REGIONS FINANCIAL CORP

Previous wording

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

Current wording

The following discussion and analysis is part of Regions Financial Corporation’s (“Regions” or the “Company”) Quarterly Report on Form 10-Q filed with the SEC and updates Regions’ Annual Report on Form 10-K for the year ended December 31, 2023, which was previously filed with the SEC. This financial information is presented to aid in understanding Regions’ financial position and results of operations and should be read together with the financial information contained in Regions’ Annual Report on Form 10-K. See Note 1 "Basis of Presentation" and Note 13 "Recent Accounting Pronouncements" to the consolidated financial statements for further detail. The emphasis of this discussion will be on the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 for the consolidated statements of income. For the consolidated balance sheets, the emphasis of this discussion will be on the balances as of June 30, 2024 compared to December 31, 2023.

Previous wording

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

Current wording

Regions conducts its banking operations through Regions Bank, an Alabama state-chartered commercial bank that is a member of the Federal Reserve System. At June 30, 2024, Regions operated 1,262 total branch outlets. Regions carries out its strategies and derives its profitability from three reportable business segments: Corporate Bank, Consumer Bank, and Wealth Management, with the remainder in Other. See Note 11 "Business Segment Information" to the consolidated financial statements for more information regarding Regions’ segment reporting structure.

Previous wording

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

Current wording

Regions reported net income available to common shareholders of $477 million or $0.52 per diluted share in the second quarter of 2024 compared to net income available to common shareholders of $556 million or $0.59 per diluted share in the second quarter of 2023.

Previous wording

Net interest income (taxable-equivalent basis) totaled $1.2 billion in the first quarter of 2024 which decreased $233 million compared to the first quarter of 2023. The net interest margin (taxable-equivalent basis) was 3.55 percent in the first quarter of 2024, reflecting a 67 basis point decrease from the same period in 2023. The decreases in net interest income and net interest margin were primarily driven by increases in deposit and funding costs due to market interest rates, including the impact of deposit remixing. This was partially offset by higher asset yields benefiting from the maturity and replacement of lower-yielding, fixed rate loans and securities.

Current wording

Net interest income (taxable-equivalent basis) totaled $1.2 billion in the second quarter of 2024, which decreased $195 million compared to the second quarter of 2023. The net interest margin (taxable-equivalent basis) was 3.51 percent in the second quarter of 2024, reflecting a 53 basis point decrease from the same period in 2023. The decreases in net interest income and net interest margin were primarily driven by increases in deposit and funding costs and partially offset by higher asset yields. Refer to the related discussion below Table 17 "Consolidated Average Daily Balances and Yield/Rate Analysis" for further detail.

Previous wording

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

Current wording

The provision for credit losses totaled $102 million in the second quarter of 2024 compared to $118 million in the second quarter of 2023. The current quarter provision reflects asset quality improvement. Net charge-offs totaled $101 million, or 0.42 percent of average loans, in the second quarter of 2024, compared to $81 million, or 0.33 percent in the second quarter of 2023. Charge-offs increased reflecting higher commercial net charge-offs. The allowance as a percent of total loans, net, increased to 1.78 percent at June 30, 2024, compared to 1.73 percent at December 31, 2023. Refer to the "Allowance for Credit Losses" section for further detail.

Previous wording

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

Current wording

Non-interest income was $545 million in the second quarter of 2024 compared to $576 million in second quarter of 2023. The decrease was primarily driven by securities losses associated with portfolio repositioning executed in the second quarter of 2024 and declines in card and ATM fees. The decreases were partially offset by higher bank-owned life insurance income and mortgage income. See Table 22 "Non-Interest Income" for further details.

Previous wording

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

Current wording

Non-interest expense was $1.0 billion in the second quarter of 2024 compared to $1.1 billion in second quarter of 2023. The decrease was driven by a decline in operational losses and other miscellaneous expenses. See Table 23 "Non-Interest Expense" for further details.

Previous wording

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

Current wording

Regions' effective tax rate was 19.8 percent in the second quarter of 2024 compared to 20.2 percent in the second quarter of 2023. See the "Income Taxes" section for further details.

Previous wording

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

Current wording

Regions and Regions Bank are required to comply with regulatory capital requirements established by Federal and State banking agencies, which include quantitative requirements including the CET1 ratio. At June 30, 2024, Regions’ CET1 ratio was estimated to be 10.42 percent. For additional information on Regions' regulatory capital requirements see the "Regulatory Requirements" section.

Previous wording

The Board authorized, on April 20, 2022, the repurchase of up to $2.5 billion of the Company's common stock, permitting purchases from the second quarter of 2022 through the fourth quarter of 2024. In the first three months of 2024, the Company repurchased 6 million shares of common stock totaling $102 million.

Current wording

The Board authorized, on April 20, 2022, the repurchase of up to $2.5 billion of the Company's common stock, permitting purchases from the second quarter of 2022 through the fourth quarter of 2024. In the first half of 2024, the Company repurchased 10 million shares of common stock totaling $189 million.

Previous wording

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

Current wording

Cash and cash equivalents increased approximately $1.7 billion from December 31, 2023 to June 30, 2024 resulting from an increase in cash balances on deposit with the Federal Reserve Bank driven primarily by FHLB advances utilized in the first and second quarters of 2024. Cash balances were also impacted by a decline in loans. See the "Loans", "Liquidity" and "Borrowed Funds" sections for more information.

Previous wording

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

Current wording

Debt securities available for sale, comprising 21 percent of earning assets, constitute approximately 97 percent of the securities portfolio. They are an important tool used to manage interest rate sensitivity and provide a primary source of liquidity for the Company, as much of the portfolio is highly liquid. Additionally, some of the securities portfolio is eligible to be used as collateral for funding of various types of borrowings. See the "Liquidity" section for more information on these arrangements. Regions maintains a highly-rated securities portfolio consisting primarily of agency MBS. See Note 3 "Debt Securities" to the consolidated financial statements for additional information. Also see the "Market Risk-Interest Rate Risk" section for more information.

Previous wording

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

Current wording

The average life of the debt securities portfolio at June 30, 2024 was estimated to be 5.7 years, with a duration of approximately 4.5 years. These metrics compare with an estimated average life of 5.5 years and a duration of approximately 4.5 years for the portfolio at December 31, 2023.

Previous wording

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

Current wording

Loans, net of unearned income, represented 72 percent of interest-earning assets as of June 30, 2024. The following table presents the distribution of Regions' loan portfolio segment and class, net of unearned income:

Previous wording

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

Current wording

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

Previous wording

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

Current wording

The commercial portfolio segment includes commercial and industrial loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases and other expansion projects. Commercial and industrial loans decreased $643 million since year-end 2023, due to a focus on client selectivity and loans refinanced off the Company's balance sheet through the debt capital markets. In the first six months of 2024, the decline in commercial and industrial loans was broad-based as shown in Table 4.

Previous wording

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

Current wording

approximately 17 percent and 18 percent of the total commercial exposure at June 30, 2024 and December 31, 2023, respectively, is well diversified, generally has low leverage with strong access to liquidity, and the REITs included in this portfolio are primarily investment or near investment grade.

Previous wording

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

Current wording

Loans for real estate development are repaid through cash flows related to the operation, sale or refinance of the property. This portfolio segment includes extensions of credit to real estate developers or investors where repayment is dependent on the sale of real estate or income generated from the real estate collateral. A portion of Regions’ investor real estate portfolio segment consists of loans secured by residential product types (land, single-family and condominium loans) within Regions’ markets. Additionally, this category includes loans made to finance income-producing properties such as apartment buildings, office and industrial buildings, and retail shopping centers. Total investor real estate loans decreased $13 million in comparison to year-end 2023 balances.

Previous wording

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

Current wording

Within the commercial real estate lending exposures detailed in Table 5 above, the multi-family (listed as apartments), business offices, and senior housing (listed as healthcare) portfolios have been previously identified as under stress due to conditions such as inflationary pressures, higher interest rates, and adverse underlying market fundamentals resulting in rising vacancies and reductions in net effective rents. Additionally, within the commercial portfolio, the trucking sector of the transportation and warehousing portfolio was identified as under stress in the second quarter of 2024. See also the allowance discussion following Table 8. The following paragraphs provide more detail on these portfolios.

Previous wording

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

Current wording

Multi-family loans represent loans to finance a residence to two or more tenants. The multi-family portfolio represented 4.4 percent of total loans at June 30, 2024. The portfolio is predominantly secured and largely located within the south, and expectations are that the portfolio stress will be temporary absent exogenous factors related to the economy or interest rates. As of June 30, 2024, approximately 85 percent of the multi-family portfolio was secured and approximately 86 percent was located in the Sunbelt region of the U.S. Additionally, the IRE multi-family portfolio had a weighted-average LTV of approximately 52 percent of committed balances at June 30, 2024, based upon appraisal at origination or most recent received, and a stressed weighted-average LTV of approximately 62 percent as of July 5, 2024, based upon GreenStreet's Commercial Property Price Index. Approximately 43 percent of the multi-family portfolio will mature in the next 12 months, including matured balances.

Previous wording

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

Current wording

Business office loans represent loans to finance office buildings. The office portfolio represented 1.6 percent of total loans at June 30, 2024. Demonstrating client selectivity, approximately 93 percent of IRE office balances were comprised of Class A properties with approximately 76 percent of IRE office balances in suburban locations. Approximately 61 percent of the IRE office portfolio was comprised of multi-tenant buildings, and of the 39 percent that was single-tenant, approximately 80 percent were investment grade tenants. As of June 30, 2024, approximately 90 percent of the office portfolio was secured with approximately 62 percent of secured balances located in the Sunbelt region of the U.S. Additionally, the IRE office portfolio had a weighted-average LTV of approximately 67 percent of committed balances at June 30, 2024, based upon appraisal at origination or most recent received, and a stressed weighted-average LTV of approximately 87 percent as of July 5, 2024, based upon GreenStreet's Commercial Property Price Index. Approximately 53 percent of the office portfolio will mature in the next 12 months, including matured balances.

Previous wording

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

Current wording

Senior housing loans represent loans to finance properties built to meet the housing needs of older adults such as independent living, assisted living and nursing homes. The senior housing sector has faced many challenges unique to it during and since the pandemic; however, market fundamentals continue to bounce back from lows experienced in the pandemic. The portfolio represented 1.3 percent of total loans at June 30, 2024.

Previous wording

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

Current wording

Residential first mortgage loans represent loans to consumers to finance a residence. These loans are typically financed over a 15 to 30 year term and, in most cases, are extended to borrowers to finance their primary residence.

Previous wording

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

Current wording

Home equity lines are secured by a first or second mortgage on the borrower's residence and allow customers to borrow against the equity in their homes. Home equity lines decreased $79 million in comparison to year-end 2023 balances, as payoffs and paydowns continue to outpace production. Substantially all of this portfolio was originated through Regions’ branch network.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

Other consumer loans primarily include indirect and direct consumer loans, overdrafts and other revolving loans. Other consumer loans decreased $71 million from year-end 2023 driven by a slight decline in consumer home improvement lending.

Previous wording

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

Current wording

In deriving any forecast, Regions benchmarks its internal forecast with external forecasts and external data available. Regions' June 2024 baseline forecast was generally stable compared to the March 2024 forecast. Growth in labor earnings will continue to outpace inflation, helping to support consumer spending, while business investment in machinery and equipment will grow at a moderate rate over coming quarters. The trend of job growth is slowing, and the baseline forecast anticipates further deceleration into the remainder of 2024. The labor force participation rate remaining below pre-pandemic levels will limit increases in the unemployment rate. As measured by CPI, inflation is expected to slow further but remain above the FOMC's 2.0 percent target through 2024. The risks to the baseline forecast are considered to be balanced.

Previous wording

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

Current wording

Credit metrics are monitored throughout each quarter in order to understand external macro-views, trends and industry outlooks, as well as Regions' internal specific views of credit metrics and trends. In the second quarter of 2024, overall asset quality improved. Commercial and investor real estate criticized balances decreased approximately $115 million, which included a decrease in classified balances of $208 million compared to the first quarter of 2024. Non-performing loans, excluding held for sale, decreased approximately $59 million compared to the first quarter of 2024. The decreases in criticized and non-performing loans were primarily due to upgrades and payoffs across several categories. Total net charge-offs decreased by 8 basis points to 0.42% of average loans compared to the first quarter of 2024. See Table 11 for more details regarding non-performing assets.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

Based upon the factors discussed above, the June 30, 2024 allowance remained relatively stable compared to the first quarter of 2024. Based on the overall analysis performed, management deemed an allowance of $1.7 billion to be appropriate to absorb expected credit losses in the loan and credit commitment portfolios as of June 30, 2024.

Previous wording

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

Current wording

Details regarding the allowance and net charge-offs, including an analysis of activity from previous year's totals, are included in Table 9 "Allowance for Credit Losses". Net charge-offs increased $58 million year-over-year, primarily driven by increases in commercial and industrial and other consumer net charge-offs. As noted, economic trends such as interest rates, unemployment, volatility in commodity prices, collateral valuations and inflationary pressure will impact the future levels of net charge-offs and may result in volatility of certain credit metrics in 2024 and beyond. See the "Second Quarter Overview" section for details on expectations for net charge-offs in 2024.

Previous wording

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

Current wording

(2)Excludes residential first mortgage loans that are 100% guaranteed by the FHA and all guaranteed loans sold to Ginnie Mae where Regions has the right but not the obligation to repurchase. Total 90+ days or more past due guaranteed loans excluded were$40 million at June 30, 2024 and $34 million at December 31, 2023.

Previous wording

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

Current wording

Non-performing loans at June 30, 2024 increased $39 million as compared to year-end 2023 levels. The same economic trends that impact net charge-offs, as discussed above, will impact the future level of non-performing assets. Circumstances related to individually large credits could also result in volatility.

Previous wording

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

Current wording

(2) Includes brokered deposits totaling $1.8 billion at June 30, 2024 and $2.4 billion at December 31, 2023.

Previous wording

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

Current wording

Total deposits at June 30, 2024 decreased approximately $1.2 billion across most segments and categories compared to year-end 2023 levels due to tax-related seasonal patterns. Slight growth in consumer deposits was overcome by declines in other segments. In addition, the pace of deposit remixing from non-interest-bearing into interest-bearing products has slowed as expected.

Previous wording

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

Current wording

Regions' deposits are granular and diversified including insured and collateralized deposits, with consumer deposits making up more than 63 percent of the total deposit base. Furthermore, corporate deposits include those that are operational in nature (where the primary use is certain operational services such as clearing, custody, payments or other cash management activities). A significant amount of the Company's deposit base is insured by the FDIC or collateralized, with approximately $10.8 billion in deposits collateralized in public funds or in trusts at June 30, 2024. The amount of estimated uninsured deposits totaled $48.4 billion at June 30, 2024, therefore over 60 percent of total deposits were insured by the FDIC. The granularity of the Company's deposits was evidenced by an average deposit account balance of approximately $18 thousand at June 30, 2024. The estimates of uninsured deposits and average account size were based on methodologies used in the Company's Call Report, which is prepared on an unconsolidated bank basis.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

Short-term borrowings, which primarily consist of FHLB advances, were $513 million at June 30, 2024, and there were no short-term borrowings outstanding at December 31, 2023. The levels of these borrowings can fluctuate depending on the Company's funding needs and the sources utilized.

Previous wording

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

Current wording

Long-term borrowings increased by approximately $2.8 billion from year-end 2023 due to the the use of FHLB advances and a debt issuance during the second quarter of 2024.

Previous wording

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

Current wording

Funding from the FHLB and Federal Reserve Bank is secured by pledged assets, primarily certain loan portfolios which are also subject to blanket lien arrangements with the FHLB and Federal Reserve Bank. As of June 30, 2024, Regions' blanket lien arrangements with these entities covered a total loan balance of approximately $93.7 billion and included loans from various loan portfolios. However, borrowing capacity with the FHLB and Federal Reserve Bank is contingent on a subset of the blanket lien portfolios which are eligible and pledged according to the parameters for each counterparty.