Table of Contents


 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
 
ý
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the quarterly period ended March 31, 2019
or
¨
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from
 
to
                               
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, Alabama
 
35203
(Address of principal executive offices)
 
(Zip Code)
(800) 734-4667
(Registrant’s telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)
 
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:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $.01 par value
RF
New York Stock Exchange
Depositary Shares, each representing a 1/40th Interest in a Share of 6.375% Non-Cumulative Perpetual Preferred Stock, Series A
RF PRA
New 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 B
RF PRB
New 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 C
RF PRC
New York Stock Exchange

The number of shares outstanding of each of the issuer’s classes of common stock was 1,013,224,918 shares of common stock, par value $.01, outstanding as of May 6, 2019.

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REGIONS FINANCIAL CORPORATION
FORM 10-Q
INDEX
 
 
 
 
 
Page
Part I. Financial Information
Item 1.
 
Financial Statements (Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
Item 3.
 
 
Item 4.
 
 
 
 
 
Part II. Other Information
 
 
Item 1.
 
 
Item 2.
 
 
Item 6.
 
 
 
 
 
 

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Glossary of Defined Terms
Agencies - collectively, FNMA, FHLMC and GNMA.
ALCO - Asset/Liability Management Committee.
AOCI - Accumulated other comprehensive income.
ASC - Accounting Standards Codification.
ASU - Accounting Standards Update.
ATM - Automated teller machine.
Bank - Regions Bank.
Basel I - Basel Committee's 1988 Regulatory Capital Framework (First Accord).
Basel III - Basel Committee's 2010 Regulatory Capital Framework (Third Accord).
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 arm of the Financial Services Roundtable.
Board - The Company’s Board of Directors.
CAP - Customer Assistance Program.
CCAR - Comprehensive Capital Analysis and Review.
CECL - Current Expected Credit Loss Approach.
CEO - Chief Executive Officer.
CET1 - Common Equity Tier 1.
CFPB - Consumer Financial Protection Bureau.
Company - Regions Financial Corporation and its subsidiaries.
CPR - Constant (or Conditional) Prepayment Rate.
CRA - Community Reinvestment Act of 1977.
Dodd-Frank Act - The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
DPD - Days Past Due.
DUS - Fannie Mae Delegated Underwriting & Servicing.
EGRRCPA - The Economic Growth, Regulatory Relief, and Consumer Protection Act.
ERI - Eligible Retained Income.
FASB - Financial Accounting Standards Board.
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.
FHLMC - Federal Home Loan Mortgage Corporation, known as Freddie Mac.
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.
FNMA - Federal National Mortgage Association, known as Fannie Mae.

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FRB - Federal Reserve Bank.
FS-ISAC - Financial Services - Information Sharing & Analysis Center.
GAAP - Generally Accepted Accounting Principles in the United States.
GDP - Gross Domestic Product.
GNMA - Government National Mortgage Association.
HUD - U.S. Department of Housing and Urban Development.
IPO - Initial public offering.
IRS - Internal Revenue Service.
LCR - Liquidity coverage ratio.
LIBOR - London InterBank Offered Rate.
LLC - Limited Liability Company.
LROC - Liquidity Risk Oversight Committee.
LTIP - Long-term incentive plan.
LTV - Loan to value.
MBS - Mortgage-backed securities.
Morgan Keegan - Morgan Keegan & Company, Inc.
MSAs - Metropolitan Statistical Areas.
MSR - Mortgage servicing right.
NM - Not meaningful.
NPR - Notice of Public Ruling.
OAS - Option-Adjusted Spread.
OCC - Office of the Comptroller of the Currency.
OCI - Other comprehensive income.
OIS - Overnight Indexed Swap.
OTTI - Other-than-temporary impairment.
Raymond James - Raymond James Financial, Inc.
Regions Securities - Regions Securities LLC.
SCB - Stress Capital Buffer.
SEC - U.S. Securities and Exchange Commission.
SERP - Supplemental Executive Retirement Plan.
SOFR - Secured Overnight Funding Rate.
Tax Reform - H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent
Resolution on the Budget for Fiscal Year 2018.
TDR - Troubled debt restructuring.
U.S. - United States.
U.S. Treasury - The United States Department of the Treasury.
UTB - Unrecognized tax benefits.
VIE - Variable interest entity.
Visa - The Visa, U.S.A. Inc. card association or its affiliates, collectively.

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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. 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, including the effects of possible declines in property values, increases in unemployment rates 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.
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 or amendments to Tax Reform, which may impact our earnings, capital ratios and our ability to return capital to stockholders.
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, loan loss provisions or actual loan losses where our allowance for loan 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, 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.
Our inability to keep pace with technological changes 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, 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 ability to obtain a regulatory non-objection (as part of the CCAR process or otherwise) to take certain capital actions, including paying dividends and any plans to increase common stock dividends, repurchase common stock under current or future programs, or redeem preferred stock or other regulatory capital instruments, may impact our ability to return capital to stockholders and market perceptions of us.

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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 and intensity of such tests and requirements.
Our ability to comply with applicable capital and liquidity requirements (including, among other things, the Basel III capital standards and the LCR rule), including our ability to generate capital internally or raise capital on favorable terms, and if we fail to meet requirements, our financial condition 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 non-financial benefits relating to our strategic initiatives.
The risks and uncertainties related to our acquisition or divestiture of businesses.
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 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, 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, “denial of service” attacks, “hacking” and identity theft, including account take-overs, a failure of which could disrupt our 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 realize our adjusted efficiency ratio target as part of our expense management initiatives.
Possible cessation or market replacement of LIBOR and the related effect on our LIBOR-based financial products and contracts, including, but not limited to, hedging products, debt obligations, investments, and loans.
Possible downgrades in our credit ratings or outlook could 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.

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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 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, 2018 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
 
 
March 31, 2019
 
December 31, 2018
 
(In millions, except share data)
Assets
 
 
 
Cash and due from banks
$
1,666

 
$
2,018

Interest-bearing deposits in other banks
2,141

 
1,520

Debt securities held to maturity (estimated fair value of $1,454 and $1,460, respectively)
1,451

 
1,482

Debt securities available for sale
23,786

 
22,729

Loans held for sale (includes $284 and $251 measured at fair value, respectively)
318

 
304

Loans, net of unearned income
84,430

 
83,152

Allowance for loan losses
(853
)
 
(840
)
Net loans
83,577

 
82,312

Other earning assets
1,617

 
1,719

Premises and equipment, net
2,026

 
2,045

Interest receivable
388

 
375

Goodwill
4,829

 
4,829

Residential mortgage servicing rights at fair value
386

 
418

Other identifiable intangible assets, net
108

 
115

Other assets
6,509

 
5,822

Total assets
$
128,802

 
$
125,688

Liabilities and Equity
 
 
 
Deposits:
 
 
 
Non-interest-bearing
$
34,775

 
$
35,053

Interest-bearing
60,945

 
59,438

Total deposits
95,720

 
94,491

Borrowed funds:
 
 
 
Short-term borrowings:
 
 
 
Other short-term borrowings
1,600

 
1,600

Total short-term borrowings
1,600

 
1,600

Long-term borrowings
12,957

 
12,424

Total borrowed funds
14,557

 
14,024

Other liabilities
3,002

 
2,083

Total liabilities
113,279

 
110,598

Equity:
 
 
 
Preferred stock, authorized 10 million shares, par value $1.00 per share
 
 
 
Non-cumulative perpetual, liquidation preference $1,000.00 per share, including related surplus, net of issuance costs; issued—1,000,000 shares
820

 
820

Common stock, authorized 3 billion shares, par value $.01 per share:
 
 
 
Issued including treasury stock—1,053,966,945 and 1,065,858,925 shares, respectively
11

 
11

Additional paid-in capital
13,584

 
13,766

Retained earnings
3,066

 
2,828

Treasury stock, at cost—41,032,675 and 41,032,676 shares, respectively
(1,371
)
 
(1,371
)
Accumulated other comprehensive income (loss), net
(598
)
 
(964
)
Total stockholders’ equity
15,512

 
15,090

Noncontrolling interest
11

 

Total equity
15,523

 
15,090

Total liabilities and equity
$
128,802

 
$
125,688


See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 
Three Months Ended March 31
 
2019
 
2018
 
(In millions, except per share data)
Interest income, including other financing income on:
 
 
 
Loans, including fees
$
981

 
$
851

Debt securities - taxable
165

 
154

Loans held for sale
3

 
3

Other earning assets
19

 
19

Operating lease assets
15

 
20

Total interest income, including other financing income
1,183

 
1,047

Interest expense on:
 
 
 
Deposits
108

 
49

Short-term borrowings
13

 
1

Long-term borrowings
102

 
72

Total interest expense
223

 
122

Depreciation expense on operating lease assets
12

 
16

Total interest expense and depreciation expense on operating lease assets
235

 
138

Net interest income and other financing income
948

 
909

Provision (credit) for loan losses
91

 
(10
)
Net interest income and other financing income after provision (credit) for loan losses
857

 
919

Non-interest income:
 
 
 
Service charges on deposit accounts
175

 
171

Card and ATM fees
109

 
104

Investment management and trust fee income
57

 
58

Capital markets income
42

 
50

Mortgage income
27

 
38

Securities gains (losses), net
(7
)
 

Other
99

 
86

Total non-interest income
502

 
507

Non-interest expense:
 
 
 
Salaries and employee benefits
478

 
495

Net occupancy expense
82

 
83

Furniture and equipment expense
76

 
81

Other
224

 
225

Total non-interest expense
860

 
884

Income from continuing operations before income taxes
499

 
542

Income tax expense
105

 
128

Income from continuing operations
394

 
414

Discontinued operations:
 
 
 
Income (loss) from discontinued operations before income taxes

 

Income tax expense (benefit)

 

Income (loss) from discontinued operations, net of tax

 

Net income
$
394

 
$
414

Net income from continuing operations available to common shareholders
$
378

 
$
398

Net income available to common shareholders
$
378

 
$
398

Weighted-average number of shares outstanding:
 
 
 
Basic
1,019

 
1,127

Diluted
1,028

 
1,141

Earnings per common share from continuing operations:
 
 
 
Basic
$
0.37

 
$
0.35

Diluted
0.37

 
0.35

Earnings per common share:
 
 
 
Basic
$
0.37

 
$
0.35

Diluted
0.37

 
0.35

See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
Three Months Ended March 31
 
2019
 
2018
 
(In millions)
Net income
$
394

 
$
414

Other comprehensive income (loss), 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 ($1) tax effect, respectively)
(1
)
 
(2
)
Net change in unrealized losses on securities transferred to held to maturity, net of tax
1

 
2

Unrealized gains (losses) on securities available for sale:
 
 
 
Unrealized holding gains (losses) arising during the period (net of $77 and ($104) tax effect, respectively)
240

 
(310
)
Less: reclassification adjustments for securities gains (losses) realized in net income (net of ($2) and zero tax effect, respectively)
(5
)
 

Net change in unrealized gains (losses) on securities available for sale, net of tax
245

 
(310
)
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
 
 
 
Unrealized holding gains (losses) on derivatives arising during the period (net of $36 and ($31) tax effect, respectively)
107

 
(92
)
Less: reclassification adjustments for gains (losses) on derivative instruments realized in net income (net of ($2) and $3 tax effect, respectively)
(6
)
 
8

Net change in unrealized gains (losses) on derivative instruments, net of tax
113

 
(100
)
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)

 
(1
)
Less: reclassification adjustments for amortization of actuarial loss realized in net income (net of ($2) and ($2) tax effect, respectively)
(7
)
 
(7
)
Net change from defined benefit pension plans and other post employment benefits, net of tax
7

 
6

Other comprehensive income (loss), net of tax
366

 
(402
)
Comprehensive income
$
760

 
$
12

See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
 
 
Stockholders' Equity
 
 
 
Preferred Stock
 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Treasury
Stock,
At Cost
 
Accumulated
Other
Comprehensive
Income (Loss), Net
 
Total
 
Non-
controlling
Interest
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
 
(In millions, except per share data)
BALANCE AT JANUARY 1, 2018
1

 
$
820

 
1,133

 
$
12

 
$
15,858

 
$
1,628

 
$
(1,377
)
 
$
(749
)
 
$
16,192

 
$

Cumulative effect from change in accounting guidance

 

 

 

 

 
(2
)
 

 

 
(2
)
 

Net income

 

 

 

 

 
414

 

 

 
414

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 
(402
)
 
(402
)
 

Cash dividends declared

 

 

 

 

 
(101
)
 

 

 
(101
)
 

Preferred stock dividends

 

 

 

 

 
(16
)
 

 

 
(16
)
 

Common stock transactions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Impact of share repurchases

 

 
(12
)
 

 
(235
)
 

 

 

 
(235
)
 

Impact of stock transactions under compensation plans, net

 

 
1

 

 
16

 

 

 

 
16

 

BALANCE AT MARCH 31, 2018
1

 
$
820

 
1,122

 
$
12

 
$
15,639

 
$
1,923

 
$
(1,377
)
 
$
(1,151
)
 
$
15,866

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE AT JANUARY 1, 2019
1

 
$
820

 
1,025

 
$
11

 
$
13,766

 
$
2,828

 
$
(1,371
)
 
$
(964
)
 
$
15,090

 
$

Cumulative effect from change in accounting guidance

 

 

 

 

 
2

 

 

 
2

 

Net income

 

 

 

 

 
394

 

 

 
394

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 
366

 
366

 

Cash dividends declared

 

 

 

 

 
(142
)
 

 

 
(142
)
 

Preferred stock dividends

 

 

 

 

 
(16
)
 

 

 
(16
)
 

Common stock transactions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Impact of share repurchases

 

 
(12
)
 

 
(190
)
 

 

 

 
(190
)
 

Impact of stock transactions under compensation plans, net

 

 

 

 
8

 

 

 

 
8

 

Other

 

 

 

 

 

 

 

 

 
11

BALANCE AT MARCH 31, 2019
1

 
$
820

 
1,013

 
$
11

 
$
13,584

 
$
3,066

 
$
(1,371
)
 
$
(598
)
 
$
15,512

 
$
11


See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

 
Three Months Ended March 31
 
2019
 
2018
 
(In millions)
Operating activities:
 
 
 
Net income
$
394

 
$
414

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Provision (credit) for loan losses
91

 
(10
)
Depreciation, amortization and accretion, net
105

 
121

Securities (gains) losses, net
7

 

Deferred income tax expense
19

 
103

Originations and purchases of loans held for sale
(510
)
 
(690
)
Proceeds from sales of loans held for sale
515

 
587

(Gain) loss on sale of loans, net
(25
)
 
(14
)
Net change in operating assets and liabilities:
 
 
 
Other earning assets
90

 
235

Interest receivable and other assets
(381
)
 
(61
)
Other liabilities
222

 
(529
)
Other
51

 
(2
)
Net cash from operating activities
578

 
154

Investing activities:
 
 
 
Proceeds from maturities of debt securities held to maturity
30

 
46

Proceeds from sales of debt securities available for sale
139

 
7

Proceeds from maturities of debt securities available for sale
799

 
798

Purchases of debt securities available for sale
(1,241
)
 
(876
)
Net proceeds from (payments for) bank-owned life insurance
(2
)
 
1

Proceeds from sales of loans
185

 
272

Purchases of loans
(171
)
 
(70
)
Purchases of mortgage servicing rights
(8
)
 
(2
)
Net change in loans
(1,383
)
 
(164
)
Net purchases of other assets
(36
)
 
(56
)
Net cash from investing activities
(1,688
)
 
(44
)
Financing activities:
 
 
 
Net change in deposits
1,229

 
101

Net change in short-term borrowings

 
(500
)
Proceeds from long-term borrowings
12,025

 
4,350

Payments on long-term borrowings
(11,525
)
 
(4,500
)
Cash dividends on common stock
(143
)
 
(102
)
Cash dividends on preferred stock
(16
)
 
(16
)
Repurchases of common stock
(190
)
 
(235
)
Taxes paid related to net share settlement of equity awards

 
(1
)
Other
(1
)
 
(3
)
Net cash from financing activities
1,379

 
(906
)
Net change in cash and cash equivalents
269

 
(796
)
Cash and cash equivalents at beginning of year
3,538

 
3,981

Cash and cash equivalents at end of period
$
3,807

 
$
3,185


See notes to consolidated financial statements.

12


Table of Contents


REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three Months Ended March 31, 2019 and 2018
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, 2018. Regions has evaluated all subsequent events for potential recognition and disclosure through the filing date of this Form 10-Q.
Effective January 1, 2019, the Company adopted new accounting guidance related to several topics. See Note 5 and Note 14 for related disclosures.
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:
 
March 31, 2019
 
 
 
Recognized in OCI (1)
 
 
 
Not Recognized in OCI
 
 
 
Amortized
Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Carrying Value
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
(In millions)
Debt securities held to maturity:
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential agency
$
853

 
$

 
$
(31
)
 
$
822

 
$
7

 
$
(3
)
 
$
826

Commercial agency
632

 

 
(3
)
 
629

 
4

 
(5
)
 
628

 
$
1,485

 
$

 
$
(34
)
 
$
1,451

 
$
11

 
$
(8
)
 
$
1,454

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
175

 
$
1

 
$
(2
)
 
$
174

 
 
 
 
 
$
174

Federal agency securities
45

 

 

 
45

 
 
 
 
 
45

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential agency
17,639

 
59

 
(257
)
 
17,441

 
 
 
 
 
17,441

Residential non-agency
2

 

 

 
2

 
 
 
 
 
2

Commercial agency
4,188

 
17

 
(28
)
 
4,177

 
 
 
 
 
4,177

Commercial non-agency
731

 
3

 
(4
)
 
730

 
 
 
 
 
730

Corporate and other debt securities
1,211

 
12

 
(6
)
 
1,217

 
 
 
 
 
1,217

 
$
23,991

 
$
92

 
$
(297
)
 
$
23,786

 
 
 
 
 
$
23,786


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Table of Contents


 
December 31, 2018
 
 
 
Recognized in OCI (1)
 
 
 
Not Recognized in OCI
 
 
 
Amortized
Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Carrying Value
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
(In millions)
Debt securities held to maturity:
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential agency
$
883

 
$

 
$
(32
)
 
$
851

 
$
1

 
$
(10
)
 
$
842

Commercial agency
634

 

 
(3
)
 
631

 

 
(13
)
 
618

 
$
1,517

 
$

 
$
(35
)
 
$
1,482

 
$
1

 
$
(23
)
 
$
1,460

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
284

 
$

 
$
(4
)
 
$
280

 
 
 
 
 
$
280

Federal agency securities
43

 

 

 
43

 
 
 
 
 
43

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential agency
17,064

 
26

 
(466
)
 
16,624

 
 
 
 
 
16,624

Residential non-agency
2

 

 

 
2

 
 
 
 
 
2

Commercial agency
3,891

 
8

 
(64
)
 
3,835

 
 
 
 
 
3,835

Commercial non-agency
768

 
2

 
(10
)
 
760

 
 
 
 
 
760

Corporate and other debt securities
1,206

 
2

 
(23
)
 
1,185

 
 
 
 
 
1,185

 
$
23,258

 
$
38

 
$
(567
)
 
$
22,729

 
 
 
 
 
$
22,729

_________
(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.

Debt securities with carrying values of $8.3 billion and $7.9 billion at March 31, 2019 and December 31, 2018, 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 March 31, 2019 and December 31, 2018.
The amortized cost and estimated fair value of debt securities held to maturity and debt securities available for sale at March 31, 2019, 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
$
853

 
$
826

Commercial agency
632

 
628

 
$
1,485

 
$
1,454

Debt securities available for sale:
 
 
 
Due in one year or less
$
71

 
$
71

Due after one year through five years
956

 
958

Due after five years through ten years
350

 
352

Due after ten years
54

 
55

Mortgage-backed securities:
 
 
 
Residential agency
17,639

 
17,441

Residential non-agency
2

 
2

Commercial agency
4,188

 
4,177

Commercial non-agency
731

 
730

 
$
23,991

 
$
23,786

The following tables present gross unrealized losses and the related estimated fair value of debt securities held to maturity and debt securities available for sale at March 31, 2019 and December 31, 2018. For debt securities transferred to held to maturity

14


Table of Contents


from available for sale, the analysis in the tables below is comparing the securities' original amortized cost to its current estimated fair value. 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.
 
March 31, 2019
 
Less Than Twelve Months
 
Twelve Months or More
 
Total
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
(In millions)
Debt securities held to maturity:
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Residential agency
$

 
$

 
$
826

 
$
(27
)
 
$
826

 
$
(27
)
Commercial agency

 

 
160

 
(8
)
 
160

 
(8
)
 
$

 
$

 
$
986

 
$
(35
)
 
$
986

 
$
(35
)
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$

 
$

 
$
149

 
$
(2
)
 
$
149

 
$
(2
)
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Residential agency
1,366

 
(10
)
 
11,801

 
(247
)
 
13,167

 
(257
)
Commercial agency

 

 
2,937

 
(28
)
 
2,937

 
(28
)
Commercial non-agency

 

 
444

 
(4
)
 
444

 
(4
)
Corporate and other debt securities
57

 
(1
)
 
380

 
(5
)
 
437

 
(6
)
 
$
1,423

 
$
(11
)
 
$
15,711

 
$
(286
)
 
$
17,134

 
$
(297
)

 
December 31, 2018
 
Less Than Twelve Months
 
Twelve Months or More
 
Total
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
(In millions)
Debt securities held to maturity:
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Residential agency
$

 
$

 
$
842

 
$
(42
)
 
$
842

 
$
(42
)
Commercial agency
486

 
(7
)
 
132

 
(9
)
 
618

 
(16
)
 
$
486

 
$
(7
)
 
$
974

 
$
(51
)
 
$
1,460

 
$
(58
)
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$

 
$

 
$
261

 
$
(4
)
 
$
261

 
$
(4
)
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Residential agency
2,830

 
(37
)
 
11,010

 
(429
)
 
13,840

 
(466
)
Commercial agency
1,073

 
(13
)
 
2,254

 
(51
)
 
3,327

 
(64
)
Commercial non-agency
229

 
(1
)
 
404

 
(9
)
 
633

 
(10
)
Corporate and other debt securities
659

 
(11
)
 
310

 
(12
)
 
969

 
(23
)
 
$
4,791

 
$
(62
)
 
$
14,239

 
$
(505
)
 
$
19,030

 
$
(567
)
The number of individual debt positions in an unrealized loss position in the tables above decreased from 1,379 at December 31, 2018 to 1,172 at March 31, 2019. The decrease in the number of securities and the total amount of unrealized losses from year-end 2018 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 an OTTI 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.
As part of the Company's normal process for evaluating OTTI, management did identify a limited number of positions where an OTTI was believed to exist as of March 31, 2019.

15


Table of Contents


Gross realized gains and gross realized losses on sales of debt securities available for sale are shown in the table below. The cost of securities sold is based on the specific identification method.
 
Three Months Ended March 31
 
2019
 
2018
 
(In millions)
Gross realized gains
$

 
$

Gross realized losses
(6
)
 

OTTI
(1
)
 

Debt securities available for sale gains (losses), net
$
(7
)
 
$


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:
 
March 31, 2019
 
December 31, 2018
 
(In millions, net of unearned income)
Commercial and industrial
$
40,985

 
$
39,282

Commercial real estate mortgage—owner-occupied
5,522

 
5,549

Commercial real estate construction—owner-occupied
434

 
384

Total commercial
46,941

 
45,215

Commercial investor real estate mortgage
4,715

 
4,650

Commercial investor real estate construction
1,871

 
1,786

Total investor real estate
6,586

 
6,436

Residential first mortgage
14,113

 
14,276

Home equity
9,014

 
9,257

Indirect—vehicles
2,759

 
3,053

Indirect—other consumer
2,547

 
2,349

Consumer credit card
1,274

 
1,345

Other consumer
1,196

 
1,221

Total consumer
30,903

 
31,501

 
$
84,430

 
$
83,152

During the three months ended March 31, 2019 and 2018, Regions purchased approximately $171 million and $70 million in indirect-other consumer loans from third parties, respectively.
During the three months ended March 31, 2019, Regions sold $167 million of affordable housing residential mortgage loans.
In January 2019, Regions decided to discontinue its indirect auto lending business due to competition-based margin compression impacting overall returns on the portfolio. Regions ceased originating new indirect auto loans in the first quarter of 2019 and intends to complete any in-process indirect auto loan closings by the end of the second quarter of 2019. The Company will remain in the direct auto lending business.
At March 31, 2019, $21.9 billion in securities and net eligible loans held by Regions were pledged to secure current and potential borrowings from the FHLB. At March 31, 2019, an additional $25.9 billion in net eligible loans held by Regions were pledged to the FRB for potential borrowings.

16


Table of Contents


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, 2018, for a description of the methodology.
ROLLFORWARD OF ALLOWANCE FOR CREDIT LOSSES
The following tables present analyses of the allowance for credit losses by portfolio segment for the three months ended March 31, 2019 and 2018. The total allowance for loan losses and the related loan portfolio ending balances are disaggregated to detail the amounts derived through individual evaluation and collective evaluation for impairment. The allowance for loan losses related to individually evaluated loans is attributable to reserves for non-accrual commercial and investor real estate loans and all TDRs. The allowance for loan losses and the loan portfolio ending balances related to collectively evaluated loans is attributable to the remainder of the portfolio.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2019
 
Commercial
 
Investor Real
Estate
 
Consumer
 
Total
 
(In millions)
Allowance for loan losses, January 1, 2019
$
520

 
$
58

 
$
262

 
$
840

Provision (credit) for loan losses
38

 
(5
)
 
58

 
91

Loan losses:
 
 
 
 
 
 
 
Charge-offs
(30
)
 

 
(72
)
 
(102
)
Recoveries
9

 
1

 
14

 
24

Net loan (losses) recoveries
(21
)
 
1

 
(58
)
 
(78
)
Allowance for loan losses, March 31, 2019
537

 
54

 
262

 
853

Reserve for unfunded credit commitments, January 1, 2019
47

 
4

 

 
51

Provision (credit) for unfunded credit losses
(1
)
 

 

 
(1
)
Reserve for unfunded credit commitments, March 31, 2019
46

 
4

 

 
50

Allowance for credit losses, March 31, 2019
$
583

 
$
58

 
$
262

 
$
903

Portion of ending allowance for loan losses:
 
 
 
 
 
 
 
Individually evaluated for impairment
$
119

 
$
3

 
$
29

 
$
151

Collectively evaluated for impairment
418

 
51

 
233

 
702

Total allowance for loan losses
$
537

 
$
54

 
$
262

 
$
853

Portion of loan portfolio ending balance:
 
 
 
 
 
 
 
Individually evaluated for impairment
$
523

 
$
22

 
$
411

 
$
956

Collectively evaluated for impairment
46,418

 
6,564

 
30,492

 
83,474

Total loans evaluated for impairment
$
46,941

 
$
6,586

 
$
30,903

 
$
84,430


17


Table of Contents


 
Three Months Ended March 31, 2018
 
Commercial
 
Investor Real
Estate
 
Consumer
 
Total
 
(In millions)
Allowance for loan losses, January 1, 2018
$
591

 
$
64

 
$
279

 
$
934

Provision (credit) for loan losses
(24
)
 
(4
)
 
18

 
(10
)
Loan losses:
 
 
 
 
 
 
 
Charge-offs
(30
)
 
(8
)
 
(74
)
 
(112
)
Recoveries
10

 
2

 
16

 
28

Net loan (losses) recoveries
(20
)
 
(6
)
 
(58
)
 
(84
)
Allowance for loan losses, March 31, 2018
547

 
54

 
239

 
840

Reserve for unfunded credit commitments, January 1, 2018
49

 
4

 

 
53

Provision (credit) for unfunded credit losses
(4
)
 

 

 
(4
)
Reserve for unfunded credit commitments, March 31, 2018
45

 
4

 

 
49

Allowance for credit losses, March 31, 2018
$
592

 
$
58

 
$
239

 
$
889

Portion of ending allowance for loan losses:
 
 
 
 
 
 
 
Individually evaluated for impairment
$
150

 
$
10

 
$
29

 
$
189

Collectively evaluated for impairment
397

 
44

 
210

 
651

Total allowance for loan losses
$
547

 
$
54

 
$
239

 
$
840

Portion of loan portfolio ending balance:
 
 
 
 
 
 
 
Individually evaluated for impairment
$
700

 
$
96

 
$
476

 
$
1,272

Collectively evaluated for impairment
42,437

 
5,491

 
30,622

 
78,550

Total loans evaluated for impairment
$
43,137

 
$
5,587

 
$
31,098

 
$
79,822


PORTFOLIO SEGMENT RISK FACTORS
The following describe the risk characteristics relevant to each of the portfolio segments.
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 or other expansion projects. 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 flow generated by business operations. Owner-occupied 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. Collection risk in this portfolio is driven by the creditworthiness of underlying borrowers, particularly cash flow from customers’ business operations, and the sensitivity to market fluctuations in commodity prices.
Investor Real Estate—Loans for real estate development are repaid through cash flow 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, these loans are made to finance income-producing properties such as apartment buildings, office and industrial buildings, and retail shopping centers. Loans in this portfolio segment are particularly sensitive to the valuation of real estate.
Consumer—The consumer portfolio segment includes residential first mortgage, home equity, indirect-vehicles, indirect-other consumer, consumer credit card, and other consumer loans. 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. Home equity lending includes both home equity loans and lines of credit. This type of lending, which is secured by a first or second mortgage on the borrower’s residence, allows customers to borrow against the equity in their home. Real estate market values as of the time the loan or line is secured directly affect the amount of credit extended and, in addition, changes in these values impact the depth of potential losses. Indirect-vehicles lending, which is lending initiated through third-party business partners, largely consists of loans made through automotive dealerships. Indirect-other consumer lending represents other point of sale lending through third parties. Consumer credit card lending includes Regions branded consumer credit card accounts. Other consumer loans include other revolving consumer accounts, direct consumer loans, and overdrafts. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.

18


Table of Contents


CREDIT QUALITY INDICATORS
The following tables present credit quality indicators for portfolio segments and classes, excluding loans held for sale, as of March 31, 2019, and December 31, 2018. Commercial and investor real estate portfolio segments are detailed by categories related to underlying credit quality and probability of default. Regions assigns these categories 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. These categories are utilized to develop the associated allowance for credit losses.
Pass—includes obligations where the probability of default is considered low;
Special Mention—includes obligations that have potential weakness that may, if not reversed or corrected, weaken the credit or inadequately protect the Company’s position at some future date. Obligations in this category may also be subject to economic or market conditions that may, in the future, have an adverse effect on debt service ability;
Substandard Accrual—includes obligations that exhibit a well-defined weakness that presently jeopardizes debt repayment, even though they are currently performing. These obligations are characterized by the distinct possibility that the Company may incur a loss in the future if these weaknesses are not corrected;
Non-accrual—includes obligations where management has determined that full payment of principal and interest is in doubt.
Substandard accrual and non-accrual loans are often collectively referred to as “classified.” Special mention, substandard accrual, and non-accrual loans are often collectively referred to as “criticized and classified.” Classes in the consumer portfolio segment are disaggregated by accrual status.
 
March 31, 2019
 
Pass
 
Special  Mention
 
Substandard
Accrual
 
Non-accrual
 
Total
 
(In millions)
Commercial and industrial
$
39,534

 
$
668

 
$
447

 
$
336

 
$
40,985

Commercial real estate mortgage—owner-occupied
5,159

 
197

 
99

 
67

 
5,522

Commercial real estate construction—owner-occupied
403

 
12

 
5

 
14

 
434

Total commercial
$
45,096

 
$
877

 
$
551

 
$
417

 
$
46,941

Commercial investor real estate mortgage
$
4,464

 
$
168

 
$
75

 
$
8

 
$
4,715

Commercial investor real estate construction
1,848

 
18

 
5

 

 
1,871

Total investor real estate
$
6,312

 
$
186

 
$
80

 
$
8

 
$
6,586

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accrual
 
Non-accrual
 
Total
 
 
 
 
 
(In millions)
Residential first mortgage
 
 
 
 
$
14,079

 
$
34

 
$
14,113

Home equity
 
 
 
 
8,950

 
64

 
9,014

Indirect—vehicles
 
 
 
 
2,759

 

 
2,759

Indirect—other consumer
 
 
 
 
2,547

 

 
2,547

Consumer credit card
 
 
 
 
1,274

 

 
1,274

Other consumer
 
 
 
 
1,196

 

 
1,196

Total consumer