REGIONS FINANCIAL CORP
For the period ended Dec 31, 2024. Filed Feb 21, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 21, 2025
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-K
Period ended 2023-12-31; filed 2024-02-23.
0001281761-24-000010
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-21.
0001281761-25-000010
Item 7. 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 441 previous paragraphs and 427 current paragraphs.
252 unchanged; 113 reworded; 57 added; 74 removed; 2 previous and 5 current paragraphs rearranged.
Tables are not compared: 34 previous and 31 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 (57)
Current report
After what is expected to be full-year 2024 growth of around 2.8 percent, Regions' baseline forecast anticipates real GDP growth of 2.2 percent in 2025. Though the economy grew at a robust pace in 2024, performance across individual sectors varied considerably. Interest rates rose over the latter part of 2024, reflecting persistent inflation pressures and uncertainty over looming policy changes. The Company's baseline forecast anticipates real GDP growth settling back toward the pre-pandemic trend rate of growth over coming quarters. There is considerable uncertainty around any forecast for 2025 made before the specific details of changes to fiscal, trade, immigration, and regulatory policy are made known.
Current report
The pace of job growth slowed over the course of 2024 reflecting a slower pace of hiring amongst firms as opposed to a rising pace of layoffs. The combination of slowing job growth and rapid growth in the supply of labor pushed the unemployment rate higher in 2024. While Regions' forecast anticipates further moderation in the pace of job growth, it also anticipates much slower growth in the supply of labor, in part reflecting likely changes to immigration policy. These two factors should leave the unemployment rate relatively unchanged from where it ended 2024, with an expected annual average rate of 4.2 percent for 2025.
Current report
Despite slowing job growth, aggregate labor earnings, the largest component of personal income, have continued to grow at a rate faster than inflation, which is expected to remain the case through 2025. This will continue to act as a support for consumer spending, and Regions' forecast anticipates growth in consumer spending will align more closely with growth in after-tax income than has been the case over the past few years. Nonetheless, the divide in spending patterns across the various income cohorts that has developed over recent quarters will likely persist in 2025.
Current report
Still-soft global economic growth and uncertainty around looming policy changes have acted as headwinds for the manufacturing sector. Business capital spending has been somewhat limited in range, but the Company's forecast anticipates faster growth over the back half of 2025, in part reflecting expectations there will be a push to enhance labor productivity. Additionally, what is anticipated to be a more conducive regulatory environment could trigger a meaningful pick-up in merger and acquisition activity in 2025.
Current report
Mortgage rates moved higher along with yields on longer-dated U.S. Treasury securities during the fourth quarter of 2024, dealing a setback to construction and sales of new single family homes. Builders have been able to facilitate sales via aggressive use of incentives, including mortgage rate buydowns, but have been more focused on paring down spec inventories. As such, construction starts of new single family homes tailed off over the second half of 2024 and Regions' forecast anticipates further declines in 2025.
Current report
Though the FOMC cut the Fed funds rate at their final meeting of 2024, it signaled a slower pace of rate cuts in 2025. Inflation pressures have proven to be more persistent than had been anticipated, and while having some concerns about cooling labor market conditions, FOMC members perceive growing upside risks to their inflation forecasts. Regions' baseline forecast anticipates two twenty-five basis point funds rate cuts in 2025, though the timing of any cuts remains somewhat uncertain, particularly given the perceived inflation impacts of looming changes to fiscal, trade, and immigration policy. To the extent there is less relief on the rates front than anticipated, potential downside risks from certain pockets of commercial real estate and the volume of debt in the non-financial corporate sector coming up for refinancing over coming quarters will continue to loom over the outlook.
Current report
Patterns of economic activity within the Regions footprint are expected to be broadly similar to those seen for the U.S. as a whole. As the Company anticipated, the pace of domestic in-migration into the Regions footprint slowed in 2024, likely reflecting a less dynamic labor market and challenging housing market conditions. Still, this left the pace of domestic in-migration in line with pre-pandemic norms, and growth in total population in the footprint continued to easily outpace the national average, and that also remains the case with growth in nonfarm payrolls. Some of the metro areas which had seen the largest cumulative increases over the prior few years have begun to see house prices decline, but underlying demand, in part reflecting above-average population growth, will help stem the extent of any such declines. Also, given the extent to which house prices have risen over recent years in these markets, the declines in house prices do not threaten to push owners into negative equity positions.
Current report
Non-interest income improved slightly, totaling $2.3 billion in both 2024 and 2023. The improvement was driven by increases in most categories, led by capital markets income. These increases were largely offset by net securities losses and decreased card and ATM fees. See Table 3 "Non-Interest Income" for further details.
Current report
During 2024, total loans decreased by $1.7 billion or 1.7 percent compared to 2023. The decrease was primarily driven by a decline in the commercial portfolio of $1.2 billion. The decline in commercial loans, specifically commercial and industrial loans, is due to lower line of credit utilization and loans refinanced off the Company's balance sheet through the debt capital markets. Refer to the "Portfolio Characteristics" section for further discussion.
Current report
The Company completed its annual goodwill impairment test as of October 1, 2024, by performing a qualitative assessment of goodwill at the reporting unit level to determine whether any indicators of impairment existed. In performing the qualitative assessment, the Company evaluated events and circumstances since the last impairment analysis, recent operating performance including reporting unit performance, changes in market capitalization, regulatory actions and assessments, changes in the business climate, company-specific factors, and trends in the banking industry. After assessing the totality of the events and circumstances, the Company determined that it is more likely than not that the fair value of the Corporate Bank, Consumer Bank, and Wealth Management reporting units exceed their respective carrying values. Therefore, a quantitative impairment test was not required. Refer to Note 9 "Intangible Assets" to the consolidated financial statements for additional discussion of goodwill.
Current report
Specific factors as of the date of filing the consolidated financial statements that could negatively impact the assumptions used in assessing goodwill for impairment include: a protracted decline in the Company’s market capitalization; adverse business trends resulting from litigation and/or regulatory actions; higher loan losses; forecasts of high unemployment levels; future increased minimum regulatory capital requirements above current thresholds (refer to Note 12 "Regulatory Capital Requirements and Restrictions" to the consolidated financial statements for a discussion of current minimum regulatory requirements); future federal rules and regulations (e.g., such as those resulting from the Dodd-Frank Act); and/or significant volatility in interest rates.
Current report
Mortgage Servicing Rights
Current report
Partially offsetting the increase in funding costs were higher asset yields benefiting from the maturity and continued replacement of lower-yielding, fixed-rate loans and securities. The Company's loan yields are primarily influenced by short-term interest rates such as 30-day term SOFR, which averaged 5.19 percent in 2024 compared to 4.98 percent in 2023. Additionally, fixed-rate lending production, which contains significant residential mortgage fixed-rate exposure, benefited from higher middle and long-term rates. The Company also continued its reinvestment strategy in the securities portfolio and executed multiple, distinct debt securities repositioning transactions. As a result, the debt securities yield increased to 2.89 percent in 2024 from 2.38 percent in 2023. See Table 6 for more information.
Current report
PROVISION FOR CREDIT LOSSES
Current report
On December 12, 2024, the CFPB adopted a final rule that caps overdraft fees in line with a benchmark fee of $5 or an amount that covers an institution's costs and losses using a standard set forth in the rules. Alternatively, an institution can charge higher overdraft fees by complying with the standard regulatory requirements governing other loans, including credit cards. The final rule is currently scheduled to take effect on October 1, 2025. However, under the presidential memorandum entitled “Regulatory Freeze Pending Review,” rules with future effective dates may be re-evaluated. Therefore, though the Company will continue to monitor and evaluate potential impact, the nature and timing of future developments that may potentially impact this or other CFPB rules and proposals cannot be predicted.
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 2024 compared to 2023, driven by credit card rewards liability adjustments combined with higher trending rewards utilization, as well as a decline in foreign ATM revenue due to elimination of balance inquiry fees in February 2024.
Current report
Securities Gains (Losses), Net
Current report
Net securities gains (losses) primarily result from the Company's asset/liability and capital management processes. In 2024, the Company sold debt securities and reinvested the proceeds at higher current market yields, incurring $205 million in total pre-tax losses. See Table 5 "Debt Securities" for more information. An additional $3 million in losses was incurred associated with the sale of certain employee benefit assets.
Current report
FDIC insurance assessments decreased in 2024 compared to 2023 primarily resulting from the special assessment that was initially recorded in 2023.
Current report
In addition to the reduction in accruals for the special assessment, 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, further drove the year-over-year decrease in FDIC insurance assessments.
Current report
Debt securities held to maturity constituted approximately 14 percent of the securities portfolio at December 31, 2024. The Company reclassified securities with an amortized cost, excluding items recognized in OCI, of $2.5 billion and $2.0 billion, in the third and fourth quarters of 2024, respectively, 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
Debt securities increased $1.8 billion from December 31, 2023 to December 31, 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 Note 11 "Borrowed Funds"). Additionally, four distinct securities repositioning transactions occurred during 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. Proceeds from the sales were reinvested at higher market yields. Through these transactions, in 2024, the Company sold approximately $4.3 billion of debt securities available for sale and realized approximately $205 million in pre-tax losses.
Current report
The following table details the contractual maturities for loans as of December 31, 2024. In instances of contractual deferral, the new contractual maturity is used to determine maturity as outlined in the allowance section of Note 1 "Summary of Significant Accounting Policies".
Current report
Underwriting of commercial loans includes the assessment of the financial performance and profile, management experience and capability, industry position and outlook, the applicability of the transactional structure, as well as the repayment enhancement provided by collateral, guarantees, and ownership or sponsorship. Any forward view of operating performance is tested against applicable stressors that may include revenue decline, margin compression, and interest rate hikes.
Current report
Commercial and industrial loans decreased $1.2 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. Throughout 2024, the decline in commercial and industrial loans was broad-based as shown in Table 11.
Current report
Underwriting for owner-occupied real estate and real estate construction loans is consistent with the underwriting of commercial loans, with particular attention to the enhancement provided by the underlying real estate collateral.
Current report
Real estate appraisals, for both commercial and IRE loans, are performed in accordance with regulatory guidelines. In some cases, reports from automated valuation services are used or internal evaluations are performed. An appraisal is ordered and reviewed prior to loan closing, and a new appraisal or evaluation is generally ordered when market conditions indicate a potential decline in the value of the collateral, or when the loan is either modified, renewed, or deteriorates to a certain level of credit weaknesses.
Current report
IRE loans generally mature within a three-to-seven-year period and consist of full, partial, and non-recourse guarantee structures. Typical term loan structures include annually testing operating covenants that require loan rebalancing based on minimum debt service coverage, debt yield, and/or LTV tests. Construction and land development loans generally mature in 12 to 24 months for acquisition and development, to 42 to 60 months for construction and contain full or partial recourse guarantee structures with 12 to 24 month extension options or roll-to-permanent financing options that often result in term loans.
Current report
Underwriting on IRE properties is based on the economic viability of the project with significant consideration given to the creditworthiness and experience of the sponsor, who is responsible for managing the property. The Company generally requires that the owner, who provides the capital to purchase the property, infuse their equity prior to any advances. Re-margining requirements (e.g., required equity infusions upon a decline in value or cash flow of the collateral) are often included in the loan agreement along with required guarantees of the sponsor.
Current report
Table 11—Commercial and Investor Real Estate Industry Exposure
Current report
Portfolios that are experiencing higher risk 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 are identified as portfolios of interest. These portfolios have an increased focus through credit management and monitoring in order to accurately capture risk and enhance strategies for positive resolutions. Included within Table 11 above, the business offices, senior housing (included within healthcare), and trucking (including within transportation and warehousing) portfolios are considered by Regions to be portfolios of interest. The multi-family portfolio that was previously identified as a portfolio of interest was removed in the fourth quarter of 2024 as Regions does not expect near term losses nor has there been a significant amount of downward migration to non-performing status. Recent and potential future interest rate cuts should ease pressure on borrowers across the entire loan portfolio. See Table 13 below for more details on these portfolios, as well as the allowance discussion following Table 16.
Current report
Table 13—Portfolios of Interest
Current report
(1) Approximately 89 percent of the office portfolio was secured, with approximately 60 percent of secured balances located in the South region of the U.S, of which 90% were Class A properties. Additionally, the IRE office portfolio had a weighted-average LTV of approximately 69 percent at December 31, 2024, based upon appraisal at origination or most recent received, and a stressed weighted-average LTV of approximately 85 percent as of January 7, 2025, based upon GreenStreet's Commercial Property Price Index. No new loan originations are being contemplated in this portfolio.
Current report
(2) Senior housing herein represents the CRE portfolio and excludes approximately $147 million in non-real estate commercial loans in the senior housing sector. Client activity in senior housing has been limited for several years as the portfolio has recovered from the vacancy rate lows of 2020-2021, but signs of improvement have been observed with expected improvements continuing in 2025.
Current report
(3) Considered a portfolio of interest as trucking companies have been working through one of the most prolonged downturns in the U.S. domestic freight market, recent measures of freight demand remained mostly positive. While there is optimism for the industry, the recovery in 2025 is expected to be gradual. Regions' strategy remains primarily centered around larger, existing clients and slowing originations of smaller trucking deals at this point in the cycle.
Current report
ALLOWANCE
Current report
Regions' quarterly allowance estimation process utilizes loss forecasting models for pooled loans, specific reserves for significant individually evaluated non-performing loans, and qualitative adjustments for items not captured by the models including specific adjustments and general imprecision. Key inputs to Regions' loss forecasting models include, but are not limited to, loan risk ratings (commercial and investor real estate loans), maturity date, days past due and FICO scores (consumer loans), collateral values securing loans, and Regions' internally prepared economic forecast. Changes in any of these factors, assumptions, or the availability of new information, could require the allowance to be adjusted in future periods, perhaps materially. Outputs from the loss forecasting models, in combination with Regions' qualitative framework and other analyses, inform management in its estimation of Regions' expected credit losses to ensure the overall allowance estimate is appropriate from both a bottom-up and top-down perspective. Actual losses could vary, perhaps materially, from management’s estimates. See Note 1 "Summary of Significant Accounting Policies" for more information.
Current report
The December 31, 2024 allowance was flat compared to September 30, 2024. The stable allowance resulted from increases in specific reserves driven by non-performing loans in portfolios of interest, offset by decreases due to moderate improvement in the economic forecast and decreases in qualitative adjustments as more of the portfolio risk was captured in the forecasting models and specific reserves. The following sections provide additional details on the key components of the allowance.
Current report
Base economic forecast
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Removed paragraphs (74)
Previous report
After full-year 2023 growth of 2.5 percent, Regions' baseline forecast anticipates real GDP growth of 2.6 percent in 2024. While the Company did not have recession as its base forecast for 2023, the economy outperformed expectations, reflecting marked improvement on the supply side of the economy that allowed for faster growth and decelerating inflation. Growth is expected to be somewhat restrained over the first half of 2024 before picking up over the second half of the year.
Previous report
The labor market proved to be resilient in 2023. While the pace of job growth slowed over the course of the year, it was driven by a slower pace of hiring as opposed to a rising pace of layoffs. This pattern is expected to continue in 2024, with further slowing in the pace of job growth putting upward pressure on the unemployment rate, but the Company does not anticipate a significant, broad-based, and sustained spike in layoffs.
Previous report
A slowing pace of job growth will lead to further deceleration in growth of aggregate labor earnings, but growth in labor earnings is expected to continue to outpace inflation, thus providing support for consumer spending. Household balance sheets remain notably healthy, and the preponderance of fixed-rate debt on household balance sheets has been a buffer against the effects of higher interest rates. Full-year 2024 growth in real consumer spending is expected to be slightly faster than 2023 growth.
Previous report
Real business investment in equipment and machinery is expected to remain soft before picking up over the second half of 2024. At the same time, the wave of business spending on structures seen over much of 2023 is subsiding, to the point that real spending on structures is expected to offer little, if any, support for real GDP growth in 2024. After having been displaced by spending on structures in 2023, business investment in intellectual property products is expected to return to its usual role as the fastest growing segment of real business fixed investment.
Previous report
Higher mortgage interest rates weighed on single family construction and sales in 2023, but sales of new single family homes proved to be more resilient than anticipated driven by a combination of still-significant pent-up demand for home purchases and the lack of existing single family homes for sale. While mortgage rates have started to decline, helping to ease affordability constraints, it will likely not do much to unlock inventories of existing homes for sale. Builders should fare better in 2024 and real residential fixed investment should be a modest support for top-line real GDP growth in 2024.
Previous report
Further deceleration in inflation in 2024, driven by a slower pace of economic growth, a modestly rising unemployment rate, and the avoidance of disruptions to the supply side of the economy would be consistent with the FOMC beginning to cut the Fed funds rate even with inflation above their 2.0 percent target rate. The real, or, inflation-adjusted, current funds rate is meaningfully restrictive, and further deceleration in inflation without cuts in the Fed funds rate would effectively make policy more restrictive. As such, we expect four twenty-five basis point cuts in the Fed funds rate by year-end 2024.
Previous report
Patterns of economic activity within the Regions footprint are expected to be broadly similar to those seen for the U.S. as a whole. A number of in-footprint states have seen heightened flows of domestic in-migration since the onset of the pandemic, which has resulted in more rapid rates of job growth and more rapid growth in housing costs. If, as Regions anticipates, the broader economy slows and labor market conditions loosen, it could be that migration patterns will shift over coming quarters. Job growth for the Company's footprint as a whole is expected to be faster than that for the U.S. as a whole. Some of the metro areas which had, prior to the increase in mortgage interest rates, seen the largest increases in house prices could experience declining house prices, but continued robust population growth in these markets will help stem the extent of any such declines.
Previous report
Non-interest income was $2.3 billion in 2023 compared to $2.4 billion in 2022. The decrease was primarily driven by lower capital markets income, service charges on deposit accounts and mortgage income partially offset by an increase in market valuation adjustments on employee benefit assets. See Table 4 "Non-Interest Income" for further details.
Previous report
During 2023, total loans increased by $1.4 billion or 1.4 percent compared to 2022. The increase was primarily driven by an increase in the consumer portfolio of $1.2 billion, with the combined balance of commercial and investor real estate loans also increasing by $198 million. The increase in consumer loans reflects growth in residential first mortgage and in other consumer loans, which was driven by consumer home improvement loans. Refer to the "Portfolio Characteristics" section for further discussion.
Previous report
•Adjusted Net Charge-offs within the Table 1 "GAAP to Non-GAAP Reconciliations"
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2024 Expectations
Previous report
(1)Expectation for CET1 is to continue to manage around 10 percent over the near term.
Previous report
(2)Expectation for net interest income assumes stable or lower short-term interest rates; flat long-term rate held at December 31, 2023 levels.
Previous report
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-K. 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-K.
Previous report
NON-GAAP MEASURES
Previous report
The table below presents computations of earnings and certain other financial measures, which excludes certain adjustments that are included in the financial results presented in accordance with GAAP. These non-GAAP financial measures include "adjusted net loan charge-offs", "adjusted net loan charge-offs as a percent of average loans, annualized", "adjusted non-interest expense", "adjusted non-interest income", "adjusted total revenue", and "adjusted total revenue, taxable-equivalent basis". Regions believes that excluding certain items provides a meaningful base for period-to-period comparison, which management believes will assist investors in analyzing the operating results of the Company and predicting future performance. These non-GAAP financial measures are also used by management to assess the performance of Regions’ business because management does not consider the activities related to the adjustments to be indications of ongoing operations. Regions believes that presentation of these non-GAAP financial measures will permit investors to assess the performance of the Company on the same basis as that applied by management. Management and the Board utilize these non-GAAP financial measures as follows:
Previous report
•Preparation of Regions’ operating budgets
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•Monthly financial performance reporting
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•Monthly close-out reporting of consolidated results
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•Presentations to investors of Company performance
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•Metrics for incentive compensation
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Net loan charge-offs (GAAP) are presented excluding adjustments to arrive at adjusted net loan-charge offs (non-GAAP). Adjusted net loan charge-offs as a percentage of average loans (non-GAAP) are calculated as adjusted net loan charge-offs (non-GAAP) divided by average loans (GAAP) and annualized. Non-interest expense (GAAP) is presented excluding adjustments to arrive at adjusted non-interest expense (non-GAAP). Net interest income (GAAP) is presented with taxable-equivalent adjustments to arrive at net interest income on a taxable-equivalent basis (GAAP). Non-interest income (GAAP) is presented excluding adjustments to arrive at adjusted non-interest income (non-GAAP). Net interest income (GAAP) and adjusted non-interest income (non-GAAP) are added together to arrive at adjusted total revenue (non-GAAP). Net interest income on a taxable-equivalent basis (GAAP) and adjusted non-interest income (non-GAAP) are added together to arrive at adjusted total revenue on a taxable-equivalent basis (non-GAAP).
Previous report
Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. Although these non-GAAP financial measures are frequently used by stakeholders in the evaluation of a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP. In particular, a measure of earnings that excludes selected items does not represent the amount that effectively accrues directly to shareholders.
Previous report
The following table provides: 1) a reconciliation of net loan charge-offs (GAAP) to adjusted net loan charge-offs (non-GAAP), 2) a computation of adjusted net loan charge-offs as a percentage of average loans, annualized (non-GAAP). 3) a reconciliation of non-interest expense (GAAP) to adjusted non-interest expense (non-GAAP), 4) a reconciliation of non-interest income (GAAP) to adjusted non-interest income (non-GAAP), 5) a computation of adjusted total revenue (non-GAAP), and 6) a computation of adjusted total revenue on a taxable-equivalent basis (non-GAAP).
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Table 1—GAAP to Non-GAAP Reconciliations
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(1)In the fourth quarter of 2023, the Company sold substantially all of its portfolio of a third party relationship. At the end of the third quarter of 2022, the Company made the strategic decision to sell certain unsecured consumer loans. For both of these transactions, the loans were marked to fair value through charge-offs.
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(1)See the "Executive Overview" for 2024 expectations for adjusted non-interest income and non-interest expense.
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(2)In the third quarter of 2022, the Company incurred settlement expenses related to a previously disclosed matter with the CFPB. The Company received insurance proceeds related to this settlement. The 2021 professional, legal and regulatory expenses are related to professional and legal expenses for acquisitions.
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(3)The 2021 amount is related to an individual BOLI claim benefit.
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Allowance for Credit Losses
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The Company completed its annual goodwill impairment test as of October 1, 2023; the Company elected to bypass the qualitative assessment and performed a quantitative assessment of goodwill at the reporting unit level to determine whether the fair value exceeded the carrying value. In performing the quantitative assessment, the estimated fair value of the reporting unit was determined using a blend of both income and market approaches.
Previous report
The results of the goodwill impairment test did not require Regions to record a goodwill impairment charge as all three reporting units continued to have a fair value in excess of carrying value.
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Residential Mortgage Servicing Rights
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Refer to Note 6 "Servicing of Financial Assets" to the consolidated financial statements for additional disclosure on residential mortgage servicing rights.
Previous report
Net interest income (taxable-equivalent basis) increased by $538 million in 2023 compared to 2022, and net interest margin increased by 54 basis points to 3.90 percent in 2023. The increases in net interest income and net interest margin were driven primarily by significantly higher short-term and long-term market interest rates and average loan growth. The loan portfolio yield, inclusive of hedging impacts, increased to 5.86 percent in 2023 from 4.46 percent in 2022. The Company's loan yields are primarily influenced by short-term interest rates such as 30-day term SOFR, which averaged 4.98 percent in 2023 compared to 1.46 percent in 2022. Additionally, fixed-rate lending production which contains significant residential mortgage fixed-rate exposure, benefited from higher middle and long-term rates. While the Company temporarily slowed reinvestment within the investment securities portfolio for much of 2023, it had returned to full reinvestment by the fourth quarter. The investment securities portfolio benefited from rising rates, with the yield increasing to 2.38 percent in 2023 from 2.20 percent in 2022.
Previous report
Additionally, net interest margin benefited from earning asset remixing out of cash balances held with the Federal Reserve Bank, which are the primary component of interest-bearing deposits in other banks shown in Table 2. In 2022, elevated cash balances were held to fund anticipated, post-pandemic deposit outflows, reducing the net interest margin in that period. Cash balances largely returned to normal levels by the end of 2023.
Previous report
Average loans as a percentage of average earning assets was 71 percent and 64 percent in 2023 and 2022, respectively. The remaining categories of earning assets are shown in Table 2 "Consolidated Average Daily Balances and Yield/Rate Analysis". The proportion of average earning assets to average total assets, which was 90 percent in both 2023 and 2022, measures the effectiveness of management’s efforts to invest available funds into the most profitable earning instruments.
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PROVISION FOR (BENEFIT FROM) CREDIT LOSSES
Previous report
On January 17, 2024, the CFPB issued a proposal for public comment that, if finalized, would cap overdraft fees in line with established benchmarks ranging between $3-$14 or their actual costs. Alternatively, an institution could calculate its own fee to break even. The Company is studying the proposal and evaluating its impact.
Previous report
Insurance Proceeds
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Previous wording
Management believes the following sections provide an overview of several of the most relevant matters necessary for an understanding of the financial aspects of Regions's business, particularly regarding its 2023 results. Cross references to more detailed information regarding each topic within MD&A and the consolidated financial statements are included. This summary is intended to assist in understanding the information provided, but should be read in conjunction with the entire MD&A and consolidated financial statements, as well as the other sections of this Annual Report on Form 10-K.
Current wording
Management believes the following sections provide an overview of several of the most relevant matters necessary for an understanding of the financial aspects of Regions' business, particularly regarding its 2024 results. Cross references to more detailed information regarding each topic within MD&A and the consolidated financial statements are included. This summary is intended to assist in understanding the information provided, but should be read in conjunction with the entire MD&A and consolidated financial statements, as well as the other sections of this Annual Report on Form 10-K.
Previous wording
The continued economic uncertainty, as described above, impacted Regions' forecast utilized in calculating the ACL as of December 31, 2023. See the "Allowance" section for further information.
Current wording
The economic environment, as described above, impacted Regions' forecast utilized in calculating the ACL as of December 31, 2024. See the "Allowance" section for further information.
Previous wording
Regions reported net income available to common shareholders of $2.0 billion or $2.11 per diluted share in 2023 compared to net income available to common shareholders of $2.1 billion or $2.28 per diluted share in 2022.
Current wording
Regions reported net income available to common shareholders of $1.8 billion or $1.93 per diluted share in 2024 compared to net income available to common shareholders of $2.0 billion or $2.11 per diluted share in 2023.
Previous wording
Net interest income (taxable-equivalent basis) totaled $5.4 billion in 2023 compared to $4.8 billion in 2022. The net interest margin (taxable-equivalent basis) was 3.90 percent in 2023, reflecting a 54 basis point increase from 2022. The increase in net interest income was primarily driven by a significant increase in market interest rates and average loan growth. Deposit mix and pricing normalization combined with higher overall funding costs, which are expected in a rising rate environment, partially offset the increases in net interest income.
Current wording
Net interest income (taxable-equivalent basis) totaled $4.9 billion in 2024 compared to $5.4 billion in 2023. The net interest margin (taxable-equivalent basis) was 3.54 percent in 2024, reflecting a 36 basis point decrease from 2023. The decreases in net interest income and net interest margin were primarily driven by higher funding costs, which included an increase in deposit costs due to continued re-mixing. Partially offsetting the increase in funding costs was higher asset yields benefiting from the maturity and continued replacement of lower-yielding, fixed-rate loans and securities. See Table 2 "Volume and Yield/Rate Variances" for further details.
Previous wording
The provision for credit losses totaled $553 million in 2023 compared to $271 million in 2022. The provision for credit losses was higher than net charge-offs by $156 million in 2023. The increase in the provision for credit losses was driven primarily by adverse risk migration and continued credit normalization, as well as a build in qualitative adjustments for incremental risk in higher risk portfolios. Refer to the "Allowance for Credit Losses" section of Management's Discussion and Analysis for further detail.
Current wording
The provision for credit losses totaled $487 million in 2024 compared to $553 million in 2023. The provision for credit losses was higher than net charge-offs by $29 million in 2024. The decrease in the provision for credit losses was driven primarily by asset quality normalization. Refer to the "Allowance for Credit Losses" section of Management's Discussion and Analysis for further detail.
Previous wording
Non-interest expense was $4.4 billion in 2023 and $4.1 billion in 2022. The increase was driven by an increase in FDIC insurance assessments primarily related to the special assessment, operational losses, and salaries and employee benefits. These increases were partially offset by a decline in professional, legal and regulatory expenses related to a settled matter with the CFPB in 2022. See Table 5 "Non-Interest Expense" for further details.
Current wording
Non-interest expense was $4.2 billion in 2024 and $4.4 billion in 2023. The decrease was driven by declines in operational losses, FDIC insurance assessments primarily related to the special assessment initially recognized in 2023, and miscellaneous expenses. The declines were partially offset by an increase in salaries and employee benefits. See Table 4 "Non-Interest Expense" for further details.
Previous wording
Regions' effective tax rate was 20.5 percent in 2023 compared to 22.0 percent in 2022. See the "Income Taxes" section for further details.
Current wording
Regions' effective tax rate was 19.6 percent in 2024 compared to 20.5 percent in 2023. See the "Income Taxes" section for further details.
Previous wording
On April 20, 2022, the Board authorized 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 fourth quarter of 2023, Regions repurchased approximately 16 million shares of common stock under these programs, which reduced shareholders' equity by $252 million.
Current wording
On April 20, 2022, the Board authorized 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. As of December 31, 2024, Regions repurchased approximately 34 million shares of common stock under this program, which reduced shareholders' equity by $614 million. On December 10, 2024, the Board authorized an extension of the common stock repurchase program through the fourth quarter of 2025.
Previous wording
Regions and Regions Bank are required to comply with regulatory capital requirements established by Federal and State banking agencies. Under the Basel III Rules, Regions is designated as a standardized approach bank. The Basel III Rules maintain the minimum guidelines for Regions to be considered well-capitalized for Tier 1 capital and Total capital at 6.0% and 10.0%, respectively. At December 31, 2023, Regions’ Tier 1 capital and Total capital ratios were estimated to be 11.57% and 13.35%, respectively.
Current wording
Regions and Regions Bank are required to comply with regulatory capital requirements established by Federal and State banking agencies. Under the Basel III Rules, Regions is designated as a standardized approach bank. The Basel III Rules maintain the minimum guidelines for Regions to be considered well-capitalized for Tier 1 capital and Total capital at 6.0% and 10.0%, respectively. At December 31, 2024, Regions’ Tier 1 capital and Total capital ratios were estimated to be 12.17% and 14.06%, respectively.
Previous wording
The Basel III Rules also officially defined CET1. Regions' CET1 ratio at December 31, 2023 was estimated to be 10.26%.
Current wording
The Basel III Rules also officially defined CET1. Regions' CET1 ratio at December 31, 2024 was estimated to be 10.80%.
Previous wording
Net charge-offs totaled $397 million, or 0.40 percent of average loans, in 2023, compared to $263 million, or 0.29 percent in 2022, with both periods reflecting an increase in consumer charge-offs due to the sale of loan portfolios. In 2023 and 2022, adjusted net charge-offs (non-GAAP) totaled $362 million, or 0.37 percent, and $200 million, or 0.22 percent, respectively. See Table 1 "GAAP to Non-GAAP Reconciliations for additional information. Commercial and industrial net charge-offs also increased from 2022 to 2023. The allowance was 1.73 percent of total loans, net of unearned income at December 31, 2023, an increase from 1.63 percent at December 31, 2022. The coverage ratio of allowance to non-performing loans excluding held for sale was 211 percent at December 31, 2023, compared to 317 percent at December 31, 2022.
Current wording
Net charge-offs totaled $458 million, or 0.47 percent of average loans, in 2024, compared to $397 million, or 0.40 percent in 2023, driven by an increase in commercial and industrial and commercial investor real estate mortgage net charge-offs. The allowance was 1.79 percent of total loans, net of unearned income at December 31, 2024, an increase from 1.73 percent at December 31, 2023. The coverage ratio of allowance to non-performing loans excluding held for sale was 186 percent at December 31, 2024, compared to 211 percent at December 31, 2023.
Previous wording
At the end of 2023, Regions Bank had $4.2 billion in cash on deposit with the Federal Reserve Bank and the loan-to-deposit ratio was 77 percent. Cash and cash equivalents at the parent company totaled $1.9 billion. Cash at the Federal Reserve declined from December 31, 2022 due to an expected decline in deposits, as well as growth in loans.
Current wording
At the end of 2024, Regions Bank had $7.8 billion in cash on deposit with the Federal Reserve Bank and the loan-to-deposit ratio was 76 percent. Cash and cash equivalents at the parent company totaled $2.4 billion. Cash at the Federal Reserve increased from December 31, 2023.
Previous wording
At December 31, 2023, the Company’s borrowing capacity with the Federal Reserve was $21.3 billion based on available collateral. Borrowing availability with the FHLB was $15.1 billion based on available collateral at the same date. Regions also maintains a shelf registration statement with the U.S. Securities and Exchange Commission that can be utilized by the Company to issue various debt and/or equity securities. Additionally, Regions' Board has authorized Regions Bank to issue up to $10 billion in aggregate principal amount of bank notes outstanding at any one time.
Current wording
At December 31, 2024, the Company’s borrowing capacity with the Federal Reserve was $21.6 billion based on available collateral. Borrowing availability with the FHLB was $10.2 billion based on available collateral at the same date. Regions also maintains a shelf registration statement with the SEC that can be utilized by the Company to issue various debt and/or equity securities. Additionally, Regions' Board has authorized Regions Bank to issue up to $10 billion in aggregate principal amount of bank notes outstanding at any one time.
Previous wording
•“Borrowings” discussion within the “Balance Sheet Analysis” section of MD&A
Current wording
•“Borrowed Funds” discussion within the “Balance Sheet Analysis” section of MD&A
Previous wording
In preparing financial information, management is required to make significant estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses for the periods shown. The accounting principles followed by Regions and the methods of applying these principles conform with GAAP, regulatory guidance, where applicable, and general banking practices. Estimates and assumptions most significant to Regions are related primarily to the allowance for credit losses, fair value measurements, intangible assets (goodwill and other identifiable intangible assets), residential MSRs and income taxes, and are summarized in the following discussion and in the notes to the consolidated financial statements.
Current wording
In preparing financial information, management is required to make significant estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses for the periods shown. The accounting principles followed by Regions and the methods of applying these principles conform with GAAP, regulatory guidance, where applicable, and general banking practices. Estimates and assumptions most significant to Regions are related primarily to the allowance, fair value measurements, intangible assets (goodwill and other identifiable intangible assets), MSRs measured at fair value, and income taxes, and are summarized in the following discussion and in the notes to the consolidated financial statements.
Previous wording
The allowance for credit losses (“allowance”) consists of two components: the allowance for loan losses and the reserve for unfunded credit commitments. Unfunded credit commitments include items such as letters of credit, financial guarantees and binding unfunded loan commitments. Regions determines its allowance in accordance with GAAP and applicable regulatory guidance.
Current wording
The allowance consists of two components: the allowance for loan losses and the reserve for unfunded credit commitments. Unfunded credit commitments include items such as letters of credit, financial guarantees and binding unfunded loan commitments. Regions determines its allowance in accordance with GAAP and applicable regulatory guidance.
Previous wording
The allowance is sensitive to a number of internal factors, such as changes in the mix and level of loan balances outstanding, portfolio performance and assigned risk ratings. The allowance is also sensitive to external factors such as the general health of the economy, as evidenced by changes in interest rates, inflation, GDP, unemployment rates, changes in real estate demand and values, volatility in commodity prices, bankruptcy filings, health pandemics, government stimulus, and the effects of weather and natural disasters such as droughts, floods and hurricanes.
Current wording
The allowance is sensitive to a number of internal factors, such as changes in the mix and level of loan balances outstanding, portfolio performance and assigned risk ratings. The allowance is also sensitive to external factors such as the general health of the economy, as evidenced by changes in interest rates, inflation, GDP, unemployment rates, changes in real estate demand and values, volatility in commodity prices, bankruptcy filings, and the effects of weather and natural disasters such as droughts, floods and hurricanes.
Previous wording
It is difficult to estimate how potential changes in any one economic factor might affect the overall allowance because a wide variety of factors and inputs are considered in the allowance estimate. Changes in the factors and inputs may not occur at the same rate and may not be consistent across all product types. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others. However, to consider the impact of a hypothetical alternate economic forecast, Regions estimated the allowance using a scenario that was one standard deviation unfavorable to the expected scenario for each macroeconomic variable. This unfavorable scenario resulted in an allowance approximately 16 percent higher than the allowance using the expected scenario.
Current wording
It is difficult to estimate how potential changes in any one economic factor might affect the overall allowance because a wide variety of factors and inputs are considered in the allowance estimate. Changes in the factors and inputs may not occur at the same rate and may not be consistent across all product types. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others. However, to consider the impact of a hypothetical alternate economic forecast, Regions estimated the allowance using a scenario that was one standard deviation unfavorable to the expected scenario for each macroeconomic variable. This unfavorable scenario resulted in an allowance approximately 15 percent higher than the allowance using the expected scenario.
Previous wording
Similar to the scenarios above, it is difficult to estimate how potential changes in credit risk factors might affect the overall allowance because of the wide variety of credit risk factors that are considered in estimating the allowance. Changes in risk ratings may not occur at the same rate and may not be consistent across product or industry types. Regions conducted a separate sensitivity analysis considering deteriorating conditions for commercial and investor real estate portfolio factors by stressing key portfolio drivers relative to the baseline portfolio conditions. Regions stressed risk ratings by one downgrade for commercial and investor real estate loans. This scenario generated an increase in the modeled allowance of approximately $185 million for the commercial and investor real estate portfolios.
Current wording
Similar to the scenarios above, it is difficult to estimate how potential changes in credit risk factors might affect the overall allowance because of the wide variety of credit risk factors that are considered in estimating the allowance. Changes in risk ratings may not occur at the same rate and may not be consistent across product or industry types. Regions conducted a separate sensitivity analysis considering deteriorating conditions for commercial and investor real estate portfolio factors by stressing key portfolio drivers relative to the baseline portfolio conditions. Regions stressed risk ratings by one downgrade for commercial and investor real estate loans. This scenario resulted in an allowance approximately 20 percent higher for the commercial and investor real estate portfolios.
Previous wording
A portion of the Company’s assets and liabilities is carried at fair value, with changes in fair value recorded either in earnings or accumulated other comprehensive income (loss). These include debt securities available for sale, mortgage loans held for sale, equity investments (with and without readily determinable market values), residential MSRs and derivative assets and liabilities. From time to time, the estimation of fair value also affects other loans held for sale, which are recorded at the lower of cost or fair value. Fair value determination is also relevant for certain other assets such as foreclosed property and other real estate, which are recorded at the lower of the recorded investment in the loan/property or fair value, less estimated costs to sell the property. For example, the fair value of other real estate is determined based on recent appraisals by third parties and other market information, less estimated selling costs. Adjustments to the appraised value are made if management becomes aware of changes in the fair value of specific properties or property types. The determination of fair value also impacts certain other assets that are periodically evaluated for impairment using fair value estimates, including goodwill and other identifiable intangible assets.
Current wording
A portion of the Company’s assets and liabilities is carried at fair value, with changes in fair value recorded either in earnings or accumulated other comprehensive income (loss). These include debt securities available for sale, mortgage loans held for sale, equity investments (with and without readily determinable market values), residential MSRs, commercial MSRs through non-DUS agency programs and derivative assets and liabilities. From time to time, the estimation of fair value also affects other loans held for sale, which are recorded at the lower of cost or fair value. Fair value determination is also relevant for certain other assets such as foreclosed property and other real estate, which are recorded at the lower of the recorded investment in the loan/property or fair value, less estimated costs to sell the property. For example, the fair value of other real estate is determined based on recent appraisals by third parties and other market information, less estimated selling costs. Adjustments to the appraised value are made if management becomes aware of changes in the fair value of specific properties or property types. The determination of fair value also impacts certain other assets that are periodically evaluated for impairment using fair value estimates, including goodwill and other identifiable intangible assets.
Previous wording
Regions has elected to measure and report its residential MSRs using the fair value method. Although sales of residential MSRs do occur, residential MSRs do not trade in an active market with readily observable market prices and the exact terms and conditions of sales may not be readily available, and are therefore Level 3 valuations in the fair value hierarchy previously discussed in the "Fair Value Measurements" section. Specific characteristics of the underlying loans greatly impact the estimated value of the related residential MSRs. As a result, Regions stratifies its residential mortgage servicing portfolio on the basis of certain risk characteristics, including loan type and contractual note rate, and values its residential MSRs using discounted cash flow modeling techniques. These techniques require management to make estimates regarding future net servicing cash flows, taking into consideration historical and forecasted residential mortgage loan prepayment rates, discount rates, escrow balances and servicing costs. Changes in interest rates, prepayment speeds or other factors impact the fair value of residential MSRs which impacts earnings. Refer to Note 6 "Servicing of Financial Assets" to the consolidated financial statements for quantitative disclosures reflecting the effect that changes in management's assumptions would have on the fair value of residential MSRs.
Current wording
Regions has elected to measure and report both its residential MSRs and commercial MSRs through non-DUS agency programs using the fair value method. Although sales of MSRs do occur, MSRs do not trade in an active market with readily observable market prices and the exact terms and conditions of sales may not be readily available, and are therefore Level 3 valuations in the fair value hierarchy previously discussed in the "Fair Value Measurements" section. Specific characteristics of the underlying loans greatly impact the estimated value of the related residential and commercial MSRs. As a result, Regions stratifies its portfolios on the basis of certain risk characteristics, including loan type and contractual note rate, as applicable. Regions values its residential and commercial MSRs using discounted cash flow modeling techniques. These techniques require management to make estimates regarding future net servicing cash flows, taking into consideration historical and forecasted mortgage loan prepayment rates, discount rates, escrow balances and servicing costs. Changes in interest rates, prepayment speeds or other factors impact the fair value of MSRs which impacts earnings.
Previous wording
Net interest income is Regions’ principal source of income and is one of the most important elements of Regions’ ability to meet its overall performance goals. In 2023, balance sheet and net interest income performance were the result of post-pandemic normalization and tightening monetary policy, including a higher interest rate environment. Both net interest income and net interest margin are influenced by market interest rates and the FOMC increased the Fed funds rate by 100 basis points during the year ended December 31, 2023. See the "Executive Overview" for a discussion of recent FOMC activity and expectations for 2024 net interest income that incorporates anticipated FOMC activity.
Current wording
Net interest income is Regions’ principal source of income and is one of the most important elements of Regions’ ability to meet its overall performance goals. Both net interest income and net interest margin are influenced by both long-term and short-term market interest rates. Long-term and short-term rates were higher for most of 2024 compared to 2023. Late in the third quarter of 2024, the FOMC decreased the Fed funds rate by approximately 50 basis points and by an additional 25 basis points at the November and December meetings, for a total of 100 basis points. See the "Executive Overview" for a discussion of recent FOMC activity.
Previous wording
Deposit and funding cost normalization, which are expected in a rising rate environment and were further influenced by bank industry stresses during the year, partially offset the increases in net interest income and net interest margin driven by loans and investment securities. In 2023, funding costs, which includes deposits and wholesale borrowings utilized during the year, increased to 1.19 percent compared to 0.23 percent in 2022. The increase in funding costs includes the impact of deposit remixing as depositors moved into higher interest earning products. Deposit costs increased to 99 basis points for 2023 compared to 14 basis points for 2022.
Current wording
Net interest income (taxable-equivalent basis) decreased by $503 million in 2024 compared to 2023, and net interest margin decreased by 36 basis points to 3.54 percent in 2024. This represents a normalization from elevated post-pandemic levels. The decreases in net interest income and net interest margin were driven primarily by higher funding costs in a prolonged high rate environment. In 2024, funding costs, which includes deposits and wholesale borrowings utilized during the year, increased to 1.73 percent compared to 1.19 percent in 2023. The increase in funding costs was driven by higher deposit costs due to continued deposit remixing as depositors moved into higher interest earning products, albeit at a slower pace than the remixing experienced in 2023. Deposit costs increased to 1.56 percent for 2024 compared to 0.99 percent for 2023.
Previous wording
(1)Amounts have been calculated using whole dollar values.
Current wording
(1)Amounts have been calculated using whole dollar values and the prevailing interest accrual methodology.
Previous wording
(3)Interest income on debt securities includes hedging expense of $1 million, hedging income of $41 million, and zero for the years ended December 31, 2023, 2022 and 2021, respectively. Hedging income for the year ended December 31, 2022 reflects strategies designed to accelerate hedge notional maturities through the use of pay fixed swaps. Benefits migrated to cash flow hedges from loans in the first quarter of 2023.
Current wording
(3)Interest income on debt securities includes hedging income of $7 million, hedging expense of $1 million, and hedging income of $41 million for the years ended December 31, 2024, 2023 and 2022, respectively. Hedging income for the year ended December 31, 2022 reflects strategies designed to accelerate hedge notional maturities through the use of pay fixed swaps. Benefits migrated to cash flow hedges from loans in the first quarter of 2023.
Previous wording
(5)Interest income on loans, net of unearned income, includes hedging expense of $236 million and hedging income of $140 million and $426 million for the years ended December 31, 2023, 2022, and 2021, respectively. Interest income on loans, net of unearned income, also includes net loan fees of $130 million, $109 million and $154 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Current wording
(5)Interest income on loans, net of unearned income, includes hedging expense of $420 million and $236 million and hedging income of $140 million for the years ended December 31, 2024, 2023 and 2022, respectively. Interest income on loans, net of unearned income, also includes net loan fees of $142 million, $130 million and $109 million for the years ended December 31, 2024, 2023 and 2022 , respectively.
Previous wording
(6)Total deposit costs may be calculated by dividing total interest expense on deposits by the sum of interest-bearing deposits and non-interest-bearing deposits. The rates for total deposit costs equaled 0.99% , 0.14% and 0.05% for the years ended December 31, 2023, 2022 and 2021, respectively.
Current wording
(6)Total deposit costs may be calculated by dividing total interest expense on deposits by the sum of interest-bearing deposits and non-interest-bearing deposits. The rates for total deposit costs equaled 1.56% , 0.99% and 0.14% for the years ended December 31, 2024, 2023 and 2022, respectively.
Previous wording
Annual changes in net interest income are due to changes in the interest rate environment, product pricing, balance sheet mix, and balance sheet growth. Over recent years, changes in the interest rate environment and the impact on product pricing and mix has been the primary contributor to changes in net interest income. The mix of earning assets can affect the interest rate spread. Regions’ primary types of earning assets are loans and investment securities. Certain types of earning assets have historically generated larger spreads; for example, loans typically generate larger spreads than other assets, such as securities or interest-bearing deposits in other banks. Average earning assets in 2023 totaled $137.9 billion, a decrease of $6.1 billion as compared to the prior year, primarily due to a decrease in interest-bearing deposits in other banks offset by a growth in loans, net of unearned income. See the "Loans", "Debt Securities", and "Cash and Cash Equivalents" sections for further details.
Current wording
The mix of earning assets can affect the interest rate spread. Regions’ primary types of earning assets are loans and investment securities. Certain types of earning assets have historically generated larger spreads; for example, loans typically generate larger spreads than other assets, such as securities or interest-bearing deposits in other banks. Average earning assets in 2024 totaled $137.5 billion, a decrease of $383 million as compared to the prior year, primarily due to a modest decline in loans, net of unearned income, partially offset by growth in debt securities and interest-bearing deposits in other banks. See the "Loans" and "Debt Securities" sections for further details.
Previous wording
The mix of interest-bearing liabilities can also affect the interest spread. Funding for Regions’ earning assets comes from interest-bearing and non-interest-bearing sources. As previously discussed, in 2023 the Company experienced deposit balance declines and remixing into higher interest bearing deposit categories. As the percentage of earning assets funded by deposits declined during the year, the Company utilized short and long-term wholesale borrowings. The changes to interest-bearing liabilities partially offset increases to net interest income and margin.
Current wording
The mix of interest-bearing liabilities can also affect the interest spread. Funding for Regions’ earning assets comes from interest-bearing and non-interest-bearing sources. As previously discussed, in 2024 the Company continued to experience a remixing of deposits into higher-interest-bearing categories, albeit at a slower pace. Higher balances within these categories contributed to the overall increase in funding costs.
Previous wording
The provision for credit losses is used to maintain the allowance for loan losses and the reserve for unfunded credit losses at a level that in management's judgment is appropriate to absorb expected credit losses over the contractual life of the loan and credit commitment portfolio at the balance sheet date. During 2023, the provision for credit losses totaled $553 million and net charge-offs were $397 million. This compares to a provision for credit losses of $271 million and net charge-offs of $263 million in 2022.
Current wording
The provision for credit losses is used to maintain the allowance for loan losses and the reserve for unfunded credit losses at a level that in management's judgment is appropriate to absorb expected credit losses over the contractual life of the loan and credit commitment portfolio at the balance sheet date. During 2024, the provision for credit losses totaled $487 million and net charge-offs were $458 million. This compares to a provision for credit losses of $553 million and net charge-offs of $397 million in 2023.
Previous wording
Service charges on deposit accounts include overdraft fees, treasury management fees and other customer transaction-related service charges, and, prior to mid-2022, non-sufficient fund fees. Service charges decreased in 2023 compared to 2022, primarily as a result of overdraft-related policy enhancements that eliminated non-sufficient fund fees in mid-June 2022. Additionally, in the second quarter of 2023, the Company added an overdraft grace feature, which compliments the overdraft-related policy enhancements and contributed to the decrease. An increase in fees from treasury management services partially offset the overall decline in service charges.
Current wording
Service charges on deposit accounts include overdraft fees, treasury management fees and other customer transaction-related service charges. Service charges increased modestly in 2024 compared to 2023, driven by an increase in fees from treasury management services. Partially offsetting the increase was a decline in overdraft fees as a result of recent overdraft-related policy enhancements.
Previous wording
Capital markets income primarily relates to capital raising activities that include securities underwriting and placement, loan syndication, as well as foreign exchange, derivatives, merger and acquisition and other advisory services. Capital markets income decreased in 2023 compared to 2022, driven primarily by negative credit/debit valuation adjustments in 2023 due to rate and spread movements. To a lesser degree, capital markets income was negatively impacted by declines in merger and acquisition advisory services and syndication revenue. Partially offsetting these decreases were increases in securities underwriting and placement fees and real estate capital markets revenue in 2023 compared to 2022.
Current wording
Capital markets income primarily relates to capital raising activities that include securities underwriting and placement, loan syndication, as well as foreign exchange, derivatives, merger and acquisition and other advisory services. Capital markets income increased in 2024 compared to 2023, impacted by a benefit from less negative credit/debit valuation adjustments due to rate and spread movements. Additionally, all other categories of capital markets income were higher year-over-year due to increased transaction volume and deal activity.
Previous wording
Mortgage income is generated through the origination and servicing of residential mortgage loans for long-term investors and sales of residential mortgage loans in the secondary market. The decrease in mortgage income in 2023 was due primarily to lower mortgage production and sales as a result of higher market interest rates. The decrease was also a result of amortization of mortgage servicing rights. Additionally, mortgage income for 2022 included approximately $12 million in gains associated with the re-securitization and sale of Ginnie Mae loans previously repurchased from their pools. Partially offsetting the declines was an increase in servicing income associated with a bulk purchase of the rights to service $6.2 billion of residential mortgage loans in the third quarter of 2023.
Current wording
Mortgage income is generated through the origination and servicing of residential mortgage loans for long-term investors and sales of residential mortgage loans in the secondary market. The increase in mortgage income in 2024 compared to 2023 was due primarily to an increase in servicing income due to bulk purchases of the rights to service $6.2 billion of residential mortgage loans in the third quarter of 2023 and $8 billion of residential mortgage loans at the end of the first quarter of 2024 and an increase in mortgage production and margins sold to the agencies. These increases were offset by a reduction in the valuation of MSRs and related hedges.
Previous wording
Investment services fee income represents income earned from investment advisory services. Investment services fee income increased during 2023 compared to 2022 due primarily to the rising interest rate environment, which has driven increases in fixed annuity rates and the related investment income. Also contributing were increases in assets under management due to additional financial advisors.
Current wording
Investment services fee income represents income earned from investment advisory services. Investment services fee income increased in 2024 compared to 2023 due to strong advisor production.
Previous wording
Bank-owned life insurance income primarily represents income earned from the appreciation of the cash surrender value of insurance contracts held and the proceeds of insurance benefits. Bank-owned life insurance income increased during 2023 compared to 2022 driven primarily by improvement in underlying crediting rates as a result of an overall increase in interest rates.
Current wording
Bank-owned life insurance income primarily represents income earned from the appreciation of the cash surrender value of insurance contracts held and the proceeds of insurance benefits. Bank-owned life insurance income increased during 2024 compared to 2023 driven primarily by increased claim volume.
Previous wording
Salaries and employee benefits consist of salaries, incentive compensation, long-term incentives, payroll taxes, and other employee benefits such as 401(k), pension, and medical, life and disability insurance, as well as, expenses from liabilities held for employee benefit purposes. Salaries and employee benefits increased during 2023 compared to 2022 primarily due to increases in base salaries, higher benefit expenses, and, to a lesser degree, an increase in severance costs in the second half of the year. These increases were offset by a decline in incentive compensation. Full-time equivalent headcount was relatively flat at December 31, 2023 as compared to December 31, 2022.
Current wording
Salaries and employee benefits consist of salaries, incentive compensation, long-term incentives, payroll taxes, and other employee benefits such as 401(k), pension, and medical, life and disability insurance, as well as, expenses from liabilities held for employee benefit purposes. Salaries and employee benefits increased in 2024 compared to 2023 primarily due to an increase in incentives, base salaries, and benefits expenses. Salaries and employee benefits were also impacted by an increase in market valuation adjustments on employee benefit assets that are offset in non-interest income. Full-time equivalent headcount decreased to 19,644 at December 31, 2024 from 20,101 at December 31, 2023.
Previous wording
Professional, legal, and regulatory expenses consist of amounts related to legal, consulting, other professional fees and regulatory charges. Professional, legal, and regulatory expenses decreased during 2023 compared to 2022 due to a settled matter with the CFPB in 2022. See Note 23 "Commitments, Contingencies and Guarantees" in the Annual Report on Form 10-K for the year ended December 31, 2022 for more detail.
Current wording
Professional, legal, and regulatory expenses consist of amounts related to legal, consulting, other professional fees and regulatory charges. Professional, legal and regulatory expenses increased in 2024 compared to 2023 due to accruals for legal and regulatory matters in the first quarter of 2024, partially offset by lower other professional fees.
Previous wording
Federal law requires that any losses to the FDIC’s DIF related to the protection of uninsured depositors under the Systemic Risk Exception be repaid by a special assessment on IDIs. In the fourth quarter of 2023, the FDIC finalized a special assessment related to the two March 2023 bank failures, totaling an estimated $16.3 billion. The rule requires the estimated amount of the entire special assessment be recognized as the accrual of a liability and related expense in the fourth quarter of 2023 pursuant to accounting guidance. The special assessment for Regions is estimated at approximately $119 million to be paid in eight quarterly installments beginning in the first quarter of 2024, which was accrued in the fourth quarter and should be deductible for income taxes.
Current wording
Federal law requires that any losses to the FDIC’s DIF related to the protection of uninsured depositors under the Systemic Risk Exception be repaid by a special assessment on IDIs. In the fourth quarter of 2023, the FDIC finalized a special assessment related to the two March 2023 bank failures, which was required to be recognized as the accrual of a liability and related expense in the fourth quarter of 2023 of $119 million. In late February 2024, the FDIC published revised loss estimates related to the failures, increasing the estimated loss to the DIF. Based on updated information provided by the FDIC, Regions increased the special assessment accrual during 2024 by $16 million. The total special assessment is to be paid in ten quarterly installments that began with the invoice for the first quarter of 2024 (received in June 2024) and are deductible for income taxes.
Previous wording
Operational losses include losses related to fraud, execution, delivery and process management, and damage to physical assets. Operational losses increased in 2023 compared to 2022 due to elevated check-related fraud losses experienced primarily during the second and third quarters of 2023.
Current wording
Operational losses include losses related to fraud, execution, delivery and process management, and damage to physical assets. Operational losses decreased in 2024 compared to 2023 primarily due to check fraud that occurred in the second and third quarters of 2023.
Previous wording
Other miscellaneous expenses include expenses related to communications, postage, supplies, certain credit-related costs, foreclosed property expenses, mortgage repurchase costs, and other costs (benefits) related to employee benefit plans. Other miscellaneous expenses increased in 2023 compared to 2022 primarily due to higher non-service based pension-related expenses and, to a lesser degree, higher fees associated with licenses and taxes.
Current wording
Other miscellaneous expenses include expenses related to communications, postage, supplies, certain credit-related costs, foreclosed property expenses, mortgage repurchase costs, and other costs (benefits) related to employee benefit plans. Other miscellaneous expenses decreased in 2024 compared to 2023 due primarily to lower pension related costs and a reduction for a contingent reserve release in the second quarter of 2024 related to a prior acquisition.
Showing the first 40 of 113 pairs. Open the source sections for the rest.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
Refer to Note 6 "Servicing of Financial Assets" to the consolidated financial statements for additional information including quantitative disclosures reflecting the effect that changes in management's assumptions would have on the fair value of MSRs.
Current report — wording carried from elsewhere
Annual changes in net interest income are due to changes in the interest rate environment, product pricing, balance sheet mix, and balance sheet growth. Over recent years, changes in the interest rate environment and the impact on product pricing and mix has been the primary contributor to changes in net interest income.
Current report — wording carried from elsewhere
Additional discussion and a tabular presentation of the applicable holding company and bank regulatory capital requirements is included in Note 12 "Regulatory Capital Requirements and Restrictions" to the consolidated financial statements.
Current report — wording carried from elsewhere
Company cannot easily unwind or offset specific exposures without significantly lowering market prices because of inadequate market depth or market disruptions (referred to as "market liquidity risk").
Current report — wording carried from elsewhere
Board through its Risk Appetite Statement and Liquidity Policy. The Company's Board, LROC and ALCO regularly review compliance with the established limits.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
(1)See Note 1 for additional information.
Previous report — wording carried elsewhere
(2)Amounts have been calculated using whole dollar values.