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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2023
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, 2022 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:
| September 30, 2023 |  |  | December 31, 2022 |
| Level 1 |  | Level 2 |  | Level 3 (1) |  | Total Estimated Fair Value |  |  | Level 1 |  | Level 2 |  | Level 3 (1) |  | Total Estimated Fair Value |
| (In millions) |
Recurring fair value measurements |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt securities available for sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities | $ | 1,186 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,186 |  |  |  | $ | 1,187 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,187 |  |
Federal agency securities | — |  |  | 1,004 |  |  | — |  |  | 1,004 |  |  |  | — |  |  | 836 |  |  | — |  |  | 836 |  |
Obligations of states and political subdivisions | — |  |  | 2 |  |  | — |  |  | 2 |  |  |  | — |  |  | 2 |  |  | — |  |  | 2 |  |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential agency | — |  |  | 15,740 |  |  | — |  |  | 15,740 |  |  |  | — |  |  | 16,954 |  |  | — |  |  | 16,954 |  |
Residential non-agency | — |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | 1 |  |  | 1 |  |
Commercial agency | — |  |  | 7,158 |  |  | — |  |  | 7,158 |  |  |  | — |  |  | 7,613 |  |  | — |  |  | 7,613 |  |
Commercial non-agency | — |  |  | 78 |  |  | — |  |  | 78 |  |  |  | — |  |  | 186 |  |  | — |  |  | 186 |  |
Corporate and other debt securities | — |  |  | 1,059 |  |  | 1 |  |  | 1,060 |  |  |  | — |  |  | 1,153 |  |  | 1 |  |  | 1,154 |  |
Total debt securities available for sale | $ | 1,186 |  |  | $ | 25,041 |  |  | $ | 1 |  |  | $ | 26,228 |  |  |  | $ | 1,187 |  |  | $ | 26,744 |  |  | $ | 2 |  |  | $ | 27,933 |  |
Loans held for sale | $ | — |  |  | $ | 217 |  |  | $ | 62 |  |  | $ | 279 |  |  |  | $ | — |  |  | $ | 177 |  |  | $ | 19 |  |  | $ | 196 |  |
Marketable equity securities in other earning assets | $ | 745 |  |  | $ | — |  |  | $ | — |  |  | $ | 745 |  |  |  | $ | 529 |  |  | $ | — |  |  | $ | — |  |  | $ | 529 |  |
Residential mortgage servicing rights | $ | — |  |  | $ | — |  |  | $ | 932 |  |  | $ | 932 |  |  |  | $ | — |  |  | $ | — |  |  | $ | 812 |  |  | $ | 812 |  |
Derivative assets (2): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps | $ | — |  |  | $ | 2,728 |  |  | $ | — |  |  | $ | 2,728 |  |  |  | $ | — |  |  | $ | 2,335 |  |  | $ | — |  |  | $ | 2,335 |  |
Interest rate options | — |  |  | 91 |  |  | 8 |  |  | 99 |  |  |  | — |  |  | 91 |  |  | 3 |  |  | 94 |  |
Interest rate futures and forward commitments | — |  |  | 8 |  |  | — |  |  | 8 |  |  |  | — |  |  | 8 |  |  | — |  |  | 8 |  |
Other contracts | — |  |  | 144 |  |  | — |  |  | 144 |  |  |  | 3 |  |  | 169 |  |  | — |  |  | 172 |  |
Total derivative assets | $ | — |  |  | $ | 2,971 |  |  | $ | 8 |  |  | $ | 2,979 |  |  |  | $ | 3 |  |  | $ | 2,603 |  |  | $ | 3 |  |  | $ | 2,609 |  |
Derivative liabilities (2): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps | $ | — |  |  | $ | 3,996 |  |  | $ | — |  |  | $ | 3,996 |  |  |  | $ | — |  |  | $ | 3,161 |  |  | $ | — |  |  | $ | 3,161 |  |
Interest rate options | — |  |  | 93 |  |  | — |  |  | 93 |  |  |  | — |  |  | 85 |  |  | — |  |  | 85 |  |
Interest rate futures and forward commitments | — |  |  | 7 |  |  | — |  |  | 7 |  |  |  | — |  |  | 5 |  |  | — |  |  | 5 |  |
Other contracts | 11 |  |  | 118 |  |  | 1 |  |  | 130 |  |  |  | 2 |  |  | 124 |  |  | 1 |  |  | 127 |  |
Total derivative liabilities | $ | 11 |  |  | $ | 4,214 |  |  | $ | 1 |  |  | $ | 4,226 |  |  |  | $ | 2 |  |  | $ | 3,375 |  |  | $ | 1 |  |  | $ | 3,378 |  |
_________ (1)All following disclosures related to Level 3 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. 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 present an analysis of residential MSRs for the three and nine months ended September 30, 2023 and 2022, respectively. .
| Residential mortgage servicing rights
| Three Months Ended September 30 |  | Nine Months Ended September 30
| 2023 |  | 2022 |  | 2023 |  | 2022
| (In millions)
Carrying value, beginning of period | $ | 801 |  |  | $ | 770 |  |  | $ | 812 |  |  | $ | 418 |
Total realized/unrealized gains (losses) included in earnings (1) | 17 |  |  | 5 |  |  | (38) |  |  | 72 |
Additions | 8 |  |  | 9 |  |  | 20 |  |  | 38 |
Purchases | 106 |  |  | 25 |  |  | 138 |  |  | 281 |
Carrying value, end of period | $ | 932 |  |  | $ | 809 |  |  | $ | 932 |  |  | $ | 809 |
_________ (1) Included in mortgage income. Amounts presented exclude offsetting impact from related derivatives.
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 . The following tables present detailed information regarding material assets and liabilities measured at fair value using significant unobservable inputs (Level 3) as of September 30, 2023, and December 31, 2022. 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 September 30, 2023 and December 31, 2022 are included. Following the tables are descriptions of the valuation techniques and the sensitivity of the techniques to changes in the significant unobservable inputs.
| September 30, 2023
| Level 3 Estimated Fair Value |  | 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) | $932 |  | Discounted cash flow |  | Weighted-average CPR (%) |  | 5.5% - 13.3% (7.7%)
|  |  |  |  | OAS (%) |  | 4.5% - 8.2% (4.8%)
_________ (1)See Note 4 for additional disclosures related to assumptions used in the fair value calculation for residential mortgage servicing rights.
| December 31, 2022
| Level 3 Estimated Fair Value |  | 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) | $812 |  | Discounted cash flow |  | Weighted-average CPR (%) |  | 6.1% - 15.1% (7.4%)
|  |  |  |  | OAS (%) |  | 4.8% -8.2% (5.1%)
_______ (1)See Note 6 to the consolidated financial statements of the Annual Report on Form 10-K for the year ended December 31, 2022 for additional disclosures related to assumptions used in the fair value calculation for residential mortgage servicing rights. FAIR VALUE OPTION The Company elected the option to measure certain commercial mortgage loans held for sale at fair value. Commercial mortgage loans held for sale are valued based on traded market prices for comparable commercial mortgage-backed securitizations, into which the loans will be placed, adjusted for movements of interest rates and credit spreads. At September 30, 2023 and December 31, 2022, the balance of these loans was immaterial. The Company has elected the option 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 September 30, 2023 and December 31, 2022. Regions has elected the fair value option for all eligible agency residential first mortgage loans originated with the intent to sell. This election allows 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. Fair values of residential first 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. At September 30, 2023, the aggregate fair value of these loans totaled $195 million compared to aggregate unpaid principal of $193 million. At December 31, 2022 the aggregate fair value of these loans totaled $160 million compared to aggregate unpaid principal of $157 million. 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. The following details net gains and losses resulting from changes in fair value of residential mortgage loans held for sale, which were recorded in mortgage income in the consolidated statements of income during the three and nine months ended September 30, 2023 and 2022. A net loss resulting from changes in fair value of residential mortgage loans held for sale totaled $2 million and $1 million for the three months and nine months ended September 30, 2023, respectively. Net losses resulting from changes in fair value of residential mortgage loans held for sale totaled $11 million and $27 million for the three and nine months ended September 30, 2022, respectively. 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. NON-RECURRING FAIR VALUE MEASUREMENTS Items measured at fair value on a non-recurring basis include loans held for sale for which the fair value option has not been elected, foreclosed property and other real estate and equity investments without a readily determinable fair value; all of which may be considered either Level 2 or Level 3 valuation measurements. Non-recurring fair value adjustments related to loans held for sale, foreclosed property and other real estate are typically a result of the application of lower of cost or fair value accounting during the period. Non-recurring fair value adjustments related to equity investments without readily determinable fair values are the result of impairments or price changes from observable transactions. The balances of each of these assets, as well as the related fair value adjustments during the periods, were immaterial at both September 30, 2023 and December 31, 2022. FAIR VALUE OF FINANCIAL INSTRUMENTS 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 September 30, 2023 are as follows:
| September 30, 2023
| Carrying Amount |  | Estimated Fair Value(1) |  | Level 1 |  | Level 2 |  | Level 3
| (In millions)
Financial assets: |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 9,016 |  |  | $ | 9,016 |  |  | $ | 9,016 |  |  | $ | — |  |  | $ | — |
Debt securities held to maturity | 763 |  |  | 703 |  |  | — |  |  | 703 |  |  | — |
Debt securities available for sale | 26,228 |  |  | 26,228 |  |  | 1,186 |  |  | 25,041 |  |  | 1 |
Loans held for sale | 459 |  |  | 459 |  |  | — |  |  | 397 |  |  | 62 |
Loans (excluding leases), net of unearned income and allowance for loan losses(2)(3) | 95,753 |  |  | 90,849 |  |  | — |  |  | — |  |  | 90,849 |
Other earning assets | 1,552 |  |  | 1,552 |  |  | 745 |  |  | 807 |  |  | — |
Derivative assets | 2,979 |  |  | 2,979 |  |  | — |  |  | 2,971 |  |  | 8 |
Financial liabilities: |  |  |  |  |  |  |  |  |
Derivative liabilities | 4,226 |  |  | 4,226 |  |  | 11 |  |  | 4,214 |  |  | 1 |
Deposits with no stated maturity(4) | 113,006 |  |  | 113,006 |  |  | — |  |  | 113,006 |  |  | — |
Time deposits(4) | 13,193 |  |  | 13,095 |  |  | — |  |  | 13,095 |  |  | — |
Short-term borrowings | 2,000 |  |  | 2,000 |  |  | — |  |  | 2,000 |  |  | — |
Long-term borrowings | 4,290 |  |  | 4,256 |  |  | — |  |  | 4,255 |  |  | 1 |
Loan commitments and letters of credit | 157 |  |  | 157 |  |  | — |  |  | — |  |  | 157 |
_________ (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 discount on the loan portfolio's net carrying amount at September 30, 2023 was $4.9 billion or 5.1 percent. (3)Excluded from this table is the sales-type, direct financing, and leveraged lease carrying amount of $1.6 billion at September 30, 2023. (4)The fair value of non-interest-bearing demand accounts, interest-bearing checking accounts, savings accounts, and money market accounts is the amount payable on demand at the reporting date (i.e., the carrying amount) as these instruments have an indeterminate maturity date. Fair values for time deposits are estimated by using discounted cash flow analyses, based on market spreads to benchmark rates. 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, 2022 are as follows:
| December 31, 2022
| Carrying Amount |  | Estimated Fair Value(1) |  | Level 1 |  | Level 2 |  | Level 3
| (In millions)
Financial assets: |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 11,227 |  |  | $ | 11,227 |  |  | $ | 11,227 |  |  | $ | — |  |  | $ | — |
Debt securities held to maturity | 801 |  |  | 751 |  |  | — |  |  | 751 |  |  | — |
Debt securities available for sale | 27,933 |  |  | 27,933 |  |  | 1,187 |  |  | 26,744 |  |  | 2 |
Loans held for sale | 354 |  |  | 354 |  |  | — |  |  | 335 |  |  | 19 |
Loans (excluding leases), net of unearned income and allowance for loan losses(2)(3) | 94,044 |  |  | 89,540 |  |  | — |  |  | — |  |  | 89,540 |
Other earning assets | 1,308 |  |  | 1,308 |  |  | 529 |  |  | 779 |  |  | — |
Derivative assets | 2,609 |  |  | 2,609 |  |  | 3 |  |  | 2,603 |  |  | 3 |
Financial liabilities: |  |  |  |  |  |  |  |  |
Derivative liabilities | 3,378 |  |  | 3,378 |  |  | 2 |  |  | 3,375 |  |  | 1 |
Deposits with no stated maturity(4) | 125,971 |  |  | 125,971 |  |  | — |  |  | 125,971 |  |  | — |
Time deposits(4) | 5,772 |  |  | 5,697 |  |  | — |  |  | 5,697 |  |  | — |
Long-term borrowings | 2,284 |  |  | 2,376 |  |  | — |  |  | 2,375 |  |  | 1 |
Loan commitments and letters of credit | 153 |  |  | 153 |  |  | — |  |  | — |  |  | 153 |
_________ (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 discount on the loan portfolio's net carrying amount at December 31, 2022 was $4.5 billion or 4.8 percent. (3)Excluded from this table is the sales-type, direct financing, and leveraged lease carrying amount of $1.5 billion at December 31, 2022. (4)The fair value of non-interest-bearing demand accounts, interest-bearing checking accounts, savings accounts, and money market accounts is the amount payable on demand at the reporting date (i.e., the carrying amount) as these instruments have an indeterminate maturity date. Fair values for time deposits are estimated by using discounted cash flow analyses, based on market spreads to benchmark rates.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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