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Derivative Financial Instruments and Hedging Activities | 9 Months Ended
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Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments and Hedging Activities | NOTE 8. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES The following tables present the notional amount and estimated fair value of derivative instruments.
| September 30, 2023 |  | December 31, 2022
| Notional Amount(1) |  | Estimated Fair Value |  | Notional Amount |  | Estimated Fair Value
| Gain(1)(2) |  | Loss(1)(2) |  | Gain(2) |  | Loss(2)
| (In millions)
Derivatives in fair value hedging relationships: |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps | $ | 1,523 |  |  | $ | 1 |  |  | $ | 154 |  |  | $ | 1,423 |  |  | $ | 1 |  |  | $ | 158 |
Derivatives in cash flow hedging relationships: |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps | 29,300 |  |  | 11 |  |  | 1,133 |  |  | 30,600 |  |  | 19 |  |  | 668 |
Interest rate options | 2,000 |  |  | 15 |  |  | 20 |  |  | — |  |  | — |  |  | — |
Total derivatives in cash flow hedging relationships | 31,300 |  |  | 26 |  |  | 1,153 |  |  | 30,600 |  |  | 19 |  |  | 668 |
Total derivatives designated as hedging instruments | $ | 32,823 |  |  | $ | 27 |  |  | $ | 1,307 |  |  | $ | 32,023 |  |  | $ | 20 |  |  | $ | 826 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps | $ | 103,527 |  |  | $ | 2,716 |  |  | $ | 2,709 |  |  | $ | 94,220 |  |  | $ | 2,315 |  |  | $ | 2,335 |
Interest rate options | 11,979 |  |  | 84 |  |  | 73 |  |  | 12,506 |  |  | 94 |  |  | 85 |
Interest rate futures and forward commitments | 591 |  |  | 8 |  |  | 7 |  |  | 985 |  |  | 8 |  |  | 5 |
Other contracts | 11,872 |  |  | 144 |  |  | 130 |  |  | 12,173 |  |  | 172 |  |  | 127 |
Total derivatives not designated as hedging instruments | $ | 127,969 |  |  | $ | 2,952 |  |  | $ | 2,919 |  |  | $ | 119,884 |  |  | $ | 2,589 |  |  | $ | 2,552 |
Total derivatives | $ | 160,792 |  |  | $ | 2,979 |  |  | $ | 4,226 |  |  | $ | 151,907 |  |  | $ | 2,609 |  |  | $ | 3,378 |
Total gross derivative instruments, before netting |  |  | $ | 2,979 |  |  | $ | 4,226 |  |  |  |  | $ | 2,609 |  |  | $ | 3,378 |
Less: Netting adjustments (3) |  |  | 2,924 |  |  | 2,490 |  |  |  |  | 2,504 |  |  | 1,925 |
Total gross derivative instruments, after netting |  |  | $ | 55 |  |  | $ | 1,736 |  |  |  |  | $ | 105 |  |  | $ | 1,453 |
_________ (1)In the second quarter of 2023, the Company entered into additional trades to transition remaining derivative exposure from LIBOR to SOFR. The table reflects net notional presentation and gross asset and liability presentation to capture the economic impact of the trades. As a part of this transition, the Company is applying certain optional expedients and exceptions in previously adopted accounting relief for hedges. (2)Derivatives in a gain position are recorded as other assets and derivatives in a loss position are recorded as other liabilities on the consolidated balance sheets. Includes accrued interest as applicable. (3)Netting adjustments represent amounts recorded to convert derivative assets and derivative liabilities from a gross basis to a net basis in accordance with applicable accounting guidance. The net basis takes into account the impact of cash collateral received or posted, legally enforceable master netting agreements, and variation margin that allow Regions to settle derivative contracts with the counterparty on a net basis and to offset the net position with the related cash collateral. HEDGING DERIVATIVES Derivatives entered into to manage interest rate risk and facilitate asset/liability management strategies are designated as hedging derivatives. Derivative financial instruments that qualify in a hedging relationship are classified, based on the exposure being hedged, as either fair value hedges or cash flow hedges. See Note 1 "Summary of Significant Accounting Policies" of the Annual Report on Form 10-K for the year ended December 31, 2022, for additional information regarding accounting policies for derivatives. FAIR VALUE HEDGES Fair value hedge relationships mitigate exposure to the change in fair value of an asset, liability or firm commitment. Regions enters into interest rate swap agreements to manage interest rate exposure on the Company’s fixed-rate borrowings. These agreements involve the receipt of fixed-rate amounts in exchange for floating-rate interest payments over the life of the agreements. Regions also enters into interest rate swap agreements to manage interest rate exposure on certain of the Company's fixed-rate prepayable and non-prepayable debt securities available for sale. These agreements involve the payment of fixed-rate amounts in exchange for floating-rate interest receipts. CASH FLOW HEDGES Cash flow hedge relationships mitigate exposure to the variability of future cash flows or other forecasted transactions. Regions enters into interest rate swaps, options (e.g., floors, caps and collars), and agreements with a combination of these instruments 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 LIBOR or SOFR interest rate swaps and interest rate floors. As of September 30, 2023, Regions is hedging its exposure to the variability in future cash flows into 2030. As of September 30, 2023, cash flow hedges were held at a pre-tax net loss of $1.0 billion, which includes pre-tax net gains of $93 million related to terminated cash flow floors and swaps. Regions expects to reclassify into earnings approximately $432 million in pre-tax expenses due to the net receipt/ payment of interest and amortization on all cash flow hedges within the next twelve months. Included in this amount is $49 million in pre-tax net gains related to the amortization of terminated cash flow floors and swaps. The following tables present the effect of hedging derivative instruments on the consolidated statements of income and the total amounts for the respective line items affected:
| Three Months Ended September 30, 2023
| Interest Income |  | Interest Income |  | Interest Expense
| Debt securities |  | Loans, including fees |  | Long-term borrowings
| (In millions)
Total income (expense) presented in the consolidated statements of income | $ | 185 |  |  | $ | 1,462 |  |  | $ | (69) |
Gains/(losses) on fair value hedging relationships: |  |  |  |  |
Interest rate contracts: |  |  |  |  |
Amounts related to interest settlements on derivatives | $ | — |  |  | $ | — |  |  | $ | (18) |
Recognized on derivatives | — |  |  | — |  |  | (3) |
Recognized on hedged items | — |  |  | — |  |  | 3 |
Income (expense) recognized on fair value hedges | $ | — |  |  | $ | — |  |  | $ | (18) |
Gains/(losses) on cash flow hedging relationships: (1) |  |  |  |  |
Interest rate contracts: |  |  |  |  |
Realized gains (losses) reclassified from AOCI into net income (2) | $ | — |  |  | $ | (82) |  |  | $ | — |
Income (expense) recognized on cash flow hedges | $ | — |  |  | $ | (82) |  |  | $ | — |
| Three Months Ended September 30, 2022
| Interest Income |  | Interest Income |  | Interest Expense
| Debt securities |  | Loans, including fees |  | Long-term borrowings
| (In millions)
Total income (expense) presented in the consolidated statements of income | $ | 171 |  |  | $ | 1,072 |  |  | $ | (31) |
Gains/(losses) on fair value hedging relationships: |  |  |  |  |
Interest rate contracts: |  |  |  |  |
Amounts related to interest settlements on derivatives | $ | 7 |  |  | $ | — |  |  | $ | (6) |
Recognized on derivatives | (3) |  |  | — |  |  | (45) |
Recognized on hedged items | (4) |  |  | — |  |  | 45 |
Income (expense) recognized on fair value hedges | $ | — |  |  | $ | — |  |  | $ | (6) |
Gains/(losses) on cash flow hedging relationships: (1) |  |  |  |  |
Interest rate contracts: |  |  |  |  |
Realized gains (losses) reclassified from AOCI into net income (2) | $ | — |  |  | $ | — |  |  | $ | — |
Income (expense) recognized on cash flow hedges | $ | — |  |  | $ | — |  |  | $ | — |
| Nine Months Ended September 30, 2023
| Interest Income |  | Interest Income |  | Interest Expense
| Debt securities |  | Loans, including fees |  | Long-term borrowings
| (In millions)
Total income (expense) presented in the consolidated statements of income | $ | 557 |  |  | $ | 4,276 |  |  | $ | (165) |
Gains/(losses) on fair value hedging relationships: |  |  |  |  |
Interest rate contracts: |  |  |  |  |
Amounts related to interest settlements on derivatives | $ | — |  |  | $ | — |  |  | $ | (47) |
Recognized on derivatives | — |  |  | — |  |  | 6 |
Recognized on hedged items | — |  |  | — |  |  | (6) |
Income (expense) recognized on fair value hedges | $ | — |  |  | $ | — |  |  | $ | (47) |
Gains/(losses) on cash flow hedging relationships: (1) |  |  |  |  |
Interest rate contracts: |  |  |  |  |
Realized gains (losses) reclassified from AOCI into net income (2) | $ | — |  |  | $ | (129) |  |  | $ | — |
Income (expense) recognized on cash flow hedges | $ | — |  |  | $ | (129) |  |  | $ | — |
| Nine Months Ended September 30, 2022
| Interest Income |  | Interest Income |  | Interest Expense
| Debt securities |  | Loans, including fees |  | Long-term borrowings
| (In millions)
Total income (expense) presented in the consolidated statements of income | $ | 466 |  |  | $ | 2,880 |  |  | $ | (82) |
Gains/(losses) on fair value hedging relationships: |  |  |  |  |
Interest rate contracts: |  |  |  |  |
Amounts related to interest settlements on derivatives | $ | 7 |  |  | $ | — |  |  | $ | (5) |
Recognized on derivatives | 33 |  |  | — |  |  | (133) |
Recognized on hedged items | (40) |  |  | — |  |  | 133 |
Income (expense) recognized on fair value hedges | $ | — |  |  | $ | — |  |  | $ | (5) |
Gains/(losses) on cash flow hedging relationships: (1) |  |  |  |  |
Interest rate contracts: |  |  |  |  |
Realized gains (losses) reclassified from AOCI into net income (2) | $ | — |  |  | $ | 188 |  |  | $ | — |
Income (expense) recognized on cash flow hedges | $ | — |  |  | $ | 188 |  |  | $ | — |
____ (1)See Note 5 for gain or (loss) recognized for cash flow hedges in AOCI. (2)Pre-tax
The following tables present the carrying amount and associated cumulative basis adjustment related to the application of hedge accounting that is included in the carrying amount of hedged assets and liabilities in fair value hedging relationships.
| September 30, 2023 |  | December 31, 2022
| Hedged Items Currently Designated |  |  |  | Hedged Items Currently Designated
| Carrying Amount of Assets/(Liabilities) |  | Hedge Accounting Basis Adjustment |  |  |  |  |  | Carrying Amount of Assets/(Liabilities) |  | Hedge Accounting Basis Adjustment
| (In millions) |  | (In millions)
Debt securities available for sale(1) | $ | 123 |  |  | $ | (1) |  |  |  |  |  |  | $ | 23 |  |  | $ | — |
Long-term borrowings | (1,246) |  |  | 152 |  |  |  |  |  |  | (1,239) |  |  | 158 |
_____ (1) Carrying amount represents amortized cost. DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS The Company holds a portfolio of interest rate swaps, option contracts, and futures and forward commitments that result from transactions with its commercial customers in which they manage their risks by entering into a derivative with Regions. The Company monitors and manages the net risk in this customer portfolio and enters into separate derivative contracts in order to reduce the overall exposure to pre-defined limits. For both derivatives with its end customers and derivatives Regions enters into to mitigate the risk in this portfolio, the Company is subject to market risk and the risk that the counterparty will default. The contracts in this portfolio are not designated as accounting hedges and are marked-to market through earnings (in capital markets income) and included in other assets and other liabilities, as appropriate. Regions enters into interest rate lock commitments, which are commitments to originate mortgage loans whereby the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. At September 30, 2023 and December 31, 2022, Regions had $169 million and $118 million, respectively, in total notional amount of interest rate lock commitments. Regions manages market risk on interest rate lock commitments and mortgage loans held for sale with corresponding forward sale commitments. Residential mortgage loans held for sale are recorded at fair value with changes in fair value recorded in mortgage income. Commercial mortgage loans held for sale are recorded at either the lower of cost or market or at fair value based on management's election. At September 30, 2023 and December 31, 2022, Regions had $330 million and $233 million, respectively, in total notional amounts related to these forward sale commitments. Changes in mark-to-market from both interest rate lock commitments and corresponding forward sale commitments related to residential mortgage loans are included in mortgage income. Changes in mark-to-market from both interest rate lock commitments and corresponding forward sale commitments related to commercial mortgage loans are included in capital markets income. Regions has elected to account for residential MSRs at fair value with any changes to fair value recorded in mortgage income. Concurrent with the election to use the fair value measurement method, Regions began using various derivative instruments in the form of forward rate commitments, futures contracts, swaps and swaptions to mitigate the effect of changes in the fair value of its residential MSRs in its consolidated statements of income. As of September 30, 2023 and December 31, 2022, the total notional amount related to these contracts was $3.3 billion and $3.4 billion, respectively. The following table presents the location and amount of gain or (loss) recognized in income on derivatives not designated as hedging instruments in the consolidated statements of income for the periods presented below:
| Three Months Ended September 30 |  | Nine Months Ended September 30 |  |
Derivatives Not Designated as Hedging Instruments | 2023 |  | 2022 |  | 2023 |  | 2022 |  |
| (In millions)
Capital markets income: |  |  |  |  |  |  |  |  |
Interest rate swaps | $ | 16 |  |  | $ | 44 |  |  | $ | (8) |  |  | $ | 111 |  |  |
Interest rate options | 14 |  |  | 4 |  |  | 35 |  |  | 20 |  |  |
Interest rate futures and forward commitments | 2 |  |  | 8 |  |  | 10 |  |  | 7 |  |  |
Other contracts | 4 |  |  | 11 |  |  | 10 |  |  | 19 |  |  |
Total capital markets income | 36 |  |  | 67 |  |  | 47 |  |  | 157 |  |  |
Mortgage income: |  |  |  |  |  |  |  |  |
Interest rate swaps | (38) |  |  | (28) |  |  | (38) |  |  | (112) |  |  |
Interest rate options | (1) |  |  | (8) |  |  | — |  |  | (17) |  |  |
Interest rate futures and forward commitments | (4) |  |  | 19 |  |  | (4) |  |  | 14 |  |  |
Total mortgage income | (43) |  |  | (17) |  |  | (42) |  |  | (115) |  |  |
| $ | (7) |  |  | $ | 50 |  |  | $ | 5 |  |  | $ | 42 |  |  |
CREDIT DERIVATIVES Regions has both bought and sold credit protection in the form of participations on interest rate swaps (swap participations). These swap participations, which meet the definition of credit derivatives, were entered into in the ordinary course of business to serve the credit needs of customers. Swap participations, whereby Regions has purchased credit protection, entitle Regions to receive a payment from the counterparty if the customer fails to make payment on any amounts due to Regions upon early termination of the swap transaction and have maturities between 2023 and 2029. Swap participations, whereby Regions has sold credit protection have maturities between 2023 and 2035. For contracts where Regions sold credit protection, Regions would be required to make payment to the counterparty if the customer fails to make payment on any amounts due to the counterparty upon early termination of the swap transaction. Regions bases the current status of the prepayment/performance risk on bought and sold credit derivatives on recently issued internal risk ratings consistent with the risk management practices of unfunded commitments. Regions’ maximum potential amount of future payments under these contracts as of September 30, 2023 was approximately $443 million. This scenario occurs if variable interest rates were at zero percent and all counterparties defaulted with zero recovery. The fair value of sold protection at September 30, 2023 and 2022 was immaterial. In transactions where Regions has sold credit protection, recourse to collateral associated with the original swap transaction is available to offset some or all of Regions’ obligation. Regions has bought credit protection in the form of credit default indices. These indices, which meet the definition of credit derivatives, were entered into in the ordinary course of business to economically hedge credit spread risk in commercial mortgage loans held for sale whereby the fair value option has been elected. Credit derivatives, whereby Regions has purchased credit protection, entitle Regions to receive a payment from the counterparty if losses on the underlying index exceed a certain threshold, dependent upon the tranche rating of the capital structure. CONTINGENT FEATURES Certain of Regions’ derivative instrument contracts with broker-dealers contain credit-related termination provisions and/or credit related provisions regarding the posting of collateral, allowing those broker-dealers to terminate the contracts in the event that Regions’ and/or Regions Bank’s credit ratings falls below specified ratings from certain major credit rating agencies. The aggregate fair values of all derivative instruments with any credit-risk-related contingent features that were in a liability position on September 30, 2023 and December 31, 2022, were $48 million and $17 million, respectively, for which Regions had posted collateral of $49 million and $20 million, respectively, in the normal course of business.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
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