REGIONS FINANCIAL CORP

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' 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.

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 2025 results. Cross references to more detailed information regarding each topic within MD&A and the consolidated financial statements are included. The following information should be read in conjunction with the entire MD&A and accompanying consolidated financial statements and related notes, as well as the other sections of this Annual Report on Form 10-K.

Previous wording

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 wording

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 was the case nationally, the pace of job growth within the footprint slowed over the course of 2025, in part reflecting a slowing pace of net in-migration from the rest of the U.S. and abroad. Still, growth in nonfarm employment has continued to run ahead of the national average. 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 persistently 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 large numbers of owners into negative equity positions.

Previous 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.

Current wording

The economic environment, as described above, impacted Regions' forecast utilized in calculating the allowance as of December 31, 2025. See the "Allowance" section for further information.

Previous 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.

Current wording

Regions reported net income available to common shareholders of $2.1 billion or $2.30 per diluted share in 2025 compared to net income available to common shareholders of $1.8 billion or $1.93 per diluted share in 2024.

Previous 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.

Current wording

Net interest income (taxable-equivalent basis) totaled $5.0 billion in 2025 compared to $4.9 billion in 2024. The net interest margin (taxable-equivalent basis) was 3.61 percent in 2025, reflecting a 7 basis point increase from 2024. The increases in net interest income and net interest margin were primarily driven by lower funding costs and hedge performance improvements as short-term interest rates declined. Net interest income and margin also benefitted from securities reinvestment activities, executed through multiple, distinct debt securities repositioning transactions. See Table 2 "Volume and Yield/Rate Variances" for further details.

Previous 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.

Current wording

The provision for credit losses totaled $470 million in 2025 compared to $487 million in 2024. In 2025, net charge-offs exceeded the provision for credit losses by $43 million compared to 2024 when the provision for credit losses exceeded net charge-offs by $29 million. Refer to the "Allowance" section of Management's Discussion and Analysis for further detail.

Previous 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.

Current wording

Non-interest expense was $4.3 billion in 2025 and $4.2 billion in 2024. The slight increase was driven by an increase in salaries and benefits, other miscellaneous expenses, and professional, legal and regulatory expenses. The increases were partially offset by declines in FDIC insurance assessments and operational losses. See Table 4 "Non-Interest Expense" for further details.

Previous 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.

Current wording

Regions' effective tax rate was 21.4 percent in 2025 compared to 19.6 percent in 2024. 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. 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.

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, which was subsequently extended through the fourth quarter of 2025. As of December 31, 2025, Regions repurchased approximately 78 million shares of common stock under this program, which reduced shareholders' equity by $1.7 billion. On December 10, 2025, the Board authorized the repurchase of up to $3.0 billion of the Company's common stock for the period beginning January 1, 2026 and extending through December 31, 2027. This authorization supersedes the prior share repurchase program, which expired on December 31, 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, 2024, Regions’ Tier 1 capital and Total capital ratios were estimated to be 12.17% and 14.06%, 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, 2025, Regions’ Tier 1 capital and Total capital ratios were 11.99% and 13.89%, respectively.

Previous wording

The Basel III Rules also officially defined CET1. Regions' CET1 ratio at December 31, 2024 was estimated to be 10.80%.

Current wording

The Basel III Rules also officially defined CET1. Regions' CET1 ratio at December 31, 2025 was estimated to be 10.89%.

Previous 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.

Current wording

Net charge-offs totaled $513 million, or 0.53 percent of average loans, in 2025, compared to $458 million, or 0.47 percent in 2024, driven by an increase in commercial and industrial and commercial investor real estate mortgage net charge-offs from resolutions within previously identified portfolios of interest with established reserves. The allowance was 1.76 percent of total loans, net of unearned income at December 31, 2025, a decrease from 1.79 percent at December 31, 2024. The coverage ratio of allowance to non-performing loans excluding loans held for sale was 242 percent at December 31, 2025, compared to 186 percent at December 31, 2024.

Previous wording

•“Allowance for Credit Losses” discussion within the “Critical Accounting Policies and Estimates” section of MD&A

Current wording

•“Allowance” discussion within the “Critical Accounting Policies and Estimates” section of MD&A

Previous wording

•“Loans,” “Allowance for Credit Losses,” and “Non-performing Assets” discussions within the “Balance Sheet Analysis” section of MD&A

Current wording

•“Loans,” "Portfolio Characteristics", “Allowance,” and “Non-performing Assets” discussions within the “Balance Sheet Analysis” section of MD&A

Previous 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.

Current wording

At the end of 2025, Regions Bank had $7.8 billion in cash on deposit with the Federal Reserve Bank and the loan-to-deposit ratio was 73 percent. Cash and cash equivalents at the parent company totaled $726 million. Cash at the Federal Reserve was stable compared to December 31, 2024.

Previous 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.

Current wording

At December 31, 2025, the Company’s borrowing capacity with the Federal Reserve was $22.8 billion based on available collateral. Borrowing availability with the FHLB was $11.1 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

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.

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, goodwill, residential MSRs, and income taxes, and are summarized in the following discussion and in the notes to the consolidated financial statements.

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, 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 floods and hurricanes.

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 resulted in an allowance approximately 20 percent higher for the commercial and investor real estate portfolios.

Current wording

Similar to the scenario 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, 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.

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). The most significant of these include debt securities available for sale, mortgage loans held for sale, 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. The determination of fair value also impacts certain other assets that are periodically evaluated for impairment using fair value estimates, including goodwill.

Previous wording

Regions’ intangible assets consist primarily of the excess of cost over the fair value of net assets of acquired businesses (“goodwill”) and other identifiable intangible assets (primarily relationship assets and agency commercial real estate licenses). Goodwill totaled $5.7 billion at both December 31, 2024 and December 31, 2023. Goodwill is allocated to each of Regions’ reportable segments (each a reporting unit: Corporate Bank, Consumer Bank, and Wealth Management). Goodwill is tested for impairment on an annual basis as of October 1 or more often if events and circumstances indicate impairment may exist (refer to Note 1 "Summary of Significant Accounting Policies" to the consolidated financial statements for further discussion).

Current wording

Goodwill consists of the excess of cost over the fair value of net assets of acquired businesses and totaled $5.7 billion at both December 31, 2025 and December 31, 2024. Goodwill is allocated to each of Regions’ reportable segments (each a reporting unit: Corporate Bank, Consumer Bank, and Wealth Management). Goodwill is tested for impairment on an annual basis as of October 1 or more often if events and circumstances indicate impairment may exist (refer to Note 1 "Summary of Significant Accounting Policies" to the consolidated financial statements for further discussion).

Previous wording

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 wording

The Company completed its annual goodwill impairment test as of October 1, 2025, 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 "Goodwill and Other Intangible Assets" to the consolidated financial statements for additional discussion of goodwill.

Previous wording

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 wording

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" in Item 8. “Financial Statements and Supplementary Data" 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.

Previous wording

RESIDENTIAL MORTGAGE SERVICING RIGHTS AT FAIR VALUE

Current wording

Residential Mortgage Servicing Rights

Previous 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.

Current 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 portfolios on the basis of certain risk characteristics, including loan type and contractual note rate, as applicable. Regions 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 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.

Previous wording

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 wording

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 residential MSRs.

Previous wording

Accrued income taxes are reported as a component of either other assets or other liabilities, as appropriate, in the consolidated balance sheets and reflect management’s estimate of income taxes to be paid or received. The Company is subject to income tax in the U.S. and multiple state and local jurisdictions. The tax laws and regulations in each jurisdiction are complex and may be subject to different interpretations by the Company and the relevant government taxing authorities. Therefore, the Company is required to exercise judgment in determining tax accruals and evaluating the Company’s tax positions, including evaluating uncertain tax positions.

Current wording

Accrued income taxes are reported as a component of either other assets or other liabilities, as appropriate, in the consolidated balance sheets and reflect management’s estimate of income taxes to be received or paid. The Company is subject to income tax in the U.S. and multiple state and local jurisdictions. The tax laws and regulations in each jurisdiction are complex and may be subject to different interpretations by the Company and the relevant government taxing authorities. Therefore, the Company is required to exercise judgment in determining tax accruals and evaluating the Company’s tax positions, including evaluating UTBs.

Previous 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.

Current wording

(3)Interest income on debt securities includes hedging income of $20 million and $7 million and hedging expense of $1 million for the years ended December 31, 2025, 2024, and 2023, respectively.

Previous 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.

Current wording

(5)Interest income on loans, net of unearned income, includes hedging expense of $242 million, $420 million and $236 million for the years ended December 31, 2025, 2024, and 2023, respectively. Interest income on loans, net of unearned income, also includes net loan fees of $122 million, $142 million and $130 million for the years ended December 31, 2025, 2024 and 2023, 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 1.56% , 0.99% and 0.14% for the years ended December 31, 2024, 2023 and 2022, 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 and equaled 1.37%, 1.56% and 0.99% for the years ended December 31, 2025, 2024, and 2023, respectively.

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. 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.

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. Annual changes in net interest income are due to changes in the interest rate environment, product pricing, balance sheet mix, and balance sheet growth.

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.

Current wording

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. Long-term and short-term rates were lower for most of 2025 compared to 2024 due to the Federal funds rate being cut several times late in 2024 and again in late 2025. In 2025 specifically, the FOMC decreased the Federal funds rate by 25 basis points at the September, October and December meetings, for a total decrease of 75 basis points. See the "Executive Overview" for a discussion of recent FOMC activity.

Previous 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.

Current wording

Net interest income (taxable-equivalent basis) increased by $172 million in 2025 compared to 2024, and net interest margin increased by 7 basis points to 3.61 percent in 2025. The increases in net interest income and net interest margin were driven primarily by lower funding costs, which includes deposits and wholesale borrowings. Funding costs declined to 1.54 percent compared to 1.73 percent in 2024, driven by deposit cost reductions in a declining rate environment and deposit balance growth, creating a more optimal funding mix. Also contributing to the more optimal funding mix in 2025 was deposit remixing, as certain time deposits matured and were replaced with lower cost product types, money market in particular. Deposit costs decreased to 1.37 percent for 2025 compared to 1.56 percent for 2024.

Previous wording

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 wording

Also benefiting net interest income and net interest margin in 2025 were the Company's continued securities reinvestment activities, executed through multiple, distinct debt securities repositioning transactions. As a result, the debt securities yield increased to 3.47 percent in 2025 from 2.89 percent in 2024. See Table 5 for more information.

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 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.

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 management determines is appropriate to absorb expected credit losses over the contractual life of the loan and credit commitment portfolio at the balance sheet date. In 2025, net charge-offs exceeded the provision for credit losses by $43 million compared to 2024 when the provision for credit losses exceeded net charge-offs by $29 million.

Previous 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.

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 2025 compared to 2024, driven primarily by an increase in fees from treasury management services and overdraft fees.

Previous wording

On October 25, 2023, the Federal Reserve issued a proposal for public comment that, if finalized, would lower the maximum interchange fee that a large debit card issuer can receive for a debit card transaction. Under the proposed rule the maximum interchange fee would be subject to adjustments every other year based upon issuer cost data. The Company is studying the proposal and evaluating its impact.

Current wording

The Company continues to monitor and evaluate the potential impact of proposals to lower the maximum interchange fee that a large debit card issuer can receive for a debit card transaction, which remain subject to ongoing litigation.

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 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.

Current wording

Capital markets income primarily relates to capital raising activities that include real estate placement, securities underwriting and placement, loan syndication, as well as foreign exchange, derivatives, merger and acquisition and other advisory services. Capital markets income was flat from 2024 to 2025 primarily due to increases in syndication revenue and commercial swap income being offset by declines in M&A fees and real estate revenue due to economic uncertainty early in 2025 affecting timing and volume of transactions.

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 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.

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 2025 compared to 2024 was due primarily to favorable mortgage servicing rights valuation adjustments, partially offset by negative pipeline valuation adjustments.

Previous 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.

Current wording

Investment services fee income represents income earned from investment advisory services. Investment services fee income increased in 2025 compared to 2024 due primarily to strong advisor production.