REGIONS FINANCIAL CORP
For the period ended Sep 30, 2024. Filed Nov 5, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 5, 2024
RF$28.31-0.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0001281761-24-000062
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-05.
0001281761-24-000097
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 279 previous paragraphs and 293 current paragraphs.
186 unchanged; 81 reworded; 23 added; 10 removed; 2 previous and 3 current paragraphs rearranged.
Tables are not compared: 31 previous and 33 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (23)
Current report
THIRD QUARTER OVERVIEW
Current report
Third Quarter Results
Current report
At the end of the third quarter of 2024 and subsequently after September 30, 2024, two powerful storms, Hurricanes Helene and Milton made landfall in the Southeastern United States, impacting states within the Company's footprint, especially Florida, North Carolina and South Carolina. The hurricanes caused significant flood and wind damage. Due to the proximity of the hurricanes to quarter-end and into early fourth quarter, Regions is still assessing all aspects of the impacts to business operations and customers. At this time the impacts to business operations, Regions' premises and the allowance for credit losses are expected to be immaterial.
Current report
(1)The Company has provided forward-looking expectations with respect to certain measures on an adjusted basis, which are non-GAAP financial measures. Due to the complexity and inherent difficulty in forecasting the occurrence and the financial impact of various items that have not yet occurred, are out of the Company’s control or cannot be predicted without unreasonable effort, a reconciliation of these forward-looking non-GAAP measures to their most directly comparable GAAP financial measures has not been provided. For the same reasons, the Company is unable to address the probable significance of these items; however, such unavailable information could have a significant impact on GAAP and non-GAAP financial results. The reconciliation of these forward-looking non-GAAP financial measures to their comparable GAAP financial measures following the end of 2024 is expected to be consistent with the reconciliation of such measures presented in Table 18.
Current report
Debt securities held to maturity constituted approximately 9 percent of the securities portfolio at September 30, 2024. In the third quarter of 2024, the Company reclassified securities with an amortized cost, excluding items recognized in OCI, of $2.5 billion from available for sale into held to maturity to reduce the volatility in AOCI in preparation for expected, upcoming changes to regulatory guidance as discussed in the "Regulatory Requirements" section. See also Note 3 "Debt Securities" for additional information.
Current report
Table 6— Portfolios of Interest
Current report
(2) Senior housing herein represents the CRE portfolio and excludes approximately $135 million in non-real estate commercial loans in the senior housing sector. There has been limited new client activity in this sector for several years.
Current report
In the third quarter of 2024, the Company's 7.75% subordinated notes matured.
Current report
See the "Third Quarter Overview" section for details on expectations for CET1.
Current report
RATINGS
Current report
Table 17 "Credit Ratings" reflects the debt ratings information of Regions Financial Corporation and Regions Bank by S&P, Moody’s, Fitch and DBRS.
Current report
Table 17—Credit Ratings
Current report
(1) As of March 31, 2024, DBRS withdrew their rating on Regions Financial Corporations' subordinated debt.
Current report
On September 16, 2024, Moody's affirmed the Company's senior unsecured debt rating and revised its outlook to stable from negative citing its very strong deposit franchise, sound profitability and conservative asset risk profile.
Current report
In general, ratings agencies base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity, asset quality, business mix, probability of government support, and level and quality of earnings. Any downgrade in credit ratings by one or more ratings agencies may impact Regions in several ways, including, but not limited to, Regions’ access to the capital markets or short-term funding, borrowing cost and capacity, collateral requirements, and acceptability of its letters of credit, thereby potentially adversely impacting Regions’ financial condition and liquidity. See the “Risk Factors” section of Regions' Annual Report on Form 10-K for the year ended December 31, 2023 for more information.
Current report
A security rating is not a recommendation to buy, sell or hold securities, and the ratings are subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. Additional information on the credit rating ranking within the overall classification system is located on the website of each credit rating agency.
Current report
(3)The third quarter 2024 amount reflects a reduction to the Company's FDIC special assessment accrual.
Current report
In the third quarter of 2024 the Company added $1.3 billion in forward-starting swaps with a receive rate of 3.22 percent, which will become active in both July 2026 and July 2028 and mature in July 2031. The Company also added $1.2 billion in pay-fixed swaps with an average pay rate of 4.85 percent maturing in 2024.
Current report
Card and ATM Fees
Current report
Card and ATM fees include the combined amounts of credit card/bank card income and debit card and ATM related revenue. Card and ATM fees decreased in both the three and nine months ended September 30, 2024 compared to the same periods in 2023, driven by a decline in foreign ATM revenue due to elimination of balance inquiry fees in February 2024, as well as credit card rewards liability adjustments combined with higher trending rewards utilization.
Current report
FDIC insurance assessments decreased in the three months ended September 30, 2024 as compared to the same period in 2023 primarily resulting from a $4 million reduction in the FDIC special assessment accrual (discussed below) and favorability in the base assessment which was driven by higher levels of unsecured debt and cash as well as lower exposures in higher risk assets. FDIC insurance assessments increased in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily resulting from the special assessment, offset by favorability in the base assessment.
Current report
Visa Class B shares Expense
Current report
Visa class B shares expense is associated with previously sold shares. The Visa class B shares have restrictions tied to finalization of certain covered litigation. Visa class B shares expense increased in the three months ended September 30, 2024 compared to the same period in 2023 due to an expense of $14 million recognized in the third quarter of 2024 for the Company's proportionate share of the escrow funding related to the ongoing covered litigation.
Removed paragraphs (10)
Previous report
SECOND QUARTER OVERVIEW
Previous report
Second Quarter Results
Previous report
On July 17, 2024, the Board declared a 4 percent increase to the quarterly common stock dividend to $0.25 which will be payable on October 1, 2024, to stockholders of record at close of business on September 3, 2024.
Previous report
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 report
Trucking loans within the transportation and warehousing portfolio represent loans to finance the daily operations for the transport of goods on commercial vehicles. The trucking business has faced one of the most prolonged downturns in the U.S domestic freight market. However, the American Trucking Association's May 2024 for-hire truck tonnage index experienced its first year over year and sequential gains since February 2023. Also, larger, established carriers continue to navigate the current economic cycle without significant deterioration in credit quality given less reliance on the spot market rate for pricing rate levels. The portfolio represented 1.5 percent of total loans at June 30, 2024.
Previous report
See the "Second Quarter Overview" section for details on expectations for CET1.
Previous report
Other Miscellaneous Income
Previous report
Other miscellaneous income includes net revenue from affordable housing, valuation adjustments to equity investments, fees from safe deposit boxes, check fees and other miscellaneous income. Net revenue from affordable housing includes actual gains and losses resulting from the sale of affordable housing investments, cash distributions from the investments and any related impairment charges. Other miscellaneous income decreased in the six months ended June 30, 2024 compared to the same period in 2023 due to negative valuation adjustments on certain equity investments and a decline in low income housing disposition fees.
Previous report
CSHE
Previous report
FDIC insurance assessments increased in the six months ended June 30, 2024 compared to the same period in 2023 primarily resulting from a special assessment recorded in the first quarter of 2024 as discussed below.
Reworded paragraphs (81)
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 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.
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 nine months ended September 30, 2024 compared to the three and nine months ended September 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 September 30, 2024 compared to December 31, 2023.
Previous wording
Regions is a financial holding company headquartered in Birmingham, Alabama operating in the South, Midwest and Texas. In addition, Regions operates several offices delivering specialty capabilities in New York, Washington D.C., Chicago and other locations nationwide. Regions provides financial solutions for a wide range of clients including retail and mortgage banking services, commercial banking services and wealth and investment services. Further, Regions and its subsidiaries deliver specialty capabilities including merger and acquisition advisory services, capital markets solutions, home improvement lending and others.
Current wording
Regions is a financial holding company headquartered in Birmingham, Alabama operating in the South, Midwest and Texas. In addition, Regions operates several offices delivering specialty capabilities in New York, Washington D.C., Chicago, Salt Lake City, and other locations nationwide. Regions provides financial solutions for a wide range of clients including retail and mortgage banking services, commercial banking services and wealth and investment services. Further, Regions and its subsidiaries deliver specialty capabilities including merger and acquisition advisory services, capital markets solutions, home improvement lending and others.
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 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.
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 September 30, 2024, Regions operated 1,261 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 $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.
Current wording
Regions reported net income available to common shareholders of $446 million or $0.49 per diluted share in the third quarter of 2024 compared to net income available to common shareholders of $465 million or $0.49 per diluted share in the third quarter of 2023.
Previous 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.
Current wording
Net interest income (taxable-equivalent basis) totaled $1.2 billion in the third quarter of 2024, which decreased $74 million compared to the third quarter of 2023. The net interest margin (taxable-equivalent basis) was 3.54 percent in the third quarter of 2024, reflecting a 19 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 19 "Consolidated Average Daily Balances and Yield/Rate Analysis" for further detail.
Previous 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.
Current wording
The provision for credit losses totaled $113 million in the third quarter of 2024 compared to $145 million in the third quarter of 2023. The current quarter provision reflects continued signs of overall asset quality stabilization experienced during 2024. Net charge-offs totaled $117 million, or 0.48 percent of average loans, in the third quarter of 2024, compared to $101 million, or 0.40 percent in the third quarter of 2023. This increase reflected higher commercial and investor real estate net charge-offs. The allowance as a percent of total loans, net, increased to 1.79 percent at September 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 $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.
Current wording
Non-interest income was $572 million in the third quarter of 2024 compared to $566 million in third quarter of 2023. The increase was primarily driven by an increase in capital markets income, service charges on deposit accounts and investment services fee income. Non-interest income also includes $75 million in securities losses associated with portfolio repositioning executed in the third quarter of 2024. See Table 24 "Non-Interest Income" for further details.
Previous 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.
Current wording
Non-interest expense was $1.1 billion in the third quarter of 2024 which decreased $24 million compared to the third quarter of 2023. The decrease was driven by a decline in operational losses, other miscellaneous expenses and FDIC insurance assessments. The decreases were partially offset by an increase in salaries and employee benefits expense. See Table 25 "Non-Interest Expense" for further details.
Previous 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.
Current wording
Regions' effective tax rate was 19.4 percent in the third quarter of 2024 compared to 20.9 percent in the third 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 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.
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 September 30, 2024, Regions’ CET1 ratio was estimated to be 10.58 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 half of 2024, the Company repurchased 10 million shares of common stock totaling $189 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. During the nine months ended September 30, 2024, the Company repurchased 14 million shares of common stock totaling $290 million.
Previous wording
(1)Expectation for CET1 is to continue to manage consistent with current levels over the near term.
Current wording
(2)Expectation for CET1 is to continue to manage consistent with current levels over the near term.
Previous wording
(2)Expectation for net interest income assumes stable or lower short-term interest rates; flat long-term rate held at June 30, 2024 levels.
Current wording
(3)Expectation for net interest income assumes stable or lower short-term interest rates; flat long-term rates held at September 30, 2024 levels.
Previous wording
The reconciliation with respect to these forward-looking non-GAAP measures is expected to be consistent with the actual non-GAAP reconciliations within Management's Discussion and Analysis of this Form 10-Q. For more information related to the Company's 2024 expectations, refer to the related sub-sections discussed in more detail within Management's Discussion and Analysis of this Form 10-Q.
Current wording
For more information related to the Company's 2024 expectations, refer to the related sub-sections discussed in more detail within Management's Discussion and Analysis of this Form 10-Q.
Previous 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.
Current wording
Cash and cash equivalents increased approximately $3.7 billion from December 31, 2023 to September 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 nine months 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 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.
Current wording
Debt securities available for sale, comprising 21 percent of earning assets, constituted approximately 91 percent of the securities portfolio at September 30, 2024. 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
Debt securities increased $412 million from December 31, 2023 to June 30, 2024 as the Company purchased $750 million of residential agency MBS securities to provide an economic hedge for the June debt issuance in the second quarter of 2024 (see Table 14—Long-Term Borrowings). Two distinct securities repositioning transactions occurred over the first half of 2024. These include the sale of mostly shorter-duration commercial agency MBS and replacement with residential agency MBS with favorable prepayment profiles. The intent was to maintain the securities portfolio duration that would otherwise shorten naturally. In the first quarter of 2024, the Company sold approximately $1.3 billion of debt securities available for sale, realizing $50 million in pre-tax losses. In the second quarter of 2024, the Company sold approximately $983 million of debt securities available for sale, realizing $50 million in pre-tax losses. The proceeds were reinvested at higher market yields.
Current wording
Debt securities increased $2.6 billion from December 31, 2023 to September 30, 2024 as the Company purchased $750 million of residential agency MBS securities with proceeds from a debt issuance in the second quarter of 2024 and an additional $1.0 billion of residential agency MBS securities and U.S Treasury securities with proceeds from a debt issuance in the third quarter of 2024 (see Table 15—Long-Term Borrowings). Additionally, three distinct securities repositioning transactions occurred over the nine months ended September 30, 2024 involving the sale of mostly shorter-duration commercial agency MBS and replacement with residential agency MBS with favorable prepayment profiles. The intent was to maintain the securities portfolio duration that would otherwise shorten naturally. In the first quarter of 2024, the Company sold approximately $1.3 billion of debt securities available for sale, realizing $50 million in pre-tax losses. In the second quarter of 2024, the Company sold approximately $983 million of debt securities available for sale, realizing $50 million in pre-tax losses. In the third quarter of 2024, the Company sold approximately $1.3 billion of debt securities available for sale, realizing $75 million in pre-tax losses. Proceeds from the sales were reinvested at higher market yields.
Previous 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.
Current wording
The average life of the debt securities portfolio at September 30, 2024 was estimated to be 5.8 years, with a duration of approximately 4.7 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 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:
Current wording
Loans, net of unearned income, represented 70 percent of interest-earning assets as of September 30, 2024. The following table presents the distribution of Regions' loan portfolio by 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 "Second 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 "Third 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 $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.
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 $1.3 billion since year-end 2023, due to lower line of credit utilization and loans refinanced off the Company's balance sheet through the debt capital markets. In the nine months ended September 30, 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 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.
Current wording
(1)"Real estate" includes REITs, which are unsecured commercial and industrial products that are real estate related. This portfolio, which accounts for approximately 17 percent and 18 percent of the total commercial exposure at September 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 $13 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 $38 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. 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.
Current wording
Included within Table 5 above, the multi-family (listed as apartments), business offices, and senior housing (listed as healthcare) portfolios are considered portfolios of interest 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. However, the level of heightened systemic risk for the multi-family and senior housing portfolios has started to decline since the second quarter of 2024. Additionally, within the commercial portfolio, the trucking sector of the transportation and warehousing portfolio is also considered a portfolio of interest as trucking companies have been working through the most prolonged downturns in the U.S. domestic freight market. Recent and future rate cuts should ease pressure on borrowers across the entire loan portfolio. See Table 6 below for more details on these portfolios, as well as the allowance discussion following Table 9 .
Previous 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.
Current wording
(1) Approximately 90 percent of the office portfolio was secured, with approximately 62 percent of secured balances located in the South region of the U.S of which 91% was Class A properties. Additionally, the IRE office portfolio had a weighted-average LTV of approximately 66 percent at September 30,
Previous 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.
Current wording
2024, based upon appraisal at origination or most recent received, and a stressed weighted-average LTV of approximately 88 percent as of October 4, 2024, based upon GreenStreet's Commercial Property Price Index. No new loan originations are currently being contemplated in this portfolio.
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 $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.
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 $91 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
The Company calculates an estimate of the current value of property secured as collateral for both residential first mortgage and home equity lending products (“current LTV”). The estimate is based on home price indices compiled by a third party. The third party data indicates trends for MSAs. Regions uses the third party valuation trends from the MSAs in the Company's footprint in its estimate. The trend data is applied to the loan portfolios taking into account the age of the most recent valuation and geographic area.
Current wording
The Company calculates an estimate of the current value of property secured as collateral for both residential first mortgage and home equity lending products (“current LTV”). The estimate is based on home price indices compiled by a third party that is updated typically every three months. The third party data indicates trends for MSAs. Regions uses the third party valuation trends from the MSAs in the Company's footprint in its estimate. The trend data is applied to the loan portfolios taking into account the age of the most recent valuation and geographic area.
Previous 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.
Current wording
Other consumer loans primarily include indirect and direct consumer loans, overdrafts and other revolving loans. Other consumer loans decreased $87 million from year-end 2023 driven by a slight decline in consumer home improvement lending.
Previous wording
Regions considers factors such as periodic updates of FICO scores, unemployment, home prices, and geography as credit quality indicators for consumer loans. FICO scores are obtained at origination and refreshed FICO scores are obtained by the Company quarterly for most consumer loans. For more information on credit quality indicators refer to Note 4 "Loans and the Allowance for Credit Losses".
Current wording
Regions considers factors such as periodic updates of FICO scores, unemployment, and home prices as credit quality indicators for consumer loans. FICO scores are obtained at origination and refreshed FICO scores are obtained by the Company quarterly for most consumer loans. For more information on credit quality indicators refer to Note 4 "Loans and the Allowance for Credit Losses".
Previous 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.
Current wording
In deriving any forecast, Regions benchmarks its internal forecast with external forecasts and external data available. Regions' September 2024 baseline forecast showed some deterioration compared to the June 2024 forecast. Job and wage growth are slowing, but growth in labor earnings is expected to continue to outpace inflation. The trend rate of job growth is slowing, but thus far this has been a function of a slowing rate of hiring as opposed to an increasing rate of layoffs. Regions' baseline forecast anticipates further deceleration in the rate of job growth in the months ahead. The labor force participation rate has risen, which has contributed to an increase in the unemployment rate, but the participation rate is nonetheless expected to remain below pre-pandemic norms, which will limit further increases in the unemployment rate over the forecast horizon. Growth in consumer spending is slowing, but this reflects growth in spending becoming realigned with income growth after the pandemic-related distortions in spending patterns over the past few years. Business investment in machinery and equipment, as well as intellectual property products, is expected to grow at a slow but steady rate over the coming quarters; sustained growth in these areas is necessary to support faster growth in labor productivity over time. Core inflation is expected to slow further but remain above the FOMC's 2.0 percent target rate through 2025. 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 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.
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 third quarter of 2024, overall asset quality continued show signs of stabilization. Commercial and investor real estate criticized balances decreased approximately $171 million, which included a slight increase in classified balances of $98 million compared to the second quarter of 2024. Non-performing loans, excluding held for sale, decreased approximately $26 million compared to the second 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 increased by 6 basis points to 0.48 percent of average loans compared to the second quarter of 2024, driven by one large investor real estate borrower. See Table 12 for more details regarding non-performing assets.
Previous 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.
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 third quarter of 2024, the general imprecision remained stable.
Previous 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.
Current wording
Based upon the factors discussed above, the September 30, 2024 allowance remained relatively stable compared to the second 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 September 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 $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.
Current wording
Details regarding the allowance and net charge-offs, including an analysis of activity from previous year's totals, are included in Table 10 "Allowance for Credit Losses". Net charge-offs increased $74 million year-over-year, primarily driven by increases in commercial and industrial and commercial investor real estate mortgage 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 "Third 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$40 million at June 30, 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$46 million at September 30, 2024 and $34 million at December 31, 2023.
Previous 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.
Current wording
Non-performing loans at September 30, 2024 increased $20 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
(1) Other deposits represent non-customer balances primarily consisting of wholesale funding (for example, Eurodollar trade deposits, selected deposits and brokered time deposits).
Current wording
(1) Other deposits represent non-customer balances primarily consisting of wholesale funding (for example, Eurodollar trade deposits, selected deposits and brokered time deposits). Other deposits include brokered deposits totaling $2.3 billion at September 30, 2024 and $2.4 billion at December 31, 2023.
Previous 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.
Current wording
Total deposits at September 30, 2024 decreased approximately $1.4 billion across most segments and categories compared to year-end 2023 levels due to seasonal consumer spending patterns. Slight growth in corporate deposits was overcome by declines in all other segments. As expected, the pace of deposit remixing from non-interest-bearing into interest-bearing products has continued to slow during 2024. Furthermore, competitive rates declined ahead of the 50 basis point reduction in the Fed funds rate late in the third quarter of 2024.
Previous 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.
Current wording
Regions' deposits are granular and diversified including insured and collateralized deposits, with consumer deposits making up more than 62 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 $9.8 billion in deposits collateralized in public funds or in trusts at September 30, 2024. The amount of estimated uninsured deposits totaled $48.9 billion at September 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 September 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.
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Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
(2) On September 6, 2034, the Notes will bear floating rate interest equal to Compounded SOFR plus 2.06%.
Current report — wording carried from elsewhere
On September 3, 2024, Regions issued $1.0 billion of 5.502% fixed rate to floating rate senior notes due September 2035. The notes will initially bear interest at 5.502% per annum and, commencing on September 6, 2034 in conjunction with the call date, the notes will bear interest at a floating rate per annum equal to Compounded SOFR plus 2.06%.
Current report — wording carried from elsewhere
Subsequent to September 30, 2024, the Company purchased 2.2 million shares for approximately $52 million through November 4, 2024. These shares were immediately retired upon repurchase and therefore were not included in treasury stock.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
(1)"Real estate" includes REITs, which are unsecured commercial and industrial products that are real estate related. This portfolio, which accounts for
Previous report — wording carried elsewhere
(2) Includes brokered deposits totaling $1.8 billion at June 30, 2024 and $2.4 billion at December 31, 2023.