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OFFON

REGIONS FINANCIAL CORPORATION

(RF)
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REGIONS FINANCIAL : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/05/2020 | 08:17am EDT

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,
2019, 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 the Form 10-K. See Note 1 "Basis of Presentation" and Note 13 "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, 2020 compared to the three and six months ended June 30, 2019 for
the consolidated statements of operations. For the consolidated balance sheets,
the emphasis of this discussion will be the balances as of June 30, 2020
compared to December 31, 2019.
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, 2020, Regions operated 1,391 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 11 "Business Segment Information" to the
consolidated financial statements for more information regarding Regions'
segment reporting structure.
On May 31, 2019, Regions entered into an agreement to acquire Highland
Associates, Inc., an institutional investment firm based in Birmingham, Alabama.
The transaction closed on August 1, 2019.
On February 27, 2020, Regions 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.
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.
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.
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. After a brief but violent contraction in economic
activity stemming from the COVID-19 pandemic and the efforts to stem its spread,
the U.S. economy had begun to recover during the second quarter. However, a
sharp increase in COVID-19 cases was seen in early July. While this increase in
cases is more likely to slow, rather than suppress, the economic recovery, it
nonetheless adds another layer of uncertainty over economic forecasts. For
full-year 2020, real GDP is expected to contract by 5.8 percent and to grow by
3.3 percent in 2021.

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Economic activity bottomed at the end of April 2020. By the end of May, each
state had taken steps to ease restrictions on economic activity, though these
steps varied across individual states. May marked the beginning of economic
improvement with the addition of over 2.6 million non-farm jobs, a rebound in
consumer spending, and improved conditions in the industrial sector. Further
economic improvement was experienced in June with both the ISM Manufacturing
Index and the ISM Non-Manufacturing index pushing above the 50 percent break
between contraction and expansion and non-farm payrolls rising by 4.8 million
jobs. Additionally, motor vehicle sales rebounded sharply through June and
applications for purchase loans stood at more than a 12-year high based on the
MBA's weekly survey data. The economy has clearly benefitted from the aggressive
fiscal and monetary policy response in the early phases of the pandemic.
As the spike in the number of positive COVID-19 tests persisted into early July,
several state and local governments rolled back some of the reopening measures,
with most of the interventions directed at bars and restaurants. The policy
response, at least thus far, has come in the form of targeted interventions
rather than re-imposing the broad shutdowns seen in the early phases of the
pandemic, which should limit the disruption to the economy. Barring a more
intense and geographically dispersed increase in the number of COVID-19 cases
than seen thus far, it is likely these targeted interventions will be the
template for policy makers to deal with any subsequent spikes in cases.
Aside from the potential fallout from the policy response, consumer and business
confidence could be adversely impacted by rising numbers of COVID-19 cases,
which could in turn weigh on growth in consumer spending and slow the pace of
improvement in the labor market. Nonetheless, after what are likely to be
extraordinarily large swings in real GDP in the second quarter (contraction) and
the third quarter (expansion) of 2020, the economy is likely to settle on a path
of steady but moderate growth over subsequent quarters. Though many households
are facing an "income cliff" at the end of July as the supplemental unemployment
insurance benefits provided by the CARES Act are set to expire, it is likely
that fiscal and monetary policy will remain supportive of the economic recovery.
The July 2020 baseline forecast anticipates that it will be 10 to 12 quarters
before the level of real GDP returns to the level from the fourth quarter of
2019, which is the last quarter free of the effects of COVID-19.
The effects within the Regions footprint will be broadly similar to those seen
in the U.S. as a whole. Florida's economy has an above-average exposure to
leisure and hospitality services, while Texas and Louisiana have above-average
exposure to energy, so these economies could be more prone to lasting effects if
the recovery does prove to be slower than is now anticipated.
The continued economic uncertainty, as described above, impacted Regions'
forecast utilized in calculating the ACL as of June 30, 2020. 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. The adverse economic
conditions and uncertainty in the economic outlook as of June 30, 2020 driven by
the COVID-19 pandemic continued to impact the second quarter 2020 financial
results in the areas as described below. Regions expects that the pandemic will
continue to influence economic conditions and the Company's financial results in
future quarters.
Even as businesses re-open across the country, Regions continued to keep
measures in place to ensure associate and customer safety, such as continuing to
limit in-person branch activity to drive-through and in-office services to
appointment only. As of June 30, 2020, approximately 95% of branches were open.
Regions is in the process of implementing a phased approach to return remote
working associates to office locations. As of June 30, 2020, approximately 90
percent of the Company's non-branch associates are working remotely.
During the second quarter of 2020, the Company continued to offer special
financial assistance to support customers who were experiencing financial
hardships related to the COVID-19 pandemic. This assistance included offering
customer payment deferrals or forbearances to existing loans over a set period
of time, typically 90 days. Residential mortgage payment assistance is granted
through a forbearance. During the forbearance period, a borrower's payment
obligation is suspended and no foreclosure action will be pursued. All payments
are then due at expiration of the forbearance period, unless the loan has been
modified. For most other loan products (commercial and consumer products except
for residential real estate), payment assistance is granted through deferrals or
extensions. Deferrals and extensions are different than forbearances in that all
payments are normally not due at the end of the deferral or extension period.
Instead, the payment due date is advanced. However, for most all products,
interest continues to accrue on the loan during the deferral or forbearance
period, unless the loan is on non-accrual.
As of June 30, 2020, Regions had processed approximately 27,200 consumer payment
deferral requests totaling $1.9 billion, including approximately 5,500
forbearances related to residential mortgages totaling approximately $1.4
billion. During May and June of 2020, approximately 34% of borrowers made
mortgage payments while in forbearance. Additionally, approximately 36% of
borrowers made home equity payments, approximately 56% made credit card
payments, and approximately 41% made auto loan payments while in deferral. In
addition, payment deferral requests for approximately 18,100 mortgage loans
serviced for others have been processed totaling approximately $3.0 billion.
Regions has also processed approximately 14,300 requests for business customers
totaling approximately $3.8 billion. Approximately 25% of corporate banking
borrowers, which excludes Ascentium and branch small business customers, have
made payments during May and June while in deferral.

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While a significant amount of payment deferrals and forbearances were granted in
the second quarter of 2020, the deferrals and forbearances initially granted at
the end of March 2020 expired prior to the end of the second quarter. As of June
30, 2020, approximately 2,160 residential first mortgage forbearances, totaling
approximately $585 million, were scheduled to expire. As of mid-July 2020,
approximately 37% of the forbearances scheduled to expire on June 30, 2020
extended the forbearance periods by one to three months. Approximately 23% of
the expired forbearances had either completed a loan modification or were in
process of being modified. In addition, approximately 25% of the remaining
expired forbearances were considered current because borrowers continued to make
regular payments throughout the forbearance period. Regions is in process of
contacting borrowers for the remaining 15% of these expired forbearances.
As noted above, loan products other than residential first mortgage have payment
deferrals or extensions which either advance the payment due date or adjust the
amount due each period so the borrower is not past due. The majority of these
borrowers do not consider a second deferral period until the next payment is
due. As a result, it is early to ascertain what actions are being taken for
these other loan products after their initial deferral period expiration. In
many cases, Regions is being proactive and reaching out to borrowers with
payment deferrals to determine their financial capacity and whether additional
payment deferrals or loan modifications are needed. As of mid-July 2020, Regions
has performed few second deferral requests for its consumer products (excluding
residential first mortgage) and its commercial and investor real estate loans.
As provided in the CARES Act passed into law on March 27, 2020, certain loan
modifications related to COVID-19 beginning March 1, 2020 through the earlier of
60 days after the national emergency concerning the COVID-19 outbreak ends or
December 31, 2020 are eligible for relief from TDR classification. Refer to
Table 15 "Troubled Debt Restructurings" for further information.
As a certified SBA lender, Regions experienced an increase in lending activity
in the second quarter of 2020 as the Company continued to assist customers
through the loan process under the PPP. Under this program, Regions has
approximately 44,600 loans outstanding totaling approximately $4.5 billion as of
June 30, 2020.
Regions continues to have strong liquidity and capital levels, which have the
Company well-prepared to respond to the increase in customer borrowing needs.
The Company has ample sources of liquidity that include a granular and 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 affected the second quarter provision for credit losses,
which was $882 million in total and $700 million in excess of net charge-offs
(see below and the "Allowance for Credit Losses" section for further detail).
Loan and deposit balances also increased due to the current environment.
Contributing to the ending loan balance increase was $4.5 billion of lending
through the PPP. Ending deposit levels continued to increase as customers have
retained excess cash from line draws, PPP loans, and other government stimulus
funds. See Table 2 "Loan Portfolio" and Table 19 "Deposits" for further
information.
The COVID-19 pandemic also affected non-interest income. At the beginning of the
second quarter of 2020, consumer spending remained low due to "non essential"
business closures, but did start to increase during the quarter as restrictions
on economic activity were eased throughout the country. Overall, customer
spending activity negatively impacted non-interest income as evidenced by
reductions in service charges of $47 million and card and ATM fess of $4 million
compared to the first quarter. If current spending levels persist, the Company
estimates non-interest income will be negatively impacted by $10 million to $15
million per month from pre-March 2020 levels. See Table 28 "Non-Interest Income"
for more detail.
During the second quarter of 2020, Regions tested goodwill for impairment in
light of the decline in the economic environment caused by the COVID-19
pandemic. The Company concluded that goodwill impairment did not exist. Refer to
the "Goodwill" section for further 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.
Supervisory Stress Test Update
On June 25, 2020, the Federal Reserve indicated that the Company exceeded all
minimum capital levels under the supervisory stress test. The capital plan
submitted to the Federal Reserve reflected no share repurchases through year-end
2020. The Company's preliminary stress capital buffer for the fourth quarter of
2020 through the third quarter of 2021 is currently estimated at 3 percent. The
Federal Reserve has provided specific limitations on capital distributions in
the third quarter of 2020 that the Company will need to maintain compliance with
in order to maintain its common stock dividend. On July 22, 2020, the Company
declared a cash dividend for the third quarter of 2020 of $0.155 per share,
which was in compliance with the Federal Reserve's limit.
Second Quarter Results
Regions reported net income (loss) available to common shareholders of $(237)
million, or $(0.25) per diluted share, in the second quarter of 2020 compared to
$374 million, or $0.37 per diluted share, in the second quarter of 2019.

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For the second quarter of 2020, net interest income (taxable-equivalent basis)
totaled $985 million, up $29 million compared to the second quarter of 2019. The
net interest margin (taxable-equivalent basis) was 3.19 percent for the second
quarter of 2020 and 3.45 percent in the second quarter of 2019. The increase in
net interest income was primarily driven by increases in loan balances due to
PPP lending, the Company's equipment finance acquisition and increased [average]
line utilization on commercial credit lines. Net interest income also benefited
from the execution of the Company's interest rate hedging strategy. The decline
in net interest margin was primarily driven by elevated levels of cash held at
the Federal Reserve, an increase in average commercial line draws, and the
impact of lower yielding PPP loans.
The provision for credit losses totaled $882 million in the second quarter of
2020, after the adoption of CECL at the beginning of the year, as compared to
the provision for loan losses of $92 million during the second quarter of 2019.
The current quarter provision includes $182 million in net charge-offs, as well
as $700 million of additional provision reflecting an increase in the expected
losses over the contractual lives of the loan and credit commitment portfolios.
The increase in the provision for credit losses during the second quarter of
2020 was driven primarily by adverse economic conditions and uncertainty in the
economic outlook resulting from the COVID-19 pandemic and credit deterioration
as evidenced by the increase in both criticized and classified loans during the
second quarter. Downgrades were primarily in the retail, energy, restaurant, and
hotel portfolios (see Note 3 "Loans and the Allowance for Credit Losses" to the
consolidated financial statements for additional information). Refer to the
"Allowance for Credit Losses" section for further detail.
Net charge-offs totaled $182 million, or an annualized 0.80 percent of average
loans, in the second quarter of 2020, compared to $92 million, or an annualized
0.44 percent for the second quarter of 2019. The increase was driven primarily
by charge-offs within the energy and restaurant portfolios, as well as additions
related to the acquisition of Ascentium. See Note 3 "Loans and the Allowance for
Credit Losses" to the consolidated financial statements for additional
information.
The allowance was 2.68 percent of total loans, net of unearned income at
June 30, 2020 compared to 1.10 percent at December 31, 2019. The increase was
impacted by all of the factors discussed above regarding the increase in the
provision. Additionally in the second quarter of 2020, Regions completed the
acquisition of Ascentium, and recognized an initial increase to the allowance of
$60 million associated with the purchase of credit deteriorated loans. The
allowance was 395 percent of total non-performing loans at June 30, 2020
compared to 180 percent at December 31, 2019. Total non-performing loans
increased to 0.68 percent of total loans, net of unearned income, at June 30,
2020, compared to 0.61 percent at December 31, 2019. The increase in
non-performing loans was driven primarily by downgrades in administrative
support, waste and repair, manufacturing, restaurant and energy-related credits.
Refer to the "Allowance for Credit Losses" section of Management's Discussion
and Analysis for further detail.
Non-interest income was $573 million for the second quarter of 2020, a $79
million increase from the second quarter of 2019. The increase was primarily
driven by higher mortgage and capital markets income, partially offset by lower
service charges and card & ATM income. See Table 28 "Non-Interest Income" for
more detail.
Total non-interest expense was $924 million in the second quarter of 2020, a $63
million increase from the second quarter of 2019. The increase was primarily
driven by higher salaries and employee benefits. See Table 29 "Non-Interest
Expense" for more detail.
Income tax expense (benefit) for the three months ended June 30, 2020 was a $47
million benefit compared to $93 million expense for the same period in 2019. See
"Income Taxes" toward the end of the Management's Discussion and Analysis
section of this report for more detail.
Expectations
Due to the current economic uncertainty, the Company has rescinded previously
issued financial targets for 2020, as well as the three-year targets previously
announced in 2019. Regions' expectations will continue to evolve in response to
the changing economic conditions presented amidst the COVID-19 pandemic, as the
Company expects that the financial results of subsequent quarters will continue
to be impacted.
BALANCE SHEET ANALYSIS
The following sections provide expanded discussion of significant changes in
certain line items in asset, liability, and equity categories.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents increased approximately $9.1 billion from year-end
2019 to June 30, 2020, due primarily to an increase in cash on deposit with the
FRB. Significant deposit growth during the quarter has contributed to
historically elevated liquidity sources for the Company. Commercial customer
deposit levels have significantly increased as customers have kept their excess
cash from line draws, PPP loans, and other government stimulus in their deposit
accounts. Some of these liquidity sources were used to increase cash at the FRB.
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, 2020      December 31, 2019
                                                 (In millions)
U.S. Treasury securities            $           181    $               182
Federal agency securities                        42                     43
Mortgage-backed securities:
Residential agency                           17,113                 16,226
Residential non-agency                            1                      1
Commercial agency                             5,829                  5,388
Commercial non-agency                           616                    647
Corporate and other debt securities           1,371                  1,451
                                    $        25,153    $            23,938


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 $1.2 billion from December 31, 2019 to June 30, 2020.
Despite the interest rate volatility during the first half of 2020, Regions'
comprehensive securities repositioning executed in the second and third quarters
of 2019 positioned the portfolio to react favorably to the current economic
environment. The increase from year-end was the result of improved market
valuation and additional purchases of mortgage-backed securities.

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LOANS HELD FOR SALE
Loans held for sale totaled $1.2 billion at June 30, 2020, consisting of $950
million of residential real estate mortgage loans, $192 million of commercial
mortgage and other loans, and $10 million of non-performing loans. At
December 31, 2019, loans held for sale totaled $637 million, consisting of $436
million of residential real estate mortgage loans, $188 million of commercial
mortgage and other loans, and $13 million of non-performing loans. The levels of
residential real estate and commercial mortgage loans held for sale that are
part of the Company's mortgage originations to be sold fluctuate depending on
the timing of origination and sale to third parties.
LOANS
Loans, net of unearned income, represented approximately 70 percent of Regions'
interest-earning assets at June 30, 2020. 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, 2020                December 31, 2019
                                                                  (In millions, net of unearned income)
Commercial and industrial                              $            47,670                   $            39,971
Commercial real estate mortgage-owner-occupied (1)                   5,491                                 5,537
Commercial real estate construction-owner-occupied (1)                 314                                   331
Total commercial                                                    53,475                                45,839
Commercial investor real estate mortgage                             5,221                                 4,936
Commercial investor real estate construction                         1,908                                 1,621
Total investor real estate                                           7,129                                 6,557
Residential first mortgage                                          15,382                                14,485
Home equity lines                                                    4,953                                 5,300
Home equity loans                                                    2,937                                 3,084
Indirect-vehicles                                                    1,331                                 1,812
Indirect-other consumer                                              3,022                                 3,249
Consumer credit card                                                 1,213                                 1,387
Other consumer                                                       1,106                                 1,250
Total consumer                                                      29,944                                30,567
                                                       $            90,548                   $            82,963


__________
(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 2019 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. See Note 3 "Loans and the
Allowance for Credit Losses" to the consolidated financial statements for
additional discussion.
Most classes within Regions' portfolio segments continue to experience the
impact of the COVID-19 pandemic. In particular, Regions' energy, freight
transportation, healthcare, travel and leisure, retail and restaurant portfolios
have experienced significant operational challenges as a result of COVID-19 and
are at the highest risk. Energy credits continue to be stressed even though oil
prices slightly recovered during the second quarter. The restaurant portfolio,
particularly credits in the casual dining space, also continues to come under
stress even as shelter in place orders have been lifted. Small business sectors
of the portfolio, as well as consumer portfolios, are being impacted by social
distancing and limited capacity rules created by the COVID-19 pandemic along
with the fact that these types of borrowers tend to have limited liquidity or
access to alternate liquidity sources. The extent to which Regions' borrowers
are ultimately impacted will be a factor of the duration and severity of the
economic impact as well as the effectiveness of the various government programs
in place to support individuals and businesses. See Table 3 "Selected Industry
Exposure" 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 increased $7.7 billion since year-end 2019. This expansion was
due to the origination of approximately $4.5 billion of PPP

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loans, the addition of $1.9 billion in loans related to the Ascentium
acquisition that occurred at the beginning of the second quarter (see the
"Second Quarter Overview" and the "Ascentium Acquisition" sections for more
information) and, to a lesser degree, elevated draws on commercial lines of
credit. Line utilization levels approached normalized levels by the end of the
second quarter. The expansion was driven by increases in the real estate, retail
trade, manufacturing, healthcare and utilities industry sectors.
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.
Table 3-Commercial Industry Exposure
                                                             June 30, 2020
                                                              Unfunded
                                             Loans           Commitments       Total Exposure
                                                             (In millions)
Administrative, support, waste and
repair                                  $       1,829     $           979     $         2,808
Agriculture                                       517                 250                 767
Educational services                            3,172                 902               4,074
Energy                                          2,195               2,108               4,303
Financial services                              4,281               4,784               9,065
Government and public sector                    3,044                 606               3,650
Healthcare                                      4,797               2,389               7,186
Information                                     1,832                 904               2,736
Manufacturing                                   5,176               4,157               9,333
Professional, scientific and technical
services                                        2,601               1,415               4,016
Real estate (3)                                 8,431               6,907              15,338
Religious, leisure, personal and
non-profit services                             2,263                 730               2,993
Restaurant, accommodation and lodging           2,480                 338               2,818
Retail trade                                    3,119               1,891               5,010
Transportation and warehousing                  2,701               1,176               3,877
Utilities                                       1,901               2,774               4,675
Wholesale goods                                 3,348               3,002               6,350
Other (1)                                        (212 )             2,180               1,968
Total commercial                        $      53,475     $        37,492     $        90,967



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                                                         December 31, 2019 (2)
                                                               Unfunded
                                             Loans            Commitments       Total Exposure
                                                             (In millions)
Administrative, support, waste and
repair                                  $        1,402     $           888     $         2,290
Agriculture                                        456                 225                 681
Educational services                             2,724                 676               3,400
Energy                                           2,172               2,528               4,700
Financial services                               4,588               4,257               8,845
Government and public sector                     2,825                 522               3,347
Healthcare                                       3,646               1,802               5,448
Information                                      1,394                 847               2,241
Manufacturing                                    4,347               3,912               8,259
Professional, scientific and technical
services                                         1,970               1,299               3,269
Real estate (3)                                  7,067               7,224              14,291
Religious, leisure, personal and
non-profit services                              1,748                 769               2,517
Restaurant, accommodation and lodging            1,780                 420               2,200
Retail trade                                     2,439               2,039               4,478
Transportation and warehousing                   1,885               1,250               3,135
Utilities                                        1,774               2,437               4,211
Wholesale goods                                  3,335               2,637               5,972
Other (1)                                          287               2,095               2,382
Total commercial                        $       45,839     $        35,827     $        81,666


________

(1) "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.

(2) 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.

(3) "Real estate" includes REITs, which are unsecured commercial and industrial

products that are real estate related.




Regions has identified certain industry sectors within the commercial and
investor real estate portfolio segments that have the highest risk due to
COVID-19 as of June 30, 2020. These high-risk industries include energy, freight
transportation, healthcare, other consumer services, restaurants, retail, travel
and leisure, hotels and retail. Industries 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. PPP loan balances are not
included in Table 4 as these loans are not considered high risk. Regions is
closely monitoring customers in these industries and has frequent dialogue with
these customers. Certain of these exposures are also represented in Table 5
through Table 8 below. All loans within these tables are in the commercial
portfolio segment, unless specifically identified as IRE.





















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Table 4-COVID-19 High-Risk Industries

                                                                                  June 30, 2020
                                  Balance        % of Total                      Leveraged % of
                                Outstanding         Loans       Utilization %        Balance        SNC % of Balance     % Deferral    % Criticized
                                                                                 ($ in millions)
Commercial
Energy - E&P, oilfield
services                     $         1,367        1.5 %             66 %            - %                   80 %              6 %            48 %
Freight transportation-
local general freight,
freight arrangement                      261        0.3 %             80 %            6 %                    - %             23 %             5 %
Healthcare - offices of
physicians and other health
practitioners                          1,130        1.2 %             72 %            4 %                    4 %             32 %             4 %
Other consumer services -
personal care services,
religious organizations, dry
cleaning and laundry
services                                 463        0.5 %             75 %            - %                    - %             29 %             8 %
Restaurants - full service,
special food services                    798        0.9 %             86 %           21 %                   40 %             29 %            32 %
Retail (non-essential) -
clothing                                 247        0.3 %             67 %            - %                   75 %             11 %            44 %
Travel and leisure -
amusement, arts and
recreation                               649        0.7 %             76 %           37 %                   48 %             17 %            17 %
Total commercial                       4,915        5.4 %             73 %           10 %                   40 %             21 %            25 %

REITs and IRE
Hotels - full service,
limited service, extended
stay                                     983        1.1 %             81 %            - %                   69 %             18 %            27 %
Retail (non-essential) -
malls and outlet centers               2,529        2.8 %             65 %            - %                   77 %              9 %            25 %
Total REITs and IRE                    3,512        3.9 %             69 %            - %                   75 %             11 %            25 %

Total COVID-19 high-risk
industries                   $         8,427


Energy
Regions' direct energy portfolio is comprised mostly of E&P and midstream sector
borrowers. As of June 30, 2020, oil prices have rebounded from all-time lows in
April 2020, but have not yet reached pre-pandemic levels. None of Regions'
direct energy credits are leveraged loans and Regions has no second lien energy
exposure. During the first six months of 2020, Regions has recognized
approximately $86 million in energy charge-offs, of which $84 million was
associated with four customers. Since first quarter 2015, utilization rates have
remained between 40-60%. Hedge positions are adequate for oil producers and
strong for natural gas providers, and 4% of energy loans are currently operating
under a COVID-19 payment deferral.

Table 5-Energy Industry Exposure

                                                                            June 30, 2020
                                           Balance                                                 Criticized
                                         Outstanding       % Outstanding    Utilization Rate        Balances       % Criticized
                                                                            (In millions)
Oilfield services and supply          $           360             17 %                70 %      $          187           52 %
E&P                                             1,007             46 %                65 %                 472           47 %
Midstream                                         646             29 %                41 %                 132           20 %
Downstream                                         97              4 %                26 %                   -            - %
Other                                              72              3 %                25 %                  43           60 %
PPP                                                13              1 %               100 %                   -            - %
Total energy                          $         2,195            100 %                51 %      $          834           38 %



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Restaurant

The quick service sector comprises over half of Regions' restaurant portfolio
balances outstanding. Quarantining, social distancing, and reduced business
travel as a result of the COVID-19 pandemic has and will continue to result in
lost demand, much of which may not be recoverable. Casual dining is the sector
under the most stress in the current environment. Quick service restaurants
focus on fast food service and limited menus. This sector has performed
relatively well during the pandemic given digital platforms, drive-through and
delivery capabilities. The $798 million in COVID high-risk balances related to
restaurants disclosed in Table 4 above are included across the quick service,
casual dining and other sectors disclosed in Table 6 below. Approximately 18% of
restaurant outstandings are leveraged. Prior to the COVID-19 pandemic, Regions
strategically exited some higher risk restaurant relationships at par.
Approximately 27% of restaurant, accommodation and lodging portfolio balances
are in payment deferrals as of June 30, 2020. During the first six months of
2020, Regions has recognized approximately $31 million in restaurant
charge-offs.
Table 6-Restaurant Industry Exposure
                                                                            June 30, 2020
                                           Balance                                                 Criticized
                                         Outstanding       % Outstanding    Utilization Rate        Balances       % Criticized
                                                                            (In millions)
Quick service                         $         1,280             56 %                84 %      $          168           13 %
Casual dining                                     487             21 %                87 %                 254           52 %
Other                                             149              6 %                90 %                  20           13 %
PPP                                               396             17 %               100 %                   -            - %
Total restaurant                      $         2,312            100 %                87 %      $          442           19 %


Hotel-related
Regions' hotel-related portfolio is the most impacted property type given
cancellations of events, conventions, and most business and leisure travel.
While demand is expected to increase in 2021, the average daily rate will likely
be slower to recover. Regions' hotel-related portfolio is primarily comprised of
12 REIT customers. These loans are unsecured commercial and industrial loans;
however, they are real estate related. The REIT portfolio benefits from low
leverage, strong liquidity, and diversity of property holdings. Companies have
also taken proactive steps to reduce capital expenditures, cut dividends, and
reduce overhead to preserve cash. SNCs comprise 59% of Regions' total
hotel-related loans. Most of Regions' borrowers for secured hotel loans have
requested deferrals. As noted above, approximately 27% of restaurant,
accommodation and lodging portfolio balances are in payment deferrals as of June
30, 2020. During the first six months of 2020, Regions has recognized no
charge-offs in hotel related lending. REITs and IRE balances in the table below
comprise the hotels COVID high-risk industry sector balance of $983 million
disclosed in Table 4. The consumer services and PPP balances included in the
table below along with the total restaurants balance in Table 6 above comprise
the restaurant, accommodation and lodging balance in Table 3 above.
Table 7-Hotel-Related Industry Exposure
                                                                          June 30, 2020
                                         Balance                                                 Criticized
                                       Outstanding       % Outstanding    Utilization Rate        Balances       % Criticized
                                                                          (In millions)
Commercial:
  REITs                             $           714             62 %                80 %      $            -             - %
  Consumer services                             131             12 %                95 %                   1             1 %
  PPP                                            37              3 %               100 %                   -             - %
Total commercial                                882             77 %                                       1             1 %

IRE:
  IRE - mortgage                                238             21 %                96 %                 236            99 %
  IRE - construction                             31              2 %                39 %                  31           100 %
Total IRE                                       269             23 %                                     267            99 %

Total hotel-related                 $         1,151            100 %                83 %      $          268            23 %






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Retail-related
Regions' retail-related industry is mainly comprised of REITs and non-leveraged
commercial and industrial sectors. Approximately $553 million of outstanding
balances across the REIT and IRE portfolios relate to shopping malls and outlet
centers. Portfolio exposure to REITs specializing in enclosed malls consists of
a small number of credits. Approximately 48% of mall REIT balances are
investment grade with low leverage. The IRE portfolio is widely distributed. The
largest tenants typically include "basic needs" anchors. However, almost all IRE
retail credits were downgraded to criticized in the second quarter due to low
rent collections and concerns over tenant viability in the long term. The
commercial and industrial retail portfolio is also widely distributed. The
largest categories include motor vehicle and parts dealers, building materials,
garden equipment and supplies, and non-store retailers. Owner-occupied CRE
consists primarily of small strip malls and convenience stores which are largely
term loans where a higher utilization rate is expected. Approximately 6% of
retail-related lending is operating in a deferral as of June 30, 2020. During
the first six months of 2020, Regions has recognized approximately $7 million in
retail-related lending charge-offs. REIT and IRE balances totaling $2,529
million in the table below comprise the COVID high-risk REITs and IRE
retail-related sector balance in Table 4. Portions of the commercial and
industrial-not leveraged, CRE owner-occupied and asset-based lending balances in
the table below comprise the $247 million of the COVID high-risk commercial
retail sector in Table 4. Additionally, the commercial and industrial leveraged
and non-leveraged, asset-based lending, PPP and CRE owner-occupied balances
totaling $3,119 million in the table below comprise the retail trade commercial
industry sector balance in Table 3.
Table 8-Retail-Related Industry Exposure
                                                                                  June 30, 2020
                                                Balance                                                 Criticized        Criticized
                                              Outstanding       % Outstanding    Utilization Rate        balances         percentage
                                                                                  (In millions)
Commercial:
  REITs                                    $         1,789             32 %                57 %      $           92           5 %
  Commercial and industrial- leveraged                 229              4 %                60 %                   -           - %
  Commercial and industrial- not leveraged           1,266             22 %                55 %                  29           2 %
  Asset-based lending                                  588             10 %                48 %                 163          28 %
  PPP                                                  334              7 %               100 %                   -           - %
  CRE- owner-occupied                                  702             12 %                94 %                  24           3 %
Total commercial                                     4,908             87 %                                     308           6 %

IRE                                                    740             13 %                94 %                 532          72 %

Total commercial and IRE retail-related    $         5,648            100 %                63 %      $          840          15 %



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 increased $572 million in comparison to 2019 year-end balances
reflecting new fundings and draws on investor real estate construction lines.
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 $897 million in comparison to 2019 year-end balances. The
increase in residential first mortgage loans was driven by an increase in
originations due to historically low market interest rates during 2020.
Approximately $3.4 billion in new loan originations were retained on the balance
sheet through the first six months of 2020.
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 $347 million in comparison to 2019 year-end balances.
Substantially all of this portfolio was originated through Regions' branch
network.

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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
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, 2020.
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 9-Home Equity Lines of Credit - Future Principal Payment Resets
           First Lien    % of Total    Second Lien    % of Total    Total
                                (Dollars in millions)
2020               69         1.40 %            56         1.12 %     125
2021                92        1.84 %             81        1.64 %      173
2022               101        2.03 %             97        1.96 %      198
2023               132        2.67 %            108        2.19 %      240
2024               184        3.71 %            145        2.92 %      329
2025-2029        1,948       39.33 %          1,727       34.87 %    3,675
2030-2034          133        2.69 %             74        1.51 %      207
Thereafter           3        0.07 %              3        0.05 %        6
Total           2,662        53.74 %         2,291        46.26 %   4,953


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 $147 million in comparison to 2019 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 10-Estimated Current Loan to Value Ranges

                                                                   June 30, 2020
                                Residential         Home Equity Lines of Credit              Home Equity Loans
                              First Mortgage         1st Lien          2nd Lien           1st Lien          2nd Lien
                                                                   (In millions)
Estimated current LTV:
Above 100%                   $            32     $             7     $         9     $         8          $         4
80% - 100%                             2,338                  64             149              42                   22
Below 80%                             12,734               2,551           2,052           2,612                  232
Data not available                       278                  40              81              13                    4
                             $        15,382     $         2,662     $     2,291     $     2,675          $       262


                                                                  December 31, 2019
                                 Residential         Home Equity Lines of Credit              Home Equity Loans
                               First Mortgage         1st Lien          2nd Lien           1st Lien          2nd Lien
                                                                    (In millions)
Estimated current LTV:
Above 100%                    $            32     $             8     $        18     $         9          $         5
80% - 100%                              1,745                  86             208              39                   29
Below 80%                              12,438               2,659           2,195           2,731                  252
Data not available                        270                  35              91              14                    5
                              $        14,485     $         2,788     $     2,512     $     2,793          $       291


Indirect-Vehicles
Indirect-vehicles lending, which is lending initiated through third-party
business partners, largely consists of loans made through automotive
dealerships. This portfolio class decreased $481 million from year-end 2019. The
decrease is due to the termination of a third-party arrangement during the
fourth quarter of 2016 and Regions' decision in January 2019 to discontinue its
indirect auto lending business. Regions ceased originating new indirect auto
loans in the first quarter of 2019 and completed any in-process indirect auto
loan closings at the end of the second quarter of 2019. The Company will remain
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 class decreased
$227 million from year-end 2019 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 $174 million from
year-end 2019 reflecting lower credit card transaction volume as customers react
to the economic environment.
Other Consumer
Other consumer loans primarily include direct consumer loans, overdrafts and
other revolving loans. Other consumer loans decreased $144 million from year-end
2019.
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" .
ALLOWANCE
In preparing financial information, management is required to make significant
estimates and assumptions that affect the reported amounts of assets,
liabilities, income and expenses for the periods shown. The accounting
principles followed by Regions and the methods of applying these principles
conform with GAAP, regulatory guidance (where applicable), and general banking
practices. The allowance is one of the most significant estimates and
assumptions to Regions. The allowance consists of two components: the allowance
for loan losses and the reserve for unfunded credit commitments. Unfunded credit
commitments include items such as letters of credit, financial guarantees and
binding unfunded loan commitments.

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On January 1, 2020, Regions adopted CECL, which replaced the incurred loss
allowance methodology with an expected loss allowance methodology. See Note 1
"Basis of Presentation", Note 3 "Loans and the Allowance for Credit Losses" and
Note 13 "Recent Accounting Pronouncements" for information about CECL adoption,
areas of judgment and methodologies used in establishing the allowance.
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.
Since the adoption of CECL on January 1, 2020, Regions has increased the
allowance by $1.0 billion from $1.4 billion to $2.4 billion, 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 11 below. While many of these items overlap regarding impact,
they are included in the category most relevant.
Table 11- Allowance Changes
                                                          Three months ended June 30, 2020
                                                                    (In millions)
Allowance for credit losses at April 1                   $                  

1,665

Initial allowance on acquired PCD loans                                     

60

Provision over net charge-offs:

  Economic outlook and adjustments                                                 287
  Changes in portfolio credit quality                                              382
  Changes in specific reserves                                                     (10 )
  Portfolio growth (run-off) (1)                                                   (35 )
  Provision impact of non-PCD acquired loans(3)                                     76
Total provision over net charge-offs                                        

700

Allowance for credit losses at June 30                   $                       2,425


                                                           Six months ended June 30, 2020
                                                                   (In millions)

Allowance for credit losses at January 1 (as adjusted for change in accounting guidance) (2)

                   $                  

1,415

Initial allowance on acquired PCD loans                                     

60

Provision over net charge-offs:

  Economic outlook and adjustments                                                510
  Changes in portfolio credit quality                                             424
  Changes in specific reserves                                                     26
  Portfolio growth (run-off) (1)                                                  (86 )
  Provision impact of non-PCD acquired loans(3)                                    76
Total provision over net charge-offs                                        

950

Allowance for credit losses at June 30                   $                  

2,425

_______

(1) Portfolio growth does not include PPP loans of $4.5 billion, which are fully

backed by the U.S. government and do not have an associated allowance.

(2) 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.

(3) This balance includes $64 million related to the initial allowance for

non-PCD loans acquired as part of the Ascentium acquisition.



There continues to be a significant amount of uncertainty surrounding the
economic environment due to the COVID-19 pandemic. Elevated unfavorable credit
metrics and charge-offs, deferrals and forbearances, continued low consumer
spending and the potential for a second wave of the pandemic are all negative
signs of the current economic landscape. Conversely, unprecedented stimulus is
working its way through the economic system, with early signs that the deferral
programs are working (as evidenced by a high savings rate). Consumers entered
the COVID-19 crisis in a stronger position compared to the economic downturn in
2007 and, with the unemployment stimulus, many on unemployment have higher cash
flows than when they were employed. Additionally, mortgage LTVs and the HPI are
holding up well. As the credit risk within Regions' loan portfolio continues to
be

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evaluated going into the second half of 2020, the negative and positive factors
of the ever-evolving economic landscape were considered in determining the
allowance estimate.
Credit metrics are monitored throughout the quarter in order to understand
external macro-views of credit metrics, trends and industry outlooks as well as
Regions' internal specific views of credit metrics and trends. The second
quarter of 2020 exhibited continued signs of economic stress due to the COVID-19
pandemic, as commercial and investor real estate criticized balances increased
approximately $1.7 billion and classified balances increased $491 million
compared to the first quarter. Non-performing loans excluding held for sale
decreased $24 million compared to the first quarter; however, total net
charge-offs increased $59 million during the second quarter. Approximately $8.4
billion of commercial and investor real estate loans are in COVID-19 high-risk
industry segments. These high-risk industries include energy, freight
transportation, healthcare, other consumer services, restaurants, retail, travel
and leisure, hotels and retail commercial real estate. Refer to the "Portfolio
Characteristics" section for more information about the high-risk industries.
Regions purchased Ascentium, an independent equipment financing company on April
1, 2020. The purchase included approximately $1.9 billion in loans and leases to
small businesses, of which approximately 46% were considered to be PCD. Regions
considered loan payment status, COVID-19 deferral status, and loans in high-risk
industries in COVID-19 highly-impacted states in its determination of PCD. The
Ascentium acquisition resulted in $136 million in additional allowance in the
second quarter, of which $76 million was recorded through the provision for
credit losses and the remaining $60 million was for acquired PCD loans and did
not impact the provision for credit losses. See the "Ascentium Acquisition"
section for more information.
Changes in the macroeconomic environment can be extremely impactful to the
allowance estimate under CECL. Regions' economic forecast utilized in the
January 1, 2020 allowance estimate upon adoption of CECL considered a relatively
benign economic environment. The forecast utilized in the March 31, 2020
allowance estimate considered a more stressed economic environment due to
COVID-19 pandemic based on early stage pandemic information. The economic
forecast utilized in the June 30, 2020 allowance estimate included further
deterioration primarily due to higher levels of unemployment. Refer to the
Economic Outlook section for more information. Regions benchmarked its internal
forecast with external forecasts and external data available.
Risks to the economic forecast included a high degree of uncertainty around how
wide the COVID-19 pandemic could spread, how long it could persist, and the
effectiveness of government relief programs and debt payment relief being
provided by the Company. Also, the unique nature of the COVID-19 economic
environment produced unintuitive modeled results due to sensitivity to the
unemployment forecasts, specifically the transient spike in unemployment rates.
The CECL models are not built or conditioned to reflect the unprecedented levels
of stimulus and cannot anticipate (or connect) the new relationships between
economic variables and portfolio risks that exist in the current environment.
There were several points of analysis used to inform appropriate model
adjustments for economic uncertainty. Industry-level stress analyses were also
performed on industries most acutely impacted by the COVID-19 pandemic. Refer to
the "Portfolio Characteristics" section for more information about COVID-19
impacted industries. These economic uncertainties and model limitations were
evaluated and resulted in a reduction to the modeled life of loan loss estimate.
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, 2020 general imprecision
allowance considered the incremental risk specific to COVID-19 payment deferrals
and delinquency trends for certain consumer models that are not economically
conditioned and as such does not fully consider these impacts.
The components of the changes in the ACL during 2020 are reflected in Table 11
above. The decrease in ACL related to portfolio runoff for the six months ended
June 30, 2020 was primarily due to a reduction in indirect-other consumer and
credit card balances which carry a relatively higher allowance. Additionally,
first quarter growth in commercial loans occurred in lower risk rating tranches,
while balance runoff occurred in higher risk rating tranches.
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, 2020. The
unemployment rate is the most significant macroeconomic factor among the CECL
models. As noted above, the June 30, 2020 allowance includes a reduction to the
modeled Base forecast to adjust for over-sensitivity within the models,
specifically for unemployment.
Table 12- Macroeconomic Factors in the Forecast
                                                                         Base R&S Forecast
                       Pre-R&S Period                                      June 30, 2020
                           2Q2020         3Q2020    4Q2020    1Q2021     2Q2021     3Q2021    4Q2021    1Q2022    2Q2022
Real GDP, annualized
% change                   (37.90 )%      25.60 %    9.00 %    5.60 %    4.10  %    3.00  %    2.90 %    2.60 %    2.80 %
Unemployment rate           13.20  %       9.90 %    9.10 %    8.60 %    7.90  %    7.40  %    7.00 %    6.70 %    6.50 %
HPI, year-over-year %
change                       5.70  %       5.00 %    3.20 %    1.30 %   (0.50 )%   (0.30 )%    1.30 %    2.80 %    3.60 %
S&P 500                     2,959         3,232     3,253     3,270     3,283      3,313      3,347     3,375     3,398



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Based on the overall analysis performed, management deemed an increase in the
allowance of $760 million as compared to March 31, 2020 to be appropriate to
absorb expected credit losses in the loan and credit commitment portfolios as of
June 30, 2020.
In June 2020, the Federal Reserve disclosed their estimated modeled credit
losses for Regions as a part of the supervisory stress test. The Federal
Reserve's economic scenario resulted in estimated losses for Regions of $5.3
billion. Whereas this scenario assumed a different macroeconomic outlook than
Regions', it may represent a possible range of potential credit losses assuming
a longer-term, widespread pandemic. As a point of clarification, the Federal
Reserve's scenario assumes severe deterioration across both business services
(commercial and investor real estate) and consumer portfolios, while Regions
assumes deterioration mainly in the business services portfolio. Additionally,
the Federal Reserve's estimate includes no benefit of government stimulus or
benefit from debt payment relief being offered by Regions and other financial
institutions. See the "Second Quarter Overview" section for further information
regarding the Company's economic outlook.
Changes in the factors used by management to determine the appropriateness of
the allowance or the availability of new information could cause the allowance
to be increased or decreased in future periods. In addition, bank regulatory
agencies, as part of their examination process, may require changes in the level
of allowance based on their judgments and estimates. Volatility in certain
credit metrics is to be expected. Additionally, changes in circumstances related
to individually large credits, commodity prices, or certain macroeconomic
forecast assumptions may result in volatility. The scenarios discussed above, or
other scenarios, have the ability to result in actual credit losses that differ,
perhaps materially, from the originally estimated amounts. In addition, it is
difficult to predict how changes in economic conditions, including changes
resulting from various pandemic scenarios, the impact of government stimulus,
and other relief programs could affect borrower behavior. This analysis is not
intended to estimate changes in the overall allowance, which would also be
influenced by the judgment management applies to the modeled loss estimates to
reflect uncertainty and imprecision based on then-current circumstances and
conditions.
Details regarding the allowance and net charge-offs, including an analysis of
activity from the previous year's totals, are included in Table 13 "Allowance
for Credit Losses." As noted above, economic trends such as interest rates,
unemployment, volatility in commodity prices 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
2020 and beyond.






















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Table 13-Allowance for Credit Losses

                                                                Six Months Ended June 30
                                                                 2020              2019
                                                                 (Dollars in millions)
Allowance for loan losses at January 1                      $        869       $       840
Cumulative change in accounting guidance (1)                         438                 -

Allowance for loan losses, January 1 (as adjusted for change in accounting guidance) (1)

                                 1,307               840

Loans charged-off:
Commercial and industrial                                            207                69
Commercial real estate mortgage-owner-occupied                         6                 5
Residential first mortgage                                             2                 3
Home equity lines                                                      7                 8
Home equity loans                                                      1                 3
Indirect-vehicles                                                     12                15
Indirect-other consumer                                               41                35
Consumer credit card                                                  33                34
Other consumer                                                        39                43
                                                                     348               215
Recoveries of loans previously charged-off:
Commercial and industrial                                             14                12
Commercial real estate mortgage-owner-occupied                         3                 3
Commercial investor real estate mortgage                               1                 1
Commercial investor real estate construction                           -                 1
Residential first mortgage                                             2                 2
Home equity lines                                                      5                 6
Home equity loans                                                      1                 2
Indirect-vehicles                                                      5                 7
Indirect-other consumer                                                -                 -
Consumer credit card                                                   5                 4
Other consumer                                                         7                 7
                                                                      43                45
Net charge-offs:
Commercial and industrial                                            193                57
Commercial real estate mortgage-owner-occupied                         3                 2
Commercial investor real estate mortgage                              (1 )              (1 )
Commercial investor real estate construction                           -                (1 )
Residential first mortgage                                             -                 1
Home equity lines                                                      2                 2
Home equity loans                                                      -                 1
Indirect-vehicles                                                      7                 8
Indirect-other consumer                                               41                35
Consumer credit card                                                  28                30
Other consumer                                                        32                36
                                                                     305               170
Provision for loan losses                                          1,214               183
Initial allowance on acquired PCD loans                               60                 -
Allowance for loan losses at June 30                               2,276               853

Reserve for unfunded credit commitments at beginning of year

                                                                  45                51
Cumulative change in accounting guidance (1)                          63                 -
Provision (credit) for unfunded credit losses                         41                (1 )
Reserve for unfunded credit commitments at June 30                   149                50
Allowance for credit losses at June 30                      $      2,425       $       903
Loans, net of unearned income, outstanding at end of period $     90,548       $    83,553
Average loans, net of unearned income, outstanding for the
period                                                      $     87,607       $    83,816




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                                                                Six Months Ended June 30
                                                                 2020              2019
                                                                  (Dollars in millions)
Ratios:
Allowance for credit losses at end of period to loans, net
of unearned income                                                   2.68 %            1.08 %

Allowance for credit losses at end of period to loans, excluding PPP, net (non-GAAP) (2)

                                    2.82 %            1.08 %

Allowance for loan losses at end of period to loans, net of unearned income

                                                      2.51 %            1.02 %
Allowance for credit losses at end of period to
non-performing loans, excluding loans held for sale                   395 %             169 %
Allowance for loan losses at end of period to
non-performing loans, excluding loans held for sale                   370 %             160 %

Net charge-offs as percentage of average loans, net of unearned income (annualized)

                                         0.70 %            0.41 %


_______

(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) See Table 23 for calculation.




Allocation of the allowance for credit losses by portfolio segment and class is
summarized as follows:
Table 14-Allowance Allocation
                                                      June 30, 2020                                        January 1, 2020
                                                         Allowance       Allowance to                          Allowance       Allowance to
                                     Loan Balance        Allocation         Loans %        Loan Balance        Allocation         Loans %
Commercial and industrial          $       47,670     $        1,109         2.33 %      $       39,971     $          443         1.11 %
Commercial real estate
mortgage-owner-occupied                     5,491                249         4.53 %               5,537                153         2.76 %
Commercial real estate
construction-owner-occupied                   314                 20         6.37 %                 331                 14         4.23 %
Total commercial                           53,475              1,378         2.58 %              45,839                610         1.33 %
Commercial investor real estate
mortgage                                    5,221                132         2.53 %               4,936                 54         1.09 %
Commercial investor real estate
construction                                1,908                 55         2.88 %               1,621                 16         0.99 %
Total investor real estate                  7,129                187         2.62 %               6,557                 70         1.07 %
Residential first mortgage                 15,382                151         0.98 %              14,485                 86         0.59 %
Home equity lines                           4,953                146         2.95 %               5,300                144         2.72 %
Home equity loans                           2,937                 42         1.43 %               3,084                 32         1.04 %
Indirect-vehicles                           1,331                 34         2.55 %               1,812                 26         1.43 %
Indirect-other consumer                     3,022                278         9.20 %               3,249                267         8.22 %
Consumer credit card                        1,213                143        11.79 %               1,387                112         8.07 %
Other consumer                              1,106                 66         5.97 %               1,250                 68         5.44 %
Total consumer                             29,944                860         2.87 %              30,567                735         2.40 %
                                   $       90,548     $        2,425         2.68 %      $       82,963     $        1,415         1.71 %



TROUBLED DEBT RESTRUCTURINGS (TDRs)
TDRs are modified loans in which a concession is provided to a borrower
experiencing financial difficulty. As provided in the CARES Act passed into law
on March 27, 2020, certain loan modifications related to the COVID-19 pandemic
beginning March 1, 2020 are eligible for relief from TDR classification. Regions
elected this provision of the CARES Act; 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. During this time, a customer's
loan is not considered past due and continues to accrue interest (unless it is a
nonperforming loans). As of June 30, 2020, the initial 90-day deferral period
had expired for a portion of COVID-19 modified loans. 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 CARES Act relief and
short-term nature of most COVID-19 deferrals precluded these modifications from
being classified as TDRs as of June 30, 2020.

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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:
Table 15-Troubled Debt Restructurings
                                                   June 30, 2020                           December 31, 2019
                                           Loan          Allowance for Credit         Loan        Allowance for Credit
                                          Balance               Losses              Balance              Losses
                                                                       (In millions)
Accruing:
Commercial                           $        49         $                 4     $        106     $                15
Investor real estate                           6                           1               32                       3
Residential first mortgage                   178                          24              177                      18
Home equity lines                             38                           6               42                       2
Home equity loans                             90                          10              109                       5
Consumer credit card                           1                           -                1                       -
Other consumer                                 3                           -                4                       -
                                             365                          45              471                      43
Non-accrual status or 90 days past
due and still accruing:
Commercial                                   214                           9              139                      20
Investor real estate                           -                           -                1                       -
Residential first mortgage                    37                           5               40                       4
Home equity lines                              3                           -                2                       -
Home equity loans                              7                           1                6                       -
                                             261                          15              188                      24
Total TDRs - Loans                   $       626         $                60     $        659     $                67

TDRs - Held For Sale                           -                           -                1                       -
Total TDRs                           $       626         $                60     $        660     $                67



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.

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Table 16-Analysis of Changes in Commercial and Investor Real Estate TDRs

                                                 Six Months Ended June 30, 2020         Six Months Ended June 30, 2019
                                                                       Investor                               Investor
                                                 Commercial          Real Estate        Commercial          Real Estate
                                                                             (In millions)
Balance, beginning of period                  $         245         $       33       $         291         $       19
Additions                                               208                  -                 100                  2
Charge-offs                                             (52 )                -                 (14 )                -
Other activity, inclusive of payments and
removals (1)                                           (138 )              (27 )               (94 )               (1 )
Balance, end of period                        $         263         $        6       $         283         $       20


_________
(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 $17 million of commercial loans and $12
million of investor real estate loans refinanced or restructured as new loans
and removed from TDR classification for the six months ended June 30, 2020.
During the six months ended June 30, 2019, less than $1 million of both
commercial loans and investor real estate loans were refinanced or restructured
as new loans and removed from TDR classification.

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NON-PERFORMING ASSETS
Non-performing assets are summarized as follows:

Table 17-Non-Performing Assets

                                                         June 30, 2020        December 31, 2019
                                                                 (Dollars in millions)
Non-performing loans:
Commercial and industrial                             $           445       $            347
Commercial real estate mortgage-owner-occupied                     74                     73
Commercial real estate construction-owner-occupied                 10                     11
Total commercial                                                  529                    431
Commercial investor real estate mortgage                            1                      2
Total investor real estate                                          1                      2
Residential first mortgage                                         32                     27
Home equity lines                                                  46                     41
Home equity loans                                                   6                      6
Total consumer                                                     84                     74

Total non-performing loans, excluding loans held for sale

                                                              614                    507
Non-performing loans held for sale                                 10                     13
Total non-performing loans(1)                                     624                    520
Foreclosed properties                                              43                     53
Non-marketable investments received in foreclosure                  -                      5
Total non-performing assets(1)                        $           667       $            578
Accruing loans 90 days past due:
Commercial and industrial                             $            11       $             11
Commercial real estate mortgage-owner-occupied                      3                      1
Total commercial                                                   14                     12
Residential first mortgage(2)                                      75                     70
Home equity lines                                                  26                     32
Home equity loans                                                  12                     10
Indirect-vehicles                                                   8                      7
Indirect-other consumer                                             3                      3
Consumer credit card                                               17                     19
Other consumer                                                      5                      5
Total consumer                                                    146                    146
                                                      $           160       $            158

Non-performing loans(1) to loans and non-performing loans held for sale

                                              0.69 %                 0.63 %
Non-performing assets(1) to loans, foreclosed
properties, non-marketable investments, and
non-performing loans held for sale                               0.74 %                 0.70 %


_________

(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 $55 million at June 30, 2020 and $66 million at December 31,

2019.



Non-performing loans at June 30, 2020 have increased compared to year-end
levels, primarily driven by energy credits that have experienced stress due to
recent declines in oil prices.
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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At June 30, 2020, Regions estimates that the amount of commercial and investor
real estate loans that have the potential to migrate to non-accrual status in
the next quarter is within the range of $325 million to $475 million. The
estimated range increased from the first quarter estimated range of $225 million
to $350 million due to certain large dollar investor real estate, energy and
natural resources, manufacturing and restaurant commercial loans that represent
potential for migration in the third quarter.
In order to arrive at the estimated range of potential problem loans for the
next quarter, credit personnel forecast certain larger dollar loans that may
potentially be downgraded to non-accrual at a future time, depending upon the
occurrence of future events. A variety of factors are included in the assessment
of potential problem loans, including a borrower's capacity and willingness to
meet contractual repayment terms, make principal curtailments or provide
additional collateral when necessary and provide current and complete financial
information, including global cash flows, contingent liabilities and sources of
liquidity. For other loans (for example, smaller dollar loans), a trend analysis
is also incorporated to determine an estimate of potential future downgrades. In
addition, the economic environment and industry trends are evaluated in the
establishment of the estimated range of potential problem loans for the next
quarter. Current trends will additionally influence the size of the estimated
range. Because of the inherent uncertainty in forecasting future events, the
estimated range of potential problem loans ultimately represents the estimated
aggregate dollar amounts of loans, as opposed to an individual listing of loans.
Many of the loans on which the potential problem loan estimate is based are
considered criticized and classified. Detailed disclosures for substandard
accrual loans (as well as other credit quality metrics) are included in Note 3
"Loans and the Allowance for Credit Losses" to the consolidated financial
statements.
The following table provides an analysis of non-accrual loans (excluding loans
held for sale) by portfolio segment:
Table 18- Analysis of Non-Accrual Loans
                                                   Non-Accrual Loans, Excluding Loans Held for Sale
                                                            Six Months Ended June 30, 2020
                                                               Investor
                                        Commercial           Real Estate           Consumer(1)           Total
                                                                     (In millions)
Balance at beginning of period       $        431         $           2          $         74         $      507
Additions                                     432                     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


                                                 Non-Accrual Loans,

Excluding Loans Held for Sale

                                                          Six Months Ended June 30, 2019
                                                              Investor
                                        Commercial          Real Estate          Consumer(1)         Total
                                                                   (In millions)

Balance at beginning of period $ 382 $ 11

   $        103       $      496
Additions                                     250                    1                    -              251
Net payments/other activity                   (82 )                 (4 )                 (8 )            (94 )
Return to accrual                             (13 )                  -                    -              (13 )
Charge-offs on non-accrual loans(2)           (63 )                  -                    -              (63 )
Transfers to held for sale(3)                 (22 )                  -                    -              (22 )
Transfers to real estate owned                 (2 )                  -                    -               (2 )
Sales                                         (20 )                  -                    -              (20 )
Balance at end of period             $        430         $          8         $         95       $      533


________

(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 $4 million and $5

million recorded upon transfer for the six months ended June 30, 2020 and

    2019, respectively.



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GOODWILL

Goodwill totaled $5.2 billion at June 30, 2020 and $4.8 billion at December 31,
2019. The increase was related to the Company's acquisition of Ascentium during
the second quarter of 2020.
Based on recent events and circumstances, Regions concluded that a triggering
event had occurred in the second quarter which required Regions to perform a
quantitative goodwill impairment test. The results of the test did not require
Regions to record a goodwill impairment charge as all three reporting units
continued to have a fair value in excess of book value. Regions will continue to
monitor for indicators of impairment throughout 2020. Refer to Note 5 "Goodwill"
to the consolidated financial statements for further information.
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, 2019 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.
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, competitive
pricing and convenient branch locations for its customers. Regions also serves
customers through providing centralized, high-quality banking services and
alternative product delivery channels such as mobile and internet banking.
The following table summarizes deposits by category:
Table 19-Deposits
                                   June 30, 2020      December 31, 2019
                                               (In millions)
Non-interest-bearing demand       $        47,964    $            34,113
Savings                                    10,698                  8,640
Interest-bearing transaction               22,407                 20,046
Money market-domestic                      29,263                 25,326
Time deposits                               6,428                  7,442
Customer deposits                         116,760                 95,567
Corporate treasury time deposits               19                    108
Corporate treasury other deposits               -                  1,800
                                  $       116,779    $            97,475


Total deposits at June 30, 2020 increased approximately $19.3 billion compared
to year-end 2019 levels, due to increases in non-interest-bearing demand,
savings, interest-bearing transaction and domestic money market categories.
These increases were offset by decreases in corporate treasury other deposits
and customer time deposits. Non-interest-bearing demand deposits increased as
customers began to pay down line of credit draws using liquidity sources outside
of the bank and brought the elevated cash levels back to Regions. Savings,
interest-bearing transaction and domestic money market categories increased due
to customers choosing to keep excess cash from government stimulus and funds
from PPP loans in their deposit accounts. Additionally, lower consumer spend due
to the economic environment impacted increased balances. Customer time deposits
decreased due to maturities during the second quarter, and lower rates during
the second quarter drove a decrease in the utilization of time deposit accounts.
Corporate treasury other deposits decreased as these deposits were used to
supplement incremental balance sheet funding at year-end 2019, but were not
utilized at the end of the second quarter of 2020.


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SHORT-TERM BORROWINGS
Short-term borrowings, which consist of FHLB advances, were zero at June 30,
2020 as compared to $2.1 billion at December 31, 2019. The levels of these
borrowings can fluctuate depending on the Company's funding needs and the
sources utilized. FHLB borrowings decreased from December 31, 2019 to June 30,
2020 as the increase in deposits reduced the need for funding from the FHLB.
Short-term secured borrowings, such as securities sold under agreements to
repurchase and FHLB advances, are a core portion of Regions funding strategy.
The securities financing market and specifically short-term FHLB advances
continue to provide reliable funding at attractive rates. See the "Liquidity"
section for further detail of Regions' borrowing capacity with the FHLB.
LONG-TERM BORROWINGS
Table 20-Long-Term Borrowings
                                                      June 30, 2020        

December 31, 2019

                                                                  (In 

millions)

Regions Financial Corporation (Parent):
3.20% senior notes due February 2021                $            359     $               358
2.75% senior notes due August 2022                               998                     997
3.80% senior notes due August 2023                               997                     996
2.25% senior notes due April 2025                                745                       -
7.75% subordinated notes due September 2024                      100                     100
6.75% subordinated debentures due November 2025                  156                     156
7.375% subordinated notes due December 2037                      298                     298
Valuation adjustments on hedged long-term debt                   115                      45
                                                               3,768                   2,950
Regions Bank:
FHLB advances                                                    401                   2,501
2.75% senior notes due April 2021                                191                     549
3 month LIBOR plus 0.38% of floating rate senior
notes due April 2021                                              66                     350
3.374% senior notes converting to 3 month LIBOR
plus 0.50%, callable August 2020, due August 2021                499                     499
3 month LIBOR plus 0.50% of floating rate senior
notes, callable August 2020, due August 2021                     499                     499
6.45% subordinated notes due June 2037                           495                     495
Ascentium note securitizations                                   459                       -
Other long-term debt                                              30                      32
Valuation adjustments on hedged long-term debt                     -                       4
                                                               2,640                   4,929
Total consolidated                                  $          6,408     $             7,879


Long-term borrowings decreased by approximately $1.5 billion since year-end
2019, due primarily to the decrease in FHLB advances of $2.1 billion, partially
offset by several other debt transactions. As mentioned above in the "Short-Term
Borrowings" section, the increase in deposits also reduced the need for
long-term borrowings from the FHLB. See the "Liquidity" section for further
detail of Regions' borrowing capacity with the FHLB. In the second quarter of
2020, Regions issued $750 million of senior notes due 2025. The issuance was
largely offset by a partial tender of the two Regions Bank Senior Notes due
April 2021. In conjunction with the partial tender of the two senior bank notes
and early terminations of FHLB advances, Regions incurred related early
extinguishment pre-tax charges totaling $6 million. Lastly, through the
Ascentium acquisition, Regions acquired securitized borrowings, which the
Company will manage within its broader liability management process and in line
with the allowable terms of the contracts.
Long-term FHLB advances have a weighted-average interest rate of 0.55 percent at
June 30, 2020 and 1.9 percent at December 31, 2019, with remaining maturities
ranging from less than 1 year to 8 years and a weighted-average of less than 1
year.
The Ascentium note securitizations have various classes and have a
weighted-average interest rate of 2.25% as of June 30, 2020, with remaining
maturities ranging from 4 years to 7 years and a weighted-average of 6.2 years.

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On August 3, 2020, Regions Bank sent notices of redemption, which will result in
the redemption on August 13, 2020 of its Senior Fixed-to-Floating Rate Bank
Notes due August 13, 2021 and of its Senior Floating Rate Bank Notes due August
13, 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. The aggregate
principal balance of the two series of notes being redeemed is $1 billion.
SHAREHOLDERS' EQUITY
Shareholders' equity was $17.6 billion at June 30, 2020 as compared to $16.3
billion at December 31, 2019. During the first six months of 2020, net loss
decreased shareholders' equity by $52 million, cash dividends on common stock
reduced shareholders' equity by $298 million and cash dividends on preferred
stock reduced shareholder's equity by $46 million. The cumulative effect from
the adoption of CECL decreased shareholders' equity by $377 million. See Note 1
"Basis of Presentation" for information about the CECL adoption. Changes in
accumulated other comprehensive income increased shareholders' equity by $1.7
billion, 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, 2020. 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.
Lastly, during the second quarter of 2020, the Company issued Series D preferred
stock, which increased stockholders' equity by $346 million.
Total equity includes noncontrolling interest of $26 million, representing the
unowned portion of a low income housing tax credit fund syndication, of which
Regions held the majority interest at June 30, 2020.
On June 25, 2020, the Federal Reserve indicated that the Company exceeded all
minimum capital levels under the supervisory stress test. See Note 6
"Stockholders' Equity and Accumulated Other Comprehensive Income (Loss)" and the
"Regulatory Capital Requirements" 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
"Regulatory Requirements" section of Management's Discussion and Analysis in the
2019 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 2019 Annual Report on Form 10-K.
In late March 2020, the federal banking agencies published an interim final rule
related to revised transition of 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. This amount was approximately $613 million at June 30, 2020, an
increase of $175 million from March 31, 2020. The impact of the addback on the
CET1 ratio was approximately 56 basis points at June 30, 2020, an increase of 16
basis points from March 31, 2020.

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The following table summarizes the applicable holding company and bank
regulatory requirements:
Table 21-Regulatory Capital Requirements
Transitional Basis Basel III Regulatory  June 30, 2020     December 31, 2019       Minimum       To Be Well
Capital Rules                              Ratio (1)             Ratio           Requirement    Capitalized
Basel III common equity Tier 1 capital:
Regions Financial Corporation                  8.87 %                9.68 %          4.50 %            N/A
Regions Bank                                  11.06                 11.58            4.50             6.50 %
Tier 1 capital:
Regions Financial Corporation                 10.38 %               10.91 %          6.00 %           6.00 %
Regions Bank                                  11.06                 11.58            6.00             8.00
Total capital:
Regions Financial Corporation                 12.57 %               12.68 %          8.00 %          10.00 %
Regions Bank                                  12.77                 12.92            8.00            10.00
Leverage capital:
Regions Financial Corporation                  8.43 %                9.65 %          4.00 %            N/A
Regions Bank                                   9.00                 10.24            4.00             5.00 %


_______

(1) The current quarter Basel III CET1 capital, Tier 1 capital, Total capital, and Leverage capital ratios are estimated.


In the first quarter of 2020, the Federal Reserve finalized the stress capital
buffer framework which, when implemented in October 2020, will create a
firm-specific risk sensitive buffer to be applied to regulatory minimum capital
levels in determining effective minimum ratio requirements. The stress capital
buffer will be floored at 2.5% to ensure effective minimum capital levels do not
decline as a result of this rule change. When implemented, the stress capital
buffer will replace the current Capital Conservation Buffer, which is a static
2.5% in addition to the minimum risk-weighted asset ratios shown above.
During the second quarter of 2020, the Federal Reserve released the results of
its supervisory stress test and indicated that Regions exceeded all minimum
capital levels under the severely adverse scenario. Regions' preliminary stress
capital buffer requirement for the fourth quarter of 2020 through the third
quarter of 2021, as determined by the Federal Reserve, is 3.0%, representing the
amount of capital degradation under the supervisory severely adverse scenario,
inclusive of four quarters of planned common stock dividends. Regions' final
stress capital buffer is to be determined by August 31, 2020.
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.  See the "Supervision and Regulation" subsection of the "Business"
section in the 2019 Annual Report on Form 10-K for more information.

LIQUIDITY

Regions maintains a robust liquidity management framework designed to
effectively manage liquidity risk in accordance with sound risk management
principals, as well as regulatory requirements as applicable to Regions'
Category IV status under the tailoring rules. Regions' 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, cash flow forecasting, liquidity
stress testing, liquidity risk limits, contingency funding plans, and collateral
management.  The framework is designed to simultaneously meet the expectations
of regulations, as well as be aligned with Regions' business mix and operating
model and their impact to liquidity management.
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 2019 Annual Report on Form
10-K for additional information.

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RATINGS

Table 22 "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 22-Credit Ratings
                                  As of June 30, 2020
                               S&P   Moody's Fitch   DBRS
Regions Financial Corporation
Senior unsecured debt          BBB+   Baa2    BBB+    AL
Subordinated debt              BBB    Baa2    BBB    BBBH
Regions Bank
Short-term                     A-2     P-1     F1    R-IL
Long-term bank deposits        N/A     A2      A-     A
Senior unsecured debt           A-    Baa2    BBB+    A
Subordinated debt              BBB+   Baa2    BBB     AL
Outlook                       Stable Stable  Stable Stable


                                  As of December 31, 2019
                               S&P   Moody's   Fitch    DBRS
Regions Financial Corporation
Senior unsecured debt          BBB+    Baa2     BBB+     AL
Subordinated debt              BBB     Baa2     BBB     BBBH
Regions Bank
Short-term                     A-2     P-1       F1     R-IL
Long-term bank deposits        N/A      A2       A-      A
Senior unsecured debt           A-     Baa2     BBB+     A
Subordinated debt              BBB+    Baa2     BBB      AL
Outlook                       Stable Positive Positive Stable


_________
N/A - Not applicable.

On April 3, 2020, Moody's revised outlooks for Regions Bank and Regions
Financial Corporation to stable from positive citing expectations for a
contracting economy in 2020 which is expected to have a direct negative impact
on U.S. banks' asset quality and profitability.
On April 9, 2020, Fitch revised the outlook for Regions Financial Corporation to
stable from positive as part of an overall revision of its U.S. bank sector and
rating outlook. Revision to the overall outlook was driven by concerns over the
negative financial and economic impacts from the COVID-19 pandemic.
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 Annual Report on Form 10-K for the year ended
December 31, 2019 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.

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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 total loans", "ending total loans excluding
PPP, net", "ACL to adjusted ending total loans ratio", "adjusted efficiency
ratio", "adjusted fee income ratio", "return on average tangible common
shareholders' equity", 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 base
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



Average total loans are presented excluding the indirect vehicles exit portfolio
to arrive at adjusted average total loans (non-GAAP). Regions believes adjusting
average total loans provides a meaningful calculation of loan growth rates and
presents them on the same basis as that applied by management.
Ending total loans are presented excluding loan balances related to loans
originated through the SBA's PPP program. Regions believes the related ACL to
adjusted ending loans 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.
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
CET1, 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 to
adjusted average total loans (non-GAAP), 2) a reconciliation of ending total
loans to ending total loans excluding PPP loans and a computation of ACL to
ending loans excluding PPP loans, 3) a reconciliation of net income (loss)
(GAAP) to net income (loss) available to common shareholders (GAAP), 4) a
reconciliation of non-interest expense (GAAP) to adjusted non-interest expense
(non-GAAP), 5) a reconciliation of net interest income/margin, taxable
equivalent basis (GAAP) to adjusted net interest income/margin, taxable
equivalent basis (non-GAAP), 6) a reconciliation of non-interest income (GAAP)
to adjusted non-interest income (non-GAAP), 7) a computation of adjusted total
revenue (non-GAAP), 8) a computation of the adjusted efficiency ratio
(non-GAAP), 9) a computation of the adjusted fee income ratio (non-GAAP), and
10) 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 23-GAAP to Non-GAAP Reconciliations

                                           Three Months Ended June 30          Six Months Ended June 30
                                              2020              2019             2020             2019
                                                              (Dollars in millions)
ADJUSTED AVERAGE BALANCES OF LOANS
Average total loans                     $       91,964     $     83,905     $      87,607     $   83,816
Less: Indirect-vehicles                          1,441            2,578             1,561          2,750
Adjusted average total loans (non-GAAP) $       90,523     $     81,327     $      86,046     $   81,066


                                            June 30, 2020     December 31, 2019     June 30, 2019
                                                            (Dollars in millions)
ACL/LOANS, EXCLUDING PPP, NET
Ending total loans                         $      90,548     $          82,963     $      83,553
Less: SBA PPP loans                                4,498                     -                 -
Ending total loans excluding PPP, net
(non-GAAP)                                 $      86,050     $          82,963     $      83,553
ACL at period end                          $       2,425     $             914     $         903
ACL/Loans, excluding PPP, net (non-GAAP)            2.82 %                1.10 %            1.08 %







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                                                       Three Months Ended June 30          Six Months Ended June 30
                                                         2020               2019             2020             2019
                                                                          (Dollars in millions)
INCOME (LOSS)
Net income (loss) (GAAP)                           $       (214 )      $        390     $       (52 )      $     784
Preferred dividends (GAAP)                                  (23 )               (16 )           (46 )            (32 )
Net income (loss) available to common
shareholders (GAAP)                              A $       (237 )      $        374     $       (98 )      $     752
ADJUSTED EFFICIENCY AND FEE INCOME RATIOS
Non-interest expense (GAAP)                      B $        924        $        861     $     1,760        $   1,721
Significant items:
  Branch consolidation, property and
equipment charges                                           (10 )                (2 )           (21 )             (8 )
Salary and employee benefits-severance
charges                                                      (2 )                (2 )            (3 )             (4 )
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 $ 898 $

     857     $     1,722        $   1,709
Net interest income (GAAP)                       D $        972        $        942     $     1,900        $   1,890
Taxable-equivalent adjustment                                13                  14              25               27
Net interest income, taxable-equivalent
basis                                            E          985                 956           1,925            1,917
Non-interest income (GAAP)                       F          573                 494           1,058              996
Significant items:
Securities (gains) losses, net                               (1 )                19              (1 )             26
Leveraged lease termination gains                             -                   -              (2 )              -
Gain on sale of affordable housing
residential mortgage loans (1)                                -                   -               -               (8 )

Adjusted non-interest income (non-GAAP) G $ 572 $

    513     $     1,055        $   1,014
Total revenue                                D+F=H $      1,545        $      1,436     $     2,958        $   2,886
Adjusted total revenue                       D+G=I $      1,544        $      1,455     $     2,955        $   2,904
Total revenue, taxable-equivalent basis      E+F=J $      1,558        $      1,450     $     2,983        $   2,913
Adjusted total revenue, taxable-equivalent
basis (non-GAAP)                             E+G=K $      1,557        $      1,469     $     2,980        $   2,931
Efficiency ratio (GAAP)                        B/J        59.35  %            59.37 %         59.01  %         59.09 %
Adjusted efficiency ratio (non-GAAP)           C/K        57.75  %            58.33 %         57.82  %         58.31 %
Fee income ratio (GAAP)                        F/J        36.78  %            34.09 %         35.48  %         34.20 %
Adjusted fee income ratio (non-GAAP)           G/K        36.77  %            34.96 %         35.42  %         34.61 %
RETURN ON AVERAGE TANGIBLE COMMON
SHAREHOLDERS' EQUITY
Average shareholders' equity (GAAP)                $     17,384        $     15,927     $    16,922        $  15,562
Less: Average intangible assets (GAAP)                    5,373               4,933           5,159            4,937
 Average deferred tax liability related to
intangibles (GAAP)                                          (94 )               (94 )           (93 )            (94 )
 Average preferred stock (GAAP)                           1,409               1,154           1,360              988
Average tangible common shareholders' equity
(non-GAAP)                                       L $     10,696        $      9,934     $    10,496        $   9,731
Return on average tangible common
shareholders' equity (non-GAAP)(2)             A/L        (8.90 )%            15.11 %         (1.87 )%         15.58 %



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                                                                                December 31,
                                                           June 30, 2020            2019
                                                           (Dollars in millions, except per
                                                                      share data)
TANGIBLE COMMON RATIOS
Ending shareholders' equity (GAAP)                       $       17,602       $       16,295
Less: Ending intangible assets (GAAP)                             5,330                4,950
 Ending deferred tax liability related to
intangibles (GAAP)                                                 (103 )                (92 )
 Ending preferred stock (GAAP)                                    1,656                1,310
Ending tangible common shareholders' equity
(non-GAAP)                                             M $       10,719       $       10,127
Ending total assets (GAAP)                               $      144,070       $      126,240
Less: Ending intangible assets (GAAP)                             5,330                4,950
 Ending deferred tax liability related to
intangibles (GAAP)                                                 (103 )                (92 )
Ending tangible assets (non-GAAP)                      N $      138,843       $      121,382
End of period shares outstanding                       O            960                  957
Tangible common shareholders' equity to tangible
assets (non-GAAP)                                    M/N           7.72 %               8.34 %

Tangible common book value per share (non-GAAP) M/O $ 11.16

  $        10.58





________
(1) The gain on sale of affordable housing residential mortgage loans in the
first quarter of 2019 was the result of the sale of approximately $167 million
of loans.
(2) Income statement amounts have been annualized in calculation.


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OPERATING RESULTS
NET INTEREST INCOME AND MARGIN
Table 24-Consolidated Average Daily Balances and Yield/Rate Analysis
                                                         Three Months Ended June 30
                                                2020                                       2019
                                Average           Income/       Yield/       Average       Income/      Yield/
                                Balance           Expense        Rate        Balance       Expense       Rate
                                          (Dollars in millions; yields on taxable-equivalent basis)
Assets
Earning assets:
Debt securities (1)          $    23,828       $       148        2.49 %   $  24,675     $     163        2.65 %
Loans held for sale                  807                 6        3.06           398             4        4.14
Loans, net of unearned
income (2)(3)                     91,964               911        3.96        83,905         1,006        4.79
Other earning assets               7,541                11        0.53         2,299            18        3.07
Total earning assets             124,140             1,076        3.46       111,277         1,191        4.27
Unrealized gains/(losses) on
securities available for
sale, net (1)                      1,031                                        (136 )
Allowance for loan losses         (1,860 )                                      (857 )
Cash and due from banks            2,070                                    

1,857

Other non-earning assets          14,439                                      13,974
                             $   139,820                                   $ 126,115
Liabilities and
Shareholders' Equity
Interest-bearing
liabilities:
Savings                      $    10,152                 3        0.13     $   8,806             3        0.16
Interest-bearing checking         21,755                 6        0.11        18,869            33        0.71
Money market                      27,870                10        0.13        24,350            49        0.79
Time deposits                      6,690                21        1.26         7,800            33        1.69
Other deposits                        72                 -        1.64         1,210             7        2.36
Total interest-bearing
deposits (4)                      66,539                40        0.24        61,035           125        0.82
Federal funds purchased and
securities sold under
agreements to repurchase               -                 -           -           244             1        2.41
Other short-term borrowings        1,558                 2        0.53         1,965            13        2.54
Long-term borrowings               7,567                49        2.56        10,855            96        3.52
Total interest-bearing
liabilities                       75,664                91        0.48        74,099           235        1.27
Non-interest-bearing
deposits (4)                      44,382                 -           -        33,883             -           -
Total funding sources            120,046                91        0.30       107,982           235        0.87
Net interest spread (1)                                           2.98                                    3.00
Other liabilities                  2,390                                       2,195
Shareholders' equity              17,384                                      15,927
Noncontrolling Interest                -                                          11
                             $   139,820                                   $ 126,115
Net interest income /margin
on a taxable-equivalent
basis (5)                                      $       985        3.19 %                 $     956        3.45 %


_____

(1) Debt securities are included on an amortized cost basis with yield, net

interest spread, 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 $3 million and $2 million for the

three months ended June 30, 2020 and 2019, respectively.

(4) 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 0.14% and 0.53% for the

three months ended June 30, 2020 and 2019, respectively.

(5) The computation of taxable-equivalent net interest income is based on the

statutory federal income tax rate of 21% for both June 30, 2020 and 2019

adjusted for applicable state income taxes net of the related federal tax

    benefit.





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                                                        Six Months Ended June 30
                                              2020                                     2019
                                Average        Income/      Yield/       Average       Income/      Yield/
                                Balance        Expense       Rate        Balance       Expense       Rate
                                        (Dollars in millions; yields on taxable-equivalent basis)
Assets
Earning assets:
Debt securities-taxable (1)  $    23,797     $     306        2.57 %   $  24,685     $     328        2.66 %
Loans held for sale                  660            11        3.32           350             7        3.92
Loans, net of unearned
income (2)(3)                     87,607         1,826        4.17        83,816         2,000        4.78
Other earning assets               4,921            24        0.96         2,256            40        3.60
Total earning assets             116,985         2,167        3.70       111,107         2,375        4.28
Unrealized gains (losses) on
securities available for
sale, net (1)                        771                                    (290 )
Allowance for loan losses         (1,588 )                                  (850 )
Cash and due from banks            1,992                                   

1,875

Other non-earning assets          14,135                                  13,988
                             $   132,295                               $ 125,830
Liabilities and
Stockholders' Equity
Interest-bearing
liabilities:
Savings                      $     9,487             7        0.15     $   8,829             7        0.17
Interest-bearing checking         20,514            28        0.28        19,087            66        0.70
Money market                      26,510            38        0.28        24,171            89        0.74
Time deposits                      6,996            47        1.35         7,637            60        1.59
Other deposits                       495             4        1.58           933              11      2.35
Total interest-bearing
deposits (4)                      64,002           124        0.39        60,657             233      0.77
Federal funds purchased and
securities sold under
agreements to repurchase              76             1        1.39           293             3        2.41
Other short-term borrowings        1,601             9        1.13         1,851            24        2.54
Long-term borrowings               7,985           108        2.69        11,301           198        3.49
Total interest-bearing
liabilities                       73,664           242        0.66        74,102             458      1.25
Non-interest-bearing
deposits (4)                      39,294             -           -        33,889             -           -
Total funding sources            112,958           242        0.43       107,991             458      0.85
Net interest spread (1)                                       3.04                                    3.03
Other liabilities                  2,415                                   2,272
Stockholders' equity              16,922                                  15,562
Noncontrolling Interest                -                                       5
                             $   132,295                               $ 125,830
Net interest income and
other financing
income/margin on a
taxable-equivalent basis
(1)(5)                                       $   1,925        3.31 %                 $   1,917        3.48 %


_____

(1) Debt securities are included on an amortized cost basis with yield, net

interest spread, 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 $5 million and $3 million for the

six months ended June 30, 2020 and 2019, respectively.

(4) 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 0.23% and 0.50% for the six

months ended June 30, 2020 and 2019, respectively.

(5) The computation of taxable-equivalent net interest income is based on the

statutory federal income tax rate of 21% for both June 30, 2020 and 2019

adjusted for applicable state income taxes net of the related federal tax

    benefit.



For the second quarter of 2020, net interest income (taxable-equivalent basis)
totaled $985 million compared to $956 million in the second quarter of 2019. The
net interest margin (taxable-equivalent basis) was 3.19 percent for the second
quarter of 2020 compared to 3.45 percent for the second quarter of 2019. Net
interest income (taxable-equivalent basis) totaled $1.9 billion for the first
six months of both 2020 and 2019. Net interest margin (taxable-equivalent basis)
was 3.31 percent and 3.48 percent for the first six months of 2020 and 2019,
respectively. The quarter-over-quarter increase in net interest income was
primarily driven by increases in loan balances due to PPP lending, the Company's
equipment finance company acquisition and increased line

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utilization on commercial credit lines. Net interest income also benefited from
the execution of the Company's interest rate hedging strategy. The hedges are
designed to protect net interest income in a low short-term interest rate
environment, such as the one that currently exists, and had a positive impact of
approximately $69 million for the first six months of 2020, of which $60 million
was realized in the three months ended June 30, 2020.
The declines in net interest margin for the second quarter 2020 and the first
six months of 2020, compared to the same periods in 2019, were primarily driven
by elevated liquidity levels, increases in loan balances due to PPP lending, the
Company's equipment finance company acquisition and increased utilization on
commercial credit lines.
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 with most yield curve tenors
floored near zero and a reduction in mortgage indices based on historical
minimums as explained in the following section. 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, 2020, Regions was modestly
asset sensitive to both gradual and instantaneous parallel yield curve shifts as
compared to the base case for the measurement horizon ending June 2021. The
second quarter showed strong balance sheet growth, particularly in low-cost
deposits and cash balances held with the Federal Reserve. These trends increase
reported asset sensitivity levels; however, they are expected to normalize over
time.
The estimated exposure associated with falling rate scenarios in the table below
reflects the combined impacts of movements in short-term and long-term interest
rates. The decline in short-term interest rates (such as the Fed Funds rate, the
rate of Interest on Excess Reserves and 1 month LIBOR) will lead to a reduction
of yield on assets and liabilities contractually tied to such rates. Under that
environment, it is expected that declines in funding costs and increases in
balance sheet hedging income will completely offset the decline in asset yields.
Therefore, net interest income sensitivity to short-term rates is approximately
neutral. Net interest income remains exposed to longer yield curve tenors. A
reduction in intermediate and long-term interest rates (such as intermediate to
longer-term U.S. Treasuries, swap and mortgage rates) will drive yields lower on
certain fixed rate, newly originated or renewed loans, reduce prospective yields
on certain investment portfolio purchases, and increase amortization of premium
expense on existing securities in the investment portfolio.
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 risk hedging activities. Forward starting hedges that have
been transacted are contemplated to the extent they start within the measurement
horizon. Twelve-month horizon asset sensitivity levels are expected to continue
to decline through 2020 as forward starting hedges move completely into the
measurement window and recent balance sheet growth begins to normalize. More
information regarding forward starting hedges is disclosed in Table 26 and its
accompanying description.


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Table 25-Interest Rate Sensitivity

                                        Estimated Annual Change
                                        in Net Interest Income
                                          June 30, 2020(1)(2)
                                             (In millions)
Gradual Change in Interest Rates
+ 200 basis points                                        $154
+ 100 basis points                                          94
- 100 basis points (floored)(3)                            (57 )

Instantaneous Change in Interest Rates
+ 200 basis points                                        $160
+ 100 basis points                                         117
- 100 basis points (floored)(3)                            (72 )


_________

(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) Forward starting cash flow hedges already transacted will reduce sensitivity

levels through 2020 as they continue to move into the measurement horizon.

See Table 27 for additional information regarding hedge start dates.

(3) The -100 basis point (floored) scenario represents a 12 month average rate

shock of -16 basis points and -64 basis points to approximately zero for 1

month LIBOR and the 10 year U.S. Treasury yield, respectively. Mortgage yield

shocks are floored at their historical minimums minus 35 basis points.



As market interest rates increased in recent years, Regions had 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, equated to the
lesser of the shock scenario amount, or a rate 35 basis points lower than the
historical all-time minimum. Recent market volatility and new historic lows
established for longer yield curve tenors have resulted in a shock scenario
where the majority of rates now fall to approximately zero. Mortgage rates,
which have retained somewhat elevated levels, are still being shocked in the
manner previously described. Further, the scenarios presented do not allow for
negative rates. The falling rate scenarios in Table 25 above quantify the
expected impact for both gradual and instantaneous shocks under this
environment.
As discussed above, the interest rate sensitivity analysis presented in Table 25
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, 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 loan and deposit
normalization reflecting management's best estimate. The behavior of deposits in
response to changes in interest rate levels is largely informed by analyses of
prior rate cycles, but with suitable adjustments based on management's
expectations in the current environment. In the base case scenario and falling
rate scenarios in Table 25, interest-bearing deposit rates achieve historical
lows. In rising rate scenarios only, management assumes that the mix of deposits
will change versus the base case balance sheet assumptions 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 $2.5
billion over 12 months in the gradual +100 basis point scenario in Table 25.
While estimates should be used as a guide, differences may result driven by the
pace of rate changes, and other market competitive factors.
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. Because futures contracts
are cash settled daily, there is minimal credit risk associated with Eurodollar
futures. Interest rate swaps are contractual agreements typically entered into
to exchange fixed for variable (or vice versa) streams

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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.
The following table presents additional information about the hedging interest
rate derivatives used by Regions to manage interest rate risk:
Table 26-Hedging Derivatives by Interest Rate Risk Management Strategy
                                                                          June 30, 2020
                                                                      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  $   3,100            2.9                    1.7 %            0.2 %                - %
Derivatives in cash flow hedging
relationships:
   Receive fixed/pay variable swaps     16,000            4.8                    1.9              0.2                  -
   Interest rate floors                  6,750            4.3                      -                -                2.1
   Total derivatives designated as
hedging instruments                  $  25,850            4.4                    1.9 %            0.2 %              2.1 %


_________

(1) Variable rate indexes on swap and floor contracts reference a combination of

short-term LIBOR benchmarks, primarily 1 month LIBOR.



A portion of the cash flow hedging relationships designated in Table 26 above
are forward starting as of June 30,2020, including $2.25 billion notional of the
outstanding cash flow swaps and $2.0 billion notional of the outstanding cash
flow floors. Forward starting swaps and floors have maturities of approximately
five years from their respective start dates, and further information regarding
the timeline for start dates has been disclosed in Table 27.
The following table presents cash flow hedge notional amounts with start dates
prior to the year-end periods shown through 2026. All cash flow hedge notional
amounts mature prior to the end of 2027.







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Table 27-Schedule of Notional for Cash Flow Hedging Derivatives

                                                                        Notional Amount
                                                                          Years Ended
                                   2020(1)(2)       2021(1)(2)        2022         2023         2024        2025        2026
                                                                         (In millions)
Receive fixed/pay variable swaps $     15,250     $     16,000     $ 16,000     $ 13,700     $ 12,700     $ 3,750     $ 1,250
Interest rate floors                    6,500            6,750        6,750        6,750        4,000         250           -
Cash flow hedges                 $     21,750     $     22,750     $ 22,750 

$ 20,450 $ 16,700 $ 4,000 $ 1,250

_________

(1) As forward starting cash flow hedges are transacted within the 12 month

measurement horizon, they will reduce 12 month net interest income

sensitivity levels as disclosed in Table 25.

(2) As of June 30, 2020, $13.75 billion of the $16.0 billion notional of the cash

flow swaps and $4.75 billion of the $6.75 billion notional of the interest

rate floors are active. During the third quarter of 2020, $1.25 billion

notional of interest rate swaps become active and $1.75 billion notional of

    interest rate floors become active. An additional $250 million notional of
    interest rate swaps become active in the fourth quarter of 2020. The
    remaining $750 million notional of interest rate swaps and $250 million

notional of interest rate floors become active in the first quarter of 2021.



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 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,
2019 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 operations.
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 9 "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-In 2017, the Financial Conduct Authority, which regulates
LIBOR, announced that by the end of 2021, panel banks will no longer be required
to submit estimates that are used to construct LIBOR, confirming that the
continuation of LIBOR will not be guaranteed beyond that date.  Regions holds
instruments that may be impacted by the likely discontinuance of LIBOR,
including loans, investments, derivative products, floating-rate obligations,
and other financial instruments that use LIBOR as a benchmark rate. 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, unavailability, or non-representativeness
of LIBOR. Regions is also coordinating with regulatory agencies and industry
groups to identify appropriate alternative rates for contracts expiring after
2021, and preparing for this transition as it relates to both new and existing
exposures. Significant uncertainty remains; however, steps to mitigate risks
associated with the transition are being overseen by Regions' Executive LIBOR
Steering Committee. Continuing activities of the LIBOR Transition Program
include facilitating the transition of all financial and strategic processes,
systems, and models; performing assessments of the transition's impact to
contracts and products; evaluating necessary operational and infrastructure
enhancements to implement alternative benchmark rates; and coordinating
communications with customers.


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MARKET RISK-PREPAYMENT RISK
Regions, like most financial institutions, is subject to changing prepayment
speeds on mortgage-related assets under different interest rate environments.
Prepayment risk is a significant risk to earnings and specifically to net
interest income . For example, mortgage loans and other financial assets may be
prepaid by a debtor, so that the debtor may refinance its obligations at lower
rates. As loans and other financial assets prepay in a falling rate environment,
Regions must reinvest these funds in lower-yielding assets. Prepayments of
assets carrying higher rates reduce Regions' interest income and overall asset
yields. Conversely, in a rising rate environment, these assets will prepay at a
slower rate, resulting in opportunity cost by not having the cash flow to
reinvest at higher rates. Prepayment risk can also impact the value of
securities and the carrying value of equity. Regions' greatest exposures to
prepayment risks primarily rest in its mortgage-backed securities portfolio, the
mortgage fixed-rate loan portfolio and the residential MSR, all of which tend to
be sensitive to interest rate movements. Each of these assets is also exposed to
prepayment risk due to factors which are not necessarily the result of interest
rates, but rather due to changes in policies or programs related, either
directly or indirectly, to the U.S. Government's governance over certain lending
and financing within the mortgage market. Such policies can work to either
encourage or discourage financing dynamics and represent a risk that is
extremely difficult to forecast and may be the result of non-economic factors.
The Company attempts to monitor and manage such exposures within reasonable
expectations while acknowledging all such risks cannot be foreseen or avoided.
Further, Regions has prepayment risk that would be reflected in non-interest
income in the form of servicing income on the residential MSRs. Regions actively
monitors prepayment exposure as part of its overall net interest income
forecasting and interest rate risk management.
LIQUIDITY
Liquidity is an important factor in the financial condition of Regions and
affects Regions' ability to meet the borrowing needs and deposit withdrawal
requirements of its customers. Regions maintains strong liquidity levels that
position the Company to respond to stressed environments. As discussed below,
Regions has a variety of liquidity sources, which it continues to utilize to
fund customer needs.
On March 27, 2020, the CARES Act was signed into law as a response to the
economic uncertainty amid the COVID-19 pandemic. A focus of the Act is the
establishment of federally guaranteed loans for small businesses under the PPP.
Regions, a certified SBA lender, has and will continue to assist its customers
through the process of utilizing this program. As a lending institution in this
program, additional liquidity is available to the Company through the Federal
Reserve's Paycheck Protection Program Liquidity Facility. As of June 30, 2020,
Regions has not used the Paycheck Protection Program Liquidity Facility.
Regions intends to fund its obligations primarily through cash generated from
normal operations. Regions also has obligations related to potential litigation
contingencies. See Note 12 "Commitments, Contingencies and Guarantees" to the
consolidated financial statements for additional discussion of the Company's
funding requirements.
Assets, consisting principally of loans and securities, are funded by customer
deposits, borrowed funds and shareholders' equity. Regions' goal in liquidity
management is to satisfy the cash flow requirements of depositors and borrowers,
while at the same time meeting the Company's cash flow needs in normal and
stressed conditions. Having and using various sources of liquidity to satisfy
the Company's funding requirements is important.
In order to ensure an appropriate level of liquidity is maintained, Regions
performs specific procedures including scenario analyses and stress testing at
the bank, holding company, and affiliate levels. 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 $2.7
billion at June 30, 2020. Compliance with the holding company cash requirements
is reported to the Risk Committee of the Board on a quarterly basis. Regions
also has minimum liquidity requirements for the Bank and subsidiaries. These
minimum requirements are informed by internal stress testing measures which are
reflective of Regions' portfolio and business mix. The Bank's funding and
contingency planning does not currently assume any reliance on short-term
unsecured sources. 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.
The securities portfolio is one of Regions' primary sources of liquidity.
Proceeds from maturities and principal and interest payments of securities
provide a constant flow of funds available for cash needs (see Note 2 "Debt
Securities"to the consolidated financial statements). The agency guaranteed
mortgage-backed securities portfolio is another source of liquidity in various
secured borrowing capacities.
Maturities in the loan portfolio also provide a steady flow of funds. Regions'
liquidity is further enhanced by its relatively stable customer deposit base.
Liquidity needs can also be met by borrowing funds in state and national money
markets, although Regions does not assume reliance on short-term unsecured
sources of funding.
The balance with the FRB is the primary component of the balance sheet line
item, "interest-bearing deposits in other banks." At June 30, 2020, Regions had
approximately $11.5 billion in cash on deposit with the FRB, an increase from
approximately $2.5 billion at December 31, 2019, due to the significant increase
in deposits associated with government programs offered in relation to COVID-19.
Refer to the "Cash and Cash Equivalents" section for more information.

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Regions' borrowing availability with the FRB as of June 30, 2020, based on
assets pledged as collateral on that date, was $14.7 billion.
Regions' financing arrangement with the FHLB adds additional flexibility in
managing the Company's liquidity position. As of June 30, 2020, Regions'
outstanding balance of FHLB borrowings was $401 million and its total borrowing
capacity from the FHLB totaled approximately $17.2 billion. FHLB borrowing
capacity is contingent on the amount of collateral pledged to the FHLB. Regions
Bank pledged certain securities, commercial and real estate mortgage loans,
residential first mortgage loans on one-to-four family dwellings and home equity
lines of credit as collateral for the outstanding FHLB advances. Additionally,
investment in FHLB stock is required 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 2019 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.
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, 2019 for a discussion of
risk characteristics of each loan type.
INFORMATION SECURITY RISK
Regions faces a variety of operational risks, including information security
risks. 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, have generally
increased in recent years. This trend is expected to continue for a number of
reasons, including the proliferation of new technologies, including
technology-based products and services used by us and our customers, the
increasing use of mobile devices and cloud technologies, the ability to conduct
more financial transactions online, 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.
Regions devotes significant financial and non-financial resources to identify
and mitigate threats to the confidentiality, availability and integrity of its
information systems. Regions regularly assesses the threats and vulnerabilities
to its environment, so it can update and maintain its systems and controls to
effectively mitigate these risks. Layered security controls are designed to
complement each other to protect customer information and transactions. Regions
regularly tests its control environment utilizing practices such as penetration
testing and more targeted assessments to ensure its controls are working as
expected. Regions will continue to commit the resources necessary to mitigate
these growing cyber risks, as well as continue to develop and enhance controls,
processes and technology to respond to evolving disruptive technology and to
protect its systems from attacks or unauthorized access. In addition, Regions
maintains a strong commitment to a comprehensive risk management program that
includes due diligence and oversight of third-party relationships with vendors.
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.
Regions' system of internal controls also incorporates an organization-wide
protocol for the appropriate reporting and escalation of information security
matters to management and the Board, to ensure effective and efficient
resolution and, if necessary, disclosure of any matters. The Board is actively
engaged in the oversight of Regions' continuous efforts to reinforce and enhance
its operational resilience and receives education to ensure that their oversight
efforts accommodate for the ever-evolving information security threat landscape.
The Board monitors Regions' information management risk policies and practices
primarily through its Risk Committee, which oversees areas of operational risk
such as information technology activities; risks associated with development,
infrastructure, and cybersecurity; approval and oversight of internal and
third-party information security risk assessments, strategies, policies and
programs; and disaster recovery, business continuity, and incident response
plans. Additionally, the Board's Audit Committee regularly reviews Regions'
cybersecurity practices, mainly by receiving reports on the cybersecurity
management program prepared by the Chief Information Security Officer, Risk
Management, and Internal Audit. The Board annually reviews the information
security program and, through its various committees, is briefed at least
quarterly on information security matters.

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Regions participates in information sharing organizations such as FS-ISAC, to
gather and share information with peer banks and other financial institutions to
better prepare and protect its information systems from attack. FS-ISAC is a
nonprofit organization whose objective is to protect the financial services
sector against cyber and physical threats and risk. It acts as a trusted third
party that provides anonymity to allow members to submit threat, vulnerability
and incident information in a non-attributable and trusted manner so information
that would normally not be shared is instead made available to other members for
the greater good of the membership. In addition to FS-ISAC, Regions is a member
of BITS. BITS serves the financial community and its members by providing
industry best practices on a variety of security and fraud topics.
Regions has contracts with vendors to provide denial of service mitigation.
These vendors have also committed the necessary resources to support Regions in
the event of a cyber event. Even though Regions devotes significant resources to
combat cyber security risks, there is no guarantee that these measures will
provide absolute security. As an additional security measure, Regions has
engaged a computer forensics firm and an industry-leading consulting firm on
retainer in case of a cyber event. Regions has also developed and maintains
robust business continuity and disaster recovery plans that it could implement
in the event of a cyber event to mitigate the effects of any such event and
minimize necessary recovery time. Some of Regions' financial risk exposure with
respect to data breaches may be offset by applicable insurance.
Even if 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 where customers have
transacted business. 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 components of
its business infrastructure, 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.
PROVISION FOR CREDIT LOSSES
The provision for credit losses is used to maintain the allowance for loan
losses and the reserve for unfunded credit losses at a level that in
management's judgment is appropriate to absorb expected credit losses over the
contractual life of the loan and credit commitment portfolio at the balance
sheet date. Regions adopted CECL on January 1, 2020. Upon adoption, Regions
classified the provision for unfunded credit losses as provision for credit
losses. Prior to 2020, the provision for unfunded credit losses was included in
non-interest expense. The provision for credit losses totaled $882 million in
the second quarter of 2020 compared to the provision for loan losses of $92
million during the second quarter of 2019. The provision for credit losses
totaled $1.3 billion for the first six months of 2020 compared to the provision
for loan losses of $183 million during the first six months of 2019. Refer to
the "Allowance for Credit Losses" section for further detail.

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NON-INTEREST INCOME
Table 28-Non-Interest Income
                                                                

Quarter-to-Date Change 6/30/2020 vs.

                               Three Months Ended June 30                      6/30/2019
                                   2020            2019               Amount                  Percent
                                                         (Dollars in millions)
Service charges on deposit
accounts                      $        131     $      181     $             (50 )                (27.6 )%
Card and ATM fees                      101            120                   (19 )                (15.8 )%
Investment management and
trust fee income                        62             59                     3                    5.1  %
Capital markets income                  95             39                    56                  143.6  %
Mortgage income                         82             31                    51                  164.5  %
Investment services fee
income                                  17             20                    (3 )                (15.0 )%
Commercial credit fee income            17             18                    (1 )                 (5.6 )%
Bank-owned life insurance               18             19                    (1 )                 (5.3 )%
Securities gains (losses),
net                                      1            (19 )                  20                  105.3  %
Market value adjustments on
employee benefit assets -
other                                   16             (2 )                  18                     NM
Other miscellaneous income              33             28                     5                   17.9  %
                              $        573     $      494     $              79                   16.0  %



                                  Six Months Ended June 30             

Year-to-Date 6/30/2020 vs. 6/30/2019

                                    2020              2019               Amount                    Percent
                                                             (Dollars in 

millions)

Service charges on deposit
accounts                      $         309       $       356     $            (47 )                  (13.2 )%
Card and ATM fees                       206               229                  (23 )                  (10.0 )%
Investment management and
trust fee income                        124               116                    8                      6.9  %
Capital markets income                  104                81                   23                     28.4  %
Mortgage income                         150                58                   92                    158.6  %
Investment services fee
income                                   39                39                    -                        -  %
Commercial credit fee income             35                36                   (1 )                   (2.8 )%
Bank-owned life insurance                35                42                   (7 )                  (16.7 )%
Securities gains (losses),
net                                       1               (26 )                 27                   (103.8 )%
Market value adjustments on
employee benefit assets -
defined benefit                           -                 5                   (5 )                 (100.0 )%
Market value adjustments on
employee benefit assets -
other                                    (9 )              (3 )                 (6 )                 (200.0 )%
Other miscellaneous income               64                63                    1                      1.6  %
                              $       1,058       $       996     $             62                      6.2  %


________
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 decreases during the second quarter and first six months of 2020
compared to the same periods of 2019 were the result of lower customer spending
due to the COVID-19 pandemic. Government stimulus programs resulting from the
COVID-19 pandemic aided in the increase of customer deposits, and this elevated
customer liquidity also caused a reduction in overdraft charges. If spend levels
continue to persist, service charges on deposit accounts will continue to be
negatively impacted for the rest of the year. 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. The decreases in
the second quarter of 2020 and first six months of 2020 compared to the same
periods of 2019 were driven primarily by decreases in bank card and consumer
credit card income as a result of decreased debit and credit

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card spend and transaction volumes associated with the COVID-19 pandemic. If
spend levels continue to persist, card and ATM fees will continue to be
negatively impacted for the rest of the year. See the "Second Quarter Overview"
section for further detail.
Capital markets income-Capital markets income primarily relates to capital
raising activities that include securities underwriting and placement, loan
syndication and placement, as well as foreign exchange, derivatives, merger and
acquisition and other advisory services. The increases in the second quarter and
first six months of 2020 compared to the same periods of 2019 were primarily
driven by a record quarter for debt and equity underwriting and fees generated
from the placement of permanent financing for real estate in the second quarter
of 2020. Capital markets income was also favorably impacted by positive
market-related credit valuation adjustments tied to credit derivatives within
commercial swap income totaling $34 million during the second quarter of 2020,
compared to negative adjustments totaling $7 million the second quarter of 2019.
These valuation adjustments for the first six months of 2020 netted to virtually
no impact as the negative valuation adjustments in the first quarter of 2020
recovered in the second quarter as credit spreads improved, compared to a
negative adjustment of $9 million the first six months of 2019.
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 increases in mortgage
income in the second quarter and first six months of 2020 compared to the same
periods of 2019 were due primarily to increases in loan production and sales
income as lower interest rates during the current quarter and first six months
of 2020 increased loan application activity. Additionally, MSR valuation
adjustments and related hedge activity positively impacted the change in
mortgage income.
Bank-owned life insurance-Bank-owned life insurance decreased in the first six
months of 2020 compared to the same period in 2019 due primarily to a decrease
in claims benefits in the first quarter of 2020 and favorable market adjustments
in the first quarter of 2019.
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, both defined benefit and other, are the reflection of
market value variations related to assets held for certain employee benefits.
The adjustments reported as employee benefit assets - other are offset in
salaries and benefits. Changes to market valuation adjustments in 2020 compared
to 2019 are driven by the overall performance of the equity markets. The
decrease in market valuation adjustments for the first six months of 2020
compared to 2019 is due to a decline in the equity markets in the first quarter
of 2020. The markets somewhat recovered during the second quarter of 2020,
leading to an increase compared to the second quarter of 2019. Furthermore, the
Company repositioned its defined benefit employee benefits assets portfolio
during the second quarter of 2019 into investments that are no longer subject to
the volatility of the equity markets.
Other miscellaneous income-Other miscellaneous income includes net revenue from
affordable housing, valuation adjustments to equity investments, 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.
At June 30, 2020, the Company's recorded investment in approximately 1,100,000
common shares of nCino Inc. was approximately $24 million. On July 14, 2020,
nCino executed an initial public offering. However, the Company is subject to a
conventional post-issuance 180 day lock-up period, which prevents the sale of
its position. Realized and unrealized gains and losses will be recognized within
other miscellaneous income.



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NON-INTEREST EXPENSE
Table 29-Non-Interest Expense
                                                                 

Quarter-to-Date Change 6/30/2020 vs.

                                Three Months Ended June 30                      6/30/2019
                                   2020             2019               Amount                  Percent
                                                         (Dollars in millions)
Salaries and employee
benefits                      $         527     $      469     $              58                   12.4  %
Net occupancy expense                    76             80                    (4 )                 (5.0 )%
Furniture and equipment
expense                                  86             84                     2                    2.4  %
Outside services                         44             52                    (8 )                (15.4 )%
Professional, legal and
regulatory expenses                      28             26                     2                    7.7  %
Marketing                                22             23                    (1 )                 (4.3 )%
FDIC insurance assessments               15             12                     3                   25.0  %
Credit/checkcard expenses                12             18                    (6 )                (33.3 )%
Branch consolidation,
property and equipment
charges                                  10              2                     8                  400.0  %
Visa class B shares expense               9              3                     6                  200.0  %
Loss on early extinguishment
of debt                                   6              -                     6                     NM
Other miscellaneous expenses             89             92                    (3 )                 (3.3 )%
                              $         924     $      861     $              63                    7.3  %


                                Six Months Ended June 30          

Year-to-Date 6/30/2020 vs. 6/30/2019

                                   2020            2019              Amount                   Percent
                                                           (Dollars in 

millions)

Salaries and employee
benefits                      $        994     $      947     $             47                     5.0  %
Net occupancy expense                  155            162                   (7 )                  (4.3 )%
Furniture and equipment
expense                                169            160                    9                     5.6  %
Outside services                        89             97                   (8 )                  (8.2 )%
Professional, legal and
regulatory expenses                     46             46                    -                       -  %
Marketing                               46             46                    -                       -  %
FDIC insurance assessments              26             25                    1                     4.0  %
Credit/checkcard expenses               25             34                   (9 )                 (26.5 )%
Branch consolidation,
property and equipment
charges                                 21              8                   13                   162.5  %
Visa class B shares expense             13              7                    6                    85.7  %
Provision (credit) for
unfunded credit losses(1)                -             (1 )                  1                   100.0  %
Loss on early extinguishment
of debt                                  6              -                    6                      NM
Other miscellaneous expenses           170            190                  (20 )                 (10.5 )%
                              $      1,760     $    1,721     $             39                     2.3  %


________
NM - Not Meaningful
(1) Upon adoption of CECL on January 1, 2020, the provision for credit losses
presented within net interest income after provision for credit losses is the
sum of the provision for loan losses and the provision for unfunded credit
commitments. Prior to the adoption of CECL, the provision for unfunded
commitments was included in other non-interest expense.

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. Salaries and employee benefits increased during the second quarter and
the first six months of 2020 compared to the same periods in 2019, driven
primarily by higher production-based incentives, increased pay related to the
COVID-19 pandemic, and annual merit raises that occurred in the second quarter
of 2020. In addition, full-time equivalent headcount increased to 20,073 at
June 30, 2020 from 19,765 at June 30, 2019, primarily due to the additional
associates from the Ascentium acquisition.

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Net occupancy expense-Net occupancy expense includes rent, depreciation, ad
valorem taxes, utilities, insurance, and maintenance. Net occupancy expense
decreased in the first six months of 2020 compared to the same period in 2019
primarily due to lower maintenance expenses resulting from the shelter in place
orders during the COVID-19 pandemic.
Furniture and equipment expense-Furniture and equipment expense includes
depreciation, maintenance and repairs, rent, taxes, and other expenses of
equipment utilized by Regions and its affiliates. Furniture and equipment
expense increased during the first six months of 2020 compared to the same
period in 2019 primarily due to increases in rental expenses and maintenance and
repairs related to investments in technology.
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 printing. Outside services decreased during the second
quarter and the first six months of 2020 compared to the same periods in 2019
due to Regions exiting a third party lending relationship in late 2019, combined
with decreases in other outside services.
Credit/checkcard expenses-Credit/checkcard expenses include credit and checkcard
fraud and expenses. Credit/checkcard expenses decreased during the second
quarter and first six months of 2020 compared to the same periods in 2019
primarily due to a decline in checkcard fraud.
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.
Visa class B shares expense-Visa class B shares expense is associated with
shares sold in a prior year. The Visa class B shares have restrictions tied to
the finalization of certain covered litigation. Visa class B shares expense
increased in both the second quarter and first six months of 2020 compared to
the same periods in 2019 as a result of increases in Visa's stock price.
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. See the "Long-Term Borrowings" section for
additional information.
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. Other miscellaneous
expenses decreased during the first six months of 2020 compared to the same
period in 2019 primarily due to lower operational losses and declines in
expenses related to non-service related pension costs.
INCOME TAXES
The Company's income benefit from continuing operations for the three months
ended June 30, 2020 was $47 million compared to income tax expense of $93
million for the three months ended June 30, 2019, resulting in effective tax
rates of 18.3 percent and 19.4 percent, respectively. The income tax benefit for
the six months ended June 30, 2020 was $5 million compared to income tax expense
of $198 million for the six months ended June 30, 2019, resulting in effective
tax rates of 10.1 percent and 20.2 percent, respectively. The effective tax
rates are lower in both current year periods due primarily to a consistent level
of permanent income tax preferences having a proportionally larger impact
relative to pre-tax earnings, which were negatively impacted in the current year
because of the COVID-19 pandemic.
Many factors impact the effective tax rate including, but not limited to, the
level of pre-tax income (loss), the mix of income (loss) between various tax
jurisdictions with differing tax rates, 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.
On January 1, 2020, the Company adopted CECL. This resulted in an adjustment to
the opening balance of the allowance. The tax impact of this adjustment
increased deferred tax assets by approximately $126 million. See Note 1 "Basis
of Presentation" to the consolidated financial statements for further
information.
At June 30, 2020, the Company reported a net deferred tax liability of $538
million compared to a net deferred tax liability of $328 million at December 31,
2019. The increase in the net deferred tax liability was primarily due to an
increase in unrealized gains on derivative instruments and available for sale
securities, partially offset by an increase in the deferred tax asset related to
the allowance.
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.

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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, as discussed below. Assets acquired and liabilities assumed were
recorded at estimated fair value.
These fair value estimates are considered preliminary as of June 30, 2020. Fair
value estimates, including loans, intangible assets and goodwill, are subject to
change for up to one year after the acquisition date as additional information
becomes available.
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 purchase discount as the Company is not expected to collect
the contractual cash flows of the loans. 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.
In conjunction with the acquisition, Regions recognized goodwill of $348 million
and other intangible assets of $47 million. 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.
Subsequent to the acquisition, Regions paid down a significant portion of the
long-term borrowings, and as of June 30, 2020, $459 million of long-term debt
remained, which is associated with three securitizations. The securitization
debt has various classes and associated maturity dates and has an effective
interest rate of 2.25%. The Company will manage these securitized borrowings
within its broader liability management process and in line with the allowable
terms of the contracts.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Reference is made to pages 92 through 96 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, 2020, 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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