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What changed in Regions Financial Corporation's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Regions Financial Corporation's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+603 added−644 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-24)

Top changes in Regions Financial Corporation's 2023 10-K

603 paragraphs added · 644 removed · 432 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

76 edited+29 added−18 removed110 unchanged
Biggest changeFurthermore, if the Federal Reserve determines that an FHC has not maintained a CRA rating of at least “satisfactory,” the FHC would not be able to commence any new financial activities or acquire a company that engages in such activities, although the FHC would still be allowed to engage in activities closely related to banking and make investments in the ordinary course of conducting banking activities. 12 Table of Contents The Federal Reserve has the power to order any BHC or its subsidiaries to terminate any activity or to terminate its ownership or control of any subsidiary when the Federal Reserve has reasonable grounds to believe that continuation of such activity or such ownership or control constitutes a serious risk to the financial soundness, safety or stability of any bank subsidiary of the BHC.
Biggest changeFurthermore, if the Federal Reserve determines that an FHC has not maintained a CRA rating of at least “satisfactory,” the FHC would not be able to commence any new financial activities or acquire a company that engages in such activities, although the FHC would still be allowed to engage in activities closely related to banking and make investments in the ordinary course of conducting banking activities.
In addition, consumers may also prevent disclosure among affiliated companies of certain non-public personal information that is assembled or used to determine eligibility for a product or service, such as that shown on consumer credit reports and 17 Table of Contents application information.
In addition, 17 Table of Contents consumers may also prevent disclosure among affiliated companies of certain non-public personal information that is assembled or used to determine eligibility for a product or service, such as that shown on consumer credit reports and application information.
Through the new Guild program, associates can now pursue a degree or other educational opportunities tuition free while building their career at the same time. By removing barriers and expanding access to education, we are continuing our commitment to Build the Best Team.
Through the Guild program, associates can now pursue a degree or other educational opportunities tuition free while building their career at the same time. By removing barriers and expanding access to education, we are continuing our commitment to Build the Best Team.
The CCAR process is intended to help ensure that these BHCs have robust, forward-looking capital planning processes that account for each company’s unique risks and that permit continued operations during times of economic and financial stress.
The CCAR process is intended to help ensure that BHCs have robust, forward-looking capital planning processes that account for each company’s unique risks and that permit continued operations during times of economic and financial stress.
Generally, however, they contain one or more of the following elements: (i) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on U.S. persons engaging in financial transactions relating to, making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (ii) a blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons).
Generally, however, they contain one or more of the following elements: (i) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on U.S. persons engaging in financial transactions relating to, making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (ii) a blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property within U.S. jurisdiction (including property in the possession or control of U.S. persons).
These descriptions do not summarize all possible or proposed changes in laws or regulations and are are not intended to be substitute for the related statues or regulatory provisions.
These descriptions do not summarize all possible or proposed changes in laws or regulations and are not intended to be a substitute for the related statues or regulatory provisions.
Capital Requirements Regions and Regions Bank are each required to comply with applicable capital adequacy standards established by the Federal Reserve, which are based on the Basel III framework.
Regulatory Capital Requirements Regions and Regions Bank are each required to comply with applicable capital adequacy standards established by the Federal Reserve, which are based on the Basel III framework.
We also offer our associates programs and tools to support their total well-being including a range of flexible work arrangements, generous time-off policies, physical, mental, and financial wellness benefits as well as other programs and practices that support associates and their families throughout the full spectrum of their careers and lives. Available Information We maintain a website at www.regions.com.
We also offer our associates programs and tools to support their total well-being including a range of flexible work arrangements, generous time-off policies, physical, mental and financial wellness benefits as well as other programs and practices that support associates and their families throughout the full spectrum of their careers and lives. Available Information We maintain a website at ir.regions.com.
The severity of these mandatory and discretionary supervisory actions depends upon the capital category in which the institution is placed. Subject to a narrow exception, the FDIA requires the banking regulator to appoint a receiver or conservator for an institution that is critically undercapitalized. As of December 31, 2022, both Regions and Regions Bank were well-capitalized.
The severity of these mandatory and discretionary supervisory actions depends upon the capital category in which the institution is placed. Subject to a narrow exception, the FDIA requires the banking regulator to appoint a receiver or conservator for an institution that is critically undercapitalized. As of December 31, 2023, both Regions and Regions Bank were well-capitalized.
As a Federal Reserve System member bank, Regions Bank is required to hold stock in the Federal Reserve Bank of Atlanta in an amount equal to 6 percent of its capital stock and surplus. Member banks with total assets in excess of $10 billion, including Regions Bank, receive a floating rate dividend tied to 10-year U.S.
As a Federal Reserve System member bank, Regions Bank is required to hold stock in the Federal Reserve Bank of Atlanta in an amount equal to six percent of its capital stock and surplus. Member banks with total assets in excess of $10 billion, including Regions Bank, receive a floating rate dividend tied to 10-year U.S.
Because diversity, equity and inclusion are fundamental to our human capital strategy, we believe it is important for our stakeholders to understand our progress, and therefore, we provided additional transparency into our workforce demographics by disclosing 2021 EEO-1 results on our 2021 Workforce Demographics Report available in our online ESG Resource Center.
Because diversity, equity and inclusion are fundamental to our human capital strategy, we believe it is important for our stakeholders to understand our progress, and therefore, we provided additional transparency into our workforce demographics by disclosing 2022 EEO-1 results on our 2022 Workforce Demographics Report available in our online ESG Resource Center.
During 2022, the FDIC adopted a final rule to increase initial base deposit insurance assessment rate schedules by 2 basis points, beginning with the first quarterly assessment period of 2023. This rule, combined with other factors influenced by Regions' financial performance, will increase regulatory premiums in 2023.
During 2022, the FDIC adopted a final rule to increase initial base deposit insurance assessment rate schedules by 2 basis points, beginning with the first quarterly assessment period of 2023. This rule, combined with other factors influenced by Regions’ financial performance, increased regulatory premiums in 2023.
Blocked assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious legal and reputational consequences.
Blocked assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a general or specific license from OFAC. Failure to comply with these sanctions could have serious legal and reputational consequences.
The council is comprised of five business leaders and four leaders of strategic enabling functions. It is chaired by Regions’ CEO and co-chaired by the Head of DEI. Additionally, Regions boasts 19 unique DEI networks across the company, strategically placed in various markets.
The council is comprised of five business leaders and four leaders of strategic enabling functions. It is chaired by Regions’ CEO and co-chaired by the Head of DEI. Additionally, Regions boasts 20 unique DEI networks across the company, strategically placed in various markets.
BHC with $100 billion or more in total consolidated assets, as well as its bank subsidiaries, to one of four categories based on its size and five other risk-based indicators: (1) cross-jurisdictional activity, (2) wSTWF, (3) non-bank assets, (4) off-balance sheet exposure, and (5) status as a U.S. G-SIB.
BHC with $100 billion or more in total consolidated assets, 11 Table of Contents as well as its bank subsidiaries, to one of four categories based on its size and five other risk-based indicators: (1) cross-jurisdictional activity, (2) wSTWF, (3) non-bank assets, (4) off-balance sheet exposure and (5) status as a U.S. G-SIB.
The federal bank regulatory agencies have indicated that paying dividends that deplete an institution’s capital base to an inadequate level would be an unsafe and unsound banking practice. Under the FDIA, an insured institution may not pay a dividend if payment would cause it to become undercapitalized or if it already is undercapitalized. See “-Safety and Soundness Standards” above.
The federal bank regulatory agencies have indicated that paying dividends that deplete an institution’s capital base to an inadequate level would be an unsafe and unsound banking practice. Under the FDIA, an insured institution may not pay a dividend if payment would cause it to become undercapitalized or if it already is undercapitalized. See “Safety and Soundness Standards” above.
Also available on our website are our (i) Corporate Governance Principles, (ii) Code of Business Conduct and Ethics, (iii) Code of Ethics for Senior Financial Officers, (iv) Fair Disclosure Policy Summary, (v) the charters of our Audit Committee, Compensation and Human Resources Committee, Nominating and Corporate Governance Committee, and Risk Committee, and (vi) a number of ESG reports and documents.
Also available on our website are our (i) Corporate Governance Principles, (ii) Code of Business Conduct and Ethics, (iii) Code of Ethics for Senior Financial Officers, (iv) Fair Disclosure Policy, (v) the charters of our Audit Committee, Compensation and Human Resources Committee, Nominating and Corporate Governance Committee, Risk Committee, Technology Committee, and Executive Committee, and (vi) a number of ESG reports and documents.
In addition, the FRB's capital plan rule relating to the CCAR process provides that a BHC must receive prior approval for any dividend, stock repurchase or other capital distribution if the BHC is required to resubmit its capital plan, subject to an exception for distributions on newly issued capital instruments.
In addition, the Federal Reserve’s capital plan rule relating to the CCAR process provides that a BHC must receive prior approval for any dividend, stock repurchase or other capital distribution if the BHC is required to resubmit its capital plan, subject to an exception for distributions on newly issued capital instruments.
Further, despite delays in obtaining regulatory approvals, we expect consolidation in the financial services industry to continue, which may produce larger, better-capitalized and more geographically diverse companies that are capable of offering a wide array of financial products and 19 Table of Contents services at competitive prices.
Further, despite delays in obtaining regulatory approvals, we expect consolidation in the financial services industry to continue, which may produce larger, better-capitalized and more geographically diverse companies that are capable of offering a wide array of financial products and services at competitive prices.
These policies must establish loan portfolio diversification standards, prudent underwriting standards (including loan-to-value limits) that are clear and measurable, loan administration procedures, and documentation, approval and reporting requirements. The real estate lending policies must reflect consideration of the federal bank regulators’ Interagency Guidelines for Real Estate Lending Policies.
These policies must establish loan portfolio diversification standards, prudent underwriting standards (including loan-to-value limits) that are clear and measurable, loan administration procedures and 15 Table of Contents documentation, approval and reporting requirements. The real estate lending policies must reflect consideration of the federal bank regulators’ Interagency Guidelines for Real Estate Lending Policies.
These ‘all-inclusive’ networks ensure that our DEI priorities are cascaded deeper into the organization giving associates the opportunity to engage in the work. We track our DEI progress through external benchmarking and internal associate engagement surveys and continually implement programs and practices to elevate our progress and commitment.
These ‘all-inclusive’ networks ensure that our DEI priorities are cascaded deeper into the organization giving associates the opportunity to voluntarily engage in the work. We monitor our DEI progress through external benchmarking and internal associate engagement surveys and continually implement programs and practices to elevate our progress and commitment.
The Basel III-based U.S. capital rules, among other things, include both risk-based requirements, which compare three measures of capital to RWAs, as well as leverage requirements, which in the case of Category IV BHCs such as Regions, consist of the Tier 1 leverage ratio described below.
The Basel III-based U.S. capital rules, among other things, include both risk-based requirements, which compare three measures of capital to RWAs, as well as leverage requirements, which in the case of Category IV banking organizations such as Regions, consist of the Tier 1 leverage ratio described below.
Key to our success is our internal talent management program which strives to optimally deploy existing talent across Regions by focusing on where our associates excel and helping them find the best roles that maximize the talents, abilities and interests of the associate.
Key to our success is our internal talent management program which strives to optimally deploy existing talent across Regions by focusing on where our associates excel and helping them find the best roles that maximize their talents, abilities and interests.
The need to attract, retain, and develop the right talent to accomplish our strategic plan is central to our success. As of December 31, 2022, Regions and its subsidiaries had 20,073 full-time equivalent employees supporting our consumer and commercial banking, wealth management, and mortgage product and services primarily across the Southeast and Midwest.
The need to attract, retain and develop the right talent to accomplish our strategic plan is central to our success. As of December 31, 2023, Regions and its subsidiaries had 20,101 full-time equivalent employees supporting our consumer and commercial banking, wealth management and mortgage product and services primarily across the Southeast and Midwest.
Under these regulations, all insured depository institutions, such as Regions Bank, must adopt and maintain written policies establishing appropriate limits and standards for extensions of credit that are secured by liens or interests in real estate or are made for the purpose of financing permanent improvements to real estate.
Under these regulations, all IDIs, such as Regions Bank, must adopt and maintain written policies establishing appropriate limits and standards for extensions of credit that are secured by liens or interests in real estate or are made for the purpose of financing permanent improvements to real estate.
We make available on our website, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, including exhibits, and amendments to those reports that are filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934.
We make available on our website, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, Form DEF 14A, and current reports on Form 8-K, including exhibits, and amendments to those reports that are filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 21 Table of Contents 1934.
A Category IV BHC is also able to elect to participate in the supervisory stress test in a year in which the BHC would not normally be subject to the supervisory stress test and consequently receive an updated SCB requirement. The SCB is subject to a 2.5 percent floor.
A Category IV banking organization is also able to elect to participate in the supervisory stress test in a year in which it would not normally be subject to the supervisory stress test and consequently receive an updated SCB requirement. The SCB is subject to a 2.5 percent floor.
For example, at the federal level, the federal banking regulators have adopted certain rules, including pursuant to the Gramm-Leach-Bliley Act, that limit the ability of banks and other financial institutions to disclose non-public personal information about consumers to third parties.
For example, at the federal level, the federal banking regulators have adopted certain rules, including pursuant to the GLBA, that limit the ability of banks and other financial institutions to disclose non-public personal information about consumers to third parties.
Our associate team reflects the diversity of the communities we serve. As of December 31, 2022, approximately 62 percent of our associates were women and approximately 36 percent self-identified as a part of a minority demographic.
Our associate team reflects the diversity of the communities we serve. As of December 31, 2023, approximately 62 percent of our associates were women and approximately 38 percent self-identified as a part of a minority demographic.
As a Category IV BHC, Regions' SCB is determined through the FRB’s CCAR supervisory stress tests which include analyses using baseline and severely adverse economic and financial scenarios Regions SCB requirement is determined by adding the FRB's modeled capital degradation, in the supervisory severely adverse scenario, plus four quarters of planned common stock dividends.
As a Category IV banking organization, Regions’ SCB is determined through the Federal Reserve’s CCAR supervisory stress tests which include analyses using baseline and severely adverse economic and financial scenarios. Regions’ SCB requirement is determined by adding the Federal Reserve’s modeled capital degradation, in the supervisory severely adverse scenario, plus four quarters of planned common stock dividends.
As a Category IV BHC, the capital degradation component of the SCB is calculated every other year, in even-numbered years. During a year in which a Category IV bank does not undergo a supervisory stress test, the BHC will receive an updated SCB requirement that reflects the BHC's updated planned common stock dividends.
As a Category IV banking organization, the capital degradation component of the SCB is calculated every other year, in even-numbered years. During a year in which a Category IV banking organization does not undergo a supervisory stress test, it will receive an updated SCB requirement that reflects its updated planned common stock dividends.
At December 31, 2022, Regions operated 2,039 ATMs and 1,286 total branch outlets primarily across the South, Midwest and Texas. The following table reflects the distribution of branch locations in each of the states in which Regions conducts its banking operations.
At December 31, 2023, Regions operated 2,023 ATMs and 1,271 total branch outlets primarily across the South, Midwest and Texas. The following table reflects the distribution of branch locations in each of the states in which Regions conducts its banking operations.
Treasuries, with the maximum dividend rate capped at 6 percent. 11 Table of Contents Regions Bank and its affiliates are also subject to supervision, regulation, and examination by the CFPB with respect to consumer protection laws and regulations.
Treasuries, with the maximum dividend rate capped at six percent. Regions Bank and its affiliates are also subject to supervision, regulation and examination by the CFPB with respect to consumer protection laws and regulations.
The scope of the laws and regulations, and the intensity of the supervision to which Regions is subject have increased in recent years, initially in response to the financial crisis, and more recently in light of other factors, including technological factors, market changes, climate, as well as increased scrutiny and possible denials of bank mergers and acquisitions by federal banking regulators.
The scope of the laws and regulations and the intensity of the supervision to which Regions is subject have increased in recent years, initially in response to the financial crisis, and more recently in light of other factors, including the failure of U.S. depository institutions in the first half of 2023, technological factors, market changes, climate change concerns, as well as increased scrutiny and possible denials of bank mergers and acquisitions by federal banking regulators.
The principal provisions of Title III of the USA PATRIOT Act require that regulated financial institutions, including state member banks: (i) establish an anti-money laundering program that includes training and audit components; (ii) comply with regulations regarding the verification of the identity of any person seeking to open an account; (iii) take additional required precautions with non-U.S. owned accounts; and (iv) perform certain verification and certification of money laundering risk for their foreign correspondent banking relationships.
The principal provisions of Title III of the USA PATRIOT Act require that regulated financial institutions, including state member banks: (i) establish an anti-money laundering program that includes internal policies, procedures and internal controls, the designation of a chief compliance officer, as well as training and audit components; (ii) comply with regulations regarding the verification of the identity of any person seeking to open an account; (iii) take additional required precautions with non-U.S. owned accounts; and (iv) perform certain due diligence on private bank accounts and due diligence on and verification and certification of money laundering risk for their foreign correspondent banking relationships.
A financial institution’s management is expected to maintain sufficient processes to effectively respond and recover the institution’s operations after a cyber-attack. A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations if a critical service provider of the institution falls victim to this type of cyber-attack.
A financial institution’s management is expected to maintain sufficient processes to effectively identify, prevent and detect a cyber-attack. A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations if a critical service provider of the institution falls victim to cyber-attack.
Our commitment to DEI starts at the top of our organization, with oversight of our initiatives provided by the CHR Committee. In 2022, Regions launched the DEI Executive Council. The Council’s purpose is to provide input and guidance over the DEI strategic priorities, build traction and support of DEI programs and build leader accountability.
Our commitment to DEI starts at the top of our organization, with oversight of our initiatives provided by the CHR Committee. Launched in late 2022, the DEI Executive Council continues to provide input and guidance over the DEI strategic priorities, build traction and support of DEI programs and help garner leader support.
During the past decade, properly managing risks has been identified as critical to the conduct of safe and sound banking activities and has become even more important as new technologies, product innovation, and the size and speed of financial transactions have changed the nature of banking markets.
Properly managing risks is critical to the conduct of safe and sound banking activities and has become even more important as new technologies, product innovation and the size and speed of financial transactions have changed the nature of 14 Table of Contents banking markets.
At December 31, 2022, Regions had total consolidated assets of approximately $155.2 billion, total consolidated deposits of approximately $131.7 billion and total consolidated shareholders’ equity of approximately $15.9 billion. The terms “Regions,” the “Company,” “we,” “us” and “our” as used herein mean collectively Regions Financial Corporation, a Delaware corporation, together with its subsidiaries when or where appropriate.
At December 31, 2023, Regions had total consolidated assets of approximately $152.2 billion, total consolidated deposits of approximately $127.8 billion and total consolidated shareholders’ equity of approximately $17.4 billion. The terms “Regions,” the “Company,” “we,” “us” and “our” as used herein mean collectively Regions Financial Corporation, a Delaware corporation, together with its subsidiaries when or where appropriate.
The CFPB also has examination and primary enforcement authority with respect to consumer financial laws for depository institutions with $10 billion or more in assets, including the authority to prevent unfair, deceptive or abusive practices in connection with the offering of consumer financial products.
The CFPB also has examination and primary enforcement authority with respect to consumer financial laws for depository institutions with $10 billion or more in assets, including the authority to prevent unfair, deceptive or abusive practices in connection with the offering of consumer financial products. The CFPB may issue regulations that impact products and services offered by Regions or Regions Bank.
Examinations by Region’s regulators consider not only compliance with applicable laws, regulations, and supervisory policies of the agency, but also capital levels, asset quality, risk management effectiveness, the ability and performance of management, and the board of directors, the effectiveness of internal controls, earnings, liquidity, and various other factors. Following those examinations, Regions and Regions Bank are assigned supervisory ratings.
Examinations by Regions’ regulators consider not only compliance with applicable laws, regulations and supervisory policies of the agency, but also capital levels, asset quality, risk management effectiveness, the ability and performance of management and the board of directors, the effectiveness of internal controls, earnings, liquidity, interest rate risk management and various other factors.
Regions Bank submitted it's most recent resolution plan in November 2022. Enforcement Authority The federal banking agencies have broad authority to issue orders to depository institutions and their holding companies prohibiting activities that constitute violations of law, rule, regulation, or administrative order, or that represent unsafe or unsound banking practices, as determined by the federal banking agencies.
Enforcement Authority The federal banking agencies have broad authority to issue orders to depository institutions and their holding companies prohibiting activities that constitute violations of law, rule, regulation or administrative order, or that represent unsafe or unsound banking practices, as determined by the federal banking agencies.
As a Category IV BHC, Regions must also develop and maintain a capital plan, and must submit the capital plan to the FRB as part of the CCAR process.
As a Category IV banking organization, Regions must also develop and maintain a capital plan, and must submit the capital plan to the Federal Reserve as part of the CCAR process.
Furthermore, as a Category IV firm, Regions is obligated, at a minimum, to: (i) calculate collateral positions monthly; (ii) establish a more limited set of liquidity risk limits ; (iii) monitor elements of intraday liquidity risk exposures; and (iv) report liquidity data on the FR 2052a on a monthly basis.
Furthermore, as a Category IV firm, Regions is obligated, at a minimum, to: (i) calculate collateral positions monthly; (ii) establish a more limited set of liquidity risk limits; (iii) monitor elements of intraday liquidity risk exposures; and (iv) report liquidity data on the FR 2052a on a monthly basis. 13 Table of Contents Resolution Planning Category IV firms such as Regions are not required to submit 165(d) resolution plans.
Economic sanctions are administered by OFAC. Territorial sanctions, which target certain countries, regions and territories, take many different forms.
Territorial sanctions, which target certain countries, regions and territories, take many different forms.
The final rule maintains the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, 13 Table of Contents relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option).
The final rule provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). Regions adopted the capital transition relief over the permissible five-year period.
Limits on Loans to One Borrower and Loans to Insiders Alabama banking law imposes limits on the amount of credit a bank can extend to any one person (or group of related persons). For Regions Bank, this limit includes credit exposures arising from derivative transactions, repurchase agreements, and securities lending and borrowing transactions.
Limits on Exposure to One Borrower and Exposure to Insiders Alabama banking law imposes limits on the amount of credit a bank can extend to any one person (or group of related persons). For Regions Bank, this limit includes credit exposures arising from loan and equivalent exposure and investment and trading exposure.
Additionally, regulators may choose to examine other factors in order to evaluate the safety and soundness of financial institutions. 14 Table of Contents Safety and Soundness The federal banking agencies have adopted a set of guidelines prescribing safety and soundness standards relating to internal controls and information systems, informational security, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, and compensation, fees and benefits.
Safety and Soundness The federal banking agencies have adopted a set of guidelines prescribing safety and soundness standards relating to internal controls and information systems, informational security, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth and compensation, fees and benefits.
Yet, such changes may have a material impact on Regions’ business, financial condition or results of operations. We will continue to evaluate the impact of any changes in law and any new regulations promulgated, including changes in regulatory costs and fees, modifications to consumer products or disclosures and the requirements of the enhanced supervision provisions, among others.
We will continue to evaluate the impact of any changes in law and any new regulations promulgated, including changes in regulatory costs and fees, modifications to consumer products or disclosures and the requirements of the enhanced supervision provisions, among others.
See Note 12 "Regulatory Capital Requirements and Restrictions" in Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for details on minimum capital ratios and those needed to be well capitalized.
For Regions Bank, the buffer requirement is the 2.5 percent SCB. See Note 12 "Regulatory Capital Requirements and Restrictions" in Item 8. “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for details on minimum capital ratios and those needed to be well capitalized.
Resolution Planning Category IV firms such as Regions are not required to submit resolution plans. The FDIC separately requires insured depositary institutions with $100 billion or more in total assets, such as Regions Bank, to submit to the FDIC periodic plans for resolution in the event of the bank’s failure.
The FDIC separately requires insured depositary institutions with $100 billion or more in total assets, such as Regions Bank, to submit to the FDIC periodic plans for resolution in the event of the bank’s failure. Regions Bank submitted its most recent resolution plan in November 2022.
Regions provides financial solutions for a wide range of clients including retail and mortgage banking services, commercial banking services and wealth and investment services. Further, Regions and its subsidiaries deliver specialty capabilities including merger and acquisition advisory services, capital markets solutions, home improvement lending and others.
Regions provides financial solutions for a wide range of clients including retail and mortgage banking services, commercial banking services and wealth and investment services. Further, Regions and its subsidiaries deliver other financial services capabilities described below.
This agreement will allow us to transition our tuition reimbursement program for associates to a best-in-class tuition assistance program that targets adult learners and provides coaching support and access to a curated catalog from Guild’s Learning Marketplace.
Our partnership with Guild Education Services, an education, skilling and mobility solution provider has allowed us to transition our tuition reimbursement program for associates to a best-in-class tuition assistance program that targets adult learners and provides coaching support and access to a curated catalog from Guild’s Learning Marketplace.
The guidance also provides that enforcement actions may be taken against a banking organization if its incentive compensation arrangements or related risk management, control or governance processes pose a risk to the organization’s safety and soundness.
The guidance also provides that enforcement actions may be taken against a banking organization if its incentive compensation arrangements or related risk management, control or governance processes pose a risk to the organization’s safety and soundness. Anti-Money Laundering A continued focus of governmental policy relating to financial institutions in recent years has been combating money laundering and terrorist financing.
Moreover, the United States Congress has recently considered, and is currently considering, various proposals for more comprehensive data privacy and cybersecurity legislation, to which Regions and/or Regions Bank may be subject if passed.
We expect this trend of state-level activity to persist and we are continually monitoring developments in the states in which our customers are located. Moreover, the United States Congress has considered, and is currently considering, various proposals for more comprehensive data privacy and cybersecurity legislation, to which Regions and/or Regions Bank may be subject to if passed.
Applicable banking laws and regulations also place restrictions on loans by FDIC-insured banks and their affiliates to their directors, executive officers and principal shareholders. 15 Table of Contents Lending Standards and Guidance The federal banking agencies have adopted uniform regulations prescribing standards for extensions of credit that are secured by liens or interests in real estate or made for the purpose of financing permanent improvements to real estate.
Lending Standards and Guidance The federal banking agencies have adopted uniform regulations prescribing standards for extensions of credit that are secured by liens or interests in real estate or made for the purpose of financing permanent improvements to real estate.
The federal banking regulators have provided guidance designed to ensure that incentive compensation arrangements at banking organizations take into account risk and are consistent with safe and sound practices.
Reporting of the collected data will not be required until 2027. 18 Table of Contents Compensation Practices Our compensation practices are subject to oversight by the Federal Reserve. The federal banking regulators have provided guidance designed to ensure that incentive compensation arrangements at banking organizations take into account risk and are consistent with safe and sound practices.
Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements.
State regulators have also been increasingly active in implementing privacy and cybersecurity laws, regulations, rules and standards. Several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and have provided detailed requirements with respect to these programs, including data encryption requirements.
The CRA record of each subsidiary bank of a FHC also is assessed by the Federal Reserve in connection with reviewing any proposed acquisition or merger application. [Regions Bank's most recent CRA rating from the Federal Reserve is "Satisfactory".] Compensation Practices Our compensation practices are subject to oversight by the Federal Reserve.
The CRA record of each subsidiary bank of a FHC also is assessed by the Federal Reserve in connection with reviewing any proposed acquisition or merger application. Regions Bank’s most recent CRA rating from the Federal Reserve was “Satisfactory.” In October 2023, the Federal Reserve, FDIC and OCC issued a final rule to amend their regulations implementing the CRA.
Regulators make this evaluation as a part of their regular examination of the institution’s safety and soundness.
Regulators make this evaluation as a part of their regular examination of the institution’s safety and soundness. Additionally, regulators may choose to examine other factors in order to evaluate the safety and soundness of financial institutions.
The USA PATRIOT Act also requires federal banking regulators to evaluate the effectiveness of an applicant in combating money laundering in determining whether to approve a proposed bank acquisition. The AMLA, which amends the BSA, was enacted in January 2021.
The USA PATRIOT Act also requires federal banking regulators to evaluate the effectiveness of an applicant in combating money laundering in determining whether to approve a proposed bank acquisition. A financial institution's failure to comply with the BSA could have serious legal and reputational consequences for the institution.
Additionally, on a quarterly basis the CHR Committee reviews the HCM Dashboard which includes a mixture of trending and point-in-time metrics designed to provide information and analysis of workforce demographics; talent acquisition; workforce stability (retention, turnover, etc.); associate engagement; learning and development; and total rewards and associate support program utilization and effectiveness.
Additionally, on a quarterly basis the CHR Committee reviews the HCM Dashboard which includes a mixture of trending and point-in-time metrics designed to provide information and analysis of workforce demographics; talent acquisition; workforce stability (retention, turnover, etc.); and associate conduct and engagement. 20 Table of Contents In order to build the best team, it is necessary for us to fill talent needs with qualified, diverse and engaged associates.
Regions adopted the capital transition relief over the permissible five-year period. For more information, see the “Regulatory Requirements” section of Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K.
This proposal is subject to a comment period. The Company will continue to evaluate this proposal and the potential impacts, if adopted as proposed. For more information, see the “Regulatory Requirements” section of Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K.
Bank regulators continue to examine financial institutions for anti-money laundering compliance and we continue to monitor and augment, where necessary, our anti-money laundering compliance program to ensure that it is commensurate with our risk profile. Office of Foreign Assets Control Regulation The U.S. has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others.
Bank regulators continue to examine financial institutions for anti-money laundering compliance and Regions Bank will continue to monitor and augment, where necessary, our anti-money laundering compliance framework, including the anti-money laundering program, policies and procedures of Regions Bank to ensure that it is commensurate with our risk profile.
In addition, laws in all 50 U.S. states generally require businesses to provide notice under certain circumstances to individuals whose personal information has been disclosed as a result of a data breach. We expect this trend of state-level activity to persist and we are continually monitoring developments in the states in which our customers are located.
Many states have also implemented or are considering implementing, comprehensive data privacy and cybersecurity laws and regulations, such as the CCPA. In addition, laws in all 50 U.S. states generally require businesses to provide notice under certain circumstances to individuals whose personal information has been disclosed as a result of a data breach.
In response to the COVID-19 pandemic, in 2020, the U.S. federal banking agencies published another final rule to delay the estimated impact on regulatory capital stemming from the implementation of CECL.
Among other circumstances, a BHC may be required to resubmit its capital plan in connection with certain acquisitions or dispositions. In 2020, the U.S. federal banking agencies published a final rule to delay the estimated impact on regulatory capital stemming from the implementation of CECL.
The FDIC also concurrently maintained the Designated Reserve Ratio for the DIF at 2 percent. FDIC Recordkeeping Requirements As a part of the FDIC Part 370 recordkeeping requirements, Regions is subject to facilitate rapid and accurate payment of FDIC-insured deposits to customers when large IDIs fail.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K. FDIC Recordkeeping Requirements As a part of the FDIC Part 370 recordkeeping requirements, Regions is subject to facilitate rapid and accurate payment of FDIC-insured deposits to customers when large IDIs fail.
This framework is intended primarily for the protection of depositors, the FDIC’s DIF and the banking system as a whole, and is not intended for the protection of shareholders or other investors. Banking and other financial services statutes, regulations and policies are continually under review by United States Congress, state legislatures and federal and state regulatory agencies.
Supervision and Regulation We are subject to the extensive regulatory framework applicable to BHCs and their subsidiaries. This framework is intended primarily for the protection of depositors, the FDIC’s DIF and the banking system as a whole, and is not intended for the protection of shareholders or other investors.
This supervisory framework, including the examination reports and supervisory ratings, which are considered confidential supervisory information, could materially impact the conduct, growth, and profitability of Region’s operations. Under the Federal Reserve's Large Financial Institution Rating System, component ratings are assigned for capital planning, liquidity risk management, and governance and controls.
Following those examinations, Regions and Regions Bank are assigned supervisory ratings. This supervisory framework, including the examination reports and supervisory ratings, which are considered confidential supervisory information, could materially impact the conduct, growth and profitability of Regions’ operations.
In addition to laws and regulations, state and federal bank regulatory agencies may issue policy statements, interpretive letters, and similar written guidance applicable to Regions and its subsidiaries. Regions cannot predict future changes in the applicable laws, regulations and regulatory agency policies, including any changes resulting from changes in the U.S. presidential administration.
Banking and other financial services statutes, regulations and policies are continually under review by United States Congress, state legislatures and federal and state regulatory agencies. In addition to laws and regulations, state and federal bank regulatory agencies may issue policy statements, interpretive letters and similar written guidance applicable to Regions and its subsidiaries.
This tool provides 20 Table of Contents the ability to inventory the skills our associates have, allowing us to target our development efforts on specific areas where elevated skills are needed.
This tool provides the ability to inventory the skills our associates have, allowing us to target our development efforts on specific areas where elevated skills are needed. Regions also offers a leader and manager development program created to help people managers understand how to evaluate performance by leveraging the power of a strengths-based and engagement-focused workforce and culture.
To be considered "well managed" under this rating system, a firm must be rated "broadly meets expectations" or "conditionally meets expectations" for each of its three component ratings. The results of examinations by any of Region’s federal bank regulators potentially can result in the imposition of significant limitations on Region’s activities and growth.
The results of examinations by any of Regions’ federal bank regulators potentially can result in the imposition of significant limitations on Regions’ activities and growth.
Community Reinvestment Act The CRA requires Regions Bank's primary federal bank regulatory agency, the Federal Reserve, to assess the bank's record in meeting the credit needs of the communities served by the bank, including low- and moderate-income neighborhoods and persons. [Additionally, CRA assessments can be impacted by other consumer related regulatory examinations.] Institutions are assigned one of four ratings: "Outstanding," "Satisfactory," "Needs to Improve," or "Substantial Noncompliance." This assessment is considered for any bank that applies to merge or consolidate with or acquire the assets or assume the liabilities of an IDI, or to open or relocate a branch office.
Community Reinvestment Act The CRA requires Regions Bank’s primary federal bank regulatory agency, the Federal Reserve, to assess the bank’s record in meeting the credit needs of the communities served by the bank, including low- and moderate-income neighborhoods and persons.
The rule also imposes requirements on bank service providers to notify their affected banking organization customers of certain computer-security incidents. State regulators have also been increasingly active in implementing privacy and cybersecurity laws, regulations, rules, and standards.
The rule also imposes requirements on bank service providers to notify their affected banking organization customers of certain computer-security incidents. Further, in 2023, the SEC issued regulations requiring public companies to disclose certain information regarding material cybersecurity incidents impacting those companies, as well as descriptions about how they manage material cybersecurity risks.
Failure of a financial institution to comply with the USA PATRIOT Act’s requirements could have serious legal and reputational consequences for the institution. Regions’ banking subsidiary has augmented its anti-money laundering compliance program and will continue to revise and update its anti-money laundering policies, procedures and controls to reflect changes required by the USA PATRIOT Act and its implementing regulations.
Regions Bank has continued to augment its anti-money laundering compliance program to comply with the BSA and its implementing regulations and will continue to revise and update its anti-money laundering policies, procedures and controls to reflect future regulatory changes. The AMLA, which amends the BSA, was enacted in January 2021.
Branches Florida 275 Tennessee 200 Alabama 189 Georgia 116 Mississippi 101 Texas 90 Louisiana 83 Arkansas 58 Missouri 51 Illinois 41 Indiana 41 South Carolina 18 Kentucky 10 North Carolina 7 Iowa 5 Utah 1 Total 1,286 Other Financial Services Operations In addition to its banking operations, Regions provides additional financial services through the following subsidiaries: Regions Equipment Finance Corporation and Regions Commercial Equipment Finance, LLC, both wholly-owned subsidiaries of Regions Bank, provide equipment financing products focusing on commercial clients.
Branches Florida 272 Tennessee 198 Alabama 186 Georgia 117 Mississippi 99 Texas 90 Louisiana 82 Arkansas 57 Missouri 49 Illinois 41 Indiana 40 South Carolina 18 Kentucky 9 North Carolina 7 Iowa 5 Utah 1 Total 1,271 Other Financial Services Operations In addition to its banking operations, Regions and its subsidiaries deliver specialty capabilities including merger and acquisition advisory services, capital markets solutions, home improvement lending, investment services, equipment financing for commercial clients and small business customers, low income housing tax credit corporate fund syndication and asset management, financing to CRA-qualified customers, investments and insurance products, broker-dealer services to commercial clients, and others.
Removed
Ascentium Capital, also a wholly-owned subsidiary of Regions Bank, provides financing of essential-use equipment for small business customers through a technology-enabled model that delivers same-day credit decisions and funding. Sabal Capital Partners, LLC, is a wholly-owned subsidiary of Regions Bank headquartered in Irvine, California, and is a national commercial real estate lender.
Added
Regions cannot predict future changes in the applicable laws, regulations and regulatory agency policies, including 10 Table of Contents any changes resulting from changes in the U.S. presidential administration. Yet, such changes may have a material impact on Regions’ business, financial condition or results of operations.
Removed
Regions Affordable Housing LLC is a wholly-owned subsidiary of Regions Bank headquartered in Great Neck, New York, and engages in low income housing tax credit corporate fund syndication and asset management.
Added
Under the Federal Reserve’s Large Financial Institution Rating System, component ratings are assigned for capital planning, liquidity risk management, and governance and controls. To be considered “well managed” under this rating system, a firm must be rated “broadly meets expectations” or “conditionally meets expectations” for each of its three component ratings.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisk Factor Summary Market Risks • Our businesses have been, and may continue to be, adversely affected by conditions in the financial markets and economic conditions generally. • Fluctuations in market interest rates may adversely affect our performance. • Transitions away from and the replacement of LIBOR and other benchmark rates could adversely impact our business, financial condition and results of operations. 21 Table of Contents Credit Risks • If we experience greater credit losses in our loan portfolios than anticipated, our earnings may be materially adversely affected. • Any future reductions in our credit ratings may increase our funding costs and place limitations on business activities. • Changes in the soundness of other financial institutions could adversely affect us. • We may suffer losses if the value of collateral declines in stressed market conditions.
Biggest changeCredit Risks • If we experience greater credit losses in our loan portfolios than anticipated, our earnings may be materially adversely affected. • Any future reductions in our credit ratings may increase our funding costs and place limitations on business activities. • Changes in the soundness of other financial institutions could adversely affect us. • We may suffer losses if the value of collateral declines in stressed market conditions.
Item 1A. Risk Factors An investment in the Company involves risks, some of which, including market, credit, technology, strategic, operational, reputational, legal, regulatory and compliance, liquidity, reputational, talent management, estimate and assumption, and other external risks, could be substantial and is inherent in our business.
Item 1A. Risk Factors An investment in the Company involves risks, some of which, including market, credit, technology, strategic, operational, reputational, legal, regulatory and compliance, liquidity, talent management, estimate and assumption and other external risks, could be substantial and is inherent in our business.
As a large financial institution, we depend on our ability to process, record and monitor a large number of customer transactions on a continuous basis and otherwise collect, transmit, store and otherwise process a significant amount of personal information in connection therewith.
As a large financial institution, we depend on our ability to process, record and monitor a large number of customer transactions on a continuous basis and otherwise collect, transmit, store and process a significant amount of personal information in connection therewith.
We are subject to complex and evolving laws, regulations, rules, standards and contractual relating to the privacy and cybersecurity of the personal information of clients, employees or others, and any failure to comply with these laws, regulations, rules, standards and contractual obligations could expose us to liability and/or reputational damage.
We are subject to complex and evolving laws, regulations, rules, standards and contractual obligations relating to the privacy and cybersecurity of the personal information of clients, employees or others, and any failure to comply with these laws, regulations, rules, standards and contractual obligations could expose us to liability and/or reputational damage.
Our ability to compete successfully depends on a number of additional factors, including customer convenience, quality of service, personal contacts, the quality of the technology that supports the customer experience, pricing and range of products.
Our ability to compete successfully depends on a number of additional factors, including customer convenience, quality of service, personal contacts, the quality of the technology that supports the customer experience and pricing and range of products.
Legal, Regulatory and Compliance Risks • We are, and may in the future be, subject to litigation, investigations and governmental proceedings that may result in liabilities adversely affecting our financial condition, business or results of operations or in reputational harm. • We are subject to extensive governmental regulation, which could have an adverse impact on our operations. • We are subject to a variety of risks in connection with any sale of loans we may conduct. • We may be subject to more stringent capital and liquidity requirements. • Rulemaking changes and regulatory initiatives implemented by the CFPB may result in higher regulatory and compliance costs that may adversely affect our results of operations. • We may not be able to complete future acquisitions, may not be successful in realizing the benefits of any future acquisitions that are completed, or may choose not to pursue acquisition opportunities we might find beneficial. • Increases in FDIC insurance assessments may adversely affect our earnings. • Unfavorable results from ongoing stress analyses may adversely affect our ability to retain customers or compete for new business opportunities. • We are a holding company and depend on our subsidiaries for dividends, distributions and other payments. • We may not pay dividends on shares of our capital stock. • Anti-takeover and banking laws and certain agreements and charter provisions may adversely affect share value. 22 Table of Contents • Our amended and restated bylaws designate (i) the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders and (ii) the federal district courts of the United States as the sole and exclusive forum for any action asserting a cause of action arising under the Securities Act, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with our company or our company’s directors, officers or other employees. • We face substantial legal and operational risks in safeguarding personal information. • Differences in regulation can affect our ability to compete effectively.
Legal, Regulatory and Compliance Risks • We are, and may in the future be, subject to litigation, investigations and governmental proceedings that may result in liabilities adversely affecting our financial condition, business or results of operations or in reputational harm. • We are subject to extensive governmental regulation, which could have an adverse impact on our operations. • We are subject to a variety of risks in connection with any sale of loans we may conduct. • We may be subject to more stringent capital and liquidity requirements. • Rulemaking changes and regulatory initiatives implemented by the CFPB may result in higher regulatory and compliance costs that may adversely affect our results of operations. • We may not be able to complete future acquisitions, may not be successful in realizing the benefits of any future acquisitions that are completed or may choose not to pursue acquisition opportunities we might find beneficial. • Increases in FDIC insurance assessments may adversely affect our earnings. • Unfavorable results from ongoing stress analyses may adversely affect our ability to retain customers or compete for new business opportunities. • We are a holding company and depend on our subsidiaries for dividends, distributions and other payments. • We may not pay dividends on shares of our capital stock. • Anti-takeover and banking laws and certain agreements and charter provisions may adversely affect share value. • Our amended and restated bylaws designate (i) the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders and (ii) the federal district courts of the United States as the sole and exclusive forum for any action asserting a cause of action arising under the Securities Act, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with our company or our company’s directors, officers or other employees. • We face substantial legal and operational risks in safeguarding personal information. • Differences in regulation can affect our ability to compete effectively.
Moreover, the United States Congress has recently considered, and is currently considering, various proposals for more comprehensive privacy and cybersecurity legislation, to which we may be subject if passed. Additionally, the federal banking regulators, as well as the SEC and related self-regulatory organizations, regularly issue guidance regarding cybersecurity that is intended to enhance cyber risk management among financial institutions.
Moreover, the United States Congress has considered, and is currently considering, various proposals for more comprehensive privacy and cybersecurity legislation, to which we may be subject if passed. Additionally, the federal banking regulators, as well as the SEC and related self-regulatory organizations, regularly issue guidance regarding cybersecurity that is intended to enhance cyber risk management among financial institutions.
We incur significant costs and expenses in connection with our initiatives to address the risks associated with oversight of our internal and external service providers. Our failure to appropriately assess and manage these relationships, especially those involving significant banking functions, shared services or other critical activities, could materially adversely affect us.
We incur significant costs and expenses in connection with our initiatives to address the risks associated with oversight of our external service providers. Our failure to appropriately assess and manage these relationships, especially those involving significant banking functions, shared services or other critical activities, could materially adversely affect us.
These statutory provisions and provisions in our certificate of incorporation, including the rights of the holders of our preferred stock, could result in Regions being less attractive to a potential acquirer and thus adversely affect our share value. 36 Table of Contents Our amended and restated bylaws designate (i) the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders and (ii) the federal district courts of the United States as the sole and exclusive forum for any action asserting a cause of action arising under the Securities Act, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with our company or our company’s directors, officers or other employees .
These statutory provisions and provisions in our certificate of incorporation, including the rights of the holders of our preferred stock, could result in Regions being less attractive to a potential acquirer and thus adversely affect our share value. 37 Table of Contents Our amended and restated bylaws designate (i) the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders and (ii) the federal district courts of the United States as the sole and exclusive forum for any action asserting a cause of action arising under the Securities Act, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with our company or our company’s directors, officers or other employees .
Such actions could reduce our profitability as these liquid investments earn a lower return than other assets, such as loans. See the "Liquidity" section within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K for our liquidity policy.
Such actions could reduce our profitability as these liquid investments earn a lower return than other assets, such as loans. See the “Liquidity” section within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K for our liquidity policy.
Additionally, a growing number of investors (in particular significant U.S. institutional investors who hold and manage substantial equity positions, in some cases in nearly all major U.S. listed companies) are integrating ESG factors into their analysis of the expected risk and return of potential investments.
Additionally, a growing number of investors (in particular institutional investors who hold and manage substantial equity positions, in some cases in nearly all major U.S. listed companies) are integrating ESG factors into their analysis of the expected risk and return of potential investments.
Certain securities within the investment portfolio, certain hedging transactions and certain of the products that we offer, such as floating-rate loans and mortgages, determine their applicable interest rate or payment amount by reference to a benchmark rate, such as LIBOR, an index, or other financial metric.
Certain securities within the investment portfolio, certain hedging transactions and certain of the products that we offer, such as floating-rate loans and mortgages, determine their applicable interest rate or payment amount by reference to a benchmark rate, an index, or other financial metric.
Reputational Risks We are subject to environmental, social and governance risks that could adversely affect our reputation and the trading price of our common stock . We are subject to a variety of risks, including reputational risk, associated with environmental, social and governance, or ESG, issues.
Reputational Risks We are subject to environmental, social and governance risks that could adversely affect our business, reputation and the trading price of our common stock . We are subject to a variety of risks, including reputational risk, associated with environmental, social and governance, or ESG, issues.
As a large financial institution with a diverse base of customers, vendors and suppliers, we may face negative publicity based on the identity, practices, and perceptions of certain entities with whom financial institutions choose to do business.
As a large financial institution with a diverse base of customers, vendors and suppliers, we may face negative publicity based on the identity, practices and perceptions of certain entities with whom we choose to do business.
First, our bylaws provide that, except for claims made under the Securities Act of 1933 (which are the subject of the forum selection provision described in the following sentence), unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (i) derivative actions brought on behalf of the Company, (ii) certain actions asserting a claim of breach of a fiduciary duty, (iii) actions asserting a claim against the Company or a director, officer or other employee of the Company arising pursuant to any provision of Delaware law, our certificate of incorporation, or our bylaws or (iv) any actions asserting a claim against the Company or any director, officer or other employee of the Company governed by the internal affairs doctrine, shall be a state court located within the State of Delaware or the federal district court for the District of Delaware if no state court located within the State of Delaware has jurisdiction.
First, our bylaws provide that, except for claims made under the Securities Act of 1933 (which are the subject of the forum selection provision described in the following sentence), unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (i) derivative actions brought on behalf of the Company, (ii) certain actions asserting a claim of breach of a fiduciary duty, (iii) actions asserting a claim against the Company or a director, officer or other employee of the Company arising pursuant to any provision of Delaware law, our certificate of incorporation, or our bylaws or (iv) any actions asserting a claim against the Company or any director, officer or other employee of the Company governed by the internal affairs doctrine, shall be the Court of Chancery of the State of Delaware or the federal district court for the District of Delaware if the Court of Chancery of the State of Delaware has no jurisdiction.
These laws and regulations govern a variety of matters, including certain debt obligations, changes in control, maintenance of adequate capital, and general business operations and financial condition (including permissible types, amounts and terms of loans and investments, the amount of reserves against deposits, restrictions on dividends and repurchases of our capital securities, establishment of branch offices, and the maximum interest rate that may be charged by law).
These laws and regulations govern a variety of matters, including certain debt obligations, changes in control, maintenance of adequate capital, consumer protection and general business operations and financial condition (including permissible types, amounts and terms of loans and investments, the amount of reserves against deposits, restrictions on dividends and repurchases of our capital securities, establishment of branch offices and the maximum interest rate that may be charged by law).
Reputational Risks • We are subject to environmental, social and governance risks that could adversely affect our reputation and the trading price of our common stock. • Damage to our reputation could significantly harm our businesses.
Reputational Risks • We are subject to environmental, social and governance risks that could adversely affect our business, reputation and the trading price of our common stock. • Damage to our reputation could significantly harm our businesses.
We may also be required to add additional compliance personnel or incur other significant compliance-related expenses. Our business, results of operations or competitive position may be adversely affected as a result. In addition, the current U.S. presidential administration recently called on all regulatory agencies to reduce or eliminate certain fees relating to a number of services, including banking services.
We may also be required to add additional compliance personnel or incur other significant compliance-related expenses. Our business, results of operations or competitive position may be adversely affected as a result. In addition, the current U.S. presidential administration has called on all regulatory agencies to reduce or eliminate certain fees relating to a number of services, including banking services.
Risks Related to Estimates and Assumptions Our reported financial results depend on management’s selection of accounting methods and certain assumptions and estimates. Our accounting policies and assumptions are fundamental to our reported financial condition and results of operations.
Estimates and Assumptions Risks Our reported financial results depend on management’s selection of accounting methods and certain assumptions and estimates. Our accounting policies and assumptions are fundamental to our reported financial condition and results of operations.
Our regulatory capital position is discussed in 33 Table of Contents greater detail in Note 12 "Regulatory Capital Requirements and Restrictions" to the consolidated financial statements of this Annual Report on Form 10-K. We are subject to a variety of risks in connection with any sale of loans we may conduct.
Our regulatory capital position is discussed in greater detail in Note 12 "Regulatory Capital Requirements and Restrictions" to the consolidated financial statements of this Annual Report on Form 10-K. 34 Table of Contents We are subject to a variety of risks in connection with any sale of loans we may conduct.
For a more detailed discussion of these risks and our management strategies for these risks, see the "Executive Overview", “Net Interest Income, Margin and Interest Rate Risk,” “Net Interest Income and Margin,” “Market Risk-Interest Rate Risk” and “Securities” sections of Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K.
For a more detailed discussion of these risks and our management strategies for these risks, see the “Executive Overview,” “Net Interest Income, Margin and Interest Rate Risk,” “Net Interest Income and Margin,” “Market Risk-Interest Rate Risk” and “Securities” sections of Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K.
These risks also includes the possibility that the value of the investment could decrease considerably, and dividends or other distributions concerning the investment could be reduced or eliminated. Discussed below are risk factors that could adversely affect our financial results and condition, as well as the value of, and return on investment in the Company.
These risks also include the possibility that the value of the investment could decrease considerably, and dividends or other distributions concerning the investment could be reduced or eliminated. Discussed below are risk factors that could adversely affect our financial results and condition, as well as the value of, and return on investment in the Company.
Because of the uncertainty of estimates involved in these matters, we may be required to do one or more of the following: significantly increase the allowance for credit losses and/or sustain credit losses that are significantly higher than the allowance provided; recognize significant losses on assets carried at fair value; recognize significant impairment on our 38 Table of Contents goodwill, other intangible assets or deferred tax asset balances; significantly increase our accrued income taxes; or significantly decrease the value of our residential MSRs.
Because of the uncertainty of estimates involved in these matters, we may be required to do one or more of the following: significantly increase the allowance for credit losses and/or sustain credit losses that are significantly higher than the allowance provided; recognize significant losses on assets carried at fair value; recognize significant impairment on our goodwill, other intangible assets or deferred tax asset balances; significantly increase our accrued income taxes; or significantly decrease the value of our residential MSRs.
Longer-term changes, such as increasing average temperatures and rising sea levels, may damage, destroy or otherwise impact the value or productivity of our properties and other assets, reduce the availability of insurance, and/or lead to prolonged disruptions in our operations.
Longer-term changes, such as increasing average temperatures and rising sea levels, may damage, destroy or otherwise impact the value or productivity of our properties and other assets, reduce the availability of or increase the cost of insurance, and/or lead to prolonged disruptions in our operations.
However, such measures cannot predict the nature, timing, or level of severe weather events or prevent the disruption that a catastrophic earthquake, fire, hurricane, tornado or other severe weather event could cause to the markets that we serve and any resulting adverse impact on our customers, such as hindering our borrowers’ ability to timely repay their loans and diminishing the value of any collateral held by us.
In addition, such measures cannot predict the nature, timing or level of severe weather events or prevent the disruption that a catastrophic earthquake, fire, hurricane, tornado or other severe weather event could cause to the markets that we serve and any resulting adverse impact on our customers, such as hindering our borrowers’ ability to timely repay their loans and diminishing the value of any collateral held by us.
The process for obtaining required regulatory approvals, particularly for large financial institutions, like Regions, can be difficult, time-consuming and unpredictable. We may fail to pursue, evaluate or complete strategic and competitively significant business opportunities as a result of our inability, or our perceived inability, to obtain required regulatory approvals in a timely manner or at all.
The process for obtaining required regulatory approvals, particularly for large financial institutions, like Regions, can be difficult, time-consuming and unpredictable. We may fail to pursue, evaluate or complete strategic and competitively 35 Table of Contents significant business opportunities as a result of our inability, or our perceived inability, to obtain required regulatory approvals in a timely manner or at all.
Additional risks could arise in connection with any failure or perceived failure by us, our service providers or other third parties with which we do business to provide adequate disclosure or transparency to our customers about the personal information collected from them and its use, to receive, document or honor the privacy 28 Table of Contents preferences expressed by our customers, to protect personal information from unauthorized disclosure, or to maintain proper training on privacy practices for all employees or third parties who have access to personal information in our possession or control.
Additional risks could arise in connection with any failure or perceived failure by us, our service providers or other third parties with which we do business to provide adequate disclosure or transparency to our customers about the personal information collected from them and its use, to receive, document or honor the privacy preferences expressed by our customers, to protect personal information from unauthorized disclosure or to maintain proper training on privacy practices for all employees or third parties who have access to personal information in our possession or control.
Our ability to attract and retain customers and highly-skilled management and employees is impacted by our reputation. A negative public opinion of us and our business can result from any number of activities, including our lending practices, corporate governance and regulatory compliance, acquisitions, and actions taken by community organizations in response to 32 Table of Contents these activities.
Our ability to attract and retain customers and highly-skilled management and employees is impacted by our reputation. A negative public opinion of us and our business can result from any number of activities, including our lending practices, corporate governance and regulatory compliance, acquisitions and actions taken by community organizations in response to these activities.
Such regulatory agencies may require us to adjust our determination of the value for these items. These adjustments could materially adversely affect our business, results of operations or financial condition. Any future reductions in our credit ratings may increase our funding costs and place limitations on business activities.
Such regulatory agencies may require us to adjust our determination of the value for these items. These adjustments could materially adversely affect our business, results of operations or financial condition. 25 Table of Contents Any future reductions in our credit ratings may increase our funding costs and place limitations on business activities.
Disruptions or failures in the physical infrastructure or operating systems or networks that support our businesses and customers, or cyber-attacks, information security breaches, or other similar incidents of the networks, systems or devices that our customers use to access our products and services, could result in customer attrition, violation of applicable privacy and cybersecurity laws and regulations, notifications obligations, regulatory fines, civil litigation, damages, injunctions, penalties or intervention, reputational damage, reimbursement or other compensation costs, remediation costs, additional cybersecurity protection costs, increased insurance premiums and/or additional compliance costs, any of which could materially adversely affect our business, results of operations or financial condition.
Disruptions or failures in the physical infrastructure or operating systems or networks that support our businesses and customers, or cybersecurity or other similar incidents of the networks, systems or devices that our customers use to access our products and services, could result in customer attrition, violation of applicable privacy and cybersecurity laws and regulations, notifications obligations, regulatory fines, civil litigation, damages, injunctions, penalties or intervention, reputational damage, reimbursement or other compensation costs, remediation costs, additional cybersecurity protection costs, increased insurance premiums and/or additional compliance costs, any of which could materially adversely affect our business, results of operations or financial condition.
If this information is inaccurate, we may be subject to regulatory action, reputational harm or other adverse effects with respect to the operation of our business, our financial condition and our results of operations. 31 Table of Contents We are exposed to risk of environmental liability when we take title to property.
If this information is inaccurate, we may be subject to regulatory action, reputational harm or other adverse effects with respect to the operation of our business, our financial condition and our results of operations. We are exposed to risk of environmental liability when we take title to property.
If Regions Bank is unable to make dividend payments to us and sufficient cash or liquidity is not otherwise available, we may not be able to make dividend payments to our common and preferred shareholders or principal and interest payments on our outstanding debt. See the “Shareholders’ Equity” section of Item 7.
If Regions Bank is unable to make 36 Table of Contents dividend payments to us and sufficient cash or liquidity is not otherwise available, we may not be able to make dividend payments to our common and preferred shareholders or principal and interest payments on our outstanding debt. See the “Shareholders’ Equity” section of Item 7.
If we become subject to significant environmental liabilities, our business, financial condition or results of operations could be adversely affected. We can be negatively affected if we fail to identify and address operational risks associated with the introduction of or changes to products, services and delivery platforms.
If we become subject to significant environmental liabilities, our business, financial condition or results of operations could be adversely affected. 32 Table of Contents We can be negatively affected if we fail to identify and address operational risks associated with the introduction of or changes to products, services and delivery platforms.
Operational Risks • We are subject to a variety of operational risks, including the risk of fraud or theft by employees, which may adversely affect our business and results of operations. • We rely on other companies to provide key components of our business infrastructure. • We depend on the accuracy and completeness of information about clients and counterparties. • We are exposed to risk of environmental liability when we take title to property. • We can be negatively affected if we fail to identify and address operational risks associated with the introduction of or changes to products, services and delivery platforms. • Enhanced regulatory and other standards for the oversight of vendors and other service providers can result in higher costs and other potential exposures.
Operational Risks • We are subject to a variety of operational risks, including the risk of fraud or theft by internal or external parties, which may adversely affect our business and results of operations. • We rely on other companies to provide key components of our business infrastructure. • We depend on the accuracy and completeness of information about clients and counterparties. 22 Table of Contents • We are exposed to risk of environmental liability when we take title to property. • We can be negatively affected if we fail to identify and address operational risks associated with the introduction of or changes to products, services and delivery platforms. • Enhanced regulatory and other standards for the oversight of vendors and other service providers can result in higher costs and other potential exposures.
In addition, enforcement matters could impact our supervisory and CRA ratings, which may in turn restrict or limit our activities. Additional information relating to our litigation, investigations and other proceedings is discussed in Note 23 "Commitments, Contingencies and Guarantees" to the consolidated financial statements of this Annual Report on Form 10-K.
In addition, enforcement matters could impact our supervisory and CRA ratings, which may in turn restrict or limit our activities. Additional information relating to our litigation, investigations and other proceedings is discussed in Note 23 “Commitments, Contingencies and Guarantees” to the consolidated financial statements of this Annual Report on Form 10-K.
Any of these actions could adversely affect our reported financial condition and results of operations. If the models that we use in our business perform poorly or provide inadequate information, our business or results of operations may be adversely affected.
Any of these actions could adversely affect our reported financial condition and results of operations. 39 Table of Contents If the models that we use in our business perform poorly or provide inadequate information, our business or results of operations may be adversely affected.
We will likely be subject to new and evolving data privacy laws in the U.S. and abroad, which could result in additional costs of compliance, litigation, regulatory 37 Table of Contents fines, and enforcement actions.
We will likely be subject to new and evolving data privacy laws in the U.S. and abroad, which could result in additional costs of compliance, litigation, regulatory fines and enforcement actions.
Transitions away from and the replacement of LIBOR and other benchmark rates could adversely impact our business, financial condition and results of operations.
Transitions away from and the replacement of benchmark rates could adversely impact our business, financial condition and results of operations.
This could result in the loss, unauthorized disclosure, misuse, or misappropriation of confidential, personal, proprietary, or other information, damage to our reputation, increases to our costs and cause customer and financial losses.
These incidents could result in the loss, unauthorized disclosure, misuse or misappropriation of confidential, personal, proprietary or other information, damage to our reputation, increases to our costs and cause customer and financial losses.
For more information concerning our compliance with capital and liquidity requirements, see Note 12 "Regulatory Capital Requirements and Restrictions" to the consolidated financial statements of this Annual Report on Form 10-K.. Rulemaking changes and regulatory initiatives implemented by the CFPB may result in higher regulatory and compliance costs that may adversely affect our results of operations.
“Business,” and for more information concerning our compliance with capital and liquidity requirements, see Note 12 “Regulatory Capital Requirements and Restrictions” to the consolidated financial statements of this Annual Report on Form 10-K. Rulemaking changes and regulatory initiatives implemented by the CFPB may result in higher regulatory and compliance costs that may adversely affect our results of operations.
Responding to concerns around climate change provides us with potential new avenues through which we can support our stakeholders but also exposes us to risks associated with the transition to a lower-carbon economy. Such risks may result from changes in policies, laws and regulations, technologies, or market preferences that are intended to address climate change.
Responding to concerns around climate change provides us with potential new avenues through which we can support our stakeholders but also exposes us to risks associated with the transition to a lower-carbon economy. Such risks may result from changes in policies, laws and regulations, technologies, or market preferences relating to climate change.
These industries have been, and may in the future be, subject to significant volatility. For example, oil prices have been volatile, both rising and falling, in recent years. Such volatility is 30 Table of Contents expected to continue in the foreseeable future due to an unpredictable geopolitical and economic environment.
These industries have been, and may in the future be, subject to significant volatility. For example, oil prices have been volatile, both rising and falling, in recent years. Such volatility is expected to continue in the foreseeable future due to an unpredictable geopolitical and economic environment.
In all cases, the attacks primarily resulted in inconvenience; however, future cyber-attacks could be more disruptive and damaging, and we may not be able to anticipate or prevent all such attacks.
In all cases, the attacks primarily resulted in inconvenience; however, future cyber-attacks or other similar incidents could be more disruptive and damaging, and we may not be able to anticipate or prevent all such attacks.
Although we believe that we have appropriate information security procedures and controls designed to prevent or limit the effects of a cyber-attack, information security breach or other similar incident, our technologies, systems, networks and our customers’ devices may be the target of cyber-attacks information security breaches or other similar incidents that could result in the unauthorized release, accessing, gathering, monitoring, loss, destruction, modification, acquisition, transfer, use or other processing of us or our customers’ confidential, personal, proprietary and other information.
Although we believe that we have appropriate information security procedures and controls designed to prevent or limit the effects of a cybersecurity or other similar incident, our technologies, systems, networks and our customers’ devices may be the target of cybersecurity or other similar incidents that could result in the unauthorized release, accessing, gathering, monitoring, loss, destruction, modification, acquisition, transfer, use or other processing of us or our customers’ confidential, personal, proprietary and other information.
The move toward digital banking and financial services, and customer 29 Table of Contents expectations regarding digital offerings, will require us to invest greater resources in technological improvements and may put us at a disadvantage to banks and non-banks with greater resources to spend on technology.
The move toward digital banking and financial services, and customer expectations regarding digital offerings, will require us to invest greater resources in technological improvements and may put us at a disadvantage to banks and non-banks with greater resources to spend on technology.
Information security risks for large financial institutions, such as us, have increased significantly in recent years in part because of the proliferation of technology-based products and services and the increased sophistication and activities of organized crime, hackers, terrorists, nation-states, nation state-supported actors, activists and other external parties. This increase is expected to continue and further intensify.
Cybersecurity risks for large financial institutions, such as us, have increased significantly in recent years in part because of the proliferation of technology-based products and services and the increased sophistication and activities of organized 27 Table of Contents crime, hackers, terrorists, nation-states, nation state-supported actors, activists and other external parties. This increase is expected to continue and further intensify.
Volatility and uncertainty related to inflation and the effects of inflation, which has recently led to increased costs for businesses and consumers and potentially contribute to poor business and economic conditions generally, may enhance or 23 Table of Contents contribute to some of the risks of our business.
Volatility and uncertainty related to inflation and the effects of inflation, which has led to increased costs for businesses and consumers and potentially contribute to poor business and economic conditions generally and may enhance or contribute to some of the risks of our business.
We also have insurance coverage, that is reviewed annually, that may, subject to policy terms and conditions, cover certain losses associated with cyber-attacks, information security breaches, and other similar incidents, but our insurer may deny coverage as to any future claim or our insurance coverage may be insufficient to cover all losses from any such attack, breach, or incident, including any related damage to our reputation.
We also have insurance coverage, that is reviewed annually, that may, subject to policy terms and conditions, cover certain losses associated with cybersecurity and other similar incidents, but our insurer may deny coverage as to any future claim or our insurance coverage may be insufficient to cover all losses from any such attack, breach or incident, including any related damage to our reputation.
We expect to make additional investments in innovation and technology to address technological disruption in the industry and improve client offerings and service. These changes allow us to better serve the our clients and to reduce costs.
We expect to make additional investments in innovation and technology to address technological 29 Table of Contents disruption in the industry and improve client offerings and service. These changes allow us to better serve the our clients and to reduce costs.
Second lien position lending carries higher credit risk because any decrease in real estate pricing may result in the value of the collateral being insufficient to cover the second lien after the first lien position has been satisfied. As of December 31, 2022, approximately $1.9 billion of our home equity lines and loans were in a second lien position.
Second lien position lending carries higher credit risk because any decrease in real estate pricing may result in the value of the collateral being insufficient to cover the second lien after the first lien position has been satisfied. As of December 31, 2023, approximately $2.0 billion of our home equity lines and loans were in a second lien position.
These factors could result in higher delinquencies and greater charge-offs in future periods, which could materially adversely affect our business, financial condition or results of operations. Weakness in the commercial real estate markets could adversely affect our performance. As of December 31, 2022, approximately 8.6% of our loan portfolio consisted of investor real estate loans.
These factors could result in higher delinquencies and greater charge-offs in future periods, which could materially adversely affect our business, financial condition or results of operations. Weakness in the commercial real estate markets could adversely affect our performance. As of December 31, 2023, approximately 9.0% of our loan portfolio consisted of investor real estate loans.
During 2022, the FDIC adopted a final rule to increase initial base deposit insurance assessment rate schedules by 2 basis points, beginning with the first quarterly assessment period of 2023. The final rule requires the revised rates to remain in effect until the DIF reserve ratio meets or exceeds 2 percent.
In 2022, the FDIC adopted a final rule to increase initial base deposit insurance assessment rate schedules by 2 basis points, which began with the first quarterly assessment period of 2023. The final rule requires the revised rates to remain in effect until the DIF reserve ratio meets or exceeds 1.35 percent.
Operational Risks We are subject to a variety of operational risks, including the risk of fraud or theft by employees, which may adversely affect our business and results of operations.
Operational Risks We are subject to a variety of operational risks, including the risk of fraud or theft by internal or external parties, which may adversely affect our business and results of operations.
We could also be adversely affected if we lose access to information or services from a third-party service provider as a result of a cyber attack, information security breach, or similar incident, or system, network or operational failure or disruption affecting the third-party service provider.
We could also be adversely affected if we lose access to information or services from a third-party service provider as a result of a cybersecurity or similar incident or system, network or operational failure or disruption affecting the third-party service provider.
We provide traditional commercial, retail and mortgage banking services, as well as other financial services including asset management, wealth management, securities brokerage, merger-and-acquisition advisory services and other specialty financing.
We provide traditional commercial, retail and mortgage banking services, as well as other financial services including asset management, wealth management, securities brokerage, merger-and-acquisition advisory services and other specialty 23 Table of Contents financing.
We rely on the mortgage secondary market to manage various risks. In 2022, we sold 36.9% of the mortgage loans we originated to the Agencies. We rely on the Agencies to purchase loans that meet their conforming loan requirements in order to reduce our credit risk and provide funding for additional loans we desire to originate.
We rely on the mortgage secondary market to manage various risks. In 2023, we sold 35.1% of the mortgage loans we originated to the Agencies. We rely on the Agencies to purchase loans that meet their conforming loan requirements in order to reduce our credit risk and provide funding for additional loans we desire to originate.
As a result, shares of our capital stock are effectively subordinated to all existing and future liabilities and obligations of our subsidiaries. At December 31, 2022, our subsidiaries’ total deposits and borrowings were approximately $132.2 billion. We may not pay dividends on shares of our capital stock.
As a result, shares of our capital stock are effectively subordinated to all existing and future liabilities and obligations of our subsidiaries. At December 31, 2023, our subsidiaries’ total deposits and borrowings were approximately $128.3 billion. We may not pay dividends on shares of our capital stock.
Technology Risks We are at risk of a variety of systems failures or errors and cybersecurity incidents that could adversely affect customer experience and our business and financial performance.
Technology Risks We are at risk of a variety of systems failures or errors and cyber-attacks or other similar incidents that could adversely affect customer experience and our business and financial performance.
We may also be required to incur significant costs in connection with any regulatory investigation or civil litigation, fines, damages or injunctions resulting from a cyber-attack, information security breach, or other similar incident that impacts us.
We may also be required to incur significant costs in connection with any regulatory investigation or civil litigation, fines, damages or injunctions resulting from a cybersecurity or other similar incident that impacts us.
As new privacy and cybersecurity-related laws, regulations, rules and standards are implemented, the time and resources needed for us to comply with such laws, regulations, rules and standards as well as our potential liability for non-compliance and reporting obligations in the case of cyber-attacks, information security breaches or other similar incidents, may significantly increase.
As new privacy and cybersecurity-related laws, regulations, rules and standards are implemented, the time and resources needed for us 28 Table of Contents to comply with such laws, regulations, rules and standards as well as our potential liability for non-compliance and reporting obligations in the case of cybersecurity or other similar incidents, may significantly increase.
A worsening of business and economic conditions generally or specifically in the principal markets in which we conduct business could have adverse effects on our business, including the following: • A decrease in the demand for, or the availability of, loans and other products and services offered by us, including as a result of increases in interest rates; • A decrease in the value of our loans held for sale or other assets secured by consumer or commercial real estate; • An impairment of certain intangible assets, such as goodwill; • A decrease in interest income from variable rate loans, due to declines in interest rates; and • An increase in the number of clients and counterparties who become delinquent, file for protection under bankruptcy laws or default on their loans or other obligations to us, which could result in a higher level of nonperforming assets, net charge-offs, provisions for credit losses, and valuation adjustments on loans held for sale • A decrease in the supply of deposits or significant increase in competition for deposits, which could result in substantial increase in cost to retain and service deposits.
A worsening of business and economic conditions generally or specifically in the principal markets in which we conduct business could have adverse effects on our business, including the following: • A decrease in the demand for, or the availability of, loans and other products and services offered by us, including as a result of changing interest rate conditions; • A decrease in the value of our loans held for sale or other assets secured by consumer or commercial real estate; • An impairment of certain intangible assets, such as goodwill; • A decrease in interest income from variable rate loans, due to declines in interest rates; • An increase in the number of clients and counterparties who become delinquent, file for protection under bankruptcy laws or default on their loans or other obligations to us, which could result in a higher level of nonperforming assets, net charge-offs, provisions for credit losses and valuation adjustments on loans held for sale; • A decrease in the supply of deposits or the need to price interest-bearing deposits higher due to competitive forces, which could result in substantial increase in cost to retain and service deposits; and • A change in the pricing or spread environment could adversely impact the yields received on newly originated loans or securities.
Failure or errors in or breach of our systems or networks, or those of our third-party service providers (or providers to such third-party service providers), including as a result of cyber-attacks, information security breaches or other similar incidents, could disrupt our businesses or impact our customers.
Failure or errors in or breach of our systems or networks, or those of our third-party service providers (or providers to such third-party service providers), including as a result of cybersecurity or other similar incidents, could disrupt our businesses or impact our customers.
Refer to Note 20 "Derivative Financial Instruments and Hedging Activities" to the consolidated financial statements of this Annual Report on Form 10-K for the fair value of contracts subject to 25 Table of Contents contingent credit features and the collateral postings associated with such contracts.
Refer to Note 20 “Derivative Financial Instruments and Hedging Activities” to the consolidated financial statements of this Annual Report on Form 10-K for the fair value of contracts subject to contingent credit features and the collateral postings associated with such contracts.
We require sufficient liquidity to meet customer loan requests, customer deposit maturities/withdrawals, payments on our debt obligations as they come due and other cash commitments under both normal operating conditions and unpredictable circumstances causing industry or general financial market stress.
Effective liquidity management is essential for the operation of our business. We require sufficient liquidity to meet customer loan requests, customer deposit maturities/withdrawals, payments on our debt obligations as they come due and other cash commitments under both normal operating conditions and unpredictable circumstances causing industry or general financial market stress.
Our business, financial, accounting and data processing systems or other operating systems and facilities may stop operating properly or become disabled or damaged as a result of a number of factors, including events that are wholly or partially beyond our control.
Our systems and facilities may stop operating properly or become disabled or damaged as a result of a number of factors, including events that are wholly or partially beyond our control.
Recently, the United States government has raised concerns about a potential increase in cyber-attacks generally as a result of the military conflict between Russia and Ukraine and the related sanctions imposed by the United States and other countries.
The United States government has raised concerns about a potential increase in cyber-attacks and other similar incidents generally as a result of the military conflict between Russia and Ukraine and the related sanctions imposed by the United States and other countries or the ongoing Israel-Hamas conflict.
For more information see the "We are subject to environmental, social and governance risks that could adversely affect our reputation and the trading price of our common stock" and “Weakness in commodity businesses could adversely affect our performance” risk factors below. 40 Table of Contents Item 1B. Unresolved Staff Comments None.
For more information see the “We are subject to environmental, social and governance risks that could adversely affect our business, reputation and the trading price of our common stock” and “Weakness in commodity businesses could adversely affect our performance” risk factors above. 41 Table of Contents Item 1B. Unresolved Staff Comments None.
Adverse changes in the economic conditions in these regions could materially adversely affect our business, results of operations or financial condition. Weakness in the residential real estate markets could adversely affect our performance. As of December 31, 2022, consumer residential real estate loans represented approximately 25.6% of our total loan portfolio.
Adverse changes in the economic conditions in these regions could materially adversely affect our business, results of operations or financial condition. 30 Table of Contents Weakness in the residential real estate markets could adversely affect our performance. As of December 31, 2023, consumer residential real estate loans represented approximately 26.3% of our total loan portfolio.
Privacy and cybersecurity are also areas of increasing state legislative focus and we are, or may in the future become, subject to various state laws and regulations regarding privacy and cybersecurity, such as the California Consumer Protection Act of 2018, as amended by the CCPA.
Privacy and cybersecurity are also areas of increasing state legislative focus and we are, or may in the future become, subject to various state laws and regulations regarding privacy and cybersecurity, such as the CCPA.
The techniques used by cyber criminals change frequently, may not be recognized until launched (or may evade detection for considerable time) and can be initiated from a variety of sources, including terrorist organizations and hostile foreign governments.
The techniques used by cyber criminals change frequently, may not be recognized until launched (or may evade detection for considerable time), can be initiated from a variety of sources, including terrorist organizations and hostile foreign governments, and may see their frequency increased, and effectiveness enhanced, by the use of artificial intelligence.
The content and application of laws and regulations affecting financial services firms sometimes vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, and other criteria.
Differences in regulation can affect our ability to compete effectively. The content and application of laws and regulations affecting financial services firms sometimes vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates and other criteria.
As of December 31, 2022, we had $5.7 billion of goodwill and $249 million of other intangible assets.
As of December 31, 2023, we had $5.7 billion of goodwill and $205 million of other intangible assets.
These types of laws, rules and regulations could prohibit or significantly restrict financial services firms such as us from sharing information among affiliates or with third parties such as vendors, and thereby increase compliance costs, or could restrict our use of personal data when developing or offering products or services to customers.
These types of laws, rules and regulations could prohibit or significantly restrict financial services firms such as us from sharing information among affiliates or with third parties such as vendors, and thereby increase compliance costs, or could restrict our use of personal data when developing or offering products or services to customers. 38 Table of Contents These restrictions could also inhibit our development or marketing of certain products or services, or increase the costs of offering them to customers.
For example, there could be electrical or telecommunications outages; natural disasters such as earthquakes, tornadoes and hurricanes; pandemics; events arising from local or larger scale political or social matters, including terrorist acts and civil unrest; and, as described below, cyber-attacks, information security breaches or other similar incidents.
For example, there could be electrical or telecommunications outages; pandemics; events arising from local or larger scale political or social matters, including terrorist acts and civil unrest; and, as described below, cyber-attacks or other similar incidents.
From time to time, the FASB and SEC change the financial accounting and reporting standards that govern the preparation of our financial statements. These changes can be difficult to predict and can materially impact how we record and report our financial condition and results of operations.
From time to time, the FASB and SEC change the financial accounting and reporting standards that govern the preparation of our financial statements. These changes can be difficult to predict and can materially impact how we record and report our financial condition and results of operations. The value of our goodwill and other intangible assets may decline in the future.
Fluctuations in market interest rates may adversely affect our performance. Our profitability depends to a large extent on our net interest income, which is the difference between the interest income received on interest-earning assets (primarily loans, leases, investment securities and cash balances held at the FRB) and the interest expense incurred in connection with interest-bearing liabilities (primarily deposits and borrowings).
Our profitability depends to a large extent on our net interest income, which is the difference between the interest income received on interest-earning assets (primarily loans, leases, investment securities and cash balances held at the Federal Reserve Bank) and the interest expense incurred in connection with interest-bearing liabilities (primarily deposits and borrowings).
Due to applicable laws and regulations or contractual obligations, we may be held responsible for cyber-attacks, 27 Table of Contents information security breaches or other similar incidents attributed to our service providers as they relate to the information we share with them.
Due to applicable laws and regulations or contractual obligations, we may be held responsible for cybersecurity or other similar incidents attributed to our service providers as they relate to the information we share with them.
Other External Risks • Our business and financial performance could be adversely affected by a U.S. government debt default or the threat of such a default. • Our business, financial condition, liquidity, capital and results of operations have been, and will likely continue to be, adversely affected by the COVID-19 pandemic and may, in the future also be affected by other pandemics. • Weather-related events and other natural or man-made disasters could cause a disruption in our operations or lead to other consequences that could adversely impact our financial results and condition.
Other External Risks • Our business and financial performance could be adversely affected by a U.S. government debt default or the threat of such a default. • Weather-related events, pandemics and other natural or man-made disasters could cause a disruption in our operations or lead to other consequences that could adversely impact our financial results and condition.
Although the exact amount of additional collateral is unknown, it is reasonable to conclude that we may be required to post additional collateral related to existing contracts with contingent credit features. Changes in the soundness of other financial institutions could adversely affect us. Financial services companies are interrelated as a result of trading, clearing, counterparty or other relationships.
Although the exact amount of additional collateral is unknown, it is reasonable to conclude that we may be required to post additional collateral related to existing contracts with contingent credit features. Changes in the soundness of other financial institutions could adversely affect us.
Certain fraud risks, including identity theft and account takeover may increase as a result of customers’ account or personally identifiable information being obtained through breaches of retailers’ or other third parties’ networks.
Certain fraud risks, including identity theft and account takeover, may increase as a result of customers’ account or personally identifiable information being obtained through breaches of retailers’ or other third parties’ networks. Examples of external fraud we face include fraudulent checks, stolen checks and other check-related fraud.

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Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed1 unchanged
Biggest changeItem 2. Properties Regions’ corporate headquarters occupy the main banking facility of Regions Bank, located at 1900 Fifth Avenue North, Birmingham, Alabama 35203. At December 31, 2022, Regions Bank, Regions’ banking subsidiary, operated 1,286 banking offices. At December 31, 2022, there were no significant encumbrances on the offices, equipment and other operational facilities owned by Regions and its subsidiaries.
Biggest changeItem 2. Properties Regions’ corporate headquarters occupy the main banking facility of Regions Bank, located at 1900 Fifth Avenue North, Birmingham, Alabama 35203. At December 31, 2023, Regions Bank, Regions’ banking subsidiary, operated 1,271 banking offices. At December 31, 2023, there were no significant encumbrances on the offices, equipment and other operational facilities owned by Regions and its subsidiaries.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

8 edited+2 added−1 removed0 unchanged
Biggest changePrior to joining Regions, served as Vice President and General Counsel of GE Global Operations and as General Counsel of GE Energy Connections. 2020 William D. Ritter 52 Senior Executive Vice President and Head of Wealth Management Group of registrant and Regions Bank. Director of Highland Associates, Inc. 2010 Ronald G.
Biggest changePlimpton 55 Senior Executive Vice President, Chief Legal Officer and Corporate Secretary of registrant and Regions Bank. Previously served as General Counsel of registrant and Regions Bank. Prior to joining Regions, served as Vice President and General Counsel of GE Global Operations and as General Counsel of GE Energy Connections. 2020 William D.
Previously served as Head of Corporate Banking Group of registrant and Regions Bank and as South Region President of Regions Bank. Prior to joining Regions, served as President of Whitney National Bank and Whitney Holding Corporation. 2011 David J. Turner, Jr. 59 Senior Executive Vice President and Chief Financial Officer of registrant and Regions Bank. 2010 Kate R.
Previously served as Head of Corporate Banking Group of registrant and Regions Bank and as South Region President of Regions Bank. Prior to joining Regions, served as President of Whitney National Bank and Whitney Holding Corporation. 2011 David J. Turner, Jr. 60 Senior Executive Vice President and Chief Financial Officer of registrant and Regions Bank. 2010 Kate R.
Previously served as Head of Private Wealth Management of Regions Bank. Prior to joining Regions, served as Vice President of Capital Group Companies. 2018 David R. Keenan 55 Senior Executive Vice President and Chief Administrative and Human Resources Officer of registrant and Regions Bank. Previously served as Chief Human Resources Officer of registrant and Regions Bank. 2010 C.
Previously served as Head of Private Wealth Management of Regions Bank. Prior to joining Regions, served as Vice President of Capital Group Companies. 2018 David R. Keenan 56 Senior Executive Vice President and Chief Administrative and Human Resources Officer of registrant and Regions Bank. Previously served as Chief Human Resources Officer of registrant and Regions Bank. 2010 C.
Danella 44 Senior Executive Vice President and Head of Consumer Banking Group of registrant and Regions Bank. Previously served as Chief Strategy and Client Experience Officer; Head of Strategic Planning & Consumer Bank Products and Origination Partnerships; and as Head of Strategic Planning and Corporate Development of registrant and Regions Bank.
Danella 45 Senior Executive Vice President and Head of Consumer Banking Group of registrant and Regions Bank. Previously served as Chief Strategy and Client Experience Officer; Head of Strategic Planning & Consumer Bank Products and Origination Partnerships; and as Head of Strategic Planning and Corporate Development of registrant and Regions Bank.
Item 4. Mine Safety Disclosures. Not applicable. Information About Our Executive Officers Information concerning the Executive Officers of Regions as of February 24, 2023 , is set forth below. Executive Officer Age Position and Offices Held with Registrant and Subsidiaries Executive Officer Since John M. Turner, Jr. 61 President and Chief Executive Officer of registrant and Regions Bank.
Item 4. Mine Safety Disclosures. Not applicable. Information About Our Executive Officers Information concerning the Executive Officers of Regions as of February 23, 2024 , is set forth below. Executive Officer Age Position and Offices Held with Registrant and Subsidiaries Executive Officer Since John M. Turner, Jr. 62 President and Chief Executive Officer of registrant and Regions Bank.
Previously served as Head of Digital and Contact Center Banking and Head of Enterprise Technology Strategic Services at Truist Bank. 2022 41 Table of Contents Scott M. Peters 61 Senior Executive Vice President and Chief Transformation Officer of registrant and Regions Bank. Director of Regions Investment Services, Inc.
Dandridge Massey 53 Senior Executive Vice President and Chief Enterprise Operations and Technology Officer of registrant and Regions Bank. Previously served as Head of Digital and Contact Center Banking and Head of Enterprise Technology Strategic Services at Truist Bank. 2022 43 Table of Contents Scott M.
Previously served as Head of Consumer Banking Group and as Consumer Services Group Head of registrant and Regions Bank. 2010 Tara A. Plimpton 54 Senior Executive Vice President, Chief Legal Officer and Corporate Secretary of registrant and Regions Bank. Previously served as General Counsel of registrant and Regions Bank.
Peters 62 Senior Executive Vice President and Chief Transformation Officer of registrant and Regions Bank. Previously served as Director of Regions Investment Services, Inc. Previously served as Head of Consumer Banking Group and as Consumer Services Group Head of registrant and Regions Bank. 2010 Tara A.
Smith 62 Senior Executive Vice President and Head of Corporate Banking Group of registrant and Regions Bank. Director of Regions Equipment Finance Corporation. Manager of RFC Financial Services Holding LLC. Previously served as Regional President, Mid-America Region of Regions Bank. 2010 42 Table of Contents PART II
Ritter 53 Senior Executive Vice President and Head of Wealth Management Group of registrant and Regions Bank. Director of Highland Associates, Inc. 2010 Ronald G. Smith 63 Senior Executive Vice President and Head of Corporate Banking Group of registrant and Regions Bank. Director of Regions Equipment Finance Corporation. Manager of RFC Financial Services Holding LLC.
Removed
Matthew Lusco 65 Senior Executive Vice President and Chief Risk Officer of registrant and Regions Bank. Previously served as managing partner of KPMG LLP’s offices in Birmingham, Alabama and Memphis, Tennessee. 2011 C. Dandridge Massey 50 Senior Executive Vice President and Chief Enterprise Operations and Technology Officer of registrant and Regions Bank.
Added
Previously served as Regional President, Mid-America Region of Regions Bank. 2010 Russell Zusi 49 Senior Executive Vice President and Chief Risk Officer of registrant and Regions Bank.
Added
Prior to joining Regions, served as Co-head of Global Compliance and Operational Risk and Global Technology and Operations Chief Risk Officer, and previously as Credit Review Executive, of Bank of America Corp. 2024 44 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+2 added−2 removed3 unchanged
Biggest changeAll of these shares were immediately retired upon repurchase and therefore were not included in treasury stock. 43 Table of Contents PERFORMANCE GRAPH The graph below compares the yearly percentage change in the cumulative total return of Regions common stock against the cumulative total return of the S&P 500 Index and the S&P 500 Banks Index for the past five years.
Biggest changeAll of these shares were immediately retired upon repurchase and therefore were not included in treasury stock.
Restrictions on the ability of Regions Bank to transfer funds to Regions at December 31, 2022, are set forth in Note 12 "Regulatory Capital Requirements and Restrictions" to the consolidated financial statements, which are included in Item 8. of this Annual Report on Form 10-K.
Restrictions on the ability of Regions Bank to transfer funds to Regions at December 31, 2023, are set forth in Note 12 "Regulatory Capital Requirements and Restrictions" to the consolidated financial statements, which are included in Item 8. of this Annual Report on Form 10-K.
Issuer Purchases of Equity Securities 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.
Issuer Purchases of Equity Securities 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. The following table presents information regarding issuer purchases of equity securities during the fourth quarter of 2023.
As of February 22, 2023, there were 36,067 holders of record of Regions common stock (including participants in the Broadridge Direct Stock Purchase and Dividend Reinvestment Plan for Regions Financial Corporation).
As of February 21, 2024, there were 35,025 holders of record of Regions common stock (including participants in the Broadridge Direct Stock Purchase and Dividend Reinvestment Plan for Regions Financial Corporation).
Removed
As of December 31, 2022, Regions had repurchased approximately 725 thousand shares of common stock at a total cost of $15 million under this plan.
Added
Period Total Number of Shares Purchased Average Price Paid per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under Publicly Announced Plans or Programs October 1-31, 2023 6,437,685 $ 14.22 6,437,685 $ 2,393,179,589 November 1-30, 2023 5,653,231 $ 15.66 5,653,231 $ 2,304,697,925 December 1-31, 2023 4,038,243 $ 17.36 4,038,243 $ 2,234,699,026 Total Fourth Quarter 16,129,159 $ 15.82 16,129,159 $ 2,234,699,026 _____ (1) Average price paid does not reflect the 1 percent excise tax charged on public company share repurchases. 45 Table of Contents PERFORMANCE GRAPH The graph below compares the yearly percentage change in the cumulative total return of Regions common stock against the cumulative total return of the S&P 500 Index and the S&P 500 Banks Index for the past five years.
Removed
Cumulative Total Return 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 Regions $ 100.00 $ 79.43 $ 105.88 $ 104.15 $ 145.18 $ 148.54 S&P 500 Index 100.00 95.61 125.70 148.81 191.48 156.77 S&P 500 Banks Index 100.00 83.56 117.52 101.35 137.28 110.91
Added
Cumulative Total Return 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Regions $ 100.00 $ 133.30 $ 131.12 $ 182.78 $ 187.01 $ 176.35 S&P 500 Index 100.00 131.47 155.65 200.29 163.98 207.04 S&P 500 Banks Index 100.00 140.64 121.29 164.28 132.73 147.28

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

217 edited+111 added−169 removed122 unchanged
Biggest changeAllocation of the allowance for credit losses by portfolio segment and class is summarized as follows: Table 17—Allowance Allocation 2022 2021 Loan Balance Allowance Allocation Allowance to Loans % (1) Loan Balance Allowance Allocation Allowance to Loans % (1) (Dollars in millions) Commercial and industrial $ 50,905 $ 628 1.2 % $ 43,758 $ 613 1.4 % Commercial real estate mortgage—owner-occupied 5,103 102 2.0 5,287 118 2.2 Commercial real estate construction—owner-occupied 298 7 2.3 264 9 3.5 Total commercial 56,306 737 1.3 49,309 740 1.5 Commercial investor real estate mortgage 6,393 114 1.8 5,441 77 1.4 Commercial investor real estate construction 1,986 28 1.4 1,586 10 0.6 Total investor real estate 8,379 142 1.7 7,027 87 1.2 Residential first mortgage 18,810 124 0.7 17,512 122 0.7 Home equity lines 3,510 77 2.2 3,744 83 2.2 Home equity loans 2,489 29 1.2 2,510 28 1.1 Consumer credit card 1,248 134 10.7 1,184 120 10.2 Other consumer—exit portfolios 570 39 6.8 1,071 64 6.0 Other consumer 5,697 300 5.3 5,427 330 6.1 Total consumer 32,324 703 2.2 31,448 747 2.4 Total $ 97,009 $ 1,582 1.6 % $ 87,784 $ 1,574 1.8 % _____ (1) Amounts have been calculated using whole dollar values. 69 Table of Contents TROUBLED DEBT RESTRUCTURINGS (TDRs) TDRs are modified loans in which a concession is provided to a borrower experiencing financial difficulty.
Biggest changeAllocation of the allowance for credit losses by portfolio segment and class is summarized as follows: Table 19—Allowance Allocation 2023 2022 Loan Balance Allowance Allocation Allowance to Loans % (1) Loan Balance Allowance Allocation Allowance to Loans % (1) (Dollars in millions) Commercial and industrial $ 50,865 $ 697 1.37 % $ 50,905 $ 628 1.23 % Commercial real estate mortgage—owner-occupied 4,887 110 2.25 5,103 102 2.00 Commercial real estate construction—owner-occupied 281 7 2.38 298 7 2.29 Total commercial 56,033 814 1.45 56,306 737 1.31 Commercial investor real estate mortgage 6,605 169 2.56 6,393 114 1.78 Commercial investor real estate construction 2,245 36 1.63 1,986 28 1.38 Total investor real estate 8,850 205 2.32 8,379 142 1.69 Residential first mortgage 20,207 100 0.50 18,810 124 0.66 Home equity lines 3,221 80 2.49 3,510 77 2.18 Home equity loans 2,439 23 0.94 2,489 29 1.17 Consumer credit card 1,341 138 10.24 1,248 134 10.75 Other consumer—exit portfolios 43 1 3.09 570 39 6.84 Other consumer 6,245 339 5.43 5,697 300 5.27 Total consumer 33,496 681 2.03 32,324 703 2.18 Total $ 98,379 $ 1,700 1.73 % $ 97,009 $ 1,582 1.63 % _____ (1) Amounts have been calculated using whole dollar values. 72 Table of Contents NON-PERFORMING ASSETS The following table presents non-performing assets as of December 31: Table 20—Non-Performing Assets 2023 2022 (Dollars in millions) Non-performing loans: Commercial and industrial $ 471 $ 347 Commercial real estate mortgage—owner-occupied 36 29 Commercial real estate construction—owner-occupied 8 6 Total commercial 515 382 Commercial investor real estate mortgage 233 53 Total investor real estate 233 53 Residential first mortgage 22 31 Home equity lines 29 28 Home equity loans 6 6 Total consumer 57 65 Total non-performing loans, excluding loans held for sale 805 500 Non-performing loans held for sale 3 3 Total non-performing loans (1) 808 503 Foreclosed properties 15 13 Total non-performing assets (1) $ 823 $ 516 Accruing loans 90+ days past due: Commercial and industrial $ 11 $ 30 Commercial real estate mortgage—owner-occupied — 1 Total commercial 11 31 Commercial investor real estate mortgage 23 40 Total investor real estate 23 40 Residential first mortgage (2) 61 47 Home equity lines 20 15 Home equity loans 7 8 Consumer credit card 20 15 Other consumer—exit portfolios — 1 Other consumer 29 17 Total consumer 137 103 Total accruing loans 90+ days past due $ 171 $ 174 Non-performing loans (1) to loans and non-performing loans held for sale 0.82 % 0.52 % Non-performing loans, excluding loans held for sale (1) to loans 0.82 % 0.52 % Non-performing assets (1) to loans, foreclosed properties and non-performing loans held for sale 0.84 % 0.53 % _________ (1) Excludes accruing loans 90+ days past due.
The primary risk exposures identified and managed through the Company’s risk management framework are market risk, liquidity risk, credit risk, operational risk, legal risk, compliance risk, reputational risk and strategic risk. • Market risk is the risk to the Company’s financial condition resulting from adverse movements in market rates or prices, such as interest rates, foreign exchange rates or equity prices. • Liquidity risk is the potential that the Company will be unable to meet its obligations as they come due because of an inability to liquidate assets or obtain adequate funding (referred to as "funding liquidity risk") or the potential that the 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"). • Credit risk is the risk that arises from the potential that a borrower or counterparty will fail to perform on an obligation. • Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, and systems or from external events. • Legal risk is defined as the risk associated with the failure to meet Regions' legal obligations from legislative, regulatory, or contractual perspectives. • Compliance risk is the risk to current or anticipated earnings or capital arising from violations of laws, rules, or regulations, or from non-conformance with prescribed practices, internal policies and procedures, or ethical standards. • Reputational risk is the potential that negative publicity regarding the Company’s business practices, whether true or not, will cause a decline in the customer base, costly litigation, or revenue reductions. • Strategic risk is the risk to current or projected financial condition and resilience from adverse business decisions, poor implementation of business decisions, or lack of responsiveness to changes in the banking industry and operating environment.
The primary risk exposures identified and managed through the Company’s risk management framework are market risk, liquidity risk, credit risk, operational risk, legal risk, compliance risk, reputational risk and strategic risk. 77 Table of Contents • Market risk is the risk to the Company’s financial condition resulting from adverse movements in market rates or prices, such as interest rates, foreign exchange rates or equity prices. • Liquidity risk is the potential that the Company will be unable to meet its obligations as they come due because of an inability to liquidate assets or obtain adequate funding (referred to as "funding liquidity risk") or the potential that the 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"). • Credit risk is the risk that arises from the potential that a borrower or counterparty will fail to perform on an obligation. • Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, and systems or from external events. • Legal risk is defined as the risk associated with the failure to meet Regions' legal obligations from legislative, regulatory, or contractual perspectives. • Compliance risk is the risk to current or anticipated earnings or capital arising from violations of laws, rules, or regulations, or from non-conformance with prescribed practices, internal policies and procedures, or ethical standards. • Reputational risk is the potential that negative publicity regarding the Company’s business practices, whether true or not, will cause a decline in the customer base, costly litigation, or revenue reductions. • Strategic risk is the risk to current or projected financial condition and resilience from adverse business decisions, poor implementation of business decisions, or lack of responsiveness to changes in the banking industry and operating environment.
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 1 standard deviation unfavorable to the expected scenario for each macroeconomic variable.
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.
The emphasis of this discussion will be on operations for the years 2022 and 2021; in addition, financial information for prior years will also be presented when appropriate. Regions’ profitability, like that of many other financial institutions, is dependent on its ability to generate revenue from net interest income as well as non-interest income sources.
The emphasis of this discussion will be on operations for the years 2023 and 2022; in addition, financial information for prior years will also be presented when appropriate. Regions’ profitability, like that of many other financial institutions, is dependent on its ability to generate revenue from net interest income as well as non-interest income sources.
Debt securities rated in the highest category by nationally recognized rating agencies and debt securities backed by the U.S. Government and government sponsored agencies, both on a direct and indirect basis, represented approximately 96 percent of the investment portfolio at December 31, 2022. All other debt securities rated below AAA, not backed by the U.S.
Debt securities rated in the highest category by nationally recognized rating agencies and debt securities backed by the U.S. Government and government sponsored agencies, both on a direct and indirect basis, represented approximately 96 percent of the investment portfolio at December 31, 2023. All other debt securities rated below AAA, not backed by the U.S.
However, the loan portfolio may be exposed to certain concentrations of credit risk which exist in relation to individual borrowers or groups of borrowers, certain types of collateral, certain types of industries, certain loan products, or certain regions of the country. See Note 4 "Loans" and Note 5 "Allowance for Credit Losses" to the consolidated financial statements for additional discussion.
However, the loan portfolio may be exposed to certain concentrations of credit risk which exist in relation to individual borrowers or groups of borrowers, certain types of collateral, certain types of industries, and certain loan products. See Note 4 "Loans" and Note 5 "Allowance for Credit Losses" to the consolidated financial statements for additional discussion.
For more information, refer to the following additional sections within this Form 10-K: • "Operating Results" section of MD&A • “Net Interest Income and Net Interest Margin” discussion within the “Operating Results” section of MD&A • “Interest Rate Risk” discussion within the “Risk Management” section of MD&A 46 Table of Contents Capital Capital Actions Regions participates in supervisory stress testing conducted by the Federal Reserve and its SCB is currently floored at 2.5 percent.
For more information, refer to the following additional sections within this Form 10-K: • "Operating Results" section of MD&A • “Net Interest Income and Net Interest Margin” discussion within the “Operating Results” section of MD&A • “Interest Rate Risk” discussion within the “Risk Management” section of MD&A Capital Capital Actions Regions participates in supervisory stress testing conducted by the Federal Reserve and its SCB is currently floored at 2.5 percent.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations EXECUTIVE OVERVIEW 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 2022 results.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations EXECUTIVE OVERVIEW 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.
However, the Company can 78 Table of Contents utilize certain risk management tools to help it maintain its balance sheet strength even if a deflationary scenario were to develop. MARKET RISK—INTEREST RATE RISK Regions’ primary market risk is interest rate risk.
However, the Company can utilize certain risk management tools to help it maintain its balance sheet strength even if a deflationary scenario were to develop. 79 Table of Contents MARKET RISK—INTEREST RATE RISK Regions’ primary market risk is interest rate risk.
Regions has made use of interest rate swaps and floors in balance sheet hedging strategies to effectively convert a portion of its fixed-rate funding position to a variable-rate position, to effectively convert a portion of its fixed-rate debt securities available for sale portfolio to a variable-rate position, and to effectively convert a portion of its floating-rate loan portfolios to fixed-rate.
Regions has made use of interest rate swaps and options in balance sheet hedging strategies to effectively convert a portion of its fixed-rate funding position to a variable-rate position, to effectively convert a portion of its fixed-rate debt securities available for sale portfolio to a variable-rate position, and to effectively convert a portion of its floating-rate loan portfolios to fixed-rate.
While the implications differ for a bank, inflation does have influence on the growth of total assets in the banking industry and the resulting level of capitalization. Inflation also affects the level of market interest rates, and therefore, the pricing of financial instruments.
While the implications differ for a bank, inflation does have influence on the growth of total assets and deposits in the banking industry and the resulting level of profitability and capitalization. Inflation also affects the level of market interest rates, and therefore, the pricing of financial instruments.
As a result, year over year changes may be impacted. 63 Table of Contents Investor Real Estate Loans for real estate development are repaid through cash flows related to the operation, sale or refinance of the property.
As a result, year over year changes may be impacted. 65 Table of Contents Investor Real Estate Loans for real estate development are repaid through cash flows related to the operation, sale or refinance of the property.
See the “Risk Factors” section of this Annual Report on Form 10-K for more information. 75 Table of Contents A security rating is not a recommendation to buy, sell or hold securities, and the ratings are subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating.
See the “Risk Factors” section of this Annual Report on Form 10-K for more information. A security rating is not a recommendation to buy, sell or hold securities, and the ratings are subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating.
Treasuries, swaps and mortgage rates) will drive yields higher on certain fixed-rate, newly originated or renewed loans, increase prospective yields on certain investment portfolio purchases, and reduce amortization of premium expense on existing securities in the investment portfolio. The opposite is true in an environment where intermediate and long-term interest rates fall.
Treasuries, swaps and mortgage rates) will drive yields higher on certain fixed-rate, newly originated or renewed loans, increase 80 Table of Contents prospective yields on certain investment portfolio purchases, and reduce amortization of premium expense on existing securities in the investment portfolio. The opposite is true in an environment where intermediate and long-term interest rates fall.
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 will migrate to cash flow hedges from loans in the first quarter of 2023. (4) Loans, net of unearned income include non-accrual loans for all periods presented.
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. (4) Loans, net of unearned income include non-accrual loans for all periods presented.
(2) Excludes residential first mortgage loans that are 100% guaranteed by the FHA and all guaranteed loans sold to Ginnie Mae where Regions has the right but not the obligation to repurchase. Total 90 days or more past due guaranteed loans excluded were $34 million at December 31, 2022 and $49 million at December 31, 2021.
(2) Excludes residential first mortgage loans that are 100% guaranteed by the FHA and all guaranteed loans sold to Ginnie Mae where Regions has the right but not the obligation to repurchase. Total 90+ days or more past due guaranteed loans excluded were $34 million at December 31, 2023 and $34 million at December 31, 2022.
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 $144 million for the commercial and investor real estate portfolios.
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.
See Note 1 "Summary of Significant Accounting Policies" and Note 19 "Income Taxes" to the consolidated financial statements for additional information about income taxes. BALANCE SHEET ANALYSIS The following sections provide expanded discussion of significant changes in certain line items in asset, liability, and shareholders' equity categories.
See Note 1 "Summary of Significant Accounting Policies" and Note 19 "Income Taxes" to the consolidated financial statements for additional information about income taxes. 60 Table of Contents BALANCE SHEET ANALYSIS The following sections provide expanded discussion of significant changes in certain line items in asset, liability, and shareholders' equity categories.
Table 7— Relative Contractual Maturities Debt Securities Maturing as of December 31, 2022 Within One Year After One But Within Five Years After Five But Within Ten Years After Ten Years Total (Dollars in millions) U.S.
Table 7— Relative Contractual Maturities Debt Securities Maturing as of December 31, 2023 Within One Year After One But Within Five Years After Five But Within Ten Years After Ten Years Total (Dollars in millions) U.S.
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 53 Table of Contents 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.
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.
LIQUIDITY AND CAPITAL RESOURCES Liquidity is an important factor in the financial condition of Regions and affects Regions’ ability to meet the needs of the Company and its customers. Regions’ goal in liquidity management is to maintain liquidity sources and reserves sufficient to satisfy the cash flow requirements of depositors and borrowers, under normal and stressed conditions.
LIQUIDITY Liquidity is an important factor in the financial condition of Regions and affects Regions’ ability to meet the needs of the Company and its customers. Regions’ goal in liquidity management is to maintain diverse liquidity sources and reserves sufficient to satisfy the cash flow requirements of depositors and borrowers, under normal and stressed conditions.
The allowance is sensitive to a number of internal factors, such as modifications in the mix and level of loan balances outstanding, portfolio performance and assigned risk ratings.
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 exposure to risk requires sound risk management practices that comprise an integrated and comprehensive set of programs and processes that apply to the entire Company. Accordingly, Regions has established a risk management framework to manage risks and provide reasonable 76 Table of Contents assurance of the achievement of the Company’s strategic objectives.
The exposure to risk requires sound risk management practices that comprise an integrated and comprehensive set of programs and processes that apply to the entire Company. Accordingly, Regions has established a risk management framework to manage risks and provide reasonable assurance of the achievement of the Company’s strategic objectives.
These controls and procedures as defined by the SEC are generally designed to ensure that financial and non-financial information required to be disclosed in reports filed with the SEC is reported within the time periods specified in the SEC’s rules and forms, and that such 86 Table of Contents information is communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
These controls and procedures as defined by the SEC are generally designed to ensure that financial and non-financial information required to be disclosed in reports filed with the SEC is reported within the time periods specified in the SEC’s rules and forms, and that such information is communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
The Board has designated an Audit Committee of outside directors to focus on oversight of management's establishment and maintenance of appropriate disclosure controls and procedures over financial reporting. See the "Financial Disclosures and Internal Controls" section of Management's Discussion and Analysis for 77 Table of Contents additional information.
The Board has designated an Audit Committee of outside directors to focus on oversight of management's establishment and maintenance of appropriate disclosure controls and procedures over financial reporting. See the "Financial Disclosures and Internal Controls" section of Management's Discussion and Analysis for additional information.
For non-dealer transactions, the need for collateral is evaluated on an individual transaction basis and is primarily dependent on the financial strength of the counterparty. Credit risk is also reduced significantly by entering into legally enforceable master netting 81 Table of Contents agreements.
For non-dealer transactions, the need for collateral is evaluated on an individual transaction basis and is primarily dependent on the financial strength of the counterparty. Credit risk is also reduced significantly by entering into legally enforceable master netting agreements.
Valuation techniques typically include option pricing models, discounted cash flow models and similar techniques, but may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability.
Valuation techniques typically include option 53 Table of Contents pricing models, discounted cash flow models and similar techniques, but may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability.
This statement is designed to be a high-level document that sets the tone for the Board’s risk appetite, which is the maximum amount of risk the Company is willing to accept in pursuit of its business objectives.
This statement is 78 Table of Contents designed to be a high-level document that sets the tone for the Board’s risk appetite, which is the maximum amount of risk the Company is willing to accept in pursuit of its business objectives.
In the event of a cyber-attack or other data breach, Regions may be required to incur significant expenses, including with respect to remediation costs, costs of implementing additional preventative measures, addressing any reputational harm and addressing any related regulatory inquiries or civil litigation arising from the event.
In the event of a cyber-attack or other data breach, Regions may be required to incur significant expenses, including with respect to remediation costs, costs of implementing additional preventative measures, addressing any reputational harm and addressing any related regulatory inquiries or civil litigation arising from the event. See Part I Item1C.
Regions utilizes the Three Lines of Defense concept to clearly designate risk management activities within the Company. • 1st Line of Defense activities provide for the identification, acceptance and ownership of risks. • 2nd Line of Defense activities provide for objective oversight of the Company’s risk-taking activities and assessment of the Company’s aggregate risk levels. • 3rd Line of Defense activities provide for independent reviews and assessments of risk management practices across the Company.
Regions utilizes the Three Lines of Defense concept to clearly designate risk management activities within the Company. • 1st Line of Defense activities include the proactive identification, management (including mitigation and risk acceptance), and ownership of risks. • 2nd Line of Defense activities provide for objective oversight of the Company’s risk-taking activities and assessment of the Company’s aggregate risk levels. • 3rd Line of Defense activities provide for independent reviews and assessments of risk management practices across the Company.
A valuation allowance is provided when it is more-likely-than-not that some portion of the deferred tax asset will not be realized. The Company currently maintains a valuation allowance for certain state carryforwards.
A valuation allowance is provided when it is more-likely- 54 Table of Contents than-not that some portion of the deferred tax asset will not be realized. The Company currently maintains a valuation allowance for certain state carryforwards.
The term “balloon payment” means there are no principal payments required until the balloon payment is due for interest-only lines of credit. The following table presents information regarding the future principal payment reset dates for the Company's home equity lines of credit as of December 31, 2022.
The term “balloon payment” means there are no principal payments required until the balloon payment is due for interest-only lines of credit. 66 Table of Contents The following table presents information regarding the future principal payment reset dates for the Company's home equity lines of credit as of December 31, 2023.
Regions’ greatest exposures to prepayment risks primarily rest in its mortgage-backed securities portfolio, the mortgage fixed-rate loan portfolio and the residential MSR, all of which tend to be sensitive to interest rate movements.
Regions’ greatest exposures to prepayment risks primarily rest in its MBS portfolio, the mortgage fixed-rate loan portfolio and the residential MSR, all of which tend to be sensitive to interest rate movements.
Regions' liquidity policy requires the holding company to maintain cash sufficient to cover the greater of (1) 18 months of debt service and other cash needs or (2) a minimum cash balance of $500 million. Cash and cash equivalents at the holding company totaled $1.6 billion at December 31, 2022.
Regions' liquidity policy requires the holding company to maintain cash sufficient to cover the greater of (1) 18 months of debt service and other cash needs or (2) a minimum cash balance of $500 million. Cash and cash equivalents at the holding company totaled $1.9 billion at December 31, 2023.
Lending at Regions is generally organized along three portfolio segments: commercial loans (including commercial and industrial, and owner-occupied commercial real estate mortgage and construction loans), investor 60 Table of Contents real estate loans (commercial real estate mortgage and construction loans) and consumer loans (residential first mortgage, home equity lines and loans, consumer credit card, other consumer—exit portfolios, and other consumer loans).
Lending at Regions is generally organized along three portfolio segments: commercial loans (including commercial and industrial, and owner-occupied commercial real estate mortgage and construction loans), investor real estate loans (commercial real estate mortgage and construction loans) and consumer loans (residential first mortgage, home equity lines and loans, consumer credit card, other consumer—exit portfolios, and other consumer loans).
Regions is a "Category IV" institution under the FRB's rules for tailoring enhanced prudential standards. Federal banking agencies allowed a phase-in of the impact of CECL on regulatory capital. At December 31, 2021, the add-back to regulatory capital was calculated as the impact of initial adoption, adjusted for 25 percent of subsequent changes in the allowance.
Regions is a "Category IV" institution under the Federal Reserve's Tailoring Rules. Federal banking agencies allowed a phase-in of the impact of CECL on regulatory capital. At December 31, 2021, the add-back to regulatory capital was calculated as the impact of initial adoption, adjusted for 25 percent of subsequent changes in the allowance.
The amount is phased-in over a three-year period beginning in 2022. At December 31, 2022, the net impact of the addback on CET1 was approximately $306 million or approximately 24 basis points. The add-back amounts will decrease by approximately $100 million each year, or approximately 8 basis points, in the first quarters of 2023, 2024, and 2025.
The amount is phased-in over a three-year period beginning in 2022. At December 31, 2023, the net impact of the addback on CET1 was approximately $204 million or approximately 16 basis points. The add-back amount will decrease by approximately $100 million each year, or approximately 8 basis points, in the first quarters of 2024 and 2025.
If market 52 Table of Contents prices are not available, quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market are used (Level 2 valuations).
If market prices are not available, quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market are used (Level 2 valuations).
For more information, refer to the following additional sections within this Form 10-K: • Adjusted Net Charge-offs within the Table 1 "GAAP to Non-GAAP Reconciliations" • "Portfolio Characteristics" section of MD&A • “Allowance for Credit Losses” discussion within the “Critical Accounting Policies and Estimates” section of MD&A • “Provision for Credit Losses” discussion within the “Operating Results” section of MD&A • “Loans,” “Allowance for Credit Losses,” “Troubled Debt Restructurings” and “Non-performing Assets” discussions within the “Balance Sheet Analysis” section of MD&A • Note 4 "Loans" to the consolidated financial statements • Note 5 "Allowance for Credit Losses" to the consolidated financial statements 47 Table of Contents Liquidity At the end of 2022, Regions Bank had $9.2 billion in cash on deposit with the Federal Reserve and the loan-to-deposit ratio was 74 percent.
For more information, refer to the following additional sections within this Form 10-K: • Adjusted Net Charge-offs within the Table 1 "GAAP to Non-GAAP Reconciliations" • "Portfolio Characteristics" section of MD&A • “Allowance for Credit Losses” discussion within the “Critical Accounting Policies and Estimates” section of MD&A • “Provision for Credit Losses” discussion within the “Operating Results” section of MD&A • “Loans,” “Allowance for Credit Losses,” and “Non-performing Assets” discussions within the “Balance Sheet Analysis” section of MD&A • Note 4 "Loans" to the consolidated financial statements • Note 5 "Allowance for Credit Losses" to the consolidated financial statements Liquidity 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.
Net interest income is primarily the difference between the interest income Regions receives on interest-earning assets, such as loans, leases, investment securities and cash balances held at the FRB, and the interest expense Regions pays on interest-bearing liabilities, principally deposits and borrowings.
Net interest income is primarily the difference between the interest income Regions receives on interest-earning assets, such as loans, leases, investment securities and cash balances held at the Federal Reserve Bank, and the interest expense Regions pays on interest-bearing liabilities, principally deposits and borrowings.
An increase or reduction in short-term interest rates (such as the Fed Funds rate, the rate of Interest on Excess Reserves, 1 month LIBOR, SOFR and BSBY) will drive the yield on assets and liabilities contractually tied to such rates higher or lower.
An increase or reduction in short-term interest rates (such as the Fed Funds rate, the rate of Interest on Excess Reserves, and SOFR) will drive the yield on assets and liabilities contractually tied to such rates higher or lower.
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), 6) a computation of adjusted total revenue on a taxable-equivalent basis (non-GAAP) and 7) presentation of the operating leverage ratio (GAAP) and the adjusted operating leverage ratio (non-GAAP).
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).
The Basel III Rules also officially defined CET1. Regions' CET1 ratio at December 31, 2022 was estimated to be 9.60%. For more information, refer to the following additional sections within this Form 10-K: • “Supervision and Regulation” discussion within Item 1.
The Basel III Rules also officially defined CET1. Regions' CET1 ratio at December 31, 2023 was estimated to be 10.26%. For more information, refer to the following additional sections within this Form 10-K: • “Supervision and Regulation” discussion within Item 1.
For more information related to the Company's 2023 expectations, refer to the related sub-sections discussed in more detail within Management's Discussion and Analysis of this Form 10-K. GENERAL The following discussion and financial information is presented to aid in understanding Regions’ financial position and results of operations.
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. 49 Table of Contents GENERAL The following discussion and financial information is presented to aid in understanding Regions’ financial position and results of operations.
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", "adjusted total revenue, taxable-equivalent basis", and "adjusted operating leverage ratio".
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".
COMPARISON OF 2021 WITH 2020 Refer to the “2021 Results” and "Operating Results" sections of Management's Discussion and Analysis of the Annual Report on Form 10-K for the year ended December 31, 2021, for comparisons of 2021 with 2020.
COMPARISON OF 2022 WITH 2021 Refer to the “2022 Results” and "Operating Results" sections of Management's Discussion and Analysis of the Annual Report on Form 10-K for the year ended December 31, 2022, for comparisons of 2022 with 2021.
Intangible Assets 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, agency commercial real estate licenses and purchased credit card relationships). Goodwill totaled $5.7 billion at both December 31, 2022 and December 31, 2021.
Intangible Assets 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, 2023 and December 31, 2022.
Additional information on the credit rating ranking within the overall classification system is located on the website of each credit rating agency. Shareholders' and Total Equity Shareholders’ equity was $15.9 billion at December 31, 2022 as compared to $18.3 billion at December 31, 2021.
Additional information on the credit rating ranking within the overall classification system is located on the website of each credit rating agency. SHAREHOLDERS' AND TOTAL EQUITY Shareholders’ equity was $17.4 billion at December 31, 2023 as compared to $15.9 billion at December 31, 2022.
Details regarding the allowance for credit losses, including an analysis of activity from the previous year’s total, are included in Table 16 "Allowance for Credit 84 Table of Contents Losses". Also, refer to Table 17 "Allowance Allocation" for details pertaining to management’s allocation of the allowance to each loan category.
Details regarding the allowance for credit losses, including an analysis of activity from the previous year’s total, are included in Table 18 "Allowance for Credit Losses". Also, refer to Table 19 "Allowance Allocation" for details pertaining to management’s allocation of the allowance to each loan category.
See the "Allowance" section for further information. 2022 Results Regions reported net income available to common shareholders of $2.1 billion or $2.28 per diluted share in 2022 compared to net income available to common shareholders of $2.4 billion or $2.49 per diluted share in 2021.
See the "Allowance" section for further information. 2023 Results 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.
(5) Interest income on loans, net of unearned income, includes hedging income of $140 million, $426 million, and $260 million for the years ended December 31, 2022, 2021 and 2020, respectively.
(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 $64 million, $152 million and $75 million for the years ended December 31, 2022, 2021 and 2020, respectively. (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.
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. (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.
Loans GENERAL Loans, net of unearned income, represented 71 percent of interest-earning assets as of December 31, 2022 compared to 60 percent as of December 31, 2021.
LOANS GENERAL Loans, net of unearned income, represented 74 percent of interest-earning assets as of December 31, 2023 compared to 71 percent as of December 31, 2022.
Under either environment, it is expected that changes in funding costs and balance sheet hedging income will only somewhat offset the change in asset yields. Net interest income remains exposed to intermediate and long term yield curve tenors.
In either scenario, it is expected that changes in funding costs and balance sheet hedging income will offset the change in asset yields, resulting in little change to net interest income. Net interest income remains exposed to intermediate and long-term yield curve tenors.
While this was a headwind to net interest income during a low rate environment, it represents a tailwind to net interest income growth as the yield curve rises. An increase in intermediate and long-term interest rates (such as intermediate to longer-term U.S.
While this was a headwind to net interest income during a low rate environment, it represents a tailwind to net interest income growth as the yield curve rises and remains elevated. Elevated, or increasing intermediate and long-term interest rates (such as intermediate to longer-term U.S.
Market Value Adjustments on Employee Benefit Assets Market value adjustments on employee benefit assets are the reflection of market value variations related to assets held for certain employee benefits. Market value adjustments on employee benefit assets decreased in 2022 compared to 2021 due to market volatility. The adjustments are offset in salaries and benefits and other non-interest expense.
Market Value Adjustments on Employee Benefit Assets Market value adjustments on employee benefit assets are the reflection of market value variations related to assets held for certain employee benefits. The adjustments are offset in salaries and benefits and other non-interest expense.
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, 2022, Regions’ Tier 1 capital and Total capital ratios were estimated to be 10.91% and 12.54%, respectively.
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.
Using a wide range of sophisticated simulation techniques provides management with extensive information on the potential impact to net interest income caused by changes in interest rates. Models are structured to simulate cash flows and accrual characteristics of Regions’ balance sheet.
Sensitivity Measurement—Financial simulation models are Regions’ primary tools used to measure interest rate exposure. Using a wide range of sophisticated simulation techniques provides management with extensive information on the potential impact to net interest income caused by changes in interest rates. Models are structured to simulate cash flows and accrual characteristics of Regions’ balance sheet.
The average life of the debt securities portfolio at December 31, 2022 was estimated to be 5.77 years, with a duration of approximately 4.81 years. These metrics compare with an estimated average life of 4.93 years and a duration of approximately 4.25 years for the portfolio at December 31, 2021.
The average life of the debt securities portfolio at December 31, 2023 was estimated to be 5.5 years, with a duration of approximately 4.5 years. These metrics compare with an estimated average life of 5.8 years and a duration of approximately 4.8 years for the portfolio at December 31, 2022.
Business • "Regulatory Requirements" section of MD&A • Note 12 "Regulatory Capital Requirements and Restrictions" to the consolidated financial statements Loan Portfolio and Credit During 2022, total loans increased by $9.2 billion or 10.5 percent compared to 2021.
Business • "Regulatory Requirements" section of MD&A • Note 12 "Regulatory Capital Requirements and Restrictions" to the consolidated financial statements Loan Portfolio and Credit During 2023, total loans increased by $1.4 billion or 1.4 percent compared to 2022.
The proportion of average earning assets to average total assets, which was 90 percent in both 2022 and 2021, measures the effectiveness of management’s efforts to invest available funds into the most profitable earning vehicles. Funding for Regions’ earning assets comes from interest-bearing and non-interest-bearing sources.
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. 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.
During the 10-year draw period customers do not have an interest-only payment option, except on a very limited basis. From May 2009 to December 2016, home equity lines of credit had a 10-year draw period and a 10-year repayment term. Prior to May 2009, the predominant structure was a 20-year draw period with a balloon payment upon maturity.
Beginning in December 2016, new home equity lines of credit have a 10-year draw period and a 20-year repayment term. During the 10-year draw period customers do not have an interest-only payment option, except on a very limited basis. From May 2009 to December 2016, home equity lines of credit had a 10-year draw period and a 10-year repayment term.
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 51 Table of Contents 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.
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. 52 Table of Contents Management considers these variables and all other available information when establishing the final level of the allowance.
Table 16—Allowance for Credit Losses 2022 2021 2020 (Dollars in millions) Allowance for loan losses at January 1 $ 1,479 $ 2,167 $ 869 Cumulative change in accounting guidance (1) — — 438 Allowance for loan losses, January 1 (as adjusted for change in accounting guidance) (1) 1,479 2,167 1,307 Loans charged-off: Commercial and industrial 102 124 358 Commercial real estate mortgage—owner-occupied 5 3 10 Commercial real estate construction—owner-occupied — 1 — Commercial investor real estate mortgage 5 20 1 Residential first mortgage 1 2 6 Home equity lines 5 6 12 Home equity loans 1 1 3 Consumer credit card 40 43 58 Other consumer—exit portfolios 18 31 61 Other consumer 198 97 104 375 328 613 Recoveries of loans previously charged-off: Commercial and industrial 47 56 38 Commercial real estate mortgage—owner-occupied 3 3 5 Commercial real estate construction—owner-occupied — — — Commercial investor real estate mortgage 2 3 3 Residential first mortgage 5 5 3 Home equity lines 12 14 12 Home equity loans 2 4 3 Consumer credit card 8 11 10 Other consumer—exit portfolios 5 5 9 Other consumer 28 23 18 112 124 101 Net charge-offs (recoveries): Commercial and industrial 55 68 320 Commercial real estate mortgage—owner-occupied 2 — 5 Commercial real estate construction—owner-occupied — 1 — Commercial investor real estate mortgage 3 17 (2) Residential first mortgage (4) (3) 3 Home equity lines (7) (8) — Home equity loans (1) (3) — Consumer credit card 32 32 48 Other consumer—exit portfolios 13 26 52 Other consumer 170 74 86 263 204 512 Provision for (benefit from) loan losses 248 (493) 1,312 Initial allowance on acquired PCD loans — 9 60 Allowance for loan losses at December 31 1,464 1,479 2,167 Reserve for unfunded credit commitments at January 1 95 126 45 Cumulative change in accounting guidance (1) — — 63 Reserve for unfunded credit commitments, as adjusted for change in accounting guidance (1) 95 126 108 Provision for (benefit from) unfunded credit losses 23 (31) 18 Reserve for unfunded credit commitments at December 31 118 95 126 Allowance for credit losses at December 31 $ 1,582 $ 1,574 $ 2,293 Loans, net of unearned income, outstanding at end of period $ 97,009 $ 87,784 $ 85,266 Average loans, net of unearned income, outstanding for the period $ 92,282 $ 84,802 $ 87,813 68 Table of Contents 2022 2021 2020 (Dollars in millions) Net loan charge-offs (recoveries) as a % of average loans, annualized (2) : Commercial and industrial 0.11 % 0.16 % 0.71 % Commercial real estate mortgage—owner-occupied 0.04 % — % 0.09 % Commercial real estate construction—owner-occupied (0.03) % 0.42 % 0.27 % Total commercial 0.11 % 0.14 % 0.64 % Commercial investor real estate mortgage 0.06 % 0.30 % (0.03) % Total investor real estate 0.04 % 0.23 % (0.03) % Residential first mortgage (0.02) % (0.02) % 0.02 % Home equity lines (0.19) % (0.20) % (0.01) % Home equity loans (0.05) % (0.11) % 0.01 % Consumer credit card 2.72 % 2.83 % 3.84 % Other consumer—exit portfolios 1.75 % 1.70 % 1.86 % Other consumer 2.99 % 2.41 % 3.26 % Total 0.29 % 0.24 % 0.58 % Ratios (2) : Allowance for credit losses at end of period to loans, net of unearned income 1.63 % 1.79 % 2.69 % Allowance for loan losses to loans, net of unearned income 1.51 % 1.69 % 2.54 % Allowance for credit losses at end of period to non-performing loans, excluding loans held for sale 317 % 349 % 308 % Allowance for loan losses to non-performing loans, excluding loans held for sale 293 % 328 % 291 % _______ (1) Regions adopted accounting guidance on January 1, 2020 and recorded the cumulative effect of the change in accounting guidance.
Table 18—Allowance for Credit Losses 2023 2022 2021 (Dollars in millions) Allowance for loan losses at January 1 $ 1,464 $ 1,479 $ 2,167 Cumulative effect from change in accounting guidance (1) (38) — — Allowance for loan losses, January 1 (as adjusted for change in accounting guidance) (1) 1,426 1,479 2,167 Loans charged-off: Commercial and industrial 195 102 124 Commercial real estate mortgage—owner-occupied 2 5 3 Commercial real estate construction—owner-occupied — — 1 Commercial investor real estate mortgage — 5 20 Residential first mortgage 1 1 2 Home equity lines 3 5 6 Home equity loans 1 1 1 Consumer credit card 52 40 43 Other consumer—exit portfolios 50 18 31 Other consumer 186 198 97 490 375 328 Recoveries of loans previously charged-off: Commercial and industrial 50 47 56 Commercial real estate mortgage—owner-occupied 2 3 3 Commercial investor real estate mortgage — 2 3 Residential first mortgage 1 5 5 Home equity lines 7 12 14 Home equity loans 1 2 4 Consumer credit card 8 8 11 Other consumer—exit portfolios 3 5 5 Other consumer 21 28 23 93 112 124 Net charge-offs (recoveries): Commercial and industrial 145 55 68 Commercial real estate mortgage—owner-occupied — 2 — Commercial real estate construction—owner-occupied — — 1 Commercial investor real estate mortgage — 3 17 Residential first mortgage — (4) (3) Home equity lines (4) (7) (8) Home equity loans — (1) (3) Consumer credit card 44 32 32 Other consumer—exit portfolios 47 13 26 Other consumer 165 170 74 397 263 204 Provision for (benefit from) loan losses 547 248 (493) Initial allowance on acquired PCD loans — — 9 Allowance for loan losses at December 31 1,576 1,464 1,479 Reserve for unfunded credit commitments at January 1 118 95 126 Provision for (benefit from) unfunded credit losses 6 23 (31) Reserve for unfunded credit commitments at December 31 124 118 95 Allowance for credit losses at December 31 $ 1,700 $ 1,582 $ 1,574 Loans, net of unearned income, outstanding at end of period $ 98,379 $ 97,009 $ 87,784 Average loans, net of unearned income, outstanding for the period $ 98,239 $ 92,282 $ 84,802 71 Table of Contents 2023 2022 2021 Net loan charge-offs (recoveries) as a % of average loans, annualized (2) : Commercial and industrial 0.28 % 0.11 % 0.16 % Commercial real estate mortgage—owner-occupied — % 0.04 % — % Commercial real estate construction—owner-occupied (0.09) % (0.03) % 0.42 % Total commercial 0.26 % 0.11 % 0.14 % Commercial investor real estate mortgage — % 0.06 % 0.30 % Commercial investor real estate construction (0.01) % — % — % Total investor real estate (0.01) % 0.04 % 0.23 % Residential first mortgage — % (0.02) % (0.02) % Home equity lines (0.10) % (0.19) % (0.20) % Home equity loans (0.02) % (0.05) % (0.11) % Consumer credit card 3.58 % 2.72 % 2.83 % Other consumer—exit portfolios 12.79 % 1.75 % 1.70 % Other consumer 2.74 % 2.99 % 2.41 % Total 0.40 % 0.29 % 0.24 % Ratios (2) : Allowance for credit losses at end of period to loans, net of unearned income 1.73 % 1.63 % 1.79 % Allowance for loan losses to loans, net of unearned income 1.60 % 1.51 % 1.69 % Allowance for credit losses at end of period to non-performing loans, excluding loans held for sale 211 % 317 % 349 % Allowance for loan losses to non-performing loans, excluding loans held for sale 196 % 293 % 328 % _______ (1) See Note 1 for additional information.
(2) Debt securities are included on an amortized cost basis with yield and net interest margin calculated accordingly. 55 Table of Contents (3) Interest income on debt securities includes hedging income of $41 million for the year ended December 31, 2022 and zero for the years ended December 31, 2021 and 2020.
(2) Debt securities are included on an amortized cost basis with yield and net interest margin calculated accordingly. (3) Interest income on debt securities includes hedging expense of $1 million, h edging income of $41 million, and zero for the years ended December 31, 2023, 2022 and 2021, respectively.
There was a $63 million fair value mark recorded through charge-offs in conjunction with the sale, which resulted in a net provision benefit of $31 million associated with the sale. 66 Table of Contents The table below reflects a range of macroeconomic factors utilized in the Base forecast over the two-year R&S forecast period as of December 31, 2022.
As discussed before Table 18 below, there was a $35 million fair value mark recorded through charge-offs, which resulted in a net provision expense of $8 million associated with the sale. The table below reflects a range of macroeconomic factors utilized in the Base forecast over the two-year R&S forecast period as of December 31, 2023.
Potentially, deflation could lead to lower profits, higher unemployment, lower production and deterioration in overall economic conditions. In addition, deflation could depress economic activity and impair bank earnings through reduced balance sheet growth and less favorable product pricing, as well as impairment in the ability of borrowers to repay loans.
In addition, deflation could depress economic activity and impair bank earnings through reduced balance sheet growth and less favorable product pricing, as well as impairment in the ability of borrowers to repay loans.
Furthermore, over the 12 month horizon, an increase of $1 billion in deposit remixing would decrease net interest income by approximately $20 million, and a decrease of $1 billion in deposit remixing would increase net interest income by $20 million.
Furthermore, over the 12 month horizon, an increase of $1 billion in deposit remixing would decrease net interest income by approximately $27 million, and a decrease of $1 billion in deposit remixing would increase net interest income by $27 million in the parallel, instantaneous +100 basis point scenario.
Circumstances related to individually large credits could also result in volatility. 72 Table of Contents The following table provides an analysis of non-accrual loans (excluding loans held for sale) by portfolio segment: Table 21— Analysis of Non-Accrual Loans Non-Accrual Loans, Excluding Loans Held for Sale for the Year Ended December 31, 2022 Commercial Investor Real Estate Consumer (1) Total (In millions) Balance at beginning of year $ 368 $ 3 $ 80 $ 451 Additions 440 58 — 498 Net payments/other activity (156) (1) (15) (172) Return to accrual (156) — — (156) Charge-offs on non-accrual loans (2) (97) (5) — (102) Transfers to held for sale (3) (13) — — (13) Transfers to real estate owned (4) — — (4) Sales — (2) — (2) Balance at end of year $ 382 $ 53 $ 65 $ 500 Non-Accrual Loans, Excluding Loans Held for Sale for the Year Ended December 31, 2021 Commercial Investor Real Estate Consumer (1) Total (In millions) Balance at beginning of year $ 524 $ 114 $ 107 $ 745 Additions 417 4 — 421 Net payments/other activity (291) (1) (27) (319) Return to accrual (141) (1) — (142) Charge-offs on non-accrual loans (2) (114) (19) — (133) Transfers to held for sale (3) (25) (94) — (119) Transfers to real estate owned (2) — — (2) Balance at end of year $ 368 $ 3 $ 80 $ 451 ________ (1) All net activity within the consumer portfolio segment other than sales and transfers to held for sale (including related charge-offs) is included as a single net number within the net payments/other activity line.
Circumstances related to individually large credits could also result in volatility. 73 Table of Contents The following table provides an analysis of non-accrual loans (excluding loans held for sale) by portfolio segment: Table 21— Analysis of Non-Accrual Loans Non-Accrual Loans, Excluding Loans Held for Sale for the Year Ended December 31, 2023 Commercial Investor Real Estate Consumer (1) Total (In millions) Balance at beginning of year $ 382 $ 53 $ 65 $ 500 Additions 581 189 — 770 Net payments/other activity (145) (9) (8) (162) Return to accrual (107) — — (107) Charge-offs on non-accrual loans (2) (188) — — (188) Transfers to held for sale (3) (8) — — (8) Balance at end of year $ 515 $ 233 $ 57 $ 805 Non-Accrual Loans, Excluding Loans Held for Sale for the Year Ended December 31, 2022 Commercial Investor Real Estate Consumer (1) Total (In millions) Balance at beginning of year $ 368 $ 3 $ 80 $ 451 Additions 440 58 — 498 Net payments/other activity (156) (1) (15) (172) Return to accrual (156) — — (156) Charge-offs on non-accrual loans (2) (97) (5) — (102) Transfers to held for sale (3) (13) — — (13) Transfers to real estate owned (4) — — (4) Sales — (2) — (2) Balance at end of year $ 382 $ 53 $ 65 $ 500 ________ (1) All net activity within the consumer portfolio segment other than sales and transfers to held for sale (including related charge-offs) is included as a single net number within the net payments/other activity line.
Refer to Note 11 "Borrowed Funds" to the consolidated financial statements for additional information. Regions may, from time to time, consider opportunistically retiring outstanding issued securities, including subordinated debt in privately negotiated or open market transactions for cash or common shares. Regulatory approval would be required for retirement of some instruments.
Regions may, from time to time, consider opportunistically retiring outstanding issued securities, including subordinated debt in privately negotiated or open market transactions for cash or common shares. Regulatory approval would be required for retirement of some instruments. See Note 14 "Shareholders' Equity and Accumulated Other Comprehensive Income (Loss)" to the consolidated financial statements for additional information.
The notional principal is not exchanged but is used as a reference for the size of interest settlements. Interest rate options are contracts that allow the buyer to purchase or sell a financial instrument at a predetermined price and time. Forward sale commitments are contractual obligations to sell market instruments at a future date for an already agreed-upon price.
Interest rate options are contracts that allow the buyer to purchase or sell a financial instrument at a predetermined price and time. Forward sale commitments are contractual obligations to sell market instruments at a future date for an already agreed-upon price.
Other identifiable intangible assets such as relationship assets, agency commercial real estate licenses and purchased credit card relationships, are reviewed at least annually (usually in the fourth quarter) for events or circumstances which could impact the recoverability of the intangible asset.
Other identifiable intangible assets such as relationship assets and agency commercial real estate licenses are reviewed at least annually (usually in the fourth quarter) for events or circumstances which could impact the recoverability of the intangible asset. These events could include loss of customer relationships, increased competition, or adverse changes in the economy.
The allowance totaled $1.6 billion at both of December 31, 2022 and 2021, which represents management's best estimate of expected losses over the life of the loan and credit commitment portfolios. Key drivers of the change in the allowance by 65 Table of Contents quarter from year-end 2021 to year-end 2022 are presented in Table 14 below.
The allowance totaled $1.7 billion as of December 31, 2023 compared to $1.6 billion at December 31, 2022, which represents management's best estimate of expected losses over the life of the loan and credit commitment portfolios. Key drivers of the change in the allowance by quarter are presented in Table 16 below.
During 2022, the provision for credit losses totaled $271 million and net charge-offs were $263 million. This compares to a benefit from credit losses of $524 million and net charge-offs of $204 million in 2021.
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.
Regions participates in supervisory stress testing conducted by the Federal Reserve and its SCB is currently floored at 2.5 percent. See Note 12 "Regulatory Capital Requirements and Restrictions" to the consolidated financial statements for further details regarding CCAR results. See the "Executive Overview" section for details on expectations of a range for CET1.
Regions participates in supervisory stress testing conducted by the Federal Reserve and its SCB is currently floored at 2.5 percent. See Note 14 "Shareholders' Equity and Accumulated Other Comprehensive Income" to the consolidated financial statements for further details regarding CCAR results. See the "Executive Overview" section for details on expectations for CET1.
Table 25—Interest Rate Sensitivity Estimated Annual Change in Net Interest Income December 31, 2022 (1)(2) (In millions) Gradual Change in Interest Rates + 200 basis points $ 184 + 100 basis points 101 - 100 basis points (147) - 200 basis points (306) Instantaneous Change in Interest Rates + 200 basis points $ 201 + 100 basis points 121 - 100 basis points (222) - 200 basis points (474) ________ (1) Disclosed interest rate sensitivity levels represent the 12-month forward looking net interest income changes as compared to market forward rate cases and include expected balance sheet growth and remixing.
Table 25—Interest Rate Sensitivity Estimated Annual Change in Net Interest Income December 31, 2023 (1)(2) (in millions) Gradual Change in Interest Rates + 200 basis points $ 54 + 100 basis points 30 - 100 basis points (50) - 200 basis points (109) Instantaneous Change in Interest Rates + 200 basis points $ — + 100 basis points 13 - 100 basis points (55) - 200 basis points (128) ________ (1) Disclosed interest rate sensitivity levels represent the 12-month forward looking net interest income changes as compared to market forward rate cases and include expected balance sheet growth and remixing.
Regions accounts for residential MSRs at fair market value with any changes to fair value being recorded within mortgage income. Regions enters into derivative transactions to economically mitigate the impact of market value fluctuations related to residential MSRs. Derivative instruments entered into in the future could be materially different from the current risk profile of Regions’ current portfolio.
Regions enters into derivative transactions to economically mitigate the impact of market value fluctuations related to residential MSRs. Derivative instruments entered into in the future could be materially different from the current risk profile of Regions’ current portfolio.
The levels of residential real estate mortgage loans held for sale that are part of the Company's mortgage originations fluctuate depending on production and retention levels, as well as the timing of origination and sale to third parties.
Levels of commercial loans held for sale fluctuate based on timing of sale to third parties. The levels of residential first mortgage loans held for sale that are part of the Company's mortgage originations fluctuate depending on the timing of origination and sale to third parties.
Ratings Table 24 "Credit Ratings" reflects the debt ratings information of Regions Financial Corporation and Regions Bank by Standard and Poor's ("S&P"), Moody’s, Fitch and Dominion Bond Rating Service Morningstar ("DBRS") as of December 31, 2022.
RATINGS Table 24 "Credit Ratings" reflects the debt ratings information of Regions Financial Corporation and Regions Bank by S&P, Moody’s, Fitch and DBRS as of December 31, 2023.
PORTFOLIO CHARACTERISTICS The following sections describe the composition of the portfolio segments and classes disclosed in Table 8, explain changes in balances from year-end 2021 and highlight the related risk characteristics. Regions believes that its loan portfolio is well diversified by product, client, and geography throughout its footprint.
See the "Executive Overview" section for details on average loan growth expectations for 2024. The following sections describe the composition of the portfolio segments and classes disclosed in Table 9, explain changes in balances from year-end 2022 and highlight the related risk characteristics. Regions believes that its loan portfolio is well diversified by product, client, and geography throughout its footprint.

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