Stockholders' Equity and Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2021

Stockholders' Equity and Accumulated Other Comprehensive Income (Loss)

NOTE 5. SHAREHOLDERS’ EQUITY AND ACCUMULATED OTHER COMPREHENSIVE INCOME

PREFERRED STOCK

The following table presents a summary of the non-cumulative perpetual preferred stock:


													June 30, 2021		December 31, 2020
	Issuance Date	Earliest Redemption Date	Dividend Rate (1)			Liquidation Amount		Liquidation Preference per Share		Liquidation preference per Depositary Share		Ownership Interest per Depositary Share	Carrying Amount		Carrying Amount
	(Dollars in millions, except per share data)
Series A (2)	11/1/2012	12/15/2017	6.375	%		$	—	$	1,000	$	25	1/40th	$	—	$	387
Series B	4/29/2014	9/15/2024	6.375	%	(3)	500		1,000		25		1/40th	433		433
Series C	4/30/2019	5/15/2029	5.700	%	(4)	500		1,000		25		1/40th	490		490
Series D	6/5/2020	9/15/2025	5.750	%	(5)	350		100,000		1,000		1/100th	346		346
Series E	5/4/2021	6/15/2026	4.450	%		400		1,000		25		1/40th	390		—
						$	1,750						$	1,659	$	1,656

_________

(1)Dividends on all series of preferred stock, if declared, accrue and are payable quarterly in arrears.

(2)The shares were fully redeemed on June 15, 2021.

(3)Dividends, if declared, will be paid quarterly at an annual rate equal to (i) for each period beginning prior to September 15, 2024, 6.375%, and (ii) for each period beginning on or after September 15, 2024, three-month LIBOR plus 3.536%.

(4)Dividends, if declared, will be paid quarterly at an annual rate equal to (i) for each period beginning prior to August 15, 2029, 5.700%, and (ii) for each period beginning on or after August 15, 2029, three-month LIBOR plus 3.148%.

(5)Dividends, if declared, will be paid quarterly at an annual rate equal to (i) for each period beginning prior to September 15, 2025, 5.750%, and (ii) for each period beginning on or after September 15, 2025, the five-year treasury rate as of the most recent reset dividend determination date plus 5.426%.

All series of preferred stock have no stated maturity and redemption is solely at Regions' option, subject to regulatory approval, in whole, or in part, after the earliest redemption date or in whole, but not in part, at any time following a regulatory capital treatment event for the Series B, Series C, Series D, and Series E preferred stock.

The Board declared a total of $46 million in cash dividends on Series A, Series B, and Series C preferred stock during both the first six months of 2021 and 2020. The Board declared $11 million in cash dividends on Series D preferred stock during the first six months of 2021; the initial quarterly dividend for Series D was declared in the third quarter of 2020 and there were no cash dividends for the first six months of 2020. Therefore, a total of $57 million in cash dividends on total preferred stock was declared in the first six months of 2021. The initial quarterly dividend date for the Series E preferred stock is September 15, 2021, therefore there were no cash dividends for Series E preferred stock for the first six months of 2021.

On May 4, 2021, Regions completed the issuance of $400 million in depositary shares each representing a 1/40th ownership interest in a share of the Company's 4.45% non-cumulative perpetual preferred stock, Series E, par value $1.00 per share ("Series E preferred stock"), with a liquidation preference of $1,000 per share of Series E preferred stock (equivalent to $25.00 per depositary share). The Company incurred $10 million of issuance costs associated with the transaction. Dividends will be paid quarterly at an annual rate equal to 4.45% for each period beginning September 15, 2021.

During the second quarter of 2021, the Company redeemed all 500,000 outstanding shares of Series A non-cumulative perpetual preferred stock and the corresponding depositary fractional shares at par for $500 million. Upon redemption, additional paid in capital was reduced by $100 million related to Series A preferred dividends that were recorded as a reduction of preferred stock, including related surplus, and net income available to common shareholders was reduced by $13 million related to issuance costs.

In the event Series B, Series C, Series D or Series E preferred shares are redeemed at the liquidation amounts, $67 million, $10 million, $4 million, or $10 million in excess of the redemption amount over the carrying amount will be recognized, respectively. Approximately $52 million of Series B preferred dividends that were recorded as a reduction of preferred stock, including related surplus, will be recorded as a reduction to common shareholders' equity. The remaining amounts listed represent issuance costs that were recorded as reductions to preferred stock, including related surplus, and will be recorded as reductions to net income available to common shareholders.

COMMON STOCK

Regions was not required to participate in the 2021 CCAR; the Company chose to participate in part to have the Federal Reserve re-evaluate Regions' SCB. Regions received the results of the voluntary test on June 28, 2021. The Federal Reserve communicated that the Company exceeded all minimum capital levels under the Federal Reserve's Supervisory Stress Test. Effective October 1, 2021, Regions' preliminary SCB requirement for the fourth quarter of 2021 through the third quarter of 2022 will be floored at 2.5 percent.

As part of the Company's capital plan, on April 21, 2021, the Board authorized the repurchase of up to $2.5 billion of the Company's common stock, permitting purchases from the second quarter of 2021 through the first quarter of 2022. As of June 30, 2021, Regions had repurchased approximately 8.0 million shares of common stock under this plan which reduced shareholders' equity by $167 million. Included in the share repurchases are approximately 1.0 million shares that were repurchased as part of the amendment to the Company’s deferred investment plan for its directors. All of these shares were immediately retired upon repurchase and therefore, will not be included in treasury stock. The Company did not repurchase shares in the first quarter of 2021 or throughout 2020.

During the third quarter of 2020, the Federal Reserve mandated that banks must not increase their quarterly per share common dividend and implemented an earnings-based payout restriction in connection with the supervisory stress test, requiring the third quarter 2020 dividend to not exceed the average of the prior four quarters of net income excluding preferred dividends. This mandate was subsequently extended through the second quarter of 2021. Therefore, Regions declared $0.155 per share in cash dividends for both the first and second quarters of 2021 and 2020, totaling $0.31 per common share for the first six months of 2021 and 2020.

In the third quarter of 2021, the Federal Reserve lifted restrictions on quarterly per share common dividends on banks whose capital remains above required levels in the ongoing 2021 CCAR cycle. On July 21, 2021, the Board approved a 10 percent increase to the third quarter common stock dividend to $0.17 per share.

ACCUMULATED OTHER COMPREHENSIVE INCOME

The following tables present the balances and activity in AOCI on a pre-tax and net of tax basis for the three and six months ended June 30, 2021 and 2020:


	Three Months Ended June 30, 2021
	Pre-tax AOCI Activity		Tax Effect (1)		Net AOCI Activity
	(In millions)
Total accumulated other comprehensive income, beginning of period	$	793	$	(201)	$	592

Unrealized losses on securities transferred to held to maturity:
Beginning balance	$	(18)	$	4	$	(14)

Reclassification adjustments for amortization of unrealized losses (2)	1		—		1
Ending balance	$	(17)	$	4	$	(13)
Unrealized gains (losses) on securities available for sale:
Beginning balance	$	513	$	(130)	$	383
Unrealized gains (losses) arising during the period	94		(23)		71
Reclassification adjustments for securities (gains) losses realized in net income (loss) (3)	(1)		—		(1)
Change in AOCI from securities available for sale activity in the period	93		(23)		70
Ending balance	$	606	$	(153)	$	453
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Beginning balance	$	1,177	$	(297)	$	880
Unrealized holding gains (losses) on derivatives arising during the period	74		(18)		56

Reclassification adjustments for (gains) losses realized in net income (2)	(104)		26		(78)
Change in AOCI from derivative activity in the period	(30)		8		(22)
Ending balance	$	1,147	$	(289)	$	858
Defined benefit pension plans and other post employment benefit plans:
Beginning balance	$	(879)	$	222	$	(657)

Reclassification adjustments for amortization of actuarial gains (losses) and settlements realized in net income (4)	14		(4)		10

Ending balance	$	(865)	$	218	$	(647)

Total other comprehensive income	78		(19)		59
Total accumulated other comprehensive income, end of period	$	871	$	(220)	$	651


	Three Months Ended June 30, 2020
	Pre-tax AOCI Activity		Tax Effect (1)		Net AOCI Activity
	(In millions)
Total accumulated other comprehensive income (loss), beginning of period	$	1,771	$	(447)	$	1,324

Unrealized losses on securities transferred to held to maturity:
Beginning balance	$	(28)	$	7	$	(21)

Reclassification adjustments for amortization of unrealized losses (2)	1		—		1
Ending balance	$	(27)	$	7	$	(20)
Unrealized gains (losses) on securities available for sale:
Beginning balance	$	871	$	(220)	$	651
Unrealized gains (losses) arising during the period	246		(61)		185
Reclassification adjustments for securities (gains) losses realized in net income (loss) (3)	(1)		—		(1)
Change in AOCI from securities available for sale activity in the period	245		(61)		184
Ending balance	$	1,116	$	(281)	$	835
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Beginning balance	$	1,712	$	(431)	$	1,281
Unrealized holding gains (losses) on derivatives arising during the period	205		(52)		153
Reclassification adjustments for (gains) losses realized in income (2)	(60)		15		(45)
Change in AOCI from derivative activity in the period	145		(37)		108
Ending balance	$	1,857	$	(468)	$	1,389
Defined benefit pension plans and other post employment benefit plans:
Beginning balance	$	(784)	$	197	$	(587)

Reclassification adjustments for amortization of actuarial gains (losses) and settlements realized in net income (4)	12		(3)		9

Ending balance	$	(772)	$	194	$	(578)

Total other comprehensive income	403		(101)		302
Total accumulated other comprehensive income, end of period	$	2,174	$	(548)	$	1,626



	Six Months Ended June 30, 2021
	Pre-tax AOCI Activity		Tax Effect (1)		Net AOCI Activity
	(In millions)
Total accumulated other comprehensive income (loss), beginning of period	$	1,759	$	(444)	$	1,315

Unrealized losses on securities transferred to held to maturity:
Beginning balance	$	(21)	$	5	$	(16)

Reclassification adjustments for amortization of unrealized losses (2)	4		(1)		3
Ending Balance	$	(17)	$	4	$	(13)
Unrealized gains (losses) on securities available for sale:
Beginning balance	$	1,062	$	(268)	$	794
Unrealized gains (losses) arising during the period	(454)		115		(339)
Reclassification adjustments for securities (gains) losses realized in net income (loss) (3)	(2)		—		(2)
Change in AOCI from securities available for sale activity in the period	(456)		115		(341)
Ending Balance	$	606	$	(153)	$	453
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Beginning balance	$	1,610	$	(406)	$	1,204
Unrealized holding gains (losses) on active hedges arising during the period	(257)		65		(192)
Reclassification adjustments for (gains) losses realized in net income (2)	(206)		52		(154)
Change in AOCI from derivative activity in the period	(463)		117		(346)
Ending balance	$	1,147	$	(289)	$	858
Defined benefit pension plans and other post employment benefit plans:
Beginning balance	$	(892)	$	225	$	(667)

Reclassification adjustments for amortization of actuarial gains (losses) and settlements realized in net income (4)	27		(7)		20

Ending Balance	$	(865)	$	218	$	(647)

Total other comprehensive income	(888)		224		(664)
Total accumulated other comprehensive income (loss), end of period	$	871	$	(220)	$	651



	Six Months Ended June 30, 2020
	Pre-tax AOCI Activity		Tax Effect (1)		Net AOCI Activity
	(In millions)
Total accumulated other comprehensive income (loss), beginning of period	$	(120)	$	30	$	(90)

Unrealized losses on securities transferred to held to maturity:
Beginning balance	$	(29)	$	7	$	(22)

Reclassification adjustments for amortization of unrealized losses (2)	2		—		2
Ending Balance	$	(27)	$	7	$	(20)
Unrealized gains (losses) on securities available for sale:
Beginning balance	$	274	$	(69)	$	205
Unrealized gains (losses) arising during the period	843		(212)		631
Reclassification adjustments for securities (gains) losses realized in net income (loss) (3)	(1)		—		(1)
Change in AOCI from securities available for sale activity in the period	842		(212)		630
Ending Balance	$	1,116	$	(281)	$	835
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Beginning balance	$	430	$	(108)	$	322
Unrealized holding gains (losses) on derivatives arising during the period	1,496		(377)		1,119

Reclassification adjustments for (gains) losses realized in net income (2)	(69)		17		(52)
Change in AOCI from derivative activity in the period	1,427		(360)		1,067
Ending balance	$	1,857	$	(468)	$	1,389
Defined benefit pension plans and other post employment benefit plans:
Beginning balance	$	(795)	$	200	$	(595)

Amounts reclassified for amortization of actuarial gains (losses) and settlements realized in net income (4)	23		(6)		17

Ending Balance	$	(772)	$	194	$	(578)

Total other comprehensive income	2,294		(578)		1,716
Total accumulated other comprehensive income, end of period	$	2,174	$	(548)	$	1,626

_________

(1)The impact of all AOCI activity is shown net of the related tax impact, calculated using an effective tax rate of approximately 25%.

(2)Reclassification amount is recognized in net interest income in the consolidated statements of income.

(3)Reclassification amount is recognized in securities gains (losses), net in the consolidated statements of income.

(4)Reclassification amount is recognized in other non-interest expense in the consolidated statements of income. Additionally, these accumulated other comprehensive income (loss) components are included in the computation of net periodic pension cost (see Note 7 for additional details).