XML 31 R17.htm IDEA: XBRL DOCUMENT v3.21.2
Fair Value Measurements
 6 Months Ended
Jun. 30, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurements
NOTE 9. FAIR VALUE MEASUREMENTS
See Note 1 "Summary of Significant Accounting Policies" to the consolidated financial statements of the Annual Report on Form 10-K for the year ended December 31, 2020 for a description of valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis. Assets and liabilities measured at fair value rarely transfer between Level 1 and Level 2 measurements. Marketable equity securities and debt securities available for sale may be periodically transferred to or from Level 3 valuation based on management’s conclusion regarding the observability of inputs used in valuing the securities. Such transfers are accounted for as if they occur at the beginning of a reporting period.
The following table presents assets and liabilities measured at estimated fair value on a recurring basis and non-recurring basis:
 June 30, 2021December 31, 2020
  Level 1Level 2
Level 3(1)
Total Estimated Fair ValueLevel 1Level 2
Level 3(1)
Total Estimated Fair Value
 (In millions)
Recurring fair value measurements
Debt securities available for sale:
U.S. Treasury securities$737 $— $— $737 $183 $— $— $183 
Federal agency securities— 99 — 99 — 105 — 105 
Mortgage-backed securities (MBS):
Residential agency— 19,860 — 19,860 — 19,076 — 19,076 
Residential non-agency— — 1 1 — — 1 1 
Commercial agency— 6,464 — 6,464 — 5,999 — 5,999 
Commercial non-agency— 553 — 553 — 586 — 586 
Corporate and other debt securities— 1,572 4 1,576 — 1,200 4 1,204 
Total debt securities available for sale$737 $28,548 $5 $29,290 $183 $26,966 $5 $27,154 
Loans held for sale$— $991 $— $991 $— $1,446 $— $1,446 
Marketable equity securities $447 $— $— $447 $388 $— $— $388 
Residential mortgage servicing rights$— $— $392 $392 $— $— $296 $296 
Derivative assets(2):
Interest rate swaps$— $1,631 $— $1,631 $— $2,750 $— $2,750 
Interest rate options— 234 26 260 — 477 43 520 
Interest rate futures and forward commitments— 13 — 13 — 11 — 11 
Other contracts1 156 — 157 2 65 1 68 
Total derivative assets$1 $2,034 $26 $2,061 $2 $3,303 $44 $3,349 
Equity investments$— $— $— $— $— $74 $— $74 
Derivative liabilities(2):
Interest rate swaps$— $1,067 $— $1,067 $— $1,464 $— $1,464 
Interest rate options— 23 — 23 — 28 — 28 
Interest rate futures and forward commitments— 4 — 4 — 26 — 26 
Other contracts1 155 4 160 2 72 6 80 
Total derivative liabilities$1 $1,249 $4 $1,254 $2 $1,590 $6 $1,598 
Non-recurring fair value measurements(3)
Loans held for sale(4)
$— $— $128 $128 $— $— $4 $4 
Equity investments without a readily determinable fair value— — 6 6 — — 12 12 
Foreclosed property and other real estate— — 12 12 — — 5 5 
_________
(1)All following disclosures related to Level 3 recurring and non-recurring assets do not include those deemed to be immaterial.
(2)As permitted under U.S. GAAP, variation margin collateral payments made or received for derivatives that are centrally cleared are legally characterized as settled. As such, these derivative assets and derivative liabilities and the related variation margin collateral are presented on a net basis on the balance sheet.
(3)From time to time, certain assets may be recorded at fair value on a non-recurring basis, and the related fair value adjustments disclosed are typically a result of the application of lower of cost or fair value accounting or a write-down occurring during the periods indicated.
(4)Loans held for sale measured at fair value on a non-recurring basis as of June 30, 2021 includes a single IRE loan of $97 million that was reclassified into loans held for sale during the second quarter of 2021 and sold subsequent to June 30, 2021.
Assets and liabilities in all levels could result in volatile and material price fluctuations. Realized and unrealized gains and losses on Level 3 assets represent only a portion of the risk to market fluctuations in Regions’ consolidated balance sheets. Further, derivatives included in Levels 2 and 3 are used by ALCO in a holistic approach to managing price fluctuation risks.
The following tables illustrate rollforwards for residential mortgage servicing rights, which are the only material assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2021 and 2020, respectively.
Residential mortgage servicing rights
Three Months Ended June 30Six Months Ended June 30
2021202020212020
(In millions)
Carrying value, beginning of period$401 $254 $296 $345 
Total realized/unrealized gains (losses) included in earnings (1)
(54)(29)19 (131)
Purchases45 24 77 35 
Carrying value, end of period$392 $249 $392 $249 
_________
(1)Included in mortgage income. Amounts presented exclude offsetting impact from related derivatives.
The following table presents the fair value adjustments related to non-recurring fair value measurements:
 Three Months Ended June 30Six Months Ended June 30
 2021202020212020
 (In millions)
Loans held for sale$(5)$(2)$(5)$(5)
Equity investments without a readily determinable fair value1 — 1 (3)
Foreclosed property and other real estate— (1)(7)(10)
The following tables present detailed information regarding material assets and liabilities measured at fair value using significant unobservable inputs (Level 3) as of June 30, 2021, and December 31, 2020. The tables include the valuation techniques and the significant unobservable inputs utilized. The range of each significant unobservable input as well as the weighted-average within the range utilized at June 30, 2021, and December 31, 2020, are included. Following the tables are descriptions of the valuation techniques and the sensitivity of the techniques to changes in the significant unobservable inputs.
 June 30, 2021
 
Level 3
Estimated Fair Value at
June 30, 2021
Valuation
Technique		Unobservable
Input(s)		Quantitative Range of
Unobservable Inputs and
(Weighted-Average)
 (Dollars in millions)
Recurring fair value measurements:
Residential mortgage servicing rights(1)
$392Discounted cash flowWeighted-average CPR (%)
6.6% - 22.2% (10.5%)
OAS (%)
4.8% - 9.4% (5.7%)
_________
(1)See Note 4 for additional disclosures related to assumptions used in the fair value calculation for residential mortgage servicing rights.
 December 31, 2020
 
Level 3
Estimated Fair Value at
December 31, 2020
Valuation
Technique		Unobservable
Input(s)		Quantitative Range of
Unobservable Inputs and
(Weighted-Average)
 (Dollars in millions)
Recurring fair value measurements:
Residential mortgage servicing rights(1)
$296Discounted cash flowWeighted-average CPR (%)
8.1% - 31.2% (15.6%)
OAS (%)
4.8% - 9.5% (5.6%)
_________
(1)See Note 7 to the consolidated financial statements of the Annual Report on Form 10-K for the year ended December 31, 2020 for additional disclosures related to assumptions used in the fair value calculation for residential mortgage servicing rights.
RECURRING FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS
Residential mortgage servicing rights
The significant unobservable inputs used in the fair value measurement of residential MSRs are OAS and CPR. This valuation requires generating cash flow projections over multiple interest rate scenarios and discounting those cash flows at a risk-adjusted rate. Additionally, the impact of prepayments and changes in the OAS are based on a variety of underlying inputs including servicing costs. Increases or decreases to the underlying cash flow inputs will have a corresponding impact on the value of the MSR asset. The net change in unrealized gains (losses) included in earnings related to MSRs held at period end are disclosed as the changes in valuation inputs or assumptions included in the MSR rollforward table in Note 4.
FAIR VALUE OPTION
Regions has elected the fair value option for all eligible agency residential mortgage loans and certain commercial mortgage loans originated with the intent to sell. These elections allow for a more effective offset of the changes in fair values of the loans and the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting. Regions has not elected the fair value option for other loans held for sale primarily because they are not economically hedged using derivative instruments. Fair values of residential mortgage loans held for sale are based on traded market prices of similar assets where available and/or discounted cash flows at market interest rates, adjusted for securitization activities that include servicing values and market conditions, and are recorded in loans held for sale in the consolidated balance sheets.
The Company also elected to measure certain commercial and industrial loans held for sale at fair value, as these loans are actively traded in the secondary market. The Company is able to obtain fair value estimates for substantially all of these loans through a third party valuation service that is broadly used by market participants. While most of the loans are traded in the market, the volume and level of trading activity is subject to variability and the loans are not exchange-traded. The balance of these loans held for sale was immaterial at June 30, 2021.
The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for mortgage loans held for sale measured at fair value:
 June 30, 2021December 31, 2020
 Aggregate
Fair Value		Aggregate
Unpaid
Principal		Aggregate Fair
Value Less
Aggregate
Unpaid
Principal		Aggregate
Fair Value		Aggregate
Unpaid
Principal		Aggregate Fair
Value Less
Aggregate
Unpaid
Principal
 (In millions)
Mortgage loans held for sale, at fair value$975 $939 $36 $1,439 $1,362 $77 
Interest income on mortgage loans held for sale is recognized based on contractual rates and is reflected in interest income on loans held for sale in the consolidated statements of income. The following table details net gains and losses resulting from changes in fair value of these loans, which were recorded in mortgage income in the consolidated statements of income during the three and six months ended June 30, 2021 and 2020. These changes in fair value are mostly offset by economic hedging activities. An immaterial portion of these amounts was attributable to changes in instrument-specific credit risk.
 Three Months Ended June 30Six Months Ended June 30
2021202020212020
 (In millions)
Net gains (losses) resulting for the change in fair value of mortgage loans held for sale$10 $20 $(40)$30 
The carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of the Company’s financial instruments as of June 30, 2021 are as follows:
 June 30, 2021
 Carrying
Amount
Estimated
Fair
Value(1)
Level 1Level 2Level 3
 (In millions)
Financial assets:
Cash and cash equivalents$25,594 $25,594 $25,594 $— $— 
Debt securities held to maturity993 1,064 — 1,064 — 
Debt securities available for sale29,290 29,290 737 28,548 5 
Loans held for sale1,194 1,194 — 1,066 128 
Loans (excluding leases), net of unearned income and allowance for loan losses(2)(3)
81,063 81,715 — — 81,715 
Other earning assets(4)
1,083 1,083 447 636 — 
Derivative assets2,061 2,061 1 2,034 26 
Financial liabilities:
Derivative liabilities1,254 1,254 1 1,249 4 
Deposits131,484 131,500 — 131,500 — 
Long-term borrowings2,870 3,363 — 3,019 344 
Loan commitments and letters of credit118 118 — — 118 
_________
(1)Estimated fair values are consistent with an exit price concept. The assumptions used to estimate the fair values are intended to approximate those that a market participant would use in a hypothetical orderly transaction. In estimating fair value, the Company makes adjustments for estimated changes in interest rates, market liquidity and credit spreads in the periods they are deemed to have occurred.
(2)The estimated fair value of portfolio loans assumes sale of the loans to a third-party financial investor. Accordingly, the value to the Company if the loans were held to maturity is not reflected in the fair value estimate. The fair value premium on the loan portfolio's net carrying amount at June 30, 2021 was $652 million or 0.8 percent.
(3)Excluded from this table is the sales-type, direct financing, and leveraged lease carrying amount of $1.4 billion at June 30, 2021.
(4)Excluded from this table is the operating lease carrying amount of $163 million at June 30, 2021.
The carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of the Company's financial instruments as of December 31, 2020 are as follows:
 December 31, 2020
 Carrying
Amount
Estimated
Fair
Value(1)
Level 1Level 2Level 3
 (In millions)
Financial assets:
Cash and cash equivalents$17,956 $17,956 $17,956 $— $— 
Debt securities held to maturity1,122 1,215 — 1,215 — 
Debt securities available for sale27,154 27,154 183 26,966 5 
Loans held for sale1,905 1,905 — 1,901 4 
Loans (excluding leases), net of unearned income and allowance for loan losses(2)(3)
81,597 82,773 — — 82,773 
Other earning assets(4)
1,017 1,017 388 629 — 
Derivative assets3,349 3,349 2 3,303 44 
Equity investments7474— 74— 
Financial liabilities:
Derivative liabilities1,598 1,598 2 1,590 6 
Deposits122,479 122,511 — 122,511 — 
Long-term borrowings3,569 4,063 — 3,592 471 
Loan commitments and letters of credit151 151 — — 151 
_________
(1)Estimated fair values are consistent with an exit price concept. The assumptions used to estimate the fair values are intended to approximate those that a market participant would use in a hypothetical orderly transaction. In estimating fair value, the Company makes adjustments for estimated changes in interest rates, market liquidity and credit spreads in the periods they are deemed to have occurred.
(2)The estimated fair value of portfolio loans assumes sale of the loans to a third-party financial investor. Accordingly, the value to the Company if the loans were held to maturity is not reflected in the fair value estimate. The fair value premium on the loan portfolio's net carrying amount at December 31, 2020 was $1.2 billion or 1.4 percent.
(3)Excluded from this table is the sales-type, direct financing, and leveraged lease carrying amount of $1.5 billion at December 31, 2020.
(4)Excluded from this table is the operating lease carrying amount of $200 million at December 31, 2020.