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RF Regions Financial

Filed: 5 May 21, 10:48am
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 endedMarch 31, 2021
or
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period fromto                               
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
Alabama35203
(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
Depositary Shares, each representing a 1/40th Interest in a Share of
4.45% Non-Cumulative Perpetual Preferred Stock, Series ERF PRENew York Stock Exchange

The number of shares outstanding of each of the issuer’s classes of common stock was 961,285,396 shares of common stock, par value $.01, as of May 3, 2021.

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REGIONS FINANCIAL CORPORATION
FORM 10-Q
INDEX

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Glossary of Defined Terms
Agencies - collectively, FNMA, FHLMC and GNMA.
ACL - Allowance for credit losses.
ALCO - Asset/Liability Management Committee.
ALLL - Allowance for loan and lease losses.
Allowance - Allowance for credit losses.
AOCI - Accumulated other comprehensive income.
ARRC - Alternative Reference Rates Committee.
ASC - Accounting Standards Codification.
Ascentium - Ascentium Capital, LLC., an equipment finance entity acquired April 1, 2020.
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 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.
CRE - Commercial real estate- mortgage owner-occupied and commercial real estate-construction owner-occupied
    classes in the Commercial portfolio segment.
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.

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E&P - Extraction and production.
EAD - Exposure-at-default.
EGRRCPA - The Economic Growth, Regulatory Relief, and Consumer Protection Act.
ERI - Eligible retained income.
FASB - Financial Accounting Standards Board.
FCA - Financial Conduct Authority.
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.
Fintechs - Financial Technology Companies.
FNMA - Federal National Mortgage Association, known as Fannie Mae.
FOMC - Federal Open Market Committee.
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.
GSE - Government Sponsored Entities.
G-SIB - Globally Systematically Important Bank Holding Company.
HPI - Housing price index.
HUD - U.S. Department of Housing and Urban Development.
ISM - Institute for Supply Chain Management.
IPO - Initial public offering.
IRE - Investor real estate portfolio segment.
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.
MBA - Mortgage Bankers Association.
MBS - Mortgage-backed securities.
Morgan Keegan - Morgan Keegan & Company, Inc., sold April 2, 2012.
MSAs - Metropolitan Statistical Areas.

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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.
PCD - Purchased credit deteriorated.
PD - Probability of default.
PPP - Paycheck Protection Program.
R&S - Reasonable and supportable.
Raymond James - Raymond James Financial, Inc.
REIT - Real estate investment trust.
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.
SBIC - Small Business Investment Company.
SCB - Stress Capital Buffer.
SEC - U.S. Securities and Exchange Commission.
SERP - Supplemental Executive Retirement Plan.
SLB - Stress leverage buffer.
SNC - Shared national credit.
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.
USD - United States dollar.
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, operations, 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 (including any resurgences), actions taken by governmental authorities in response to the pandemic and their success, the effectiveness and acceptance of any vaccines, 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, 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 ongoing COVID-19 pandemic, on our businesses, operations, and financial results and conditions. The duration and severity of the ongoing COVID-19 pandemic, which has disrupted the global economy, has and could continue to adversely affect our capital and liquidity position, impair the ability of borrowers to repay outstanding loans and increase our allowance for credit losses, impair collateral values, and result in lost revenue or additional expenses. The pandemic could also cause an outflow of deposits, result in goodwill impairment charges and the impairment of other financial and nonfinancial assets, and increase our cost of capital.
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 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, credit loss provisions or actual credit losses where our allowance for credit 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, including fintechs, some of whom possess greater financial resources than we do or are subject to different regulatory standards than we are.

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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, including those related to the offering of digital banking and financial services, could result in losing business to competitors.
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, including as a result of the recent change in U.S. presidential administration and control of the U.S. Congress, 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 capital actions, including dividend payments, common stock repurchases, or redemptions of preferred stock or other regulatory capital instruments, must not cause us to fall below minimum capital ratio requirements, with applicable buffers taken into account, and must comply with other requirements and restrictions under law or imposed by our regulators, which may impact our ability to return capital to shareholders.
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), including our ability to generate capital internally or raise capital on favorable terms, and if we fail to meet requirements, our financial condition and market perceptions of us 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 nonfinancial 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, civil unrest, 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

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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, ransomware, “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 achieve our expense management initiatives.
Market replacement of LIBOR and the related effect on our LIBOR-based financial products and contracts, including, but not limited to, derivative products, debt obligations, deposits, investments, and loans.
Possible downgrades in our credit ratings or outlook could, among other negative impacts, 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.
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, 2020 and 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
 
March 31, 2021December 31, 2020
 (In millions, except share data)
Assets
Cash and due from banks$1,918 $1,558 
Interest-bearing deposits in other banks23,002 16,398 
Debt securities held to maturity (estimated fair value of $1,131 and $1,215, respectively)1,059 1,122 
Debt securities available for sale (amortized cost of $26,579 and $26,092, respectively)27,092 27,154 
Loans held for sale (includes $1,169 and $1,446 measured at fair value, respectively)1,487 1,905 
Loans, net of unearned income84,755 85,266 
Allowance for loan losses(1,976)(2,167)
Net loans82,779 83,099 
Other earning assets1,262 1,217 
Premises and equipment, net1,852 1,897 
Interest receivable336 346 
Goodwill5,181 5,190 
Residential mortgage servicing rights at fair value401 296 
Other identifiable intangible assets, net114 122 
Other assets6,848 7,085 
Total assets$153,331 $147,389 
Liabilities and Equity
Deposits:
Non-interest-bearing$55,925 $51,289 
Interest-bearing73,677 71,190 
Total deposits129,602 122,479 
Borrowed funds:
Long-term borrowings2,916 3,569 
Total borrowed funds2,916 3,569 
Other liabilities2,951 3,230 
Total liabilities135,469 129,278 
Equity:
Preferred stock, authorized 10 million shares, par value $1.00 per share
Non-cumulative perpetual, including related surplus, net of issuance costs; issued—1,850,000 shares1,656 1,656 
Common stock, authorized 3 billion shares, par value $0.01 per share:
Issued including treasury stock— 1,001,756,659 and 1,001,507,052 shares, respectively10 10 
Additional paid-in capital12,740 12,731 
Retained earnings4,235 3,770 
Treasury stock, at cost— 41,032,676 shares(1,371)(1,371)
Accumulated other comprehensive income, net592 1,315 
Total shareholders’ equity17,862 18,111 
Total liabilities and equity$153,331 $147,389 
See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 Three Months Ended March 31
 20212020
 (In millions, except per share data)
Interest income on:
Loans, including fees$854 $903 
Debt securities133 158 
Loans held for sale12 
Other earning assets14 13 
Total interest income1,013 1,079 
Interest expense on:
Deposits19 84 
Short-term borrowings
Long-term borrowings27 59 
Total interest expense46 151 
Net interest income967 928 
Provision for (benefit from) credit losses(142)373 
Net interest income after provision for (benefit from) credit losses1,109 555 
Non-interest income:
Service charges on deposit accounts157 178 
Card and ATM fees115 105 
Investment management and trust fee income66 62 
Capital markets income100 
Mortgage income90 68 
Securities gains (losses), net
Other112 63 
Total non-interest income641 485 
Non-interest expense:
Salaries and employee benefits546 467 
Net occupancy expense77 79 
Equipment and software expense90 83 
Other215 207 
Total non-interest expense928 836 
Income before income taxes822 204 
Income tax expense180 42 
Net income$642 $162 
Net income available to common shareholders$614 $139 
Weighted-average number of shares outstanding:
Basic961 957 
Diluted968 961 
Earnings per common share:
Basic$0.64 $0.15 
Diluted$0.63 $0.14 

See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 Three Months Ended March 31
 20212020
 (In millions)
Net income$642 $162 
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 0 and 0 tax effect, respectively)
Less: reclassification adjustments for amortization of unrealized losses on securities transferred to held to maturity (net of ($1) and 0 tax effect, respectively)(2)(1)
Net change in unrealized losses on securities transferred to held to maturity, net of tax
Unrealized gains on securities available for sale:
Unrealized holding gains (losses) arising during the period (net of ($138) and $151 tax effect, respectively)(410)446 
Less: reclassification adjustments for securities gains (losses) realized in net income (net of 0 and 0 tax effect, respectively)
Net change in unrealized gains on securities available for sale, net of tax(411)446 
Unrealized gains on derivative instruments designated as cash flow hedges:
Unrealized holding gains (losses) on derivatives arising during the period (net of ($83) and $325 tax effect, respectively)(248)966 
Less: reclassification adjustments for gains (losses) on derivative instruments realized in net income (net of $26 and $2 tax effect, respectively)76 
Net change in unrealized gains on derivative instruments, net of tax(324)959 
Defined benefit pension plans and other post employment benefits:
Net actuarial gains (losses) arising during the period (net of 0 and 0 tax effect, respectively)
Less: reclassification adjustments for amortization of actuarial loss and settlements realized in net income (net of ($3) and ($3) tax effect, respectively)(10)(8)
Net change from defined benefit pension plans and other post employment benefits, net of tax10 
Other comprehensive income, net of tax(723)1,414 
Comprehensive income$(81)$1,576 
See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Shareholders' Equity
 Preferred StockCommon StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury
Stock,
At Cost
Accumulated
Other
Comprehensive
Income, Net
Total
 SharesAmountSharesAmount
 (In millions)
BALANCE AT JANUARY 1, 2020$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)
Impact of stock transactions under compensation plans, net— — — — 10 — — — 10 
BALANCE AT MARCH 31, 2020$1,310 957 $10 $12,695 $3,364 $(1,371)$1,324 $17,332 
BALANCE AT JANUARY 1, 2021$1,656 960 $10 $12,731 $3,770 $(1,371)$1,315 $18,111 
Net income— — — — — 642 — — 642 
Other comprehensive income (loss), net of tax— — — — — — — (723)(723)
Cash dividends declared— — — — — (149)— — (149)
Preferred stock dividends— — — — — (28)— — (28)
Impact of common stock transactions under compensation plans, net— — — — — — 
BALANCE AT MARCH 31, 2021$1,656 961 $10 $12,740 $4,235 $(1,371)$592 $17,862 

See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31
 20212020
 (In millions)
Operating activities:
Net income$642 $162 
Adjustments to reconcile net income to net cash from operating activities:
Provision for (benefit from) credit losses(142)373 
Depreciation, amortization and accretion, net101 100 
Securities losses, net(1)
Deferred income tax expense (benefit)92 (69)
Originations and purchases of loans held for sale(1,716)(1,034)
Proceeds from sales of loans held for sale2,131 1,140 
(Gain) loss on sale of loans, net(74)(33)
Net change in operating assets and liabilities:
Other earning assets(51)(212)
Interest receivable and other assets(96)41 
Other liabilities(273)221 
Other106 98 
Net cash from operating activities719 787 
Investing activities:
Proceeds from maturities of debt securities held to maturity63 36 
Proceeds from sales of debt securities available for sale27 31 
Proceeds from maturities of debt securities available for sale1,439 844 
Purchases of debt securities available for sale(2,005)(1,308)
Net proceeds from (payments for) bank-owned life insurance(1)
Proceeds from sales of loans120 85 
Purchases of loans(269)(472)
Purchases of mortgage servicing rights(11)(4)
Net change in loans596 (4,448)
Net purchases of other assets(27)(43)
Net cash from investing activities(67)(5,280)
Financing activities:
Net change in deposits7,123 2,555 
Net change in short-term borrowings1,100 
Proceeds from long-term borrowings3,950 
Payments on long-term borrowings(632)(1,799)
Cash dividends on common stock(149)(149)
Cash dividends on preferred stock(28)(23)
Taxes paid related to net share settlement of equity awards(2)
Net cash from financing activities6,312 5,634 
Net change in cash and cash equivalents6,964 1,141 
Cash and cash equivalents at beginning of year17,956 4,114 
Cash and cash equivalents at end of period$24,920 $5,255 

See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three Months Ended March 31, 2021 and 2020
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, 2020. Regions has evaluated all subsequent events for potential recognition and disclosure through the filing date of this Form 10-Q.
During 2021, the Company adopted new accounting guidance related to several topics. See Note 12 for related disclosures.

14

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:
 March 31, 2021
Recognized in OCI (1)
Not Recognized in OCI
 Amortized
Cost
Gross Unrealized GainsGross Unrealized LossesCarrying ValueGross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
 (In millions)
Debt securities held to maturity:
Mortgage-backed securities:
Residential agency$501 $$(17)$484 $29 $$513 
Commercial agency576 (1)575 43 618 
$1,077 $$(18)$1,059 $72 $$1,131 
Debt securities available for sale:
U.S. Treasury securities$229 $$(1)$232 $232 
Federal agency securities100 (3)98 98 
Mortgage-backed securities:
Residential agency18,563 458 (175)18,846 18,846 
Residential non-agency
Commercial agency6,038 219 (58)6,199 6,199 
Commercial non-agency558 12 570 570 
Corporate and other debt securities1,090 56 1,146 1,146 
$26,579 $750 $(237)$27,092 $27,092 
 December 31, 2020
Recognized in OCI (1)
Not Recognized in OCI
 Amortized
Cost
Gross Unrealized GainsGross Unrealized LossesCarrying ValueGross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
 (In millions)
Debt securities held to maturity:
Mortgage-backed securities:
Residential agency$554 $$(19)$535 $34 $$569 
Commercial agency589 (2)587 59 646 
$1,143 $$(21)$1,122 $93 $$1,215 
Debt securities available for sale:
U.S. Treasury securities$178 $$$183 $183 
Federal agency securities102 105 105 
Mortgage-backed securities:
Residential agency18,455 625 (4)19,076 19,076 
Residential non-agency
Commercial agency5,659 346 (6)5,999 5,999 
Commercial non-agency571 15 586 586 
Corporate and other debt securities1,126 78 1,204 1,204 
$26,092 $1,072 $(10)$27,154 $27,154 
_________
(1)The gross unrealized losses recognized in OCI on securities held to maturity resulted from a transfer of securities available for sale to held to maturity in the second quarter of 2013.


15

Debt securities with carrying values of $9.5 billion and $10.3 billion at March 31, 2021, and December 31, 2020, respectively, were pledged to secure public funds, trust deposits and certain borrowing arrangements. Included within total pledged securities is approximately $24 million of encumbered U.S. Treasury securities at both March 31, 2021, and December 31, 2020.
The amortized cost and estimated fair value of debt securities held to maturity and debt securities available for sale at March 31, 2021, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Amortized
Cost
Estimated
Fair Value
 (In millions)
Debt securities held to maturity:
Mortgage-backed securities:
Residential agency$501 $513 
Commercial agency576 618 
$1,077 $1,131 
Debt securities available for sale:
Due in one year or less$268 $271 
Due after one year through five years756 793 
Due after five years through ten years285 303 
Due after ten years110 109 
Mortgage-backed securities:
Residential agency18,563 18,846 
Residential non-agency
Commercial agency6,038 6,199 
Commercial non-agency558 570 
$26,579 $27,092 
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 March 31, 2021, and December 31, 2020. For debt securities transferred to held to maturity from available for sale, the analysis in the tables below is comparing the securities' original amortized cost to its current estimated fair value. These securities are segregated between investments that have been in a continuous unrealized loss position for less than twelve months and for twelve months or more.
 March 31, 2021
 Less Than Twelve MonthsTwelve Months or MoreTotal
 Estimated
Fair
Value
Gross
Unrealized
Losses
Estimated
Fair
Value
Gross
Unrealized
Losses
Estimated
Fair
Value
Gross
Unrealized
Losses
 (In millions)
Debt securities available for sale:
U.S. Treasury securities$62 $(1)$$$64 $(1)
Federal agency securities62 (3)62 (3)
Mortgage-backed securities:
Residential agency$7,100 $(175)$21 $$7,121 $(175)
Commercial agency1,644 (58)19 1,663 (58)
$8,868 $(237)$42 $$8,910 $(237)


16

 December 31, 2020
 Less Than Twelve MonthsTwelve Months or MoreTotal
 Estimated
Fair
Value
Gross
Unrealized
Losses
Estimated
Fair
Value
Gross
Unrealized
Losses
Estimated
Fair
Value
Gross
Unrealized
Losses
 (In millions)
Debt securities available for sale:
Mortgage-backed securities:
Residential agency$914 $(4)$101 $$1,015 $(4)
Commercial agency819 (6)819 (6)
$1,733 $(10)$101 $$1,834 $(10)
The number of individual debt positions in an unrealized loss position in the tables above increased from 129 at December 31, 2020, to 254 at March 31, 2021. The increase in the number of securities and the total amount of unrealized losses from year-end 2020 was primarily due to changes in market interest rates. In instances where an unrealized loss existed, there was no indication of an adverse change in credit on the underlying positions in the tables above. As it relates to these positions, management believes no individual unrealized loss, other than those discussed below, represented credit impairment as of those dates. The Company does not intend to sell, and it is not more likely than not that the Company will be required to sell, the positions before the recovery of their amortized cost basis, which may be at maturity.
Gross realized gains and gross realized losses on sales of debt securities available for sale were immaterial for the three months ended March 31, 2021 and 2020. The cost of securities sold is based on the specific identification method. As part of the Company's normal process for evaluating impairment, management did not identify any positions where impairment was believed to exist in either of the three months ended March 31, 2021or 2020.
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:
March 31, 2021December 31, 2020
 (In millions)
Commercial and industrial$43,241 $42,870 
Commercial real estate mortgage—owner-occupied5,335 5,405 
Commercial real estate construction—owner-occupied293 300 
Total commercial48,869 48,575 
Commercial investor real estate mortgage5,405 5,394 
Commercial investor real estate construction1,817 1,869 
Total investor real estate7,222 7,263 
Residential first mortgage16,643 16,575 
Home equity lines4,286 4,539 
Home equity loans2,631 2,713 
Indirect—vehicles768 934 
Indirect—other consumer2,262 2,431 
Consumer credit card1,111 1,213 
Other consumer963 1,023 
Total consumer28,664 29,428 
Total loans, net of unearned income$84,755 $85,266 
During the three months ended March 31, 2021 and 2020, Regions purchased approximately $261 million and $470 million in indirect-other consumer, residential first mortgage and commercial and industrial loans from third parties, respectively.
Regions ceased originating new indirect auto loans in the first quarter of 2019. The Company remains in the direct auto lending business.

17

At March 31, 2021, $19.6 billion in securities and net eligible loans held by Regions were pledged for potential borrowings from the FHLB. At March 31, 2021, an additional $17.7 billion in net eligible loans held by Regions were pledged to the FRB for potential borrowings.
Included in the commercial and industrial loan balance are sales-type and direct financing leases totaling $1.2 billion as of March 31, 2021, with related income of $16 million for the three months ended March 31, 2021.
ALLOWANCE FOR CREDIT LOSSES
Regions determines the appropriate level of the allowance on a quarterly basis. Refer to Note 1 "Summary of Significant Accounting Policies" to the consolidated financial statements to the Annual Report on Form 10-K for the year ended December 31, 2020, for a description of the methodology.
As of March 31, 2021, Regions' total loans included $4.3 billion of PPP loans. These loans are guaranteed by the Federal government and as the guarantee is not separable from the loans, Regions recorded an immaterial allowance on these loans.
ROLLFORWARD OF ALLOWANCE FOR CREDIT LOSSES
During the three months ended March 31, 2021, Regions decreased the allowance by $225 million to $2.1 billion, which represents management's best estimate of expected losses over the life of the portfolio. The decrease was due primarily to improving credit metrics, improvement in macroeconomic conditions and recent government stimulus programs. 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. Regions' models are sensitive to changes in the economic scenarios. While the March 31, 2021 economic forecast includes a degree of uncertainty around how long the COVID-19 pandemic will persist, the forecast continues to exhibit improvement in the economic outlook. Risks to the economic forecast and the model limitations are considered through model adjustments and the qualitative framework.
The following tables present analyses of the allowance by portfolio segment for the three months ended March 31, 2021 and 2020.
 Three Months Ended March 31, 2021
 CommercialInvestor Real
Estate
ConsumerTotal
 (In millions)
Allowance for loan losses, January 1, 2021$1,196 $183 $788 $2,167 
Provision for (benefit from) loan losses(83)(18)(7)(108)
Loan losses:
Charge-offs(47)(15)(52)(114)
Recoveries16 15 31 
Net loan (losses) recoveries(31)(15)(37)(83)
Allowance for loan losses, March 31, 20211,082 150 744 1,976 
Reserve for unfunded credit commitments, January 1, 202197 14 15 126 
Provision for (benefit from) unfunded credit losses(30)(3)(1)(34)
Reserve for unfunded credit commitments, March 31, 202167 11 14 92 
Allowance for credit losses, March 31, 2021$1,149 $161 $758 $2,068 

18

 Three Months Ended March 31, 2020
 CommercialInvestor Real
Estate
ConsumerTotal
 (In millions)
Allowance for loan losses, December 31, 2019$537 $45 $287 $869 
Cumulative change in accounting guidance(3)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)
Recoveries13 21 
Net loan (losses) recoveries(64)(60)(123)
Allowance for loan losses, March 30, 2020721 63 776 1,560 
Reserve for unfunded credit commitments, December 31, 201941 45 
Cumulative change in accounting guidance36 13 14 63 
Reserve for unfunded credit commitments, January 1, 2020 (adjusted for change in accounting guidance)77 17 14 108 
Provision for (benefit from) unfunded credit losses(4)(3)
Reserve for unfunded credit commitments, March 30, 202073 18 14 105 
Allowance for credit losses, March 31, 2020$794 $81 $790 $1,665 
PORTFOLIO SEGMENT RISK FACTORS
Regions’ portfolio segments are commercial, investor real estate and consumer. Classes within each segment present unique credit risks. Refer to Note 6 "Allowance for Credit Losses" in the Annual Report on Form 10-K for the year ended December 31, 2020 for information regarding Regions’ portfolio segments and related classes, as well as the risks specific to each.
CREDIT QUALITY INDICATORS
The commercial and investor real estate portfolio segments’ primary credit quality indicator is internal risk ratings which are detailed by categories related to underlying credit quality and probability of default. Regions assigns these risk ratings at loan origination and reviews the relationship utilizing a risk-based approach on, at minimum, an annual basis or at any time management becomes aware of information affecting the borrowers' ability to fulfill their obligations. Both quantitative and qualitative factors are considered in this review process. Regions' ratings are aligned to federal banking regulators’ definitions and are utilized to develop the associated allowance for credit losses. Refer to Note 6 "Allowance for Credit Losses" in the Annual Report on Form 10-K for the year ended December 31, 2020 for information regarding commercial risk ratings.
Regions' consumer portfolio segment has various classes that present unique credit risks. Regions considers factors such as periodic updates of FICO scores, accrual status, days past due status, unemployment rates, home prices and geography as credit quality indicators for the consumer loan portfolio. FICO scores are obtained at origination as part of Regions' formal underwriting process. Refreshed FICO scores are obtained by the Company quarterly for all consumer loans, including residential first mortgage loans. Current FICO data is not available for certain loans in the portfolio for various reasons; for example, if customers do not use sufficient credit, an updated score may not be available. These categories are utilized to develop the associated allowance for credit losses. The higher the FICO score the less probability of default and vice versa.

19

The following tables present applicable credit quality indicators for the loan portfolio segments and classes, excluding loans held for sale, by vintage year as of March 31, 2021 and December 31, 2020. Classes in the commercial and investor real estate portfolio segments are disclosed by risk rating. Classes in the consumer portfolio segment are disclosed by current FICO scores. Refer to Note 6 "Allowance for Credit Losses" in the Annual Report on Form 10-K for the year ended December 31, 2020 for more information regarding Regions' credit quality indicators.
March 31, 2021
Term LoansRevolving LoansRevolving Loans Converted to Amortizing
Unallocated (1)
Total
Origination Year
20212020201920182017Prior
(In millions)
Commercial and industrial:
   Risk Rating:
   Pass(2)
$3,755 $10,495 $5,656 $3,182 $2,242 $3,367 $12,048 $$(91)$40,654 
   Special Mention91 252 302 $44 $54 560 1,309 
   Substandard Accrual16 39 80 118 $54 $537 852 
   Non-accrual18 36 57 91 $20 $33 171 426 
Total commercial and industrial$3,795 $10,661 $6,045 $3,693 $2,360 $3,462 $13,316 $$(91)$43,241 
Commercial real estate mortgage—owner-occupied:
   Risk Rating:
   Pass$312 $1,315 $841 $844 $512 $1,060 $137 $$(4)$5,017 
   Special Mention24 25 17 18 47 135 
   Substandard Accrual45 12 12 16 90 
   Non-accrual11 23 17 22 15 93 
Total commercial real estate mortgage—owner-occupied:$315 $1,354 $934 $890 $564 $1,138 $144 $$(4)$5,335 
Commercial real estate construction—owner-occupied:
   Risk Rating:
   Pass$$74 $63 $37 $23 $58 $$$$266 
   Special Mention
   Substandard Accrual14 
   Non-accrual
Total commercial real estate construction—owner-occupied:$$75 $66 $38 $28 $75 $$$$293 
Total commercial$4,113 $12,090 $7,045 $4,621 $2,952 $4,675 $13,468 $$(95)$48,869 
Commercial investor real estate mortgage:
   Risk Rating:
   Pass$396 $1,375 $1,168 $995 $245 $161 $315 $$(6)$4,649 
   Special Mention55 61 179 38 15 11 359 
   Substandard Accrual71 160 57 297 
   Non-accrual38 59 100 
Total commercial investor real estate mortgage$451 $1,507 $1,545 $1,090 $260 $184 $374 $$(6)$5,405 

20

March 31, 2021
Term LoansRevolving LoansRevolving Loans Converted to Amortizing
Unallocated (1)
Total
Origination Year
20212020201920182017Prior
(In millions)
Commercial investor real estate construction:
   Risk Rating:
   Pass$43 $253 $590 $191 $$$680 $$(11)$1,749 
   Special Mention32 32 67 
   Substandard Accrual
   Non-accrual
Total commercial investor real estate construction$43 $254 $622 $223 $$$683 $$(11)$1,817 
Total investor real estate$494 $1,761 $2,167 $1,313 $261 $186 $1,057 $$(17)$7,222 
Residential first mortgage:
FICO scores
   Above 720$902 $5,602 $1,554 $695 $886 $3,558 $$$$13,197 
   681-720118 475 155 90 91 453 1,382 
   620-68045 200 103 65 67 445 925 
   Below 62039 47 52 51 539 735 
   Data not available14 56 24 10 14 135 142 404 
Total residential first mortgage$1,086 $6,372 $1,883 $912 $1,109 $5,130 $$$142 $16,643 
Home equity lines:
FICO scores
   Above 720$$$$$$$3,152 $46 $$3,198 
   681-720452 10 462 
   620-680297 12 309 
   Below 620173 181 
   Data not available104 29 136 
Total home equity lines$$$$$$$4,178 $79 $29 $4,286 
Home equity loans
FICO scores
   Above 720$129 $406 $223 $205 $290 $804 $$$$2,057 
   681-72020 48 35 30 36 102 271 
   620-68019 16 16 21 82 161 
   Below 62013 61 91 
   Data not available21 — 20 51 
Total home equity loans$156 $476 $283 $262 $364 $1,070 $$$20 $2,631 
Indirect—vehicles:
FICO scores
   Above 720$$$16 $264 $114 $95 $$$$489 
   681-72043 19 17 83 
   620-68038 19 20 80 
   Below 62036 22 27 88 
   Data not available14 28 
Total indirect- vehicles$$$26 $384 $179 $165 $$$14 $768 

21

March 31, 2021
Term LoansRevolving LoansRevolving Loans Converted to Amortizing
Unallocated (1)
Total
Origination Year
20212020201920182017Prior
(In millions)
Indirect—other consumer:
FICO scores
   Above 720$$365 $609 $345 $124 $80 $$$$1,523 
   681-72053 151 99 37 23 363 
   620-68012 64 55 23 15 169 
   Below 62018 18 51 
   Data not available17 130 156 
Total indirect- other consumer$$449 $845 $520 $193 $125 $$$130 $2,262 
Consumer credit card:
FICO scores
   Above 720$$$$$$$609 $$$609 
   681-720237 237 
   620-680192 192 
   Below 62079 79 
   Data not available(14)(6)
Total consumer credit card$$$$$$$1,125 $$(14)$1,111 
Other consumer:
FICO scores
   Above 720$56 $183 $136 $67 $22 $$110 $$$581 
   681-72017 49 36 15 52 175 
   620-68011 30 22 38 114 
   Below 62017 44 
   Data not available43 49 
Total other consumer$129 $272 $203 $96 $30 $11 $220 $$$963 
Total consumer loans$1,371 $7,569 $3,240 $2,174 $1,875 $6,501 $5,532 $79 $323 $28,664 
Total Loans$5,978 $21,420 $12,452 $8,108 $5,088 $11,362 $20,057 $79 $211 $84,755 
December 31, 2020
Term LoansRevolving LoansRevolving Loans Converted to Amortizing
Unallocated (1)
Total
Origination Year
20202019201820172016Prior
(In millions)
Commercial and industrial:
   Risk Rating:
   Pass(2)
$12,260 $6,115 $3,550 $2,413 $1,166 $2,493 $12,138 $$(39)$40,096 
   Special Mention133 250 376 84 48 722 1,618 
   Substandard Accrual41 50 78 55 20 490 738 
   Non-accrual42 59 97 20 23 19 158 418 
Total commercial and industrial$12,476 $6,474 $4,101 $2,572 $1,214 $2,564 $13,508 $$(39)$42,870 

22

December 31, 2020
Term LoansRevolving LoansRevolving Loans Converted to Amortizing
Unallocated (1)
Total
Origination Year
20202019201820172016Prior
(In millions)
Commercial real estate mortgage—owner-occupied:
   Risk Rating:
   Pass$1,379 $882 $913 $547 $401 $801 $140 $$(3)$5,060 
   Special Mention18 31 23 22 10 44 154 
   Substandard Accrual38 16 16 15 94 
   Non-accrual14 23 19 21 14 97 
Total commercial real estate mortgage—owner-occupied:$1,414 $974 $971 $606 $421 $874 $148 $$(3)$5,405 
Commercial real estate construction—owner-occupied:
   Risk Rating:
   Pass$61 $75 $39 $24 $24 $40 $$$$272 
   Special Mention
   Substandard Accrual14 
   Non-accrual
Total commercial real estate construction—owner-occupied:$62 $78 $40 $30 $30 $51 $$$$300 
Total commercial$13,952 $7,526 $5,112 $3,208 $1,665 $3,489 $13,665 $$(42)$48,575 
Commercial investor real estate mortgage:
   Risk Rating:
   Pass$1,663 $1,243 $1,137 $252 $65 $162 $332 $$(5)$4,849 
   Special Mention77 76 15 180 
   Substandard Accrual69 114 57 251 
   Non-accrual44 68 114 
Total commercial investor real estate mortgage$1,737 $1,478 $1,271 $267 $67 $179 $400 $$(5)$5,394 
Commercial investor real estate construction:
   Risk Rating:
   Pass$224 $601 $266 $$$$679 $$(11)$1,761 
   Special Mention30 36 31 106 
   Substandard Accrual
   Non-accrual
Total commercial investor real estate construction$255 $638 $297 $$$$688 $$(11)$1,869 
Total investor real estate$1,992 $2,116 $1,568 $268 $67 $180 $1,088 $$(16)$7,263 
Residential first mortgage:
FICO scores
   Above 720$5,564 $1,738 $809 $1,023 $1,279 $2,709 $$$$13,122 
   681-720525 189 103 112 113 360 1,402 
   620-680211 100 73 64 67 404 919 
   Below 62031 44 50 51 60 499 735 
   Data not available52 23 13 16 15 126 10 142 397 
Total residential first mortgage$6,383 $2,094 $1,048 $1,266 $1,534 $4,098 $10 $$142 $16,575 

23

December 31, 2020
Term LoansRevolving LoansRevolving Loans Converted to Amortizing
Unallocated (1)
Total
Origination Year
20202019201820172016Prior
(In millions)
Home equity lines:
FICO scores
   Above 720$$$$$$$3,334 $45 $$3,379 
   681-720492 10 502 
   620-680319 11 330 
   Below 620181 188 
   Data not available107 30 140 
Total home equity lines$$$$$$$4,433 $76 $30 $4,539 
Home equity loans
FICO scores
   Above 720$417 $251 $233 $325 $304 $580 $$$$2,110 
   681-72057 40 35 39 37 76 284 
   620-68021 17 19 22 25 65 169 
   Below 62013 15 52 98 
   Data not available17 21 52 
Total home equity loans$498 $317 $298 $403 $386 $790 $$$21 $2,713 
Indirect—vehicles:
FICO scores
   Above 720$$18 $305 $137 $92 $40 $$$$592 
   681-72050 22 16 101 
   620-68044 23 18 97 
   Below 62042 26 24 14 109 
   Data not available17 35 
Total indirect- vehicles$$30 $445 $214 $154 $74 $$$17 $934 
Indirect—other consumer:
FICO scores
   Above 720$297 $721 $392 $138 $60 $31 $$$$1,639 
   681-72039 173 116 41 18 396 
   620-68073 63 27 12 190 
   Below 62022 22 61 
   Data not available135 145 
Total indirect- other consumer$346 $992 $596 $217 $96 $49 $$$135 $2,431 
Consumer credit card:
FICO scores
   Above 720$$$$$$$667 $$$667 
   681-720255 255 
   620-680208 208 
   Below 62091 91 
   Data not available(15)(8)
Total consumer credit card$$$$$$$1,228 $$(15)$1,213 

24

December 31, 2020
Term LoansRevolving LoansRevolving Loans Converted to Amortizing
Unallocated (1)
Total
Origination Year
20202019201820172016Prior
(In millions)
Other consumer:
FICO scores
   Above 720$209 $163 $84 $30 $$$117 $$$613 
   681-72061 44 20 52 184 
   620-68034 28 13 42 123 
   Below 62011 11 19 51 
   Data not available46 52 
Total other consumer$361 $247 $123 $42 $10 $$233 $$$1,023 
Total consumer loans$7,588 $3,680 $2,510 $2,142 $2,180 $5,016 $5,904 $76 $332 $29,428 
Total Loans$23,532 $13,322 $9,190 $5,618 $3,912 $8,685 $20,657 $76 $274 $85,266 
_________
(1)These amounts consist of fees that are not allocated at the loan level and loans serviced by third parties wherein Regions does not receive FICO or vintage information.
(2)Commercial and Industrial lending includes PPP lending in the 2020 and 2021 vintage years.
AGING AND NON-ACCRUAL ANALYSIS
The following tables include an aging analysis of DPD and loans on non-accrual status for each portfolio segment and class as of March 31, 2021 and December 31, 2020. Loans on non-accrual status with no related allowance included $105 million and $112 million of commercial and industrial loans as of March 31, 2021 and December 31, 2020, respectively. Non–accrual loans with no related allowance typically include loans where the underlying collateral is deemed sufficient to recover all remaining principal. Loans that have been fully charged-off do not appear in the tables below.
 March 31, 2021
 Accrual Loans   
 30-59 DPD60-89 DPD90+ DPDTotal
30+ DPD
Total
Accrual
Non-accrualTotal
 (In millions)
Commercial and industrial$27 $15 $$50 $42,815 $426 $43,241 
Commercial real estate mortgage—owner-occupied10 5,242 93 5,335 
Commercial real estate construction—owner-occupied284 293 
Total commercial35 17 61 48,341 528 48,869 
Commercial investor real estate mortgage5,305 100 5,405 
Commercial investor real estate construction1,817 1,817 
Total investor real estate7,122 100 7,222 
Residential first mortgage82 38 138 258 16,590 53 16,643 
Home equity lines14 19 41 4,238 48 4,286 
Home equity loans14 26 2,622 2,631 
Indirect—vehicles14 768 768 
Indirect—other consumer18 2,262 2,262 
Consumer credit card14 26 1,111 1,111 
Other consumer14 963 963 
Total consumer135 66 196 397 28,554 110 28,664 
$172 $84 $205 $461 $84,017 $738 $84,755 
 

25

 December 31, 2020
 Accrual Loans   
 30-59 DPD60-89 DPD90+ DPDTotal
30+ DPD
Total
Accrual
Non-accrualTotal
 (In millions)
Commercial and industrial$37 $22 $$66 $42,452 $418 $42,870 
Commercial real estate mortgage—owner-occupied5,308 97 5,405 
Commercial real estate construction—owner-occupied291 300 
Total commercial42 23 73 48,051 524 48,575 
Commercial investor real estate mortgage5,280 114 5,394 
Commercial investor real estate construction1,869 1,869 
Total investor real estate7,149 114 7,263 
Residential first mortgage104 41 156 301 16,522 53 16,575 
Home equity lines24 11 19 54 4,493 46 4,539 
Home equity loans10 13 30 2,705 2,713 
Indirect—vehicles15 23 934 934 
Indirect—other consumer12 25 2,431 2,431 
Consumer credit card14 28 1,213 1,213 
Other consumer12 17 1,023 1,023 
Total consumer185 80 213 478 29,321 107 29,428 
$230 $103 $221 $554 $84,521 $745 $85,266 
TROUBLED DEBT RESTRUCTURINGS
Regions regularly modifies commercial and investor real estate loans in order to facilitate a workout strategy. Similarly, Regions works to meet the individual needs of consumer borrowers to stem foreclosure through its CAP. Refer to Note 1 "Summary of Significant Accounting Policies" and Note 6 "Allowance for Credit Losses" in the Annual Report on Form 10-K for the year ended December 31, 2020 for additional information regarding the Company's TDRs,including their impact on the allowance and designation of TDRs in periods subsequent to the modification.
As provided in the Consolidated Appropriations Act passed into law on December 27, 2020, which extended initial guidance provided in the CARES Act, certain loan modifications related to the COVID-19 pandemic beginning March 1, 2020 through the earlier of 60 days after the end of the pandemic or January 1, 2022 are eligible for relief from TDR classification. Regions elected this provision; therefore, modified loans that met the required guidelines for relief are not considered TDRs and are excluded from the disclosures below. The Consolidated Appropriations Act relief and short-term nature of most COVID-19 deferrals precluded the majority of Regions' COVID-19 loan modifications from being classified as TDRs as of March 31, 2021 and December 31, 2020.

26

The following tables present the end of period balance for loans modified in a TDR during the periods presented by portfolio segment and class, and the financial impact of those modifications. The tables include modifications made to new TDRs, as well as renewals of existing TDRs.
 Three Months Ended March 31, 2021
   Financial Impact
of Modifications
Considered TDRs
 Number of
Obligors
Recorded
Investment
Increase in
Allowance at
Modification
 (Dollars in millions)
Commercial and industrial26 $30 $
Commercial real estate mortgage—owner-occupied
Commercial real estate construction—owner-occupied
Total commercial32 31 
Commercial investor real estate mortgage
Commercial investor real estate construction
Total investor real estate
Residential first mortgage175 35 
Home equity lines
Home equity loans
Consumer credit card
Indirect—vehicles and other consumer48 
Total consumer226 36 
260 $74 $
 Three Months Ended March 31, 2020
   Financial Impact
of Modifications
Considered TDRs
 Number of
Obligors
Recorded
Investment
Increase in
Allowance at
Modification
 (Dollars in millions)
Commercial and industrial26 $74 $
Commercial real estate mortgage—owner-occupied
Commercial real estate construction—owner-occupied— 
Total commercial32 77 
Commercial investor real estate mortgage
Commercial investor real estate construction
Total investor real estate
Residential first mortgage52 
Home equity lines
Home equity loans15 
Consumer credit card10 
Indirect—vehicles and other consumer10 
Total consumer87 
124 $86 $

27

NOTE 4. SERVICING OF FINANCIAL ASSETS
RESIDENTIAL MORTGAGE BANKING ACTIVITIES
The fair value of residential MSRs is calculated using various assumptions including future cash flows, market discount rates, expected prepayment rates, servicing costs and other factors. A significant change in prepayments of mortgages in the servicing portfolio could result in significant changes in the valuation adjustments, thus creating potential volatility in the carrying amount of residential MSRs. The Company compares fair value estimates and assumptions to observable market data where available, and also considers recent market activity and actual portfolio experience.
The table below presents an analysis of residential MSRs under the fair value measurement method:
 Three Months Ended March 31
 20212020
 (In millions)
Carrying value, beginning of period$296 $345 
Additions32 11 
Increase (decrease) in fair value:
Due to change in valuation inputs or assumptions90 (83)
Economic amortization associated with borrower repayments (1)
(17)(19)
Carrying value, end of period$401 $254 
________
(1)"Economic amortization associated with borrower repayments" includes both total loan payoffs as well as partial paydowns. Regions' MSR decay methodology is a discounted net cash flow approach.

In the first quarter of 2021 and 2020, the Company purchased the rights to service residential mortgage loans on a flow basis for approximately $11 million and $4 million, respectively.
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:
 March 31
 20212020
 (Dollars in millions)
Unpaid principal balance$34,212 $33,787 
Weighted-average CPR (%)10.2 %18.1 %
Estimated impact on fair value of a 10% increase$(28)$(26)
Estimated impact on fair value of a 20% increase$(51)$(49)
Option-adjusted spread (basis points)564629 
Estimated impact on fair value of a 10% increase$(10)$(5)
Estimated impact on fair value of a 20% increase$(21)$(10)
Weighted-average coupon interest rate3.8 %4.2 %
Weighted-average remaining maturity (months)289278
Weighted-average servicing fee (basis points)27.5 27.4 
The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, the effect of an adverse variation in a particular assumption on the fair value of the residential MSRs is calculated without changing any other assumption, while in reality changes in one factor may result in changes in another, which may either magnify or counteract the effect of the change. The derivative instruments utilized by Regions would serve to reduce the estimated impacts to fair value included in the table above.

28

The following table presents servicing related fees, which includes contractually specified servicing fees, late fees and other ancillary income resulting from the servicing of residential mortgage loans:
 Three Months Ended March 31
 20212020
 (In millions)
Servicing related fees and other ancillary income$24 $25 
Residential mortgage loans are sold in the secondary market with standard representations and warranties regarding certain characteristics such as the quality of the loan, the absence of fraud, the eligibility of the loan for sale and the future servicing associated with the loan. Regions may be required to repurchase these loans at par, or make-whole or indemnify the purchasers for losses incurred when representations and warranties are breached.
Regions maintains an immaterial repurchase liability related to residential mortgage loans sold with representations and warranty provisions. This repurchase liability is reported in other liabilities on the consolidated balance sheets and reflects management’s estimate of losses based on historical repurchase and loss trends, as well as other factors that may result in anticipated losses different from historical loss trends. Adjustments to this reserve are recorded in other non-interest expense on the consolidated statements of income.
COMMERCIAL MORTGAGE BANKING ACTIVITIES
Regions is an approved DUS lender. The DUS program provides liquidity to the multi-family housing market. In connection with the DUS program, Regions services commercial mortgage loans, retains commercial MSRs and intangible assets associated with the DUS license, and assumes a loss share guarantee associated with the loans. See Note 1 "Summary of Significant Accounting Policies" in the 2020 Annual Report on Form 10-K for additional information. Also see Note 11 for additional information.
The table below presents an analysis of commercial MSRs under the amortization measurement method:
Three Months Ended March 31
20212020
(In millions)
Carrying value, beginning of period$74 $59 
Additions11 
Economic amortization associated with borrower repayments (1)
(3)(3)
Carrying value, end of period$82 $59 
________
(1)"Economic amortization associated with borrower repayments" includes both total loan payoffs as well as partial paydowns.
Regions periodically evaluates the commercial MSRs for impairment based on fair value. The estimated fair value of the commercial MSRs was approximately $91 million at March 31, 2021 and $81 million December 31, 2020.
The following table presents servicing related fees, which includes contractually specified servicing fees, late fees and other ancillary income resulting from the servicing of commercial mortgage loans:
Three Months Ended March 31
20212020
(In millions)
Servicing related fees and other ancillary income$0$

29

NOTE 5. SHAREHOLDERS’ EQUITY AND ACCUMULATED OTHER COMPREHENSIVE INCOME

PREFERRED STOCK
    The following table presents a summary of the non-cumulative perpetual preferred stock:    
0March 31, 2021December 31, 2020
Issuance DateEarliest Redemption Date
Dividend Rate (1)
Liquidation AmountLiquidation Preference per ShareLiquidation preference per Depositary ShareOwnership Interest per Depositary ShareCarrying AmountCarrying Amount
(Dollars in millions, except per share data)
Series A11/1/201212/15/20176.375 %$500 $1,000 $25 1/40th$387 $387 
Series B4/29/20149/15/20246.375 %(2)500 1,000 25 1/40th433 433 
Series C4/30/20195/15/20295.700 %(3)500 1,000 25 1/40th490 490 
Series D6/5/20209/15/20255.750 %(4)350 100,000 1,000 1/100th346 346 
$1,850 $1,656 $1,656 
_________
(1)Dividends on all series of preferred stock, if declared, accrue and are payable quarterly in arrears.
(2)Dividends, if declared, will be paid quarterly at an annual rate equal to (i) for each period beginning prior to September 15, 2024, 6.375%, and (ii) for each period beginning on or after September 15, 2024, three-month LIBOR plus 3.536%.
(3)Dividends, if declared, will be paid quarterly at an annual rate equal to (i) for each period beginning prior to August 15, 2029, 5.700%, and (ii) for each period beginning on or after August 15, 2029, three-month LIBOR plus 3.148%.
(4)Dividends, if declared, will be paid quarterly at an annual rate equal to (i) for each period beginning prior to September 15, 2025, 5.750%, and (ii) for each period beginning on or after September 15, 2025, the five-year treasury rate as of the most recent reset dividend determination date plus 5.426%.
    All series of preferred stock have no stated maturity and redemption is solely at Regions' option, subject to regulatory approval, in whole, or in part, after the earliest redemption date or in whole, but not in part, 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, Series C, and Series D preferred stock.
The Board of Directors declared a total of $23 million in cash dividends on Series A, Series B and Series C preferred stock during both the first three months of 2021 and 2020. The Board of Directors declared $5 million in cash dividends on Series D preferred stock during the first three months of 2021. Therefore, a total of $28 million in cash dividends on total preferred stock was declared in the first three months of 2021 compared to the total of $23 million in cash dividends on total preferred stock declared in the first three months of 2020, as the initial quarterly dividend for the Series D preferred stock was declared in the third quarter of 2020.
In the event Series A, Series B, Series C, or Series D preferred shares are redeemed at the liquidation amounts, $113 million, $67 million, $10 million, or $4 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 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. Approximately $4 million of Series D 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.
On April 27, 2021 Regions launched a proposed public offering, which was completed on May 4, 2021, for the issuance of $400 million in depositary shares each representing a 1/40th ownership interest in a share of the Company's 4.45% Non-Cumulative Perpetual Preferred Stock, Series E, par value $1.00 per share ("Series E preferred stock"), with a liquidation preference of $1,000 per share of Series E preferred stock (equivalent to $25.00 per depositary share). Dividends will be paid quarterly at an annual rate equal to 4.45% for each period beginning September 15, 2021. The net proceeds from the issuance of the Series E preferred stock will be used to redeem all of the outstanding shares of the Company's Series A preferred stock. On May 4, 2021, Regions sent redemption notices to the holders of the Series A preferred stock, which will result in the redemption on the dividend payment date on June 15, 2021.

30

COMMON STOCK
Regions was not required to participate in the 2021 CCAR; the Company chose to participate in part to have the Federal Reserve re-evaluate Regions' SCB. The submission was made in April 2021 and the Company expects to receive the results by June 30, 2021, with an effective date October 1, 2021.
As part of the Company's capital plan, on April 21, 2021, the Board authorized the repurchase of up to $2.5 billion of the Company's common stock, permitting purchases from the second quarter of 2021 through the first quarter of 2022. The Company did not repurchase shares in the first quarter of 2021 or throughout 2020.
During the third quarter of 2020, the Federal Reserve mandated that banks must not increase their quarterly per share common dividend and implemented an earnings-based payout restriction in connection with the supervisory stress test, requiring the third quarter 2020 dividend to not exceed the average of the prior four quarters of net income excluding preferred dividends. This mandate was subsequently extended through the second quarter of 2021. The Federal Reserve has indicated these restrictions are expected to be lifted beginning in the third quarter of 2021, subject to capital remaining above required levels in the ongoing 2021 CCAR cycle.
Regions declared $0.155 per share in cash dividends for both the first quarter of 2021 and 2020.
ACCUMULATED OTHER COMPREHENSIVE INCOME
The following tables present the balances and activity in AOCI on a pre-tax and net of tax basis for the three months ended March 31, 2021 and 2020:
Three Months Ended March 31, 2021
Pre-tax AOCI Activity
Tax Effect (1)
Net AOCI Activity
(In millions)
Total accumulated other comprehensive income, beginning of period$1,759 $(444)$1,315 
Unrealized losses on securities transferred to held to maturity:
Beginning balance$(21)$$(16)
Reclassification adjustments for amortization of unrealized losses (2)
(1)
Ending balance$(18)$$(14)
Unrealized gains (losses) on securities available for sale:
Beginning balance$1,062 $(268)$794 
Unrealized gains (losses) arising during the period(548)138 (410)
Reclassification adjustments for securities (gains) losses realized in net income (loss) (3)
(1)(1)
Change in AOCI from securities available for sale activity in the period(549)138 (411)
Ending balance$513 $(130)$383 
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Beginning balance$1,610 $(406)$1,204 
Unrealized holding gains (losses) on derivatives arising during the period(331)83 (248)
Reclassification adjustments for (gains) losses realized in net income (2)
(102)26 (76)
Change in AOCI from derivative activity in the period(433)109 (324)
Ending balance$1,177 $(297)$880 
Defined benefit pension plans and other post employment benefit plans:
Beginning balance$(892)$225 $(667)
Reclassification adjustments for amortization of actuarial gains (losses) and settlements realized in net income (4)
13 (3)10 
Ending balance$(879)$222 $(657)
Total other comprehensive income(966)243 (723)
Total accumulated other comprehensive income, end of period$793 $(201)$592 


31

Three Months Ended March 31, 2020
Pre-tax AOCI Activity
Tax Effect (1)
Net AOCI Activity
(In millions)
Total accumulated other comprehensive income (loss), beginning of period$(120)$30 $(90)
Unrealized losses on securities transferred to held to maturity:
Beginning balance$(29)$$(22)
Reclassification adjustments for amortization of unrealized losses (2)
Ending balance$(28)$$(21)
Unrealized gains (losses) on securities available for sale:
Beginning balance$274 $(69)$205 
Unrealized gains (losses) arising during the period597 (151)446 
Ending balance$871 $(220)$651 
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Beginning balance$430 $(108)$322 
Unrealized holding gains (losses) on derivatives arising during the period1,291 (325)966 
Reclassification adjustments for (gains) losses realized in income (2)

(9)(7)
Change in AOCI from derivative activity in the period1,282 (323)959 
Ending balance$1,712 $(431)$1,281 
Defined benefit pension plans and other post employment benefit plans:
Beginning balance$(795)$200 $(595)
Reclassification adjustments for amortization of actuarial gains (losses) and settlements realized in net income (4)
11 (3)
Ending balance$(784)$197 $(587)
Total other comprehensive income1,891 (477)1,414 
Total accumulated other comprehensive income, end of period$1,771 $(447)$1,324 
_________
(1)The impact of all AOCI activity is shown net of the related tax impact, calculated using an effective tax rate of approximately 25%.
(2)Reclassification amount is recognized in net interest income in the consolidated statements of income.
(3)Reclassification amount is recognized in securities gains (losses), net in the consolidated statements of income.
(4)Reclassification amount is recognized in other non-interest expense in the consolidated statements of income. Additionally, these accumulated other comprehensive income (loss) components are included in the computation of net periodic pension cost (see Note 7 for additional details).

0

32

NOTE 6. EARNINGS PER COMMON SHARE
The following table sets forth the computation of basic earnings per common share and diluted earnings per common share:
 Three Months Ended March 31
 20212020
 (In millions, except per share amounts)
Numerator:
Net income$642 $162 
Preferred stock dividends(28)(23)
Net income available to common shareholders$614 $139 
Denominator:
Weighted-average common shares outstanding—basic961 957 
Potential common shares
Weighted-average common shares outstanding—diluted968 961 
Earnings per common share:
Basic$0.64 $0.15 
Diluted0.63 0.14 
The effect from the assumed exercise of 3 million in stock options, restricted stock units and awards and performance stock units for both the three months ended March 31, 2021 and 2020, was not included in the above computations of diluted earnings per common share because such amounts would have had an antidilutive effect on earnings per common share.
NOTE 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 PlansNon-qualified PlansTotal
Three Months Ended March 31
202120202021202020212020
(In millions)
Service cost$$$$$10 $10 
Interest cost12 16 13 17 
Expected return on plan assets(35)(37)(35)(37)
Amortization of actuarial loss11 13 11 
Net periodic pension cost (credit)$(3)$(3)$$$$
The service cost component of net periodic pension cost (credit) is recorded in salaries and employee benefits on the consolidated statements of income. Components other than service cost are recorded in other non-interest expense on the consolidated statements of income.
Regions' funding policy for the qualified plans is to contribute annually at least the amount required by IRS minimum funding standards. Regions made no contributions during the first three months of 2021.
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 three months ended March 31, 2021 or 2020.

33

NOTE 8. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
The following tables present the notional amount and estimated fair value of derivative instruments on a gross basis.
 March 31, 2021December 31, 2020
 Notional
Amount
Estimated Fair ValueNotional
Amount
Estimated Fair Value
 
Gain(1)
Loss(1)
Gain(1)
Loss(1)
 (In millions)
Derivatives in fair value hedging relationships:
Interest rate swaps$1,750 $59 $13 $2,100 $77 $
Derivatives in cash flow hedging relationships:
Interest rate swaps (2)
18,000 $762 $16,000 1,181 
Interest rate floors (3)(4)
3,750 $226 $5,750 430 
Total derivatives in cash flow hedging relationships21,750 $988 $21,750 1,611 
Total derivatives designated as hedging instruments$23,500 $1,047 $15 $23,850 $1,688 $
Derivatives not designated as hedging instruments:
Interest rate swaps$77,082 $1,057 $1,107 $76,764 $1,492 $1,464 
Interest rate options15,776 $75 $25 13,806 90 28 
Interest rate futures and forward commitments3,810 $38 $4,270 11 26 
Other contracts9,181 $83 $80 9,924 68 80 
Total derivatives not designated as hedging instruments$105,849 $1,253 $1,218 $104,764 $1,661 $1,598 
Total derivatives$129,349 $2,300 $1,233 $128,614 $3,349 $1,598 
Total gross derivative instruments, before netting$2,300 $1,233 $3,349 $1,598 
Less: Netting adjustments (5)
$1,686 $1,148 2,428 1,545 
Total gross derivative instruments, after netting (6)
$614 $85 $921 $53 
_________
(1)Derivatives in a gain position are recorded as other assets and derivatives in a loss position are recorded as other liabilities on the consolidated balance sheets.
(2)Includes accrued interest of $28 million at March 31, 2021 and December 31, 2020, respectively.
(3)Includes accrued interest of $9 million at March 31, 2021 and $12 million at December 31, 2020.
(4)Estimated fair value includes premium of approximately $51 million as of March 31, 2021 and $83 million as of December 31, 2020 to be amortized over the remaining life. Approximately $29 million of the decrease since December 31, 2020 related to hedges that were terminated during the first quarter of 2021 and were not amortized into earnings as of the date of termination.
(5)Netting adjustments represent amounts recorded to convert derivative assets and derivative liabilities from a gross basis to a net basis in accordance with applicable accounting guidance. The net basis takes into account the impact of cash collateral received or posted, legally enforceable master netting agreements and variation margin that allow Regions to settle derivative contracts with the counterparty on a net basis and to offset the net position with the related cash collateral.
(6)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 March 31, 2021 and December 31, 2020, financial instruments posted of $24 million, for both periods, were not offset in the consolidated balance sheets.
HEDGING DERIVATIVES
Derivatives entered into to manage interest rate risk and facilitate asset/liability management strategies are designated as hedging derivatives. Derivative financial instruments that qualify in a hedging relationship are classified, based on the exposure being hedged, as either fair value hedges or cash flow hedges. See Note 1 "Summary of Significant Accounting Policies" of the Annual Report on Form 10-K for the year ended December 31, 2020, 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.

34

CASH FLOW HEDGES
Cash flow hedge relationships mitigate exposure to the variability of future cash flows or other forecasted transactions.
Regions enters into interest rate swap and floor agreements to manage overall cash flow changes related to interest rate risk exposure on LIBOR-based loans. The agreements effectively modify the Company’s exposure to interest rate risk by utilizing receive fixed/pay LIBOR interest rate swaps and interest rate floors. As of March 31, 2021, Regions is hedging its exposure to the variability in future cash flows for forecasted transactions through 2026.
During the three months ended March 31, 2021, the Company terminated $2.0 billion and $2.6 billion in notional of floor and swap hedges, respectively.The following table presents the pre-tax impact of terminated cash flow hedges on AOCI. The balance of terminated cash flow hedges in AOCI will be amortized into earnings through 2025.
Three Months Ended March 31
20212020
(In millions)
Unrealized gains on terminated hedges included in AOCI- January 1$121 $78 
Unrealized gains (losses) on terminated hedges arising during the period166 (6)
Reclassification adjustments for amortization of unrealized (gains) into net income(8)(2)
Unrealized gains on terminated hedges included in AOCI-March 31$279 $70 
Regions expects to reclassify into earnings approximately $420 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 $93 million in pre-tax net gains related to the amortization of discontinued cash flow hedges.
The following tables present the effect of hedging derivative instruments on the consolidated statements of income and the total amounts for the respective line items effected:

Three Months Ended March 31, 2021
Interest IncomeInterest Expense
Loans, Including FeesLong-term Borrowings
(In millions)
Total amounts presented in the consolidated statements of income$854 $27 
Gains/(losses) on fair value hedging relationships:
Interest rate contracts:
   Amounts related to interest settlements on derivatives$$
   Recognized on derivatives(22)
   Recognized on hedged items22 
Net income recognized on fair value hedges$$
Gains/(losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income (2)
$102 $
Income (expense) recognized on cash flow hedges$102 $


35

Three Months Ended March 31, 2020
Interest IncomeInterest Expense
Loans, Including FeesLong-term Borrowings
(In millions)
Total amounts presented in the consolidated statements of income$903 $59 
Gains/(losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements on derivatives$$
Recognized on derivatives77 
Recognized on hedged items(76)
Net income recognized on fair value hedges$$
Gains/(losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income (2)
$$
Income (expense) recognized on cash flow hedges$$
___
(1)See Note 5 for gain or (loss) recognized for cash flow hedges in AOCI.
(2)Pre-tax.
The following tables present the carrying amount and associated cumulative basis adjustment related to the application of hedge accounting that is included in the carrying amount of hedged assets and liabilities in fair value hedging relationships.
March 31, 2021December 31, 2020
Hedged Items Currently DesignatedHedged Items Currently Designated
Carrying Amount of Assets/(Liabilities)Hedge Accounting Basis AdjustmentCarrying Amount of Assets/(Liabilities)Hedge Accounting Basis Adjustment
(In millions)
Long-term borrowings$(1,790)$(42)$(2,171)$(64)
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 March 31, 2021 and December 31, 2020, Regions had $894 million and $924 million, respectively, in total notional amount of interest rate lock commitments. Regions manages market risk on interest rate lock commitments and mortgage loans held for sale with corresponding forward sale commitments. Residential mortgage loans held for sale are recorded at fair value with changes in fair value recorded in mortgage income. Commercial mortgage loans held for sale are recorded at either the lower of cost or market or at fair value based on management's election. At March 31, 2021 and December 31, 2020, Regions had $1.8 billion and $1.9 billion, respectively, in total notional amounts related to these forward sale commitments. Changes in mark-to-market from both interest rate lock commitments and corresponding forward sale commitments related to residential mortgage loans are included in mortgage income. Changes in mark-to-market from both interest rate lock commitments and corresponding forward sale commitments related to commercial mortgage loans are included in capital markets income.
Regions has elected to account for residential MSRs at fair value with any changes to fair value recorded in mortgage income. Concurrent with the election to use the fair value measurement method, Regions began using various derivative instruments in the form of forward rate commitments, futures contracts, swaps and swaptions to mitigate the effect of changes in the fair value of its residential MSRs in its consolidated statements of income. As of March 31, 2021 and December 31, 2020, the total notional amount related to these contracts was $4.3 billion and $4.1 billion, respectively.

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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 March 31
Derivatives Not Designated as Hedging Instruments20212020
 (In millions)
Capital markets income:
Interest rate swaps$23 $(37)
Interest rate options15 16 
Interest rate futures and forward commitments
Other contracts(10)
Total capital markets income52 (26)
Mortgage income:
Interest rate swaps(67)98 
Interest rate options(13)24 
Interest rate futures and forward commitments30 (16)
Total mortgage income(50)106 
$$80 
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 2021 and 2029. Swap participations, whereby Regions has sold credit protection have maturities between 2021 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 March 31, 2021 was approximately $520 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 March 31, 2021 and 2020 was immaterial. In transactions where Regions has sold credit protection, recourse to collateral associated with the original swap transaction is available to offset some or all of Regions’ obligation.
Regions has bought credit protection in the form of credit default indices. These indices, which meet the definition of credit derivatives, were entered into in the ordinary course of business to economically hedge credit spread risk in commercial mortgage loans held for sale whereby the fair value option has been elected. Credit derivatives, whereby Regions has purchased credit protection, entitle Regions to receive a payment from the counterparty if losses on the underlying index exceed a certain threshold, dependent upon the tranche rating of the capital structure.
CONTINGENT FEATURES
Certain of Regions’ derivative instrument contracts with broker-dealers contain credit-related termination provisions and/or credit-related provisions regarding the posting of collateral, allowing those broker-dealers to terminate the contracts in the event that Regions’ and/or Regions Bank’s credit ratings falls below specified ratings from certain major credit rating agencies. The aggregate fair values of all derivative instruments with any credit-risk-related contingent features that were in a liability position on March 31, 2021 and December 31, 2020, were $95 million and $74 million, respectively, for which Regions had posted collateral of $99 million and $74 million, respectively, in the normal course of business.

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NOTE 9. FAIR VALUE MEASUREMENTS
See Note 1 "Summary of Significant Accounting Policies" to the consolidated financial statements of the Annual Report on Form 10-K for the year ended December 31, 2020 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:
 March 31, 2021December 31, 2020
 Level 1Level 2
Level 3(1)
Total Estimated Fair ValueLevel 1Level 2
Level 3(1)
Total Estimated Fair Value
 (In millions)
Recurring fair value measurements
Debt securities available for sale:
U.S. Treasury securities$232 $$$232 $183 $$$183 
Federal agency securities98 98 105 105 
Mortgage-backed securities (MBS):
Residential agency18,846 18,846 19,076 19,076 
Residential non-agency
Commercial agency6,199 6,199 5,999 5,999 
Commercial non-agency570 570 586 586 
Corporate and other debt securities1,142 1,146 1,200 1,204 
Total debt securities available for sale$232 $26,855 $$27,092 $183 $26,966 $$27,154 
Loans held for sale$$1,169 $$1,169 $$1,446 $$1,446 
Marketable equity securities$443 $$$443 $388 $$$388 
Residential mortgage servicing rights$$$401 $401 $$$296 $296 
Derivative assets(2):
Interest rate swaps$$1,878 $$1,878 $$2,750 $$2,750 
Interest rate options270 31 301 477 43 520 
Interest rate futures and forward commitments38 38 11 11 
Other contracts82 83 65 68 
Total derivative assets$$2,268 $31 $2,300 $$3,303 $44 $3,349 
Equity investments$$$$$$74 $$74 
Derivative liabilities(2):
Interest rate swaps$$1,122 $$1,122 $$1,464 $$1,464 
Interest rate options25 25 28 28 
Interest rate futures and forward commitments26 26 
Other contracts75 80 72 80 
Total derivative liabilities$$1,228 $$1,233 $$1,590 $$1,598 
Non-recurring fair value measurements
Loans held for sale$$$$$$$$
Equity investments without a readily determinable fair value12 12 
Foreclosed property and other real estate16 16 
_________
(1)All following disclosures related to Level 3 recurring and non-recurring assets do not include those deemed to be immaterial.
(2)As permitted under U.S. GAAP, variation margin collateral payments made or received for derivatives that are centrally cleared are legally characterized as settled. As such, these derivative assets and derivative liabilities and the related variation margin collateral are presented on a net basis on the balance sheet.
Assets and liabilities in all levels could result in volatile and material price fluctuations. Realized and unrealized gains and losses on Level 3 assets represent only a portion of the risk to market fluctuations in Regions’ consolidated balance

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sheets. Further, derivatives included in Levels 2 and 3 are used by ALCO in a holistic approach to managing price fluctuation risks.
The following tables illustrate rollforwards for residential mortgage servicing rights, which are the only material assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2021 and 2020, respectively.
Residential mortgage servicing rights
Three Months Ended March 31
20212020
(In millions)
Carrying value, beginning of period$296 $345 
Total realized/unrealized gains (losses) included in earnings (1)
73 (102)
Purchases32 11 
Carrying value, end of period$401 $254 
_________
(1)Included in mortgage income. Amounts presented exclude offsetting impact from related derivatives.
The following table presents the fair value adjustments related to non-recurring fair value measurements:
 Three Months Ended March 31
 20212020
 (In millions)
Loans held for sale$(3)$(3)
Equity investments without a readily determinable fair value(3)
Foreclosed property and other real estate(7)(9)
The following tables present detailed information regarding material assets and liabilities measured at fair value using significant unobservable inputs (Level 3) as of March 31, 2021, and December 31, 2020. 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 March 31, 2021, and December 31, 2020, are included. Following the tables are descriptions of the valuation techniques and the sensitivity of the techniques to changes in the significant unobservable inputs.
 March 31, 2021
 
Level 3
Estimated Fair Value at
March 31, 2021
Valuation
Technique
Unobservable
Input(s)
Quantitative Range of
Unobservable Inputs and
(Weighted-Average)
 (Dollars in millions)
Recurring fair value measurements:
Residential mortgage servicing rights(1)
$401Discounted cash flowWeighted-average CPR (%)5.4% - 21.9% (10.2%)
OAS (%)4.8% - 9.5% (5.6%)
_________
(1)See Note 4 for additional disclosures related to assumptions used in the fair value calculation for residential mortgage servicing rights.
 December 31, 2020
 
Level 3
Estimated Fair Value at
December 31, 2020
Valuation
Technique
Unobservable
Input(s)
Quantitative Range of
Unobservable Inputs and
(Weighted-Average)
 (Dollars in millions)
Recurring fair value measurements:
Residential mortgage servicing rights(1)
$296Discounted cash flowWeighted-average CPR (%)8.1% - 31.2% (15.6%)
OAS (%)4.8% - 9.5% (5.6%)
_________
(1)See Note 7 to the consolidated financial statements of the Annual Report on Form 10-K for the year ended December 31, 2020 for additional disclosures related to assumptions used in the fair value calculation for residential mortgage servicing rights.


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RECURRING FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS
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.
FAIR VALUE OPTION
Regions has elected the fair value option for all 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 Company also elected to measure certain commercial and industrial loans held for sale at fair value, as these loans are actively traded in the secondary market. The Company is able to obtain fair value estimates for substantially all of these loans through a third party valuation service that is broadly used by market participants. While most of the loans are traded in the market, the volume and level of trading activity is subject to variability and the loans are not exchange-traded. The balance of these loans held for sale was immaterial at March 31, 2021.
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:
 March 31, 2021December 31, 2020
 Aggregate
Fair Value
Aggregate
Unpaid
Principal
Aggregate Fair
Value Less
Aggregate
Unpaid
Principal
Aggregate
Fair Value
Aggregate
Unpaid
Principal
Aggregate Fair
Value Less
Aggregate
Unpaid
Principal
 (In millions)
Mortgage loans held for sale, at fair value$1,163 $1,136 $27 $1,439 $1,362 $77 
Interest income on mortgage loans held for sale is recognized based on contractual rates and is reflected in interest income on loans held for sale in the consolidated statements of income. The following table details net gains and losses resulting from changes in fair value of these loans, which were recorded in mortgage income in the consolidated statements of income during the three months ended March 31, 2021 and 2020. These changes in fair value are mostly offset by economic hedging activities. An immaterial portion of these amounts was attributable to changes in instrument-specific credit risk.
 Three Months Ended March 31
20212020
 (In millions)
Net gains (losses) resulting for the change in fair value of mortgage loans held for sale$(50)$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 March 31, 2021 are as follows:
 March 31, 2021
 Carrying
Amount
Estimated
Fair
Value(1)
Level 1Level 2Level 3
 (In millions)
Financial assets:
Cash and cash equivalents$24,920 $24,920 $24,920 $$
Debt securities held to maturity1,059 1,131 1,131 
Debt securities available for sale27,092 27,092 232 26,855 
Loans held for sale1,487 1,487 1,479 
Loans (excluding leases), net of unearned income and allowance for loan losses(2)(3)
81,335 82,156 82,156 
Other earning assets(4)
1,074 1,074 443 631 
Derivative assets2,300 2,300 2,268 31 
Financial liabilities:
Derivative liabilities1,233 1,233 1,228 
Deposits129,602 129,624 129,624 
Long-term borrowings2,916 3,351 3,086 265 
Loan commitments and letters of credit119 119 119 
_________
(1)Estimated fair values are consistent with an exit price concept. The assumptions used to estimate the fair values are intended to approximate those that a market participant would use in a hypothetical orderly transaction. In estimating fair value, the Company makes adjustments for estimated changes in interest rates, market liquidity and credit spreads in the periods they are deemed to have occurred.
(2)The estimated fair value of portfolio loans assumes sale of the loans to a third-party financial investor. Accordingly, the value to the Company if the loans were held to maturity is not reflected in the fair value estimate. The fair value premium on the loan portfolio's net carrying amount at March 31, 2021 was $821 million or 1.0 percent.
(3)Excluded from this table is the sales-type, direct financing, and leveraged lease carrying amount of $1.4 billion at March 31, 2021.
(4)Excluded from this table is the operating lease carrying amount of $188 million at March 31, 2021.

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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, 2020 are as follows:
 December 31, 2020
 Carrying
Amount
Estimated
Fair
Value(1)
Level 1Level 2Level 3
 (In millions)
Financial assets:
Cash and cash equivalents$17,956 $17,956 $17,956 $$
Debt securities held to maturity1,122 1,215 1,215 
Debt securities available for sale27,154 27,154 183 26,966 
Loans held for sale1,905 1,905 1,901 
Loans (excluding leases), net of unearned income and allowance for loan losses(2)(3)
81,597 82,773 82,773 
Other earning assets(4)
1,017 1,017 388 629 
Derivative assets3,349 3,349 3,303 44 
Equity investments747474
Financial liabilities:
Derivative liabilities1,598 1,598 1,590 
Deposits122,479 122,511 122,511 
Long-term borrowings3,569 4,063 3,592 471 
Loan commitments and letters of credit151 151 151 
_________
(1)Estimated fair values are consistent with an exit price concept. The assumptions used to estimate the fair values are intended to approximate those that a market participant would use in a hypothetical orderly transaction. In estimating fair value, the Company makes adjustments for estimated changes in interest rates, market liquidity and credit spreads in the periods they are deemed to have occurred.
(2)The estimated fair value of portfolio loans assumes sale of the loans to a third-party financial investor. Accordingly, the value to the Company if the loans were held to maturity is not reflected in the fair value estimate. The fair value premium on the loan portfolio's net carrying amount at December 31, 2020 was $1.2 billion or 1.4 percent.
(3)Excluded from this table is the sales-type, direct financing, and leveraged lease carrying amount of $1.5 billion at December 31, 2020.
(4)Excluded from this table is the operating lease carrying amount of $200 million at December 31, 2020.

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NOTE 10. BUSINESS SEGMENT INFORMATION
Each of Regions’ reportable segments is a strategic business unit that serves specific needs of Regions’ customers based on the products and services provided. The segments are based on the manner in which management views the financial performance of the business. The Company has 3 reportable segments: Corporate Bank, Consumer Bank, and Wealth Management, with the remainder in Other. Additional information about the Company's reportable segments is included in Regions' Annual Report on Form 10-K for the year ended December 31, 2020.
The application and development of management reporting methodologies is a dynamic process and is subject to periodic enhancements. As these enhancements are made, financial results presented by each reportable segment may be periodically revised. Accordingly, the prior period was updated to reflect these enhancements. In the first quarter of 2021, the net interest income allocation methodology was enhanced. All net interest income including the FTP offset, activities of the treasury function, securities portfolio and interest rate risk activities is allocated to the three reporting segments.
The following tables present financial information for each reportable segment for the period indicated.
 Three Months Ended March 31, 2021
 Corporate BankConsumer
Bank
Wealth
Management
OtherConsolidated
 (In millions)
Net interest income$435 $497 $35 $$967 
Provision for (benefit from) credit losses79 73 (297)(142)
Non-interest income193 331 92 25 641 
Non-interest expense267 529 94 38 928 
Income (loss) before income taxes282 226 30 284 822 
Income tax expense (benefit)70 57 46 180 
Net income (loss)$212 $169 $23 $238 $642 
Average assets$59,492 $34,053 $2,047 $50,962 $146,554 
 Three Months Ended March 31, 2020
 Corporate BankConsumer BankWealth
Management
OtherConsolidated
 (In millions)
Net interest income$352 $538 $38 $$928 
Provision for credit losses53 88 228 373 
Non-interest income (loss)104 315 87 (21)485 
Non-interest expense235 499 87 15 836 
Income (loss) before income taxes168 266 34 (264)204 
Income tax expense (benefit)42 67 (76)42 
Net income (loss)$126 $199 $25 $(188)$162 
Average assets$55,085 $34,600 $2,060 $33,026 $124,771 

NOTE 11. COMMITMENTS, CONTINGENCIES AND GUARANTEES
COMMERCIAL COMMITMENTS
Regions issues off-balance sheet financial instruments in connection with lending activities. The credit risk associated with these instruments is essentially the same as that involved in extending loans to customers and is subject to Regions’ normal credit approval policies and procedures. Regions measures inherent risk associated with these instruments by recording a reserve for unfunded commitments based on an assessment of the likelihood that the guarantee will be funded and the creditworthiness of the customer or counterparty. Collateral is obtained based on management’s assessment of the creditworthiness of the customer. Credit risk is represented in unused commitments to extend credit, standby letters of credit and commercial letters of credit. Refer to Note 24 "Commitments, Contingencies and Guarantees" in the Annual Report on Form 10-K for the year ended December 31, 2020 for more information regarding these instruments.

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Credit risk associated with these instruments is represented by the contractual amounts indicated in the following table:
March 31, 2021December 31, 2020
 (In millions)
Unused commitments to extend credit$59,377 $56,644 
Standby letters of credit1,660 1,742 
Commercial letters of credit72 132 
Liabilities associated with standby letters of credit27 25 
Assets associated with standby letters of credit27 25 
Reserve for unfunded credit commitments92 126 
LEGAL CONTINGENCIES
    Regions and its subsidiaries are subject to loss contingencies related to litigation, claims, investigations and legal and administrative cases and proceedings arising in the ordinary course of business. Regions evaluates these contingencies based on information currently available, including advice of counsel. Regions establishes accruals for those matters when a loss contingency is considered probable and the related amount is reasonably estimable. Any accruals are periodically reviewed and may be adjusted as circumstances change. Some of Regions' exposure with respect to loss contingencies may be offset by applicable insurance coverage. In determining the amounts of any accruals or estimates of possible loss contingencies however, Regions does not take into account the availability of insurance coverage. To the extent that Regions has an insurance recovery, the proceeds are recorded in the period the recovery is received.
When it is practicable, Regions estimates possible loss contingencies, whether or not there is an accrued probable loss. When Regions is able to estimate such possible losses, and when it is reasonably possible Regions could incur losses in excess of amounts accrued, Regions discloses the aggregate estimation of such possible losses. Regions currently estimates that it is reasonably possible that it may experience losses in excess of what Regions has accrued in an aggregate amount of up to approximately $20 million as of March 31, 2021, 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.
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. As previously disclosed, Regions is cooperating with an investigation by the CFPB into certain of Regions' overdraft practices and policies. 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 could develop into administrative, civil or criminal proceedings or enforcement actions that could result in consequences that have a material effect on Regions' consolidated financial position, results of operations or cash flows as a whole. Such consequences could include adverse judgments, findings, settlements, penalties, fines, orders, injunctions, restitution, or alterations in our business practices, and could result in additional expenses and collateral costs, including reputational damage.    
While the final outcome of litigation and claims exposures or of any inquiries is inherently unpredictable, management is currently of the opinion that the outcome of pending and threatened litigation and inquiries will not have a material effect on Regions’ business, consolidated financial position, results of operations or cash flows as a whole. However, in the event of unexpected future developments, it is reasonably possible that an adverse outcome in any of the matters discussed above could be material to Regions’ business, consolidated financial position, results of operations or cash flows for any particular reporting period of occurrence.

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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 March 31, 2021 and December 31, 2020, the Company's DUS servicing portfolio totaled approximately $4.6 billion and $4.5 billion, respectively. Regions' maximum quantifiable contingent liability related to its loss share guarantee was approximately $1.5 billion at both March 31, 2021 and December 31, 2020. 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 both March 31, 2021 and December 31, 2020. Refer to Note 1 "Summary of Significant Accounting Policies" in the Annual Report on Form 10-K for the year ended December 31, 2020, for additional information.

45

NOTE 12. RECENT ACCOUNTING PRONOUNCEMENTS
StandardDescriptionRequired Date of AdoptionEffect on Regions' financial statements or other significant matters
Standards Adopted (or partially adopted) in 2021
ASU 2019-12 Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes
The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

January 1, 2021The adoption of this guidance did not have a material impact.
ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)The amendments clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815.
January 1, 2021


The adoption of this guidance did not have a material impact.
ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other CostsThe amendments in this Update were issued to clarify that entities should reevaluate at each reporting period whether callable debt securities are within the scope of the guidance in Topic 310-20, which requires the premium on such debt securities to be amortized to the next call date.January 1, 2021The adoption of this guidance did not have a material impact.
ASU 2020-10, Codification ImprovementsThis Update was issued to make minor technical corrections and improvements to the Codification as part of an ongoing FASB project to clarify guidance and correct inconsistent application of unclear guidance. The ASU codifies in Section 50 (Disclosure) of various Codification Topics the disclosure guidance that includes an option to provide certain information either on the face of the financial statements or in notes to the financial statements that was previously codified only in Section 45 (Other Presentation Matters). It also amends various Codification Topics to clarify guidance that may have been unclear when originally codified and that has resulted in inconsistent application.January 1, 2021The adoption of this guidance did not have a material impact.
ASU 2021-01 Reference Rate Reform (Topic 848)The Update was issued to clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to contracts that are affected by the discounting transition. Specifically, certain provisions in Topic 848, if elected by an entity, would apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. Amendments in this ASU to the expedients and exceptions in Topic 848 are included to capture the incremental consequences of the scope refinement and to tailor the existing guidance to derivative instruments affected by the discounting transition.The Update is effective upon issuance and can be applied through December 31, 2022The adoption of this guidance did not have a material impact.


46

StandardDescriptionRequired Date of AdoptionEffect on Regions' financial statements or other significant matters
Standards Not Yet Adopted
ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity
(Subtopic 815-40)
This Update simplifies accounting for convertible instruments by removing certain separation models. Additionally, it revises and clarifies guidance on the derivatives scope exception to make the exception easier to apply.January 1, 2022Regions is evaluating the impact upon adoption; however, the impact is not expected to be material.


47

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, 2020, 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 12 "Recent Accounting Pronouncements" to the consolidated financial statements for further detail. The emphasis of this discussion will be on the three months ended March 31, 2021 compared to the three months ended March 31, 2020 for the consolidated statements of income. For the consolidated balance sheets, the emphasis of this discussion will be the balances as of March 31, 2021 compared to December 31, 2020.
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 7 through 9 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 March 31, 2021, Regions operated 1,366 total branch outlets. Regions carries out its strategies and derives its profitability from three reportable business segments: Corporate Bank, Consumer Bank, and Wealth Management, with the remainder in Other. See Note 10 "Business Segment Information" to the consolidated financial statements for more information regarding Regions’ segment reporting structure.
On February 27, 2020, Regions announced that it had entered into an agreement to acquire Ascentium Capital LLC, an independent equipment financing company headquartered in Kingwood, Texas. The transaction closed on April 1, 2020, and included approximately $1.9 billion in loans and leases to small businesses. Refer to the "Ascentium Acquisition" section for more detail.
Regions’ profitability, like that of many other financial institutions, is dependent on its ability to generate revenue from net interest income as well as non-interest income sources. Net interest income is primarily the difference between the interest income Regions receives on interest-earning assets, such as loans and securities, and the interest expense Regions pays on interest-bearing liabilities, principally deposits and borrowings. Regions’ net interest income is impacted by the size and mix of its balance sheet components and the interest rate spread between interest earned on its assets and interest paid on its liabilities. Non-interest income includes fees from service charges on deposit accounts, card and ATM fees, mortgage servicing and secondary marketing, investment management and trust activities, capital markets and other customer services which Regions provides. Results of operations are also affected by the provision for credit losses and non-interest expenses such as salaries and employee benefits, 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. Regions' April 2021 baseline forecast anticipates real GDP growth of 6.2 percent in 2021, 4.1 percent in 2022, and 2.3 percent in 2023. The April baseline forecast anticipates the level of real GDP will return to the fourth quarter 2019 level, the last quarter free of the effects of COVID-19, in the second quarter of 2021. While the downside risks posed by the COVID-19 virus have not been eliminated, they nonetheless have diminished with further progress on the vaccination front. Further reopening of the economy and significant fiscal and monetary

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support are expected to lead to notably rapid growth over coming quarters, but it is anticipated that by year-end 2022 the economy will be on a path of growth of around 2.0 percent that prevailed prior to the pandemic. As has been the case over the past year, there remains a heightened degree of uncertainty around economic forecasts being made at present.
There was a marked acceleration in the pace of economic activity in March 2021, as evidenced in the data on nonfarm employment, consumer spending, residential construction, and personal income. The monthly surveys conducted by the ISM show accelerating and broad-based expansions in the manufacturing sector and the broad services sector; and in March, the ISM Manufacturing Index reached its highest level since December 1983 and the ISM Non-Manufacturing Index rose to its highest level on record. The acceleration in the pace of economic activity in March in part reflects payback for activity having been held down by unusually harsh winter weather in February, but also reflects further reopening of the economy and the distribution of the bulk of the third round of Economic Impact Payments of up to $1,400 per eligible recipient.
The third round of Economic Impact Payments came on top of an already elevated household saving rate. While there are questions as to whether, or to what extent, consumer behavior and attitudes will have changed after the experiences of the pandemic, it is nonetheless expected that coming months will see a significant spike in consumer spending, particularly spending on services, as further progress is made on the vaccination front and the economy more fully reopens. Additional fiscal policy support will also contribute to a faster pace of economic growth. While supply chain/logistics issues pose a headwind, particularly for motor vehicle producers, the broad-based expansion in the manufacturing sector is expected to continue over coming quarters, and business investment spending will contribute to top-line real GDP growth. Single family residential construction will also be additive to growth, but the for-sale segment of the housing market remains plagued by notably low inventories of homes, new and existing, for sale. Along with strong demand, lean inventories have contributed to robust house price appreciation which, in conjunction with higher mortgage interest rates, could weigh on affordability. However, new home construction and sales are expected to contribute to top-line real GDP growth.
Inflation is expected to accelerate further in the months ahead, reflecting base effects, supply chain/logistics bottlenecks, and services prices adjusting to the economy reopening, while further weakness in the U.S. dollar could also add to inflation pressures. While base effects are obviously transitory, it is unclear whether, or to what extent, inflation pressures will be sustained, particularly to the point the FOMC would feel compelled to respond. Still, to the extent inflation, and inflation expectations, rise over coming quarters, that will be a source of upward pressure on longer-term market interest rates, with added pressure stemming from larger government budget deficits that will necessitate increased debt issuance. With the short end of the yield curve well-anchored, persistent steepening of the yield curve could at some point lead the FOMC to alter the composition of FRB asset purchases, putting more emphasis on longer-dated assets and less emphasis on shorter-dated assets. We expect no changes in the pace of FRB asset purchases in 2021, nor do we anticipate any changes in the Fed funds rate target range at least through 2022.
The Biden Administration’s proposed $2.3 trillion infrastructure plan is not incorporated into the April baseline forecast, as at present there are no final details on either the spending side or the tax side of the plan. Still, expectations of the potential economic effects of the plan should be tempered by the fact that spending would be phased in over an eight-year period and may be at least partially offset by tax increases. As such, the net effect on GDP growth in any single year over the 2022-2029 period could be relatively small.
In March 2021, many of the top depository states in the Regions footprint had significantly lower unemployment rates than the U.S as a whole, which could indicate a more accelerated economic recovery in these states. Furthermore, parts of the Regions footprint, most notably Florida, that are traditionally more reliant on travel and tourism will continue to benefit from further reopening of the economy and increased mobility. However, 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 slower than is now anticipated.
The continued signs of economic improvement, with consideration of uncertainty inherent in the forecast, impacted Regions' forecast utilized in calculating the ACL as of March 31, 2021. 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. In the first quarter of 2021, the economic forecast continued to show signs of recovery. While some uncertainty remains, the economic forecast shows a much more positive outlook as the economy moves toward fully reopening. There are select areas where the COVID-19 pandemic impacted first quarter conditions, as discussed below. Regions expects that the pandemic will continue to influence economic conditions and the Company's financial results in future quarters.
While branch lobbies are open for business, Regions continues to keep measures in place to ensure associate and customer safety, such as providing face coverings for all associates and reducing occupancy levels to encourage social distancing. Regions is in the process of implementing a phased approach to return remote working associates to office locations. As of March 31, 2021, approximately 90 percent of the Company's non-branch associates are working remotely.

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During the first quarter of 2021, the Company continued to offer financial assistance to support customers who were experiencing financial hardships related to the COVID-19 pandemic. This assistance included offering special COVID-related payment deferral or forbearance programs for the Company's mortgage and home equity loan customers.
Regions' outstanding deferrals have declined 92 percent since the initial relief provided in early 2020 from $5.7 billion as of June 30, 2020 to $437 million as of March 31, 2021. Of total outstanding deferrals, 61 percent are related to residential mortgages that are government guaranteed. Of the loan balances that have exited deferral, 96 percent were either current or less than 30 days past due.
As a certified SBA lender, Regions experienced a slight increase in lending activity in the first quarter of 2021 as the Company continued to assist customers through the loan process under the PPP. Under this program, Regions has approximately 45,900 loans outstanding totaling approximately $4.3 billion as of March 31, 2021.
Regions continues to have strong liquidity and capital levels, which have the Company well-prepared to respond to customer borrowing needs. The Company has ample sources of liquidity that include a 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. See the "Liquidity", "Shareholders' Equity", and "Regulatory Capital" sections for further information.
The COVID-19 pandemic also affected non-interest income. With additional government stimulus and changes in customer behavior, combined with continued enhancements to overdraft practices and transaction postings, the Company estimates consumer service charges will remain 10 percent to 15 percent below pre-pandemic levels. See Table 24 "Non-Interest Income" for more 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.
Supervisory Stress Test Update
During the third quarter of 2020, the FRB finalized Regions' SCB requirement for the fourth quarter of 2020 through the third quarter of 2021 at 3.0 percent. On April 21, 2021, the Company declared a cash dividend for the second quarter of 2021 of $0.155 per share, which was in compliance with the Federal Reserve's SCB framework.
While Regions was not required to participate in the 2021 CCAR, the Company chose to participate in part to have the Federal Reserve re-evaluate Regions' SCB. The submission was made in April 2021 and the Company expects to receive the results by June 30, 2021, with an effective date of October 1, 2021.
First Quarter Results
Regions reported net income available to common shareholders of $614 million, or $0.63 per diluted share, in the first quarter of 2021 compared to $139 million, or $0.14 per diluted share, in the first quarter of 2020.
For the first quarter of 2021, net interest income (taxable-equivalent basis) totaled $1.0 billion, up $38 million compared to the first quarter of 2020. The net interest margin (taxable-equivalent basis) was 3.02 percent for the first quarter of 2021 and 3.44 percent in the first quarter of 2020. The increase in net interest income was primarily driven by decreases in deposit costs and outstanding borrowings. Net interest margin was negatively impacted by excess cash balances due to significant deposit growth. Refer to Table 20 "Consolidated Average Daily Balances and Yield/Rate Analysis" for further details.
The benefit from credit losses totaled $142 million in the first quarter of 2021, as compared to a provision of $373 million during the first quarter of 2020. The current quarter benefit was primarily due to continuing improvement in credit metrics, improvement in macroeconomic conditions and recent government stimulus programs. Refer to the "Allowance for Credit Losses" section for further detail.
Net charge-offs totaled $83 million, or an annualized 0.40 percent of average loans, in the first quarter of 2021, compared to $123 million, or an annualized 0.59 percent for the first quarter of 2020. The decrease was primarily driven by broad-based improvements across most portfolios. See Note 3 "Loans and the Allowance for Credit Losses" to the consolidated financial statements for additional information.
The allowance was 2.44 percent of total loans, net of unearned income at March 31, 2021 compared to 2.69 percent at December 31, 2020. The decrease was impacted by the factors discussed above. The allowance was 280 percent of total non-performing loans at March 31, 2021 compared to 308 percent at December 31, 2020. Total non-performing loans (excluding loans held for sale) remained flat at 0.87 percent of total loans, net of unearned income, at both March 31, 2021 and December 31, 2020. Refer to the "Allowance for Credit Losses" section for further detail.
Non-interest income was $641 million for the first quarter of 2021, a $156 million increase from the first quarter of 2020. The increase was primarily driven by higher mortgage and capital markets income and positive market valuation adjustments on

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employee benefit assets. The increases were partially offset by lower service charges income. See Table 24 "Non-Interest Income" for more detail.
Total non-interest expense was $928 million in the first quarter of 2021, a $92 million increase from the first quarter of 2020. The increase was primarily driven by higher salaries and employee benefit expenses. See Table 25 "Non-Interest Expense" for more detail.
Income tax expense for the three months ended March 31, 2021 was $180 million compared to $42 million for the same period in 2020. See "Income Taxes" toward the end of the Management’s Discussion and Analysis section of this report for more detail.
Expectations
2021 Expectations
CategoryExpectation
Total Adjusted Revenue(1)
Down modestly (depending on timing and amount of PPP forgiveness)
Adjusted Non-Interest ExpenseStable
Adjusted Average LoansDown low single digits
Adjusted Ending LoansUp low single digits
Net charge-offs/ average loans40 - 50 basis points
Effective tax rateApproximately 22%
_____
(1)Total revenue guidance assumes short-term rates remain near zero and the 10-year U.S Treasury yield remains between 1.5%-1.75%.
The reconciliation with respect to these forward-looking non-GAAP measures is expected to be consistent with the actual non-GAAP reconciliations within Management's Discussion and Analysis of this Form 10-Q. For more information related to the Company's 2021 expectations, refer to the related sub-sections discussed in more detail within Management's Discussion and Analysis of this Form 10-Q.
BALANCE SHEET ANALYSIS
The following sections provide expanded discussion of significant changes in certain line items in asset, liability, and shareholders' equity categories.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents increased approximately $7.0 billion from year-end 2020 to March 31, 2021, due primarily to an increase in cash on deposit with the FRB. Excess liquidity from deposit growth is held at the FRB. Deposit growth was primarily driven by consumer deposits from recent government stimulus payments during the first quarter of 2021. See the "Liquidity" and "Deposits" sections for more information.
DEBT SECURITIES
The following table details the carrying values of debt securities, including both available for sale and held to maturity:
Table 1—Debt Securities
March 31, 2021December 31, 2020
 (In millions)
U.S. Treasury securities$232 $183 
Federal agency securities98 105 
Mortgage-backed securities:
Residential agency19,330 19,611 
Residential non-agency
Commercial agency6,774 6,586 
Commercial non-agency570 586 
Corporate and other debt securities1,146 1,204 
$28,151 $28,276 
    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

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financial statements for additional information. Also see the "Market Risk-Interest Rate Risk" and "Liquidity" sections for more information.
Debt securities decreased $125 million from December 31, 2020 to March 31, 2021. The decrease from year-end was primarily the result of a reduction in net unrealized gains due to an increase in market interest rates.
LOANS HELD FOR SALE
    Loans held for sale totaled $1.5 billion at March 31, 2021, consisting of $1.2 billion of residential real estate mortgage loans, $316 million of commercial mortgage and other loans, and $8 million of non-performing loans. At December 31, 2020, loans held for sale totaled $1.9 billion, consisting of $1.4 billion of residential real estate mortgage loans, $460 million of commercial mortgage and other loans, and $6 million of non-performing loans. In the fourth quarter of 2020, Regions made the decision to sell a certain portfolio of $239 million commercial and industrial loans, which were reclassified to held for sale as of December 31, 2020. As of March 31, 2021, these loans remain in the held for sale portfolio. 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 64 percent of Regions’ interest-earning assets at March 31, 2021. The following table presents the distribution of Regions’ loan portfolio by portfolio segment and class, net of unearned income:
Table 2—Loan Portfolio
March 31, 2021December 31, 2020
 (In millions, net of unearned income)
Commercial and industrial$43,241 $42,870 
Commercial real estate mortgage—owner-occupied (1)
5,335 5,405 
Commercial real estate construction—owner-occupied (1)
293 300 
Total commercial48,869 48,575 
Commercial investor real estate mortgage5,405 5,394 
Commercial investor real estate construction1,817 1,869 
Total investor real estate7,222 7,263 
Residential first mortgage16,643 16,575 
Home equity lines4,286 4,539 
Home equity loans2,631 2,713 
Indirect—vehicles768 934 
Indirect—other consumer2,262 2,431 
Consumer credit card1,111 1,213 
Other consumer963 1,023 
Total consumer28,664 29,428 
$84,755 $85,266 
__________
(1)Collectively referred to as CRE.
PORTFOLIO CHARACTERISTICS
The following sections describe the composition of the portfolio segments and classes disclosed in Table 2, explain changes in balances from 2020 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. Refer to Note 6 "Allowance for Credit Losses" in the Annual Report on Form 10-K for the year ended December 31, 2020 for additional information regarding Regions’ portfolio segments and related classes, as well as the risks specific to each.
Many classes within Regions' portfolio segments continue to experience the impact of the COVID-19 pandemic. The extent to which Regions' borrowers are ultimately impacted will be influenced by the duration and severity of the economic impact, the timely distribution and efficacy of a vaccine, as well as the effectiveness of various government stimulus programs in place to support individuals and businesses. See Table 3 and Table 4 below for more detail.

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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 $371 million since year-end 2020. The March 31, 2021 balance includes $4.3 billion of PPP loans, an increase of $700 million compared to year-end 2020. Although commercial and industrial loans increased modestly, line utilization levels continued to decline to historically low levels since year-end driven by continued excess liquidity and customer deleveraging.
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.
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—Commercial Industry Exposure
March 31, 2021
LoansUnfunded CommitmentsTotal Exposure
(In millions)
Administrative, support, waste and repair$1,622 $989 $2,611 
Agriculture419 257 676 
Educational services2,985 895 3,880 
Energy1,600 2,312 3,912 
Financial services4,143 5,254 9,397 
Government and public sector2,851