Regions Financial Corporation · 10-Q · Item 2 MD&A

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

The following discussion and analysis is part of Regions Financial Corporation’s (“Regions” or the “Company”) Quarterly Report on Form 10-Q filed with the SEC and should be read in conjunction with the consolidated financial statements and the related notes that appear in Part I, Item 1 of this report. In addition, this discussion and analysis updates the Annual Report on Form 10-K for the year ended December 31, 2025, which was previously filed with the SEC. This financial information is presented to aid in understanding Regions’ financial position and results of operations and should be read together with the financial information contained in Regions’ Annual Report on Form 10-K.

See Note 1 "Basis of Presentation" and Note 13 "Recent Accounting Pronouncements" to those consolidated financial statements for further detail. The emphasis of this discussion will be on the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 for the consolidated statements of income. For the consolidated balance sheets, the emphasis of this discussion will be on the balances as of June 30, 2026 compared to December 31, 2025.

This discussion and analysis contains statements that may be considered “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. See pages 6 through 8 for additional information regarding forward-looking statements.

CORPORATE PROFILE

Regions is a financial holding company headquartered in Birmingham, Alabama operating in the South, Midwest and Texas. In addition, Regions operates several offices delivering specialty capabilities in New York, Washington D.C., Chicago, Salt Lake City, and other locations nationwide. Regions provides financial solutions for a wide range of clients including retail and mortgage banking services, commercial banking services and wealth and investment services. Further, Regions and its subsidiaries deliver other specialty capabilities including merger and acquisition advisory services, capital markets solutions, home improvement lending, investment advisory services, equipment financing for commercial clients and small business customers, low income housing tax credit corporate fund syndication and asset management, financing to CRA-qualified customers, investment and insurance products, broker-dealer services to commercial clients, and others.

Regions conducts its banking operations through Regions Bank, an Alabama state-chartered commercial bank that is a member of the Federal Reserve System. At June 30, 2026, Regions operated 1,246 total branch outlets. Regions carries out its strategies and derives its profitability from three reportable business segments: Corporate Bank, Consumer Bank, and Wealth Management, with the remainder in Other. See Note 11 "Business Segment Information" to the consolidated financial statements for more information regarding Regions’ segment reporting structure.

Regions’ business strategy is focused on providing a competitive mix of products and services, delivering quality customer service, and continuing to develop and optimize distribution channels that include a branch distribution network with offices in convenient locations, as well as electronic and mobile banking.

Regions’ profitability, like that of many other financial institutions, is dependent on its ability to generate revenue from net interest income as well as non-interest income sources. Net interest income is primarily the difference between the interest income Regions receives on interest-earning assets, such as loans, leases, investment securities and cash balances held at the Federal Reserve Bank, and the interest expense Regions pays on interest-bearing liabilities, principally deposits and borrowings. Regions’ net interest income is impacted by the size and mix of its balance sheet components and the interest rate spread between interest earned on its assets and interest paid on its liabilities. Non-interest income includes fees from service charges on deposit accounts, card and ATM fees, mortgage servicing and secondary marketing, investment management and trust activities, capital markets and other customer services which Regions provides.

Results of operations are also affected by the provision for credit losses and non-interest expenses such as salaries and employee benefits, equipment and software expenses, occupancy, professional, legal and regulatory expenses, FDIC insurance assessments, and other operating expenses, as well as income taxes.

Economic conditions, competition, new legislation and related rules impacting regulation of the financial services industry and the monetary and fiscal policies of the Federal government significantly affect most, if not all, financial institutions, including Regions. Lending and deposit activities and fee income generation are influenced by levels of business spending and investment, consumer income, consumer spending and savings, capital market activities, and competition among financial institutions, as well as customer preferences, interest rate conditions, inflation and prevailing market rates on competing products in Regions’ market areas.

SECOND QUARTER OVERVIEW

Economic Environment in Regions' Banking Markets

Regions utilized its internal June baseline forecast to calculate the ACL as of June 30, 2026. Refer to the "Economic forecast and qualitative adjustments" discussion in the "Allowance" section for further detail.

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Second Quarter Results

Regions reported net income available to common shareholders of $549 million or $0.64 per diluted share in the second quarter of 2026 compared to net income available to common shareholders of $534 million or $0.59 per diluted share in the second quarter of 2025.

T1Net interest income (taxable-equivalent basis) totaled $1.3 billion in the second quarter of 2026, which increased $20 million compared to the second quarter of 2025. The net interest margin (taxable-equivalent basis) was 3.66 percent in the second quarter of 2026, reflecting a 1 basis point increase from the same period in 2025. The increases in net interest income and margin were driven primarily by lower total funding costs that overcame a modest decline in loan yields, which were also protected by the Company's hedging program. Additionally, net interest income and margin benefitted from fixed-rate asset turnover and securities repositionings executed in 2025 and 2026. Refer to the related discussion below Table 18 "Consolidated Average Daily Balances and Yield/Rate Analysis" for further detail.

T2The provision for credit losses totaled $68 million in the second quarter of 2026 compared to $126 million in the second quarter of 2025. Net charge-offs totaled $102 million, or 0.42 percent of average loans, in the second quarter of 2026, compared to $113 million, or 0.47 percent of average loans, in the second quarter of 2025. This decrease reflected continued progress on previously identified portfolios of interest that were already reserved for. The allowance as a percent of total loans, net, decreased to 1.63 percent at June 30, 2026, compared to 1.76 percent at December 31, 2025 due to asset quality improvement and resolutions of previously reserved for credits. Refer to the "Allowance" section for further detail.

Non-interest income was $630 million in the second quarter of 2026 compared to $646 million in the second quarter of 2025 primarily driven by securities losses associated with repositioning transactions in the second quarter of 2026 and a decline in mortgage income. Partially offsetting the losses were increases in service charges, investment management and trust fee income, investment services fee income, and higher market valuations on employee benefit assets. See Table 23 "Non-Interest Income" for further details.

Non-interest expense was $1.1 billion in the second quarter of 2026 which increased $48 million compared to the second quarter of 2025. The increase was primarily driven by an increase in salaries and benefits and outside services expenses. These increases were partially offset by a decline in FDIC insurance expense, operational losses, and Visa class B shares expense. See Table 24 "Non-Interest Expense" for further details.

Regions' effective tax rate was 20.7 percent in the second quarter of 2026 compared to 20.3 percent in the second quarter of 2025. See the "Income Taxes" section for further details.

Capital

Regions and Regions Bank are required to comply with regulatory capital requirements established by Federal and State banking agencies, which include quantitative requirements including the CET1 ratio. T3At June 30, 2026, Regions’ CET1 ratio was estimated to be 10.7 percent. For additional information on Regions' regulatory capital requirements see the "Regulatory Requirements" section.

Regions is subject to supervisory stress testing conducted by the Federal Reserve and its SCB is currently floored at 2.5 percent. See Note 6 "Shareholders' Equity and Accumulated Other Comprehensive Income (Loss)" to the consolidated financial statements for further details.

T4The Board has authorized the repurchase of up to $3.0 billion of the Company's common stock through the fourth quarter of 2027. See Note 6 "Shareholders' Equity and Accumulated Other Comprehensive Income (Loss)" for more information.

On July 15, 2026, the Board declared a $0.035 increase, or 13 percent, to the quarterly common stock dividend to $0.30 which will be payable on October 1, 2026, to shareholders of record at close of business on September 1, 2026.

BALANCE SHEET ANALYSIS

The following sections provide expanded discussion of significant changes in certain line items in asset, liability, and shareholders' equity categories.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents decreased approximately $981 million from year-end 2025 to June 30, 2026 primarily due to an increase in loans and a decrease in deposits which was partially offset by an increase in borrowed funds. See the "Loans", "Deposits, "Borrowed Funds" and "Liquidity" sections for more information.

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DEBT SECURITIES

The following table details the carrying values of debt securities, including both held to maturity and available for sale:

Table 1—Debt Securities

(In millions)

U.S. Treasury securities

$

$

Federal agency securities

Obligations of states and political subdivisions

2

2

Mortgage-backed securities:

Residential agency

Commercial agency

Commercial non-agency

Corporate and other debt securities

$

$

Debt securities, which comprise approximately 23 percent of earning assets, are an important tool used to manage interest rate sensitivity and provide a primary source of liquidity for the Company, as much of the portfolio is highly liquid. Additionally, some of the debt securities portfolio is eligible to be used as collateral for funding of various types of borrowings. See the "Liquidity" and "Market Risk-Interest Rate Risk" sections for more information on these arrangements. See also Note 3 "Debt Securities" to the consolidated financial statements for additional information.

As of June 30, 2026, debt securities held to maturity and debt securities available for sale represented 16 percent and 84 percent, respectively, of the total debt securities portfolio.

Debt securities decreased $507 million from December 31, 2025 to June 30, 2026 due to the timing of securities purchases and less favorable market valuation adjustments resulting from changes in interest rates. During the second quarter of 2026, the Company executed a debt securities repositioning involving the sale of shorter-duration commercial agency MBS and U.S. Treasuries, which were replaced with longer-duration commercial and residential agency MBS and U.S. Treasuries with higher market yields. In total the Company sold approximately $900 million of debt securities available for sale and realized approximately $40 million in pre-tax losses.

The average life of the debt securities portfolio at both June 30, 2026 and December 31, 2025 was estimated to be 5.9 years, with a duration of approximately 3.9 years, inclusive of fair value hedges (see Table 20).

LOANS HELD FOR SALE

The following table presents Regions’ loans held for sale by type:

Table 2—Loans Held for Sale

(In millions)

Commercial

$

$

Residential first mortgage

Consumer and other performing

2

—

Non-performing

1

—

$

$

Commercial loans held for sale include commercial mortgage loans originated for sale to third parties and commercial loans originally recorded as held for investment when management has the intent to sell. Levels of commercial loans held for sale fluctuate based on timing of sale to third parties. The levels of residential first mortgage loans held for sale that are part of the Company's mortgage originations fluctuate depending on the timing of origination and sale to third parties.

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LOANS

GENERAL

Loans, net of unearned income, represented approximately 70 percent of interest-earning assets as of June 30, 2026. The following table presents the distribution of Regions' loan portfolio by segment and class, net of unearned income:

Table 3—Loan Portfolio

(In millions, net of unearned income)

Commercial and industrial

$

$

Commercial real estate mortgage—owner-occupied

Commercial real estate construction—owner-occupied

Total commercial

Commercial investor real estate mortgage

Commercial investor real estate construction

Total investor real estate

Residential first mortgage

Home equity lines

Home equity loans

Consumer credit card

Other consumer

Total consumer

$

$

PORTFOLIO CHARACTERISTICS

T5Loans, net of unearned income, increased $3.6 billion from year-end 2025 due to an increase across all commercial and investor real estate loan classes as discussed below. These increases were partially offset by a slight decline in consumer loans. Regions manages loan growth with a focus on risk management and risk-adjusted return on capital.

The following sections describe the composition of the portfolio segments and classes disclosed in Table 3, explain changes in balances from year-end 2025 and highlight the related risk characteristics. Regions believes that its loan portfolio is well diversified by product, client, and geography throughout its footprint. However, the loan portfolio may be exposed to certain concentrations of credit risk which exist in relation to individual borrowers or groups of borrowers, certain types of collateral, certain types of industries, and certain loan products. See Note 4 "Loans and the Allowance for Credit Losses" to the consolidated financial statements for additional discussion.

Commercial

Over half of the Company’s total loans are included in the commercial portfolio segment. These balances are spread across numerous industries, as noted in Table 4. The Company manages the related risks to this portfolio by setting certain lending limits for each significant industry. The commercial portfolio segment includes commercial and industrial loans for use in customers' normal business operations to finance working capital needs, equipment purchases, expansion projects and acquisitions. See the "Portfolio Characteristics" section in Regions' Annual Report on Form 10-K for the year ended December 31, 2025 for more information on details surrounding the commercial portfolio segment and underwriting criteria, underwriting for owner-occupied real estate and real estate construction and real estate appraisals for commercial and IRE loans.

Commercial and industrial loans increased $3.1 billion since year-end 2025 driven primarily by increases in energy and utilities, manufacturing, real estate, and healthcare. Growth was driven by higher line utilization rates and new loan production. In the first six months of 2026, the increase in commercial and industrial loans was broad-based as shown in Table 4.

The commercial portfolio also includes owner-occupied commercial real estate mortgage loans to operating businesses, which are loans for long-term financing on real estate assets, and are repaid by cash generated by business operations. Owner-occupied commercial real estate construction loans are made to commercial businesses for the development of land or construction of a building where the repayment is derived from revenues generated from the business of the borrower. These owner-occupied real estate and real estate construction loans generally mature within a 10 year period and with amortization periods reflecting the longer life of the underlying collateral. Typical structure is an amortizing term loan, though construction loans are short-term, monitored, non-revolving draw facilities. These loans frequently have a covenant package combination consistent with the underwriting of commercial loans, inclusive of applicable debt service coverage, leverage, and liquidity measurements.

Investor Real Estate

Loans for real estate development are repaid through cash flows related to the operation, sale or refinance of the property. This portfolio segment includes extensions of credit to real estate developers or investors where repayment is dependent on the

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sale of real estate or income generated from the real estate collateral. A portion of Regions’ IRE portfolio segment consists of loans secured by residential product types (land, single-family and condominium loans) within Regions’ markets. Additionally, this category includes loans made to finance income-producing properties such as apartment buildings, office and industrial buildings, and retail shopping centers. Total IRE loans increased $863 million in comparison to year-end 2025 balances due to increases in fundings to previously approved projects and new term loans for apartments and medical office buildings. See the "Investor Real Estate" section in Regions' Annual Report on Form 10-K for the year ended December 31, 2025 for more information on details surrounding the investor real estate portfolio segment and underwriting criteria.

The following tables provide detail of Regions' commercial and IRE lending balances in selected industries.

Table 4—Commercial and Investor Real Estate Industry Exposure

Loans

Unfunded Commitments

Total Exposure

Percent of Balance

Loans

Unfunded Commitments

Total Exposure

Percent of Balance

(In millions)

(In millions)

Commercial:

Administrative, support, waste and repair

$

$

$

%

$

$

$

%

Agriculture

%

%

Educational services

%

%

Energy

%

%

Financial services

%

%

Government and public sector

%

%

Healthcare

%

%

Information

%

%

Manufacturing

%

%

Professional, scientific and technical services

%

%

Real estate (1)

%

%

Religious, leisure, personal and non-profit services

%

%

Restaurant, accommodation and lodging

%

%

Retail trade

%

%

Transportation and warehousing

%

%

Utilities

%

%

Wholesale goods

%

%

Other (2)

%

%

Total commercial

$

$

$

%

$

$

$

%

Investor real estate:

Hotel

$

$

5

$

%

$

$

8

$

%

Industrial

%

%

Land

%

%

Multi-family

%

%

Office

%

%

Retail

%

%

Single-family/condo

%

%

Data center

%

%

Self storage

3

—

3

—

%

3

%

Medical office building

%

%

Other (2)

%

%

Total investor real estate

$

$

$

%

$

$

$

%

_______

(1)"Real estate" includes REITs, which are unsecured commercial and industrial products that are real estate related. This portfolio is well diversified, generally has low leverage with strong access to liquidity, and the REITs included in this portfolio are primarily investment or near investment grade.

(2)"Other" contains balances related to non-classifiable and invalid business industry codes offset by payments in process and fee accounts that are not available at the loan level.

(3)As customers' businesses evolve (e.g. up or down the vertical manufacturing chain), Regions may need to change the assigned business industry code used to define the customer relationship. When these changes occur, Regions does not recast the customer history for prior periods into the new classification because the business industry code used in the prior period was deemed appropriate. As a result, year over year changes may be impacted.

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The Company's total non-owner-occupied commercial real estate lending consists of both unsecured commercial and industrial loans that are real estate related (including REITs) and investor real estate loans and are considered to be well diversified across property types. The following tables provide detail of these loans:

Table 5— Unsecured Commercial Real Estate and Investor Real Estate Exposure

Loan Balance

Percent of Total (1)

Loan Balance

Percent of Total (1)

(In millions)

Residential homebuilders

$

%

$

%

Apartments

%

%

Industrial

%

%

Data center

%

%

Diversified

%

%

Business offices

%

%

Residential land

%

%

Retail

%

%

Healthcare

%

%

Hotel

%

%

Commercial land

%

%

Self Storage

%

%

Medical office building

%

%

Other

%

%

Total (2)

$

%

$

%

_______

(1)Amounts calculated based on whole dollar values.

(2)Owner-occupied commercial real estate is not included as the principal source of repayment is individual businesses, which more closely aligns with the commercial portfolio credit performance.

T6Portfolios that are experiencing higher risk due to conditions such as inflationary pressures, higher interest rates, and adverse underlying market fundamentals (identified as portfolios of interest) include business offices and trucking (included within transportation and warehousing) at June 30, 2026 within Table 4 above.

While the business offices portfolio remains a portfolio of interest, credit quality is improving. The office portfolio totaled $858 million and represented 0.9 percent of total loans at June 30, 2026, declining from $1.0 billion and 1.1 percent of loans at December 31, 2025. The office portfolio included non-performing loans of $121 million and had associated charge-offs of $1 million in the six months ended June 30, 2026. Approximately 99 percent of the office portfolio was secured, with approximately 62 percent of secured balances located in the South region of the U.S, of which 87 percent were Class A properties. Approximately 60 percent of the office portfolio will mature in the next 12 months.

Additionally, the IRE office portfolio had a weighted-average LTV of approximately 64 percent at June 30, 2026, based upon appraisal at origination or most recent received, and a stressed weighted-average LTV of approximately 84 percent as of April 7, 2026, based upon GreenStreet's Commercial Property Price Index. While the office portfolio remains stressed, well-located, highly amenitized properties are observing improvements to property fundamentals. No new loan originations are being contemplated in this portfolio.

The trucking portfolio remains a portfolio of interest as trucking companies have been working through one of the most prolonged downturns in the U.S. domestic freight market. While the freight cycle has improved and spot-market fundamentals are strong, the industry remains vulnerable to economic uncertainty. The trucking portfolio totaled $1.1 billion and represented 1.1 percent of total loans at June 30, 2026, declining from $1.2 billion and 1.3 percent of loans at December 31, 2025. The trucking portfolio included non-performing loans of $45 million and had associated charge-offs of $29 million in the six months ended June 30, 2026. New originations in the sector have been curtailed and those that occur are either secured or targeted towards larger companies.

Residential First Mortgage

Residential first mortgage loans represent loans to consumers to finance a residence. These loans are typically financed over a 15 to 30 year term and, in most cases, are extended to borrowers to finance their primary residence. Total residential first mortgage loans decreased $267 million in comparison to year-end 2025 balances as payoffs and paydowns outpaced production.

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Home Equity Lines

Home equity lines are secured by a first or second mortgage on the borrower's residence and allow customers to borrow against the equity in their homes. Substantially all of this portfolio was originated through Regions' branch network. See the "Portfolio Characteristics" section in Regions' Annual Report on Form 10-K for the year ended December 31, 2025 for more information on home equity line draw and repayment structures.

The following table presents information regarding the future principal payment reset dates for the Company's home equity lines of credit as of June 30, 2026. The balances presented are based on maturity date for lines with a balloon payment and draw period expiration date for lines that convert to a repayment period.

Table 6—Home Equity Lines of Credit - Future Principal Payment Resets

First Lien

% of Total

Second Lien

% of Total

Total

(Dollars in millions)

$

%

$

%

$

%

%

%

%

%

%

%

%

%

%

%

%

Thereafter

%

8

%

Revolving Loans Converted to Amortizing

%

%

Total

$

%

$

%

$

Home Equity Loans

Home equity loans are also secured by a first or second mortgage on the borrower's residence, are primarily originated as amortizing loans, and allow customers to borrow against the equity in their homes. Substantially all of this portfolio was originated through Regions’ branch network.

Consumer Credit Quality Data

The Company calculates an estimate of the current value of property secured as collateral for both residential first mortgage and home equity lending products (“current LTV”). The estimate is based on home price indices compiled by a third party that is updated typically every three months. The third party data indicates trends for MSAs. Regions uses the third party valuation trends from the MSAs in the Company's footprint in its estimate. The trend data is applied to the loan portfolios taking into account the age of the most recent valuation and geographic area.

The following table presents current LTV data for components of the residential first mortgage, home equity lines and home equity loans classes of the consumer portfolio segment. Current LTV data for some loans in the portfolio is not available due to mergers and systems integrations. The amounts in the table represent the entire loan balance. For purposes of the table below, if the loan balance exceeds the current estimated collateral the entire balance is included in the “Above 100%” category, regardless of the amount of collateral available to partially offset the shortfall.

Table 7—Estimated Current Loan to Value Ranges

Residential

First Mortgage

Home Equity Lines of Credit

Home Equity Loans

Residential

First Mortgage

Home Equity Lines of Credit

Home Equity Loans

1st Lien

2nd Lien

1st Lien

2nd Lien

1st Lien

2nd Lien

1st Lien

2nd Lien

(In millions)

(In millions)

Estimated current LTV:

$

$

—

$

—

$

1

$

—

$

$

2

$

1

$

—

$

1

$

1

3

3

2

3

Data not available

9

2

(1)

3

1

—

$

$

$

$

$

$

$

$

$

$

Consumer Credit Card

Consumer credit card lending represents primarily open-ended variable interest rate consumer credit card loans.

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Other Consumer

Other consumer loans primarily include indirect and direct consumer loans, overdrafts and other revolving loans. Other consumer loans decreased $297 million from year-end 2025 driven by a decline in consumer home improvement lending.

Regions considers factors such as periodic updates of FICO scores, accrual status, DPD status, unemployment rates, home prices, and geography as credit quality indicators for the consumer loan portfolio. FICO scores are obtained at origination and refreshed FICO scores are obtained by the Company quarterly for most consumer loans. For more information on credit quality indicators refer to Note 4 "Loans and the Allowance for Credit Losses".

ALLOWANCE

The allowance represents management's best estimate of expected losses over the life of the loan and credit commitment portfolios and consists of two components: the allowance for loan losses and the reserve for unfunded credit commitments. Unfunded credit commitments includes items such as letters of credit, financial guarantees and binding unfunded loan commitments. The allowance totaled $1.6 billion at June 30, 2026 and $1.7 billion at December 31, 2025.

Regions' allowance estimation process utilizes loss forecasting models for pooled loans, specific reserves for significant individually evaluated non-performing loans, and qualitative adjustments for items not captured by the models including specific adjustments and general imprecision. Key inputs to Regions' loss forecasting models include, but are not limited to, loan risk ratings (commercial and investor real estate loans), maturity date, days past due and FICO scores (consumer loans), collateral values securing loans, and Regions' internally prepared baseline economic forecast. Changes in any of these factors, assumptions, or the availability of new information, could require the allowance to be adjusted in future periods, perhaps materially. Outputs from the loss forecasting models, in combination with Regions' qualitative framework and other analyses, inform management in its estimation of Regions' expected credit losses to ensure the overall allowance estimate is appropriate from both a bottom-up and top-down perspective.

Current prevailing economic uncertainty and the potential for further disruption could influence future levels of the allowance. Actual losses could vary, perhaps materially, from management’s estimates. See Note 1 "Summary of Significant Accounting Policies" in the Annual Report on Form 10-K for the year ended December 31, 2025 for more information.

Management reviews the allowance on a quarterly basis using updated information, including changes to economic conditions, the loan portfolio and credit information. The following table provides an analysis of the changes in the allowance for the three and six months ended June 30, 2026:

Table 8—Allowance Analysis

(In millions)

Balance at beginning of period

$

$

Economic/ Qualitative changes

5

Specific reserve changes

Portfolio changes

Balance at end of period

$

$

Table 9 below reflects a range of macroeconomic factors utilized in the baseline economic forecast over the two-year R&S forecast period as of June 30, 2026. The unemployment rate is the most significant macroeconomic factor among the allowance models and was expected to remain relatively consistent over the forecast period.

Table 9—Macroeconomic Factors in the Forecast

Pre-R&S Period

Baseline R&S Forecast

Unemployment rate

%

%

%

%

%

%

%

%

%

Real GDP, annualized % change

%

%

%

%

%

%

%

%

%

HPI, year-over-year % change

—

%

%

%

—

%

%

%

%

%

%

CPI, year-over-year % change

%

%

%

%

%

%

%

%

%

Economic forecast and qualitative adjustments

Regions' internally-developed June 2026 baseline forecast, which was similar to the March 2026 baseline forecast, reflects slightly lower real GDP which is expected to grow 2.0 percent in 2026. While consumer spending was supported by tax legislation enacted in 2025, it is expected to be partially offset by higher prices. Corporate profit margins remain healthy and are supportive of growth in business investment, which is expected to support real GDP growth. Inflation as measured by CPI is expected to remain above the FOMC's 2.0 percent target rate into 2027. The longer the conflict in the Middle East persists, the

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greater the risk that core inflation could increase. Labor markets have firmed slightly in 2026 and the current baseline forecast anticipates a moderate pace of job growth resulting in a modest decrease in the allowance for the three months ended June 30, 2026.

While it is the intent of Regions' quantitative allowance methodologies to reflect all risk factors, including incremental risk in portfolios identified as under stress, any estimate involves assumptions and uncertainties resulting in some level of imprecision. Regions' qualitative framework has a general imprecision component which is meant to acknowledge that model and forecast errors are inherent in any modeling estimate. The general imprecision component remained stable for the three months ended June 30, 2026.

The qualitative framework also has specific adjustment components which are reserves meant to capture specific issues or events that management believes are not adequately captured in the model outcomes. Specific qualitative adjustments declined in the three months ended June 30, 2026.

Credit metrics, specific reserves and portfolio changes

Overall credit metrics continued to improve through the three months ended June 30, 2026. The ratio of net charge-offs to average loans decreased 12 basis points in the three months ended June 30, 2026 compared to the first three months of 2026, reflecting continued progress on previously identified portfolios of interest for which specific reserves had already been established. Therefore, specific reserve releases due to charge-offs resulted in a decrease in the allowance. Commercial and investor real estate criticized balances as a percent of total related loans, and non-performing loan balances decreased in the three months ended June 30, 2026. See Table 10 for more details on net charge-offs, non-performing loans and criticized loans.

The combination of credit quality improvements and specific reserve releases due to charge-offs resulted in a decrease in the allowance in the three months ended June 30, 2026. Regarding impacts to the allowance as a result of portfolio changes, high quality loan portfolio growth and other credit quality considerations resulted in an increase in the modeled allowance results for the three months ended June 30, 2026.

Overall allowance

Based upon the factors discussed above, the June 30, 2026 allowance decreased $34 million in the three months ended June 30, 2026. The allowance reduction resulted from overall credit quality improvement in the portfolio and continued progress resolving loans within previously identified portfolios of interest, partially offset by an increase for high quality loan growth.

Furthermore, in the six months ended June 30, 2026, the allowance decreased $73 million driven primarily by overall credit quality improvement in the portfolio, including declines in criticized loans as a percent of loan balances and non-performing loan balances, and continued resolutions of loans within previously identified portfolios of interest.

Details regarding the allowance and net charge-offs activity are summarized as follows:

Table 10—Allowance Roll-forward

Three Months Ended

Six Months Ended

(Dollars in millions)

Beginning allowance for loan losses

$

$

$

$

$

Loans charged-off:

Commercial and industrial

Commercial real estate mortgage—owner-occupied

1

—

1

1

2

Commercial investor real estate mortgage

—

—

4

—

Residential first mortgage

1

—

—

1

1

Home equity lines

1

1

—

2

1

Home equity loans

—

—

1

—

—

Consumer credit card

Other consumer

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Three Months Ended

Six Months Ended

(Dollars in millions)

Recoveries of loans previously charged-off:

Commercial and industrial

8

9

Commercial real estate mortgage—owner-occupied

1

—

—

1

—

Commercial real estate construction—owner-occupied

—

—

—

—

1

Commercial investor real estate mortgage

—

—

1

—

—

Residential first mortgage

1

—

1

1

1

Home equity lines

1

1

1

2

2

Home equity loans

—

—

1

—

Consumer credit card

2

3

2

5

5

Other consumer

8

8

8

Net charge-offs (recoveries):

Commercial and industrial

Commercial real estate mortgage—owner-occupied

—

—

1

—

2

Commercial real estate construction—owner-occupied

—

—

—

—

(1)

Commercial investor real estate mortgage

—

—

3

—

Residential first mortgage

—

—

(1)

—

—

Home equity lines

—

—

(1)

—

(1)

Consumer credit card

Other consumer

Provision for loan losses

Ending allowance for loan losses

Beginning reserve for unfunded credit commitments

Provision for (benefit from) unfunded credit losses

4

(2)

(6)

Ending reserve for unfunded credit commitments

Allowance for credit losses at period end

$

$

$

$

$

Loans, net of unearned income, outstanding at end of period

$

$

$

$

$

Average loans, net of unearned income, outstanding for the period

$

$

$

$

$

Net loan charge-offs (recoveries) as a % of average loans, annualized (1):

Commercial and industrial

%

%

%

%

%

Commercial real estate mortgage—owner-occupied

%

%

%

%

%

Commercial real estate construction—owner-occupied

%

%

%

%

%

Total commercial

%

%

%

%

%

Commercial investor real estate mortgage

—

%

%

%

%

%

Total investor real estate

—

%

%

%

%

%

Residential first mortgage

—

%

—

%

—

%

—

%

—

%

Home equity lines

%

%

%

%

%

Home equity loans

%

%

—

%

%

%

Consumer credit card

%

%

%

%

%

Other consumer

%

%

%

%

%

Total consumer

%

%

%

%

%

Total

%

%

%

%

%

Non-performing loans, excluding loans held for sale

$

$

$

$

$

Non-performing loans held for sale

$

1

$

1

$

—

$

1

$

Non-performing loans, including loans held for sale

$

$

$

$

$

Foreclosed properties

$

$

$

$

$

Non-performing assets (NPAs)

$

$

$

$

$

Table of Contents

Three Months Ended

Six Months Ended

(Dollars in millions)

Criticized loans—business (2)

$

$

$

$

$

Ratios (1):

Allowance for credit losses at end of period to loans, net of unearned income

%

%

%

%

%

Allowance for credit losses at end of period to non-performing loans, excluding loans held for sale

%

%

%

%

%

Business criticized loans to total business loans (2)

%

%

%

%

%

_______

(1)Amounts have been calculated using whole dollar values.

(2)Business represents the combined total of commercial and investor real estate loans.

Net charge-offs decreased $4 million for the six months ended June 30, 2026 compared to the same period in 2025. Economic and qualitative trends such as interest rates, unemployment, volatility in commodity prices, collateral valuations and inflationary pressure will impact the future levels of net charge-offs and may result in volatility of certain credit metrics for 2026 and beyond.

The following table summarizes the allocation of the allowance by portfolio segment and class:

Table 11—Allowance Allocation

Loan Balance

Allowance Allocation

Allowance to Loans %(1)

Loan Balance

Allowance Allocation

Allowance to Loans %(1)

(Dollars in millions)

(Dollars in millions)

Commercial and industrial

$

$

%

$

$

%

Commercial real estate mortgage—owner-occupied

%

%

Commercial real estate construction—owner-occupied

7

%

6

%

Total commercial

%

%

Commercial investor real estate mortgage

%

%

Commercial investor real estate construction

%

%

Total investor real estate

%

%

Residential first mortgage

%

%

Home equity lines

%

%

Home equity loans

%

%

Consumer credit card

%

%

Other consumer

%

%

Total consumer

%

%

Total

$

$

%

$

$

%

_____

(1)Amounts have been calculated using whole dollar values.

Table of Contents

NON-PERFORMING ASSETS

The following table presents non-performing assets as of June 30, 2026 and December 31, 2025:

Table 12—Non-Performing Assets

(Dollars in millions)

Non-performing loans:

Commercial and industrial

$

$

Commercial real estate mortgage—owner-occupied

Commercial real estate construction—owner-occupied

2

2

Total commercial

Commercial investor real estate mortgage

Total investor real estate

Residential first mortgage

Home equity lines

Home equity loans

8

7

Total consumer

Total non-performing loans, excluding loans held for sale

Non-performing loans held for sale

1

—

Total non-performing loans(1)

Foreclosed properties

Total non-performing assets(1)

$

$

Accruing loans 90+ days past due:

Commercial and industrial

$

4

$

6

Commercial real estate mortgage—owner-occupied

1

—

Total commercial

5

6

Residential first mortgage(2)

Home equity lines

Home equity loans

8

8

Consumer credit card

Other consumer

Total consumer

Total accruing loans 90+ days past due

$

$

Non-performing loans(1) to loans and non-performing loans held for sale

%

%

Non-performing loans, excluding loans held for sale(1) to loans

%

%

Non-performing assets(1) to loans, foreclosed properties and non-performing loans held for sale

%

%

_________

(1)Excludes accruing loans 90+ days past due.

(2)Excludes residential first mortgage loans that are 100% guaranteed by the FHA and all guaranteed loans sold to Ginnie Mae where Regions has the right but not the obligation to repurchase; however, includes Ginnie Mae repurchased loans with partial guarantees. Total 90+ days or more past due guaranteed loans excluded were $100 million at June 30, 2026 and $79 million at December 31, 2025.

Non-performing loans, excluding loans held for sale, decreased $30 million at June 30, 2026 as compared to year-end 2025. The same economic trends that impact net charge-offs, as discussed above, will impact the future level of non-performing loans. Circumstances related to individually large credits could also result in volatility.

Table of Contents

The following table provides an analysis of non-accrual loans (excluding loans held for sale) by portfolio segment:

Table 13— Analysis of Non-Accrual Loans

Non-Accrual Loans, Excluding Loans Held for Sale for the Six Months Ended

Commercial

Investor

Real Estate

Consumer(1)

Total

Commercial

Investor

Real Estate

Consumer(1)

Total

(In millions)

(In millions)

Balance at beginning of period

$

$

$

$

$

$

$

$

Additions

—

—

Net payments/other activity

1

Return to accrual

(7)

—

—

(7)

(9)

—

—

(9)

Charge-offs on non-accrual loans(2)

—

—

—

Transfers to held for sale(3)

(2)

—

(1)

(3)

—

Net loan sales

(6)

—

—

(6)

(2)

—

Balance at end of period

$

$

$

$

$

$

$

$

________

(1)All net activity within the consumer portfolio segment other than sales and transfers to held for sale (including related charge-offs) is included as a single net number within the net payments/other activity line.

(2)Includes charge-offs on loans on non-accrual status and charge-offs taken upon sale and transfer of non-accrual loans to held for sale.

(3)Transfers to held for sale are shown net of charge-offs recorded upon transfer.

GOODWILL

Goodwill totaled $5.7 billion at both June 30, 2026 and December 31, 2025. Refer to Note 1 "Summary of Significant Accounting Policies" and Note 9 "Goodwill and Other Intangible Assets" to the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2025 for the methodologies and assumptions used in the goodwill impairment analysis.

DEPOSITS

Regions competes with other banking and financial services companies for a share of the deposit market. Regions’ ability to compete in the deposit market depends heavily on the pricing of its deposits and how effectively the Company meets customers’ needs. Regions employs various means to meet those needs and enhance competitiveness, such as providing a high level of customer service, competitive pricing and convenient branch locations for its customers. Regions also serves customers through providing centralized, high-quality banking services through the Company's digital channels and contact center.

Deposits are Regions’ primary source of funds, providing funding for over 90 percent of average earning assets at both June 30, 2026 and December 31, 2025. The following table summarizes deposits by category and by segment:

Table 14—Deposits by Category and by Segment

(In millions)

Non-interest-bearing deposits

$

$

Interest-bearing checking

Savings

Money market—domestic

Time deposits

$

$

Consumer Bank segment

$

$

Corporate Bank segment

Wealth Management segment

Other(1)

$

$

____

(1) Other deposits represent non-customer balances primarily consisting of wholesale funding (for example, selected deposits and brokered time deposits). Other deposits include brokered deposits totaling $1.6 billion at June 30, 2026 and $1.3 billion at December 31, 2025.

T7Total deposits at June 30, 2026 decreased approximately $418 million compared to year-end 2025 levels reflecting normal seasonal patterns associated with tax refunds and payments. The decline was driven by a decrease in interest-bearing checking, money market, and time deposits. Deliberate product management resulted in a shift from time deposits into other products. The mix of non-interest-bearing deposits was approximately 31 percent of total deposits at June 30, 2026, which remained stable in comparison to December 31, 2025.

See the "Liquidity" and "Market Risk-Interest Rate Risk" sections for further discussion on liquidity and interest rates.

Table of Contents

BORROWED FUNDS

Short-Term Borrowings

Short-term borrowings totaled $3.0 billion at June 30, 2026, consisting of federal funds purchased of $200 million and FHLB advances of $2.8 billion. At December 31, 2025, short-term borrowings totaled $750 million comprised entirely of FHLB advances. The levels of these borrowings can fluctuate depending on the Company's funding needs and the sources utilized. See the "Liquidity" section for further discussion and detail of Regions' borrowing capacity with the FHLB.

Table 15—Long-Term Borrowings

(In millions)

Regions Financial Corporation (Parent):

$

$

Valuation adjustments on hedged long-term debt