustments on hedged long-term debt50
 (47)115
 45
3,698
 3,102
3,021
 2,950
Regions Bank:      
FHLB advances3,001
 6,902
4,651
 2,501
2.75% senior notes due April 2021549
 548
549
 549
3 month LIBOR plus 0.38% of floating rate senior notes due April 2021349
 349
350
 350
3.374% senior notes converting to 3 month LIBOR plus 0.50%, callable August 2020, due August 2021499
 499
499
 499
3 month LIBOR plus 0.50% of floating rate senior notes, callable August 2020, due August 2021499
 499
499
 499
6.45% subordinated notes due June 2037495
 495
495
 495
Other long-term debt33
 33
31
 32
Valuation adjustments on hedged long-term debt5
 (3)10
 4
5,430
 9,322
7,084
 4,929
Total consolidated$9,128
 $12,424
$10,105
 $7,879
Long-term borrowings decreasedincreased by approximately $3.3$2.2 billion since year-end 2018,2019, due primarily to a decreasean increase in FHLB advances of $3.9$2.2 billion. This decrease was offset by anThe increase in short-term borrowings relatedlong-term FHLB advances was due to an anticipated increase in customer borrowing needs due to the current economic environment. As mentioned above, FHLB advances. Duringadvances were also used to increase the first quarterbalance of 2019, Regions issued $500 millioncash held at the FRB. See the "Liquidity" section for further detail of senior notes through a reopening ofRegions' borrowing capacity with the Company's 3.80% senior notes due August 2023, which were effectively converted to floating rate notes at 1 month LIBOR through the simultaneous execution of an interest rate swap.FHLB.
Long-term FHLB advances have a weighted-average interest rate of 2.21.0 percent at September 30, 2019March 31, 2020 and 2.61.9 percent at December 31, 20182019, with remaining maturities ranging from less than one year to nineeight years and a weighted-average of approximately 1 year.
STOCKHOLDERS’SHAREHOLDERS’ EQUITY
Stockholders’Shareholders’ equity was $16.6$17.3 billion at September 30, 2019March 31, 2020 as compared to $15.1$16.3 billion at December 31, 2018.2019. During the first ninethree months of 2019,2020, net income increased stockholders’shareholders’ equity by $1.2 billion,$162 million, while cash dividends on common stock reduced stockholders'shareholders' equity by $433$149 million and cash dividends on preferred stock reduced stockholder'sshareholder's equity by $56$23 million. The cumulative effect from the adoption of CECL decreased shareholders' equity by $377 million. See Note 1 "Basis of Presentation" for information about the CECL adoption. Changes in accumulated other comprehensive income increased stockholders'shareholders' equity by $1.3$1.4 billion, primarily due to the net change in unrealized gains (losses) on securities available for sale and derivative instruments as a result of changes in market interest rates during the first nine monthsquarter 2020.

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Table of 2019. Common stock repurchased during the first nine months of 2019 reduced stockholders' equity by $969 million. These shares were immediately retired and therefore are not included in treasury stock. Furthermore, during the second quarter of 2019 the Company issued Series C Preferred Stock, which increased stockholders' equity by $490 million.Contents


During the second quarter of 2019, the Board authorized the repurchase of up to $1.37$1.370 billion of the Company's common stock, permitting repurchases from the beginning of the third quarter of 2019 through the end of the second quarter of 2020. The Company did not repurchase shares in the first quarter of 2020, and given the uncertainty in the overall economic environment as a result of the COVID-19 pandemic, no share repurchases are currently anticipated for 2020.
On July 24, 2019,Regions' dividend policy is set to withstand adverse conditions and as such, the Board declared an increaseCompany currently has no plans to reduce the quarterly common stock dividend.level of or eliminate cash dividends in consideration of the COVID-19 pandemic.  However, Regions will continue to exercise prudent capital management and closely monitor the implications from the evolving economic environment. Under U.S. capital rules, the Company would be subject to constraints on dividend payout restrictions if it failed to meet the effective minimum ratio requirements, which are comprised of regulatory minimum capital levels of 4.5% CET1 to risk-weighted assets, 6.0% tier 1 capital to risk-weighted assets and 8.0% total risk-based capital to risk-weighted assets, plus a static 2.5% Capital Conservation Buffer. As such, effective minimum requirements are currently 7% CET1 capital to risk-weighted assets, 8.5% tier 1 capital to risk-weighted assets and 10.5% total risk-based capital to risk-weighted assets.
In the first quarter of 2020, the Federal Reserve finalized the Stress Capital Buffer framework that will replace the Capital Conservation Buffer when implemented in October 2020. See "Regulatory Requirements" section for further information.
See Note 6 “Stockholders’5 "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 Federal and State banking agencies. These regulatory capital requirements involve quantitative measures of the Company's assets, liabilities and selected off-balance sheet items, and also qualitative judgments by the regulators. Failure to meet minimum capital requirements can subject the Company to a series of increasingly restrictive regulatory actions.
Under the Basel III Rules, Regions is designated as a standardized approach bank. Additional discussion of the Basel III Rules, their applicability to Regions, recent proposals and final rules issued by the federal banking agencies and recent laws enacted that impact regulatory requirements is included in the "Regulatory Requirements" section of Management's Discussion and Analysis in the 20182019 Annual Report on Form 10-K. Additional discussion is also included in Note 1413 "Regulatory Capital Requirements and Restrictions" to the consolidated financial statements in the 20182019 Annual Report on Form 10-K.
In late March 2020, the federal banking agencies published an interim final rule related to revised transition of the impact of CECL on regulatory capital requirements.  The rule allows an add-back to regulatory capital for the impacts of CECL for a two-year period.  At the end of the two years, the impact is then phased-in over the following three years.  The add-back is calculated as the impact of initial adoption, adjusted for 25 percent of subsequent changes in the allowance.  At March 31, 2020, this amount was approximately $438 million.  The impact on CET1 was approximately 40 basis points.  The interim final rule has been published for comment, and has an immediate effective date.
Additionally in late March 2020, the CARES Act was signed into law.  This Act provides optional temporary relief from complying with CECL. While Regions is deferring the capital impact of CECL allowed by the interim final rule as discussed above, the Company did not elect the statutory relief related to CECL implementation provided by the CARES Act.
The following table summarizes the applicable holding company and bank regulatory requirements:
Table 14—16—Regulatory Capital Requirements
Transitional Basis Basel III Regulatory Capital Rules
March 31, 2020
Ratio (1)
 
December 31, 2019
Ratio
 
Minimum
Requirement
 
To Be Well
Capitalized
Basel III common equity Tier 1 capital:       
Regions Financial Corporation9.45% 9.68% 4.50% N/A
Regions Bank11.47
 11.58
 4.50
 6.50%
Tier 1 capital:       
Regions Financial Corporation10.65% 10.91% 6.00% 6.00%
Regions Bank11.47
 11.58
 6.00
 8.00
Total capital:       
Regions Financial Corporation12.53% 12.68% 8.00% 10.00%
Regions Bank12.94
 12.92
 8.00
 10.00
Leverage capital:       
Regions Financial Corporation9.63% 9.65% 4.00% N/A
Regions Bank10.39
 10.24
 4.00
 5.00%
Transitional Basis Basel III Regulatory Capital Rules
September 30, 2019
Ratio (1)
 
December 31, 2018
Ratio
 
Minimum
Requirement
 
To Be Well
Capitalized
Basel III common equity Tier 1 capital:       
Regions Financial Corporation9.58% 9.90% 4.50% N/A
Regions Bank11.67
 11.59
 4.50
 6.50%
Tier 1 capital:       
Regions Financial Corporation10.82% 10.68% 6.00% 6.00%
Regions Bank11.67
 11.59
 6.00
 8.00
Total capital:       
Regions Financial Corporation12.59% 12.46% 8.00% 10.00%
Regions Bank13.01
 12.92
 8.00
 10.00
Leverage capital:       
Regions Financial Corporation9.52% 9.32% 4.00% N/A
Regions Bank10.29
 10.12
 4.00
 5.00%
_______________
(1) The current quarter Basel III CET1 capital, Tier 1 capital, Total capital, and Leverage capital ratios are estimated.


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In the first quarter of 2020, the Federal Reserve finalized the Stress Capital Buffer framework which, when implemented in October 2020, will create a firm-specific risk sensitive buffer to be applied to regulatory minimum capital levels in determining effective minimum ratio requirements. The Stress Capital Buffer will be floored at 2.5% to ensure effective minimum capital levels do not decline as a result of this rule change. When implemented, the Stress Capital Buffer will replace the current Capital Conservation Buffer, which is a static 2.5% in addition to the minimum risk-weighted asset ratios shown above.
The Federal Reserve approved its rule for tailoring enhanced prudential standards for bank holding companies with $100 billion or more in total consolidated assets.  The framework outlines tailored standards for matters related to capital and liquidity.  As expected, the Category IV standards will apply to Regions is a "Category IV" institution under the finalthese rules.  See the “Supervision and Regulation” subsection of the “Business” section in the 20182019 Annual Report on Form 10-K for more information.
LIQUIDITY COVERAGE RATIO
Regions is currently subject to theLIQUIDITY
The federal banking agencies have adopted rules implementing Basel III-based U.S.III’s LCR, rule, which is a quantitative liquidity metric designed to ensure that a covered bank or BHC maintains an adequate level of unencumbered high-quality liquid assets under an acute 30-day liquidity stress scenario. FollowingUnder the threshold amendments recently made by EGRRCPA, the LCR rule currently applies intailoring rules, Regions has been designated as a modified, less stringent, form to BHCs, such as Regions, having $100 billion or more but less than $250 billion in total consolidated assetsCategory IV institution and less than $10 billion in total on-balance sheet foreign exposure. However, in early October, the Federal Reserve, the OCC and the FDIC finalized rules that will, among other things, make institutions such as Regions with less than $250 billion in total consolidated assetsis no longer subject to theany LCR requirement. The LCR rule also imposesCategory IV institutions, including Regions, remain subject to liquidity risk management requirements, but these requirements are now tailored such that collateral positions are calculated only monthly, a more limited set of liquidity risk limits exists, and fewer elements of intraday liquidity risk exposures are monitored. Also, liquidity stress testing is required quarterly rather than monthly, and liquidity data on the FR 2052a is reported on a monthly calculation requirement. In December 2016,basis. Regions remains subject to the Federal Reserve issuedliquidity buffer requirements.
Regions maintains a final rule on the public disclosure of the LCR calculation that requires BHCs, such as Regions,robust liquidity management framework designed to disclose publicly, on a quarterly basis, quantitativeeffectively manage liquidity risk in accordance with sound risk management principals.  The framework establishes sustainable processes and qualitative information about certain components of its LCRtools to effectively identify, measure, mitigate, monitor, and report liquidity risks beginning with results fromRegions’ Liquidity Management Policy and the fourth quarter of 2018.Liquidity Risk Appetite Statements approved by the Board.  Processes within the liquidity management framework include, but are not limited to, liquidity risk governance, cash management, liquidity stress testing, liquidity risk limits, contingency funding plans, and collateral management.  While the framework is designed to comply with liquidity regulations, the processes often go beyond minimum regulatory requirements and are commensurate with Regions’ operating model and risk profile.
At September 30, 2019,    See the Company was fully compliant with the LCR requirements. Changes in the mix and size of the Company's balance sheet and investment portfolio are likely to occur in the future, and additional funding may need to be sourced to remain compliant.
See"Liquidity" section for more information. Also, see the “Supervision and Regulation—Liquidity Regulation” subsection of the “Business” section, the "Risk Factors" section and the “Risk Factors”"Liquidity" section in the 20182019 Annual Report on Form 10-K for moreadditional information.

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RATINGS
Table 15 “Credit Ratings”17 "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 September 30, 2019March 31, 2020 and December 31, 2018.2019.
Table 15—17—Credit Ratings
 As of September 30,March 31, 2020 and December 31, 2019
 S&PMoody’sFitchDBRS
Regions Financial Corporation    
Senior unsecured debtBBB+Baa2BBB+AL
Subordinated debtBBBBaa2BBBBBBH
Regions Bank    
Short-termA-2P-1F1R-IL
Long-term bank depositsN/AA2A-A
Senior unsecured debtA-Baa2BBB+A
Subordinated debtBBB+Baa2BBBAL
OutlookStablePositiveStablePositiveStable
 As of December 31, 2018
S&PMoody’sFitchDBRS
Regions Financial Corporation
Senior unsecured debtBBB+Baa2BBB+AL
Subordinated debtBBBBaa2BBBBBBH
Regions Bank
Short-termA-2P-1F2R-IL
Long-term bank depositsN/AA2A-A
Senior unsecured debtA-Baa2BBB+A
Subordinated debtBBB+Baa2BBBAL
OutlookStablePositiveStableStable
_________
N/A - Not applicable.

During the third quarter of 2019, Fitch Ratings upgraded its short-term default ratingOn April 3, 2020 Moody's revised outlooks for Regions Bank and Regions Financial Corporation to F1stable from F2.positive citing expectations for a contracting economy in 2020 which is expected to have a direct negative impact on U.S. banks' asset quality and profitability.

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On April 9, 2020 Fitch also upgraded its short-term deposit ratingrevised the outlook for Regions BankFinancial Corporation to F1stable from F2. Fitch attributedpositive as part of an overall revision of its U.S. bank sector and rating outlook. Revision to the upgrade to changes in its short-term ratings criteria, while also referencingoverall outlook was driven by concerns over the Company’s robust liquidity managementnegative financial and funding profile. Furthermore, Fitch viewedeconomic impacts from the Company’s liquidity stress testing process as supportive of the rating given the measurement and monitoring of liquidity outflow coverage under various stress scenarios and time horizons.COVID-19 pandemic.
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, 20182019 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 average total loans,”loans”, "adjusted ending total loans", “adjusted efficiency ratio,”ratio”, “adjusted fee income ratio,”ratio”, “return on average tangible common stockholders’ equity,” on a consolidated and continuing operations basis,shareholders' equity”, and end of period “tangible common stockholders’ equity,” and “Basel III CET1, on a fully phased-in basis”shareholders’ equity”, 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
Total average and ending loans isare presented including (1) the impact of the fourth quarter of 2018 reclassification of purchase cards to commercial and industrial loans from others assets, (2) excluding the impact of the first quarter 2018 residential first mortgage loan sale, and (3) excluding the indirect vehicles exit portfolio to arrive at adjusted average and ending total loans (non-GAAP). Regions believes adjusting average and ending total loans provides a meaningmeaningful calculation of loan growth rates and presents them on the 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 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’shareholders’ 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,CET1, the calculation of which is codified in federal banking regulations. Analysts and banking regulators have assessed Regions’ capital adequacy using the tangible common stockholders’shareholders’ equity measure. Because tangible common stockholders’shareholders’ 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’shareholders’ equity, Regions believes that it is useful to provide investors the ability to assess Regions’ capital adequacy on this same basis.
The calculation of the fully phased-in pro-forma CET1 is based on Regions’ understanding of the Final Basel III requirements. For Regions, the Basel III framework became effective on a phased-in approach starting in 2015 with full implementation extending to 2019. The Basel III rules are now fully phased in, other than with respect to deductions and adjustments whose transitional treatment has been extended until the federal banking agencies' July 2019 final rule to revise and simplify the capital treatment of selected categories of assets is effective April 1, 2020. The calculation provided in the following table includes estimated pro-forma amounts for the ratio on a fully phased-in basis. Regions’ current understanding of the final framework includes certain assumptions, including the Company’s interpretation of the requirements, and informal feedback received through the regulatory process. Regions’ understanding of the framework is evolving and will likely change as analyses and discussions with regulators continue. Because Regions is not currently subject to the fully phased-in capital rules, this pro-forma measure is considered to be a non-GAAP financial measure, and other entities may calculate it differently from Regions’ disclosed calculation. 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 the ability to assess Regions’ capital adequacy on this 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 GAAP. In particular, a measure of earnings that excludes selected items does not represent the amount that effectively accrues directly to stockholders.shareholders.

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The following tables provide: 1) a reconciliation of average total loans to adjusted average total loans (non-GAAP), 2) a reconciliation of ending total loans to adjusted ending total loans (non-GAAP), 3) a reconciliation of net income (GAAP) to net income available to common shareholders (GAAP), 3)4) a reconciliation of non-interest expense from continuing operations (GAAP) to adjusted non-interest expense from continuing operations (non-GAAP), 4)5) a reconciliation of net interest income/margin, taxable equivalent basis (GAAP) to adjusted net interest income/margin, taxable equivalent basis (non-GAAP), 6) a reconciliation of non-interest income from continuing operations (GAAP) to adjusted non-interest income from continuing operations (non-GAAP), 5)7) a computation of adjusted total revenue (non-GAAP), 6)8) a computation of the adjusted efficiency ratio (non-GAAP), 7)9) a computation of the adjusted fee income ratio (non-GAAP), 8)and 10) a reconciliation of average and ending stockholders’shareholders’ equity (GAAP) to average and ending tangible common stockholders’shareholders’ equity (non-GAAP) and calculations of related ratios (non-GAAP), 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—18—GAAP to Non-GAAP Reconciliations
Three Months Ended September 30 Nine Months Ended September 30Three Months Ended March 31
2019 2018 2019 20182020 2019
(Dollars in millions)(Dollars in millions)
ADJUSTED AVERAGE BALANCES OF LOANS          
Average total loans$82,986
 $81,022
 $83,536
 $80,294
$83,249
 $83,725
Add: Purchasing card balances (1)
—
 239
 —
 225
Less: Balances of residential first mortgage loans sold (2)
—
 —
 —
 54
Less: Indirect—vehicles2,247
 3,190
 2,581
 3,252
1,679
 2,924
Adjusted average total loans (non-GAAP)$80,739
 $78,071
 $80,955
 $77,213
$81,570
 $80,801
 March 31, 2020 December 31, 2019
 (Dollars in millions)
ADJUSTED ENDING BALANCES OF LOANS   
Ending total loans$88,098
 $84,430
Less: Indirect—vehicles1,557
 2,759
Adjusted ending total loans (non-GAAP)86,541
 81,671

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 Three Months Ended September 30 Nine Months Ended September 30 Three Months Ended March 31
 2019 2018 2019 2018 2020 2019
 (Dollars in millions) (Dollars in millions)
INCOME — CONSOLIDATED
        
INCOME    
Net income (GAAP) $409
 $564
 $1,193
 $1,353
 $162
 $394
Preferred dividends (GAAP) (24) (16) (56) (48) (23) (16)
Net income available to common shareholders (GAAP)A$385
 $548
 $1,137
 $1,305
A$139
 $378
ADJUSTED EFFICIENCY AND FEE INCOME RATIOS — CONTINUING OPERATIONS
        
ADJUSTED EFFICIENCY AND FEE INCOME RATIOS    
Non-interest expense (GAAP)B$871
 $922
 $2,592
 $2,717
B$836
 $860
Significant items:            
Contribution to Regions' Financial Corporation foundation —
 (60) —
 (60)
Branch consolidation, property and equipment charges (5) (4) (13) (8) (11) (6)
Expenses associated with residential mortgage loan sale —
 —
 —
 (4)
Salary and employee benefits—severance charges (1) (5) (5) (54) (1) (2)
Adjusted non-interest expense (non-GAAP)C$865
 $853
 $2,574
 $2,591
C$824
 $852
Net interest income and other financing income (GAAP)D$937
 $942
 $2,827
 $2,777
Net interest income (GAAP)D$928
 $948
Taxable-equivalent adjustment 13
 13
 40
 38
 12
 13
Net interest income and other financing income, taxable-equivalent basis - continuing operationsE950
 955
 2,867
 2,815
Net interest income, taxable-equivalent basisE940
 961
Non-interest income (GAAP)F558
 519
 1,554
 1,538
F485
 502
Significant items:            
Securities (gains) losses, net —
 —
 26
 (1) —
 7
Leveraged lease termination gains (1) (4) (1) (8) (2) —
Gain on sale of affordable housing residential mortgage loans (3)
 —
 —
 (8) —
Gain on sale of affordable housing residential mortgage loans (1)
 —
 (8)
Adjusted non-interest income (non-GAAP)G$557
 $515
 $1,571
 $1,529
G$483
 $501
Total revenueD+F=H$1,495
 $1,461
 $4,381
 $4,315
D+F=H$1,413
 $1,450
Adjusted total revenueD+G=I$1,494
 $1,457
 $4,398
 $4,306
D+G=I$1,411
 $1,449
Total revenue, taxable-equivalent basisE+F=J$1,508
 $1,474
 $4,421
 $4,353
E+F=J$1,425
 $1,463
Adjusted total revenue, taxable-equivalent basis (non-GAAP)E+G=K$1,507
 $1,470
 $4,438
 $4,344
E+G=K$1,423
 $1,462
Efficiency ratio (GAAP)B/J57.75% 62.59% 58.63% 62.42%B/J58.65% 58.81%
Adjusted efficiency ratio (non-GAAP)C/K57.40% 58.05% 58.00% 59.65%C/K57.89% 58.29%
Fee income ratio (GAAP)F/J37.00% 35.19% 35.15% 35.33%F/J34.05% 34.31%
Adjusted fee income ratio (non-GAAP)G/K36.97% 35.03% 35.41% 35.20%G/K33.95% 34.26%
RETURN ON AVERAGE TANGIBLE COMMON STOCKHOLDERS’ EQUITY — CONSOLIDATED
        
Average stockholders’ equity (GAAP) $16,621
 $15,401
 $15,918
 $15,642
RETURN ON AVERAGE TANGIBLE COMMON SHAREHOLDERS’ EQUITY    
Average shareholders’ equity (GAAP) $16,460
 $15,192
Less: Average intangible assets (GAAP) 4,949
 4,955
 4,940
 5,032
 4,947
 4,940
Average deferred tax liability related to intangibles (GAAP) (93) (97) (94) (98) (92) (94)
Average preferred stock (GAAP) 1,310
 820
 1,097
 820
 1,310
 820
Average tangible common stockholders’ equity (non-GAAP)L$10,455
 $9,723
 $9,975
 $9,888
Return on average tangible common stockholders’ equity (non-GAAP)(4)
A/L14.62% 22.36% 15.24% 17.65%
Average tangible common shareholders’ equity (non-GAAP)L$10,295
 $9,526
Return on average tangible common shareholders’ equity (non-GAAP)(2)
A/L5.43% 16.09%

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 September 30, 2019 December 31, 2018 March 31, 2020 December 31, 2019
 (Dollars in millions, except per share data) (Dollars in millions, except per share data)
TANGIBLE COMMON RATIOS — CONSOLIDATED
    
Ending stockholders’ equity (GAAP) $16,581
 $15,090
TANGIBLE COMMON RATIOS    
Ending shareholders’ equity (GAAP) $17,332
 $16,295
Less: Ending intangible assets (GAAP) 4,956
 4,944
 4,943
 4,950
Ending deferred tax liability related to intangibles (GAAP) (93) (94) (92) (92)
Ending preferred stock (GAAP) 1,310
 820
 1,310
 1,310
Ending tangible common stockholders’ equity (non-GAAP)M$10,408
 $9,420
Ending tangible common shareholders’ equity (non-GAAP)M$11,171
 $10,127
Ending total assets (GAAP) $128,147
 $125,688
 $133,542
 $126,240
Less: Ending intangible assets (GAAP) 4,956
 4,944
 4,943
 4,950
Ending deferred tax liability related to intangibles (GAAP) (93) (94) (92) (92)
Ending tangible assets (non-GAAP)N$123,284
 $120,838
N$128,691
 $121,382
End of period shares outstandingO964
 1,025
O957
 957
Tangible common stockholders’ equity to tangible assets (non-GAAP)M/N8.44% 7.80%
Tangible common shareholders’ equity to tangible assets (non-GAAP)M/N8.68% 8.34%
Tangible common book value per share (non-GAAP)M/O$10.79
 $9.19
M/O$11.67
 $10.58
  September 30, 2019 December 31, 2018
  (Dollars in millions, except per share data)
BASEL III COMMON EQUITY TIER 1 RATIO—FULLY PHASED-IN PRO-FORMA (5)
    
Stockholders’ equity (GAAP) $16,581
 $15,090
Non-qualifying goodwill and intangibles (4,853) (4,839)
Adjustments, including all components of accumulated other comprehensive income, disallowed deferred tax assets, threshold deductions and other adjustments (297) 940
Preferred stock (GAAP) (1,310) (820)
Basel III common equity Tier 1—Fully Phased-In Pro-Forma (non-GAAP)
P$10,121
 $10,371
Basel III risk-weighted assets—Fully Phased-In Pro-Forma (non-GAAP) (6)
Q$106,203
 $105,475
Basel III common equity Tier 1 ratio—Fully Phased-In Pro-Forma (non-GAAP)
P/Q9.53% 9.83%
_________
(1)On December 31, 2018, purchasing cards were reclassified to commercial and industrial loans from other assets.
(2)Adjustments to average loan balances assume a simple day-weighted average impact for the first quarter of 2018.
(3)________
(1) The gain on sale of affordable housing residential mortgage loans in the first quarter of 2019 was the result of the sale of approximately $167 million of loans.
(4)Income statement amounts have been annualized in calculation.
(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.sale of approximately $167 million of loans.
(2) Income statement amounts have been annualized in calculation.

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OPERATING RESULTS
NET INTEREST INCOME AND MARGIN
Table 17—19—Consolidated Average Daily Balances and Yield/Rate Analysis
Three Months Ended September 30Three Months Ended March 31
2019 20182020 2019
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:                      
Debt securities—taxable(1)
$23,909
 $160
 2.67% $24,956
 $156
 2.49%
Debt securities(1)
$23,766
 $158
 2.66% $24,695
 $165
 2.67%
Loans held for sale557
 5
 3.73
 386
 4
 4.14
514
 5
 3.72
 302
 3
 3.63
Loans, net of unearned income (2)(3)
82,986
 983
 4.70
 81,022
 932
 4.56
83,249
 915
 4.40
 83,725
 994
 4.78
Investment in operating leases, net323
 3
 3.60
 410
 3
 3.33
Other earning assets1,764
 12
 2.69
 2,440
 17
 2.87
2,302
 13
 2.37
 2,213
 22
 4.16
Total earning assets109,539
 1,163
 4.21
 109,214
 1,112
 4.04
109,831
 1,091
 3.97
 110,935
 1,184
 4.29
Unrealized gains (losses) on securities available for sale, net (1)
251
     (758)    
Unrealized gains/(losses) on securities available for sale, net510
     (444)    
Allowance for loan losses(857)     (834)    (1,315)     (843)    
Cash and due from banks1,891
     2,036
    1,915
     1,893
    
Other non-earning assets13,839
     13,868
    13,830
     14,002
    
$124,663
     $123,526
    $124,771
     $125,543
    
Liabilities and Stockholders’ Equity           
Liabilities and Shareholders’ Equity           
Interest-bearing liabilities:                      
Savings$8,607
 4
 0.16
 $8,928
 4
 0.15
$8,822
 4
 0.17
 $8,852
 4
 0.17
Interest-bearing checking18,257
 33
 0.71
 18,924
 21
 0.44
19,273
 22
 0.47
 19,309
 33
 0.69
Money market24,904
 42
 0.68
 24,046
 22
 0.37
25,151
 28
 0.46
 23,989
 40
 0.68
Time deposits8,689
 37
 1.74
 6,630
 17
 1.06
7,302
 26
 1.44
 7,471
 27
 1.49
Other deposits919
 4
 1.57
 653
 4
 2.33
Total interest-bearing deposits (4)
60,457
 116
 0.77
 58,528
 64
 0.44
61,467
 84
 0.55
 60,274
 108
 0.73
Federal funds purchased and securities sold under agreements to repurchase208
 1
 2.28
 154
 —
 —
151
 1
 1.39
 343
 2
 2.41
Other short-term borrowings2,187
 13
 2.31
 1,480
 8
 2.07
1,644
 7
 1.69
 1,735
 11
 2.55
Long-term borrowings9,340
 83
 3.47
 10,429
 84
 3.14
8,402
 59
 2.81
 11,753
 102
 3.47
Total interest-bearing liabilities72,192
 213
 1.17
 70,591
 156
 0.88
71,664
 151
 0.85
 74,105
 223
 1.22
Non-interest-bearing deposits (4)
33,599
 —
 —
 35,414
 —
 —
34,205
 —
 —
 33,896
 —
 —
Total funding sources105,791
 213
 0.80
 106,005
 156
 0.58
105,869
 151
 0.57
 108,001
 223
 0.83
Net interest spread(1)
    3.04
     3.16
    3.12
     3.07
Other liabilities2,251
     2,120
    2,442
     2,350
    
Stockholders’ equity16,621
     15,401
    
Shareholders’ equity16,460
     15,192
    
$124,663
     $123,526
    $124,771
     $125,543
    
Net interest income and other financing income/margin on a taxable-equivalent basis(1)(5)
  $950
 3.44%   $956
 3.47%
Net interest income /margin on a taxable-equivalent basis(5)
  $940
 3.44%   $961
 3.51%
_____
(1)Debt securities are included on an amortized cost basis with yield, net interest spread, and net interest margin calculated accordingly. All prior period balances and yields/rates have been recast for comparability purposes.
(2)Loans, net of unearned income include non-accrual loans for all periods presented.
(3)Interest income includes net loan fees of $1$2 million and $3$1 million for the three months ended September 30,March 31, 2020 and 2019, and 2018, respectively.
(4)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 0.49%0.35% and 0.27%0.46% for the three months ended September 30,March 31, 2020 and 2019, and 2018, respectively.
(5)The computation of taxable-equivalent net interest income and other financing income is based on the statutory federal income tax rate of 21% for both September 30,March 31, 2020 and 2019 and 2018, adjusted for applicable state income taxes net of the related federal tax benefit.




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 Nine Months Ended September 30
 2019 2018
 Average Balance Income/
Expense		 Yield/
Rate		 Average
Balance		 Income/
Expense		 Yield/
Rate
 (Dollars in millions; yields on taxable-equivalent basis)
Assets           
Earning assets:           
Debt securities—taxable(1)
$24,423
 $488
 2.66% $25,086
 $466
 2.48%
Loans held for sale420
 12
 3.83
 378
 11
 3.87
Loans, net of unearned income (2)(3)
83,536
 2,983
 4.75
 80,294
 2,689
 4.46
Investment in operating leases, net342
 9
 3.48
 440
 11
 3.24
Other earning assets1,857
 46
 3.32
 2,616
 53
 2.73
Total earning assets110,578
 3,538
 4.26
 108,814
 3,230
 3.95
Unrealized gains (losses) on securities available for sale, net (1)
(107)     (697)    
Allowance for loan losses(852)     (871)    
Cash and due from banks1,880
     1,980
    
Other non-earning assets13,938
     14,101
    
 $125,437
     $123,327
    
Liabilities and Stockholders’ Equity           
Interest-bearing liabilities:           
Savings$8,754
 11
 0.16
 $8,842
 11
 0.16
Interest-bearing checking18,808
 99
 0.70
 19,461
 55
 0.38
Money market24,418
 131
 0.72
 24,292
 55
 0.30
Time deposits8,610
 108
 1.69
 6,711
 49
 0.98
Total interest-bearing deposits (4)
60,590
 349
 0.77
 59,306
 170 0.38
Federal funds purchased and securities sold under agreements to repurchase265
 4
 2.38
 100
 1
 1.75
Other short-term borrowings1,964
 37
 2.46
 937
 14
 1.96
Long-term borrowings10,640
 281
 3.49
 9,571
 229
 3.16
Total interest-bearing liabilities73,459
 671
 1.22
 69,914
 414 0.79
Non-interest-bearing deposits (4)
33,791
 —
 —
 35,563
 —
 —
Total funding sources107,250
 671
 0.83
 105,477
 414 0.52
Net interest spread(1)
    3.04
     3.16
Other liabilities2,265
     2,208
    
Stockholders’ equity15,918
     15,642
    
Noncontrolling Interest4
     —
    
 $125,437
     $123,327
    
Net interest income and other financing income/margin on a taxable-equivalent basis (1)(5)
  $2,867
 3.47%   $2,816
 3.46%
____
(1)Debt securities are included on an amortized cost basis with yield, net interest spread, and net interest margin calculated accordingly. All prior period balances and yields/rates have been recast for comparability purposes.
(2)Loans, net of unearned income include non-accrual loans for all periods presented.
(3)Interest Income includes net loan fees of $4 million and $14 million for nine months ended September 30, 2019 and 2018 respectively
(4)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 0.49% and 0.24% for nine months ended September 30, 2019 and 2018 respectively.
(5)The computation of taxable-equivalent net interest income and other financing income is based on the statutory federal income tax rate of 21% for both September 30, 2019 and 2018, adjusted for applicable state income taxes net of the related federal tax benefit.
For the first quarter of 2020, net interest income (taxable-equivalent basis) totaled $940 million compared to $961 million in the first quarter of 2019. The net interest margin (taxable-equivalent basis) was 3.44 percent for the first quarter of 2020 and 3.51 percent for the first quarter of 2019. The decreases in net interest income and other financing income and net interest margin for the thirdfirst quarter of 2019,2020, compared to the same period in 2018,2019, were primarily attributable to higher funding costs and a less favorable funding mix.lower market interest rates. The decreases were partially offset by lower funding costs, the positive impactsimpact of loan hedges becoming active during the first quarter of 2020, and favorable loan remixing into higher short-term market rates, continued execution of securities repositioning strategies, higheryielding consumer loans. Furthermore, one additional day in the current quarter increased net interest income but reduced net interest margin, and lower average loan balances and favorable loan remixing. During the first nine months of 2019, compared to the same period in 2018, the increases innegatively impacted net interest income and other financing income andbut positively impacted net interest margin were also driven by higher

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short-term market interest rates, securities repositioning, higher average loan balances, and favorable loan remixing. These increases during the first nine months of 2019 were only partially offset by higher funding costs and a less favorable funding mix.margin.
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 results 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 derived 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. Given low market rates by historical standards, the Company presents varying magnitudes of downfocuses on a falling rate shock scenariosscenario with most yield curve tenors floored near zero and a reduction in mortgage indices based on historical yield curve minimums as explained in the following section. 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 September 30, 2019,March 31, 2020, Regions was modestly asset sensitive to both gradual and instantaneous parallel yield curve shifts as compared to the base case for the measurement horizon ending September 2020. Twelve month horizon asset sensitivity levels are expected to decline through early 2020 as forward starting hedges move into the measurement window.March 2021. The estimated exposure associated with falling rate scenarios 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. Fed Funds increases from the most recent hiking cycle have resulted in a modest increase in depositDeposit and other funding costs for Regions.are currently low when compared to historical levels. Therefore, it is expected that declines in funding costs will only partially offset the decline in asset yields. Yet, the combination of deposit cost reductions and increased balance sheet hedging income serves to mostly offset net interest income sensitivity to short-term rates. Net interest income remains exposed to longer yield curve tenors. 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.
The table below summarizes Regions' positioning in various parallel yield curve shifts (i.e., including all yield curve tenors). The scenarios are inclusive of all interest rate risk hedging activities. Forward starting hedges that have been transacted are contemplated to the extent they start within the measurement horizon. These forward starting hedging relationships, which primarily begin in early 2020, are being used to protect net interest income and other financing income as the macroeconomic cycle continues to evolve. Therefore, the Company'sTwelve-month horizon asset sensitivity levels are expected to continue to decline through early 2020.2020 as forward starting hedges move completely into the measurement window. More information regarding forward starting hedges is disclosed in Table 1921 and its accompanying description.


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Table 18—20—Interest Rate Sensitivity
 
Estimated Annual Change
in Net Interest Income
September 30, 2019March 31, 2020(1)(2)
 (In millions)
Gradual Change in Interest Rates 
+ 200 basis points
$123113
+ 100 basis points6869
- 100 basis points (floored)(3)
(98)
- 200 basis points (floored)(13744)
  
Instantaneous Change in Interest Rates 
+ 200 basis points
$106127
+ 100 basis points9289
- 100 basis points (floored)(3)
(146)
- 200 basis points (floored)(19978)
_________
(1)Disclosed interest rate sensitivity levels represent the 12 month forward looking net interest income and other financing income changes as compared to market forward rate cases and include expected balance sheet growth and remixing.
(2)Forward starting cash flow hedges already transacted will reduce sensitivity levels through 2020 as they continue to move into the measurement horizon (seehorizon. See Table 2022 for additional information regarding hedge start dates).dates.
(3)Estimates forThe -100 basis point (floored) scenario represents a gradual parallel yield curve shift12 month average rate shock of minus 100-21 basis points with long-termand -80 basis points to zero for 1 month LIBOR and the 10 year U.S. Treasury yield, curve levelsrespectively. Mortgage yield shocks are floored at approximately 1% as discussed below, inclusive of forward starting cash flow hedges already transacted, would be a decrease to 12 month net interest income and other financing income of approximately 3 percent in the current quarter, approximately 1.5 percent at year-end 2019, and less than 1 percent by year-end 2020.their historical minimums minus 35 basis points.
As market interest rates have increased in recent years, larger magnitude falling rate shock scenarios have become possible, although the probability of such a movement is currently low. Regions hashad established scenarios by which yield curve tenors will fall to a consistent level. The shock magnitude for each tenor, when compared to market forward rates, equatesequated to the lesser of the shock scenario amount, or a rate 35 basis points lower than the historical all-time minimum. For example,Recent market volatility and new historic lows established for longer yield curve tenors have resulted in a shock scenario where the 10 year Treasury yield is floored atmajority of rates now fall to approximately 1.0%. Use of this steepening scenario provides a sufficiently punitive rate environment, while maintaining a higher level of reasonableness.zero. Mortgage rates, which have retained somewhat elevated levels, are still being shocked in the manner previously described. Further, the scenarios presented do not allow for negative rates. The falling rate scenarios in Table 1820 above quantify the expected impact for both gradual and instantaneous shocks under this environment.
As discussed above, the interest rate sensitivity analysis presented in Table 1820 is informed by a variety of assumptions and estimates regarding the courseprogression 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 thatwhich 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 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 -100 basis point gradual interestbase case scenario and falling rate change scenarioscenarios in Table 18, the20, interest-bearing deposit re-pricing sensitivity over the 12 month horizon is expected to be between 25 percent and 30 percent of changes in short-term market rates (e.g., Fed Funds). A 5 percentage point lower sensitivity than the baseline assumption would decrease 12 month net interest income and other financing income in the gradual -100 basis points scenario by approximately $23 million when compared to the baseline scenario. 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.
achieve historical lows. In rising rate scenarios only, management assumes that the mix of deposits will change versus the baselinebase case balance sheet growth assumptions as 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. As the rate cycle has progressed and a mix shift has become inherent in the baseline forecast, management has reduced the sensitivity impact on the shock scenarios. The magnitude of the shift is rate dependent and equates to approximately $1.5$2.0 billion over 12 months in the gradual +100 basis point scenario in Table 18. In20. While estimates should be used as a guide, differences may result driven by the event this shift increased by an additional $1.5 billion over 12 months, the result would be a reductionpace of 12 month net interest incomerate changes, and other financing income in the gradual +100 basis points scenario by approximately $9 million.

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

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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 are executed on behalf of the Company's customers and are used by customers to manage fluctuations in foreign exchange rates. The Company is subject to the credit risk that another party will fail to perform.
Regions has made use of interest rate swaps and floors 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—21—Hedging Derivatives by Interest Rate Risk Management Strategy

September 30, 2019March 31, 2020
  Weighted-Average    Weighted-Average  
Notional
Amount		 Maturity (Years) 
Receive Rate(1)
 
Pay Rate(1)
 
Strike Price(1)(2)
Notional
Amount		 Maturity (Years) 
Receive Rate(1)
 
Pay Rate(1)
 
Strike Price(1)(2)
(Dollars in millions)(Dollars in millions)
Derivatives in fair value hedging relationships:                  
Receive fixed/pay variable swaps$3,650
 2.4
 1.9% 2.1% —%$2,900
 2.2
 2.2% 0.9% —%
Receive variable/pay fixed swaps32
 6.0
 2.2% 2.7
 —
Derivatives in cash flow hedging relationships:                  
Receive fixed/pay variable swaps12,750
 5.5
 2.1% 1.9
 —
16,000
 5.0
 1.9
 1.0
 —
Interest rate floors6,750
 5.1
 —% —
 2.16,750
 4.6
 —
 —
 2.1
Total derivatives designated as hedging instruments$23,182
 5.1
 2.0% 1.9% 2.1%$25,650
 4.6
 1.9% 1.0% 2.1%
_________
(1)Variable rate indexes on swap and floor contracts reference a combination of short-term LIBOR benchmarks, primarily 1 month LIBOR.
(2)Strike price is not adjusted for premiums paid on interest rate floors.
A portion of the cash flow hedging relationships designated in Table 1921 above are forward starting, including $7.75$5.25 billion notional of the outstanding cash flow swaps.swaps and $2.0 billion notional of the outstanding cash flow floors. Interest rate swaps and floors of $750 million notional went into effect$5.3 billion and $4.0 billion, respectively, became active during the thirdfirst quarter of 2019 and the remaining $6.0 billion notional are forward starting.2020. Forward starting swaps and floors have maturities of approximately five years from their respective start dates. The total receive rate and strike price on all forward starting cash flow swaps and floors was 2.4 percent and 2.1 percent, respectively. Subsequent to September 30, 2019 an additional $2.5 billion of notional value forward starting receive fixed cash flow derivatives were added with the intent to reduce the net interest income and other financing income impact of lower long-term rates on 2020 loan originations.


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The following table presents cash flow hedge notional amounts with start dates prior to the year-end periods shown through 2026. All cash flow hedge notional amounts mature prior to the end of 2027.







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Table 22—Schedule of Notional for Cash Flow Hedging Derivatives

Notional AmountNotional Amount
Years EndedYears Ended
2019(1)
 
2020(1)(2)
 2021 2022 2023 2024 2025 2026
2020(1)(2)
 
2021(1)(2)
 2022 2023 2024 2025 2026
(In millions)(In millions)
Receive fixed/pay variable swaps$5,500
 $12,000
 $12,750
 $12,750
 $10,450
 $9,450
 $3,750
 $1,250
$15,250
 $16,000
 $16,000
 $13,700
 $12,700
 $3,750
 $1,250
Interest rate floors750
 6,500
 6,750
 6,750
 6,750
 4,000
 250
 —
6,500
 6,750
 6,750
 6,750
 4,000
 250
 —
Cash flow hedges$6,250
 $18,500
 $19,500
 $19,500
 $17,200
 $13,450
 $4,000
 $1,250
$21,750
 $22,750
 $22,750
 $20,450
 $16,700
 $4,000
 $1,250
_________
(1)As forward starting cash flow hedges are transacted within the 12 month measurement horizon, they will reduce 12 month net interest income and other financing income sensitivity levels as disclosed in Table 18.20.
(2)Start dates for $10.3As of March 31, 2020, $10.75 billion of the $12.0$16.0 billion notional of the cash flow swaps and $4.8$4.75 billion of the $6.5$6.75 billion notional of the interest rate floors are atactive. During the beginningsecond quarter of 2020.2020, an additional $3.0 billion notional of interest rate swaps and $1.75 billion notional of interest rate floors will become active. During the third quarter of 2020 $250 million notional of interest rate swaps become active; and during the fourth quarter of 2020 $1.25 billion notional of interest rate swaps become active. The remaining $750 million notional of interest rate swaps and $250 million notional of interest rate floors become active in the first quarter of 2021.
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. All hedging interest rate swap derivatives traded by Regions are subject to mandatory clearing. The counterparty risk for cleared trades effectively moves from the executing broker to the clearinghouse allowing Regions to benefit from the risk mitigation controls in place at the respective clearinghouse. The “Credit Risk” section in Regions’ Annual Report on Form 10-K for the year ended December 31, 20182019 contains more information on the management of credit risk.
Regions also uses derivatives to meet the needs of its customers. Interest rate swaps, interest rate options and foreign exchange forwards are the most common derivatives sold to customers. Other derivative instruments with similar characteristics are used to hedge market risk and minimize volatility associated with this portfolio. Instruments used to service customers are held in the trading account, with changes in value recorded in the consolidated statements of income.
The primary objective of Regions’ hedging strategies is to mitigate the impact of interest rate changes, from an economic perspective, on net interest income and other financing income and the net present value of its balance sheet. The overall effectiveness of these hedging strategies is subject to market conditions, the quality of Regions’ execution, the accuracy of its valuation assumptions, counterparty credit risk and changes in interest rates. See Note 9 “Derivative8 "Derivative Financial Instruments and Hedging Activities”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.
LIBOR Transition - In 2017, the Financial Conduct Authority, which regulates LIBOR, announced that by the end of 2021 panel banks will no longer be required to submit estimates that are used to construct LIBOR, confirming that the continuation of LIBOR will not be guaranteed beyond that date.  Regions holds instruments that may be impacted by the likely discontinuance of LIBOR, including loans, investments, hedging products, floating-rate obligations and other financial instruments that use LIBOR as a benchmark rate. The Company cannot currently predict the full impact of the LIBOR discontinuation on net interest income and other financing income or the related processes. However, Regions is coordinating with regulators and industry groups to identify an appropriate replacement ratealternative rates for contracts expiring after 2021, as well asand preparing for this transition as it relates to both new and existing exposures. The Company has established a LIBOR Transition Program, which includes dedicated leadership and staff with all relevant business lines and support groups engaged. An initialA LIBOR impact and risk assessment has been performed, which identified the associated risks across products, systems, models, and processes. PlansUpdated fallback language was incorporated into LIBOR-relevant contracts and customer facing communication which commenced with the launch of the regions.com/libor page. Steps to mitigate risks associated with the transition are under development and are being overseen by Regions’ Executive LIBOR Steering Committee as part of the LIBOR Transition Program. Continuing activities of the LIBOR Transition Program include facilitating the transition of all financial and strategic processes, systems and models; performing assessments of the transition impact to contracts and products; evaluating necessary operational and infrastructure enhancements upon implementation of alternative benchmark rates; and coordinating communications with customers.

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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 MSRs. 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. TheRegions maintains strong liquidity coverage ratio rulelevels that position the Company to respond to stressed environments. As discussed below, Regions has a variety of liquidity sources, which it continues to utilize to fund customer needs.
On March 27, 2020, the CARES Act was signed into law as a response to the economic uncertainty amid the COVID-19 pandemic. A focus of the Act is designedthe establishment of federally guaranteed loans for small businesses under the PPP. Regions, a certified SBA lender, has and will continue to ensure that financial institutions haveassist its customers through the necessary assetsprocess of utilizing this program. As a lending institution in this program, additional liquidity is available to the Company through the Federal Reserve's Paycheck Protection Program Liquidity Facility. Regions' use of this funding source will depend on hand to withstand short-term liquidity disruptions. Seehow economic conditions develop and also on the "Liquidity Coverage Ratio" discussion included in the "Regulatory Requirements" sectioncontinuing demand for PPP loans and other sources of Management's Discussion and Analysis for additional information.liquidity.
Regions intends to fund its obligations primarily through cash generated from normal operations. Regions also has obligations related to potential litigation contingencies. See Note 12 “Commitments,11 "Commitments, Contingencies and Guarantees”Guarantees" to the consolidated financial statements for additional discussion of the Company’s funding requirements. Regions also has obligations related to potential litigation contingencies.
Assets, consisting principally of loans and securities, are funded by customer deposits, borrowed funds and stockholders’shareholders’ 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.needs in normal and stressed conditions. 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 $2.5$1.6 billion at September 30, 2019.March 31, 2020. 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. These minimum requirements are informed by internal stress testing measures which are reflective of Regions' portfolio and business mix. The Bank's funding and contingency planning does not currently includeassume any reliance on short-term unsecured sources. Risk limits are established by the Board through its Risk Appetite Statement and Liquidity Policy. The Company's Board, LROC and ALCO regularly review compliance with the established limits.
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 2 “Debt 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. 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 relyassume reliance on short-term unsecured wholesale marketsources of funding.
The balance with the FRB is the primary component of the balance sheet line item, “interest-bearing deposits in other banks.” At September 30, 2019,March 31, 2020, Regions had approximately $3.1$3.2 billion in cash on deposit with the FRB, an increase from approximately $1.5$2.5 billion at December 31, 2018.2019. Refer to the "Cash and Cash Equivalents" section for more information.

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Regions’ borrowing availability with the FRB as of September 30, 2019,March 31, 2020, based on assets pledged as collateral on that date, was $17.3$15.3 billion.
Regions’ financing arrangement with the FHLB adds additional flexibility in managing the Company's liquidity position. As of September 30, 2019,March 31, 2020, Regions’ outstanding balance of FHLB borrowings was $8.4$7.8 billion and its total borrowing capacity from the FHLB totaled $17.5approximately $17.6 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 dwellings and home equity lines of credit as collateral for the outstanding FHLB advances outstanding.advances. Additionally, investment

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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 2018 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. Additionally, Regions' Board has authorized Regions Bank to issue up to $10 billion in aggregate principal amount of bank notes outstanding at any one time. Refer to Note 13 "Long-Term Borrowings"12 "Borrowings" to the consolidated financial statements in the 20182019 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 credit portfolio that provides for stable credit costs with acceptable volatility through an economic cycle. Regions has a diversifiedvarious processes to manage credit risk as described below. In order to assess the risk profile of the loan portfolio, in terms of product type, collateral and geography. See Table 2 for further details of eachRegions considers risk factors within the loan portfolio segment.segments and classes, the current U.S. economic environment and that of its primary banking markets, as well as counterparty risk. See the “Portfolio Characteristics” section of the Annual Report on Form 10-K for the year ended December 31, 20182019 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 that are conducted regularly 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, including technology-based products and services used by us and our customers, the increasing use of mobile devices and cloud technologies, the ability to conduct more financial transactions online, and the increasing 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 regularly tests its control environment utilizing practices such as penetration testing and more targeted assessments to ensure its controls are working as expected. 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 respond to evolving disruptive technology and to protect its systems from attacks or unauthorized access. In addition, Regions maintains a strong commitment to a comprehensive risk management program that includes due diligence and oversight of third-party relationships with vendors.
As a result of the COVID-19 pandemic, Regions has experienced a modest increase in cyber events, such as phishing attacks and malicious traffic from outside the United States.  However, the Company's layered control environment has effectively detected and prevented any material impact related to these events.
Regions’ system of internal controls also incorporates an organization-wide protocol for the appropriate reporting and escalation of information security matters to management and the Board, to ensure effective and efficient resolution and, if necessary, disclosure of any matters. The Board is actively engaged in the oversight of Regions’ continuous efforts to reinforce and enhance its operational resilience and receives education to ensure that their oversight efforts accommodate for the ever-evolving information security threat landscape. The Board monitors Regions’ information management risk policies and practices primarily through its Risk Committee, which oversees areas of operational risk such as information technology activities; risks associated with development, infrastructure, and cybersecurity; approval and oversight of internal and third-party information security risk assessments, strategies, policies and programs; and disaster recovery, business continuity, and incident response plans. Additionally, the Board’s Audit Committee regularly reviews Regions’ cybersecurity practices, mainly by receiving reports on the cybersecurity management program prepared by the Chief Information Security Officer, risk management, and Internal Audit. The Board annually reviews the information security program and, through its various committees, is briefed at least quarterly on information security matters.

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Regions participates in information sharing organizations such as FS-ISAC, to gather and share information with 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 committed the necessary resources to support Regions in the event of 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 cyber event. Regions has also developed and maintains robust business continuity and disaster recovery plans that it could implement in the event of a cyber

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event so as to mitigate the effects of any such event and minimize necessary recovery time. Some of Regions' financial risk exposure with respect to data breaches may be offset by applicable insurance.
Even if Regions successfully prevents cyber attacks to its own network, the Company may still incur losses that result from customers' account information being 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.
PROVISION FOR LOANCREDIT LOSSES
The provision for loancredit losses is used to maintain the allowance for loan losses and the reserve for unfunded credit losses at a level that in management’s judgment is appropriate to absorb probableexpected credit losses inherent inover the contractual life of the loan and credit commitment portfolio at the balance sheet date. Regions adopted CECL on January 1, 2020. Upon adoption, Regions classified the provision for unfunded credit losses as provision for credit losses. Prior to 2020, the provision for unfunded credit losses was included in non-interest expense. The provision for credit losses totaled $373 million in the first quarter of 2020 compared to the provision for loan losses totaled $108 million in the third quarter of 2019 compared to $84 million during the third quarter of 2018. The provision for loan losses totaled $291 million for the first nine months of 2019 compared to $134$91 million during the first nine monthsquarter of 2018.2019. Refer to the "Allowance for Credit Losses" section of Management's Discussion and Analysis for further detail.
NON-INTEREST INCOME
Table 21—Non-Interest Income from Continuing Operations
 Three Months Ended September 30 Quarter-to-Date Change 9/30/2019 vs. 9/30/2018
 2019 2018 Amount Percent
 (Dollars in millions)
Service charges on deposit accounts$186
 179
 $7
 3.9 %
Card and ATM fees114
 111
 3
 2.7 %
Investment management and trust fee income63
 59
 4
 6.8 %
Capital markets income36
 45
 (9) (20.0)%
Mortgage income56
 32
 24
 75.0 %
Investment services fee income20
 18
 2
 11.1 %
Commercial credit fee income19
 18
 1
 5.6 %
Bank-owned life insurance18
 18
 —
 — %
Market value adjustments on employee benefit assets - defined benefit—
 3
 (3) (100.0)%
Market value adjustments on employee benefit assets - other7
 4
 3
 75.0 %
Other miscellaneous income39
 32
 7
 21.9 %
 $558
 $519
 $39
 7.5 %


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NON-INTEREST INCOME
Table 23—Non-Interest Income
Nine Months Ended September 30 Year-to-Date 9/30/2019 vs. 9/30/2018Three Months Ended March 31 Quarter-to-Date Change 3/31/2020 vs. 3/31/2019
2019 2018 Amount Percent2020 2019 Amount Percent
(Dollars in millions)(Dollars in millions)
Service charges on deposit accounts$542
 $525
 $17
 3.2 %$178
 175
 $3
 1.7 %
Card and ATM fees343
 327
 16
 4.9 %105
 109
 (4) (3.7)%
Investment management and trust fee income179
 175
 4
 2.3 %62
 57
 5
 8.8 %
Capital markets income117
 152
 (35) (23.0)%9
 42
 (33) (78.6)%
Mortgage income114
 107
 7
 6.5 %68
 27
 41
 151.9 %
Investment services fee income59
 54
 5
 9.3 %22
 19
 3
 15.8 %
Commercial credit fee income55
 52
 3
 5.8 %18
 18
 —
 — %
Bank-owned life insurance60
 53
 7
 13.2 %17
 23
 (6) (26.1)%
Securities gains (losses), net(26) 1
 (27) NM
—
 (7) 7
 100.0 %
Market value adjustments on employee benefit assets - defined benefit5
 1
 4
 400.0 %—
 5
 (5) (100.0)%
Market value adjustments on employee benefit assets - other4
 3
 1
 33.3 %(25) (1) (24) NM
Other miscellaneous income102
 88
 14
 15.9 %31
 35
 (4) (11.4)%
$1,554
 $1,538
 $16
 1.0 %$485
 $502
 $(17) (3.4)%
________
NM - Not Meaningful
Service charges on deposit accounts—Service charges on deposit accounts include non-sufficient fundsfund and overdraft fees, corporate analysis service charges, overdraft protection fees and other customer transaction-related service charges. The increasesincrease during the thirdfirst quarter of 2019 and the first nine months of 20192020 compared to the same periodsperiod of 2018 were2019 was primarily due to continued customer account growthan increase in corporate analysis service charges, which were partially offset by a decrease in consumer service charges. However, service charges were negatively impacted during the first quarter of 2020 by a general decrease in spending late in the quarter associated with the COVID-19 pandemic. If recent spend levels persist, service charges on deposit accounts will continue to be negatively impacted. See the "First Quarter Overview" section of Management's Discussion and increases in non-sufficient fund activity.Analysis for further detail.
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 increase in card and ATM feesdecrease in the thirdfirst quarter of 2019 compared to the same period in 2018 was driven by checkcard interchange income. The increase in card and ATM fees in first nine months of 20192020 compared to the same period of 20182019 was driven primarily the result of account growth and the related increasesby decreases in commercial and consumer credit card interchange income as a result of decreased debit and checkcard interchange income.credit card spend and transaction volumes associated with the COVID-19 pandemic. If recent spend levels persist, card and ATM fees will continue to be negatively impacted. See the "First Quarter Overview" section of Management's Discussion and Analysis for further detail.
Capital markets income—Capital markets income primarily relates to capital raising activities that includesinclude securities underwriting and placement, loan syndication and placement, as well as foreign exchange, derivatives, merger and acquisition and other advisory services. The decreasesdecrease in the thirdfirst quarter of 2019 and first nine months of 20192020 compared to the same periods in 2018 wereperiod of 2019 was primarily due to declines in merger and acquisition advisory services and commercial swap income. The declines in commercial swap income were driven by market-related credit valuation adjustments tied to customer derivatives. The decreasesderivatives, as well as a decline in merger and acquisition advisory fees reflecting the third quarter of 2019 andeconomic environment in the first nine monthsquarter of 2019 compared to the same periods in 20182020. The decreases were partially offset by higher securities underwritingincreases in customer interest rate swap income and fees generated from the placement fees.of permanent financing for real estate customers.
Mortgage income—Mortgage income is generated through the origination and servicing of residential mortgage loans for long-term investors and sales of residential mortgage loans in the secondary market. The increase in mortgage income in the thirdfirst quarter of 20192020 compared to the same period in 2018of 2019 was due primarily driven by improvements in the valuation of mortgage servicing rights and related hedges, as well asto increases in mortgageloan production and sales and servicing income. The increase in mortgage income as lower interest rates during the first nine months of 2019 compared to the same period in 2018 was also due to higher salescurrent quarter increased loan applications and servicing income, partially offset by reductions in theproduction. Additionally, MSR valuation of mortgage servicing rightsadjustments and related hedges.hedge activity positively impacted mortgage income.
Bank-owned life insurance—Bank-owned life insurance increaseddecreased in the first nine monthsquarter of 20192020 compared to the same period in 20182019 due primarily to an increasea decrease in claims benefits in the first quarter of 2020 and favorable market valuation adjustments.adjustments in the first quarter of 2019.
Securities gains (losses), net—Net securities gains (losses) primarily result from the Company's asset/liability management process. The net loss incurred during the first nine months of 2019 was primarily due to the sale of certain lower-yielding securities in the second quarter of 2019. See Table 1 "Debt Securities" section for additional information.

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Market value adjustments on employee benefit assets—Market value adjustments on employee benefit assets, both defined benefit and other, are the reflection of market value variations related to assets held for certain employee benefits. The adjustments reported as employee benefit assets - other are offset in salaries and benefits. The decrease in market valuation adjustments for the other employee benefits assets during the first quarter of 2020 compared to the same period of 2019 was due primarily to the decline in the equity markets. Furthermore, the Company repositioned its defined benefit employee benefits assets portfolio during the second quarter of 2019 into investments that are no longer subject to the volatility of the equity markets.
Other miscellaneous income—Other miscellaneous income includes net revenue from affordable housing, valuation adjustments to equity investments, fees from safe deposit boxes, check fees and other miscellaneous income. Net revenue from affordable housing includes actual gains and losses resulting from the sale of affordable housing investments, cash distributions

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from the investments and any related impairment charges. Other miscellaneous income increaseddecreased in the thirdfirst quarter of 20192020 compared to the same period in 20182019 primarily due to increases in the values of certain equity method investments and an increase in commercial leasing income driven by less net impairment charges on operating lease assets. The increase in other miscellaneous income during the first nine months of 2019 compared to the same period in 2018 was also impacted by an increase in commercial leasing income from less net impairment charges during 2019, a$8 million gain associated with the sale of $167 million of affordable housing residential mortgage loans and an increase in consumer merchant commission income. These items were partially offset by decreases in the values of certain equity method investments and low income housing investments, as well as net gains associated with the sale of certain low income housing investmentsthat was recognized in the first quarter of 2018.2019. This decrease was partially offset by increases in leveraged lease termination gains and commercial leasing income. If current economic conditions persist, non-marketable equity investments may be negatively impacted resulting in valuation declines or impairment.
NON-INTEREST EXPENSE
Table 22—24—Non-Interest Expense from Continuing Operations
 Three Months Ended September 30 Quarter-to-Date Change 9/30/2019 vs. 9/30/2018
 2019 2018 Amount Percent
 (Dollars in millions)
Salaries and employee benefits$481
 $473
 $8
 1.7 %
Net occupancy expense80
 82
 (2) (2.4)%
Furniture and equipment expense83
 81
 2
 2.5 %
Outside services48
 46
 2
 4.3 %
Professional, legal and regulatory expenses21
 32
 (11) (34.4)%
Marketing23
 20
 3
 15.0 %
FDIC insurance assessments12
 22
 (10) (45.5)%
Credit/checkcard expenses19
 18
 1
 5.6 %
Branch consolidation, property and equipment charges5
 4
 1
 25.0 %
Visa class B shares expense5
 —
 5
 NM
Provision (credit) for unfunded credit losses(2) 2
 (4) (200.0)%
Other miscellaneous expenses96
 142
 (46) (32.4)%
 $871
 $922
 $(51) (5.5)%


 Three Months Ended March 31 Quarter-to-Date Change 3/31/2020 vs. 3/31/2019
 2020 2019 Amount Percent
 (Dollars in millions)
Salaries and employee benefits$467
 $478
 $(11) (2.3)%
Net occupancy expense79
 82
 (3) (3.7)%
Furniture and equipment expense83
 76
 7
 9.2 %
Outside services45
 45
 —
 — %
Professional, legal and regulatory expenses18
 20
 (2) (10.0)%
Marketing24
 23
 1
 4.3 %
FDIC insurance assessments11
 13
 (2) (15.4)%
Credit/checkcard expenses13
 16
 (3) (18.8)%
Branch consolidation, property and equipment charges11
 6
 5
 83.3 %
Visa class B shares expense4
 4
 —
 — %
Provision (credit) for unfunded credit losses (1)
—
 (1) 1
 100.0 %
Other miscellaneous expenses81
 98
 (17) (17.3)%
 $836
 $860
 $(24) (2.8)%
 Nine Months Ended September 30 Year-to-Date 9/30/2019 vs. 9/30/2018
 2019 2018 Amount Percent
 (Dollars in millions)
Salaries and employee benefits$1,428
 $1,479
 $(51) (3.4)%
Net occupancy expense242
 249
 (7) (2.8)%
Furniture and equipment expense243
 243
 —
 — %
Outside services145
 141
 4
 2.8 %
Professional, legal and regulatory expenses67
 92
 (25) (27.2)%
Marketing69
 71
 (2) (2.8)%
FDIC insurance assessments37
 71
 (34) (47.9)%
Credit/checkcard expenses53
 44
 9
 20.5 %
Branch consolidation, property and equipment charges13
 8
 5
 62.5 %
Visa class B shares expense12
 12
 —
 — %
Provision (credit) for unfunded credit losses(3) (3) —
 — %
Other miscellaneous expenses286
 310
 (24) (7.7)%
 $2,592
 $2,717
 $(125) (4.6)%
________
NM - Not Meaningful
(1) Upon adoption of CECL on January 1, 2020, the provision for credit losses presented within net interest income after provision for credit losses is the sum of the provision for loan losses and the provision for unfunded credit commitments. Prior to the adoption of CECL, the provision for unfunded commitments was included in other non-interest expense.

Salaries and employee benefits—Salaries and employee benefits consist of salaries, incentive compensation, long-term incentives, payroll taxes, and other employee benefits such as 401(k), pension, and medical, life and disability insurance, as well as, expenses from liabilities held for employee benefit purposes. Salaries and employee benefits increased for the third quarter and decreased forduring the first nine monthsquarter of 20192020 compared to the same periodsperiod in 2018. The increase for the third quarter of 2019, was driven primarily by an additional pay daynegative market value adjustments on employee benefit assets. Full-time equivalent headcount decreased to 19,743 at March 31, 2020 from 20,056 at March 31, 2019, reflecting the impact of the Company's continued efficiency initiatives implemented as part of its strategic priorities.
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 first quarter of 2020 compared to the same period in 2019 primarily due to increases in rental expenses, maintenance and higher production-based incentives. These increases were partially offset by a decrease in severance chargesrepairs, and continued staffing reductions. The decreaseinvestments in severancetechnology.
Branch consolidation, property and equipment charges—Branch consolidation, property and equipment charges wasinclude valuation adjustments related 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.

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primary driver of the decrease for the first nine months of 2019. Full-time equivalent headcount from continuing operations decreased to 19,549 at September 30, 2019 from 19,869 at September 30, 2018, reflecting the impact of the Company's efficiency initiatives implemented as part of its strategic priorities.
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 decreased during the third quarter and first nine months of 2019 compared to the same periods in 2018 primarily due to lower consulting fees and a reduction in legal fees.
FDIC insurance assessments—FDIC insurance assessments decreased in the third quarter and first nine months of 2019 compared to the same periods in 2018 primarily due to the discontinuation of the FDIC assessment surcharge that was in place throughout the first nine months of 2018.
Visa class B shares expense—Visa class B share expense is associated with shares sold in the prior year. The Visa class B shares have restrictions tied to finalization of certain covered litigation. Visa class B share expense increased in the third quarter of 2019 compared to the same period in 2018 as a result of changes in the status of certain covered litigation.
Other miscellaneous expenses—Other miscellaneous expenses include expenses related to communications, postage, supplies, certain credit-related costs, foreclosed property expenses, mortgage repurchase costs, operational losses and other costs (benefits) related to employee benefit plans. Other miscellaneous expenses decreased during the thirdfirst quarter and first nine months of 20192020 compared to the same periodsperiod in 20182019 primarily driven by a $60 million contributiondue to Regions' charitable foundation that was made in the third quarter of 2018. This was partially offset by higherlower operational losses and an increasedeclines in expenses related to non-service related pension costs associated with a lower discount rate.costs.
INCOME TAXES
The Company’s income tax expense from continuing operations for the three months ended September 30, 2019March 31, 2020 was $107$42 million and $85$105 million for the three months ended September 30, 2018,March 31, 2019, resulting in effective taxes rates of 20.6 percent and 18.721.0 percent, respectively. Income tax expense from continuing operations for
Many factors impact the nine months ended September 30, 2019 was $305 million compared to income tax expense of $302 million for the same period in 2018, resulting in effective tax rates of 20.3 percent and 20.7 percent, respectively. The Company expects the full-year effective tax rate will be 20 percent to 21 percent for 2019.
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 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.
On January 1, 2020, the Company adopted CECL and recorded an adjustment to the opening balance of the allowance. The tax impact of this adjustment increased deferred tax assets by approximately $126 million. See Note 1 "Basis of Presentation" to the consolidated financial statements for further information.
At September 30, 2019,March 31, 2020, the Company reported a net deferred tax liability of $409$608 million compared to a net deferred tax assetliability of $20$328 million at December 31, 20182019. The changeincrease in the net deferred tax liability was primarily due to a changean increase in the composition of net unrealized gains on derivative instruments and losses from a net loss to a net gain related primarily to available for sale securities, partially offset by an increase in the deferred tax asset related to the allowance due to the adoption of CECL and derivative instruments.the first quarter 2020 increase in the allowance.
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 3 "Discontinued Operations" to the consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2018. The results from discontinued operations for both the third quarter 2019 and 2018 were immaterial.


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Item 3. Quantitative and Qualitative Disclosures about Market Risk
Reference is made to pages 8378 through 8782 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 September 30, 2019,March 31, 2020, 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 12, “Commitments,11, "Commitments, Contingencies and Guarantees”Guarantees" in the Notes to the Consolidated Financial Statements (Unaudited) in Part I. Item 1. of this report, which is incorporated by reference.
Item 1A. Risk Factors
An investment in the Company involves risk, some of which, including market, liquidity, credit, operational, legal, compliance, reputational and strategic risks, could be substantial and is inherent in our business. This risk also includes the possibility that the value of the investment could decrease considerably, and dividends or other distributions concerning the investment could be reduced or eliminated. Discussed below is a risk factor that could adversely affect Regions' financial results and condition, as well as the value of, and return on investment in the Company, that was not included in Part II, Item 1A of the 2019 Annual Report on Form 10-K as it arose after the filing.
Our business, financial condition, liquidity, capital and results of operations have been, and will likely continue to be, adversely affected by the COVID-19 pandemic.
The COVID-19 pandemic has created economic and financial disruptions that have adversely affected, and are likely to continue to adversely affect, our business, financial condition, liquidity, capital and results of operations. We cannot predict at this time the extent to which the COVID-19 pandemic will continue to negatively affect our business, financial condition, liquidity, capital and results of operations. The extent of any continued or future adverse effects of the COVID-19 pandemic will depend on future developments, which are highly uncertain and outside our control, including the scope and duration of the pandemic, the direct and indirect impact of the pandemic on our employees, clients, customers, counterparties and service providers, as well as other market participants, and actions taken by governmental authorities and other third parties in response to the pandemic.
The COVID-19 pandemic has contributed to (i) increased unemployment and decreased consumer confidence and business generally, leading to an increased risk of delinquencies, defaults and foreclosures; (ii) sudden and significant declines, and significant increases in volatility, in financial markets; (iii) ratings downgrades, credit deterioration and defaults in many industries, including transportation, natural resources (in particular oil and gas), hospitality and commercial real estate; (iv) significant draws on credit lines as customers seek to increase liquidity; (v) significant reductions in the targeted federal funds rate (which was reduced to a target rate of between zero and 0.25% in the first quarter and may be reduced to below zero if the Federal Reserve determines economic conditions warrant); (vi) increased spending on our business continuity efforts, which may in turn require that we further cut costs and investments in other areas; and (vii) heightened cybersecurity, information security and operational risks as a result of work-from-home arrangements.In addition, we also face an increased risk of client disputes, litigation and governmental and regulatory scrutiny as a result of the effects of the COVID-19 pandemic on market and economic conditions and actions governmental authorities take in response to those conditions.
We are prioritizing the safety of our customers and employees, and have temporarily closed a small number of branches and have limited branch activity to drive-through services or in-office appointments. Additionally, almost 50% of associates are working remotely. If these measures are not effective in serving our customers or affect the productivity of our associates, they may lead to significant disruptions in our business operations.
Many of our counterparties and third-party service providers have also been, and may further be, affected by “stay-at-home” orders, market volatility and other factors that increase their risks of business disruption or that may otherwise affect their ability to perform under the terms of any agreements with us or provide essential services. As a result, our operational and other risks are generally expected to increase until the pandemic subsides.
We have experienced an increase in cyber events, such as phishing attacks and malicious traffic from outside the United States.  Our layered control environment has effectively detected and prevented any material impact related to these events to date. Our information security risks are generally expected to increase until the pandemic subsides.
We are offering special financial assistance to support customers who are experiencing financial hardships related to the COVID-19 pandemic, including waivers of certain withdrawal fees from time deposits and savings and money market accounts, loan payment deferrals and extensions, credit card payment extensions, consumer mortgage payment forbearance and payment deferment, suspending initiation of new repossessions of automobiles and other vehicles and suspending new residential property foreclosures on consumer real estate loans. Additionally, we are a certified and qualified SBA lender and are assisting our customers with their applications for the PPP. These assistance efforts may adversely affect our revenue and results of operations. These government programs are complex and our participation may lead to governmental and regulatory scrutiny, negative publicity and damage to our reputation. In addition, if such measures are not effective in mitigating the effects of the COVID-19 pandemic on borrowers, we may experience higher rates of default and increased credit losses in future periods.
Certain industries where Regions has credit exposure, including restaurants (in particular, casual dining restaurants), hotels, agriculture, commercial retail, and transportation, have experienced significant operational challenges as a result of the COVID-19 pandemic. These negative effects have resulted in a number of corporate lending clients making higher than usual draws on

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outstanding lines of credit, which may negatively affect our liquidity if current economic conditions persist. The effects of the COVID-19 pandemic may also cause our commercial customers to be unable to pay their loans as they come due or decrease the value of collateral, which we expect would cause significant increases in our credit losses.
Our earnings and cash flows are dependent to a large degree on net interest income (the difference between interest income from loans and investments and interest expense on deposits and borrowings). Net interest income is significantly affected by market rates of interest. The significant reductions to the federal funds rate has led to a decrease in the rates and yields on U.S. Treasury securities. If interest rates are reduced further in response to the COVID-19 pandemic, we expect that our net interest income will decline, perhaps significantly. The overall effect of lower interest rates cannot be predicted at this time and depends on future actions the Federal Reserve may take to increase or reduce the targeted federal funds rate in response to the COVID-19 pandemic, and resulting economic conditions.
The effects of the COVID-19 pandemic on economic and market conditions have increased demands on our liquidity as we meet our customers’ and clients’ needs. We have suspended stock repurchases through the second quarter of 2020 to preserve capital and liquidity in order to support our customers, clients and employees and although we have no current plans to reduce or suspend our common stock dividend, we will continue to exercise prudent capital management and monitor the business environment.
The COVID-19 pandemic may impact our assessment of our goodwill. During the first quarter of 2020, Regions assessed goodwill in light of the onset of the COVID-19 pandemic and concluded that it was not more likely than not that the fair value of each of our reporting units was less than its carrying value. Risks to our goodwill assessment are generally expected to increase until the pandemic subsides.
Governmental authorities worldwide have taken unprecedented measures to stabilize the markets and support economic growth. The success of these measures is unknown and they may not be sufficient to address the negative effects of the COVID-19 pandemic or avert severe and prolonged reductions in economic activity.
Other negative effects of the COVID-19 pandemic that may impact our business, financial condition, liquidity, capital and results of operations cannot be predicted at this time, but it is likely that our business, financial condition, liquidity, capital and results of operations will continue to be adversely affected until the pandemic subsides and the U.S. economy begins to recover. Further, the COVID-19 pandemic may also have the effect of heightening many of the other risks described in the section entitled “Risk Factors” in our most recent Annual Report on Form 10-K and any subsequent Quarterly Report on Form 10-Q. Until the pandemic subsides, we expect continued draws on lines of credit, reduced revenues from our lending businesses, increased credit losses in our lending portfolios and decreased fee income. Even after the pandemic subsides, it is possible that the U.S. and other major economies continue to experience a prolonged recession, which we expect would materially and adversely affect our business, financial condition, liquidity, capital and results of operations.
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 September 30, 2019, 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
July 1-31, 2019 5,100,000
 $15.95
 5,100,000
 $1,288,602,780
August 1-31, 2019 22,454,869
 $14.41
 22,454,869
 $964,728,254
September 1-30, 2019 12,130,933
 $15.15
 12,130,933
 $780,744,464
Total 3rd Quarter 39,685,802
 $14.83
 39,685,802
 $780,744,464

On June 27, 2019, Regions announced the Board authorizedauthorization of the repurchase of up to $1.37$1.370 billion of the Company's common stock, permitting repurchases from the beginning of the third quarter of 2019 through the end of the second quarter of 2020. As of September 30, 2019, Regions has repurchased approximately 39.7 million shares ofdid not repurchase any outstanding common stock atduring the three month period ended March 31, 2020, and given the uncertainty in the overall economic environment as a total costresult of approximately $589 million under this plan. All of these shares were immediately retired upon repurchase and, therefore, will not be included in treasury stock.the COVID-19 pandemic, no share repurchases are currently anticipated for 2020.



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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 
Certificate of Designations, incorporated by reference to Exhibit 3.4 to the Form 8-A filed by registrant on April 29, 2019.
   
3.5 
By-laws as amended and restated, incorporated by reference to Exhibit 3.2 to Form 8-K Current Report filed by registrant on July 24, 2019.
   
10.1
Regions Financial Corporation Executive Severance Plan, incorporated by reference to Exhibit 10.1 to Form 8-K Current Report filed by registrant on October 18, 2019.
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 The following materials from Regions' Form 10-Q Report for the quarterly period ended September 30, 2019,March 31, 2020, formatted in Inline XBRL: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Income; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Changes in Stockholders'Shareholders' Equity; (v) the Consolidated Statements of Cash Flows; and (vi) the Notes to the Consolidated Financial Statements.
   
104 
The cover page of Regions' Form 10-Q Report for the quarter ended September 30, 2019,March 31, 2020, formatted in Inline XBRL (included within the Exhibit 101 attachments).



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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: NovemberMay 6, 20192020 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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