Derivative Financial Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2025

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments and Hedging Activities

NOTE 9. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

The following tables present the notional amount and estimated fair value of derivative instruments:


	June 30, 2025						December 31, 2024
	Notional Amount(1)		Estimated Fair Value				Notional Amount		Estimated Fair Value
			Gain(1)		Loss(1)				Gain(1)		Loss(1)
	(In millions)
Derivatives in fair value hedging relationships:
Interest rate swaps	$	6,337	$	3	$	91	$	5,484	$	26	$	95

Derivatives in cash flow hedging relationships:
Interest rate swaps	35,198		96		261		36,660		—		718
Interest rate options	2,000		7		3		2,000		4		6
Total derivatives in cash flow hedging relationships	37,198		103		264		38,660		4		724
Total derivatives designated as hedging instruments	$	43,535	$	106	$	355	$	44,144	$	30	$	819
Derivatives not designated as hedging instruments:
Interest rate swaps	$	92,942	$	1,150	$	1,112	$	94,803	$	1,608	$	1,598
Interest rate options	11,624		24		12		11,005		31		24
Interest rate futures and forward commitments	1,552		10		3		1,247		8		4
Other contracts	14,103		206		200		12,539		139		106
Total derivatives not designated as hedging instruments	$	120,221	$	1,390	$	1,327	$	119,594	$	1,786	$	1,732
Total derivatives	$	163,756	$	1,496	$	1,682	$	163,738	$	1,816	$	2,551

Total gross derivative instruments, before netting			$	1,496	$	1,682			$	1,816	$	2,551
Less: Netting adjustments (2)			1,270		1,096				1,703		1,615
Total gross derivative instruments, after netting			$	226	$	586			$	113	$	936

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(1)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. The table reflects net notional presentation and gross asset and liability presentation to capture the economic impact of the trades.

(2)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. Cash collateral, all of which is included as a netting adjustment, totaled $75 million and $106 million for derivative assets at June 30, 2025 and December 31, 2024, respectively. Cash collateral totaled $105 million and $87 million for derivative liabilities at June 30, 2025 and December 31, 2024, respectively.

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" in the Annual Report on Form 10-K for the year ended December 31, 2024 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 and time deposits. 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 SOFR interest rate swaps and interest rate options. As of June 30, 2025, Regions was hedging its exposure to the variability in future cash flows into 2034.

As of June 30, 2025, cash flow hedges were held at a pre-tax net loss of $121 million, which includes pre-tax net gains of $20 million related to terminated cash flow floors and swaps. Regions expects to reclassify into earnings approximately $155

million in pre-tax losses 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 $11 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 June 30, 2025
	Interest Income				Interest Expense
	Debt securities		Loans, including fees		Long-term borrowings
	(In millions)
Total income (expense) presented in the consolidated statements of income	$	286	$	1,377	$	(77)

Gains/(losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements on derivatives	$	5	$	—	$	(7)
Recognized on derivatives	(33)		—		9
Recognized on hedged items	33		—		(9)
Income (expense) recognized on fair value hedges	$	5	$	—	$	(7)

Gains/(losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income, pre-tax	$	—	$	(60)	$	—
Income (expense) recognized on cash flow hedges	$	—	$	(60)	$	—



	Three Months Ended June 30, 2024
	Interest Income				Interest Expense
	Debt securities		Loans, including fees		Long-term borrowings		Deposits
	(In millions)
Total income (expense) presented in the consolidated statements of income	$	219	$	1,432	$	(61)	$	(502)

Gains/(losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements on derivatives	$	2	$	—	$	(17)	$	—
Recognized on derivatives	—		—		10		—
Recognized on hedged items	—		—		(10)		—
Income (expense) recognized on fair value hedges	$	2	$	—	$	(17)	$	—

Gains/(losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income, pre-tax	$	—	$	(116)	$	—	$	—
Income (expense) recognized on cash flow hedges	$	—	$	(116)	$	—	$	—



	Six Months Ended June 30, 2025
	Interest Income				Interest Expense
	Debt securities		Loans, including fees		Long-term borrowings
	(In millions)
Total income (expense) presented in the consolidated statements of income	$	552	$	2,719	$	(162)

Gains/(losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements on derivatives	$	8	$	—	$	(21)
Recognized on derivatives	(79)		—		34
Recognized on hedged items	79		—		(34)
Income (expense) recognized on fair value hedges	$	8	$	—	$	(21)

Gains/(losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income, pre-tax	$	—	$	(127)	$	—
Income (expense) recognized on cash flow hedges	$	—	$	(127)	$	—



	Six Months Ended June 30, 2024
	Interest Income				Interest Expense
	Debt securities		Loans, including fees		Long-term borrowings		Deposits
	(In millions)
Total income (expense) presented in the consolidated statements of income	$	428	$	2,853	$	(105)	$	(997)

Gains/(losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements on derivatives	$	5	$	—	$	(34)	$	—
Recognized on derivatives	6		—		6		(1)
Recognized on hedged items	(7)		—		(6)		1
Income (expense) recognized on fair value hedges	$	4	$	—	$	(34)	$	—

Gains/(losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income, pre-tax	$	—	$	(233)	$	—	$	—
Income (expense) recognized on cash flow hedges	$	—	$	(233)	$	—	$	—

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(1)See Note 6 for gain or (loss) recognized for cash flow hedges in AOCI.

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.


	June 30, 2025				December 31, 2024
	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)	$	6,716	$	35			$	3,304	$	(22)
Long-term borrowings	(2,342)		57				(3,058)		91

_____

(1) Carrying amount represents amortized cost basis.

At June 30, 2025 and December 31, 2024, the Company designated interest rate swaps as fair value hedges of debt securities available for sale under which the Company designated $1.8 billion and $750 million, respectively, as the hedged amount from a closed portfolio of prepayable financial assets with a carrying amount of $4.5 billion and $1.8 billion, respectively. At June 30, 2025, approximately $10 million of the hedge accounting basis adjustments related to active portfolio layer method hedges. During 2025 the Company terminated fair value hedges related to available for sale debt securities. The terminated hedges had a remaining basis adjustment of $23 million.

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS

The Company holds a portfolio of derivative instruments not designated as accounting hedges, therefore these derivatives are marked-to-market through earnings (in capital markets income or mortgage income as appropriate) and included in other assets and other liabilities, as appropriate. Refer to Note 20 "Derivative Financial Instruments and Hedging Activities" in the Annual Report on Form 10-K for the year ended December 31, 2024 for more information regarding these derivative instruments.

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 June 30				Six Months Ended June 30
Derivatives Not Designated as Hedging Instruments	2025		2024		2025		2024
	(In millions)
Capital markets income:
Interest rate swaps	$	5	$	6	$	11	$	15
Interest rate options	13		14		21		23
Interest rate futures and forward commitments	5		6		8		14
Other contracts	(19)		(1)		(21)		5
Total capital markets income	4		25		19		57
Mortgage income:
Interest rate swaps	(4)		(8)		12		(23)
Interest rate options	(1)		(2)		—		(1)
Interest rate futures and forward commitments	1		(2)		—		8
Total mortgage income	(4)		(12)		12		(16)
	$	—	$	13	$	31	$	41

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 2025 and 2030. Swap participations, whereby Regions has sold credit protection have maturities between 2025 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 June 30, 2025 was approximately $534 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 June 30, 2025 and 2024 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.

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 June 30, 2025 and December 31, 2024, were $47 million and $47 million, respectively, for which Regions had posted collateral of $43 million and $34 million, respectively, in the normal course of business.