REGIONS FINANCIAL CORP (RF) FY 2024 MD&A

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

EXECUTIVE OVERVIEW

Management believes the following sections provide an overview of several of the most relevant matters necessary for an understanding of the financial aspects of Regions' business, particularly regarding its 2024 results. Cross references to more detailed information regarding each topic within MD&A and the consolidated financial statements are included. This summary is intended to assist in understanding the information provided, but should be read in conjunction with the entire MD&A and consolidated financial statements, as well as the other sections of this Annual Report on Form 10-K.

Economic Environment in Regions' Banking Markets

After what is expected to be full-year 2024 growth of around 2.8 percent, Regions' baseline forecast anticipates real GDP growth of 2.2 percent in 2025. Though the economy grew at a robust pace in 2024, performance across individual sectors varied considerably. Interest rates rose over the latter part of 2024, reflecting persistent inflation pressures and uncertainty over looming policy changes. The Company's baseline forecast anticipates real GDP growth settling back toward the pre-pandemic trend rate of growth over coming quarters. There is considerable uncertainty around any forecast for 2025 made before the specific details of changes to fiscal, trade, immigration, and regulatory policy are made known.

The pace of job growth slowed over the course of 2024 reflecting a slower pace of hiring amongst firms as opposed to a rising pace of layoffs. The combination of slowing job growth and rapid growth in the supply of labor pushed the unemployment rate higher in 2024. While Regions' forecast anticipates further moderation in the pace of job growth, it also anticipates much slower growth in the supply of labor, in part reflecting likely changes to immigration policy. These two factors should leave the unemployment rate relatively unchanged from where it ended 2024, with an expected annual average rate of 4.2 percent for 2025.

Despite slowing job growth, aggregate labor earnings, the largest component of personal income, have continued to grow at a rate faster than inflation, which is expected to remain the case through 2025. This will continue to act as a support for consumer spending, and Regions' forecast anticipates growth in consumer spending will align more closely with growth in after-tax income than has been the case over the past few years. Nonetheless, the divide in spending patterns across the various income cohorts that has developed over recent quarters will likely persist in 2025.

Still-soft global economic growth and uncertainty around looming policy changes have acted as headwinds for the manufacturing sector. Business capital spending has been somewhat limited in range, but the Company's forecast anticipates faster growth over the back half of 2025, in part reflecting expectations there will be a push to enhance labor productivity. Additionally, what is anticipated to be a more conducive regulatory environment could trigger a meaningful pick-up in merger and acquisition activity in 2025.

Mortgage rates moved higher along with yields on longer-dated U.S. Treasury securities during the fourth quarter of 2024, dealing a setback to construction and sales of new single family homes. Builders have been able to facilitate sales via aggressive use of incentives, including mortgage rate buydowns, but have been more focused on paring down spec inventories. As such, construction starts of new single family homes tailed off over the second half of 2024 and Regions' forecast anticipates further declines in 2025.

Though the FOMC cut the Fed funds rate at their final meeting of 2024, it signaled a slower pace of rate cuts in 2025. Inflation pressures have proven to be more persistent than had been anticipated, and while having some concerns about cooling labor market conditions, FOMC members perceive growing upside risks to their inflation forecasts. Regions' baseline forecast anticipates two twenty-five basis point funds rate cuts in 2025, though the timing of any cuts remains somewhat uncertain, particularly given the perceived inflation impacts of looming changes to fiscal, trade, and immigration policy. To the extent there is less relief on the rates front than anticipated, potential downside risks from certain pockets of commercial real estate and the volume of debt in the non-financial corporate sector coming up for refinancing over coming quarters will continue to loom over the outlook.

Patterns of economic activity within the Regions footprint are expected to be broadly similar to those seen for the U.S. as a whole. As the Company anticipated, the pace of domestic in-migration into the Regions footprint slowed in 2024, likely reflecting a less dynamic labor market and challenging housing market conditions. Still, this left the pace of domestic in-migration in line with pre-pandemic norms, and growth in total population in the footprint continued to easily outpace the national average, and that also remains the case with growth in nonfarm payrolls. Some of the metro areas which had seen the largest cumulative increases over the prior few years have begun to see house prices decline, but underlying demand, in part reflecting above-average population growth, will help stem the extent of any such declines. Also, given the extent to which house prices have risen over recent years in these markets, the declines in house prices do not threaten to push owners into negative equity positions.

The economic environment, as described above, impacted Regions' forecast utilized in calculating the ACL as of December 31, 2024. See the "Allowance" section for further information.

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2024 Results

Regions reported net income available to common shareholders of $1.8 billion or $1.93 per diluted share in 2024 compared to net income available to common shareholders of $2.0 billion or $2.11 per diluted share in 2023.

Net interest income (taxable-equivalent basis) totaled $4.9 billion in 2024 compared to $5.4 billion in 2023. The net interest margin (taxable-equivalent basis) was 3.54 percent in 2024, reflecting a 36 basis point decrease from 2023. The decreases in net interest income and net interest margin were primarily driven by higher funding costs, which included an increase in deposit costs due to continued re-mixing. Partially offsetting the increase in funding costs was higher asset yields benefiting from the maturity and continued replacement of lower-yielding, fixed-rate loans and securities. See Table 2 "Volume and Yield/Rate Variances" for further details.

The provision for credit losses totaled $487 million in 2024 compared to $553 million in 2023. The provision for credit losses was higher than net charge-offs by $29 million in 2024. The decrease in the provision for credit losses was driven primarily by asset quality normalization. Refer to the "Allowance for Credit Losses" section of Management's Discussion and Analysis for further detail.

Non-interest income improved slightly, totaling $2.3 billion in both 2024 and 2023. The improvement was driven by increases in most categories, led by capital markets income. These increases were largely offset by net securities losses and decreased card and ATM fees. See Table 3 "Non-Interest Income" for further details.

Non-interest expense was $4.2 billion in 2024 and $4.4 billion in 2023. The decrease was driven by declines in operational losses, FDIC insurance assessments primarily related to the special assessment initially recognized in 2023, and miscellaneous expenses. The declines were partially offset by an increase in salaries and employee benefits. See Table 4 "Non-Interest Expense" for further details.

Regions' effective tax rate was 19.6 percent in 2024 compared to 20.5 percent in 2023. See the "Income Taxes" section for further details.

For more information, refer to the following additional sections within this Form 10-K:

•"Operating Results" section of MD&A

•“Net Interest Income and Net Interest Margin” discussion within the “Operating Results” section of MD&A

•“Interest Rate Risk” discussion within the “Risk Management” section of MD&A

Capital

Capital Actions

Regions participates in supervisory stress testing conducted by the Federal Reserve and its SCB is currently floored at 2.5 percent. See Note 14 "Shareholders' Equity and Accumulated Other Comprehensive Income (Loss)" to the consolidated financial statements for further details regarding CCAR results.

On April 20, 2022, the Board authorized the repurchase of up to $2.5 billion of the Company's common stock, permitting purchases from the second quarter of 2022 through the fourth quarter of 2024. As of December 31, 2024, Regions repurchased approximately 34 million shares of common stock under this program, which reduced shareholders' equity by $614 million. On December 10, 2024, the Board authorized an extension of the common stock repurchase program through the fourth quarter of 2025.

For more information, refer to the following additional sections within this Form 10-K:

•"Shareholders' Equity" discussion in MD&A

•"Regulatory Requirements" section of MD&A

•Note 14 "Shareholders' Equity and Accumulated Other Comprehensive Income (Loss)" to the consolidated financial statements

Regulatory Capital

Regions and Regions Bank are required to comply with regulatory capital requirements established by Federal and State banking agencies. Under the Basel III Rules, Regions is designated as a standardized approach bank. The Basel III Rules maintain the minimum guidelines for Regions to be considered well-capitalized for Tier 1 capital and Total capital at 6.0% and 10.0%, respectively. At December 31, 2024, Regions’ Tier 1 capital and Total capital ratios were estimated to be 12.17% and 14.06%, respectively.

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

For more information, refer to the following additional sections within this Form 10-K:

•“Supervision and Regulation” discussion within Item 1. Business

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•"Regulatory Requirements" section of MD&A

•Note 12 "Regulatory Capital Requirements and Restrictions" to the consolidated financial statements

Loan Portfolio and Credit

During 2024, total loans decreased by $1.7 billion or 1.7 percent compared to 2023. The decrease was primarily driven by a decline in the commercial portfolio of $1.2 billion. The decline in commercial loans, specifically commercial and industrial loans, is due to lower line of credit utilization and loans refinanced off the Company's balance sheet through the debt capital markets. Refer to the "Portfolio Characteristics" section for further discussion.

Net charge-offs totaled $458 million, or 0.47 percent of average loans, in 2024, compared to $397 million, or 0.40 percent in 2023, driven by an increase in commercial and industrial and commercial investor real estate mortgage net charge-offs. The allowance was 1.79 percent of total loans, net of unearned income at December 31, 2024, an increase from 1.73 percent at December 31, 2023. The coverage ratio of allowance to non-performing loans excluding held for sale was 186 percent at December 31, 2024, compared to 211 percent at December 31, 2023.

For more information, refer to the following additional sections within this Form 10-K:

•"Portfolio Characteristics" section of MD&A

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

•“Provision for Credit Losses” discussion within the “Operating Results” section of MD&A

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

•Note 4 "Loans" to the consolidated financial statements

•Note 5 "Allowance for Credit Losses" to the consolidated financial statements

Liquidity

At the end of 2024, Regions Bank had $7.8 billion in cash on deposit with the Federal Reserve Bank and the loan-to-deposit ratio was 76 percent. Cash and cash equivalents at the parent company totaled $2.4 billion. Cash at the Federal Reserve increased from December 31, 2023.

At December 31, 2024, the Company’s borrowing capacity with the Federal Reserve was $21.6 billion based on available collateral. Borrowing availability with the FHLB was $10.2 billion based on available collateral at the same date. Regions also maintains a shelf registration statement with the SEC that can be utilized by the Company to issue various debt and/or equity securities. Additionally, Regions' Board has authorized Regions Bank to issue up to $10 billion in aggregate principal amount of bank notes outstanding at any one time.

Regions is required to conduct liquidity stress testing and measure its available sources of liquidity against minimums as established by Regions' internal liquidity policy. Regions was fully compliant with those requirements as of year-end.

For more information, refer to the following additional sections within this Form 10-K:

•“Supervision and Regulation” discussion within Item 1. Business

•“Borrowed Funds” discussion within the “Balance Sheet Analysis” section of MD&A

•“Regulatory Requirements” section of MD&A

•“Liquidity” discussion within the “Risk Management” section of MD&A

•Note 11 "Borrowed Funds" to the consolidated financial statements

GENERAL

The following discussion and financial information is presented to aid in understanding Regions’ financial position and results of operations. The emphasis of this discussion will be on operations for the years 2024 and 2023; in addition, financial information for prior years will also be presented when appropriate.

Regions’ profitability, like that of many other financial institutions, is dependent on its ability to generate revenue from net interest income as well as non-interest income sources. Net interest income is primarily the difference between the interest income Regions receives on interest-earning assets, such as loans, leases, investment securities and cash balances held at the Federal Reserve Bank, and the interest expense Regions pays on interest-bearing liabilities, principally deposits and borrowings. 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

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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, equipment and software expenses, 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.

Business Segments

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, and other specialty financing. Regions carries out its strategies and derives its profitability from three reportable segments: Corporate Bank, Consumer Bank, and Wealth Management, with the remainder in Other.

See Note 22 "Business Segment Information" to the consolidated financial statements for further information on Regions’ business segments.

CRITICAL ACCOUNTING ESTIMATES AND RELATED POLICIES

In preparing financial information, management is required to make significant estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses for the periods shown. The accounting principles followed by Regions and the methods of applying these principles conform with GAAP, regulatory guidance, where applicable, and general banking practices. Estimates and assumptions most significant to Regions are related primarily to the allowance, fair value measurements, intangible assets (goodwill and other identifiable intangible assets), MSRs measured at fair value, and income taxes, and are summarized in the following discussion and in the notes to the consolidated financial statements.

Allowance

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. Regions determines its allowance in accordance with GAAP and applicable regulatory guidance.

See Note 1 "Summary of Significant Accounting Policies" and Note 5 "Allowance for Credit Losses" to the consolidated financial statements for information about areas of judgment and methodologies used in establishing the allowance.

The allowance is sensitive to a number of internal factors, such as changes in the mix and level of loan balances outstanding, portfolio performance and assigned risk ratings. The allowance is also sensitive to external factors such as the general health of the economy, as evidenced by changes in interest rates, inflation, GDP, unemployment rates, changes in real estate demand and values, volatility in commodity prices, bankruptcy filings, and the effects of weather and natural disasters such as droughts, floods and hurricanes.

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 loan losses that differ from the originally estimated amounts.

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 below, or other scenarios, have the ability to result in actual credit losses that differ, perhaps materially, from the originally estimated amounts. 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.

It is difficult to estimate how potential changes in any one economic factor might affect the overall allowance because a wide variety of factors and inputs are considered in the allowance estimate. Changes in the factors and inputs may not occur at the same rate and may not be consistent across all product types. Additionally, changes in factors and inputs may be

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directionally inconsistent, such that improvement in one factor may offset deterioration in others. However, to consider the impact of a hypothetical alternate economic forecast, Regions estimated the allowance using a scenario that was one standard deviation unfavorable to the expected scenario for each macroeconomic variable. This unfavorable scenario resulted in an allowance approximately 15 percent higher than the allowance using the expected scenario.

Similar to the scenarios above, it is difficult to estimate how potential changes in credit risk factors might affect the overall allowance because of the wide variety of credit risk factors that are considered in estimating the allowance. Changes in risk ratings may not occur at the same rate and may not be consistent across product or industry types. Regions conducted a separate sensitivity analysis considering deteriorating conditions for commercial and investor real estate portfolio factors by stressing key portfolio drivers relative to the baseline portfolio conditions. Regions stressed risk ratings by one downgrade for commercial and investor real estate loans. This scenario resulted in an allowance approximately 20 percent higher for the commercial and investor real estate portfolios.

Fair Value Measurements

A portion of the Company’s assets and liabilities is carried at fair value, with changes in fair value recorded either in earnings or accumulated other comprehensive income (loss). These include debt securities available for sale, mortgage loans held for sale, equity investments (with and without readily determinable market values), residential MSRs, commercial MSRs through non-DUS agency programs and derivative assets and liabilities. From time to time, the estimation of fair value also affects other loans held for sale, which are recorded at the lower of cost or fair value. Fair value determination is also relevant for certain other assets such as foreclosed property and other real estate, which are recorded at the lower of the recorded investment in the loan/property or fair value, less estimated costs to sell the property. For example, the fair value of other real estate is determined based on recent appraisals by third parties and other market information, less estimated selling costs. Adjustments to the appraised value are made if management becomes aware of changes in the fair value of specific properties or property types. The determination of fair value also impacts certain other assets that are periodically evaluated for impairment using fair value estimates, including goodwill and other identifiable intangible assets.

Fair value is generally defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) as opposed to the price that would be paid to acquire the asset or received to assume the liability (an entry price), in an orderly transaction between market participants at the measurement date under current market conditions. While management uses judgment when determining the price at which willing market participants would transact when there has been a significant decrease in the volume or level of activity for the asset or liability in relation to “normal” market activity, management’s objective is to determine the point within the range of fair value estimates that is most representative of a sale to a third-party investor under current market conditions. The value to the Company if the asset or liability were held to maturity is not included in the fair value estimates.

A fair value measure should reflect the assumptions that market participants would use in pricing the asset or liability, including the assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of nonperformance. Fair value is measured based on a variety of inputs the Company utilizes. Fair value may be based on quoted market prices for identical assets or liabilities traded in active markets (Level 1 valuations). If market prices are not available, quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market are used (Level 2 valuations). Where observable market data is not available, the valuation is generated from model-based techniques that use significant assumptions not observable in the market, but observable based on Company-specific data (Level 3 valuations). These unobservable assumptions reflect the Company’s own estimates for assumptions that market participants would use in pricing the asset or liability. Valuation techniques typically include option pricing models, discounted cash flow models and similar techniques, but may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability.

See Note 1 "Summary of Significant Accounting Policies" to the consolidated financial statements for a detailed discussion of determining fair value, including pricing validation processes.

Intangible Assets

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

The Company completed its annual goodwill impairment test as of October 1, 2024, by performing a qualitative assessment of goodwill at the reporting unit level to determine whether any indicators of impairment existed. In performing the qualitative assessment, the Company evaluated events and circumstances since the last impairment analysis, recent operating performance including reporting unit performance, changes in market capitalization, regulatory actions and assessments,

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changes in the business climate, company-specific factors, and trends in the banking industry. After assessing the totality of the events and circumstances, the Company determined that it is more likely than not that the fair value of the Corporate Bank, Consumer Bank, and Wealth Management reporting units exceed their respective carrying values. Therefore, a quantitative impairment test was not required. Refer to Note 9 "Intangible Assets" to the consolidated financial statements for additional discussion of goodwill.

Specific factors as of the date of filing the consolidated financial statements that could negatively impact the assumptions used in assessing goodwill for impairment include: a protracted decline in the Company’s market capitalization; adverse business trends resulting from litigation and/or regulatory actions; higher loan losses; forecasts of high unemployment levels; future increased minimum regulatory capital requirements above current thresholds (refer to Note 12 "Regulatory Capital Requirements and Restrictions" to the consolidated financial statements for a discussion of current minimum regulatory requirements); future federal rules and regulations (e.g., such as those resulting from the Dodd-Frank Act); and/or significant volatility in interest rates.

Other identifiable intangible assets such as relationship assets and agency commercial real estate licenses are reviewed at least annually (usually in the fourth quarter) for events or circumstances which could impact the recoverability of the intangible asset. These events could include loss of customer relationships, increased competition, or adverse changes in the economy. To the extent an other identifiable intangible asset is deemed unrecoverable, an impairment loss would be recorded to reduce the carrying amount. These events or circumstances, if they occur, could be material to Regions’ operating results for any particular reporting period but the potential impact cannot be reasonably estimated. As of December 31, 2024, the Company’s review indicated there was no impairment in the value of the other identifiable intangible assets.

Mortgage Servicing Rights

Regions has elected to measure and report both its residential MSRs and commercial MSRs through non-DUS agency programs using the fair value method. Although sales of MSRs do occur, MSRs do not trade in an active market with readily observable market prices and the exact terms and conditions of sales may not be readily available, and are therefore Level 3 valuations in the fair value hierarchy previously discussed in the "Fair Value Measurements" section. Specific characteristics of the underlying loans greatly impact the estimated value of the related residential and commercial MSRs. As a result, Regions stratifies its portfolios on the basis of certain risk characteristics, including loan type and contractual note rate, as applicable. Regions values its residential and commercial MSRs using discounted cash flow modeling techniques. These techniques require management to make estimates regarding future net servicing cash flows, taking into consideration historical and forecasted mortgage loan prepayment rates, discount rates, escrow balances and servicing costs. Changes in interest rates, prepayment speeds or other factors impact the fair value of MSRs which impacts earnings.

Refer to Note 6 "Servicing of Financial Assets" to the consolidated financial statements for additional information including quantitative disclosures reflecting the effect that changes in management's assumptions would have on the fair value of MSRs.

Income Taxes

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

Deferred income taxes represent the amount of future income taxes to be paid or received and are accounted for using the asset and liability method with the net balance reported in other assets or other liabilities, as appropriate, in the consolidated balance sheets. The Company determines the realization of deferred tax assets by considering all positive and negative evidence available, including the impact of recent operating results, future reversals of taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards and tax planning strategies. In projecting future taxable income, the Company utilizes forecasted pre-tax earnings, adjusts for the estimated temporary differences and incorporates assumptions, including the amounts of income allocable to taxing jurisdictions. Determining whether deferred tax assets are realizable is subjective and requires the use of significant judgment. A valuation allowance is provided when it is more-likely-than-not that some portion of the deferred tax asset will not be realized. The Company currently maintains a valuation allowance for certain state carryforwards.

The Company’s estimate of accrued income taxes, deferred income taxes and income tax expense can also change in any period as a result of new legislative or judicial guidance impacting tax positions, as well as changes in income tax rates and changes in operating activities. Any changes, if they occur, can be significant to the Company’s consolidated financial position, results of operations or cash flows.

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See Note 1 "Summary of Significant Accounting Policies" and Note 19 "Income Taxes" to the consolidated financial statements for further details and discussion.

OPERATING RESULTS

NET INTEREST INCOME AND NET INTEREST MARGIN

Net interest income is Regions’ principal source of income and is one of the most important elements of Regions’ ability to meet its overall performance goals. Both net interest income and net interest margin are influenced by both long-term and short-term market interest rates. Long-term and short-term rates were higher for most of 2024 compared to 2023. Late in the third quarter of 2024, the FOMC decreased the Fed funds rate by approximately 50 basis points and by an additional 25 basis points at the November and December meetings, for a total of 100 basis points. See the "Executive Overview" for a discussion of recent FOMC activity.

Net interest income (taxable-equivalent basis) decreased by $503 million in 2024 compared to 2023, and net interest margin decreased by 36 basis points to 3.54 percent in 2024. This represents a normalization from elevated post-pandemic levels. The decreases in net interest income and net interest margin were driven primarily by higher funding costs in a prolonged high rate environment. In 2024, funding costs, which includes deposits and wholesale borrowings utilized during the year, increased to 1.73 percent compared to 1.19 percent in 2023. The increase in funding costs was driven by higher deposit costs due to continued deposit remixing as depositors moved into higher interest earning products, albeit at a slower pace than the remixing experienced in 2023. Deposit costs increased to 1.56 percent for 2024 compared to 0.99 percent for 2023.

Partially offsetting the increase in funding costs were higher asset yields benefiting from the maturity and continued replacement of lower-yielding, fixed-rate loans and securities. The Company's loan yields are primarily influenced by short-term interest rates such as 30-day term SOFR, which averaged 5.19 percent in 2024 compared to 4.98 percent in 2023. Additionally, fixed-rate lending production, which contains significant residential mortgage fixed-rate exposure, benefited from higher middle and long-term rates. The Company also continued its reinvestment strategy in the securities portfolio and executed multiple, distinct debt securities repositioning transactions. As a result, the debt securities yield increased to 2.89 percent in 2024 from 2.38 percent in 2023. See Table 6 for more information.

See also the "Market Risk-Interest Rate Risk" section in Management's Discussion and Analysis for additional information.

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Table 1 "Consolidated Average Daily Balances and Yield/Rate Analysis" presents a detail of net interest income (on a taxable-equivalent basis), the net interest margin, and the net interest spread.

Table 1—Consolidated Average Daily Balances and Yield/Rate Analysis

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(1)Amounts have been calculated using whole dollar values and the prevailing interest accrual methodology.

(2)Debt securities are included on an amortized cost basis with yield and net interest margin calculated accordingly.

(3)Interest income on debt securities includes hedging income of $7 million, hedging expense of $1 million, and hedging income of $41 million for the years ended December 31, 2024, 2023 and 2022, respectively. Hedging income for the year ended December 31, 2022 reflects strategies designed to accelerate hedge notional maturities through the use of pay fixed swaps. Benefits migrated to cash flow hedges from loans in the first quarter of 2023.

(4)Loans, net of unearned income include non-accrual loans for all periods presented.

(5)Interest income on loans, net of unearned income, includes hedging expense of $420 million and $236 million and hedging income of $140 million for the years ended December 31, 2024, 2023 and 2022, respectively. Interest income on loans, net of unearned income, also includes net loan fees of $142 million, $130 million and $109 million for the years ended December 31, 2024, 2023 and 2022 , respectively.

(6)Total deposit costs may be calculated by dividing total interest expense on deposits by the sum of interest-bearing deposits and non-interest-bearing deposits. The rates for total deposit costs equaled 1.56% , 0.99% and 0.14% for the years ended December 31, 2024, 2023 and 2022, respectively.

(7)The computation of taxable-equivalent net interest income is based on the statutory federal income tax rate of 21%, adjusted for applicable state income taxes net of the related federal tax benefit.

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Table 2 "Volume and Yield/Rate Variances" provides additional information with which to analyze the changes in net interest income.

Table 2— Volume and Yield/Rate Variances

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Notes:

•The change in interest not due solely to volume or yield/rate has been allocated to the volume column and yield/rate column in proportion to the relationship of the absolute dollar amounts of the change in each.

•The computation of taxable-equivalent net interest income is based on the statutory federal income tax rate of 21%, adjusted for applicable state income taxes net of the related federal tax benefit.

Annual changes in net interest income are due to changes in the interest rate environment, product pricing, balance sheet mix, and balance sheet growth. Over recent years, changes in the interest rate environment and the impact on product pricing and mix has been the primary contributor to changes in net interest income.

The mix of earning assets can affect the interest rate spread. Regions’ primary types of earning assets are loans and investment securities. Certain types of earning assets have historically generated larger spreads; for example, loans typically generate larger spreads than other assets, such as securities or interest-bearing deposits in other banks. Average earning assets in 2024 totaled $137.5 billion, a decrease of $383 million as compared to the prior year, primarily due to a modest decline in loans, net of unearned income, partially offset by growth in debt securities and interest-bearing deposits in other banks. See the "Loans" and "Debt Securities" sections for further details.

The mix of interest-bearing liabilities can also affect the interest spread. Funding for Regions’ earning assets comes from interest-bearing and non-interest-bearing sources. As previously discussed, in 2024 the Company continued to experience a remixing of deposits into higher-interest-bearing categories, albeit at a slower pace. Higher balances within these categories contributed to the overall increase in funding costs.

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. During 2024, the provision for credit losses totaled $487 million and net charge-offs were $458 million. This compares to a provision for credit losses of $553 million and net charge-offs of $397 million in 2023.

For further discussion and analysis of the total allowance for credit losses, see the "Allowance for Credit Losses" and “Risk Management” sections found later in this report. See also Note 5 "Allowance for Credit Losses" to the consolidated financial statements.

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NON-INTEREST INCOME

Table 3—Non-Interest Income

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NM- Not meaningful.

(1) In the third quarter of 2022, the Company settled a previously disclosed matter with the CFPB. The Company received an insurance reimbursement in the fourth quarter of 2022 related to the settlement.

Service Charges on Deposit Accounts

Service charges on deposit accounts include overdraft fees, treasury management fees and other customer transaction-related service charges. Service charges increased modestly in 2024 compared to 2023, driven by an increase in fees from treasury management services. Partially offsetting the increase was a decline in overdraft fees as a result of recent overdraft-related policy enhancements.

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

On December 12, 2024, the CFPB adopted a final rule that caps overdraft fees in line with a benchmark fee of $5 or an amount that covers an institution's costs and losses using a standard set forth in the rules. Alternatively, an institution can charge higher overdraft fees by complying with the standard regulatory requirements governing other loans, including credit cards. The final rule is currently scheduled to take effect on October 1, 2025. However, under the presidential memorandum entitled “Regulatory Freeze Pending Review,” rules with future effective dates may be re-evaluated. Therefore, though the Company will continue to monitor and evaluate potential impact, the nature and timing of future developments that may potentially impact this or other CFPB rules and proposals cannot be predicted.

Card and ATM Fees

Card and ATM fees include the combined amounts of credit card/bank card income and debit card and ATM related revenue. Card and ATM fees decreased in 2024 compared to 2023, driven by credit card rewards liability adjustments combined with higher trending rewards utilization, as well as a decline in foreign ATM revenue due to elimination of balance inquiry fees in February 2024.

Capital Markets Income

Capital markets income primarily relates to capital raising activities that include securities underwriting and placement, loan syndication, as well as foreign exchange, derivatives, merger and acquisition and other advisory services. Capital markets income increased in 2024 compared to 2023, impacted by a benefit from less negative credit/debit valuation adjustments due to rate and spread movements. Additionally, all other categories of capital markets income were higher year-over-year due to increased transaction volume and deal activity.

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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 increase in mortgage income in 2024 compared to 2023 was due primarily to an increase in servicing income due to bulk purchases of the rights to service $6.2 billion of residential mortgage loans in the third quarter of 2023 and $8 billion of residential mortgage loans at the end of the first quarter of 2024 and an increase in mortgage production and margins sold to the agencies. These increases were offset by a reduction in the valuation of MSRs and related hedges.

Investment Services Fee Income

Investment services fee income represents income earned from investment advisory services. Investment services fee income increased in 2024 compared to 2023 due to strong advisor production.

Bank-owned Life Insurance

Bank-owned life insurance income primarily represents income earned from the appreciation of the cash surrender value of insurance contracts held and the proceeds of insurance benefits. Bank-owned life insurance income increased during 2024 compared to 2023 driven primarily by increased claim volume.

Market Value Adjustments on Employee Benefit Assets

Market value adjustments on employee benefit assets are the reflection of market value variations related to assets held for certain employee benefits. The adjustments are offset in salaries and benefits and other non-interest expense.

Securities Gains (Losses), Net

Net securities gains (losses) primarily result from the Company's asset/liability and capital management processes. In 2024, the Company sold debt securities and reinvested the proceeds at higher current market yields, incurring $205 million in total pre-tax losses. See Table 5 "Debt Securities" for more information. An additional $3 million in losses was incurred associated with the sale of certain employee benefit assets.

Table 4—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 in 2024 compared to 2023 primarily due to an increase in incentives, base salaries, and benefits expenses. Salaries and employee benefits were also impacted by an increase in market valuation adjustments on employee benefit assets that are offset in non-interest income. Full-time equivalent headcount decreased to 19,644 at December 31, 2024 from 20,101 at December 31, 2023.

Professional, Legal and Regulatory Expenses

Professional, legal, and regulatory expenses consist of amounts related to legal, consulting, other professional fees and regulatory charges. Professional, legal and regulatory expenses increased in 2024 compared to 2023 due to accruals for legal and regulatory matters in the first quarter of 2024, partially offset by lower other professional fees.

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FDIC Insurance Assessments

FDIC insurance assessments decreased in 2024 compared to 2023 primarily resulting from the special assessment that was initially recorded in 2023.

Federal law requires that any losses to the FDIC’s DIF related to the protection of uninsured depositors under the Systemic Risk Exception be repaid by a special assessment on IDIs. In the fourth quarter of 2023, the FDIC finalized a special assessment related to the two March 2023 bank failures, which was required to be recognized as the accrual of a liability and related expense in the fourth quarter of 2023 of $119 million. In late February 2024, the FDIC published revised loss estimates related to the failures, increasing the estimated loss to the DIF. Based on updated information provided by the FDIC, Regions increased the special assessment accrual during 2024 by $16 million. The total special assessment is to be paid in ten quarterly installments that began with the invoice for the first quarter of 2024 (received in June 2024) and are deductible for income taxes.

In addition to the reduction in accruals for the special assessment, favorability in the base assessment which was driven by higher levels of unsecured debt and cash as well as lower exposures in higher risk assets, further drove the year-over-year decrease in FDIC insurance assessments.

Operational Losses

Operational losses include losses related to fraud, execution, delivery and process management, and damage to physical assets. Operational losses decreased in 2024 compared to 2023 primarily due to check fraud that occurred in the second and third quarters of 2023.

Other Miscellaneous Expenses

Other miscellaneous expenses include expenses related to communications, postage, supplies, certain credit-related costs, foreclosed property expenses, mortgage repurchase costs, and other costs (benefits) related to employee benefit plans. Other miscellaneous expenses decreased in 2024 compared to 2023 due primarily to lower pension related costs and a reduction for a contingent reserve release in the second quarter of 2024 related to a prior acquisition.

INCOME TAXES

The Company’s income tax expense for the year ended December 31, 2024 was $461 million compared to $533 million in 2023, resulting in effective tax rates of 19.6% and 20.5%, respectively. The decrease in the effective tax rate for 2024 was primarily due to lower pre-tax income in 2024 as compared to 2023, causing tax preferential items to have a more favorable impact to the effective tax rate.

The effective tax rate is affected by many factors including, but not limited to, the level of pre-tax income, the mix of income between various tax jurisdictions with differing tax rates, enacted tax legislation, net tax benefits related to affordable housing investments, bank-owned life insurance income, 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 UTBs. Accordingly, the comparability of the effective tax rate between periods may be impacted.

At December 31, 2024, the Company reported a net deferred tax asset of $775 million compared to $741 million at December 31, 2023.

See Note 1 "Summary of Significant Accounting Policies" and Note 19 "Income Taxes" to the consolidated financial statements for additional information about income taxes.

BALANCE SHEET ANALYSIS

The following sections provide expanded discussion of significant changes in certain line items in asset, liability, and shareholders' equity categories.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents increased approximately $3.9 billion from $6.8 billion at December 31, 2023 to $10.7 billion at December 31, 2024 resulting from an increase in cash balances on deposit with the Federal Reserve Bank driven primarily by FHLB advances utilized in 2024. Cash balances were also impacted by a decline in loans. See the "Loans", "Liquidity" and "Borrowed Funds" sections for more information.

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DEBT SECURITIES

The following table details the carrying values of debt securities, including both held to maturity and available for sale, as of December 31:

Table 5—Debt Securities

Debt securities, which comprise approximately 22 percent of earning assets, are an important tool used to manage interest rate sensitivity and provide a primary source of liquidity for the Company, as much of the portfolio is highly liquid. Additionally, some of the securities portfolio is eligible to be used as collateral for funding of various types of borrowings. See the "Liquidity" section for more information on these arrangements. Also see the "Market Risk-Interest Rate Risk" section for more information.

Debt securities held to maturity constituted approximately 14 percent of the securities portfolio at December 31, 2024. The Company reclassified securities with an amortized cost, excluding items recognized in OCI, of $2.5 billion and $2.0 billion, in the third and fourth quarters of 2024, respectively, from available for sale into held to maturity to reduce the volatility in AOCI in preparation for expected, upcoming changes to regulatory guidance as discussed in the "Regulatory Requirements" section. See also Note 3 "Debt Securities" for additional information.

Debt securities available for sale, constituted approximately 86 percent of the securities portfolio at December 31, 2024. Regions maintains a highly-rated securities portfolio consisting primarily of agency MBS. Regions’ investment policy emphasizes credit quality and liquidity. Debt securities backed by the U.S. Government and government sponsored agencies, both on a direct and indirect basis, represented approximately 98 percent of the investment portfolio at December 31, 2024. All other debt securities rated below AAA, not backed by the U.S. Government or government sponsored agencies, or which are not rated represented approximately 2 percent of total debt securities at December 31, 2024.

Debt securities increased $1.8 billion from December 31, 2023 to December 31, 2024 as the Company purchased $750 million of residential agency MBS securities with proceeds from a debt issuance in the second quarter of 2024 and an additional $1.0 billion of residential agency MBS securities and U.S Treasury securities with proceeds from a debt issuance in the third quarter of 2024 (see Note 11 "Borrowed Funds"). Additionally, four distinct securities repositioning transactions occurred during 2024 involving the sale of mostly shorter-duration commercial agency MBS and replacement with residential agency MBS with favorable prepayment profiles. The intent was to maintain the securities portfolio duration that would otherwise shorten naturally. Proceeds from the sales were reinvested at higher market yields. Through these transactions, in 2024, the Company sold approximately $4.3 billion of debt securities available for sale and realized approximately $205 million in pre-tax losses.

The average life of the debt securities portfolio at December 31, 2024 was estimated to be 6.1 years, with a duration of approximately 4.5 years. These metrics compare with an estimated average life of 5.5 years and a duration of approximately 4.5 years for the portfolio at December 31, 2023.

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Table 6 "Relative Contractual Maturities" details the contractual maturities of debt securities, including held to maturity and available for sale, and the related weighted-average yields.

Table 6— Relative Contractual Maturities

_________

(1)The weighted-average yields are calculated on the basis of the yield to maturity based on the carrying value of each debt security. The yields presented in Table 1 are calculated based on the amortized cost of each debt security and yields earned throughout each year. Yields are calculated based on whole dollar amounts.

LOANS HELD FOR SALE

The following table presents Regions’ loans held for sale by type at December 31:

Table 7—Loans Held for Sale

Commercial loans held for sale include commercial mortgage loans originated for sale to third parties and commercial loans originally recorded as held for investment when management has the intent to sell. Levels of commercial loans held for sale fluctuate based on timing of sale to third parties. The levels of residential first mortgage loans held for sale that are part of the Company's mortgage originations fluctuate depending on the timing of origination and sale to third parties.

LOANS

GENERAL

Loans, net of unearned income, represented 70 percent of interest-earning assets as of December 31, 2024 compared to 74 percent as of December 31, 2023. Lending at Regions is generally organized along three portfolio segments: commercial loans (including commercial and industrial, and owner-occupied commercial real estate mortgage and construction loans), investor real estate loans (commercial real estate mortgage and construction loans) and consumer loans (residential first mortgage, home equity lines and loans, consumer credit card, other consumer—exit portfolios, and other consumer loans).

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The following table illustrates a year-over-year comparison of loans, net of unearned income, by portfolio segment and class as of December 31:

Table 8—Loan Portfolio

The following table details the contractual maturities for loans as of December 31, 2024. In instances of contractual deferral, the new contractual maturity is used to determine maturity as outlined in the allowance section of Note 1 "Summary of Significant Accounting Policies".

Table 9— Loan Maturities

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The following table shows the distribution of those loans with maturities greater than one year between predetermined and variable interest rate loans as of December 31, 2024.

Table 10- Loan Distribution by Rate Type

_________

(1)The lending reported in variable rate disclosure is based upon the rate in the underlying lending agreements. For some lending arrangements, Regions enters into interest rate swap and floor agreements to manage overall cash flow changes related to interest rate risk exposure on variable rate loans. The agreements effectively modify the Company’s exposure to interest rate risk by utilizing receive fixed/pay variable interest rate swaps and interest rate floors. The impact of hedging is not considered within this disclosure.

PORTFOLIO CHARACTERISTICS

Loans, net of unearned income, decreased $1.7 billion year over year, primarily due to decreases in the commercial and industrial portfolio class. Regions manages loan growth with a focus on risk management and risk-adjusted return on capital.

The following sections describe the composition of the portfolio segments and classes disclosed in Table 9, explain changes in balances from year-end 2023 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, and certain loan products. See Note 4 "Loans" and Note 5 "Allowance for Credit Losses" to the consolidated financial statements for additional discussion.

Commercial

The commercial portfolio segment includes commercial and industrial loans for use in customers' normal business operations to finance working capital needs, equipment purchases, expansion projects and acquisitions. Regions' commercial loans generally mature within a five-year period with applicable amortization based on the underlying collateral or financing purpose. Typical loan structures consist of revolving and non-revolving lines of credit, amortizing term loans, guidance facilities, and single-pay loans, further tailored to meet the specific needs of the customer. These loans frequently have a covenant package combination inclusive of applicable debt service coverage, leverage, and liquidity measurements.

Underwriting of commercial loans includes the assessment of the financial performance and profile, management experience and capability, industry position and outlook, the applicability of the transactional structure, as well as the repayment enhancement provided by collateral, guarantees, and ownership or sponsorship. Any forward view of operating performance is tested against applicable stressors that may include revenue decline, margin compression, and interest rate hikes.

Commercial and industrial loans decreased $1.2 billion since year-end 2023, due to lower line of credit utilization and loans refinanced off the Company's balance sheet through the debt capital markets. Throughout 2024, the decline in commercial and industrial loans was broad-based as shown in Table 11.

The commercial portfolio also includes owner-occupied commercial real estate mortgage loans to operating businesses, which are loans for long-term financing on real estate assets, and are repaid by cash 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. These owner-occupied real estate and real estate construction loans generally mature within a 10 year period and with amortization periods reflecting the longer life of the underlying collateral. Typical structure is an amortizing term loan, though construction loans are short-term, monitored, non-revolving draw facilities. These loans frequently have a covenant package combination

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consistent with the underwriting of commercial loans, inclusive of applicable debt service coverage, leverage, and liquidity measurements.

Underwriting for owner-occupied real estate and real estate construction loans is consistent with the underwriting of commercial loans, with particular attention to the enhancement provided by the underlying real estate collateral.

Real estate appraisals, for both commercial and IRE loans, are performed in accordance with regulatory guidelines. In some cases, reports from automated valuation services are used or internal evaluations are performed. An appraisal is ordered and reviewed prior to loan closing, and a new appraisal or evaluation is generally ordered when market conditions indicate a potential decline in the value of the collateral, or when the loan is either modified, renewed, or deteriorates to a certain level of credit weaknesses.

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 Table 11. The Company manages the related risks to this portfolio by setting certain lending limits for each significant industry.

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’ IRE 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 IRE loans decreased $140 million in comparison to year-end 2023 balances.

IRE loans generally mature within a three-to-seven-year period and consist of full, partial, and non-recourse guarantee structures. Typical term loan structures include annually testing operating covenants that require loan rebalancing based on minimum debt service coverage, debt yield, and/or LTV tests. Construction and land development loans generally mature in 12 to 24 months for acquisition and development, to 42 to 60 months for construction and contain full or partial recourse guarantee structures with 12 to 24 month extension options or roll-to-permanent financing options that often result in term loans.

Underwriting on IRE properties is based on the economic viability of the project with significant consideration given to the creditworthiness and experience of the sponsor, who is responsible for managing the property. The Company generally requires that the owner, who provides the capital to purchase the property, infuse their equity prior to any advances. Re-margining requirements (e.g., required equity infusions upon a decline in value or cash flow of the collateral) are often included in the loan agreement along with required guarantees of the sponsor.

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The following tables provide detail of Regions' commercial and IRE lending balances in selected industries as of December 31.

Table 11—Commercial and Investor Real Estate Industry Exposure

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_______

(1)"Real estate" includes REITs, which are unsecured commercial and industrial products that are real estate related. This portfolio is well diversified, generally has low leverage with strong access to liquidity, and the REITs included in this portfolio are primarily investment or near investment grade.

(2)"Other" contains balances related to non-classifiable and invalid business industry codes offset by payments in process and fee accounts that are not available at the loan level.

(3)As customers' businesses evolve (e.g. up or down the vertical manufacturing chain), Regions may need to change the assigned business industry code used to define the customer relationship. When these changes occur, Regions does not recast the customer history for prior periods into the new classification because the business industry code used in the prior period was deemed appropriate. As a result, year over year changes may be impacted.

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The Company's total non-owner-occupied commercial real estate lending consists of both unsecured commercial and industrial loans that are real estate related (including REITs) and investor real estate loans and are considered to be well diversified across property types. The following table provides detail of these loans:

Table 12— Unsecured Commercial Real Estate and Investor Real Estate Exposure

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(1)Amounts calculated based on whole dollar values.

(2)Owner-occupied commercial real estate is not included as the principal source of repayment is individual businesses, which more closely aligns with the commercial portfolio credit performance.

Portfolios that are experiencing higher risk due to conditions such as inflationary pressures, higher interest rates, and adverse underlying market fundamentals resulting in rising vacancies and reductions in net effective rents are identified as portfolios of interest. These portfolios have an increased focus through credit management and monitoring in order to accurately capture risk and enhance strategies for positive resolutions. Included within Table 11 above, the business offices, senior housing (included within healthcare), and trucking (including within transportation and warehousing) portfolios are considered by Regions to be portfolios of interest. The multi-family portfolio that was previously identified as a portfolio of interest was removed in the fourth quarter of 2024 as Regions does not expect near term losses nor has there been a significant amount of downward migration to non-performing status. Recent and potential future interest rate cuts should ease pressure on borrowers across the entire loan portfolio. See Table 13 below for more details on these portfolios, as well as the allowance discussion following Table 16.

Table 13—Portfolios of Interest

___

(1) Approximately 89 percent of the office portfolio was secured, with approximately 60 percent of secured balances located in the South region of the U.S, of which 90% were Class A properties. Additionally, the IRE office portfolio had a weighted-average LTV of approximately 69 percent at December 31, 2024, based upon appraisal at origination or most recent received, and a stressed weighted-average LTV of approximately 85 percent as of January 7, 2025, based upon GreenStreet's Commercial Property Price Index. No new loan originations are being contemplated in this portfolio.

(2) Senior housing herein represents the CRE portfolio and excludes approximately $147 million in non-real estate commercial loans in the senior housing sector. Client activity in senior housing has been limited for several years as the portfolio has recovered from the vacancy rate lows of 2020-2021, but signs of improvement have been observed with expected improvements continuing in 2025.

(3) Considered a portfolio of interest as trucking companies have been working through one of the most prolonged downturns in the U.S. domestic freight market, recent measures of freight demand remained mostly positive. While there is optimism for the industry, the recovery in 2025 is expected to be gradual. Regions' strategy remains primarily centered around larger, existing clients and slowing originations of smaller trucking deals at this point in the cycle.

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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. Total residential first mortgage loans decreased $113 million in comparison to year-end 2023 balances.

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 $71 million in comparison to year-end 2023 balances, as payoffs and paydowns continue to outpace production. Substantially all of this portfolio was originated through Regions' branch network.

Beginning in December 2016, new home equity lines of credit have a 10-year draw period and a 20-year repayment term. During the 10-year draw period customers do not have an interest-only payment option, except on a very limited basis. From May 2009 to December 2016, home equity lines of credit had a 10-year draw period and a 10-year repayment term. Prior to May 2009, the predominant structure was a 20-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 December 31, 2024. 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 14—Home Equity Lines of Credit - Future Principal Payment Resets

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. Substantially all of this portfolio was originated through Regions’ branch network.

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 that is updated typically every three months. 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 15—Estimated Current Loan to Value Ranges

Consumer Credit Card

Consumer credit card lending represents primarily open-ended variable interest rate consumer credit card loans. Consumer credit card increased $104 million from year-end 2023 driven by both active account and balance per account growth.

Other Consumer—Exit Portfolios

Exit portfolios primarily include lending initiatives through third parties consisting of loans made through automotive dealerships. Regions ceased originating new loans related to these businesses prior to 2020 and therefore the portfolio balances have been in run-off.

Other Consumer

Other consumer loans primarily include indirect and direct consumer loans, overdrafts and other revolving loans. Other consumer loans decreased $156 million from year-end 2023 driven by a decline in certain direct lending channels and a slight decline in consumer home improvement lending.

Regions considers factors such as periodic updates of FICO scores, accrual status, days past due status, unemployment rates, home prices, and geography as credit quality indicators for the consumer loan portfolio. FICO scores are obtained at origination and refreshed FICO scores are obtained by the Company quarterly for most consumer loans. For more information on credit quality indicators refer to Note 5 "Allowance for Credit Losses".

ALLOWANCE

The allowance represents management's best estimate of expected losses over the life of the loan portfolio and consists of two components: the allowance for loan losses and the reserve for unfunded credit commitments. Unfunded credit commitments includes items such as letters of credit, financial guarantees and binding unfunded loan commitments. The allowance totaled $1.7 billion at December 31, 2024, September 30, 2024 and December 31, 2023, which represents management's best estimate of expected losses over the life of the loan and credit commitment portfolios.

Regions' quarterly allowance estimation process utilizes loss forecasting models for pooled loans, specific reserves for significant individually evaluated non-performing loans, and qualitative adjustments for items not captured by the models including specific adjustments and general imprecision. Key inputs to Regions' loss forecasting models include, but are not limited to, loan risk ratings (commercial and investor real estate loans), maturity date, days past due and FICO scores (consumer loans), collateral values securing loans, and Regions' internally prepared economic forecast. Changes in any of these factors, assumptions, or the availability of new information, could require the allowance to be adjusted in future periods, perhaps materially. Outputs from the loss forecasting models, in combination with Regions' qualitative framework and other analyses, inform management in its estimation of Regions' expected credit losses to ensure the overall allowance estimate is appropriate from both a bottom-up and top-down perspective. Actual losses could vary, perhaps materially, from management’s estimates. See Note 1 "Summary of Significant Accounting Policies" for more information.

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The December 31, 2024 allowance was flat compared to September 30, 2024. The stable allowance resulted from increases in specific reserves driven by non-performing loans in portfolios of interest, offset by decreases due to moderate improvement in the economic forecast and decreases in qualitative adjustments as more of the portfolio risk was captured in the forecasting models and specific reserves. The following sections provide additional details on the key components of the allowance.

Base economic forecast

In deriving any forecast, Regions benchmarks its internal forecast with external forecasts and external data available. Regions' December 2024 baseline forecast was stable compared to the September 2024 forecast. While job and wage growth are slowing, growth in labor earnings is expected to continue to outpace inflation. Global uncertainty and soft growth have acted as a headwind for manufacturing and business capital spending has been somewhat limited, but the Company expects faster growth in the back half of 2025. Core inflation is expected to slow further but remain above the FOMC's 2.0 percent target rate through 2025. The risks to the base economic forecast are considered to be balanced. See the Economic Environment in Regions' Banking Markets discussion in the "Executive Overview" section for additional information.

Table 16 below reflects a range of macroeconomic factors utilized in the base economic forecast over the two-year R&S forecast period as of December 31, 2024. The unemployment rate is the most significant macroeconomic factor among the allowance models and is expected to remain relatively consistent over the forecast period.

Table 16— Macroeconomic Factors in the Forecast

Portfolio credit metrics and specific reserves

Credit metrics are monitored throughout each quarter and are a key consideration in the allowance process. In the fourth quarter of 2024, overall asset quality continued to perform within the Company's expectations. Commercial and investor real estate criticized balances increased approximately $24 million, which included a decrease in classified balances of $192 million compared to the third quarter of 2024.

Non-performing loans, excluding held for sale, increased approximately $107 million compared to the third quarter of 2024. The increase in non-performing loans was primarily due to credits in previously identified portfolios of interest. The increase in non-performing loans therefore resulted in higher specific reserves in the fourth quarter. See Table 19 for more details regarding non-performing assets.

Qualitative adjustments

While it is the intent of Regions' quantitative allowance methodologies to reflect all risk factors, including incremental risk in portfolios identified as under stress, any estimate involves assumptions and uncertainties resulting in some level of imprecision. Regions' qualitative framework has a general imprecision component which is meant to acknowledge that model and forecast errors are inherent in any modeling estimate. In the fourth quarter of 2024, the general imprecision component remained stable as there were no significant changes in the level of uncertainty in the economic scenario or in the models' performance.

The qualitative framework also has specific adjustment components which are reserves meant to capture specific issues or events that management believes are not adequately captured in the model outcomes. In the fourth quarter of 2024, Regions maintained qualitative adjustments for certain commercial real estate sectors due to elevated interest rates, vacancy rates and potential declining property values, as well as for certain consumer portfolios where stabilization to historical averages is still anticipated. While qualitative adjustments were maintained in the fourth quarter of 2024, they were reduced from the third quarter of 2024 due to more of the risk being captured in the loss forecasting models and specific reserve estimates, as well as additional portfolio stability resulting in less uncertainty in some portfolios.

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Details regarding the allowance and net charge-offs, including an analysis of activity from previous year's totals, are included in Table 17 "Allowance for Credit Losses".

Table 17—Allowance for Credit Losses

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_______

(1)See Note 1 to the consolidated financial statements for additional information.

(2)Amounts have been calculated using whole dollar values.

Net charge-offs increased $61 million year-over-year, primarily driven by increases in commercial and industrial and commercial investor real estate mortgage net charge-offs, and partially offset by a decline in net charge-offs in exit portfolios. As noted, economic trends such as interest rates, unemployment, volatility in commodity prices, collateral valuations and inflationary pressure will impact the future levels of net charge-offs and may result in volatility of certain credit metrics in 2025 and beyond.

Allocation of the allowance by portfolio segment and class is summarized as follows:

Table 18—Allowance Allocation

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(1)Amounts have been calculated using whole dollar values.

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NON-PERFORMING ASSETS

The following table presents non-performing assets as of December 31:

Table 19—Non-Performing Assets

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(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 Ginnie Mae 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 December 31, 2024 and $34 million at December 31, 2023.

Non-performing loans at December 31, 2024 increased $120 million as compared to year-end 2023 levels primarily due to increases in the industries or property types of office, transportation and warehousing, apartments and retail, partially offset by reductions in information and restaurant, accommodation and lodging. The same economic trends that impact net charge-offs, as discussed above, will impact the future level of non-performing loans. Circumstances related to individually large credits could also result in volatility.

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The following tables provide an analysis of non-accrual loans (excluding loans held for sale) by portfolio segment:

Table 20— Analysis of Non-Accrual Loans

________

(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 recorded upon transfer.

OTHER EARNING ASSETS

Other earning assets consist primarily of investments in Federal Reserve Bank and FHLB stock, marketable equity securities, and other miscellaneous earning assets. The balance at December 31, 2024 totaled $1.6 billion, increasing from $1.4 billion at December 31, 2023 primarily due to an increase of investments in Federal Reserve Bank and FHLB stock. Refer to Note 7 "Other Earning Assets" to the consolidated financial statements for additional information.

RESIDENTIAL MORTGAGE SERVICING RIGHTS AT FAIR VALUE

Residential MSRs increased approximately $101 million from December 31, 2023 to December 31, 2024. The year-over-year increase was primarily due to a bulk purchase of the rights to service $8 billion of residential mortgage loans in the first quarter of 2024. Partially offsetting the increase was higher amortization of servicing rights. An analysis of residential MSRs is presented in Note 6 "Servicing of Financial Assets" to the consolidated financial statements.

OTHER ASSETS

Other assets increased $646 million to $9.5 billion as of December 31, 2024. The increase was primarily due to Regions' Early Pay program which provides customers access to their payroll funds up to two days in advance. Also contributing was an increase in a receivable related to the sale of commercial loans held for sale which fluctuates based on the timing of sale and subsequent settlement, as well as an increase in investments in economic development projects.

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 through the Company's digital channels and contact center.

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Table of Contents

Deposits are Regions’ primary source of funds, providing funding for 92 percent of average earning assets in both 2024 and 2023. Table 21 "Deposits by Category and by Segment" details year-over-year deposit balance changes on a period-ending basis.

The following table summarizes deposits by category and by segment as of December 31:

Table 21—Deposits by Category and by Segment