Companies: 10,652     total market cap: $140.563 T
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Regions Financial
RF
#951
Rank
$26.07 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$29.74
Share price
-0.13%
Change (1 day)
26.28%
Change (1 year)
๐Ÿฆ Banks๐Ÿ’ณ Financial services
Categories
Regions Financial Corporation is one of America's largest full-service providers of consumer and commercial banking, wealth management, and mortgage products and services.
  1. Regions Financial
  2. Quarterly Reports (10-Q)
  3. Submitted on 2021-08-06

Regions Financial - 10-Q quarterly report FY Q2


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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
10-Q
☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended
June 30, 2021
or
☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period fromto                                
Commission File Number: 001-34034
Regions Financial Corporation
(Exact name of registrant as specified in its charter)
Delaware 63-0589368
(State or other jurisdiction of
incorporation or organization)		 (I.R.S. Employer
Identification No.)
1900 Fifth Avenue North 
Birmingham
Alabama35203
(Address of principal executive offices) (Zip Code)
(800) 734-4667
(Registrant’s telephone number, including area code)
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.01 par valueRFNew York Stock Exchange
Depositary Shares, each representing a 1/40th Interest in a Share of
6.375% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series BRF PRBNew York Stock Exchange
Depositary Shares, each representing a 1/40th Interest in a Share of
5.700% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series CRF PRCNew York Stock Exchange
Depositary Shares, each representing a 1/40th Interest in a Share of
4.45% Non-Cumulative Perpetual Preferred Stock, Series ERF PRENew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ý  Yes    ¨  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ý  Yes    ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): Large
accelerated filer ý Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company  ☐  Emerging growth company  ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    ý  No
Securities registered pursuant to Section 12(b) of the Act:
As of August 4, 2021 there were 954,539,307 shares of the issuer's common stock, par value $.01 per share, outstanding.
1
Table of Contents

REGIONS FINANCIAL CORPORATION
FORM 10-Q
INDEX
 
  Page
Forward-Looking Statements
Part I. Financial Information
Item 1.Financial Statements (Unaudited)
9
10
11
12
13
14
Item 2.
53
Item 3.
92
Item 4.
92
Part II. Other Information
Item 1.
93
Item 2.
93
Item 6.
94
95
2
Table of Contents

Glossary of Defined Terms
Agencies - collectively, FNMA and GNMA.
ACL - Allowance for credit losses.
ALCO - Asset/Liability Management Committee.
ALLL - Allowance for loan and lease losses.
Allowance - Allowance for credit losses.
AOCI - Accumulated other comprehensive income.
ARRC - Alternative Reference Rates Committee.
Ascentium - Ascentium Capital, LLC., an equipment finance entity acquired April 1, 2020.
ASU - Accounting Standards Update.
ATM - Automated teller machine.
Bank - Regions Bank.
Basel III Rules - Final capital rules adopting the Basel III capital framework approved by U.S. federal
    regulators in 2013.
Basel Committee - Basel Committee on Banking Supervision.
BHC - Bank Holding Company.
BITS - Technology policy division of the Bank Policy Institute.
Board - The Company’s Board of Directors.
CAP - Customer Assistance Program.
CARES Act - Coronavirus Aid, Relief, and Economic Security Act 
CCAR - Comprehensive Capital Analysis and Review.
CECL - Accounting Standards Update 2016-13, Measurement of Credit Losses on Financial Instruments ("Current
    Expected Credit Losses")
CET1 - Common Equity Tier 1.
CFPB - Consumer Financial Protection Bureau.
Company - Regions Financial Corporation and its subsidiaries.
COVID-19 - Coronavirus Disease 2019.
CPI - Consumer price index.
CPR - Constant (or Conditional) prepayment rate.
Dodd-Frank Act - The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
DFAST - Dodd-Frank Act Stress Test.
DPD - Days past due.
DUS - Fannie Mae Delegated Underwriting & Servicing.
E&P - Extraction and production.
FASB - Financial Accounting Standards Board.
FCA - Financial Conduct Authority.
FDIC - The Federal Deposit Insurance Corporation.
Federal Reserve - The Board of Governors of the Federal Reserve System.
FHA - Federal Housing Administration.
FHLB - Federal Home Loan Bank.
3
Table of Contents

FICO - The Financing Corporation, established by the Competitive Equality Banking Act of.1987.
FICO scores - Personal credit scores based on the model introduced by the Fair Isaac Corporation.
Fintechs - Financial Technology Companies.
FOMC - Federal Open Market Committee.
FRB - Federal Reserve Bank.
GAAP - Generally Accepted Accounting Principles in the United States.
GDP - Gross domestic product.
GNMA - Government National Mortgage Association.
HPI - Housing price index.
IRE - Investor real estate portfolio segment.
IRS - Internal Revenue Service.
LIBOR - London InterBank Offered Rate.
LROC - Liquidity Risk Oversight Committee.
LTV - Loan to value.
MBS - Mortgage-backed securities.
MSAs - Metropolitan Statistical Areas.
MSR - Mortgage servicing right.
NM - Not meaningful.
OAS - Option-adjusted spread.
OCC - Office of the Comptroller of the Currency.
OCI - Other comprehensive income.
PCD - Purchased credit deteriorated.
PD - Probability of default.
PPP - Paycheck Protection Program.
R&S - Reasonable and supportable.
S&P 500 - a stock market index that measures the stock performance of 500 large companies listed on stock
    exchanges in the United States.
SBA - Small Business Administration.
SBIC - Small Business Investment Company.
SCB - Stress Capital Buffer.
SEC - U.S. Securities and Exchange Commission.
TDR - Troubled debt restructuring.
U.S. - United States.
U.S. Treasury - The United States Department of the Treasury.
USD - United States dollar.
UTB - Unrecognized tax benefits.
VIE - Variable interest entity.
Visa - The Visa, U.S.A. Inc. card association or its affiliates, collectively.

4
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Forward-Looking Statements
This Quarterly Report on Form 10-Q, other periodic reports filed by Regions Financial Corporation under the Securities Exchange Act of 1934, as amended, and any other written or oral statements made by us or on our behalf to analysts, investors, the media and others, may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.
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 words “future,” “anticipates,” “assumes,” “intends,” “plans,” “seeks,” “believes,” “predicts,” “potential,” “objectives,” “estimates,” “expects,” “targets,” “projects,” “outlook,” “forecast,” “would,” “will,” “may,” “might,” “could,” “should,” “can,” and similar terms and expressions often signify forward-looking statements. Further, statements about the potential effects of the COVID-19 pandemic on our businesses, operations, and financial results and conditions may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including the scope and duration of the pandemic (including any resurgences), actions taken by governmental authorities in response to the pandemic and their success, the effectiveness and acceptance of any vaccines, and the direct and indirect impact of the pandemic on our customers, third parties and us. Forward-looking statements are not based on historical information, but rather are related to future operations, strategies, financial results or other developments. Forward-looking statements are based on management’s current expectations as well as certain assumptions and estimates made by, and information available to, management at the time the statements are made. Those statements are based on general assumptions and are subject to various risks, and because they also relate to the future they are likewise subject to inherent uncertainties and other factors that may cause actual results to differ materially from the views, beliefs and projections expressed in such statements. Therefore, we caution you against relying on any of these forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, those described below:
•Current and future economic and market conditions in the United States generally or in the communities we serve (in particular the Southeastern United States), including the effects of possible declines in property values, increases in unemployment rates, financial market disruptions and potential reductions of economic growth, which may adversely affect our lending and other businesses and our financial results and conditions.
•Possible changes in trade, monetary and fiscal policies of, and other activities undertaken by, governments, agencies, central banks and similar organizations, which could have a material adverse effect on our earnings.
•Possible changes in market interest rates or capital markets could adversely affect our revenue and expense, the value of assets and obligations, and the availability and cost of capital and liquidity.
•The impact of pandemics, including the ongoing COVID-19 pandemic, on our businesses, operations, and financial results and conditions. The duration and severity of the ongoing COVID-19 pandemic, which has disrupted the global economy, has and could continue to adversely affect our capital and liquidity position, impair the ability of borrowers to repay outstanding loans and increase our allowance for credit losses, impair collateral values, and result in lost revenue or additional expenses. The pandemic could also result in goodwill impairment charges and the impairment of other financial and nonfinancial assets, and increase our cost of capital.
•Any impairment of our goodwill or other intangibles, any repricing of assets, or any adjustment of valuation allowances on our deferred tax assets due to changes in law, adverse changes in the economic environment, declining operations of the reporting unit or other factors.
•The effect of changes in tax laws, including the effect of any future interpretations of existing tax law or any enactment of new domestic tax legislation and corporate tax rates, which may impact our earnings, capital ratios and our ability to return capital to shareholders.
•Possible changes in the creditworthiness of customers and the possible impairment of the collectability of loans and leases, including operating leases.
•Changes in the speed of loan prepayments, loan origination and sale volumes, charge-offs, credit loss provisions or actual credit losses where our allowance for credit losses may not be adequate to cover our eventual losses.
•Possible acceleration of prepayments on mortgage-backed securities due to low interest rates, and the related acceleration of premium amortization on those securities.
•Loss of customer checking and savings account deposits as customers pursue other, higher-yield investments, which could increase our funding costs.
•Possible changes in consumer and business spending and saving habits and the related effect on our ability to increase assets and to attract deposits, which could adversely affect our net income.
•Our ability to effectively compete with other traditional and non-traditional financial services companies, including fintechs, some of whom possess greater financial resources than we do or are subject to different regulatory standards than we are.
•Our inability to develop and gain acceptance from current and prospective customers for new products and services and the enhancement of existing products and services to meet customers’ needs and respond to emerging technological trends in a timely manner could have a negative impact on our revenue.
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•Our inability to keep pace with technological changes, including those related to the offering of digital banking and financial services, could result in losing business to competitors.
•Changes in laws and regulations affecting our businesses, including legislation and regulations relating to bank products and services, as well as changes in the enforcement and interpretation of such laws and regulations by applicable governmental and self-regulatory agencies, including as a result of the recent change in U.S. presidential administration and control of the U.S. Congress, which could require us to change certain business practices, increase compliance risk, reduce our revenue, impose additional costs on us, or otherwise negatively affect our businesses.
•Our capital actions, including dividend payments, common stock repurchases, or redemptions of preferred stock or other regulatory capital instruments, must not cause us to fall below minimum capital ratio requirements, with applicable buffers taken into account, and must comply with other requirements and restrictions under law or imposed by our regulators, which may impact our ability to return capital to shareholders.
•Our ability to comply with stress testing and capital planning requirements (as part of the CCAR process or otherwise) may continue to require a significant investment of our managerial resources due to the importance of such tests and requirements.
•Our ability to comply with applicable capital and liquidity requirements (including, among other things, the Basel III capital standards), including our ability to generate capital internally or raise capital on favorable terms, and if we fail to meet requirements, our financial condition and market perceptions of us could be negatively impacted.
•The effects of any developments, changes or actions relating to any litigation or regulatory proceedings brought against us or any of our subsidiaries.
•The costs, including possibly incurring fines, penalties, or other negative effects (including reputational harm) of any adverse judicial, administrative, or arbitral rulings or proceedings, regulatory enforcement actions, or other legal actions to which we or any of our subsidiaries are a party, and which may adversely affect our results.
•Our ability to manage fluctuations in the value of assets and liabilities and off-balance sheet exposure so as to maintain sufficient capital and liquidity to support our business.
•Our ability to execute on our strategic and operational plans, including our ability to fully realize the financial and nonfinancial benefits relating to our strategic initiatives.
•The risks and uncertainties related to our acquisition or divestiture of businesses, including our pending acquisition of EnerBank and risks related to such acquisition including: the possibility that regulatory and other approvals and conditions are not received or satisfied on a timely basis or at all, or contain unanticipated terms and conditions; delays in closing the proposed transaction; expected synergies, cost savings and other financial or other benefits may not be realized within the expected timeframes or might be less than projected; difficulties in integrating the business; and the inability of Regions to effectively cross-sell products to EnerBank's customers.
•The success of our marketing efforts in attracting and retaining customers.
•Our ability to recruit and retain talented and experienced personnel to assist in the development, management and operation of our products and services may be affected by changes in laws and regulations in effect from time to time.
•Fraud or misconduct by our customers, employees or business partners.
•Any inaccurate or incomplete information provided to us by our customers or counterparties.
•Inability of our framework to manage risks associated with our business such as credit risk and operational risk, including third-party vendors and other service providers, which could, among other things, result in a breach of operating or security systems as a result of a cyber attack or similar act or failure to deliver our services effectively.
•Dependence on key suppliers or vendors to obtain equipment and other supplies for our business on acceptable terms.
•The inability of our internal controls and procedures to prevent, detect or mitigate any material errors or fraudulent acts.
•The effects of geopolitical instability, including wars, conflicts, civil unrest, and terrorist attacks and the potential impact, directly or indirectly, on our businesses.
•The effects of man-made and natural disasters, including fires, floods, droughts, tornadoes, hurricanes, and environmental damage (specifically in the Southeastern United States), which may negatively affect our operations and/or our loan portfolios and increase our cost of conducting business. The severity and impact of future earthquakes, fires, hurricanes, tornadoes, droughts, floods and other weather-related events are difficult to predict and may be exacerbated by global climate change.
•Changes in commodity market prices and conditions could adversely affect the cash flows of our borrowers operating in industries that are impacted by changes in commodity prices (including businesses indirectly impacted by commodities prices such as businesses that transport commodities or manufacture equipment used in the production of commodities), which could impair their ability to service any loans outstanding to them and/or reduce demand for loans in those industries.
•Our ability to identify and address cyber-security risks such as data security breaches, malware, ransomware, “denial of service” attacks, “hacking” and identity theft, including account take-overs, a failure of which could disrupt our
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business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage to our systems, increased costs, losses, or adverse effects to our reputation.
•Our ability to achieve our expense management initiatives.
•Market replacement of LIBOR and the related effect on our LIBOR-based financial products and contracts, including, but not limited to, derivative products, debt obligations, deposits, investments, and loans.
•Possible downgrades in our credit ratings or outlook could, among other negative impacts, increase the costs of funding from capital markets.
•The effects of a possible downgrade in the U.S. government’s sovereign credit rating or outlook, which could result in risks to us and general economic conditions that we are not able to predict.
•The effects of problems encountered by other financial institutions that adversely affect us or the banking industry generally could require us to change certain business practices, reduce our revenue, impose additional costs on us, or otherwise negatively affect our businesses.
•The effects of the failure of any component of our business infrastructure provided by a third party could disrupt our businesses, result in the disclosure of and/or misuse of confidential information or proprietary information, increase our costs, negatively affect our reputation, and cause losses.
•Our ability to receive dividends from our subsidiaries, in particular Regions Bank, could affect our liquidity and ability to pay dividends to shareholders.
•Changes in accounting policies or procedures as may be required by the FASB or other regulatory agencies could materially affect our financial statements and how we report those results, and expectations and preliminary analyses relating to how such changes will affect our financial results could prove incorrect.
•Other risks identified from time to time in reports that we file with the SEC.
•Fluctuations in the price of our common stock and inability to complete stock repurchases in the time frame and/or on the terms anticipated.
•The effects of any damage to our reputation resulting from developments related to any of the items identified above.
You should not place undue reliance on any forward-looking statements, which speak only as of the date made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible to predict all of them. We assume no obligation and do not intend to update or revise any forward-looking statements that are made from time to time, either as a result of future developments, new information or otherwise, except as may be required by law.
See also the reports filed with the SEC, including the discussion under the “Risk Factors” section of Regions’ Annual Report on Form 10-K for the year ended December 31, 2020 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, as filed with the SEC and available on its website at www.sec.gov.
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
June 30, 2021December 31, 2020
 (In millions, except share data)
Assets
Cash and due from banks$1,820 $1,558 
Interest-bearing deposits in other banks23,774 16,398 
Debt securities held to maturity (estimated fair value of $1,064 and $1,215, respectively)
993 1,122 
Debt securities available for sale (amortized cost of $28,684 and $26,092, respectively)
29,290 27,154 
Loans held for sale (includes $991 and $1,446 measured at fair value, respectively)
1,194 1,905 
Loans, net of unearned income84,074 85,266 
Allowance for loan losses (1,597)(2,167)
Net loans82,477 83,099 
Other earning assets1,246 1,217 
Premises and equipment, net1,825 1,897 
Interest receivable323 346 
Goodwill5,181 5,190 
Residential mortgage servicing rights at fair value392 296 
Other identifiable intangible assets, net108 122 
Other assets6,987 7,085 
Total assets$155,610 $147,389 
Liabilities and Equity
Deposits:
Non-interest-bearing$56,468 $51,289 
Interest-bearing75,016 71,190 
Total deposits131,484 122,479 
Borrowed funds:
Long-term borrowings2,870 3,569 
Total borrowed funds2,870 3,569 
Other liabilities3,004 3,230 
Total liabilities137,358 129,278 
Equity:
Preferred stock, authorized 10 million shares, par value $1.00 per share
Non-cumulative perpetual, including related surplus, net of issuance costs; issued—1,750,000 and 1,850,000 shares, respectively
1,659 1,656 
Common stock, authorized 3 billion shares, par value $0.01 per share:
Issued including treasury stock— 995,547,025 and 1,001,507,052 shares, respectively
10 10 
Additional paid-in capital12,467 12,731 
Retained earnings 4,836 3,770 
Treasury stock, at cost— 41,032,676 shares
(1,371)(1,371)
Accumulated other comprehensive income, net651 1,315 
Total shareholders’ equity18,252 18,111 
Total liabilities and equity$155,610 $147,389 
See notes to consolidated financial statements.
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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended June 30Six Months Ended June 30
 2021202020212020
 (In millions, except per share data)
Interest income on:
Loans, including fees$849 $898 $1,703 $1,801 
Debt securities131 148 264 306 
Loans held for sale12 6 24 11 
Other earning assets14 11 28 24 
Total interest income1,006 1,063 2,019 2,142 
Interest expense on:
Deposits17 40 36 124 
Short-term borrowings— 2 — 10 
Long-term borrowings26 49 53 108 
Total interest expense43 91 89 242 
Net interest income963 972 1,930 1,900 
Provision for (benefit from) credit losses(337)882 (479)1,255 
Net interest income after provision for (benefit from) credit losses1,300 90 2,409 645 
Non-interest income:
Service charges on deposit accounts163 131 320 309 
Card and ATM fees128 101 243 206 
Investment management and trust fee income69 62 135 124 
Capital markets income61 95 161 104 
Mortgage income53 82 143 150 
Securities gains (losses), net1 1 2 1 
Other144 101 256 164 
Total non-interest income619 573 1,260 1,058 
Non-interest expense:
Salaries and employee benefits532 527 1,078 994 
Equipment and software expense89 86 179 169 
Net occupancy expense75 76 152 155 
Other202 235 417 442 
Total non-interest expense898 924 1,826 1,760 
Income (loss) before income taxes1,021 (261)1,843 (57)
Income tax expense (benefit)231 (47)411 (5)
Net income (loss)$790 $(214)$1,432 $(52)
Net income (loss) available to common shareholders$748 $(237)$1,362 $(98)
Weighted-average number of shares outstanding:
Basic958 960 959 958 
Diluted965 960 967 958 
Earnings (loss) per common share:
Basic$0.78 $(0.25)$1.42 $(0.10)
Diluted$0.77 $(0.25)$1.41 $(0.10)

See notes to consolidated financial statements.
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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 Three Months Ended June 30
 20212020
 (In millions)
Net income (loss)$790 $(214)
Other comprehensive income, net of tax:
Unrealized losses on securities transferred to held to maturity:
Unrealized losses on securities transferred to held to maturity during the period (net of zero and zero tax effect, respectively)
— — 
Less: reclassification adjustments for amortization of unrealized losses on securities transferred to held to maturity (net of zero and zero tax effect, respectively)
(1)(1)
Net change in unrealized losses on securities transferred to held to maturity, net of tax1 1 
Unrealized gains on securities available for sale:
Unrealized holding gains (losses) arising during the period (net of $23 and $61 tax effect, respectively)
71 185 
Less: reclassification adjustments for securities gains (losses) realized in net income (net of zero and zero tax effect, respectively)
1 1 
Net change in unrealized gains on securities available for sale, net of tax70 184 
Unrealized gains on derivative instruments designated as cash flow hedges:
Unrealized holding gains (losses) on derivatives arising during the period (net of $18 and $52 tax effect, respectively)
56 153 
Less: reclassification adjustments for gains (losses) on derivative instruments realized in net income (net of $26 and $15 tax effect, respectively)
78 45 
Net change in unrealized gains on derivative instruments, net of tax(22)108 
Defined benefit pension plans and other post employment benefits:
Net actuarial gains (losses) arising during the period (net of zero and zero tax effect, respectively)
— — 
Less: reclassification adjustments for amortization of actuarial loss and settlements realized in net income (net of ($4) and ($3) tax effect, respectively)
(10)(9)
Net change from defined benefit pension plans and other post employment benefits, net of tax10 9 
Other comprehensive income, net of tax59 302 
Comprehensive income$849 $88 
 Six Months Ended June 30
 20212020
 (In millions)
Net income (loss)$1,432 $(52)
Other comprehensive income, net of tax:
Unrealized losses on securities transferred to held to maturity:
Unrealized losses on securities transferred to held to maturity during the period (net of zero and zero tax effect, respectively)
— — 
Less: reclassification adjustments for amortization of unrealized losses on securities transferred to held to maturity (net of ($1) and zero tax effect, respectively)
(3)(2)
Net change in unrealized losses on securities transferred to held to maturity, net of tax3 2 
Unrealized gains on securities available for sale:
Unrealized holding gains (losses) arising during the period (net of ($115) and $212 tax effect, respectively)
(339)631 
Less: reclassification adjustments for securities gains (losses) realized in net income (net of zero and zero tax effect, respectively)
2 1 
Net change in unrealized gains on securities available for sale, net of tax(341)630 
Unrealized gains on derivative instruments designated as cash flow hedges:
Unrealized holding gains (losses) on derivatives arising during the period (net of ($65) and $377 tax effect, respectively)
(192)1,119 
Less: reclassification adjustments for gains (losses) on derivative instruments realized in net income (net of $52 and $17 tax effect, respectively)
154 52 
Net change in unrealized gains on derivative instruments, net of tax(346)1,067 
Defined benefit pension plans and other post employment benefits:
Net actuarial gains (losses) arising during the period (net of zero and zero tax effect, respectively)
— — 
Less: reclassification adjustments for amortization of actuarial loss and settlements realized in net income (net of ($7) and ($6) tax effect, respectively)
(20)(17)
Net change from defined benefit pension plans and other post employment benefits, net of tax20 17 
Other comprehensive income, net of tax(664)1,716 
Comprehensive income$768 $1,664 
See notes to consolidated financial statements.
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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Shareholders' Equity
 Preferred StockCommon StockAdditional
Paid-In
Capital		Retained
Earnings		Treasury
Stock,
At Cost		Accumulated
Other
Comprehensive
Income (Loss), Net		TotalNon-
controlling
Interest
 SharesAmountSharesAmount
 (In millions)
BALANCE AT JANUARY 1, 20202 $1,310 957 $10 $12,685 $3,751 $(1,371)$(90)$16,295 $— 
Cumulative effect from change in accounting guidance— — — — — (377)— — (377)— 
Net income— — — — — 162 — — 162 — 
Other comprehensive income (loss), net of tax— — — — — — — 1,414 1,414 — 
Cash dividends declared— — — — — (149)— — (149)— 
Preferred stock dividends— — — — — (23)— — (23)— 
Impact of stock transactions under compensation plans, net— — — — 10 — — — 10 — 
BALANCE AT MARCH 31, 20202 $1,310 957 $10 $12,695 $3,364 $(1,371)$1,324 $17,332 $— 
BALANCE AT APRIL 1, 20202 $1,310 957 $10 $12,695 $3,364 $(1,371)$1,324 $17,332 $— 
Net income (loss)— — — — — (214)— — (214)— 
Other comprehensive income (loss), net of tax— — — — — — — 302 302 — 
Cash dividends declared — — — — — (149)— — (149)— 
Preferred stock dividends— — — — — (23)— — (23)— 
Net proceeds from issuance of Series D preferred stock— 346 — — — — — — 346 — 
Impact of stock transactions under compensation plans, net and other— — 3 — 8 — — — 8 — 
Other— — — — — — — — — 26 
BALANCE AT JUNE 30, 20202 $1,656 960 $10 $12,703 $2,978 $(1,371)$1,626 $17,602 $26 
BALANCE AT JANUARY 1, 20212 $1,656 960 $10 $12,731 $3,770 $(1,371)$1,315 $18,111 $— 
Net income— — — — — 642 — — 642 — 
Other comprehensive income (loss), net of tax— — — — — — — (723)(723)— 
Cash dividends declared — — — — — (149)— — (149)— 
Preferred stock dividends— — — — — (28)— — (28)— 
Impact of common stock transactions under compensation plans, net— — 1 — 9 — — — 9 — 
BALANCE AT MARCH 31, 20212 $1,656 961 $10 $12,740 $4,235 $(1,371)$592 $17,862 $— 
BALANCE AT APRIL 1, 20212 $1,656 961 $10 $12,740 $4,235 $(1,371)$592 $17,862 $— 
Net income— — — — — 790 — — 790 — 
Other comprehensive income (loss), net of tax— — — — — — — 59 59 — 
Cash dividends declared — — — — — (147)— — (147)— 
Preferred stock dividends— — — — — (29)— — (29)— 
Net proceeds from issuance of Series E preferred stock— 390 — — — — — — 390 — 
Redemption of Series A preferred stock— (387)— — (100)(13)— — (500)— 
Impact of common stock share repurchases— — (8)— (167)— — — (167)— 
Impact of common stock transactions under compensation plans, net— — 2 — (6)— — — (6)— 
BALANCE AT JUNE 30, 20212 $1,659 955 $10 $12,467 $4,836 $(1,371)$651 $18,252 $— 

See notes to consolidated financial statements.
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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30
 20212020
 (In millions)
Operating activities:
Net income (loss)$1,432 $(52)
Adjustments to reconcile net income to net cash from operating activities:
Provision for (benefit from) credit losses(479)1,255 
Depreciation, amortization and accretion, net195 228 
Securities losses, net(2)(1)
Deferred income tax expense (benefit)180 (242)
Originations and purchases of loans held for sale(3,516)(2,918)
Proceeds from sales of loans held for sale4,143 2,517 
(Gain) loss on sale of loans, net(123)(97)
(Gain) loss on early extinguishment of debt— 6 
Net change in operating assets and liabilities:
Other earning assets
(40)305 
Interest receivable and other assets
(313)55 
Other liabilities
(128)489 
Other79 99 
Net cash from operating activities1,428 1,644 
Investing activities:
Proceeds from maturities of debt securities held to maturity129 76 
Proceeds from sales of debt securities available for sale45 102 
Proceeds from maturities of debt securities available for sale2,961 1,909 
Purchases of debt securities available for sale(5,790)(2,352)
Net proceeds from (payments for) bank-owned life insurance1 (4)
Proceeds from sales of loans203 141 
Purchases of loans(548)(895)
Purchases of mortgage servicing rights(37)(16)
Net change in loans1,594 (4,902)
Net purchases of other assets(37)(88)
Payment for acquisition of a business, net of cash received— (387)
Net cash from investing activities(1,479)(6,416)
Financing activities:
Net change in deposits9,005 19,304 
Net change in short-term borrowings— (2,050)
Proceeds from long-term borrowings— 4,698 
Payments on long-term borrowings(674)(8,088)
Net proceeds from issuance of preferred stock390 346 
Payment for redemption of preferred stock(500)— 
Cash dividends on common stock(298)(298)
Cash dividends on preferred stock(57)(46)
Repurchases of common stock(167)— 
Taxes paid related to net share settlement of equity awards(10)(7)
Other— (3)
Net cash from financing activities7,689 13,856 
Net change in cash and cash equivalents7,638 9,084 
Cash and cash equivalents at beginning of year17,956 4,114 
Cash and cash equivalents at end of period$25,594 $13,198 
See notes to consolidated financial statements.
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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Six Months Ended June 30, 2021 and 2020
NOTE 1. BASIS OF PRESENTATION
Regions Financial Corporation (“Regions” or the "Company”) provides a full range of banking and bank-related services to individual and corporate customers through its subsidiaries and branch offices located across the South, Midwest and Texas. The Company competes with other financial institutions located in the states in which it operates, as well as other adjoining states. Regions is subject to the regulations of certain government agencies and undergoes periodic examinations by certain regulatory authorities.
The accounting and reporting policies of Regions and the methods of applying those policies that materially affect the consolidated financial statements conform with GAAP and with general financial services industry practices. The accompanying interim financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and notes to the consolidated financial statements necessary for a complete presentation of financial position, results of operations, comprehensive income and cash flows in conformity with GAAP. In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the consolidated financial statements have been included. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto in Regions’ Annual Report on Form 10-K for the year ended December 31, 2020. Regions has evaluated all subsequent events for potential recognition and disclosure through the filing date of this Form 10-Q.
During 2021, the Company adopted new accounting guidance related to several topics. See Note 12 for related disclosures.
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NOTE 2. DEBT SECURITIES
The amortized cost, gross unrealized gains and losses, and estimated fair value of debt securities held to maturity and debt securities available for sale are as follows:
 June 30, 2021
Recognized in OCI (1)
Not Recognized in OCI
 Amortized
Cost		Gross Unrealized GainsGross Unrealized LossesCarrying ValueGross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair
Value
 (In millions)
Debt securities held to maturity:
Mortgage-backed securities:
Residential agency$449 $— $(15)$434 $26 $— $460 
Commercial agency561 — (2)559 45 — 604 
$1,010 $— $(17)$993 $71 $— $1,064 
Debt securities available for sale:
U.S. Treasury securities$732 $5 $— $737 $737 
Federal agency securities98 2 (1)99 99 
Mortgage-backed securities:
Residential agency19,551 420 (111)19,860 19,860 
Residential non-agency1 — — 1 1 
Commercial agency6,241 254 (31)6,464 6,464 
Commercial non-agency543 10 — 553 553 
Corporate and other debt securities1,518 59 (1)1,576 1,576 
$28,684 $750 $(144)$29,290 $29,290 
 December 31, 2020
Recognized in OCI (1)
Not Recognized in OCI
 Amortized
Cost		Gross Unrealized GainsGross Unrealized LossesCarrying ValueGross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair
Value
 (In millions)
Debt securities held to maturity:
Mortgage-backed securities:
Residential agency$554 $— $(19)$535 $34 $— $569 
Commercial agency589 — (2)587 59 — 646 
$1,143 $— $(21)$1,122 $93 $— $1,215 
Debt securities available for sale:
U.S. Treasury securities$178 $5 $— $183 $183 
Federal agency securities102 3 — 105 105 
Mortgage-backed securities:
Residential agency18,455 625 (4)19,076 19,076 
Residential non-agency1 — — 1 1 
Commercial agency5,659 346 (6)5,999 5,999 
Commercial non-agency571 15 — 586 586 
Corporate and other debt securities1,126 78 — 1,204 1,204 
$26,092 $1,072 $(10)$27,154 $27,154 
_________
(1)The gross unrealized losses recognized in OCI on securities held to maturity resulted from a transfer of securities available for sale to held to maturity in the second quarter of 2013.

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Debt securities with carrying values of $9.8 billion and $10.3 billion at June 30, 2021, and December 31, 2020, respectively, were pledged to secure public funds, trust deposits and certain borrowing arrangements. Included within total pledged securities is approximately $24 million of encumbered U.S. Treasury securities at both June 30, 2021, and December 31, 2020.
The amortized cost and estimated fair value of debt securities held to maturity and debt securities available for sale at June 30, 2021, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Amortized
Cost		Estimated
Fair Value
 (In millions)
Debt securities held to maturity:
Mortgage-backed securities:
Residential agency$449 $460 
Commercial agency561 604 
$1,010 $1,064 
Debt securities available for sale:
Due in one year or less$316 $319 
Due after one year through five years1,155 1,191 
Due after five years through ten years770 792 
Due after ten years107 110 
Mortgage-backed securities:
Residential agency19,551 19,860 
Residential non-agency1 1 
Commercial agency6,241 6,464 
Commercial non-agency543 553 
$28,684 $29,290 
The following tables present gross unrealized losses and the related estimated fair value of debt securities available for sale at June 30, 2021, and December 31, 2020. These securities are segregated between investments that have been in a continuous unrealized loss position for less than twelve months and for twelve months or more.
 June 30, 2021
 Less Than Twelve MonthsTwelve Months or MoreTotal
 Estimated
Fair
Value		Gross
Unrealized
Losses		Estimated
Fair
Value		Gross
Unrealized
Losses		Estimated
Fair
Value		Gross
Unrealized
Losses
 (In millions)
Debt securities available for sale:
Federal agency securities64 (1)33 — 97 (1)
Mortgage-backed securities:
Residential agency$8,017 $(111)$17 $— $8,034 $(111)
Commercial agency1,564 (31)19 — 1,583 (31)
Corporate and other debt securities311 (1)— — 311 (1)
$9,956 $(144)$69 $— $10,025 $(144)

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 December 31, 2020
 Less Than Twelve MonthsTwelve Months or MoreTotal
 Estimated
Fair
Value		Gross
Unrealized
Losses		Estimated
Fair
Value		Gross
Unrealized
Losses		Estimated
Fair
Value		Gross
Unrealized
Losses
 (In millions)
Debt securities available for sale:
Mortgage-backed securities:
Residential agency$914 $(4)$101 $— $1,015 $(4)
Commercial agency819 (6)— — 819 (6)
$1,733 $(10)$101 $— $1,834 $(10)
The number of individual debt positions in an unrealized loss position in the tables above increased from 129 at December 31, 2020, to 321 at June 30, 2021. The increase in the number of securities and the total amount of unrealized losses from year-end 2020 was primarily due to changes in market interest rates. In instances where an unrealized loss existed, there was no indication of an adverse change in credit on the underlying positions in the tables above. As it relates to these positions, management believes no individual unrealized loss, other than those discussed below, represented credit impairment as of those dates. The Company does not intend to sell, and it is not more likely than not that the Company will be required to sell, the positions before the recovery of their amortized cost basis, which may be at maturity.
Gross realized gains and gross realized losses on sales of debt securities available for sale were immaterial for the three and six months ended June 30, 2021 and 2020. The cost of securities sold is based on the specific identification method. As part of the Company's normal process for evaluating impairment, management did not identify any positions where impairment was believed to exist in either of the three and six months ended June 30, 2021 or 2020.
NOTE 3. LOANS AND THE ALLOWANCE FOR CREDIT LOSSES
LOANS
The following table presents the distribution of Regions' loan portfolio by segment and class, net of unearned income:
June 30, 2021December 31, 2020
 (In millions)
Commercial and industrial$42,628 $42,870 
Commercial real estate mortgage—owner-occupied5,381 5,405 
Commercial real estate construction—owner-occupied245 300 
Total commercial48,254 48,575 
Commercial investor real estate mortgage5,449 5,394 
Commercial investor real estate construction1,799 1,869 
Total investor real estate7,248 7,263 
Residential first mortgage17,051 16,575 
Home equity lines4,057 4,539 
Home equity loans2,588 2,713 
Indirect—vehicles621 934 
Indirect—other consumer2,157 2,431 
Consumer credit card1,131 1,213 
Other consumer967 1,023 
Total consumer28,572 29,428 
Total loans, net of unearned income$84,074 $85,266 
During the six months ended June 30, 2021 and 2020, Regions purchased approximately $532 million and $902 million in indirect-other consumer, residential first mortgage and commercial and industrial loans from third parties, respectively.
At June 30, 2021, $15.2 billion in securities and net eligible loans held by Regions were pledged for potential borrowings from the FHLB. At June 30, 2021, an additional $12.8 billion in net eligible loans held by Regions were pledged to the FRB for potential borrowings.
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Included in the commercial and industrial loan balance are sales-type and direct financing leases totaling $1.2 billion as of June 30, 2021, with related income of $31 million for the six months ended June 30, 2021.
ALLOWANCE FOR CREDIT LOSSES
Regions determines the appropriate level of the allowance on a quarterly basis. Refer to Note 1 "Summary of Significant Accounting Policies" to the consolidated financial statements to the Annual Report on Form 10-K for the year ended December 31, 2020, for a description of the methodology.
As of June 30, 2021, Regions' total loans included $2.9 billion of PPP loans. These loans are guaranteed by the Federal government and as the guarantee is not separable from the loans, Regions recorded an immaterial allowance on these loans.
ROLLFORWARD OF ALLOWANCE FOR CREDIT LOSSES
During the six months ended June 30, 2021, Regions decreased the allowance by $609 million to $1.7 billion, which represents management's best estimate of expected losses over the life of the portfolio. The decrease was due primarily to continued improvement in the economic outlook due to vaccine deployment, lower expectations of future credit losses due to the benefit of government stimulus programs, and impact of expected charge-offs that were previously provided for. While the allowance estimate reflects these benefits, elevated levels of imprecision remain due to continued uncertainty regarding the timing of full economic recovery.
Macroeconomic factors utilized in the CECL loss models include, but are not limited to, unemployment rate, GDP, HPI and the S&P 500 index, with unemployment being the most significant macroeconomic factor. Regions' models are sensitive to changes in the economic scenarios. The June 30, 2021 economic forecast was relatively consistent with the March 2021 forecast with the exception of the HPI which had meaningful increases during the quarter. Risks to the economic forecast and the model limitations are considered through model adjustments and the qualitative framework.
The following tables present analyses of the allowance by portfolio segment for the three and six months ended June 30, 2021 and 2020.
 Three Months Ended June 30, 2021
 CommercialInvestor Real
Estate		ConsumerTotal
 (In millions)
Allowance for loan losses, April 1, 2021$1,082 $150 $744 $1,976 
Provision for (benefit from) loan losses(203)(57)(72)(332)
Loan losses:
Charge-offs(36)(4)(43)(83)
Recoveries15 2 19 36 
Net loan (losses) recoveries(21)(2)(24)(47)
Allowance for loan losses, June 30, 2021858 91 648 1,597 
Reserve for unfunded credit commitments, April 1, 202167 11 14 92 
Provision for (benefit from) unfunded credit commitments(6)2 (1)(5)
Reserve for unfunded credit commitments, June 30, 202161 13 13 87 
Allowance for credit losses, June 30, 2021$919 $104 $661 $1,684 
 Three Months Ended June 30, 2020
 CommercialInvestor Real
Estate		ConsumerTotal
 (In millions)
Allowance for loan losses, April 1, 2020$721 $63 $776 $1,560 
Provision for (benefit from) loan losses622 97 119 838 
Initial allowance on acquired PCD loans60 — — 60 
Loan losses:
Charge-offs(142)— (62)(204)
Recoveries10 — 12 22 
Net loan (losses) recoveries(132)— (50)(182)
Allowance for loan losses, June 30, 20201,271 160 845 2,276 
Reserve for unfunded credit commitments, April 1, 202073 18 14 105 
Provision for (benefit from) unfunded credit commitments34 9 1 44 
Reserve for unfunded credit commitments, June 30, 2020107 27 15 149 
Allowance for credit losses, June 30, 2020$1,378 $187 $860 $2,425 

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 Six Months Ended June 30, 2021
 CommercialInvestor Real
Estate		ConsumerTotal
 (In millions)
Allowance for loan losses, January 1, 2021$1,196 $183 $788 $2,167 
Provision for (benefit from) loan losses(286)(75)(79)(440)
Loan losses:
Charge-offs(83)(19)(95)(197)
Recoveries31 2 34 67 
Net loan (losses) recoveries(52)(17)(61)(130)
Allowance for loan losses, June 30, 2021858 91 648 1,597 
Reserve for unfunded credit commitments, January 1, 202197 14 15 126 
Provision for (benefit from) unfunded credit commitments(36)(1)(2)(39)
Reserve for unfunded credit commitments, June 30, 202161 13 13 87 
Allowance for credit losses, June 30, 2021$919 $104 $661 $1,684 

 Six Months Ended June 30, 2020
 CommercialInvestor Real
Estate		ConsumerTotal
 (In millions)
Allowance for loan losses, December 31, 2019$537 $45 $287 $869 
Cumulative change in accounting guidance(3)7 434 438 
Allowance for loan losses, January 1, 2020 (adjusted for change in accounting guidance)$534 $52 $721 $1,307 
Provision for (benefit from) loan losses873 107 234 1,214 
Initial allowance on acquired PCD loans60 — — 60 
Loan losses:
Charge-offs(213)— (135)(348)
Recoveries17 1 25 43 
Net loan (losses) recoveries(196)1 (110)(305)
Allowance for loan losses, June 30, 20201,271 160 845 2,276 
Reserve for unfunded credit commitments, December 31, 201941 4 — 45 
Cumulative change in accounting guidance36 13 14 63 
Reserve for unfunded credit commitments, January 1, 2020 (adjusted for change in accounting guidance)77 17 14 108 
Provision (credit) for unfunded credit losses30 10 1 41 
Reserve for unfunded credit commitments, June 30, 2020107 27 15 149 
Allowance for credit losses, June 30, 2020$1,378 $187 $860 $2,425 
PORTFOLIO SEGMENT RISK FACTORS
Regions’ portfolio segments are commercial, investor real estate and consumer. Classes within each segment present unique credit risks. Refer to Note 6 "Allowance for Credit Losses" in the Annual Report on Form 10-K for the year ended December 31, 2020 for information regarding Regions’ portfolio segments and related classes, as well as the risks specific to each.
CREDIT QUALITY INDICATORS
The commercial and investor real estate portfolio segments’ primary credit quality indicator is internal risk ratings which are detailed by categories related to underlying credit quality and probability of default. Regions assigns these risk ratings at loan origination and reviews the relationship utilizing a risk-based approach on, at minimum, an annual basis or at any time management becomes aware of information affecting the borrowers' ability to fulfill their obligations. Both quantitative and qualitative factors are considered in this review process. Regions' ratings are aligned to federal banking regulators’ definitions and are utilized to develop the associated allowance. Refer to Note 6 "Allowance for Credit Losses" in the Annual Report on Form 10-K for the year ended December 31, 2020 for information regarding commercial risk ratings.
Regions' consumer portfolio segment has various classes that present unique credit risks. Regions considers factors such as periodic updates of FICO scores, accrual status, days past due status, unemployment rates, home prices and geography as credit quality indicators for the consumer loan portfolio. FICO scores are obtained at origination as part of Regions' formal
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underwriting process. Refreshed FICO scores are obtained by the Company quarterly for all consumer loans, including residential first mortgage loans. Current FICO data is not available for certain loans in the portfolio for various reasons; for example, if customers do not use sufficient credit, an updated score may not be available. These categories are utilized to develop the associated allowance for credit losses. The higher the FICO score the less probability of default and vice versa.
The following tables present applicable credit quality indicators for the loan portfolio segments and classes, excluding loans held for sale, by vintage year as of June 30, 2021 and December 31, 2020. Classes in the commercial and investor real estate portfolio segments are disclosed by risk rating. Classes in the consumer portfolio segment are disclosed by current FICO scores. Refer to Note 6 "Allowance for Credit Losses" in the Annual Report on Form 10-K for the year ended December 31, 2020 for more information regarding Regions' credit quality indicators.
June 30, 2021
Term LoansRevolving Loans Revolving Loans Converted to Amortizing
Unallocated (1)
Total
Origination Year
20212020201920182017Prior
(In millions)
Commercial and industrial:
   Risk Rating:
   Pass(2)
$6,383 $8,169 $5,010 $2,831 $1,984 $3,236 $12,961 $— $(90)$40,484 
   Special Mention29 81 163 178 $33 $61 507 — — 1,052 
   Substandard Accrual53 18 56 71 $38 $7 377 — — 620 
   Non-accrual66 47 59 88 $10 $19 183 — — 472 
Total commercial and industrial$6,531 $8,315 $5,288 $3,168 $2,065 $3,323 $14,028 $— $(90)$42,628 
Commercial real estate mortgage—owner-occupied:
   Risk Rating:
   Pass$655 $1,249 $830 $792 $477 $945 $134 $— $(4)$5,078 
   Special Mention3 51 18 24 7 47 1 — — 151 
   Substandard Accrual1 5 38 10 9 12 1 — — 76 
   Non-accrual2 8 15 16 21 13 1 — — 76 
Total commercial real estate mortgage—owner-occupied:$661 $1,313 $901 $842 $514 $1,017 $137 $— $(4)$5,381 
Commercial real estate construction—owner-occupied:
   Risk Rating:
   Pass$18 $64 $34 $37 $21 $50 $1 $— $— $225 
   Special Mention— — — — 2 — — — — 2 
   Substandard Accrual— — — — 2 6 — — — 8 
   Non-accrual1 1 — — 1 7 — — — 10 
Total commercial real estate construction—owner-occupied:$19 $65 $34 $37 $26 $63 $1 $— $— $245 
Total commercial$7,211 $9,693 $6,223 $4,047 $2,605 $4,403 $14,166 $— $(94)$48,254 
Commercial investor real estate mortgage:
   Risk Rating:
   Pass$883 $1,061 $1,169 $998 $236 $132 $276 $— $(5)$4,750 
   Special Mention24 82 190 2 15 10 — — — 323 
   Substandard Accrual40 69 176 57 15 8 7 — — 372 
   Non-accrual— — — 1 — 3 — — — 4 
Total commercial investor real estate mortgage$947 $1,212 $1,535 $1,058 $266 $153 $283 $— $(5)$5,449 
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June 30, 2021
Term LoansRevolving Loans Revolving Loans Converted to Amortizing
Unallocated (1)
Total
Origination Year
20212020201920182017Prior
(In millions)
Commercial investor real estate construction:
   Risk Rating:
   Pass$116 $285 $516 $151 $1 $2 $682 $— $(10)$1,743 
   Special Mention— 1 55 — — — — — — 56 
   Substandard Accrual— — — — — — — — — — 
   Non-accrual— — — — — — — — — — 
Total commercial investor real estate construction$116 $286 $571 $151 $1 $2 $682 $— $(10)$1,799 
Total investor real estate$1,063 $1,498 $2,106 $1,209 $267 $155 $965 $— $(15)$7,248 
Residential first mortgage:
FICO scores
   Above 720$2,080 $5,577 $1,396 $583 $780 $3,201 $— $— $— $13,617 
   681-720251 440 141 79 86 408 — — — 1,405 
   620-680101 179 90 64 55 438 — — — 927 
   Below 62015 40 46 48 50 488 — — — 687 
   Data not available29 52 24 9 12 125 10 — 154 415 
Total residential first mortgage$2,476 $6,288 $1,697 $783 $983 $4,660 $10 $— $154 $17,051 
Home equity lines:
FICO scores
   Above 720$— $— $— $— $— $— $2,984 $49 $— $3,033 
   681-720— — — — — — 425 10 — 435 
   620-680— — — — — — 283 13 — 296 
   Below 620— — — — — — 152 8 — 160 
   Data not available— — — — — — 101 3 29 133 
Total home equity lines$— $— $— $— $— $— $3,945 $83 $29 $4,057 
Home equity loans
FICO scores
   Above 720$290 $376 $197 $184 $264 $722 $— $— $— $2,033 
   681-72042 44 31 25 31 90 — — — 263 
   620-68014 17 15 15 19 76 — — — 156 
   Below 6202 2 6 8 12 54 — — — 84 
   Data not available— 2 2 3 4 22 — — 19 52 
Total home equity loans$348 $441 $251 $235 $330 $964 $— $— $19 $2,588 
Indirect—vehicles:
FICO scores
   Above 720$— $— $13 $225 $94 $67 $— $— $— $399 
   681-720— — 3 36 15 12 — — — 66 
   620-680— — 3 31 16 15 — — — 65 
   Below 620— — 3 29 18 19 — — — 69 
   Data not available— — — 3 4 4 — — 11 22 
Total indirect- vehicles$— $— $22 $324 $147 $117 $— $— $11 $621 
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June 30, 2021
Term LoansRevolving Loans Revolving Loans Converted to Amortizing
Unallocated (1)
Total
Origination Year
20212020201920182017Prior
(In millions)
Indirect—other consumer:
FICO scores
   Above 720$99 $393 $518 $305 $110 $69 $— $— $— $1,494 
   681-72015 61 127 84 32 19 — — — 338 
   620-6802 14 56 45 19 13 — — — 149 
   Below 620— 2 15 15 6 5 — — — 43 
   Data not available— — 3 3 2 1 — — 124 133 
Total indirect- other consumer$116 $470 $719 $452 $169 $107 $— $— $124 $2,157 
Consumer credit card:
FICO scores
   Above 720$— $— $— $— $— $— $642 $— $— $642 
   681-720— — — — — — 235 — — 235 
   620-680— — — — — — 186 — — 186 
   Below 620— — — — — — 74 — — 74 
   Data not available— — — — — — 8 — (14)(6)
Total consumer credit card$— $— $— $— $— $— $1,145 $— $(14)$1,131 
Other consumer:
FICO scores
   Above 720$120 $156 $112 $53 $16 $5 $113 $— $— $575 
   681-72039 42 28 11 2 1 52 — — 175 
   620-68023 25 17 7 2 1 36 — — 111 
   Below 6206 8 7 3 1 1 16 — — 42 
   Data not available59 — — — — — 3 — 2 64 
Total other consumer$247 $231 $164 $74 $21 $8 $220 $— $2 $967 
Total consumer loans$3,187 $7,430 $2,853 $1,868 $1,650 $5,856 $5,320 $83 $325 $28,572 
Total Loans$11,461 $18,621 $11,182 $7,124 $4,522 $10,414 $20,451 $83 $216 $84,074 
December 31, 2020
Term LoansRevolving Loans Revolving Loans Converted to Amortizing
Unallocated (1)
Total
Origination Year
20202019201820172016Prior
(In millions)
Commercial and industrial:
   Risk Rating:
   Pass(2)
$12,260 $6,115 $3,550 $2,413 $1,166 $2,493 $12,138 $— $(39)$40,096 
   Special Mention133 250 376 84 5 48 722 — — 1,618 
   Substandard Accrual41 50 78 55 20 4 490 — — 738 
   Non-accrual42 59 97 20 23 19 158 — — 418 
Total commercial and industrial$12,476 $6,474 $4,101 $2,572 $1,214 $2,564 $13,508 $— $(39)$42,870 
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December 31, 2020
Term LoansRevolving Loans Revolving Loans Converted to Amortizing
Unallocated (1)
Total
Origination Year
20202019201820172016Prior
(In millions)
Commercial real estate mortgage—owner-occupied:
   Risk Rating:
   Pass$1,379 $882 $913 $547 $401 $801 $140 $— $(3)$5,060 
   Special Mention18 31 23 22 10 44 6 — — 154 
   Substandard Accrual3 38 16 16 4 15 2 — — 94 
   Non-accrual14 23 19 21 6 14 — — — 97 
Total commercial real estate mortgage—owner-occupied:$1,414 $974 $971 $606 $421 $874 $148 $— $(3)$5,405 
Commercial real estate construction—owner-occupied:
   Risk Rating:
   Pass$61 $75 $39 $24 $24 $40 $9 $— $— $272 
   Special Mention1 — — 2 2 — — — — 5 
   Substandard Accrual— 3 1 3 4 3 — — — 14 
   Non-accrual— — — 1 — 8 — — — 9 
Total commercial real estate construction—owner-occupied:$62 $78 $40 $30 $30 $51 $9 $— $— $300 
Total commercial$13,952 $7,526 $5,112 $3,208 $1,665 $3,489 $13,665 $— $(42)$48,575 
Commercial investor real estate mortgage:
   Risk Rating:
   Pass$1,663 $1,243 $1,137 $252 $65 $162 $332 $— $(5)$4,849 
   Special Mention5 77 76 15 — 7 — — — 180 
   Substandard Accrual69 114 57 — 2 9 — — — 251 
   Non-accrual— 44 1 — — 1 68 — — 114 
Total commercial investor real estate mortgage$1,737 $1,478 $1,271 $267 $67 $179 $400 $— $(5)$5,394 
Commercial investor real estate construction:
   Risk Rating:
   Pass$224 $601 $266 $1 $— $1 $679 $— $(11)$1,761 
   Special Mention30 36 31 — — — 9 — — 106 
   Substandard Accrual1 1 — — — — — — — 2 
   Non-accrual— — — — — — — — — — 
Total commercial investor real estate construction$255 $638 $297 $1 $— $1 $688 $— $(11)$1,869 
Total investor real estate$1,992 $2,116 $1,568 $268 $67 $180 $1,088 $— $(16)$7,263 
Residential first mortgage:
FICO scores
   Above 720$5,564 $1,738 $809 $1,023 $1,279 $2,709 $— $— $— $13,122 
   681-720525 189 103 112 113 360 — — — 1,402 
   620-680211 100 73 64 67 404 — — — 919 
   Below 62031 44 50 51 60 499 — — — 735 
   Data not available52 23 13 16 15 126 10 — 142 397 
Total residential first mortgage$6,383 $2,094 $1,048 $1,266 $1,534 $4,098 $10 $— $142 $16,575 
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December 31, 2020
Term LoansRevolving Loans Revolving Loans Converted to Amortizing
Unallocated (1)
Total
Origination Year
20202019201820172016Prior
(In millions)
Home equity lines:
FICO scores
   Above 720$— $— $— $— $— $— $3,334 $45 $— $3,379 
   681-720— — — — — — 492 10 — 502 
   620-680— — — — — — 319 11 — 330 
   Below 620— — — — — — 181 7 — 188 
   Data not available— — — — — — 107 3 30 140 
Total home equity lines$— $— $— $— $— $— $4,433 $76 $30 $4,539 
Home equity loans
FICO scores
   Above 720$417 $251 $233 $325 $304 $580 $— $— $— $2,110 
   681-72057 40 35 39 37 76 — — — 284 
   620-68021 17 19 22 25 65 — — — 169 
   Below 6202 7 9 13 15 52 — — — 98 
   Data not available1 2 2 4 5 17 — — 21 52 
Total home equity loans$498 $317 $298 $403 $386 $790 $— $— $21 $2,713 
Indirect—vehicles:
FICO scores
   Above 720$— $18 $305 $137 $92 $40 $— $— $— $592 
   681-720— 5 50 22 16 8 — — — 101 
   620-680— 4 44 23 18 8 — — — 97 
   Below 620— 3 42 26 24 14 — — — 109 
   Data not available— — 4 6 4 4 — — 17 35 
Total indirect- vehicles$— $30 $445 $214 $154 $74 $— $— $17 $934 
Indirect—other consumer:
FICO scores
   Above 720$297 $721 $392 $138 $60 $31 $— $— $— $1,639 
   681-72039 173 116 41 18 9 — — — 396 
   620-6809 73 63 27 12 6 — — — 190 
   Below 6201 22 22 9 5 2 — — — 61 
   Data not available— 3 3 2 1 1 — — 135 145 
Total indirect- other consumer$346 $992 $596 $217 $96 $49 $— $— $135 $2,431 
Consumer credit card:
FICO scores
   Above 720$— $— $— $— $— $— $667 $— $— $667 
   681-720— — — — — — 255 — — 255 
   620-680— — — — — — 208 — — 208 
   Below 620— — — — — — 91 — — 91 
   Data not available— — — — — — 7 — (15)(8)
Total consumer credit card$— $— $— $— $— $— $1,228 $— $(15)$1,213 
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December 31, 2020
Term LoansRevolving Loans Revolving Loans Converted to Amortizing
Unallocated (1)
Total
Origination Year
20202019201820172016Prior
(In millions)
Other consumer:
FICO scores
   Above 720$209 $163 $84 $30 $7 $3 $117 $— $— $613 
   681-72061 44 20 5 1 1 52 — — 184 
   620-68034 28 13 4 1 1 42 — — 123 
   Below 62011 11 6 3 1 — 19 — — 51 
   Data not available46 1 — — — — 3 — 2 52 
Total other consumer$361 $247 $123 $42 $10 $5 $233 $— $2 $1,023 
Total consumer loans$7,588 $3,680 $2,510 $2,142 $2,180 $5,016 $5,904 $76 $332 $29,428 
Total Loans$23,532 $13,322 $9,190 $5,618 $3,912 $8,685 $20,657 $76 $274 $85,266 
_________
(1)These amounts consist of fees that are not allocated at the loan level and loans serviced by third parties wherein Regions does not receive FICO or vintage information.
(2)Commercial and industrial lending includes PPP lending in the 2020 and 2021 vintage years.
AGING AND NON-ACCRUAL ANALYSIS
The following tables include an aging analysis of DPD and loans on non-accrual status for each portfolio segment and class as of June 30, 2021 and December 31, 2020. Loans on non-accrual status with no related allowance included $203 million and $112 million of commercial and industrial loans as of June 30, 2021 and December 31, 2020, respectively. Non–accrual loans with no related allowance typically include loans where the underlying collateral is deemed sufficient to recover all remaining principal. Loans that have been fully charged-off do not appear in the tables below.
 June 30, 2021
 Accrual Loans   
 30-59 DPD60-89 DPD90+ DPDTotal
30+ DPD		Total
Accrual		Non-accrualTotal
 (In millions)
Commercial and industrial$24 $11 $4 $39 $42,156 $472 $42,628 
Commercial real estate mortgage—owner-occupied5 2 2 9 5,305 76 5,381 
Commercial real estate construction—owner-occupied— — — — 235 10 245 
Total commercial29 13 6 48 47,696 558 48,254 
Commercial investor real estate mortgage4 — — 4 5,445 4 5,449 
Commercial investor real estate construction— — — — 1,799 — 1,799 
Total investor real estate4 — — 4 7,244 4 7,248 
Residential first mortgage67 30 119 216 17,000 51 17,051 
Home equity lines12 6 21 39 4,012 45 4,057 
Home equity loans7 3 13 23 2,580 8 2,588 
Indirect—vehicles7 2 2 11 621 — 621 
Indirect—other consumer7 5 3 15 2,157 — 2,157 
Consumer credit card6 5 12 23 1,131 — 1,131 
Other consumer8 2 2 12 967 — 967 
Total consumer114 53 172 339 28,468 104 28,572 
$147 $66 $178 $391 $83,408 $666 $84,074 
 
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 December 31, 2020
 Accrual Loans   
 30-59 DPD60-89 DPD90+ DPDTotal
30+ DPD		Total
Accrual		Non-accrualTotal
 (In millions)
Commercial and industrial $37 $22 $7 $66 $42,452 $418 $42,870 
Commercial real estate mortgage—owner-occupied4 1 1 6 5,308 97 5,405 
Commercial real estate construction—owner-occupied1 — — 1 291 9 300 
Total commercial42 23 8 73 48,051 524 48,575 
Commercial investor real estate mortgage3 — — 3 5,280 114 5,394 
Commercial investor real estate construction— — — — 1,869 — 1,869 
Total investor real estate3 — — 3 7,149 114 7,263 
Residential first mortgage104 41 156 301 16,522 53 16,575 
Home equity lines24 11 19 54 4,493 46 4,539 
Home equity loans10 7 13 30 2,705 8 2,713 
Indirect—vehicles15 4 4 23 934 — 934 
Indirect—other consumer12 8 5 25 2,431 — 2,431 
Consumer credit card8 6 14 28 1,213 — 1,213 
Other consumer12 3 2 17 1,023 — 1,023 
Total consumer185 80 213 478 29,321 107 29,428 
$230 $103 $221 $554 $84,521 $745 $85,266 
TROUBLED DEBT RESTRUCTURINGS
Regions regularly modifies commercial and investor real estate loans in order to facilitate a workout strategy. Similarly, Regions works to meet the individual needs of consumer borrowers to stem foreclosure through its CAP. Refer to Note 1 "Summary of Significant Accounting Policies" and Note 6 "Allowance for Credit Losses" in the Annual Report on Form 10-K for the year ended December 31, 2020 for additional information regarding the Company's TDRs, including their impact on the allowance and designation of TDRs in periods subsequent to the modification.
As provided in the Consolidated Appropriations Act passed into law on December 27, 2020, which extended initial guidance provided in the CARES Act, certain loan modifications related to the COVID-19 pandemic beginning March 1, 2020 through the earlier of 60 days after the end of the pandemic or January 1, 2022 are eligible for relief from TDR classification. Regions elected this provision; therefore, modified loans that met the required guidelines for relief are not considered TDRs and are excluded from the disclosures below. The Consolidated Appropriations Act relief and short-term nature of most COVID-19 deferrals precluded the majority of Regions' COVID-19 loan modifications from being classified as TDRs as of June 30, 2021 and December 31, 2020.
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The following tables present the end of period balance for loans modified in a TDR during the periods presented by portfolio segment and class, and the financial impact of those modifications. The tables include modifications made to new TDRs, as well as renewals of existing TDRs.
 Three Months Ended June 30, 2021
   Financial Impact
of Modifications
Considered TDRs
 Number of
Obligors		Recorded
Investment		Increase in
Allowance at
Modification
 (Dollars in millions)
Commercial and industrial15 $20 $— 
Commercial real estate mortgage—owner-occupied8 2 — 
Commercial real estate construction—owner-occupied1 1 — 
Total commercial24 23 — 
Commercial investor real estate mortgage4 69 — 
Commercial investor real estate construction— — — 
Total investor real estate4 69 — 
Residential first mortgage161 26 2 
Home equity lines3 1 — 
Home equity loans6 1 — 
Consumer credit card— — — 
Indirect—vehicles and other consumer4 — — 
Total consumer174 28 2 
202 $120 $2 
 Three Months Ended June 30, 2020
   Financial Impact
of Modifications
Considered TDRs
 Number of
Obligors		Recorded
Investment		Increase in
Allowance at
Modification
 (Dollars in millions)
Commercial and industrial67 $120 $— 
Commercial real estate mortgage—owner-occupied5 3 — 
Commercial real estate construction—owner-occupied— — — 
Total commercial72 123 — 
Commercial investor real estate mortgage3 — — 
Commercial investor real estate construction— — — 
Total investor real estate3 — — 
Residential first mortgage31 4 1 
Home equity lines— — — 
Home equity loans12 1 — 
Consumer credit card1 — — 
Indirect—vehicles and other consumer1 — — 
Total consumer45 5 1 
120 $128 $1 
 Six Months Ended June 30, 2021
   Financial Impact
of Modifications
Considered TDRs
 Number of
Obligors		Recorded
Investment		Increase in
Allowance at
Modification
 (Dollars in millions)
Commercial and industrial41 $50 $— 
Commercial real estate mortgage—owner-occupied14 3 — 
Commercial real estate construction—owner-occupied1 1 — 
Total commercial56 54 — 
Commercial investor real estate mortgage6 76 — 
Commercial investor real estate construction— — — 
Total investor real estate6 76 — 
Residential first mortgage336 61 5 
Home equity lines5 1 — 
Home equity loans7 1 — 
Consumer credit card— — — 
Indirect—vehicles and other consumer52 1 — 
Total consumer400 64 5 
462 $194 $5 
 Six Months Ended June 30, 2020
   Financial Impact
of Modifications
Considered TDRs
 Number of
Obligors		Recorded
Investment		Increase in
Allowance at
Modification
 (Dollars in millions)
Commercial and industrial93 $194 $— 
Commercial real estate mortgage—owner-occupied10 5 — 
Commercial real estate construction—owner-occupied1 1 — 
Total commercial104 200 — 
Commercial investor real estate mortgage7 1 — 
Commercial investor real estate construction1 — — 
Total investor real estate8 1 — 
Residential first mortgage83 11 2 
Home equity lines— — — 
Home equity loans27 2 — 
Consumer credit card11 — — 
Indirect—vehicles and other consumer11 — — 
Total consumer132 13 2 
244 $214 $2 
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NOTE 4. SERVICING OF FINANCIAL ASSETS
RESIDENTIAL MORTGAGE BANKING ACTIVITIES
The fair value of residential MSRs is calculated using various assumptions including future cash flows, market discount rates, expected prepayment rates, servicing costs and other factors. A significant change in prepayments of mortgages in the servicing portfolio could result in significant changes in the valuation adjustments, thus creating potential volatility in the carrying amount of residential MSRs. The Company compares fair value estimates and assumptions to observable market data where available, and also considers recent market activity and actual portfolio experience.
The table below presents an analysis of residential MSRs under the fair value measurement method:
 Three Months Ended June 30Six Months Ended June 30
 2021202020212020
 (In millions)
Carrying value, beginning of period$401 $254 $296 $345 
Additions45 24 77 35 
Increase (decrease) in fair value:
Due to change in valuation inputs or assumptions(38)(11)52 (94)
Economic amortization associated with borrower repayments (1)
(16)(18)(33)(37)
Carrying value, end of period$392 $249 $392 $249 
________
(1)"Economic amortization associated with borrower repayments" includes both total loan payoffs as well as partial paydowns. Regions' MSR decay methodology is a discounted net cash flow approach.

In the six months ended 2021 and 2020, the Company purchased the rights to service residential mortgage loans on a flow basis for approximately $37 million and $16 million, respectively.
Data and assumptions used in the fair value calculation, as well as the valuation’s sensitivity to rate fluctuations, related to residential MSRs (excluding related derivative instruments) are as follows:
 June 30
 20212020
 (Dollars in millions)
Unpaid principal balance$35,519 $33,575 
Weighted-average CPR (%)10.5 %17.0 %
Estimated impact on fair value of a 10% increase$(27)$(25)
Estimated impact on fair value of a 20% increase$(49)$(44)
Option-adjusted spread (basis points)571626 
Estimated impact on fair value of a 10% increase$(9)$(5)
Estimated impact on fair value of a 20% increase$(19)$(11)
Weighted-average coupon interest rate3.7 %4.1 %
Weighted-average remaining maturity (months)292280
Weighted-average servicing fee (basis points)27.3 27.4 
The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, the effect of an adverse variation in a particular assumption on the fair value of the residential MSRs is calculated without changing any other assumption, while in reality changes in one factor may result in changes in another, which may either magnify or counteract the effect of the change. The derivative instruments utilized by Regions would serve to reduce the estimated impacts to fair value included in the table above.
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The following table presents servicing related fees, which includes contractually specified servicing fees, late fees and other ancillary income resulting from the servicing of residential mortgage loans:
 Three Months Ended June 30Six Months Ended June 30
 2021202020212020
 (In millions)(In millions)
Servicing related fees and other ancillary income$25 $23 $49 $48 
Residential mortgage loans are sold in the secondary market with standard representations and warranties regarding certain characteristics such as the quality of the loan, the absence of fraud, the eligibility of the loan for sale and the future servicing associated with the loan. Regions may be required to repurchase these loans at par, or make-whole or indemnify the purchasers for losses incurred when representations and warranties are breached.
Regions maintains an immaterial repurchase liability related to residential mortgage loans sold with representations and warranty provisions. This repurchase liability is reported in other liabilities on the consolidated balance sheets and reflects management’s estimate of losses based on historical repurchase and loss trends, as well as other factors that may result in anticipated losses different from historical loss trends. Adjustments to this reserve are recorded in other non-interest expense on the consolidated statements of income.
COMMERCIAL MORTGAGE BANKING ACTIVITIES
Regions is an approved DUS lender. The DUS program provides liquidity to the multi-family housing market. In connection with the DUS program, Regions services commercial mortgage loans, retains commercial MSRs and intangible assets associated with the DUS license, and assumes a loss share guarantee associated with the loans. See Note 1 "Summary of Significant Accounting Policies" in the 2020 Annual Report on Form 10-K for additional information. Also see Note 11 for additional information.
The table below presents an analysis of commercial MSRs under the amortization measurement method:
Three Months Ended June 30Six Months Ended June 30
2021202020212020
(In millions)(In millions)
Carrying value, beginning of period$82 $59 $74 $59 
Additions8 7 19 10 
Economic amortization associated with borrower repayments (1)
(4)(2)(7)(5)
Carrying value, end of period$86 $64 $86 $64 
________
(1)"Economic amortization associated with borrower repayments" includes both total loan payoffs as well as partial paydowns.
Regions periodically evaluates the commercial MSRs for impairment based on fair value. The estimated fair value of the commercial MSRs was approximately $93 million at June 30, 2021 and $81 million December 31, 2020.
The following table presents servicing related fees, which includes contractually specified servicing fees, late fees and other ancillary income resulting from the servicing of commercial mortgage loans:
Three Months Ended June 30Six Months Ended June 30
2021202020212020
(In millions)(In millions)
Servicing related fees and other ancillary income$5 $5 $10 $10 
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NOTE 5. SHAREHOLDERS’ EQUITY AND ACCUMULATED OTHER COMPREHENSIVE INCOME

PREFERRED STOCK
    The following table presents a summary of the non-cumulative perpetual preferred stock:    
June 30, 2021December 31, 2020
Issuance DateEarliest Redemption Date
Dividend Rate (1)
Liquidation AmountLiquidation Preference per ShareLiquidation preference per Depositary ShareOwnership Interest per Depositary ShareCarrying AmountCarrying Amount
(Dollars in millions, except per share data)
Series A (2)
11/1/201212/15/20176.375 %$— $1,000 $25 1/40th$— $387 
Series B4/29/20149/15/20246.375 %
(3)
500 1,000 25 1/40th433 433 
Series C4/30/20195/15/20295.700 %
(4)
500 1,000 25 1/40th490 490 
Series D6/5/20209/15/20255.750 %
(5)
350 100,000 1,000 1/100th346 346 
Series E5/4/20216/15/20264.450 %400 1,000 25 1/40th390 — 
$1,750 $1,659 $1,656 
_________
(1)Dividends on all series of preferred stock, if declared, accrue and are payable quarterly in arrears.
(2)The shares were fully redeemed on June 15, 2021.
(3)Dividends, if declared, will be paid quarterly at an annual rate equal to (i) for each period beginning prior to September 15, 2024, 6.375%, and (ii) for each period beginning on or after September 15, 2024, three-month LIBOR plus 3.536%.
(4)Dividends, if declared, will be paid quarterly at an annual rate equal to (i) for each period beginning prior to August 15, 2029, 5.700%, and (ii) for each period beginning on or after August 15, 2029, three-month LIBOR plus 3.148%.
(5)Dividends, if declared, will be paid quarterly at an annual rate equal to (i) for each period beginning prior to September 15, 2025, 5.750%, and (ii) for each period beginning on or after September 15, 2025, the five-year treasury rate as of the most recent reset dividend determination date plus 5.426%.
All series of preferred stock have no stated maturity and redemption is solely at Regions' option, subject to regulatory approval, in whole, or in part, after the earliest redemption date or in whole, but not in part, at any time following a regulatory capital treatment event for the Series B, Series C, Series D, and Series E preferred stock.
The Board declared a total of $46 million in cash dividends on Series A, Series B, and Series C preferred stock during both the first six months of 2021 and 2020. The Board declared $11 million in cash dividends on Series D preferred stock during the first six months of 2021; the initial quarterly dividend for Series D was declared in the third quarter of 2020 and there were no cash dividends for the first six months of 2020. Therefore, a total of $57 million in cash dividends on total preferred stock was declared in the first six months of 2021. The initial quarterly dividend date for the Series E preferred stock is September 15, 2021, therefore there were no cash dividends for Series E preferred stock for the first six months of 2021.
On May 4, 2021, Regions completed the issuance of $400 million in depositary shares each representing a 1/40th ownership interest in a share of the Company's 4.45% non-cumulative perpetual preferred stock, Series E, par value $1.00 per share ("Series E preferred stock"), with a liquidation preference of $1,000 per share of Series E preferred stock (equivalent to $25.00 per depositary share). The Company incurred $10 million of issuance costs associated with the transaction. Dividends will be paid quarterly at an annual rate equal to 4.45% for each period beginning September 15, 2021.
During the second quarter of 2021, the Company redeemed all 500,000 outstanding shares of Series A non-cumulative perpetual preferred stock and the corresponding depositary fractional shares at par for $500 million. Upon redemption, additional paid in capital was reduced by $100 million related to Series A preferred dividends that were recorded as a reduction of preferred stock, including related surplus, and net income available to common shareholders was reduced by $13 million related to issuance costs.
In the event Series B, Series C, Series D or Series E preferred shares are redeemed at the liquidation amounts, $67 million, $10 million, $4 million, or $10 million in excess of the redemption amount over the carrying amount will be recognized, respectively. Approximately $52 million of Series B preferred dividends that were recorded as a reduction of preferred stock, including related surplus, will be recorded as a reduction to common shareholders' equity. The remaining amounts listed represent issuance costs that were recorded as reductions to preferred stock, including related surplus, and will be recorded as reductions to net income available to common shareholders.
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COMMON STOCK
Regions was not required to participate in the 2021 CCAR; the Company chose to participate in part to have the Federal Reserve re-evaluate Regions' SCB. Regions received the results of the voluntary test on June 28, 2021. The Federal Reserve communicated that the Company exceeded all minimum capital levels under the Federal Reserve's Supervisory Stress Test. Effective October 1, 2021, Regions' preliminary SCB requirement for the fourth quarter of 2021 through the third quarter of 2022 will be floored at 2.5 percent.
As part of the Company's capital plan, on April 21, 2021, the Board authorized the repurchase of up to $2.5 billion of the Company's common stock, permitting purchases from the second quarter of 2021 through the first quarter of 2022. As of June 30, 2021, Regions had repurchased approximately 8.0 million shares of common stock under this plan which reduced shareholders' equity by $167 million. Included in the share repurchases are approximately 1.0 million shares that were repurchased as part of the amendment to the Company’s deferred investment plan for its directors. All of these shares were immediately retired upon repurchase and therefore, will not be included in treasury stock. The Company did not repurchase shares in the first quarter of 2021 or throughout 2020.
During the third quarter of 2020, the Federal Reserve mandated that banks must not increase their quarterly per share common dividend and implemented an earnings-based payout restriction in connection with the supervisory stress test, requiring the third quarter 2020 dividend to not exceed the average of the prior four quarters of net income excluding preferred dividends. This mandate was subsequently extended through the second quarter of 2021. Therefore, Regions declared $0.155 per share in cash dividends for both the first and second quarters of 2021 and 2020, totaling $0.31 per common share for the first six months of 2021 and 2020.
In the third quarter of 2021, the Federal Reserve lifted restrictions on quarterly per share common dividends on banks whose capital remains above required levels in the ongoing 2021 CCAR cycle. On July 21, 2021, the Board approved a 10 percent increase to the third quarter common stock dividend to $0.17 per share.
ACCUMULATED OTHER COMPREHENSIVE INCOME
The following tables present the balances and activity in AOCI on a pre-tax and net of tax basis for the three and six months ended June 30, 2021 and 2020:
Three Months Ended June 30, 2021
Pre-tax AOCI Activity
Tax Effect (1)
Net AOCI Activity
(In millions)
Total accumulated other comprehensive income, beginning of period$793 $(201)$592 
Unrealized losses on securities transferred to held to maturity:
Beginning balance$(18)$4 $(14)
Reclassification adjustments for amortization of unrealized losses (2)
1 — 1 
Ending balance$(17)$4 $(13)
Unrealized gains (losses) on securities available for sale:
Beginning balance$513 $(130)$383 
Unrealized gains (losses) arising during the period94 (23)71 
Reclassification adjustments for securities (gains) losses realized in net income (loss) (3)
(1)— (1)
Change in AOCI from securities available for sale activity in the period93 (23)70 
Ending balance$606 $(153)$453 
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Beginning balance$1,177 $(297)$880 
Unrealized holding gains (losses) on derivatives arising during the period74 (18)56 
Reclassification adjustments for (gains) losses realized in net income (2)
(104)26 (78)
Change in AOCI from derivative activity in the period(30)8 (22)
Ending balance$1,147 $(289)$858 
Defined benefit pension plans and other post employment benefit plans:
Beginning balance$(879)$222 $(657)
Reclassification adjustments for amortization of actuarial gains (losses) and settlements realized in net income (4)
14 (4)10 
Ending balance$(865)$218 $(647)
Total other comprehensive income 78 (19)59 
Total accumulated other comprehensive income, end of period$871 $(220)$651 

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Three Months Ended June 30, 2020
Pre-tax AOCI Activity
Tax Effect (1)
Net AOCI Activity
(In millions)
Total accumulated other comprehensive income (loss), beginning of period$1,771 $(447)$1,324 
Unrealized losses on securities transferred to held to maturity:
Beginning balance$(28)$7 $(21)
Reclassification adjustments for amortization of unrealized losses (2)
1 — 1 
Ending balance$(27)$7 $(20)
Unrealized gains (losses) on securities available for sale:
Beginning balance$871 $(220)$651 
Unrealized gains (losses) arising during the period246 (61)185 
Reclassification adjustments for securities (gains) losses realized in net income (loss) (3)
(1)— (1)
       Change in AOCI from securities available for sale activity in the period245 (61)184 
Ending balance$1,116 $(281)$835 
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Beginning balance$1,712 $(431)$1,281 
Unrealized holding gains (losses) on derivatives arising during the period205 (52)153 
Reclassification adjustments for (gains) losses realized in income (2)

(60)15 (45)
Change in AOCI from derivative activity in the period145 (37)108 
Ending balance$1,857 $(468)$1,389 
Defined benefit pension plans and other post employment benefit plans:
Beginning balance$(784)$197 $(587)
Reclassification adjustments for amortization of actuarial gains (losses) and settlements realized in net income (4)
12 (3)9 
Ending balance$(772)$194 $(578)
Total other comprehensive income 403 (101)302 
Total accumulated other comprehensive income, end of period$2,174 $(548)$1,626 
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Six Months Ended June 30, 2021
Pre-tax AOCI Activity
Tax Effect (1)
Net AOCI Activity
(In millions)
Total accumulated other comprehensive income (loss), beginning of period$1,759 $(444)$1,315 
Unrealized losses on securities transferred to held to maturity:
Beginning balance$(21)$5 $(16)
Reclassification adjustments for amortization of unrealized losses (2)
4 (1)3 
Ending Balance$(17)$4 $(13)
Unrealized gains (losses) on securities available for sale:
Beginning balance$1,062 $(268)$794 
Unrealized gains (losses) arising during the period(454)115 (339)
Reclassification adjustments for securities (gains) losses realized in net income (loss) (3)

(2)— (2)
       Change in AOCI from securities available for sale activity in the period(456)115 (341)
Ending Balance$606 $(153)$453 
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Beginning balance$1,610 $(406)$1,204 
Unrealized holding gains (losses) on active hedges arising during the period(257)65 (192)
Reclassification adjustments for (gains) losses realized in net income (2)
(206)52 (154)
Change in AOCI from derivative activity in the period(463)117 (346)
Ending balance$1,147 $(289)$858 
Defined benefit pension plans and other post employment benefit plans:
Beginning balance$(892)$225 $(667)
Reclassification adjustments for amortization of actuarial gains (losses) and settlements realized in net income (4)
27 (7)20 
Ending Balance$(865)$218 $(647)
Total other comprehensive income (888)224 (664)
Total accumulated other comprehensive income (loss), end of period$871 $(220)$651 
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Six Months Ended June 30, 2020
Pre-tax AOCI Activity
Tax Effect (1)
Net AOCI Activity
(In millions)
Total accumulated other comprehensive income (loss), beginning of period$(120)$30 $(90)
Unrealized losses on securities transferred to held to maturity:
Beginning balance$(29)$7 $(22)
Reclassification adjustments for amortization of unrealized losses (2)
2 — 2 
Ending Balance$(27)$7 $(20)
Unrealized gains (losses) on securities available for sale:
Beginning balance$274 $(69)$205 
Unrealized gains (losses) arising during the period843 (212)631 
Reclassification adjustments for securities (gains) losses realized in net income (loss) (3)

(1)— (1)
Change in AOCI from securities available for sale activity in the period842 (212)630 
Ending Balance$1,116 $(281)$835 
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Beginning balance$430 $(108)$322 
Unrealized holding gains (losses) on derivatives arising during the period1,496 (377)1,119 
Reclassification adjustments for (gains) losses realized in net income (2)
(69)17 (52)
Change in AOCI from derivative activity in the period1,427 (360)1,067 
Ending balance$1,857 $(468)$1,389 
Defined benefit pension plans and other post employment benefit plans:
Beginning balance$(795)$200 $(595)
Amounts reclassified for amortization of actuarial gains (losses) and settlements realized in net income (4)
23 (6)17 
Ending Balance$(772)$194 $(578)
Total other comprehensive income 2,294 (578)1,716 
Total accumulated other comprehensive income, end of period$2,174 $(548)$1,626 
_________
(1)The impact of all AOCI activity is shown net of the related tax impact, calculated using an effective tax rate of approximately 25%.
(2)Reclassification amount is recognized in net interest income in the consolidated statements of income.
(3)Reclassification amount is recognized in securities gains (losses), net in the consolidated statements of income.
(4)Reclassification amount is recognized in other non-interest expense in the consolidated statements of income. Additionally, these accumulated other comprehensive income (loss) components are included in the computation of net periodic pension cost (see Note 7 for additional details).

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NOTE 6. EARNINGS PER COMMON SHARE
The following table sets forth the computation of basic earnings per common share and diluted earnings per common share:
 Three Months Ended June 30Six Months Ended June 30
 2021202020212020
 (In millions, except per share amounts)
Numerator:
Net income (loss)$790 $(214)$1,432 $(52)
Preferred stock dividends and other (1)
(42)(23)(70)(46)
Net income (loss) available to common shareholders$748 $(237)$1,362 $(98)
Denominator:
Weighted-average common shares outstanding—basic958 960 959 958 
Potential common shares7 — 8 — 
Weighted-average common shares outstanding—diluted965 960 967 958 
Earnings (loss) per common share:
Basic$0.78 $(0.25)$1.42 $(0.10)
Diluted0.77 (0.25)1.41 (0.10)
_________
(1)Preferred stock dividends and other for the three and six months ended June 30, 2021 includes $13 million of issuance costs associated with the redemption of Series A preferred shares. See Note 5 for additional information.
The effects from the assumed exercise of 4 million in stock options, restricted stock units and awards and performance stock units for both the three months and six months ended June 30, 2021 was not included in the above computations of diluted earnings per common share because such amounts would have had an antidilutive effect on earnings per common share.
For the three and six months ended June 30, 2020, basic and diluted weighted-average common shares outstanding for earnings (loss) per common share are the same due to net losses.
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NOTE 7. PENSION AND OTHER POSTRETIREMENT BENEFITS
Regions' defined benefit pension plans cover certain employees as the pension plans are closed to new entrants. The Company also sponsors a SERP, which is a non-qualified pension plan that provides certain senior executive officers defined benefits in relation to their compensation.
Net periodic pension cost (credit) includes the following components:
Qualified PlansNon-qualified PlansTotal
Three Months Ended June 30
202120202021202020212020
(In millions)
Service cost$10 $8 $2 $1 $12 $9 
Interest cost12 16 — 1 12 17 
Expected return on plan assets(36)(38)— — (36)(38)
Amortization of actuarial loss12 11 2 1 14 12 
Net periodic pension cost (credit)$(2)$(3)$4 $3 $2 $— 
Qualified PlansNon-qualified PlansTotal
Six Months Ended June 30
202120202021202020212020
(In millions)
Service cost$19 $17 $3 $2 $22 $19 
Interest cost24 32 1 2 25 34 
Expected return on plan assets(71)(75)— — (71)(75)
Amortization of actuarial loss23 20 4 3 27 23 
Net periodic pension cost (credit)$(5)$(6)$8 $7 $3 $1 
The service cost component of net periodic pension cost (credit) is recorded in salaries and employee benefits on the consolidated statements of income. Components other than service cost are recorded in other non-interest expense on the consolidated statements of income.
Regions' funding policy for the qualified plans is to contribute annually at least the amount required by IRS minimum funding standards. Regions made no contributions during the first six months of 2021.
Regions also provides other postretirement benefits, such as defined benefit health care plans and life insurance plans, that cover certain retired employees. There was no material impact from other postretirement benefits on the consolidated financial statements for the six months ended June 30, 2021 or 2020.
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NOTE 8. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
The following tables present the notional amount and estimated fair value of derivative instruments on a gross basis.
 June 30, 2021December 31, 2020
 Notional
Amount		Estimated Fair ValueNotional
Amount		Estimated Fair Value
 
Gain(1)
Loss(1)
Gain(1)
Loss(1)
 (In millions)
Derivatives in fair value hedging relationships:
Interest rate swaps$1,750 $60 $11 $2,100 $77 $— 
Derivatives in cash flow hedging relationships:
Interest rate swaps (2)
17,000 532 1 16,000 1,181 — 
Interest rate floors (3)(4)
3,500 196 — 5,750 430 — 
Total derivatives in cash flow hedging relationships20,500 728 1 21,750 1,611 — 
Total derivatives designated as hedging instruments$22,250 $788 $12 $23,850 $1,688 $— 
Derivatives not designated as hedging instruments:
Interest rate swaps
$76,721 $1,039 $1,055 $76,764 $1,492 $1,464 
Interest rate options
15,590 $64 $23 13,806 90 28 
Interest rate futures and forward commitments
2,921 $13 $4 4,270 11 26 
Other contracts9,120 $157 $160 9,924 68 80 
Total derivatives not designated as hedging instruments $104,352 $1,273 $1,242 $104,764 $1,661 $1,598 
Total derivatives
$126,602 $2,061 $1,254 $128,614 $3,349 $1,598 
Total gross derivative instruments, before netting$2,061 $1,254 $3,349 $1,598 
Less: Netting adjustments (5)
$1,357 $1,202 2,428 1,545 
Total gross derivative instruments, after netting (6)
$704 $52 $921 $53 
_________
(1)Derivatives in a gain position are recorded as other assets and derivatives in a loss position are recorded as other liabilities on the consolidated balance sheets.
(2)Includes accrued interest of $21 million at June 30, 2021 and $28 million at December 31, 2020, respectively.
(3)Includes accrued interest of $8 million at June 30, 2021 and $12 million at December 31, 2020, respectively.
(4)Estimated fair value includes premium of approximately $44 million as of June 30, 2021 and $83 million as of December 31, 2020 to be amortized over the remaining life. Approximately $32 million of the decrease since December 31, 2020 related to hedges that were terminated during the first six months of 2021 and were not amortized into earnings as of the date of termination.
(5)Netting adjustments represent amounts recorded to convert derivative assets and derivative liabilities from a gross basis to a net basis in accordance with applicable accounting guidance. The net basis takes into account the impact of cash collateral received or posted, legally enforceable master netting agreements, and variation margin that allow Regions to settle derivative contracts with the counterparty on a net basis and to offset the net position with the related cash collateral.
(6)The gain amounts, which are not collateralized with cash or other assets or reserved for, represent the net credit risk on all trading and other derivative positions. As of June 30, 2021 and December 31, 2020, financial instruments posted of $24 million, for both periods, were not offset in the consolidated balance sheets.
HEDGING DERIVATIVES
Derivatives entered into to manage interest rate risk and facilitate asset/liability management strategies are designated as hedging derivatives. Derivative financial instruments that qualify in a hedging relationship are classified, based on the exposure being hedged, as either fair value hedges or cash flow hedges. See Note 1 "Summary of Significant Accounting Policies" of the Annual Report on Form 10-K for the year ended December 31, 2020, for additional information regarding accounting policies for derivatives.
FAIR VALUE HEDGES
Fair value hedge relationships mitigate exposure to the change in fair value of an asset, liability or firm commitment.
Regions enters into interest rate swap agreements to manage interest rate exposure on the Company’s fixed-rate borrowings. These agreements involve the receipt of fixed-rate amounts in exchange for floating-rate interest payments over the life of the agreements. Regions enters into interest rate swap agreements to manage interest rate exposure on certain of the Company's fixed-rate available for sale debt securities. These agreements involve the payment of fixed-rate amounts in exchange for floating-rate interest receipts.
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CASH FLOW HEDGES
Cash flow hedge relationships mitigate exposure to the variability of future cash flows or other forecasted transactions.
Regions enters into interest rate swap and floor agreements to manage overall cash flow changes related to interest rate risk exposure on LIBOR-based loans. The agreements effectively modify the Company’s exposure to interest rate risk by utilizing receive fixed/pay LIBOR interest rate swaps and interest rate floors. As of June 30, 2021, Regions is hedging its exposure to the variability in future cash flows for forecasted transactions through 2026.
During the three and six months ended June 30, 2021, the Company terminated $250 million and $2.3 billion, respectively, in notional of floor hedges. During the three and six months ended June 30, 2021, the Company terminated $3.0 billion and $5.6 billion, respectively, in notional of swap hedges. The following table presents the pre-tax impact of terminated cash flow hedges on AOCI. The balance of terminated cash flow hedges in AOCI will be amortized into earnings through 2025.
Three Months Ended June 30Six Months Ended June 30
2021202020212020
(In millions)
Unrealized gains on terminated hedges included in AOCI- Beginning$279 $70 $121 $78 
Unrealized gains (losses) on terminated hedges arising during the period249 — 415 (6)
Reclassification adjustments for amortization of unrealized (gains) into net income(34)(2)(42)(4)
Unrealized gains on terminated hedges included in AOCI-Ending$494 $68 $494 $68 
Regions expects to reclassify into earnings approximately $427 million in pre-tax income due to the receipt or payment of interest payments and floor premium amortization on all cash flow hedges within the next twelve months. Included in this amount is $174 million in pre-tax net gains related to the amortization of discontinued cash flow hedges.
The following tables present the effect of hedging derivative instruments on the consolidated statements of income and the total amounts for the respective line items effected:

Three Months Ended June 30, 2021
Interest IncomeInterest Expense
Loans, Including FeesLong-term Borrowings
(In millions)
Total amounts presented in the consolidated statements of income$849 $26 
Gains/(losses) on fair value hedging relationships:
Interest rate contracts:
   Amounts related to interest settlements on derivatives
$— $7 
   Recognized on derivatives
— (4)
   Recognized on hedged items
— 4 
Net income recognized on fair value hedges$— $7 
Gains/(losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income (2)
$104 $— 
Income (expense) recognized on cash flow hedges$104 $— 

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Three Months Ended June 30, 2020
Interest IncomeInterest Expense
Loans, Including FeesLong-term Borrowings
(In millions)
Total amounts presented in the consolidated statements of income$898 $49 
Gains/(losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements on derivatives
$— $11 
Recognized on derivatives
— 1 
Recognized on hedged items
— (1)
Net income recognized on fair value hedges$— $11 
Gains/(losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income (2)
$60 $— 
Income (expense) recognized on cash flow hedges$60 $— 
Six Months Ended June 30, 2021
Interest IncomeInterest Expense
Loans, Including FeesLong-term Borrowings
(In millions)
Total amounts presented in the consolidated statements of income$1,703 $53 
Gains/(losses) on fair value hedging relationships:
Interest rate contracts:
   Amounts related to interest settlements on derivatives
$— $14 
   Recognized on derivatives
— (26)
   Recognized on hedged items
— 26 
Income (expense) recognized on fair value hedges$— $14 
Gains/(losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income (2)
$206 $— 
Income (expense) recognized on cash flow hedges$206 $— 
Six Months Ended June 30, 2020
Interest IncomeInterest Expense
Loans, Including FeesLong-term Borrowings
(In millions)
Total amounts presented in the consolidated statements of income$1,801 $108 
Gains/(losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements on derivatives
$— $15 
Recognized on derivatives
— 77 
Recognized on hedged items
— (77)
Income (expense) recognized on fair value hedges$— $15 
Gains/(losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income (2)
$69 $— 
Income (expense) recognized on cash flow hedges$69 $— 
___
(1)See Note 5 for gain or (loss) recognized for cash flow hedges in AOCI.
(2)Pre-tax.
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The following tables present the carrying amount and associated cumulative basis adjustment related to the application of hedge accounting that is included in the carrying amount of hedged assets and liabilities in fair value hedging relationships.
June 30, 2021December 31, 2020
Hedged Items Currently DesignatedHedged Items Currently Designated
Carrying Amount of Assets/(Liabilities)Hedge Accounting Basis AdjustmentCarrying Amount of Assets/(Liabilities)Hedge Accounting Basis Adjustment
(In millions)
Long-term borrowings$(1,786)$(38)$(2,171)$(64)
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
The Company holds a portfolio of interest rate swaps, option contracts, and futures and forward commitments that result from transactions with its commercial customers in which they manage their risks by entering into a derivative with Regions. The Company monitors and manages the net risk in this customer portfolio and enters into separate derivative contracts in order to reduce the overall exposure to pre-defined limits. For both derivatives with its end customers and derivatives Regions enters into to mitigate the risk in this portfolio, the Company is subject to market risk and the risk that the counterparty will default. The contracts in this portfolio are not designated as accounting hedges and are marked-to market through earnings (in capital markets fee income) and included in other assets and other liabilities, as appropriate.
Regions enters into interest rate lock commitments, which are commitments to originate mortgage loans whereby the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. At June 30, 2021 and December 31, 2020, Regions had $806 million and $924 million, respectively, in total notional amount of interest rate lock commitments. Regions manages market risk on interest rate lock commitments and mortgage loans held for sale with corresponding forward sale commitments. Residential mortgage loans held for sale are recorded at fair value with changes in fair value recorded in mortgage income. Commercial mortgage loans held for sale are recorded at either the lower of cost or market or at fair value based on management's election. At June 30, 2021 and December 31, 2020, Regions had $1.5 billion and $1.9 billion, respectively, in total notional amounts related to these forward sale commitments. Changes in mark-to-market from both interest rate lock commitments and corresponding forward sale commitments related to residential mortgage loans are included in mortgage income. Changes in mark-to-market from both interest rate lock commitments and corresponding forward sale commitments related to commercial mortgage loans are included in capital markets income.
Regions has elected to account for residential MSRs at fair value with any changes to fair value recorded in mortgage income. Concurrent with the election to use the fair value measurement method, Regions began using various derivative instruments in the form of forward rate commitments, futures contracts, swaps and swaptions to mitigate the effect of changes in the fair value of its residential MSRs in its consolidated statements of income. As of June 30, 2021 and December 31, 2020, the total notional amount related to these contracts was $3.9 billion and $4.1 billion, respectively.
The following table presents the location and amount of gain or (loss) recognized in income on derivatives not designated as hedging instruments in the consolidated statements of income for the periods presented below:
 Three Months Ended June 30Six Months Ended June 30
Derivatives Not Designated as Hedging Instruments2021202020212020
 (In millions)
Capital markets income:
Interest rate swaps$(3)$29 $20 $(8)
Interest rate options2 16 17 32 
Interest rate futures and forward commitments3 2 12 7 
Other contracts2 11 7 — 
Total capital markets income4 58 56 31 
Mortgage income:
Interest rate swaps29 6 (38)104 
Interest rate options(2)2 (15)26 
Interest rate futures and forward commitments(19)17 11 1 
Total mortgage income8 25 (42)131 
$12 $83 $14 $162 
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CREDIT DERIVATIVES
Regions has both bought and sold credit protection in the form of participations on interest rate swaps (swap participations). These swap participations, which meet the definition of credit derivatives, were entered into in the ordinary course of business to serve the credit needs of customers. Swap participations, whereby Regions has purchased credit protection, entitle Regions to receive a payment from the counterparty if the customer fails to make payment on any amounts due to Regions upon early termination of the swap transaction and have maturities between 2022 and 2029. Swap participations, whereby Regions has sold credit protection have maturities between 2021 and 2038. For contracts where Regions sold credit protection, Regions would be required to make payment to the counterparty if the customer fails to make payment on any amounts due to the counterparty upon early termination of the swap transaction. Regions bases the current status of the prepayment/performance risk on bought and sold credit derivatives on recently issued internal risk ratings consistent with the risk management practices of unfunded commitments.
Regions’ maximum potential amount of future payments under these contracts as of June 30, 2021 was approximately $537 million. This scenario occurs if variable interest rates were at zero percent and all counterparties defaulted with zero recovery. The fair value of sold protection at June 30, 2021 and 2020 was immaterial. In transactions where Regions has sold credit protection, recourse to collateral associated with the original swap transaction is available to offset some or all of Regions’ obligation.
Regions has bought credit protection in the form of credit default indices. These indices, which meet the definition of credit derivatives, were entered into in the ordinary course of business to economically hedge credit spread risk in commercial mortgage loans held for sale whereby the fair value option has been elected. Credit derivatives, whereby Regions has purchased credit protection, entitle Regions to receive a payment from the counterparty if losses on the underlying index exceed a certain threshold, dependent upon the tranche rating of the capital structure.
CONTINGENT FEATURES
Certain of Regions’ derivative instrument contracts with broker-dealers contain credit-related termination provisions and/or credit-related provisions regarding the posting of collateral, allowing those broker-dealers to terminate the contracts in the event that Regions’ and/or Regions Bank’s credit ratings falls below specified ratings from certain major credit rating agencies. The aggregate fair values of all derivative instruments with any credit-risk-related contingent features that were in a liability position on June 30, 2021 and December 31, 2020, were $115 million and $74 million, respectively, for which Regions had posted collateral of $116 million and $74 million, respectively, in the normal course of business.
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NOTE 9. FAIR VALUE MEASUREMENTS
See Note 1 "Summary of Significant Accounting Policies" to the consolidated financial statements of the Annual Report on Form 10-K for the year ended December 31, 2020 for a description of valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis. Assets and liabilities measured at fair value rarely transfer between Level 1 and Level 2 measurements. Marketable equity securities and debt securities available for sale may be periodically transferred to or from Level 3 valuation based on management’s conclusion regarding the observability of inputs used in valuing the securities. Such transfers are accounted for as if they occur at the beginning of a reporting period.
The following table presents assets and liabilities measured at estimated fair value on a recurring basis and non-recurring basis:
 June 30, 2021December 31, 2020
  Level 1Level 2
Level 3(1)
Total Estimated Fair ValueLevel 1Level 2
Level 3(1)
Total Estimated Fair Value
 (In millions)
Recurring fair value measurements
Debt securities available for sale:
U.S. Treasury securities$737 $— $— $737 $183 $— $— $183 
Federal agency securities— 99 — 99 — 105 — 105 
Mortgage-backed securities (MBS):
Residential agency— 19,860 — 19,860 — 19,076 — 19,076 
Residential non-agency— — 1 1 — — 1 1 
Commercial agency— 6,464 — 6,464 — 5,999 — 5,999 
Commercial non-agency— 553 — 553 — 586 — 586 
Corporate and other debt securities— 1,572 4 1,576 — 1,200 4 1,204 
Total debt securities available for sale$737 $28,548 $5 $29,290 $183 $26,966 $5 $27,154 
Loans held for sale$— $991 $— $991 $— $1,446 $— $1,446 
Marketable equity securities $447 $— $— $447 $388 $— $— $388 
Residential mortgage servicing rights$— $— $392 $392 $— $— $296 $296 
Derivative assets(2):
Interest rate swaps$— $1,631 $— $1,631 $— $2,750 $— $2,750 
Interest rate options— 234 26 260 — 477 43 520 
Interest rate futures and forward commitments— 13 — 13 — 11 — 11 
Other contracts1 156 — 157 2 65 1 68 
Total derivative assets$1 $2,034 $26 $2,061 $2 $3,303 $44 $3,349 
Equity investments$— $— $— $— $— $74 $— $74 
Derivative liabilities(2):
Interest rate swaps$— $1,067 $— $1,067 $— $1,464 $— $1,464 
Interest rate options— 23 — 23 — 28 — 28 
Interest rate futures and forward commitments— 4 — 4 — 26 — 26 
Other contracts1 155 4 160 2 72 6 80 
Total derivative liabilities$1 $1,249 $4 $1,254 $2 $1,590 $6 $1,598 
Non-recurring fair value measurements(3)
Loans held for sale(4)
$— $— $128 $128 $— $— $4 $4 
Equity investments without a readily determinable fair value— — 6 6 — — 12 12 
Foreclosed property and other real estate— — 12 12 — — 5 5 
_________
(1)All following disclosures related to Level 3 recurring and non-recurring assets do not include those deemed to be immaterial.
(2)As permitted under U.S. GAAP, variation margin collateral payments made or received for derivatives that are centrally cleared are legally characterized as settled. As such, these derivative assets and derivative liabilities and the related variation margin collateral are presented on a net basis on the balance sheet.
(3)From time to time, certain assets may be recorded at fair value on a non-recurring basis, and the related fair value adjustments disclosed are typically a result of the application of lower of cost or fair value accounting or a write-down occurring during the periods indicated.
(4)Loans held for sale measured at fair value on a non-recurring basis as of June 30, 2021 includes a single IRE loan of $97 million that was reclassified into loans held for sale during the second quarter of 2021 and sold subsequent to June 30, 2021.
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Assets and liabilities in all levels could result in volatile and material price fluctuations. Realized and unrealized gains and losses on Level 3 assets represent only a portion of the risk to market fluctuations in Regions’ consolidated balance sheets. Further, derivatives included in Levels 2 and 3 are used by ALCO in a holistic approach to managing price fluctuation risks.
The following tables illustrate rollforwards for residential mortgage servicing rights, which are the only material assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2021 and 2020, respectively.
Residential mortgage servicing rights
Three Months Ended June 30Six Months Ended June 30
2021202020212020
(In millions)
Carrying value, beginning of period$401 $254 $296 $345 
Total realized/unrealized gains (losses) included in earnings (1)
(54)(29)19 (131)
Purchases45 24 77 35 
Carrying value, end of period$392 $249 $392 $249 
_________
(1)Included in mortgage income. Amounts presented exclude offsetting impact from related derivatives.
The following table presents the fair value adjustments related to non-recurring fair value measurements:
 Three Months Ended June 30Six Months Ended June 30
 2021202020212020
 (In millions)
Loans held for sale$(5)$(2)$(5)$(5)
Equity investments without a readily determinable fair value1 — 1 (3)
Foreclosed property and other real estate— (1)(7)(10)
The following tables present detailed information regarding material assets and liabilities measured at fair value using significant unobservable inputs (Level 3) as of June 30, 2021, and December 31, 2020. The tables include the valuation techniques and the significant unobservable inputs utilized. The range of each significant unobservable input as well as the weighted-average within the range utilized at June 30, 2021, and December 31, 2020, are included. Following the tables are descriptions of the valuation techniques and the sensitivity of the techniques to changes in the significant unobservable inputs.
 June 30, 2021
 
Level 3
Estimated Fair Value at
June 30, 2021
Valuation
Technique		Unobservable
Input(s)		Quantitative Range of
Unobservable Inputs and
(Weighted-Average)
 (Dollars in millions)
Recurring fair value measurements:
Residential mortgage servicing rights(1)
$392Discounted cash flowWeighted-average CPR (%)
6.6% - 22.2% (10.5%)
OAS (%)
4.8% - 9.4% (5.7%)
_________
(1)See Note 4 for additional disclosures related to assumptions used in the fair value calculation for residential mortgage servicing rights.
 December 31, 2020
 
Level 3
Estimated Fair Value at
December 31, 2020
Valuation
Technique		Unobservable
Input(s)		Quantitative Range of
Unobservable Inputs and
(Weighted-Average)
 (Dollars in millions)
Recurring fair value measurements:
Residential mortgage servicing rights(1)
$296Discounted cash flowWeighted-average CPR (%)
8.1% - 31.2% (15.6%)
OAS (%)
4.8% - 9.5% (5.6%)
_________
(1)See Note 7 to the consolidated financial statements of the Annual Report on Form 10-K for the year ended December 31, 2020 for additional disclosures related to assumptions used in the fair value calculation for residential mortgage servicing rights.

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RECURRING FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS
Residential mortgage servicing rights
The significant unobservable inputs used in the fair value measurement of residential MSRs are OAS and CPR. This valuation requires generating cash flow projections over multiple interest rate scenarios and discounting those cash flows at a risk-adjusted rate. Additionally, the impact of prepayments and changes in the OAS are based on a variety of underlying inputs including servicing costs. Increases or decreases to the underlying cash flow inputs will have a corresponding impact on the value of the MSR asset. The net change in unrealized gains (losses) included in earnings related to MSRs held at period end are disclosed as the changes in valuation inputs or assumptions included in the MSR rollforward table in Note 4.
FAIR VALUE OPTION
Regions has elected the fair value option for all eligible agency residential mortgage loans and certain commercial mortgage loans originated with the intent to sell. These elections allow for a more effective offset of the changes in fair values of the loans and the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting. Regions has not elected the fair value option for other loans held for sale primarily because they are not economically hedged using derivative instruments. Fair values of residential mortgage loans held for sale are based on traded market prices of similar assets where available and/or discounted cash flows at market interest rates, adjusted for securitization activities that include servicing values and market conditions, and are recorded in loans held for sale in the consolidated balance sheets.
The Company also elected to measure certain commercial and industrial loans held for sale at fair value, as these loans are actively traded in the secondary market. The Company is able to obtain fair value estimates for substantially all of these loans through a third party valuation service that is broadly used by market participants. While most of the loans are traded in the market, the volume and level of trading activity is subject to variability and the loans are not exchange-traded. The balance of these loans held for sale was immaterial at June 30, 2021.
The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for mortgage loans held for sale measured at fair value:
 June 30, 2021December 31, 2020
 Aggregate
Fair Value		Aggregate
Unpaid
Principal		Aggregate Fair
Value Less
Aggregate
Unpaid
Principal		Aggregate
Fair Value		Aggregate
Unpaid
Principal		Aggregate Fair
Value Less
Aggregate
Unpaid
Principal
 (In millions)
Mortgage loans held for sale, at fair value$975 $939 $36 $1,439 $1,362 $77 
Interest income on mortgage loans held for sale is recognized based on contractual rates and is reflected in interest income on loans held for sale in the consolidated statements of income. The following table details net gains and losses resulting from changes in fair value of these loans, which were recorded in mortgage income in the consolidated statements of income during the three and six months ended June 30, 2021 and 2020. These changes in fair value are mostly offset by economic hedging activities. An immaterial portion of these amounts was attributable to changes in instrument-specific credit risk.
 Three Months Ended June 30Six Months Ended June 30
2021202020212020
 (In millions)
Net gains (losses) resulting for the change in fair value of mortgage loans held for sale$10 $20 $(40)$30 
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The carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of the Company’s financial instruments as of June 30, 2021 are as follows:
 June 30, 2021
 Carrying
Amount
Estimated
Fair
Value(1)
Level 1Level 2Level 3
 (In millions)
Financial assets:
Cash and cash equivalents$25,594 $25,594 $25,594 $— $— 
Debt securities held to maturity993 1,064 — 1,064 — 
Debt securities available for sale29,290 29,290 737 28,548 5 
Loans held for sale1,194 1,194 — 1,066 128 
Loans (excluding leases), net of unearned income and allowance for loan losses(2)(3)
81,063 81,715 — — 81,715 
Other earning assets(4)
1,083 1,083 447 636 — 
Derivative assets2,061 2,061 1 2,034 26 
Financial liabilities:
Derivative liabilities1,254 1,254 1 1,249 4 
Deposits131,484 131,500 — 131,500 — 
Long-term borrowings2,870 3,363 — 3,019 344 
Loan commitments and letters of credit118 118 — — 118 
_________
(1)Estimated fair values are consistent with an exit price concept. The assumptions used to estimate the fair values are intended to approximate those that a market participant would use in a hypothetical orderly transaction. In estimating fair value, the Company makes adjustments for estimated changes in interest rates, market liquidity and credit spreads in the periods they are deemed to have occurred.
(2)The estimated fair value of portfolio loans assumes sale of the loans to a third-party financial investor. Accordingly, the value to the Company if the loans were held to maturity is not reflected in the fair value estimate. The fair value premium on the loan portfolio's net carrying amount at June 30, 2021 was $652 million or 0.8 percent.
(3)Excluded from this table is the sales-type, direct financing, and leveraged lease carrying amount of $1.4 billion at June 30, 2021.
(4)Excluded from this table is the operating lease carrying amount of $163 million at June 30, 2021.
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The carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of the Company's financial instruments as of December 31, 2020 are as follows:
 December 31, 2020
 Carrying
Amount
Estimated
Fair
Value(1)
Level 1Level 2Level 3
 (In millions)
Financial assets:
Cash and cash equivalents$17,956 $17,956 $17,956 $— $— 
Debt securities held to maturity1,122 1,215 — 1,215 — 
Debt securities available for sale27,154 27,154 183 26,966 5 
Loans held for sale1,905 1,905 — 1,901 4 
Loans (excluding leases), net of unearned income and allowance for loan losses(2)(3)
81,597 82,773 — — 82,773 
Other earning assets(4)
1,017 1,017 388 629 — 
Derivative assets3,349 3,349 2 3,303 44 
Equity investments7474— 74— 
Financial liabilities:
Derivative liabilities1,598 1,598 2 1,590 6 
Deposits122,479 122,511 — 122,511 — 
Long-term borrowings3,569 4,063 — 3,592 471 
Loan commitments and letters of credit151 151 — — 151 
_________
(1)Estimated fair values are consistent with an exit price concept. The assumptions used to estimate the fair values are intended to approximate those that a market participant would use in a hypothetical orderly transaction. In estimating fair value, the Company makes adjustments for estimated changes in interest rates, market liquidity and credit spreads in the periods they are deemed to have occurred.
(2)The estimated fair value of portfolio loans assumes sale of the loans to a third-party financial investor. Accordingly, the value to the Company if the loans were held to maturity is not reflected in the fair value estimate. The fair value premium on the loan portfolio's net carrying amount at December 31, 2020 was $1.2 billion or 1.4 percent.
(3)Excluded from this table is the sales-type, direct financing, and leveraged lease carrying amount of $1.5 billion at December 31, 2020.
(4)Excluded from this table is the operating lease carrying amount of $200 million at December 31, 2020.
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NOTE 10. BUSINESS SEGMENT INFORMATION
Each of Regions’ reportable segments is a strategic business unit that serves specific needs of Regions’ customers based on the products and services provided. The segments are based on the manner in which management views the financial performance of the business. The Company has three reportable segments: Corporate Bank, Consumer Bank, and Wealth Management, with the remainder in Other. Additional information about the Company's reportable segments is included in Regions' Annual Report on Form 10-K for the year ended December 31, 2020.
The application and development of management reporting methodologies is a dynamic process and is subject to periodic enhancements. As these enhancements are made, financial results presented by each reportable segment may be periodically revised. Accordingly, the prior period was updated to reflect these enhancements. In the first quarter of 2021, the net interest income allocation methodology was enhanced. All net interest income including the FTP offset, activities of the treasury function, securities portfolio and interest rate risk activities is allocated to the three reporting segments.
The following tables present financial information for each reportable segment for the period indicated.
 Three Months Ended June 30, 2021
 Corporate BankConsumer
Bank		Wealth
Management		OtherConsolidated
 (In millions)
Net interest income $442 $488 $33 $— $963 
Provision for (benefit from) credit losses 77 60 3 (477)(337)
Non-interest income164 314 100 41 619 
Non-interest expense261 534 93 10 898 
Income before income taxes268 208 37 508 1,021 
Income tax expense 67 52 9 103 231 
Net income201 156 28 405 790 
Average assets$59,861 $33,415 $2,036 $59,366 $154,678 
 Three Months Ended June 30, 2020
 Corporate BankConsumer BankWealth
Management		OtherConsolidated
 (In millions)
Net interest income$431 $508 $33 $— $972 
Provision for credit losses78 80 4 720 882 
Non-interest income 181 287 81 24 573 
Non-interest expense256 504 82 82 924 
Income (loss) before income taxes278 211 28 (778)(261)
Income tax expense (benefit)69 53 7 (176)(47)
Net income (loss)209 158 21 (602)(214)
Average assets$65,595 $34,385 $2,009 $37,831 $139,820 
 Six Months Ended June 30, 2021
 Corporate BankConsumer BankWealth
Management		OtherConsolidated
 (In millions)
Net interest income $877 $985 $68 $— $1,930 
Provision for (benefit from) credit losses 157 133 6 (775)(479)
Non-interest income357 645 192 66 1,260 
Non-interest expense529 1,065 186 46 1,826 
Income before income taxes548 432 68 795 1,843 
Income tax expense 137 108 17 149 411 
Net income 411 324 51 646 1,432 
Average assets$59,677 $33,728 $2,041 $55,192 $150,638 
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 Six Months Ended June 30, 2020
 Corporate BankConsumer BankWealth
Management		OtherConsolidated
 (In millions)
Net interest income$783 $1,046 $71 $— $1,900 
Provision for credit losses 130 168 7 950 1,255 
Non-interest income285 601 167 5 1,058 
Non-interest expense494 1,008 172 86 1,760 
Income (loss) before income taxes444 471 59 (1,031)(57)
Income tax expense (benefit)111 118 15 (249)(5)
Net income (loss)333 353 44 (782)(52)
Average assets$60,340 $34,490 $2,035 $35,430 $132,295 

NOTE 11. COMMITMENTS, CONTINGENCIES AND GUARANTEES
COMMERCIAL COMMITMENTS
Regions issues off-balance sheet financial instruments in connection with lending activities. The credit risk associated with these instruments is essentially the same as that involved in extending loans to customers and is subject to Regions’ normal credit approval policies and procedures. Regions measures inherent risk associated with these instruments by recording a reserve for unfunded commitments based on an assessment of the likelihood that the guarantee will be funded and the creditworthiness of the customer or counterparty. Collateral is obtained based on management’s assessment of the creditworthiness of the customer. Credit risk is represented in unused commitments to extend credit, standby letters of credit and commercial letters of credit. Refer to Note 24 "Commitments, Contingencies and Guarantees" in the Annual Report on Form 10-K for the year ended December 31, 2020 for more information regarding these instruments.
Credit risk associated with these instruments is represented by the contractual amounts indicated in the following table:
June 30, 2021December 31, 2020
 (In millions)
Unused commitments to extend credit$60,626 $56,644 
Standby letters of credit1,773 1,742 
Commercial letters of credit42 132 
Liabilities associated with standby letters of credit31 25 
Assets associated with standby letters of credit31 25 
Reserve for unfunded credit commitments87 126 
LEGAL CONTINGENCIES
    Regions and its subsidiaries are subject to loss contingencies related to litigation, claims, investigations and legal and administrative cases and proceedings arising in the ordinary course of business. Regions evaluates these contingencies based on information currently available, including advice of counsel. Regions establishes accruals for those matters when a loss contingency is considered probable and the related amount is reasonably estimable. Any accruals are periodically reviewed and may be adjusted as circumstances change. Some of Regions' exposure with respect to loss contingencies may be offset by applicable insurance coverage. In determining the amounts of any accruals or estimates of possible loss contingencies however, Regions does not take into account the availability of insurance coverage. To the extent that Regions has an insurance recovery, the proceeds are recorded in the period the recovery is received.
When it is practicable, Regions estimates possible loss contingencies, whether or not there is an accrued probable loss. When Regions is able to estimate such possible losses, and when it is reasonably possible Regions could incur losses in excess of amounts accrued, Regions discloses the aggregate estimation of such possible losses. Regions currently estimates that it is reasonably possible that it may experience losses in excess of what Regions has accrued in an aggregate amount of up to approximately $20 million as of June 30, 2021, with it also being reasonably possible that Regions could incur no losses in excess of amounts accrued. However, as available information changes, the matters for which Regions is able to estimate, as well as the estimates themselves will be adjusted accordingly.
Assessments of litigation and claims exposure are difficult because they involve inherently unpredictable factors including, but not limited to, the following: whether the proceeding is in the early stages; whether damages are unspecified, unsupported, or uncertain; whether there is a potential for punitive or other pecuniary damages; whether the matter involves legal uncertainties, including novel issues of law; whether the matter involves multiple parties and/or jurisdictions; whether
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discovery has begun or is not complete; whether meaningful settlement discussions have commenced; and whether the lawsuit involves class allegations. Assessments of class action litigation, which is generally more complex than other types of litigation, are particularly difficult, especially in the early stages of the proceeding when it is not known whether a class will be certified or how a potential class, if certified, will be defined. As a result, Regions may be unable to estimate reasonably possible losses with respect to some of the matters disclosed below, and the aggregated estimated amount discussed above may not include an estimate for every matter disclosed below.
Regions is involved in formal and informal information-gathering requests, investigations, reviews, examinations and proceedings by various governmental regulatory agencies, law enforcement authorities and self-regulatory bodies regarding Regions’ business, Regions' business practices and policies, and the conduct of persons with whom Regions does business. As previously disclosed, Regions is cooperating with an investigation by the CFPB into certain of Regions' overdraft practices and policies. Additional inquiries will arise from time to time. In connection with those inquiries, Regions receives document requests, subpoenas and other requests for information. The inquiries could develop into administrative, civil or criminal proceedings or enforcement actions that could result in consequences that have a material effect on Regions' consolidated financial position, results of operations or cash flows as a whole. Such consequences could include adverse judgments, findings, settlements, penalties, fines, orders, injunctions, restitution, or alterations in our business practices, and could result in additional expenses and collateral costs, including reputational damage.    
While the final outcome of litigation and claims exposures or of any inquiries is inherently unpredictable, management is currently of the opinion that the outcome of pending and threatened litigation and inquiries will not have a material effect on Regions’ business, consolidated financial position, results of operations or cash flows as a whole. However, in the event of unexpected future developments, it is reasonably possible that an adverse outcome in any of the matters discussed above could be material to Regions’ business, consolidated financial position, results of operations or cash flows for any particular reporting period of occurrence.
GUARANTEES
FANNIE MAE DUS LOSS SHARE GUARANTEE
Regions is a DUS lender. The DUS program provides liquidity to the multi-family housing market. Regions services loans sold to Fannie Mae and is required to provide a loss share guarantee equal to one-third for the majority of its DUS servicing portfolio. At June 30, 2021 and December 31, 2020, the Company's DUS servicing portfolio totaled approximately $4.8 billion and $4.5 billion, respectively. Regions' maximum quantifiable contingent liability related to its loss share guarantee was approximately $1.6 billion and $1.5 billion at June 30, 2021 and December 31, 2020, respectively. The Company would be liable for this amount only if all of the loans it services for Fannie Mae, for which the Company retains some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement. Therefore, the maximum quantifiable contingent liability is not representative of the actual loss the Company would be expected to incur. The estimated fair value of the associated loss share guarantee recorded as a liability on the Company's consolidated balance sheets was approximately $5 million at both June 30, 2021 and December 31, 2020. Refer to Note 1 "Summary of Significant Accounting Policies" in the Annual Report on Form 10-K for the year ended December 31, 2020, for additional information.
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NOTE 12. RECENT ACCOUNTING PRONOUNCEMENTS
StandardDescriptionRequired Date of AdoptionEffect on Regions' financial statements or other significant matters
Standards Adopted (or partially adopted) in 2021
ASU 2019-12 Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes
The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

January 1, 2021
The adoption of this guidance did not have a material impact.
ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)
The amendments clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815.
January 1, 2021


The adoption of this guidance did not have a material impact.
ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other CostsThe amendments in this Update were issued to clarify that entities should reevaluate at each reporting period whether callable debt securities are within the scope of the guidance in Topic 310-20, which requires the premium on such debt securities to be amortized to the next call date.January 1, 2021The adoption of this guidance did not have a material impact.
ASU 2020-10, Codification ImprovementsThis Update was issued to make minor technical corrections and improvements to the Codification as part of an ongoing FASB project to clarify guidance and correct inconsistent application of unclear guidance. The ASU codifies in Section 50 (Disclosure) of various Codification Topics the disclosure guidance that includes an option to provide certain information either on the face of the financial statements or in notes to the financial statements that was previously codified only in Section 45 (Other Presentation Matters). It also amends various Codification Topics to clarify guidance that may have been unclear when originally codified and that has resulted in inconsistent application.January 1, 2021The adoption of this guidance did not have a material impact.
ASU 2021-01 Reference Rate Reform (Topic 848)The Update was issued to clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to contracts that are affected by the discounting transition. Specifically, certain provisions in Topic 848, if elected by an entity, would apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. Amendments in this ASU to the expedients and exceptions in Topic 848 are included to capture the incremental consequences of the scope refinement and to tailor the existing guidance to derivative instruments affected by the discounting transition.The Update is effective upon issuance and can be applied through December 31, 2022The adoption of this guidance did not have a material impact.

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StandardDescriptionRequired Date of AdoptionEffect on Regions' financial statements or other significant matters
Standards Not Yet Adopted
ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity
(Subtopic 815-40)
This Update simplifies accounting for convertible instruments by removing certain separation models. Additionally, it revises and clarifies guidance on the derivatives scope exception to make the exception easier to apply.
January 1, 2022
Regions is evaluating the impact upon adoption; however, the impact is not expected to be material.
ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40)The Update clarified how an issuer should account for modifications made to equity-classified written call options (i.e. a warrant to purchase the issuer’s common stock). The guidance in the Update requires the issuer to treat a modification of an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a new warrant. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the warrant or as termination of the original warrant and issuance of a new warrant.January 1, 2022Regions is evaluating the impact upon adoption; however, the impact is not expected to be material.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
INTRODUCTION
The following discussion and analysis is part of Regions Financial Corporation’s (“Regions” or the “Company”) Quarterly Report on Form 10-Q filed with the SEC and updates Regions’ Annual Report on Form 10-K for the year ended December 31, 2020, which was previously filed with the SEC. This financial information is presented to aid in understanding Regions’ financial position and results of operations and should be read together with the financial information contained in Regions’ Annual Report on Form 10-K. See Note 1 "Basis of Presentation" and Note 12 "Recent Accounting Pronouncements" to the consolidated financial statements for further detail. The emphasis of this discussion will be on the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020 for the consolidated statements of income. For the consolidated balance sheets, the emphasis of this discussion will be the balances as of June 30, 2021 compared to December 31, 2020.
This discussion and analysis contains statements that may be considered “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. See pages 7 through 9 for additional information regarding forward-looking statements.
CORPORATE PROFILE
Regions is a financial holding company headquartered in Birmingham, Alabama, that operates in the South, Midwest and Texas. Regions provides traditional commercial, retail and mortgage banking services, as well as other financial services in the fields of asset management, wealth management, securities brokerage, trust services, merger and acquisition advisory services and other specialty financing.
Regions conducts its banking operations through Regions Bank, an Alabama state-chartered commercial bank that is a member of the Federal Reserve System. At June 30, 2021, Regions operated 1,313 total branch outlets. Regions carries out its strategies and derives its profitability from three reportable business segments: Corporate Bank, Consumer Bank, and Wealth Management, with the remainder in Other. See Note 10 "Business Segment Information" to the consolidated financial statements for more information regarding Regions’ segment reporting structure.
Regions’ business strategy is focused on providing a competitive mix of products and services, delivering quality customer service, and continuing to develop and optimize distribution channels that include a branch distribution network with offices in convenient locations, as well as electronic and mobile banking.
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. Net interest income is primarily the difference between the interest income Regions receives on interest-earning assets, such as loans and securities, and the interest expense Regions pays on interest-bearing liabilities, principally deposits and borrowings. Regions’ net interest income is impacted by the size and mix of its balance sheet components and the interest rate spread between interest earned on its assets and interest paid on its liabilities. Non-interest income includes fees from service charges on deposit accounts, card and ATM fees, mortgage servicing and secondary marketing, investment management and trust activities, capital markets and other customer services which Regions provides. Results of operations are also affected by the provision for credit losses and non-interest expenses such as salaries and employee benefits, occupancy, professional, legal and regulatory expenses, FDIC insurance assessments, and other operating expenses, as well as income taxes.
Economic conditions, competition, new legislation and related rules impacting regulation of the financial services industry and the monetary and fiscal policies of the Federal government significantly affect most, if not all, financial institutions, including Regions. Lending and deposit activities and fee income generation are influenced by levels of business spending and investment, consumer income, consumer spending and savings, capital market activities, and competition among financial institutions, as well as customer preferences, interest rate conditions and prevailing market rates on competing products in Regions’ market areas.
On February 27, 2020, Regions announced that it had entered into an agreement to acquire Ascentium Capital LLC, an independent equipment financing company headquartered in Kingwood, Texas. The transaction closed on April 1, 2020, and included approximately $1.9 billion in loans and leases to small businesses. Refer to the "Ascentium Acquisition" section for more detail.
On June 8, 2021, Regions announced that it had entered into an agreement to acquire EnerBank USA, a consumer lending institution specializing in home improvement lending headquartered in Salt Lake City, Utah. The transaction is expected to close in the fourth quarter of 2021, subject to regulatory approval.
SECOND QUARTER OVERVIEW
Economic Environment in Regions’ Banking Markets
One of the primary factors influencing the credit performance of Regions’ loan portfolio is the overall economic environment in the U.S. and the primary markets in which it operates. The July 2021 baseline forecast anticipates real GDP
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growth of 6.1 percent in 2021, 5.3 percent in 2022, and 2.5 percent in 2023. The initial estimate for the second quarter 2021 GDP was released on July 29, 2021, which confirmed the July baseline forecast assumption that the aggregate level of real GDP would return to the pre-pandemic levels of the fourth quarter of 2019. While the downside risks posed by the COVID-19 virus have not been eliminated, they nonetheless have declined with further progress on the vaccination front. Further reopening of the economy and significant fiscal and monetary support are expected to sustain rapid growth over coming quarters on the heels of the 6.4 percent annualized real GDP growth seen in the first quarter of 2021. However, recent increases in COVID-19 case counts in Regions' footprint, and the progression of variants, have the potential to increase uncertainty in the outlook and are therefore being monitored closely. That said, Regions continues to expect that by year-end 2022 the economy will be back on the path of growth around 2.0 percent that prevailed prior to the pandemic. As has been the case since the onset of the pandemic, there remains a heightened degree of uncertainty around economic forecasts being made at present.
An increasingly common theme in the economic data over recent months is the growing imbalance between the demand side of the economy and the supply side. Thanks to an unprecedented degree of fiscal and monetary policy support, greater numbers of people being vaccinated against the COVID-19 virus, and the lifting of restrictions on economic activity, the demand side of the economy is notably robust. The supply side of the economy, however, is unable to keep pace. Shortages of labor and non-labor inputs and shipping bottlenecks are driving up costs to producers and acting as drags on output growth, and the growing imbalance between demand and supply has contributed to the sharp acceleration in inflation over recent months.
Supply and demand imbalances are evident in the labor market. As of June 2021, the level of nonfarm employment was 6.8 million jobs below the pre-pandemic peak, while there are 3.4 million fewer people in the labor force than was the case prior to the pandemic. Yet, there are over nine million open jobs waiting to be filled, and it seems clear that firms would be hiring more workers were they able to. While labor supply constraints should begin easing over coming months, in the interim they are leading to more upward pressure on wages than would seem consistent with the remaining degree of labor market slack, with average hourly earnings rising across all broad industry groups. With the various rounds of pandemic-related stimulus payments having largely run their course, labor earnings will resume their role as the main driver of growth in personal income.
The acceleration in the growth of labor income comes at a time when the personal saving rate remains significantly elevated, with an estimated $2.4 trillion more in household saving than would have been the case had pre-pandemic income and saving trends been maintained. Households have also been paring down debt to the point that, as of the first quarter of 2021, the level of non-mortgage debt was below the pre-pandemic level. As such, conditions are in place for continued growth in consumer spending over coming quarters. Residential investment is expected to be a support for real GDP growth over coming quarters, but to a lesser degree than had previously been the case. Despite mortgage interest rates remaining favorable, notably lean inventories have fueled rapid house price appreciation over the past year, thus eroding affordability. Along with some easing in demand, improvement on the supply side of the market is expected to result in a moderation in the pace of house price appreciation in the fourth quarter of 2021 and subsequent quarters.
As measured by the CPI, inflation hit 5.4 percent in June 2021, with core inflation hitting 4.5 percent, the highest rate of core inflation since November 1991. While some factors behind the acceleration in inflation over recent months, such as base effects and the normalization of services prices, will fade in the months ahead, supply chain bottlenecks, higher shipping costs, and higher labor costs could be sources of more persistent inflation pressures. As such, while inflation is expected to slow from current rates, it is likely to remain easily above the FOMC’s 2.0 percent target rate into 2022. That said, the FOMC continues to believe that inflation pressures are mostly transitory which, along with their stated willingness to let inflation run above their target rate for “some time,” makes it unlikely they will respond to higher inflation. While it is expected that the FOMC will begin tapering the pace of the Fed’s monthly asset purchases in early-2022, no changes in the Fed funds rate target range are expected until mid-2023. As such, monetary policy is expected to remain accommodative over the forecast horizon.
The July baseline forecast incorporates the infrastructure bill which has garnered bipartisan support in Congress, which would result in approximately $579 billion in spending above what has previously been assumed. While there is scope for further fiscal policy measures, at present there are no specific details on either the spending or tax measures and, as such, no such changes are incorporated into the current baseline forecast. It should also be noted that expectations of the potential economic effects of the infrastructure bill and any additional spending should be tempered by the fact that any such spending would be phased in over an eight-to-ten year period and would be at least partially offset by tax increases. As such, the net effect on GDP growth in any single year over the 2022-2029 period would be relatively small.
Patterns of economic activity within the Regions footprint are expected to be broadly similar to those seen in the U.S. as a whole. Those parts of the footprint, most notably Florida, traditionally more reliant on travel and tourism are benefiting from further reopening of the economy and increased mobility. While an above-average exposure to manufacturing across much of the footprint will be a tailwind to growth within the footprint, supply chain and logistics bottlenecks mean that growth will be slower than would otherwise be the case. To the extent remote working remains part of the post-pandemic landscape, states such as Florida, Georgia, the Carolinas, Tennessee, and Texas that have consistently benefited from above average degrees of in-migration should continue to do so, which will provide support to the broader economies of these states.
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The continued signs of economic improvement, with consideration of uncertainty inherent in the forecast, impacted Regions' forecast utilized in calculating the ACL as of June 30, 2021. See the "Allowance" section for further information.
COVID-19 Pandemic
Regions' business operations and financial results are influenced by the economic environment in which the Company operates. In the second quarter of 2021, the economic forecast continued to show signs of recovery. While some uncertainty remains, the economic forecast shows a much more positive outlook as the economy is more fully reopen. There are select areas where the COVID-19 pandemic impacted second quarter conditions, as discussed below. Regions expects that the pandemic will continue to influence economic conditions and the Company's financial results in future quarters, albeit at a diminishing rate.
Regions is in the process of implementing a phased approach to return remote working associates to office locations. As of June 30, 2021, approximately 85 percent of the Company's non-branch associates are working remotely.
During the second quarter of 2021, the Company continued to offer financial assistance to support customers who were experiencing financial hardships related to the COVID-19 pandemic. This assistance included offering special COVID-related payment deferral or forbearance programs for the Company's mortgage and home equity loan customers.
Regions' outstanding deferrals have declined 95 percent since the initial relief provided in early 2020 from $5.7 billion as of June 30, 2020 to $269 million as of June 30, 2021. Of total outstanding deferrals, 71 percent are related to residential mortgages that are government guaranteed.
As a certified SBA lender, Regions provided its customers with the loan process under the PPP. Program funding ended in the second quarter of 2021 and the forgiveness process is ongoing. Regions originated PPP loans totaling approximately $6.2 billion, of which approximately 38,100 loans totaling approximately $2.9 billion remained outstanding as of June 30, 2021. Regions expects that approximately 80% of the total $6.2 billion of PPP loans will be forgiven by year-end 2021.
Regions continues to have strong liquidity and capital levels, which have the Company well-prepared to respond to customer borrowing needs. The Company has ample sources of liquidity that include a stable deposit base, cash balances held at the Federal Reserve, borrowing capacity at the Federal Home Loan Bank, unencumbered highly liquid securities, and borrowing availability at the Federal Reserve's discount window. See the "Liquidity", "Shareholders' Equity", and "Regulatory Capital" sections for further information.
The COVID-19 pandemic also affected non-interest income. Due to changes in customer behavior, combined with continued enhancements to overdraft practices and transaction postings, the Company estimates consumer service charges will remain 10 percent to 15 percent below pre-pandemic levels. See Table 24 "Non-Interest Income" for more detail.
Regions has experienced a modest increase in cyber events as a result of the COVID-19 pandemic, however the Company's layered control environment has effectively detected and prevented any material impact related to these events. Refer to the "Information Security" section for further detail.
Capital
During the third quarter of 2020, the FRB finalized Regions' SCB requirement for the fourth quarter of 2020 through the third quarter of 2021 at 3.0 percent. In the second quarter of 2021, Regions received the results of the Company's voluntary participation in 2021 CCAR. The FRB communicated that the Company exceeded all minimum capital levels under the supervisory stress test and the Company's stress capital buffer for the fourth quarter of 2021 through the third quarter of 2022 will be floored at 2.5 percent.
In the third quarter of 2021, the FRB lifted restrictions on dividends that were put in place in previous periods in response to the COVID-19 pandemic. On July 21, 2021, the Company declared a cash dividend for the third quarter of 2021 of $0.17 per share of common stock, which was in compliance with the FRB's SCB framework.
The Company intends to operate at a range for CET1 of 9.25 percent to 9.75 percent, with the expectation to manage to the mid-point by year-end 2021. The Company regularly performs internal stress testing which can result in modifications to the operating range.
Second Quarter Results
Regions reported net income (loss) available to common shareholders of $748 million, or $0.77 per diluted share, in the second quarter of 2021 compared to $(237) million, or $(0.25) per diluted share, in the second quarter of 2020.
For the second quarter of 2021, net interest income (taxable-equivalent basis) totaled $975 million, down $10 million compared to the second quarter of 2020. The net interest margin (taxable-equivalent basis) was 2.81 percent for the second quarter of 2021 and 3.19 percent in the second quarter of 2020. The decrease in net interest income was primarily driven by a decrease in average loan balances and re-mixing into lower yielding lending portfolios. Net interest margin was negatively impacted by excess cash balances due to continued deposit growth as well as the repricing of fixed-rate loan and securities
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portfolios at lower market interest rates. Refer to Table 20 "Consolidated Average Daily Balances and Yield/Rate Analysis" for further details.
The benefit from credit losses totaled $337 million in the second quarter of 2021, as compared to a provision of $882 million during the second quarter of 2020. The current quarter benefit was primarily due to continuing improvement in credit metrics, continued improvement in the economic forecast, vaccine deployment and the impact of expected charge-offs previously provided for. Refer to the "Allowance for Credit Losses" section for further detail.
Net charge-offs totaled $47 million, or an annualized 0.23 percent of average loans, in the second quarter of 2021, compared to $182 million, or an annualized 0.80 percent for the second quarter of 2020. The decrease was primarily driven by broad-based improvements across most portfolios. See Note 3 "Loans and the Allowance for Credit Losses" to the consolidated financial statements for additional information.
The allowance was 2.00 percent of total loans, net of unearned income at June 30, 2021 compared to 2.69 percent at December 31, 2020. The decrease was impacted by the factors discussed above. The allowance was 253 percent of total non-performing loans at June 30, 2021 compared to 308 percent at December 31, 2020. Total non-performing loans (excluding loans held for sale) declined to 0.79 percent of total loans, net of unearned income, at June 30, 2021 compared to 0.87 percent at December 31, 2020. Refer to the "Allowance for Credit Losses" section for further detail.
Non-interest income was $619 million for the second quarter of 2021, a $46 million increase from the second quarter of 2020. The increase was primarily driven by increases in service charges, card and ATM fees and other miscellaneous income. The increases were partially offset by declines in mortgage income and capital markets income. See Table 24 "Non-Interest Income" for more detail.
Total non-interest expense was $898 million in the second quarter of 2021, a $26 million decrease from the second quarter of 2020. The decrease was primarily driven by lower professional, legal and regulatory expenses and branch consolidation, property and equipment charges. See Table 25 "Non-Interest Expense" for more detail.
Income tax expense for the three months ended June 30, 2021 was $231 million compared to a $47 million benefit for the same period in 2020. See "Income Taxes" toward the end of the Management’s Discussion and Analysis section of this report for more detail.
Expectations
2021 Expectations
Category
Expectation (1)
Total Adjusted RevenueStable to up modestly (dependent on timing and amount of PPP forgiveness)
Adjusted Non-Interest ExpenseStable to up modestly
Adjusted Average LoansDown low single digits
Adjusted Ending LoansUp low single digits
Net charge-offs / average loans25-35 basis points
Effective tax rate22-23%
_____
(1)The impacts from the Company's agreement to purchase EnerBank USA are not considered in these expectations.
The reconciliation with respect to these forward-looking non-GAAP measures is expected to be consistent with the actual non-GAAP reconciliations within Management's Discussion and Analysis of this Form 10-Q. For more information related to the Company's 2021 expectations, refer to the related sub-sections discussed in more detail within Management's Discussion and Analysis of this Form 10-Q.
BALANCE SHEET ANALYSIS
The following sections provide expanded discussion of significant changes in certain line items in asset, liability, and shareholders' equity categories.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents increased approximately $7.6 billion from year-end 2020 to June 30, 2021, due primarily to an increase in cash on deposit with the FRB. Excess liquidity from deposit growth is held at the FRB. Deposit growth was primarily driven by consumer deposits from government stimulus payments and new account growth during the first six months of 2021. See the "Liquidity" and "Deposits" sections for more information.
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DEBT SECURITIES
The following table details the carrying values of debt securities, including both available for sale and held to maturity:
Table 1—Debt Securities
June 30, 2021December 31, 2020
 (In millions)
U.S. Treasury securities$737 $183 
Federal agency securities99 105 
Mortgage-backed securities:
Residential agency20,294 19,611 
Residential non-agency1 1 
Commercial agency7,023 6,586 
Commercial non-agency553 586 
Corporate and other debt securities1,576 1,204 
$30,283 $28,276 
    Debt securities available for sale, which constitute the majority of the securities portfolio, are an important tool used to manage interest rate sensitivity and provide a primary source of liquidity for the Company. Regions maintains a highly rated securities portfolio consisting primarily of agency mortgage-backed securities. See Note 2 "Debt Securities" to the consolidated financial statements for additional information. Also see the "Market Risk-Interest Rate Risk" and "Liquidity" sections for more information.
Debt securities increased $2.0 billion from December 31, 2020 to June 30, 2021. The increase from year-end was primarily the result of the purchase of approximately $2.0 billion in U.S treasury securities, mortgage-backed securities and corporate and other debt securities during the second quarter of 2021.
LOANS HELD FOR SALE
    Loans held for sale totaled $1.2 billion at June 30, 2021, consisting of $976 million of residential real estate mortgage loans, $118 million of commercial mortgage and other loans, and $99 million of non-performing loans. At December 31, 2020, loans held for sale totaled $1.9 billion, consisting of $1.4 billion of residential real estate mortgage loans, $460 million of commercial mortgage and other loans, and $6 million of non-performing loans. In the fourth quarter of 2020, Regions made the decision to sell a certain portfolio of $239 million commercial and industrial loans, which were reclassified to held for sale as of December 31, 2020. In the second quarter of 2021, the Company decided not to sell the respective loans; therefore, effective June 1, 2021, the remaining balance of approximately $193 million was reclassified back to the loan portfolio. The levels of residential real estate and commercial 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.
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LOANS
Loans, net of unearned income, represented approximately 60 percent of Regions' interest-earning assets as of June 30, 2021. The following table presents the distribution of Regions’ loan portfolio by portfolio segment and class, net of unearned income:
Table 2—Loan Portfolio
June 30, 2021December 31, 2020
 (In millions, net of unearned income)
Commercial and industrial$42,628 $42,870 
Commercial real estate mortgage—owner-occupied (1)
5,381 5,405 
Commercial real estate construction—owner-occupied (1)
245 300 
Total commercial48,254 48,575 
Commercial investor real estate mortgage5,449 5,394 
Commercial investor real estate construction1,799 1,869 
Total investor real estate7,248 7,263 
Residential first mortgage17,051 16,575 
Home equity lines4,057 4,539 
Home equity loans2,588 2,713 
Indirect—vehicles621 934 
Indirect—other consumer2,157 2,431 
Consumer credit card1,131 1,213 
Other consumer967 1,023 
Total consumer28,572 29,428 
$84,074 $85,266 
__________
(1)Collectively referred to as CRE.
PORTFOLIO CHARACTERISTICS
The following sections describe the composition of the portfolio segments and classes disclosed in Table 2, explain changes in balances from 2020 year-end, and highlight the related risk characteristics. Regions believes that its loan portfolio is well diversified by product, client, and geography throughout its footprint. However, the loan portfolio may be exposed to certain concentrations of credit risk which exist in relation to individual borrowers or groups of borrowers, certain types of collateral, certain types of industries, certain loan products, or certain regions of the country. Refer to Note 6 "Allowance for Credit Losses" in the Annual Report on Form 10-K for the year ended December 31, 2020 for additional information regarding Regions’ portfolio segments and related classes, as well as the risks specific to each.
While the economic environment continues to improve as the economy re-opens, there are select industries that continue to experience impacts of the COVID-19 pandemic. See Table 3 and Table 4 below for more detail.
Commercial
The commercial portfolio segment includes commercial and industrial loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases and other expansion projects. Commercial and industrial loans decreased $242 million since year-end 2020. The June 30, 2021 balance includes $2.9 billion of PPP loans, a decrease of $676 million compared to year-end 2020, reflecting an acceleration in PPP forgiveness in the second quarter. While line utilization levels remain well below pre-pandemic levels, utilization is believed to have reached an inflection point late in the second quarter.
Commercial also includes owner-occupied commercial real estate mortgage loans to operating businesses, which are loans for long-term financing of land and buildings, and are repaid by cash flows generated by business operations. Owner-occupied commercial real estate construction loans are made to commercial businesses for the development of land or construction of a building where the repayment is derived from revenues generated from the business of the borrower.
Over half of the Company’s total loans are included in the commercial portfolio segment. These balances are spread across numerous industries as noted in the table below. The Company manages the related risks to this portfolio by setting certain lending limits for each significant industry.
The following tables provide detail of Regions' commercial lending balances in selected industries.
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Table 3—Commercial Industry Exposure
June 30, 2021
LoansUnfunded CommitmentsTotal Exposure
(In millions)
Administrative, support, waste and repair$1,531 $1,017 $2,548 
Agriculture358 292 650 
Educational services2,841 1,106 3,947 
Energy1,665 2,339 4,004 
Financial services 4,649 5,378 10,027 
Government and public sector2,761 476 3,237 
Healthcare3,760 2,502 6,262 
Information1,900 1,079 2,979 
Manufacturing 4,496 4,510 9,006 
Professional, scientific and technical services 2,368 1,470 3,838 
Real estate (1)
7,261 8,002 15,263 
Religious, leisure, personal and non-profit services1,998 738 2,736 
Restaurant, accommodation and lodging1,946 464 2,410 
Retail trade2,589 2,149 4,738 
Transportation and warehousing2,853 1,442 4,295 
Utilities2,058 2,785 4,843 
Wholesale goods 3,246 3,143 6,389 
Other (2)
(26)3,439 3,413 
Total commercial$48,254 $42,331 $90,585 
December 31, 2020 (3)
LoansUnfunded CommitmentsTotal Exposure
(In millions)
Administrative, support, waste and repair$1,605 $1,017 $2,622 
Agriculture424 332 756 
Educational services3,055 852 3,907 
Energy1,676 2,337 4,013 
Financial services 4,416 4,905 9,321 
Government and public sector2,907 621 3,528 
Healthcare4,141 2,468 6,609 
Information1,699 1,096 2,795 
Manufacturing4,555 4,216 8,771 
Professional, scientific and technical services 2,467 1,594 4,061 
Real estate (1)
7,285 7,456 14,741 
Religious, leisure, personal and non-profit services1,966 810 2,776 
Restaurant, accommodation and lodging2,196 341 2,537 
Retail trade2,578 2,178 4,756 
Transportation and warehousing 2,731 1,415 4,146 
Utilities1,829 2,758 4,587 
Wholesale goods 3,050 3,303 6,353 
Other (2)
(5)1,774 1,769 
Total commercial$48,575 $39,473 $88,048 
________
(1)"Real estate" includes REITs, which are unsecured commercial and industrial products that are real estate related.
(2)"Other" contains balances related to non-classifiable and invalid business industry codes offset by payments in process and fee accounts that are not available at the loan level.
(3)As customers' businesses evolve (e.g. up or down the vertical manufacturing chain), Regions may need to change the assigned business industry code used to define the customer relationship. When these changes occur, Regions does not recast the customer history for prior periods into the new classification because the business industry code used in the prior period was deemed appropriate. As a result, comparable period changes may be impacted.

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Regions has identified certain industry sectors within the commercial and investor real estate portfolio segments that have the highest risk due to COVID-19. A bottom-up review was performed in the second quarter of 2021, which narrowed high-risk industry sectors compared to year-end 2020. As of June 30, 2021, these high-risk industries include energy, consumer services and travel, retail, restaurants, and hotels. Identified COVID-19 high-risk balances have declined $2.5 billion from $5.2 billion at year-end 2020 to $2.7 billion as of June 30, 2021.
Industries and sub-sectors identified as high-risk may change in future periods depending on how the macroeconomic environment conditions develop over time. These identified high-risk industries, and specified sectors within these industries, are detailed in Table 4 below. Regions is closely monitoring customers in these industries and has frequent dialogue with these customers. All loans within these tables are in the commercial portfolio segment, unless specifically identified as IRE. PPP loan balances are not included in Table 4 as these loans are not considered high risk, as they are fully guaranteed by the U.S. government.
Table 4—COVID-19 High-Risk Industries
June 30, 2021
Balance Outstanding% of Total LoansUtilization %
% Criticized(1)
($ in millions)
Commercial
Energy - E&P, oilfield services$1,020 1.2 %50 %27 %
Consumer services & travel - amusement, arts and recreation, personal care services, charter bus industry616 0.7 %77 %8 %
Retail (non-essential) - clothing210 0.3 %46 %4 %
Restaurants - full services563 0.7 %67 %51 %
Total commercial2,409 2.9 %58 %26 %
REITs and IRE
Hotels - full service, limited service, extended stay297 0.4 %96 %95 %
Total REITs and IRE 297 0.4 %96 %95 %
Total COVID-19 high-risk industries$2,706 
_______
(1)Regions defines classified loans as commercial and investor real estate loans risk-rated substandard accrual and non-accrual, and criticized loans as those risk-rated special mention, substandard accrual and non-accrual. Criticized loans are also referred to as "criticized and classified".
Investor Real Estate
Loans for real estate development are repaid through cash flows related to the operation, sale or refinance of the property. This portfolio segment includes extensions of credit to real estate developers or investors where repayment is dependent on the sale of real estate or income generated from the real estate collateral. A portion of Regions’ investor real estate portfolio segment consists of loans secured by residential product types (land, single-family and condominium loans) within Regions’ markets. Additionally, this category includes loans made to finance income-producing properties such as apartment buildings, office and industrial buildings, and retail shopping centers. Total investor real estate loans decreased $15 million in comparison to 2020 year-end balances.
Residential First Mortgage
Residential first mortgage loans represent loans to consumers to finance a residence. These loans are typically financed over a 15 to 30 year term and, in most cases, are extended to borrowers to finance their primary residence. These loans increased $476 million in comparison to 2020 year-end balances. The increase in residential first mortgage loans was primarily driven by an increase in originations due to continued historically low market interest rates. Approximately $3.2 billion in new loan originations were retained on the balance sheet through the first six months of 2021.
Home Equity Lines
Home equity lines are secured by a first or second mortgage on the borrower's residence and allow customers to borrow against the equity in their homes. Home equity lines decreased by $482 million in comparison to 2020 year-end balances. Substantially all of this portfolio was originated through Regions’ branch network.
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. Prior to May 2009, home equity lines of credit had a 20-year repayment term with a balloon payment upon maturity or a 5-year draw
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period with a balloon payment upon maturity. 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 June 30, 2021. The balances presented are based on maturity date for lines with a balloon payment and draw period expiration date for lines that convert to a repayment period.
Table 5—Home Equity Lines of Credit - Future Principal Payment Resets
First Lien% of TotalSecond Lien% of TotalTotal
(Dollars in millions)
202189 2.19 %67 1.66 %156 
2022741.83 %721.77 %146
20231022.52 %791.95 %181
20241453.56 %1072.64 %252
20251463.60 %1623.99 %308
2026-20311,60139.47 %1,24630.70 %2,847
2031-20351012.47 %601.50 %161
Thereafter30.08 %30.07 %6
Total2,261 55.72 %1,796 44.28 %4,057 
Home Equity Loans
Home equity loans are also secured by a first or second mortgage on the borrower's residence, are primarily originated as amortizing loans, and allow customers to borrow against the equity in their homes. Home equity loans decreased by $125 million in comparison to 2020 year-end balances. Substantially all of this portfolio was originated through Regions’ branch network.
Other Consumer Credit Quality Data
The Company calculates an estimate of the current value of property secured as collateral for both residential first mortgage and home equity lending products (“current LTV”). The estimate is based on home price indices compiled by a third party. The third party data indicates trends for MSAs. Regions uses the third party valuation trends from the MSAs in the Company's footprint in its estimate. The trend data is applied to the loan portfolios taking into account the age of the most recent valuation and geographic area.
The following table presents current LTV data for components of the residential first mortgage, home equity lines and home equity loans classes of the consumer portfolio segment. Current LTV data for some loans in the portfolio is not available due to mergers and systems integrations. The amounts in the table represent the entire loan balance. For purposes of the table below, if the loan balance exceeds the current estimated collateral the entire balance is included in the “Above 100%” category, regardless of the amount of collateral available to partially offset the shortfall.
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Table 6—Estimated Current Loan to Value Ranges
 June 30, 2021
Residential
First Mortgage		Home Equity Lines of CreditHome Equity Loans
 1st Lien2nd Lien1st Lien2nd Lien
 (In millions)
Estimated current LTV:
Above 100%$8 $1 $1 $4 $2 
Above 80% - 100%2,528 15 37 19 7 
80% and below14,241 2,213 1,691 2,364 182 
Data not available274 32 67 7 3 
$17,051 $2,261 $1,796 $2,394 $194 
    
 December 31, 2020
Residential
First Mortgage		Home Equity Lines of CreditHome Equity Loans
 1st Lien2nd Lien1st Lien2nd Lien
 (In millions)
Estimated current LTV:
Above 100%$20 $4 $2 $5 $4 
Above 80% - 100%2,510 32 82 22 12 
80% and below13,790 2,417 1,888 2,452 207 
Data not available255 32 82 7 4 
$16,575 $2,485 $2,054 $2,486 $227 
Indirect—Vehicles
Indirect-vehicles lending, which was lending initiated through third-party business partners, largely consists of loans made through automotive dealerships. This portfolio decreased $313 million from year-end 2020 as Regions has discontinued its indirect auto lending business. The Company remains in the direct auto lending business.
Indirect—Other Consumer
Indirect-other consumer lending represents other lending initiatives through third parties, including point of sale lending. This portfolio decreased $274 million from year-end 2020 due to exiting a third party relationship during the fourth quarter of 2019.
Consumer Credit Card
Consumer credit card lending represents primarily open-ended variable interest rate consumer credit card loans. These balances decreased $82 million from year-end 2020 reflecting lower credit card transaction volume as well as elevated payment rates.
Other Consumer
Other consumer loans primarily include direct consumer loans, overdrafts and other revolving loans. Other consumer loans decreased $56 million from year-end 2020.
Regions considers factors such as periodic updates of FICO scores, unemployment, home prices, and geography as credit quality indicators for consumer loans. FICO scores are obtained at origination and refreshed FICO scores are obtained by the Company quarterly for all consumer loans. For more information on credit quality indicators refer to Note 3 "Loans and the Allowance for Credit Losses" .
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ALLOWANCE
The allowance consists of two components: the allowance for loan losses and the reserve for unfunded credit commitments. Discussion of the methodology used to calculate the allowance is included in Note 1 "Summary of Significant Accounting Policies" and Note 6 "Allowance for Credit Losses" to the consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2020, as well as related discussion in Management's Discussion and Analysis.
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 also sensitive to external factors such as the general health of the economy, as evidenced by changes in interest rates, 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.
Management considers these variables and all other available information when establishing the final level of the allowance. These variables and others have the ability to result in actual credit losses that differ from the originally estimated amounts.
The allowance totaled $1.7 billion at June 30, 2021 compared to $2.3 billion at December 31, 2020, 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 are presented in Table 7 below. While many of these items overlap regarding impact, they are included in the category most relevant.
Table 7— Allowance Changes
Three Months Ended
June 30, 2021June 30, 2020
(In millions)
Allowance for credit losses, beginning balance$2,068 $1,665 
Initial allowance on acquired PCD loans— 60 
Net charge-offs(47)(182)
Provision over (less than) net charge-offs:
    Economic outlook and adjustments(265)287 
    Changes in portfolio credit quality(67)382 
    Changes in specific reserves(36)(10)
    Other portfolio changes (1)
31 147 
    Initial provision impact of non-PCD acquired loans (2)
— 76 
Total provision over (less than) net charge-offs(384)700 
Allowance for credit losses, ending balance$1,684 $2,425 
Six Months Ended
June 30, 2021June 30, 2020
(In millions)
Allowance for credit losses, beginning balance (as adjusted for change in accounting guidance) (3)
$2,293 $1,415 
Initial allowance on acquired PCD loans— 60 
Net charge-offs(130)(305)
Provision over (less than) net charge-offs:
    Economic outlook and adjustments(394)510 
    Changes in portfolio credit quality(81)424 
    Changes in specific reserves(53)26 
    Other portfolio changes (1)
49 219 
    Initial provision impact of non-PCD acquired loans (2)
— 76 
Total provision over (less than) net charge-offs (609)950 
Allowance for credit losses, ending balance$1,684 $2,425 
_______
(1)This line item includes the net impact of portfolio growth, portfolio run-off, pay-downs and changes in the mix of total outstanding loans.. This line item excludes the impact of PPP loans of $2.9 billion as of June 30, 2021, which are fully backed by the U.S. government and have an immaterial associated allowance.
(2)This balance includes $64 million related to the initial allowance for non-PCD loans acquired as part of the Ascentium acquisition. Impact included only for the quarter of acquisition.
(3)Regions adopted the CECL accounting guidance on January 1, 2020 and recorded the cumulative effect of the change in accounting guidance as a reduction to retained earnings and an increase to deferred tax assets in the first quarter of 2020.

Credit metrics are monitored throughout the quarter in order to understand external macro-views, trends and industry outlooks, as well as Regions' internal specific views of credit metrics and trends. The second quarter of 2021 exhibited strong
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asset quality performance, reflecting broad-based improvements across most portfolios. Commercial and investor real estate criticized balances decreased approximately $534 million, classified balances decreased $243 million, and total net charge-offs decreased $36 million compared to the first quarter of 2021. Non-performing loans, excluding held for sale, decreased approximately $72 million compared to the first quarter of 2021, while non-performing assets increased modestly. Additionally, mortgage LTVs are holding up well and the HPI showed robust appreciation. Regions continued to perform a bottom-up review of loan portfolios during the second quarter of 2021, which resulted in fewer sectors considered high-risk compared to the first quarter of 2021. As of June 30, 2021, $2.7 billion of commercial and investor real estate loans are in COVID-19 high-risk industry segments, a decline of $700 million from March 31, 2021. Refer to the "Portfolio Characteristics" section for more information about the high-risk industries. As the credit risk within Regions' loan portfolio continues to be evaluated, both negative and positive factors of the economic landscape were considered in determining the allowance estimate.
As economic activity accelerated due to widespread reopening of the economy, the second quarter of 2021 showed continued signs of economic improvement. Regions' June 2021 forecast was relatively consistent with the March 2021 forecast with the exception of HPI which saw meaningful increases. Regions' economic forecast utilized in the June 30, 2021 allowance estimate considered sustained reopening of the economy, further vaccine distribution and continued increases in consumer spending on goods and services. Refer to the Economic Environment in Regions' Banking Markets within the "Second Quarter Overview" section for more information. Furthermore, Regions benchmarked its internal forecast with external forecasts and external data available.
The table below reflects a range of macroeconomic factors utilized in the Base forecast over the two-year R&S forecast period as of June 30, 2021. The unemployment rate is the most significant macroeconomic factor among the CECL models. Unemployment remained normalized in the second quarter.
Table 8— Macroeconomic Factors in the Forecast
Pre-R&S PeriodBase R&S Forecast
June 30, 2021
2Q20213Q20214Q20211Q20222Q20223Q20224Q20221Q20232Q2023
Real GDP, annualized % change6.80 %6.10 %6.20 %5.10 %3.40 %3.00 %2.30 %2.30 %2.10 %
Unemployment rate5.80 %5.20 %4.90 %4.60 %4.40 %4.20 %4.00 %3.90 %3.80 %
HPI, year-over-year % change13.60 %12.60 %9.70 %6.90 %3.70 %2.80 %3.10 %3.30 %3.40 %
S&P 5004,1714,2304,2474,2734,3034,3294,3494,3814,411
The continued improvement in the economic forecast due to vaccine deployment, the impact of expected charge-offs previously provided for, lower expectations of future credit losses, and credit improvement (described above), were significant drivers of the modeled decreases in the allowance.
While Regions' quantitative allowance methodologies strive to reflect all risk factors, any estimate involves assumptions and uncertainties resulting in some level of imprecision. The qualitative framework has a general imprecision component which is meant to acknowledge that model and forecast errors are inherent in any modeling estimate. The June 30, 2021 general imprecision allowance was reduced compared to the first quarter of 2021, but continues to reflect management's caution with respect to the modeled reductions in the allowance given the uncertainty surrounding the pace of economic recovery, including the potential for higher inflation, as the changing status of the pandemic unfolds.
Based on the overall analysis performed, management deemed an allowance of $1.7 billion to be appropriate to absorb expected credit losses in the loan and credit commitment portfolios as of June 30, 2021.


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`Details regarding the allowance and net charge-offs, including an analysis of activity from the previous year’s totals, are included in Table 9 "Allowance for Credit Losses." As noted above, economic trends such as interest rates, unemployment, volatility in commodity prices, inflation and collateral valuations as well as the length and depth of the COVID-19 pandemic and the impact of the CARES Act and other policy accommodations will impact the future levels of net charge-offs and may result in volatility of certain credit metrics during the remainder of 2021 and beyond.
Table 9—Allowance for Credit Losses
 Six Months Ended June 30
 20212020
 (Dollars in millions)
Allowance for loan losses at January 1$2,167 $869 
Cumulative change in accounting guidance (1)
— 438 
Allowance for loan losses, January 1 (as adjusted for change in accounting guidance) (1)
2,167 1,307 
Loans charged-off:
Commercial and industrial80 207 
Commercial real estate mortgage—owner-occupied2 6 
Commercial real estate construction—owner-occupied1 — 
Commercial investor real estate mortgage19 — 
Residential first mortgage1 2 
Home equity lines4 7 
Home equity loans1 1 
Indirect—vehicles
3 12 
Indirect—other consumer
35 41 
Consumer credit card24 33 
Other consumer27 39 
197 348 
Recoveries of loans previously charged-off:
Commercial and industrial30 14 
Commercial real estate mortgage—owner-occupied1 3 
Commercial real estate construction—owner-occupied— — 
Commercial investor real estate mortgage2 1 
Residential first mortgage3 2 
Home equity lines8 5 
Home equity loans2 1 
Indirect—vehicles
3 5 
Indirect—other consumer
3 — 
Consumer credit card6 5 
Other consumer9 7 
67 43 
Net charge-offs (recoveries):
Commercial and industrial50 193 
Commercial real estate mortgage—owner-occupied1 3 
Commercial real estate construction—owner-occupied1 — 
Commercial investor real estate mortgage17 (1)
Residential first mortgage(2)— 
Home equity lines(4)2 
Home equity loans(1)— 
Indirect—vehicles
— 7 
Indirect—other consumer
32 41 
Consumer credit card18 28 
Other consumer18 32 
130 305 
Provision for (benefit from) loan losses(440)1,214 
Initial allowance on acquired PCD loans— 60 
Allowance for loan losses at June 301,597 2,276 
Reserve for unfunded credit commitments at January 1126 45 
Cumulative change in accounting guidance (1)
— 63 
Provision for (benefit from) unfunded credit losses(39)41 
Reserve for unfunded credit commitments at June 3087 149 
Allowance for credit losses at June 30$1,684 $2,425 
Loans, net of unearned income, outstanding at end of period$84,074 $90,548 
Average loans, net of unearned income, outstanding for the period$84,653 $87,607 
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 Six Months Ended June 30
 20212020
 (Dollars in millions)
Net loan charge-offs (recoveries) as a % of average loans, annualized(2):
Commercial and industrial0.23 %0.86 %
Commercial real estate mortgage—owner-occupied0.03 %0.13 %
Commercial real estate construction—owner-occupied0.67 %— %
Total commercial0.21 %0.78 %
Commercial investor real estate mortgage0.64 %(0.04)%
Commercial investor real estate construction(0.01)%(0.01)%
Total investor real estate0.48 %(0.03)%
Residential first mortgage(0.02)%— %
Home equity—lines of credit(0.17)%0.08 %
Home equity—closed-end(0.09)%— %
Indirect—vehicles0.13 %0.90 %
Indirect—other consumer2.87 %2.60 %
Consumer credit card3.18 %4.28 %
Other consumer3.59 %5.45 %
Total consumer0.43 %0.73 %
Total0.31 %0.70 %
Ratios:
Allowance for credit losses at end of period to loans, net of unearned income 2.00 %2.68 %
Allowance for credit losses at end of period to loans, excluding PPP, net (non-GAAP) (3)
2.07 %2.82 %
Allowance for loan losses at end of period to loans, net of unearned income 1.90 %2.51 %
Allowance for credit losses at end of period to non-performing loans, excluding loans held for sale253 %395 %
Allowance for loan losses at end of period to non-performing loans, excluding loans held for sale240 %370 %
_______
(1)Regions adopted the CECL accounting guidance on January 1, 2020 and recorded the cumulative effect of the change in accounting guidance as a reduction to retained earnings and an increase to deferred tax assets. See Note 1 for additional details.
(2)Amounts have been calculated using whole dollar values.
(3)See Table 19 for calculation.
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Allocation of the allowance for credit losses by portfolio segment and class is summarized as follows:
Table 10—Allowance Allocation
 June 30, 2021December 31, 2020
 Loan BalanceAllowance Allocation
Allowance to Loans % (1)
Loan BalanceAllowance Allocation
Allowance to Loans % (1)
(Dollars in millions)
Commercial and industrial$42,628 $756 1.8 %$42,870 $1,027 2.4 %
Commercial real estate mortgage—owner-occupied5,381 150 2.8 5,405 242 4.5 
Commercial real estate construction—owner-occupied245 13 5.4 300 24 8.0 
Total commercial48,254 919 1.9 48,575 1,293 2.7 
Commercial investor real estate mortgage5,449 85 1.6 5,394 167 3.1 
Commercial investor real estate construction1,799 19 1.0 1,869 30 1.6 
Total investor real estate7,248 104 1.4 7,263 197 2.7 
Residential first mortgage17,051 130 0.8 16,575 155 0.9 
Home equity lines4,057 104 2.6 4,539 122 2.7 
Home equity loans2,588 32 1.2 2,713 33 1.2 
Indirect—vehicles621 8 1.3 934 19 2.0 
Indirect—other consumer2,157 183 8.5 2,431 241 9.9 
Consumer credit card1,131 130 11.5 1,213 161 13.3 
Other consumer967 74 7.7 1,023 72 7.0 
Total consumer28,572 661 2.3 29,428 803 2.7 
Total$84,074 $1,684 2.0 %$85,266 $2,293 2.7 %
Less: SBA PPP loans2,948 3 0.1 %3,624 1 — 
Total, excluding PPP loans (2)
$81,126 $1,681 2.1 %$81,642 $2,292 2.8 %
_______
(1)Amounts have been calculated using whole dollar values.
(2)Non-GAAP; see Table 19 for reconciliation.
TROUBLED DEBT RESTRUCTURINGS (TDRs)
TDRs are modified loans in which a concession is provided to a borrower experiencing financial difficulty. As provided initially in the CARES Act passed into law on March 27, 2020 and subsequently extended through the Consolidated Appropriations Act signed into law on December 27, 2020, certain loan modifications related to the COVID-19 pandemic beginning March 1, 2020 through the earlier of 60 days after the end of the pandemic or January 1, 2022 are eligible for relief from TDR classification. Regions elected this provision of both Acts; therefore, modified loans that met the required guidelines for relief are not considered TDRs and are excluded from the disclosures below.
Under Regions' COVID-19 deferral and forbearance programs, customer payments are deferred for a period of time, typically 90 days. Upon expiration of the deferral period, customers may apply for additional relief or resume making payments on their loans. Repayment plans for the deferrals differ depending on the loan type and repayment ability of the borrower. The TDR relief and short-term nature of most COVID-19 deferrals precluded these modifications from being classified as TDRs as of June 30, 2021.
Residential first mortgage, home equity, consumer credit card and other consumer TDRs are consumer loans modified under the CAP. Commercial and investor real estate loan modifications are not the result of a formal program, but represent situations where modifications were offered as a workout alternative. Renewals of classified commercial and investor real estate loans are considered to be TDRs, even if no reduction in interest rate is offered, if the existing terms are considered to be below market. Insignificant modifications are not considered TDRs. More detailed information is included in Note 3 "Loans and the Allowance for Credit Losses" to the consolidated financial statements. The following table summarizes the loan balance and related allowance for accruing and non-accruing TDRs for the periods presented:
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Table 11—Troubled Debt Restructurings
 June 30, 2021December 31, 2020
 Loan
Balance		Allowance for Credit LossesLoan
Balance		Allowance for Credit Losses
 (In millions)
Accruing:
Commercial$72 $3 $77 $6 
Investor real estate75 4 44 1 
Residential first mortgage 217 32 188 23 
Home equity lines31 4 35 5 
Home equity loans65 9 78 8 
Consumer credit card— — 1 — 
Other consumer4— 4 — 
464 52 427 43 
Non-accrual status or 90 days past due and still accruing:
Commercial 114 11 124 18 
Residential first mortgage32 5 42 6 
Home equity lines3 — 2 — 
Home equity loans7 1 7 1 
156 17 175 25 
Total TDRs - Loans$620 $69 $602 $68 
TDRs - Held For Sale— — 1 — 
Total TDRs$620 $69 $603 $68 
The following table provides an analysis of the changes in commercial and investor real estate TDRs. TDRs with subsequent restructurings that meet the definition of a TDR are only reported as TDR additions in the period they were first modified. Other than resolutions such as charge-offs, foreclosures, payments, sales and transfers to held for sale, Regions may remove loans from TDR classification if the following conditions are met: the borrower's financial condition improves such that the borrower is no longer in financial difficulty, the loan has not had any forgiveness of principal or interest, the loan has not been restructured as an "A" note/"B" note, the loan has been reported as a TDR over one fiscal year-end and the loan is subsequently refinanced or restructured at market terms such that it qualifies as a new loan.
For the consumer portfolio, changes in TDRs are primarily due to additions from CAP modifications and outflows from payments and charge-offs. Given the types of concessions currently being granted under the CAP as detailed in Note 3 "Loans and the Allowance for Credit Losses" to the consolidated financial statements, Regions does not expect that the market interest rate condition will be widely achieved. Therefore, Regions expects consumer loans modified through CAP to continue to be identified as TDRs for the remaining term of the loan.
Table 12—Analysis of Changes in Commercial and Investor Real Estate TDRs
 Six Months Ended June 30, 2021Six Months Ended June 30, 2020
 CommercialInvestor
Real Estate		CommercialInvestor
Real Estate
 (In millions)
Balance, beginning of period$201 $44 $245 $33 
Additions35 70 208 — 
Charge-offs(7)— (52)— 
Other activity, inclusive of payments and removals (1)
(43)(39)(138)(27)
Balance, end of period$186 $75 $263 $6 
________
(1)The majority of this category consists of payments and sales. It also includes normal amortization/accretion of loan basis adjustments, loans transferred to held for sale, removals and reclassifications between portfolio segments. Additionally, it includes $11 million of commercial loans and $37 million of investor real estate loans refinanced or restructured as new loans and removed from TDR
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classification for the six months ended June 30, 2021. During the six months ended June 30, 2020, $17 million of commercial loans and $12 million of investor real estate loans were refinanced or restructured as new loans and removed from TDR classification.
NON-PERFORMING ASSETS
Non-performing assets are summarized as follows:

Table 13—Non-Performing Assets
June 30, 2021December 31, 2020
 (Dollars in millions)
Non-performing loans:
Commercial and industrial$472 $418 
Commercial real estate mortgage—owner-occupied76 97 
Commercial real estate construction—owner-occupied10 9 
Total commercial558 524 
Commercial investor real estate mortgage4 114 
Total investor real estate4 114 
Residential first mortgage51 53 
Home equity lines45 46 
Home equity loans8 8 
Total consumer
104 107 
Total non-performing loans, excluding loans held for sale666 745 
Non-performing loans held for sale99 6 
Total non-performing loans(1)
765 751 
Foreclosed properties15 25 
Total non-performing assets(1)
$780 $776 
Accruing loans 90 days past due:
Commercial and industrial$4 $7 
Commercial real estate mortgage—owner-occupied2 1 
Total commercial6 8 
Residential first mortgage(2)
75 99 
Home equity lines21 19 
Home equity loans13 13 
Indirect—vehicles2 4 
Indirect—other consumer3 5 
Consumer credit card12 14 
Other consumer2 2 
Total consumer
128 156 
$134 $164 
Non-performing loans(1) to loans and non-performing loans held for sale
0.91 %0.88 %
Non-performing assets(1) to loans, foreclosed properties, non-marketable investments, and non-performing loans held for sale
0.93 %0.91 %
_________
(1)Excludes accruing loans 90 days past due.
(2)Excludes residential first mortgage loans that are 100% guaranteed by the FHA and all guaranteed loans sold to the GNMA where Regions has the right but not the obligation to repurchase. Total 90 days or more past due guaranteed loans excluded were $44 million at June 30, 2021 and $57 million at December 31, 2020.
Non-performing loans at June 30, 2021 have increased compared to year-end levels, primarily driven by an increase in commercial and industrial. The decline in non-performing investor real estate loans is due to the reclassification of a credit to held for sale as of June 30, 2021.
Economic trends such as interest rates, unemployment, volatility in commodity prices, and collateral valuations will impact the future level of non-performing assets. Circumstances related to individually large credits could also result in volatility.
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The following table provides an analysis of non-accrual loans (excluding loans held for sale) by portfolio segment:
Table 14— Analysis of Non-Accrual Loans
 
Non-Accrual Loans, Excluding Loans Held for Sale
Six Months Ended June 30, 2021
 CommercialInvestor
Real Estate
Consumer(1)
Total
 (In millions)
Balance at beginning of period $524 $114 $107 $745 
Additions282 4 3 289 
Net payments/other activity(127)(2)(6)(135)
Return to accrual (35)— — (35)
Charge-offs on non-accrual loans(2)
(74)(18)— (92)
Transfers to held for sale(3)
(10)(94)— (104)
Transfers to real estate owned(2)— — (2)
Sales— — — — 
Balance at end of period$558 $4 $104 $666 
 
Non-Accrual Loans, Excluding Loans Held for Sale
Six Months Ended June 30, 2020
 CommercialInvestor
Real Estate
Consumer(1)
Total
 (In millions)
Balance at beginning of period$431 $2 $74 $507 
Additions432 1 12 445 
Net payments/other activity(99)(2)(2)(103)
Return to accrual(13)— — (13)
Charge-offs on non-accrual loans(2)
(195)— — (195)
Transfers to held for sale(3)
(11)— — (11)
Transfers to real estate owned(4)— — (4)
Sales(12)— — (12)
Balance at end of period$529 $1 $84 $614 
________
(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.
(2)Includes charge-offs on loans on non-accrual status and charge-offs taken upon sale and transfer of non-accrual loans to held for sale.
(3)Transfers to held for sale are shown net of charge-offs of $6 million and $4 million recorded upon transfer for the six months ended June 30, 2021 and 2020, respectively.
GOODWILL
Goodwill totaled $5.2 billion at both June 30, 2021 and December 31, 2020 and is allocated to each of Regions’ reportable segments (each a reporting unit), at which level goodwill is tested for impairment on an annual basis or more often if events and circumstances indicate the fair value of the reporting unit may have declined below the carrying value (refer to Note 1 "Summary of Significant Accounting Policies" to the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2020 for further discussion of when Regions tests goodwill for impairment and the Company's methodology and valuation approaches used to determine the estimated fair value of each reporting unit).
The result of the assessment performed for the second quarter of 2021 did not indicate that the estimated fair values of the Company’s reporting units (Corporate Bank, Consumer Bank and Wealth Management) had declined below their respective carrying values. Therefore, Regions determined that a test of goodwill impairment was not required for any of Regions’ reporting units for the June 30, 2021 interim period.
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DEPOSITS
Regions competes with other banking and financial services companies for a share of the deposit market. Regions’ ability to compete in the deposit market depends heavily on the pricing of its deposits and how effectively the Company meets customers’ needs. Regions employs various means to meet those needs and enhance competitiveness, such as providing a high level of customer service and competitive pricing and convenient branch locations for its customers. Regions also serves customers through providing centralized, high-quality banking services and the Company's digital channels and contact center.
The following table summarizes deposits by category:
Table 15—Deposits
June 30, 2021December 31, 2020
 (In millions)
Non-interest-bearing demand$56,468 $51,289 
Savings14,099 11,635 
Interest-bearing transaction25,512 24,484 
Money market—domestic30,725 29,719 
Time deposits4,679 5,341 
Customer deposits131,483 122,468 
Corporate treasury time deposits1 11 
$131,484 $122,479 
Total deposits at June 30, 2021 increased approximately $9.0 billion compared to year-end 2020 levels, driven by increases in categories other than customer time deposits. Increases across categories were primarily driven by an increase in customer deposit balances due to recent government stimulus payments and new account growth. Also contributing to non-interest bearing demand growth is an increase in deposits from business customers who continued to retain excess liquidity. Customer time deposits decreased due to maturities, and continued lower interest rates resulted in a decrease in the utilization of time deposit accounts.
LONG-TERM BORROWINGS
Table 16—Long-Term Borrowings
June 30, 2021December 31, 2020
 (In millions)
Regions Financial Corporation (Parent):
3.20% senior notes due February 2021$— $360 
3.80% senior notes due August 2023997 997 
2.25% senior notes due May 2025745 744 
7.75% subordinated notes due September 2024100 100 
6.75% subordinated debentures due November 2025155 155 
7.375% subordinated notes due December 2037298 298 
Valuation adjustments on hedged long-term debt38 64 
2,333 2,718 
Regions Bank:
2.75% senior notes due April 2021— 190 
3 month LIBOR plus 0.38% of floating rate senior notes due April 2021— 66 
6.45% subordinated notes due June 2037496 496 
Ascentium note securitizations39 97 
Other long-term debt2 2 
537 851 
Total consolidated$2,870 $3,569 
Long-term borrowings decreased by approximately $699 million since year-end 2020 due primarily to redemptions of parent and bank debt. See the "Liquidity" section for further detail of Regions' borrowing capacity with the FHLB, which is currently not being utilized.
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On January 12, 2021, Regions sent notices of redemption, which resulted in the redemption on January 22, 2021, of its 3.20% senior notes due February 2021 pursuant to their terms, at an aggregate redemption price equal to the sum of 100% of the principal amount of the notes being redeemed and any accrued and unpaid interest to, but excluding, the redemption date.
On February 19, 2021, Regions Bank sent notices of redemption, which resulted in the redemption on March 1, 2021 of its 2.75% senior bank notes due April 1, 2021 and of its senior floating rate bank notes due April 1, 2021 pursuant to their terms, at an aggregate redemption price equal to the sum of 100% of the principal amount of the notes being redeemed and any accrued and unpaid interest to, but excluding, the redemption date.
At June 30, 2021, one Ascentium note securitization class remained outstanding with an interest rate of 2.12% maturing in October 2025. At December 31, 2020, the Ascentium note securitizations had various classes and had a weighted-average interest rate of 2.12% with remaining maturities ranging from 3 years to 5 years and a weighted-average of 4.3 years.
SHAREHOLDERS’ EQUITY
Shareholders’ equity was $18.3 billion at June 30, 2021 as compared to $18.1 billion at December 31, 2020. During the first six months of 2021, net income increased shareholders' equity by $1.4 billion, cash dividends on common stock reduced shareholders' equity by $296 million, and cash dividends on preferred stock reduced shareholders' equity by $57 million. Changes in AOCI decreased shareholders' equity by $664 million, primarily due to the net change in unrealized gains (losses) on securities available for sale and derivative instruments as a result of changes in market interest rates during the six months ended June 30, 2021. The derivative instruments are hedges designed to protect net interest income in a low short-term interest rate environment, such as the one that currently exists. During the second quarter of 2021, the Company issued Series E preferred stock, which increased shareholders' equity by $390 million. The Company also redeemed all of the outstanding shares of it's Series A preferred stock, which decreased shareholders' equity by $500 million. Common stock repurchased during the first six months of 2021 reduced shareholders' equity $167 million. These shares were immediately retired and therefore are not included in treasury stock.
See Note 5 "Shareholders' Equity and Accumulated Other Comprehensive Income" section for additional information.
REGULATORY REQUIREMENTS
Regions and Regions Bank are required to comply with regulatory capital requirements established by Federal and State banking agencies. These regulatory capital requirements involve quantitative measures of the Company's assets, liabilities and selected off-balance sheet items, and also qualitative judgments by the regulators. Failure to meet minimum capital requirements can subject the Company to a series of increasingly restrictive regulatory actions.
Under the Basel III Rules, Regions is designated as a standardized approach bank. Additional discussion of the Basel III Rules, their applicability to Regions, recent proposals and final rules issued by the federal banking agencies and recent laws enacted that impact regulatory requirements is included in the “Supervision and Regulation” subsection of the “Business” section in the 2020 Annual Report on Form 10-K and the "Regulatory Requirements" section of Management's Discussion and Analysis in the 2020 Annual Report on Form 10-K. Additional discussion is also included in Note 13 "Regulatory Capital Requirements and Restrictions" to the consolidated financial statements in the 2020 Annual Report on Form 10-K.
In the third quarter of 2020, the federal banking agencies finalized a rule related to the impact of CECL on regulatory capital requirements.  The rule allows an add-back to regulatory capital for the impacts of CECL for a two-year period.  At the end of the two years, the impact is then phased-in over the following three years.  The add-back is calculated as the impact of initial adoption, adjusted for 25 percent of subsequent changes in the allowance. At June 30, 2021, the impact of the add-back on CET1 was approximately $432 million, or approximately 40 basis points.
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The following table summarizes the applicable holding company and bank regulatory requirements:
Table 17—Regulatory Capital Requirements
Basel III Regulatory Capital Rules
June 30, 2021
Ratio (1)
December 31, 2020
Ratio		Minimum
Requirement		To Be Well
Capitalized
Common equity Tier 1 capital:
Regions Financial Corporation10.37 %9.84 %4.50 %N/A
Regions Bank
12.69 12.17 4.50 6.50 %
Tier 1 capital:
Regions Financial Corporation11.90 %11.39 %6.00 %6.00 %
Regions Bank
12.69 12.17 6.00 8.00 
Total capital:
Regions Financial Corporation13.85 %13.56 %8.00 %10.00 %
Regions Bank
14.19 13.89 8.00 10.00 
Leverage capital:
Regions Financial Corporation8.56 %8.71 %4.00 %N/A
Regions Bank
9.14 9.30 4.00 5.00 %
_______
(1)The current quarter Basel III CET1 capital, Tier 1 capital, Total capital, and Leverage capital ratios are estimated.

In October of 2020, the SCB framework that was finalized in the first quarter of 2020, was implemented. This new framework created a firm-specific risk sensitive buffer that is applied to regulatory minimum capital levels to help determine effective minimum ratio requirements. The SCB is now floored at 2.5 percent to ensure effective minimum capital levels do not decline as a result of this rule change. At implementation, the SCB replaced the current Capital Conservation Buffer, which was a static 2.5 percent in addition to the minimum risk-weighted asset ratios shown above.
During the third quarter of 2020, and in connection with the results of its supervisory stress test released in June 2020, the Federal Reserve finalized Regions' SCB requirement for the fourth quarter of 2020 through the third quarter of 2021 at 3.0 percent. The 3.0 percent requirement represented the amount of capital degradation under the supervisory severely adverse scenario, inclusive of four quarters of planned common stock dividends. In December 2020, the Federal Reserve disclosed the results of its supervisory stress test associated with the capital plan resubmission. While the Federal Reserve did not recalibrate SCBs as a part of the resubmission for participating banks, Regions’ implied SCB would have been floored at 2.5 percent based on capital degradation in the supervisory severely adverse scenario had the SCB been updated. The decision to update SCB requirements based on the resubmission results was initially deferred to March 31 and subsequently deferred again to June 30, 2021.
Regions chose to participate in 2021 CCAR in part to have the Federal Reserve re-evaluate Regions' SCB. Regions received the results of the voluntary test on June 28, 2021. The Federal Reserve communicated that the Company exceeded all minimum capital levels under the Federal Reserve's Supervisory Stress Test. Effective October 1, 2021, Regions' preliminary SCB requirement for the fourth quarter of 2021 through the third quarter of 2022 will be floored at 2.5 percent.
The Federal Reserve approved its rule for tailoring enhanced prudential standards for bank holding companies with $100 billion or more in total consolidated assets. The framework outlines tailored standards for matters related to capital and liquidity. Regions is a "Category IV" institution under these rules.

LIQUIDITY
Regions maintains a robust liquidity management framework designed to effectively manage liquidity risk in accordance with sound risk management principals and regulatory expectations. The framework establishes sustainable processes and tools to effectively identify, measure, mitigate, monitor, and report liquidity risks beginning with Regions’ Liquidity Management Policy and the Liquidity Risk Appetite Statements approved by the Board. Processes within the liquidity management framework include, but are not limited to, liquidity risk governance, cash management, liquidity stress testing, liquidity risk limits, contingency funding plans, and collateral management. While the framework is designed to comply with liquidity regulations, the processes are further tailored to be commensurate with Regions’ operating model and risk profile.
See the "Liquidity" section for more information. Also, see the “Supervision and Regulation—Liquidity Regulation” subsection of the “Business” section, the "Risk Factors" section and the "Liquidity" section in the 2020 Annual Report on Form 10-K for additional information.
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RATINGS
Table 18 "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 ("DBRS").
Table 18—Credit Ratings
 As of Both June 30, 2021 and December 31, 2020
 S&PMoody’sFitchDBRS
Regions Financial Corporation
Senior unsecured debtBBB+Baa2BBB+AL
Subordinated debtBBBBaa2BBBBBBH
Regions Bank
Short-term A-2P-1F1R-IL
Long-term bank depositsN/AA2A-A
Senior unsecured debtA-Baa2BBB+A
Subordinated debtBBB+Baa2BBBAL
OutlookStableStableStableStable
_________
N/A - Not applicable.
On July 13, 2021, subsequent to the end of the second quarter, Fitch upgraded Regions' outlook from Stable to Positive citing improved credit quality and returns relative to peers.
In general, ratings agencies base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity, asset quality, business mix, probability of government support, and level and quality of earnings. Any downgrade in credit ratings by one or more ratings agencies may impact Regions in several ways, including, but not limited to, Regions’ access to the capital markets or short-term funding, borrowing cost and capacity, collateral requirements, and acceptability of its letters of credit, thereby potentially adversely impacting Regions’ financial condition and liquidity. See the “Risk Factors” section in the 2020 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. Additional information on the credit rating ranking within the overall classification system is located on the website of each credit rating agency.
NON-GAAP MEASURES
The table below presents computations of earnings and certain other financial measures, which exclude certain significant items that are included in the financial results presented in accordance with GAAP. These non-GAAP financial measures include “adjusted average balances of loans”, "adjusted ending balances of loans", "ACL to loans excluding PPP, net ratio", "adjusted net interest margin", “adjusted efficiency ratio”, “adjusted fee income ratio”, “return on average tangible common shareholders' equity” on a consolidated operations basis, and end of period “tangible common shareholders’ equity”, and related ratios. Regions believes that expressing earnings and certain other financial measures excluding these significant items provides a meaningful basis for period-to-period comparisons, which management believes will assist investors in analyzing the operating results of the Company and predicting future performance. These non-GAAP financial measures are also used by management to assess the performance of Regions’ business because management does not consider the activities related to the adjustments to be indications of ongoing operations. Regions believes that presentation of these non-GAAP financial measures will permit investors to assess the performance of the Company on the same basis as that applied by management. Management and the Board utilize these non-GAAP financial measures as follows:
•Preparation of Regions’ operating budgets
•Monthly financial performance reporting
•Monthly close-out reporting of consolidated results (management only)
•Presentations to investors of Company performance
•Metrics for incentive compensation
Average total loans and ending total loans are presented including commercial loans reclassified from held for sale and excluding loan balances related to loans originated through the SBA's PPP program, the indirect-other consumer exit portfolio and the indirect-vehicles exit portfolio to arrive at adjusted average total loans (non-GAAP) and adjusted ending total loans (non-GAAP). Regions believes adjusting average and ending total loans provides a meaningful calculation of loan growth rates and presents them on the same basis as that applied by management.
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Ending total loans are presented excluding loan balances related to loans originated through the SBA's PPP program. Regions believes the related ACL to loans excluding PPP ratio provides meaningful information about credit loss allowance levels when the SBA's PPP loans, which are fully backed by the U.S. government, are excluded from total loans and the related credit loss is excluded from the total allowance for credit losses.
Net interest margin is presented excluding the impact of SBA PPP loans and excess cash, defined as cash exceeding $750 million. Regions believes the adjusted net interest margin (non-GAAP) provides investors with meaningful additional information about Regions' performance when margin associated with the SBA's PPP loans and excess cash are excluded from net interest margin (GAAP).
The adjusted efficiency ratio (non-GAAP), which is a measure of productivity, is generally calculated as adjusted non-interest expense divided by adjusted total revenue on a taxable-equivalent basis. The adjusted fee income ratio (non-GAAP) is generally calculated as adjusted non-interest income divided by adjusted total revenue on a taxable-equivalent basis. Management uses these ratios to monitor performance and believes these measures provide meaningful information to investors. Non-interest expense (GAAP) is presented excluding adjustments to arrive at adjusted non-interest expense (non-GAAP), which is the numerator for the adjusted efficiency ratio. Non-interest income (GAAP) is presented excluding adjustments to arrive at adjusted non-interest income (non-GAAP), which is the numerator for the adjusted fee income ratio. Net interest income on a taxable-equivalent basis and non-interest income are added together to arrive at total revenue on a taxable-equivalent basis. Adjustments are made to arrive at adjusted total revenue on a taxable-equivalent basis (non-GAAP), which is the denominator for the adjusted efficiency and adjusted fee income ratios.
Tangible common shareholders’ equity ratios have become a focus of some investors in analyzing the capital position of the Company absent the effects of intangible assets and preferred stock. Traditionally, the Federal Reserve and other banking regulatory bodies have assessed a bank’s capital adequacy based on Tier 1 capital, the calculation of which is codified in federal banking regulations. Analysts and banking regulators have assessed Regions’ capital adequacy using the tangible common shareholders’ equity measure. Because tangible common shareholders’ equity is not formally defined by GAAP, this measure is considered to be a non-GAAP financial measure and other entities may calculate it differently than Regions’ disclosed calculations. Since analysts and banking regulators may assess Regions’ capital adequacy using tangible common shareholders’ equity, Regions believes that it is useful to provide investors the ability to assess Regions’ capital adequacy on this same basis.
Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. Although these non-GAAP financial measures are frequently used by stakeholders in the evaluation of a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP. In particular, a measure of earnings that excludes selected items does not represent the amount that effectively accrues directly to shareholders.
The following tables provide: 1) a reconciliation of average total loans (GAAP) to adjusted average total loans (non-GAAP), 2) a reconciliation of ending total loans (GAAP) to adjusted ending total loans (non-GAAP), 3) a reconciliation of ending total loans excluding PPP loans (non-GAAP), a reconciliation of ACL (GAAP) to ACL excluding PPP loans' ACL (non-GAAP), and a computation of ACL to ending loans excluding PPP loans (non-GAAP), 4) a reconciliation of net interest margin (GAAP) to adjusted net interest margin (non-GAAP), 5) a reconciliation of net income (GAAP) to net income available to common shareholders (GAAP), 6) a reconciliation of non-interest expense (GAAP) to adjusted non-interest expense (non-GAAP), 7) a reconciliation of net interest income, taxable equivalent basis (GAAP) to adjusted net interest income, taxable equivalent basis (non-GAAP), 8) a reconciliation of non-interest income (GAAP) to adjusted non-interest income (non-GAAP), 9) a computation of adjusted total revenue (non-GAAP), 10) a computation of the adjusted efficiency ratio (non-GAAP), 11) a computation of the adjusted fee income ratio (non-GAAP), and 12) a reconciliation of average and ending shareholders’ equity (GAAP) to average and ending tangible common shareholders’ equity (non-GAAP) and calculations of related ratios (non-GAAP).

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Table 19—GAAP to Non-GAAP Reconciliations
Three Months Ended June 30Six Months Ended June 30
2021202020212020
(Dollars in millions)
ADJUSTED AVERAGE BALANCES OF LOANS
Average total loans (GAAP)$84,551 $91,964 $84,653 $87,607 
Add: Commercial loans held for sale reclassified to the portfolio(1)
138 — 184 — 
Less: SBA PPP loans3,901 3,213 3,850 1,606 
Less: Indirect—other consumer exit portfolio 909 1,493 971 1,595 
Less: Indirect—vehicles 690 1,441 770 1,561 
Adjusted average total loans (non-GAAP)$79,189 $85,817 $79,246 $82,845 
(1)On December 31, 2020, Regions reclassified a certain portfolio of approximately $239 million of commercial and industrial loans to loans held for sale. On June 1, 2021, Regions made the decision not to sell the respective loans, therefore the remaining balance of approximately $193 million was reclassified back into the held for investment portfolio.
 June 30, 2021December 31, 2020
 (Dollars in millions)
ADJUSTED ENDING BALANCES OF LOANS
Ending total loans (GAAP)84,074 85,266 
Add: Commercial loans held for sale reclassified to the portfolio(1)
— 239 
Less: SBA PPP loans2,948 3,624 
Less: Indirect—other consumer exit portfolio858 1,101 
Less: Indirect—vehicles621 934 
Adjusted ending total loans (non-GAAP)$79,647 $79,846 
(1)On December 31, 2020, Regions reclassified a certain portfolio of approximately $239 million of commercial and industrial loans to loans held for sale. As of June 1, 2021, the remaining loan balance of approximately $193 million had been reclassified back into the held for investment portfolio.
June 30, 2021December 31, 2020June 30, 2020
(Dollars in millions)
ACL/LOANS, EXCLUDING PPP, NET
Ending total loans (GAAP)$84,074 $85,266 $90,548 
Less: SBA PPP loans2,948 3,624 4,498 
Ending total loans excluding PPP, net (non-GAAP)$81,126 $81,642 $86,050 
ACL at period end$1,684 $2,293 $2,425 
Less: SBA PPP loans' ACL3 1 — 
ACL excluding PPP loans' ACL (non-GAAP)$1,681 $2,292 2,425 
ACL/Loans, excluding PPP, net (non-GAAP)2.07 %2.81 %2.82 %
Three Months Ended June 30Six Months Ended June 30
2021202020212020
ADJUSTED NET INTEREST MARGIN
Net interest margin (GAAP)2.81 %3.19 %2.91 %3.31 %
Impact of SBA PPP loans (1)
(0.05)%0.02 %(0.04)%0.01 %
Impact of excess cash (2)
0.55 %0.15 %0.49 %0.08 %
Adjusted net interest margin (non-GAAP)3.31 %3.36 %3.36 %3.40 %
________
(1)The impact of SBA PPP loans was determined using average PPP loan balances of $3.9 billion and $3.8 billion for the three and six months ended June 30, 2021, respectively, and $3.2 billion and $1.6 billion for the three and six months ended June 30, 2020, respectively. Related SBA PPP net interest income totaled $43 million and $83 million for the three and six months ended June 30, 2021, respectively, and $18 million for both the three and six months ended June 30, 2020.
(2)The impact of excess cash was determined using the average cash balance in excess of $750 million which totals $22.6 billion and $19.2 billion for the three and six months ended June 30, 2021, respectively and $5.4 billion and $2.7 billion for the three and six months ended June 30, 2020, respectively. The related net interest income totaled $3 million and $5 million for the three and six months ended June 30, 2021, respectively, and $1 million for both the three and six months ended June 30, 2020.
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  Three Months Ended June 30Six Months Ended June 30
  2021202020212020
  (Dollars in millions)
INCOME
Net income (loss) (GAAP)$790 $(214)$1,432 $(52)
Preferred dividends and other (GAAP) (1)
(42)(23)(70)(46)
Net income (loss) available to common shareholders (GAAP)A$748 $(237)$1,362 $(98)
ADJUSTED EFFICIENCY AND FEE INCOME RATIOS
Non-interest expense (GAAP)B$898 $924 $1,826 $1,760 
Significant items:
Contribution to Regions' Financial Corporation foundation
(1)— (3)— 
   Branch consolidation, property and equipment charges
— (10)(5)(21)
Salary and employee benefits—severance charges
(2)(2)(5)(3)
Loss on early extinguishment of debt
— (6)— (6)
 Professional, legal and regulatory expenses— (7)— (7)
Acquisition expenses— (1)— (1)
Adjusted non-interest expense (non-GAAP)C$895 $898 $1,813 $1,722 
Net interest income (GAAP)D$963 $972 $1,930 $1,900 
Taxable-equivalent adjustment12 13 23 25 
Net interest income, taxable-equivalent basisE975 985 1,953 1,925 
Non-interest income (GAAP)F619 573 1,260 1,058 
Significant items:
Securities (gains) losses, net(1)(1)(2)(1)
Gains on equity investment— — (3)— 
Leveraged lease termination gains — — — (2)
Bank owned life insurance (2)
(18)— (18)— 
Adjusted non-interest income (non-GAAP)G$600 $572 $1,237 $1,055 
Total revenueD+F=H$1,582 $1,545 $3,190 $2,958 
Adjusted total revenueD+G=I$1,563 $1,544 $3,167 $2,955 
Total revenue, taxable-equivalent basisE+F=J$1,594 $1,558 $3,213 $2,983 
Adjusted total revenue, taxable-equivalent basis (non-GAAP)E+G=K$1,575 $1,557 $3,190 $2,980 
Efficiency ratio (GAAP)(3)
B/J56.39 %59.35 %56.86 %59.01 %
Adjusted efficiency ratio (non-GAAP)(3)
C/K56.88 %57.75 %56.86 %57.82 %
Fee income ratio (GAAP)(3)
F/J38.85 %36.78 %39.22 %35.48 %
Adjusted fee income ratio (non-GAAP)(3)
G/K38.11 %36.77 %38.78 %35.42 %
RETURN ON AVERAGE TANGIBLE COMMON SHAREHOLDERS’ EQUITY
Average shareholders’ equity (GAAP)$18,000 $17,384 $18,019 $16,922 
Less: Average intangible assets (GAAP)5,292 5,373 5,300 5,159 
 Average deferred tax liability related to intangibles (GAAP)
(96)(94)(100)(93)
 Average preferred stock (GAAP)
1,659 1,409 1,657 1,360 
Average tangible common shareholders’ equity (non-GAAP)L$11,145 $10,696 $11,162 10,496 
Return on average tangible common shareholders’ equity (non-GAAP)(4)
A/L26.91 %(8.90)%24.60 %(1.87)%
June 30, 2021December 31, 2020
  (Dollars in millions, except per share data)
TANGIBLE COMMON RATIOS
Ending shareholders’ equity (GAAP)$18,252 $18,111 
Less: Ending intangible assets (GAAP)5,289 5,312 
  Ending deferred tax liability related to intangibles (GAAP)(96)(106)
  Ending preferred stock (GAAP)1,659 1,656 
Ending tangible common shareholders’ equity (non-GAAP)M$11,400 $11,249 
Ending total assets (GAAP)$155,610 $147,389 
Less: Ending intangible assets (GAAP)5,289 5,312 
  Ending deferred tax liability related to intangibles (GAAP)(96)(106)
Ending tangible assets (non-GAAP)N$150,417 $142,183 
End of period shares outstandingO955 960 
Tangible common shareholders’ equity to tangible assets (non-GAAP)(3)
M/N7.58 %7.91 %
Tangible common book value per share (non-GAAP)(3)
M/O$11.94 $11.71 
________
NM - Not Meaningful
(1)Preferred stock dividends and other for the three and six months ended June 30, 2021 includes $13 million of issuance costs associated with the redemption of Series A preferred shares. See Note 5 for additional information.
(2)The second quarter 2021 amount relates to an individual BOLI claim benefit, which is a tax-free gain.
(3)Amounts have been calculated using whole dollar values.
(4)Income statement amounts have been annualized in calculation.























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OPERATING RESULTS
NET INTEREST INCOME AND MARGIN
Table 20—Consolidated Average Daily Balances and Yield/Rate Analysis
 Three Months Ended June 30
 20212020
 Average
Balance		Income/
Expense		Yield/
Rate		Average
Balance		Income/
Expense		Yield/
Rate
 (Dollars in millions; yields on taxable-equivalent basis)
Assets
Earning assets:
Federal funds sold and securities purchased under agreements to resell$9 $— 0.13 %$— $— — %
Debt securities (1)
28,633 131 1.83 23,828 148 2.49 
Loans held for sale 1,382 12 3.36 807 6 3.06 
Loans, net of unearned income (2)(3)
84,551 861 4.07 91,964 911 3.96 
Interest bearing deposits in other banks23,337 7 0.11 6,115 2 0.10 
Other earning assets(4)
1,297 7 2.20 1,426 9 2.35 
Total earning assets139,209 1,018 2.92 124,140 1,076 3.46 
Unrealized gains/(losses) on securities available for sale, net (1)
627 1,031 
Allowance for loan losses(1,896)(1,860)
Cash and due from banks2,094 2,070 
Other non-earning assets14,644 14,439 
$154,678 $139,820 
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Savings$13,914 5 0.14 $10,152 3 0.13 
Interest-bearing checking25,044 2 0.03 21,755 6 0.11 
Money market30,762 2 0.03 27,870 10 0.13 
Time deposits4,813 8 0.64 6,690 21 1.26 
Other deposits4 — 0.55 72 — 1.64 
Total interest-bearing deposits (5)
74,537 17 0.09 66,539 40 0.24 
Other short-term borrowings— — — 1,558 2 0.53 
Long-term borrowings2,901 26 3.59 7,567 49 2.56 
Total interest-bearing liabilities77,438 43 0.22 75,664 91 0.48 
Non-interest-bearing deposits (5)
56,595 — — 44,382 — — 
Total funding sources134,033 43 0.13 120,046 91 0.30 
Net interest spread (1)
2.70 2.98 
Other liabilities2,645 2,390 
Shareholders’ equity18,000 17,384 
$154,678 $139,820 
Net interest income /margin on a taxable-equivalent basis (6)
$975 2.81 %$985 3.19 %
________
(1)Debt securities are included on an amortized cost basis with yield and net interest margin calculated accordingly.
(2)Loans, net of unearned income include non-accrual loans for all periods presented.
(3)Interest income includes net loan fees of $40 million and $3 million for the three months ended June 30, 2021 and 2020, respectively.
(4)Due to the impact of interest bearing deposits in other banks on the balance sheet in 2021, other earning assets and interest bearing deposits in other banks for prior periods have been revised to reflect the 2021 presentation.
(5)Total deposit costs may be calculated by dividing total interest expense on deposits by the sum of interest-bearing deposits and non-interest-bearing deposits. The rates for total deposit costs equal 0.05% and 0.14% for the three months ended June 30, 2021 and 2020, respectively.
(6)The computation of taxable-equivalent net interest income is based on the statutory federal income tax rate of 21% for both June 30, 2021 and 2020 adjusted for applicable state income taxes net of the related federal tax benefit.
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 Six Months Ended June 30
 20212020
 Average BalanceIncome/
Expense		Yield/
Rate		Average
Balance		Income/
Expense		Yield/
Rate
 (Dollars in millions; yields on taxable-equivalent basis)
Assets
Earning assets:
Federal funds sold and securities purchased under agreements to resell$4 $— 0.13 %$— $— — %
Debt securities (1)
$27,910 $264 1.89 %$23,797 $306 2.57 %
Loans held for sale1,492 24 3.22 660 11 3.32 
Loans, net of unearned income (2)(3)
84,653 1,726 4.09 87,607 1,826 4.17 
Interest bearing deposits in other banks19,942 11 0.11 3,456 4 0.21 
Other earning assets (4)
1,288 17 2.73 1,465 202.72 
Total earning assets135,289 2,042 3.03 116,985 2,167 3.70 
Unrealized gains (losses) on securities available for sale, net (1)
746 771 
Allowance for loan losses(2,017)(1,588)
Cash and due from banks2,013 1,992 
Other non-earning assets14,607 14,135 
$150,638 $132,295 
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Savings $13,132 10 0.15 $9,487 70.15 
Interest-bearing checking24,610 4 0.03 20,514 280.28 
Money market 30,097 5 0.03 26,510 380.28 
Time deposits4,984 17 0.69 6,996 471.35 
Other deposits4 — 1.19 495 41.58 
Total interest-bearing deposits (4)
72,827 36 0.10 64,002 1240.39 
Federal funds purchased and securities sold under agreements to repurchase— — — 76 1 1.39 
Other short-term borrowings— — — 1,601 9 1.13 
Long-term borrowings3,046 53 3.50 7,985 1082.69 
Total interest-bearing liabilities75,873 89 0.24 73,664 2420.66 
Non-interest-bearing deposits (4)
54,230 — — 39,294 — — 
Total funding sources130,103 89 0.14 112,958 2420.43 
Net interest spread (1)
2.79 3.04 
Other liabilities2,516 2,415 
Shareholders’ equity18,019 16,922 
$150,638 $132,295 
Net interest income and other financing income/margin on a taxable-equivalent basis (6)
$1,953 2.91 %$1,925 3.31 %
________
(1)Debt securities are included on an amortized cost basis with yield and net interest margin calculated accordingly.
(2)Loans, net of unearned income include non-accrual loans for all periods presented.
(3)Interest income includes net loan fees of $74 million and $5 million for the six months ended June 30, 2021 and 2020, respectively.
(4)Due to the impact of interest bearing deposits in other banks on the balance sheet in 2021, other earning assets and interest bearing deposits in other banks for prior periods have been revised to reflect the 2021 presentation.
(5)Total deposit costs may be calculated by dividing total interest expense on deposits by the sum of interest-bearing deposits and non-interest-bearing deposits. The rates for total deposit costs equal 0.06% and 0.23% for the six months ended June 30, 2021 and 2020, respectively.
(6)The computation of taxable-equivalent net interest income is based on the statutory federal income tax rate of 21% for both June 30, 2021 and 2020 adjusted for applicable state income taxes net of the related federal tax benefit.
Net interest income decreased slightly for the second quarter 2021 compared to the same period in 2020 and increased slightly for the first six months of 2021 compared to the same period in 2020. Net interest income declines from lower long-term rates have been offset by lower deposit and borrowing costs and active cash management strategies, including $2 billion of securities purchases in the second quarter of 2021. Interest income on loans for the first three and six months of 2021 and 2020 was aided by the Company's hedging strategy, with benefits expanding as more notional became active throughout 2020. The hedges had a positive impact of approximately $206 million for the first six months of 2021 compared to $69 million in the same period of 2020.
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The declines in net interest margin for the second quarter and first six months of 2021, compared to the same periods in 2020, were primarily driven by continued elevated liquidity as indicated by higher cash balances. Regions continues to prudently manage its excess liquidity balances through extinguishments of long-term borrowings and securities purchases. Net interest margin for the second quarter and first six months of 2021 was negatively impacted by the repricing of fixed-rate loan portfolios and the securities portfolio at lower market interest rates. Excluding the impact of PPP lending and excess cash, which Regions considers to be balances in excess of $750 million, adjusted net interest margin (non-GAAP) for the second quarter 2021 and the six months ended June 30, 2020 compared to the same periods in 2020 declined modestly to 3.31% and 3.36%, respectively. While the second quarter of 2021 securities purchases benefited net interest income and net interest margin, they reduced adjusted net interest margin. See Table 19 "GAAP to Non-GAAP Reconciliations" for a reconciliation of adjusted net interest margin.
Net interest income, exclusive of the impact from PPP loans and excess cash, is expected to grow through the remainder of 2021; aided by hedging, balance sheet management strategies, and deposit rates. Furthermore, long-term rate pressure is expected to become more neutral near year-end.
MARKET RISK—INTEREST RATE RISK
Regions’ primary market risk is interest rate risk. This includes uncertainty with respect to absolute interest rate levels as well as relative interest rate levels, which are impacted by both the shape and the slope of the various yield curves that affect the financial products and services that the Company offers. To quantify this risk, Regions measures the change in its net interest income in various interest rate scenarios compared to a base case scenario. Net interest income sensitivity to market rate movements is a useful short-term indicator of Regions’ interest rate risk.
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. Assumptions are made about the direction and volatility of interest rates, the slope of the yield curve, and the changing composition of the balance sheet that results from both strategic plans and from customer behavior. Among the assumptions are expectations of balance sheet growth and composition, the pricing and maturity characteristics of existing business and the characteristics of future business. Interest rate-related risks are expressly considered, such as pricing spreads, the pricing of deposit accounts, prepayments and other option risks. Regions considers these factors, as well as the degree of certainty or uncertainty surrounding their future behavior.
The primary objective of asset/liability management at Regions is to coordinate balance sheet composition with interest rate risk management to sustain reasonable and stable net interest income throughout various interest rate cycles. In computing interest rate sensitivity for measurement, Regions compares a set of alternative interest rate scenarios to the results of a base case scenario derived using “market forward rates.” The standard set of interest rate scenarios includes the traditional instantaneous parallel rate shifts of plus 100 and 200 basis points. Given low market rates by historical standards, the Company focuses on a falling rate shock scenario where all rates fall to levels consistent with historical minimums. In addition to parallel curve shifts, multiple curve steepening and flattening scenarios are contemplated. Regions includes simulations of gradual interest rate movements phased in over a six-month period that may more realistically mimic the speed of potential interest rate movements.
Exposure to Interest Rate Movements—As of June 30, 2021, Regions was asset sensitive to both gradual and instantaneous parallel yield curve shifts as compared to the base case for the 12-month measurement horizon ending June 2022.
The second quarter of 2021 continued the trend of strong growth in low-cost deposits and cash balances held with the Federal Reserve. Retention of these balance sheet liquidity inflows is uncertain and much of the recent deposit growth may be more rate sensitive under a rising rate scenario. Therefore, additional sensitivity analysis focused on pandemic-related "surge" deposit pricing behavior and retention is outlined in Table 21.
The estimated exposure associated with the rising and falling rate scenarios in the table below reflects the combined impacts of movements in short-term and long-term interest rates. Net interest income sensitivity to short-term rates is approximately neutral when excluding pandemic-related deposit increases. An increase or reduction in short-term interest rates (such as the Fed Funds rate, the rate of Interest on Excess Reserves and 1-month LIBOR) will drive the yield on assets and liabilities contractually tied to such rates higher or lower. Under either environment, it is expected that changes in funding costs and balance sheet hedging income will completely offset the change in asset yields. Importantly, the potential to retain "surge" deposits with lower than expected repricing behavior represents an opportunity for further net interest income growth in the increasing rate scenario.
Net interest income remains exposed to intermediate yield curve tenors. While this was a headwind to net interest income during the pandemic, it also represents a tailwind to net interest income growth as the yield curve steepens. An increase in intermediate and long-term interest rates (such as intermediate to longer-term U.S. Treasuries, swap 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
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opposite is true in an environment where intermediate and long-term interest rates fall. Approximately 70% of fixed rate asset production is at the 5-year tenor point or shorter.
The interest rate sensitivity analysis presented below in Table 21 is informed by a variety of assumptions and estimates regarding the progression of the balance sheet in both the baseline scenario as well as the scenarios of instantaneous and gradual shifts in the yield curve. Though there are many assumptions which affect the estimates for net interest income, those pertaining to deposit pricing, deposit mix and overall balance sheet composition are particularly impactful. Given the uncertainties associated with the prolonged period of low interest rates and industry liquidity, management evaluates the impact to its sensitivity analysis of these key assumptions. Sensitivity calculations are hypothetical and should not be considered to be predictive of future results.
The Company’s baseline balance sheet assumptions include management's best estimate for balance sheet growth in the coming 12 months. However, the behavior of pandemic-related "surge" deposits under a rising rate scenario is uncertain. Therefore, Table 21 includes two balance sheet scenarios to help inform a potential range of outcomes. The first is an opportunity scenario, and assumes that these deposits behave more like stable, legacy balances, which is consistent with historical disclosures. The second is a reduction scenario assuming that these depositors will be more sensitive to rate, requiring a higher interest rate in order to hold their balances with the bank. For this scenario, "surge" deposits are assumed to encompass all balance growth on legacy accounts evidenced from February 2020 to June 2021, or approximately $28 billion. These deposits, including non-interest bearing products, are attributed with a 75% repricing beta in rising rate scenarios. Importantly, the impact to net interest income under a changing rate environment is the same whether the "surge" deposit balances are held at a higher beta or the balances attrite and the funding is replaced with wholesale sources. Given the evolving nature of the environment, estimates have been conservatively derived. Should the balances remain with the Company longer or demonstrate less sensitivity to interest rates, there is potential for upside (e.g. the opportunity scenario). The disclosure in Table 21 does not prescribe a view as to the longevity of surge deposits on the balance sheet.
The behavior of deposit pricing in response to changes in interest rate levels is largely informed by analyses of prior rate cycles. In the base case scenario and falling rate scenarios in Table 21, interest-bearing deposit rates move into the single digits. The deposit beta model is dynamic across both interest rate level and time. Currently, the Scenario One gradual +100 basis point shock outlined in the table below includes an approximate 20% to 25% interest-bearing deposit beta for legacy deposits. Again, the "surge" deposit interest-bearing deposit beta is bookended in each scenario, assuming legacy betas and a 75% beta, respectively. Deposit pricing outperformance or underperformance of 5% in that scenario would increase or decrease net interest income by approximately $26 million, respectively.
In rising rate scenarios only, management assumes that the mix of legacy deposits will change versus the base case as informed by analyses of prior rate cycles. Management assumes that in rising rate scenarios, some shift from non-interest bearing to interest-bearing products will occur. The magnitude of the shift is rate dependent and equates to approximately $3 billion over 12 months in the gradual +100 basis point scenario in Table 21.
The table below summarizes Regions' positioning in various parallel yield curve shifts (i.e., including all yield curve tenors). The scenarios are inclusive of all interest rate hedging activities. More information regarding hedges is disclosed in Table 22 and its accompanying description. Importantly, outstanding receive-fixed cash flow hedges begin to mature in December 2022. While those maturities are outside of the 12-month horizon of the analysis outlined in Table 21, the hedge maturity profile will begin to add asset sensitivity at a time when markets currently expect the FOMC to begin to increase short-term interest rates. Regions expects to maintain a persistent amount of hedges through time to support a consistent, sustainable earnings profile and will adjust outstanding derivatives depending on changing market dynamics and the balance sheet mix.
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Table 21—Interest Rate Sensitivity
Scenario One: Estimated Annual Change
in Net Interest Income
June 30, 2021(1)(2)(3)
Scenario Two:
Estimated Annual Change
in Net Interest Income
June 30, 2021 (1)(2)(4)
 (In millions)
Gradual Change in Interest Rates
+ 200 basis points$457 $186 
+ 100 basis points250 114 
 - 100 basis points (floored)(5)
(44)(44)
Instantaneous Change in Interest Rates
+ 200 basis points$586 $252 
+ 100 basis points337 169 
 - 100 basis points (floored)(5)
(56)(56)
_________
(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.
(2)All cash flow hedges are fully reflected within the measurement horizon (See Table 23 for additional information regarding hedge maturity dates).
(3)Scenario assumes all deposits (including "surge" deposits) perform consistently with historical experiences.
(4)Scenario accounts for uncertainty in "surge" deposit balances. Assumes a 75% beta on "surge" balances, calculated as legacy deposit growth experienced since February 2020 ($28 billion as of June 2021).
(5)The -100 basis point (floored) scenario represents a rate shock where all rates are floored at historical lows observed during the pandemic.
Regions has established scenarios by which yield curve tenors will fall to a consistent level. The shock magnitude for each tenor, when compared to market forward rates, equates to the lesser of the shock scenario amount, or a rate equal to the historical all-time minimum. Further, the scenarios presented do not allow for negative rates. The falling rate scenarios in Table 21 above quantify the expected impact for both gradual and instantaneous shocks under this environment.
Interest rate movements may also have an impact on the value of Regions’ securities portfolio, which can directly impact the carrying value of shareholders’ equity. Regions from time to time may hedge these price movements with derivatives (as discussed below).
Derivatives—Regions uses financial derivative instruments for management of interest rate sensitivity. ALCO, which consists of members of Regions’ senior management team, in its oversight role for the management of interest rate sensitivity, approves the use of derivatives in balance sheet hedging strategies. Derivatives are also used to offset the risks associated with customer derivatives, which include interest rate, credit and foreign exchange risks. The most common derivatives Regions employs are forward rate contracts, Eurodollar futures contracts, interest rate swaps, options on interest rate swaps, interest rate caps and floors, and forward sale commitments.
Forward rate contracts are commitments to buy or sell financial instruments at a future date at a specified price or yield. A Eurodollar futures contract is a future on a Eurodollar deposit. Eurodollar futures contracts subject Regions to market risk associated with changes in interest rates. Interest rate swaps are contractual agreements typically entered into to exchange fixed for variable rate (or vice versa) streams of interest payments. 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. Foreign currency contracts involve the exchange of one currency for another on a specified date and at a specified rate. These contracts are executed on behalf of the Company's customers and are used by customers to manage fluctuations in foreign exchange rates. The Company is subject to the credit risk that another party will fail to perform.
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 and to effectively convert a portion of its variable-rate loan portfolios to fixed-rate. Regions also uses derivatives to economically manage interest rate and pricing risk associated with its mortgage origination business. In the period of time that elapses between the origination and sale of mortgage loans, changes in interest rates have the potential to cause a decline in the value of the loans in this held-for-sale portfolio. Futures contracts and forward sale commitments are used to protect the value of the loan pipeline and loans held for sale from changes in interest rates and pricing.
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The following table presents additional information about the hedging interest rate derivatives used by Regions to manage interest rate risk:
Table 22—Hedging Derivatives by Interest Rate Risk Management Strategy
June 30, 2021
Weighted-Average
Notional
Amount		Maturity (Years)
Receive Rate(1)
Pay Rate(1)
Strike Price(1)
(Dollars in millions)
Derivatives in fair value hedging relationships:
     Receive fixed/pay variable swaps$1,750 2.8 1.6 %0.1 %— %
Derivatives in cash flow hedging relationships:
     Receive fixed/pay variable swaps17,000 3.1 1.3 0.1 — 
     Interest rate floors3,500 3.1 — — 2.2 
     Total derivatives designated as hedging instruments$22,250 3.1 1.3 %0.1 %2.2 %
_________
(1)Variable rate indexes on swap and floor contracts reference a combination of short-term LIBOR benchmarks, primarily 1-month LIBOR.

As of June 30, 2021, all of the cash flow hedging relationships designated in Table 22 above were active. Total cash flow hedges have a current weighted average maturity of approximately 3.1 years. During the first and second quarters of 2021, Regions shortened a portion of its future hedge exposure to balance its future interest rate risk needs with the evolving macro-economic environment and its changing balance sheet. During the first and second quarters of 2021, the Company terminated $2.0 billion and $250 million, respectively, in notional of floor hedges. During the first and second quarters of 2021, the Company terminated $2.6 billion and $3.0 billion, respectively, in notional of swap hedges. Notional of $4.6 billion and $2.0 billion was replaced with shorter maturity swaps during the first and second quarters of 2021, respectively. Longer maturity receive-fixed swap terminations of $1.3 billion in the second quarter of 2021 were intended to offset some of the sensitivity impact from adding $2.0 billion fixed-rate securities during the second quarter.
Importantly, the gain on unwound hedges is deferred and amortized into net interest income over the life of the original hedge, creating no change in the expected net interest income profile relative to the discounted future cash flows under market forward rates at the time the hedges are unwound. These changes and the resulting hedge maturity profile allow for an increasing asset sensitive balance sheet position when the FOMC seems more likely to move short-term rates higher. Further, the industry transition away from LIBOR rates is not expected to materially impact either hedge effectiveness or income recognition on the Company's current portfolio of hedges.
The following table presents cash flow hedge notional amounts outstanding at each year-end period. The initial hedge maturities begin in December 2022.
Table 23—Schedule of Notional for Cash Flow Hedging Derivatives
Notional Amount
Years Ended
2021(1)
2022(1)
2023202420252026
(In millions)
Receive fixed/pay variable swaps $17,000 $13,000 $10,450 $9,450 $2,500 $1,250 
Interest rate floors3,500 3,500 3,500 1,000 250 — 
Cash flow hedges$20,500 $16,500 $13,950 $10,450 $2,750 $1,250 
_________
(1)All cash flow hedges active within the 12-month measurement horizon are included in the income sensitivity levels as disclosed in Table 21.
Regions manages the credit risk of these instruments in much the same way as it manages credit risk of the loan portfolios by establishing credit limits for each counterparty and through collateral agreements for dealer transactions. 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. When there is more than one transaction with a counterparty and there is a legally enforceable master netting agreement in place, the exposure represents the net of the gain and loss positions with and collateral received from and/or posted to that counterparty. All hedging interest rate swap derivatives traded by Regions are subject to mandatory clearing. The
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counterparty risk for cleared trades effectively moves from the executing broker to the clearinghouse allowing Regions to benefit from the risk mitigation controls in place at the respective clearinghouse. The “Credit Risk” section in Regions’ Annual Report on Form 10-K for the year ended December 31, 2020 contains more information on the management of credit risk.
Regions also uses derivatives to meet the needs of its customers. Interest rate swaps, interest rate options and foreign exchange forwards are the most common derivatives sold to customers. Other derivative instruments with similar characteristics are used to hedge market risk and minimize volatility associated with this portfolio. Instruments used to service customers are held in the trading account, with changes in value recorded in the consolidated statements of income.
The primary objective of Regions’ hedging strategies is to mitigate the impact of interest rate changes, from an economic perspective, on net interest income and the net present value of its balance sheet. The overall effectiveness of these hedging strategies is subject to market conditions, the quality of Regions’ execution, the accuracy of its valuation assumptions, counterparty credit risk and changes in interest rates. See Note 8 "Derivative Financial Instruments and Hedging Activities" to the consolidated financial statements for a tabular summary of Regions’ quarter-end derivatives positions and further discussion.
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.
LIBOR TRANSITION
On March 5, 2021, the FCA announced that LIBOR will not be available for use after December 31, 2021. Further, existing contracts referencing 1-week or 2-month USD LIBOR settings must be remediated no later than December 31, 2021. Existing contracts referencing all other USD LIBOR settings must be remediated no later than June 30, 2023. Regions holds instruments that may be impacted by the discontinuance of LIBOR, including loans, investments, derivative products, floating-rate obligations, and other financial instruments that use LIBOR as a benchmark rate. However, Regions' LIBOR exposure is primarily in settings other than 1-week or 2-month USD LIBOR. The Company has established a LIBOR Transition Program, which includes dedicated leadership and staff, with all relevant business lines and support groups engaged. As part of this program, the Company continues to identify, assess, and monitor risks associated with the discontinuation of LIBOR. Steps to mitigate risks associated with the transition are being overseen by Regions’ Executive LIBOR Steering Committee. Regions is following industry efforts to develop alternative reference rates and is operationally ready to offer new benchmarks as they are adopted by regulatory agencies and industry groups.
Regions has taken proactive steps to facilitate the transition on behalf of customers, which include:
•The adoption and ongoing implementation of fallback provisions that provide for the determination of replacement rates for LIBOR-linked financial products.
•The adoption of new products linked to alternative reference rates, such as adjustable-rate mortgages, consistent with guidance provided by the US regulators, ARRC, and GSEs.
Regions continues to evaluate its financial and operational infrastructure in its effort to transition all financial and strategic processes, systems, and models to reference rates other than LIBOR. Regions has also implemented processes to educate all client-facing associates and coordinate communications with customers regarding the transition.
As of June 30, 2021, Regions had approximately $33.9 billion of total outstanding commercial and investor real estate loans and $1.1 billion of total consumer loans that reference LIBOR. Regions also has securities within its investment portfolio of $420 million that reference LIBOR. Furthermore, Regions' Series B and C preferred stock reference LIBOR when their dividend rate begins to float after 2023 and had total carrying values of $433 million and $490 million, respectively, as of June 30, 2021.
In the third quarter of 2020, Regions adopted temporary accounting relief for affected transactions that reference LIBOR. See Note 1 “Summary of Significant Accounting Policies” in Regions’ Annual Report on Form 10-K for the year ended December 31, 2020 for details.
LIQUIDITY
Liquidity is an important factor in the financial condition of Regions and sustains 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. Accordingly, Regions maintains a variety of liquidity sources, as further described below. Furthermore, Regions performs specific procedures, including scenario analyses and stress testing to evaluate and maintain appropriate levels of available liquidity in alignment with liquidity risk.
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Regions' operation of its business provides a generally balanced liquidity base which is comprised of customer assets, consisting principally of loans, and funding provided by customer deposits and borrowed funds. Maturities in the loan portfolio provide a steady flow of funds, and are supplemented by Regions' relatively steady deposit base.
The securities portfolio serves as a primary source and storehouse of liquidity. Proceeds from maturities and principal and interest payments of securities provide a continual flow of funds available for cash needs (see Note 2 "Debt Securities" to the consolidated financial statements). Furthermore, the highly liquid nature of the portfolio (for example, the agency guaranteed MBS portfolio) can be readily used as a source of cash through various secured borrowing arrangements. Cash reserves, liquid assets and secured borrowing capabilities (including borrowing capacity at the FHLB, as discussed below) aid in the management of liquidity in normal and stressed conditions, and/or meeting the need of contingent events such as obligations related to potential litigation. (See Note 11 "Commitments, Contingencies and Guarantees" to the consolidated financial statements for additional discussion of the Company’s funding requirements.) Liquidity needs can also be met by borrowing funds in national money markets, though Regions does maintain limits on short-term unsecured funding due to the volatility that can affect such markets.
The balance with the FRB is the primary component of the balance sheet line item, “interest-bearing deposits in other banks.” At June 30, 2021, Regions had approximately $23.8 billion in cash on deposit with the FRB, an increase from approximately $16.4 billion at December 31, 2020, which has continued to be impacted by deposits associated with government programs offered in relation to COVID-19. Refer to the "Cash and Cash Equivalents" section for more information.
Regions’ borrowing availability with the FRB as of June 30, 2021, based on assets pledged as collateral on that date, was $12.8 billion.
Regions’ financing arrangement with the FHLB adds additional flexibility in managing the Company's liquidity position. As of June 30, 2021, Regions had no FHLB borrowings and its total borrowing capacity from the FHLB totaled approximately $15.2 billion. FHLB borrowing capacity is contingent on the amount of collateral pledged to the FHLB. Regions Bank pledges certain securities and loans as collateral, which comprise its FHLB borrowing capacity. Additionally, investment in FHLB stock is required based on membership and in relation to the level of outstanding borrowings. The FHLB has been and is expected to continue to be a reliable and economical source of funding.
Regions maintains a shelf registration statement with the SEC that can be utilized by Regions to issue various debt and/or equity securities. Additionally, Regions' Board has authorized Regions Bank to issue up to $10 billion in aggregate principal amount of bank notes outstanding at any one time. Refer to Note 12 "Borrowings" to the consolidated financial statements in the 2020 Annual Report on Form 10-K 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. See Note 5 "Shareholders' Equity and Accumulated Other Comprehensive Income" to the consolidated financial statements for further information.
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 $1.1 billion at June 30, 2021. Overall liquidity risk limits are established by the Board through its Risk Appetite Statement and Liquidity Policy. The Company's Board, LROC and ALCO regularly review compliance with the established limits.
CREDIT RISK
Regions’ objective regarding credit risk is to maintain a credit portfolio that provides for stable credit costs with acceptable volatility through an economic cycle. Regions has various processes to manage credit risk as described below. In order to assess the risk profile of the loan portfolio, Regions considers risk factors within the loan portfolio segments and classes, the current U.S. economic environment and that of its primary banking markets, as well as counterparty risk. See the “Portfolio Characteristics” section of the Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of risk characteristics of each loan type.
INFORMATION SECURITY RISK
Regions faces information security risks, such as evolving and adaptive cyber attacks that are conducted regularly against Regions and other large financial institutions to compromise or disable information systems, which have increased in recent years. This trend is expected to continue for a number of reasons, including increases in technology-based products and services used by us and our customers, the growing use of mobile, cloud, and other emerging technologies, and the increasing sophistication and activities of organized crime, hackers, terrorists, nation-states, activists and other external parties or fraud on the part of employees.
As a result of the COVID-19 pandemic, Regions has experienced a modest increase in cyber events, such as phishing attacks and malicious traffic from outside the United States. However, the Company's layered control environment has effectively detected and prevented any material impact related to these events.
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Even when Regions successfully prevents cyber attacks to its own network, the Company may still incur losses that result from customers' account information being obtained through breaches of retailers' networks that enable customer transactions. The fraud losses, as well as the costs of investigations and re-issuing new customer cards, may impact Regions' financial results. In addition, Regions also relies on some vendors to provide certain business infrastructure components, and although Regions actively assesses and monitors the information security capabilities of these vendors, Regions' reliance on them may also increase exposure to information security risk.
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. Refer to the "Information Security Risk" section in Management's Discussion and Analysis included in the Annual Report on Form 10-K for the year ended December 31, 2020 for further discussion of Regions' information security risk.
PROVISION FOR (BENEFIT FROM) CREDIT LOSSES
The provision for (benefit from) credit losses is used to maintain the allowance for loan losses and the reserve for unfunded credit losses at a level that in management’s judgment is appropriate to absorb expected credit losses over the contractual life of the loan and credit commitment portfolio at the balance sheet date. The benefit from credit losses totaled $337 million in the second quarter of 2021 compared to a provision for credit losses of $882 million during the second quarter of 2020. The benefit from credit losses totaled $479 million for the first six months of 2021 compared to the provision for credit losses of $1.3 billion for the first six months of 2020. Refer to the "Allowance" section for further detail.
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NON-INTEREST INCOME
Table 24—Non-Interest Income
 Three Months Ended June 30Quarter-to-Date Change 6/30/2021 vs. 6/30/2020
20212020AmountPercent
 (Dollars in millions)
Service charges on deposit accounts$163 $131 $32 24.4 %
Card and ATM fees128 101 27 26.7 %
Mortgage income53 82 (29)(35.4)%
Capital markets income61 95 (34)(35.8)%
Investment management and trust fee income69 62 7 11.3 %
Bank-owned life insurance33 18 15 83.3 %
Investment services fee income27 17 10 58.8 %
Commercial credit fee income23 17 6 35.3 %
Securities gains (losses), net1 1 — — %
Market value adjustments on employee benefit assets - other8 16 (8)(50.0)%
Other miscellaneous income53 33 20 60.6 %
$619 $573 $46 8.0 %
 Six Months Ended June 30Year-to-Date 6/30/2021 vs. 6/30/2020
 20212020AmountPercent
 (Dollars in millions)
Service charges on deposit accounts$320 $309 $11 3.6 %
Card and ATM fees243 206 37 18.0 %
Mortgage income143 150 (7)(4.7)%
Capital markets income161 104 57 54.8 %
Investment management and trust fee income135 124 11 8.9 %
Bank-owned life insurance50 35 15 42.9 %
Investment services fee income52 39 13 33.3 %
Commercial credit fee income45 35 10 28.6 %
Gain on equity investment3 — 3 NM
Securities gains (losses), net2 1 1 100.0 %
Market value adjustments on employee benefit assets - other15 (9)24 266.7 %
Other miscellaneous income91 64 27 42.2 %
$1,260 $1,058 $202 19.1 %
________
NM - Not Meaningful

Service charges on deposit accounts—Service charges on deposit accounts include non-sufficient fund and overdraft fees, corporate analysis service charges, overdraft protection fees and other customer transaction-related service charges. The increases during the second quarter and the first six months of 2021 compared to the same periods of 2020 were the result of elevated consumer spending in 2021 as the economy began to reopen and the pace of economic activity accelerated. While service charge revenue improved, changes to customer spending behaviors as a result of the pandemic, combined with enhancements to overdraft practices and transaction posting procedures, are expected to keep service charges approximately ten to fifteen percent below pre-pandemic levels. See the "Second Quarter Overview" section for further detail.
Card and ATM fees—Card and ATM fees include the combined amounts of credit card/bank card income and debit card and ATM related revenue. Card and ATM fees increased in both the second quarter and the first six months of 2021 compared to the same periods of 2020, driven by increased debit card spending and transaction volume.
Mortgage income—Mortgage income is generated through the origination and servicing of residential mortgage loans for long-term investors and sales of residential mortgage loans in the secondary market. The decrease in mortgage income in the
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second quarter compared to the same period in 2020 was due to compressed margins on loans sold in the secondary market to maintain market competitiveness. Additionally, mortgage refinance production was down in the second quarter of 2021 compared to the elevated production volume experienced in the same period in 2020. The decrease for the first six months of 2021 compared to the same period in 2020 was primarily a result of lower MSR market valuation.
Capital markets income—Capital markets income primarily relates to capital raising activities that include securities underwriting and placement, loan syndication, as well as foreign exchange, derivatives, merger and acquisition and other advisory services. Capital markets income decreased in the second quarter of 2021 compared to the same period in 2020 primarily due to the benefit of significant positive market-related credit valuation adjustments within commercial swap income experienced in the second quarter of 2020. In the first six months of 2021, capital markets income increased compared to the same period in 2020 primarily driven by the exceptionally strong results in the first quarter of 2021 and the relatively low capital markets income level experienced by most categories in the first quarter of 2020.
Bank-owned life insurance—Bank-owned life insurance income primarily represents income earned from the appreciation of the cash surrender value of insurance contracts held and the proceeds of insurance benefits. Bank-owned life insurance increased during the second quarter and the first six months of 2021 compared to the same periods of 2020 due primarily to an $18 million individual BOLI claim benefit recognized in the second quarter of 2021.
Investment services fee income—Investment services fee income represents income earned from investment advisory services. Investment services fee income increased during the second quarter and the first six months of 2021 compared to the same periods of 2020 due primarily to stronger financial advisor production and favorable market conditions.
Commercial credit fee income—Commercial credit fee income includes letters of credit fees and unused commercial commitment fees. Commercial credit fee income increased during the second quarter and the first six months of 2021 compared to the same periods of 2020 driven primarily by an increase in unused commercial line fees driven by continued low credit line utilization.
Securities gains (losses), net—Net securities gains (losses) primarily result from the Company's asset/liability management process. See Table 1 "Debt Securities" section for additional information.
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 adjustment reported as employee benefit assets - other is offset in salaries and benefits.
Other miscellaneous income—Other miscellaneous income includes net revenue from affordable housing, valuation adjustments to equity investments (other than the item shown separately above), fees from safe deposit boxes, check fees and other miscellaneous income. Net revenue from affordable housing includes actual gains and losses resulting from the sale of affordable housing investments, cash distributions from the investments and any related impairment charges. Other miscellaneous income increased in the second quarter and the first six months of 2021 compared to the same periods of 2020 primarily due to increases in commercial loan and leasing related fee income and SBIC income.
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NON-INTEREST EXPENSE
Table 25—Non-Interest Expense
 Three Months Ended June 30Quarter-to-Date Change 6/30/2021 vs. 6/30/2020
 20212020AmountPercent
 (Dollars in millions)
Salaries and employee benefits$532 $527 $5 0.9 %
Equipment and software expense89 86 3 3.5 %
Net occupancy expense75 76 (1)(1.3)%
Outside services39 44 (5)(11.4)%
Marketing29 22 7 31.8 %
Professional, legal and regulatory expenses15 28 (13)(46.4)%
Credit/checkcard expenses17 12 5 41.7 %
FDIC insurance assessments11 15 (4)(26.7)%
Branch consolidation, property and equipment charges— 10 (10)(100.0)%
Visa class B shares expense6 9 (3)(33.3)%
Loss on early extinguishment of debt— 6 (6)(100.0)%
Other miscellaneous expenses85 89 (4)(4.5)%
$898 $924 $(26)(2.8)%
 Six Months Ended June 30Year-to-Date 6/30/2021 vs. 6/30/2020
 20212020AmountPercent
 (Dollars in millions)
Salaries and employee benefits$1,078 $994 $84 8.5 %
Equipment and software expense179 169 10 5.9 %
Net occupancy expense152 155 (3)(1.9)%
Outside services77 89 (12)(13.5)%
Marketing51 46 5 10.9 %
Professional, legal and regulatory expenses44 46 (2)(4.3)%
Credit/checkcard expenses31 25 6 24.0 %
FDIC insurance assessments21 26 (5)(19.2)%
Branch consolidation, property and equipment charges5 21 (16)(76.2)%
Visa class B shares expense10 13 (3)(23.1)%
Loss on early extinguishment of debt— 6 (6)(100.0)%
Other miscellaneous expenses178 170 8 4.7 %
$1,826 $1,760 $66 3.8 %
________
NM - Not Meaningful

Salaries and employee benefits—Salaries and employee benefits consist of salaries, incentive compensation, long-term incentives, payroll taxes, and other employee benefits such as 401(k), pension, and medical, life and disability insurance, as well as, expenses from liabilities held for employee benefit purposes. During the first six months of 2021, salaries and benefits expense increased compared to the same period in 2020 primarily driven by higher 401(k) and other benefits expenses, as a result of positive market valuation adjustments, and higher production-based incentives. Offsetting these increases, full-time equivalent headcount decreased to 18,814 at June 30, 2021 from 20,073 at June 30, 2020, reflecting the continuing impact of the Company's efficiency initiatives implemented as part of its strategic priorities.
Equipment and software expense—Equipment and software expense includes depreciation, maintenance and repairs, rent, taxes, and other expenses of equipment and software (software is rented and internally developed) utilized by Regions and its affiliates. Equipment and software expense increased in the first six months of 2021 compared to the same period in 2020, driven primarily by software rental expense, depreciation, and maintenance and repair.
Outside services—Outside services consists of expenses related to routine services provided by third parties, such as contract labor, servicing costs, data processing, loan pricing and research, data license purchases, data subscriptions, and check
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printing. Outside services decreased during the second quarter and the first six months of 2021 compared to the same periods in 2020 due primarily to Regions exiting a third party lending relationship.
Marketing—Marketing consists of advertising, market research, and public relations expenses. Marketing increased during the second quarter and the first six months of 2021 compared to the same periods in 2020 due to the timing of marketing campaigns.
Professional, legal and regulatory expenses—Professional, legal and regulatory expenses consist of amounts related to legal, consulting, other professional fees and regulatory charges. Professional, legal and regulatory expenses decreased during the second quarter compared to the same period in 2020, primarily due to lower legal expenses.
Branch consolidation, property and equipment charges—Branch consolidation, property and equipment charges include valuation adjustments related to owned branches when the decision to close them is made. Accelerated depreciation and lease write-off charges are recorded for leased branches through and at the actual branch close date. Branch consolidation, property and equipment charges also include costs related to occupancy optimization initiatives.
Loss on early extinguishment of debt—During the second quarter of 2020, Regions executed the partial debt extinguishment of two senior bank notes and early terminations of FHLB advances, incurring related early extinguishment pre-tax charges totaling $6 million.
Other miscellaneous expenses—Other miscellaneous expenses include expenses related to communications, postage, supplies, certain credit-related costs, foreclosed property expenses, mortgage repurchase costs, operational losses and other costs (benefits) related to employee benefit plans.
INCOME TAXES
The Company’s income tax expense for the three months ended June 30, 2021 was $231 million compared to income tax benefit of $47 million for the three months ended June 30, 2020, resulting in effective tax rates of 22.6 percent and 18.3 percent, respectively. The income tax expense for the six months ended June 30, 2021 was $411 million compared to income tax benefit of $5 million for the six months ended June 30, 2020, resulting in effective tax rates of 22.3 percent and 10.1 percent, respectively. The Company expects the full-year tax rate to be approximately 22 percent to 23 percent for 2021, excluding the impact of unanticipated discrete items.
The effective tax rate is affected by many factors including, but not limited to, the level of pre-tax income, the mix of income between various tax jurisdictions with differing tax rates, enacted tax legislation, net tax benefits related to affordable housing investments, bank-owned life insurance, tax-exempt interest and nondeductible expenses. In addition, the effective tax rate is affected by items that may occur in any given period but are not consistent from period-to-period, such as the termination of certain leveraged leases, share-based payments, valuation allowance changes and changes to unrecognized tax benefits. Accordingly, the comparability of the effective tax rate between periods may be impacted.
At June 30, 2021, the Company reported a net deferred tax liability of $451 million compared to a net deferred tax liability of $505 million at December 31, 2020. The decrease in the net deferred tax liability was primarily due to the decrease in unrealized gains on available for sale securities and derivative instruments, which was partially offset by a decrease in the deferred tax asset related to allowance for loan losses.
ASCENTIUM ACQUISITION
On April 1, 2020, Regions completed its acquisition of an equipment finance company Ascentium Capital, LLC. The acquisition gives Regions the ability to increase business loans and leases to small business customers using Ascentium's tech-enabled same-day credit decision and funding capabilities. 
As a result of the acquisition Regions recorded approximately $2.4 billion of assets and assumed $1.9 billion of liabilities. Of the total assets acquired, $1.9 billion were loans and leases that are included in Regions' commercial and industrial loan portfolio. Of the liabilities assumed, $1.8 billion were long-term borrowings. Regions subsequently paid down a significant portion of the borrowings, and as of June 30, 2021, $39 million of long-term debt remained. Assets acquired and liabilities assumed were recorded at estimated fair value.
Of the loans acquired, a portion were determined to be credit deteriorated on the date of purchase. Purchased loans that have experienced a more than insignificant deterioration in credit quality since origination are considered to be credit deteriorated. PCD loans are initially recorded at purchase price less the ALLL recognized at acquisition. Subsequent credit loss activity is recorded within the provision for credit losses.
Regions recorded PCD loans of $873 million as a result of the acquisition, which was reflective of a nominal discount. Regions recorded an ALLL related to these loans of $60 million, which was included in the total acquired asset value as part of the acquisition.
The non-credit discount related to Ascentium's PCD loans and the fair value mark on non-PCD loans will be amortized to interest income over the contractual life of the loan using the effective interest method. The amortization will not be material.
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In conjunction with the acquisition, Regions initially recognized goodwill of $348 million and other intangible assets of $47 million. Purchase accounting adjustments of $16 million reduced goodwill during the measurement period. Intangible assets are comprised of trademarks, customer lists and other intangibles. Intangible assets will be amortized over the expected useful life of each recognized asset.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Reference is made to pages 81 through 85 included in Management’s Discussion and Analysis.
Item 4. Controls and Procedures
Based on an evaluation, as of the end of the period covered by this Form 10-Q, under the supervision and with the participation of Regions’ management, including its Chief Executive Officer and Chief Financial Officer, the Chief Executive Officer and Chief Financial Officer have concluded that Regions’ disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) are effective. During the quarter ended June 30, 2021, there have been no changes in Regions’ internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Regions’ internal control over financial reporting.

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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information required by this item is set forth in Note 11, "Commitments, Contingencies and Guarantees" in the Notes to the Consolidated Financial Statements (Unaudited) in Part I. Item 1. of this report, which is incorporated by reference.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Information concerning Regions' repurchases of its outstanding common stock during the three month period ended June 30, 2021, is set forth in the following table:
PeriodTotal Number of  Shares PurchasedAverage Price Paid
 per Share		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
April 1—30, 2021(1)
2,773,358 $21.70 2,773,358 $2,439,768,153 
May 1—31, 20215,052,590 $22.68 5,052,590 $2,325,802,183 
June 1—30, 2021200,000 $23.64 200,000 $2,321,075,043 
Total 2nd Quarter8,025,948 $22.56 8,025,948 $2,321,075,043 
(1)Included in the share repurchases are approximately 1 million shares that were repurchased as part of the amendment to the Company’s deferred investment plan for its directors.
As part of the Company's capital plan, on April 21, 2021, Regions announced the Board's authorization of the repurchase of up to $2.5 billion of the Company's common stock, permitting purchases from the second quarter of 2021 through the first quarter of 2022. All of these shares were immediately retired upon repurchase and, therefore, will not be included in treasury stock.

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Item 6. Exhibits
The following is a list of exhibits including items incorporated by reference
3.1
3.2
3.3
3.4
3.5
3.6
4.1
4.2
10.1
10.2
10.3
10.4
31.1
31.2
32
101
The following materials from Regions' Form 10-Q Report for the quarterly period ended June 30, 2021, formatted in Inline XBRL: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Income; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Changes in Shareholders' Equity; (v) the Consolidated Statements of Cash Flows; and (vi) the Notes to the Consolidated Financial Statements.
104
The cover page of Regions' Form 10-Q Report for the quarter ended June 30, 2021, formatted in Inline XBRL (included within the Exhibit 101 attachments).


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
DATE: August 6, 2021
 Regions Financial Corporation
 
/S/    HARDIE B. KIMBROUGH, JR.        
 Hardie B. Kimbrough, Jr.
Executive Vice President and Controller
(Chief Accounting Officer and Authorized Officer)

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