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Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2023
Accounting Policies [Abstract]  
Financing Receivable, Allowance for Credit Losses, Policy or Methodology Change
MODIFICATIONS TO BORROWERS EXPERIENCING FINANCIAL DIFFICULTY
On January 1, 2023, the Company adopted new accounting guidance that eliminated the recognition and measurement guidance for TDRs while enhancing disclosure requirements for certain loan refinancings and restructurings made to borrowers experiencing financial difficulty, also referred to as modifications to troubled borrowers. The guidance also requires disclosure of current-period gross write-offs by year of origination. Regions applied the guidance prospectively, except Regions used the modified-retrospective transition method related to the recognition and measurement of TDRs. The cumulative effect of the modified-retrospective application was a decrease in the allowance of $38 million and an increase to retained earnings of $28 million, net of taxes. Refer to Note 1 "Summary of Significant Accounting Policies" and Note 5 "Allowance for Credit Losses" in the Annual Report on Form 10-K for the year ended December 31, 2022 for additional information regarding TDRs and the related allowance for credit loss accounting prior to the adoption of modifications to troubled borrowers guidance.
Modifications to troubled borrowers
Modifications to troubled borrowers are loans where the borrower is experiencing financial difficulty at the time of modification and are undertaken in order to improve the likelihood of repayment. Modification types classified as modifications to troubled borrowers include interest rate reductions, other than insignificant term extensions, other than insignificant payment deferrals, principal forgiveness, or any combination of these. Further details are as follows:
Interest rate reduction modifications include instances where the absolute interest rate is reduced as part of the modification. In instances where the rate index changes for variable-rate loans, Regions evaluates whether or not the absolute interest rate decreases from the original rate to the updated rate.
Term extensions are maturity extensions, many of which occur through renewals or restructurings.
Payment deferrals include modifications wherein the contractual payment term is extended. Examples of payment deferral modifications include, but are not limited to, re-agings, payment delays or holidays, lengthening of amortization terms, allowing for an interest-only payment period, and capitalizing interest payments in loan restructurings.
Regions rarely grants principal forgiveness modifications.
Modifications to troubled borrowers are subject to policies governing accrual/non-accrual evaluation consistent with all other loans of the same product type as discussed in Note 1 "Summary of Significant Accounting Policies" in the Annual Report on Form 10-K for the year ended December 31, 2022. As such, modifications to troubled borrowers may include loans remaining on non-accrual, moving to non-accrual, or continuing on accrual status, depending on the individual facts and circumstances.
Allowance for credit losses
The allowance is intended to cover expected credit losses over the contractual life of loans measured at amortized cost, including unfunded commitments. Upon the adoption of modifications to troubled borrowers guidance in January 2023, the Company eliminated TDR and reasonable expectations of a TDR ("RETDR") designations and specific measurement rules within the calculation of the allowance credit losses, which resulted in a decrease to the allowance upon application of the modified-retrospective transition method discussed above. See Note 1 "Summary of Significant Accounting Policies" in the
Annual Report on Form 10-K for the year ended December 31, 2022 for previous discussion of allowance measurement methodology for these items.
Modifications identified as modifications to troubled borrowers have no separate or distinct allowance measurement rules under the new guidance. As such, these loans are included in their respective loan pools (if they do not qualify for specific evaluation) and expected losses are determined by the Company's allowance models and qualitative framework.
Fair Value of Financial Instruments, Policy [Policy Text Block]
FAIR VALUE MEASUREMENTS - FAIR VALUE OF FINANCIAL INSTRUMENTS
The method and assumptions used to estimate the fair value of certain financial instruments new to 2023 is discussed below. Refer to Note 1 "Summary of Significant Accounting Policies" in the Annual Report on Form 10-K for the year ended December 31, 2022 for additional information regarding fair value measurements.
Short-term borrowings: The carrying amounts of short-term borrowings reported in the consolidated balance sheets approximate the estimated fair values, and are considered Level 2 measurements as similar instruments are traded in active markets.