REGIONS FINANCIAL CORP (Form: 10-Q, Received: 11/05/2014 13:16:48)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



ý	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended September 30, 2014



¨	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from	to

Commission File Number: 001-34034




Regions Financial Corporation
(Exact name of registrant as specified in its charter)




Delaware		63-0589368
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

1900 Fifth Avenue North Birmingham, Alabama		35203
(Address of principal executive offices)		(Zip Code)

(800) 734-4667

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ý Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ý Accelerated filer ¨ Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes ý No

The number of shares outstanding of each of the issuer’s classes of common stock was 1,376,475,042 shares of common stock, par value $.01, outstanding as of November 3, 2014.

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REGIONS FINANCIAL CORPORATION

FORM 10-Q

INDEX



		Page
Part I. Financial Information
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets—September 30, 2014 and December 31, 2013	5
	Consolidated Statements of Income—Three and nine months ended September 30, 2014 and 2013	6
	Consolidated Statements of Comprehensive Income (Loss)—Three and nine months ended September 30, 2014 and 2013	7
	Consolidated Statements of Changes in Stockholders’ Equity—Nine months ended September 30, 2014 and 2013	8
	Consolidated Statements of Cash Flows—Nine months ended September 30, 2014 and 2013	9
	Notes to Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	55
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	91
Item 4.	Controls and Procedures	91

Part II. Other Information
Item 1.	Legal Proceedings	92
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	92
Item 6.	Exhibits	93

Signatures		94

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Forward-Looking Statements

This Quarterly Report on Form 10-Q, other periodic reports filed by Regions Financial Corporation under the Securities Exchange Act of 1934, as amended, and any other written or oral statements made by us or on our behalf to analysts, investors, the media and others, may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The terms “Regions,” the “Company,” “we,” “us” and “our” mean Regions Financial Corporation, a Delaware corporation, and its subsidiaries when or where appropriate. The words “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “targets,” “projects,” “outlook,” “forecast,” “will,” “may,” “could,” “should,” “can,” and similar expressions often signify forward-looking statements . Forward-looking statements are not based on historical information, but rather are related to future operations, strategies, financial results or other developments. Forward-looking statements are based on management’s current expectations as well as certain assumptions and estimates made by, and information available to, management at the time the statements are made. Those statements are based on general assumptions and are subject to various risks, and because they also relate to the future they are likewise subject to inherent uncertainties and other factors that may cause actual results to differ materially from the views, beliefs and projections expressed in such statements. Therefore, we caution you against relying on any of these forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, those described below:


•	Current and future economic and market conditions in the United States generally or in the communities we serve, including the effects of declines in property values, unemployment rates and potential reduction of economic growth.


•	Possible changes in trade, monetary and fiscal policies of, and other activities undertaken by, governments, agencies, central banks and similar organizations.


•	The effects of a possible downgrade in the U.S. government’s sovereign credit rating or outlook.


•	Possible changes in market interest rates.


•	Any impairment of our goodwill or other intangibles, or any adjustment of valuation allowances on our deferred tax assets due to adverse changes in the economic environment, declining operations of the reporting unit, or other factors.


•	Possible changes in the creditworthiness of customers and the possible impairment of the collectability of loans.


•	Changes in the speed of loan prepayments, loan origination and sale volumes, charge-offs, loan loss provisions or actual loan losses.


•	Possible acceleration of prepayments on mortgage-backed securities due to low interest rates, and the related acceleration of premium amortization on those securities.


•	Our ability to effectively compete with other financial services companies, some of whom possess greater financial resources than we do and are subject to different regulatory standards than we are.


•	Loss of customer checking and savings account deposits as customers pursue other, higher-yield investments.


•	Our ability to develop and gain acceptance from current and prospective customers for new products and services in a timely manner.


•	Changes in laws and regulations affecting our businesses, including changes in the enforcement and interpretation of such laws and regulations by applicable governmental and self-regulatory agencies.


•	Our ability to obtain regulatory approval (as part of the CCAR process or otherwise) to take certain capital actions, including paying dividends and any plans to increase common stock dividends, repurchase common stock under current or future programs, or redeem preferred stock or other regulatory capital instruments.


•	Our ability to comply with applicable capital and liquidity requirements (including finalized Basel III capital standards), including our ability to generate capital internally or raise capital on favorable terms.


•	The costs and other effects (including reputational harm) of any adverse judicial, administrative, or arbitral rulings or proceedings, regulatory enforcement actions, or other legal actions to which we or any of our subsidiaries are a party.


•	Any adverse change to our ability to collect interchange fees in a profitable manner, whether such change is the result of regulation, litigation, legislation, or other governmental action.


•	Our ability to manage fluctuations in the value of assets and liabilities and off-balance sheet exposure so as to maintain sufficient capital and liquidity to support our business.


•	Possible changes in consumer and business spending and saving habits and the related effect on our ability to increase assets and to attract deposits.


•	Any inaccurate or incomplete information provided to us by our customers or counterparties.


•	Inability of our framework to manage risks associated with our business such as credit risk and operational risk, including third-party vendors and other service providers.


•	The inability of our internal disclosure controls and procedures to prevent, detect or mitigate any material errors or fraudulent acts.


•	The effects of geopolitical instability, including wars, conflicts and terrorist attacks.


•	The effects of man-made and natural disasters, including fires, floods, droughts, tornadoes, hurricanes and environmental damage.


•	Our ability to keep pace with technological changes.

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•	Our ability to identify and address cyber-security risks such as data security breaches, “denial of service” attacks, “hacking” and identity theft.


•	Possible downgrades in our credit ratings or outlook.


•	The effects of problems encountered by other financial institutions that adversely affect us or the banking industry generally.


•	The effects of the failure of any component of our business infrastructure which is provided by a third party.


•	Our ability to receive dividends from our subsidiaries.


•	Changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies.


•	The effects of any damage to our reputation resulting from developments related to any of the items identified above.

You should not place undue reliance on any forward-looking statements, which speak only as of the date made. We assume no obligation to update or revise any forward-looking statements that are made from time to time, either as a result of future developments, new information or otherwise, except as may be required by law.

See also the reports filed with the Securities and Exchange Commission, including the discussion under the “Risk Factors” section of Regions’ Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission and available on its website at www.sec.gov.

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PART I

FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



	September 30, 2014			December 31, 2013
	(In millions, except share data)
Assets
Cash and due from banks	$	1,770		$	1,661
Interest-bearing deposits in other banks	2,993			3,612
Federal funds sold and securities purchased under agreements to resell	20			—
Trading account securities	103			111
Securities held to maturity (estimated fair value of $2,224 and $2,307, respectively)	2,222			2,353
Securities available for sale	22,379			21,485
Loans held for sale (includes $456 and $429 measured at fair value, respectively)	504			1,055
Loans, net of unearned income	76,607			74,609
Allowance for loan losses	(1,178		)	(1,341		)
Net loans	75,429			73,268
Other interest-earning assets	91			86
Premises and equipment, net	2,192			2,216
Interest receivable	310			313
Goodwill	4,816			4,816
Residential mortgage servicing rights at fair value	277			297
Other identifiable intangible assets	287			295
Other assets	5,833			5,828
Total assets	$	119,226		$	117,396
Liabilities and Stockholders’ Equity
Deposits:
Non-interest-bearing	$	31,388		$	30,083
Interest-bearing	62,742			62,370
Total deposits	94,130			92,453
Borrowed funds:
Short-term borrowings:
Federal funds purchased and securities sold under agreements to repurchase	1,893			2,182
Long-term borrowings	3,813			4,830
Total borrowed funds	5,706			7,012
Other liabilities	2,230			2,163
Total liabilities	102,066			101,628
Stockholders’ equity:
Preferred stock, authorized 10 million shares, par value $1.00 per share
Non-cumulative perpetual, liquidation preference $1,000.00 per share, including related surplus, net of issuance costs; issued—1,000,000 and 500,000 shares, respectively	900			450
Common stock, authorized 3 billion shares, par value $.01 per share:
Issued including treasury stock—1,419,889,980 and 1,419,006,360 shares, respectively	14			14
Additional paid-in capital	19,069			19,216
Retained earnings (deficit)	(1,272		)	(2,216		)
Treasury stock, at cost—41,262,629 and 41,285,676 shares, respectively	(1,377		)	(1,377		)
Accumulated other comprehensive income (loss), net	(174		)	(319		)
Total stockholders’ equity	17,160			15,768
Total liabilities and stockholders’ equity	$	119,226		$	117,396

See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME



	Three Months Ended September 30					Nine Months Ended September 30
	2014		2013			2014		2013
	(In millions, except per share data)
Interest income on:
Loans, including fees	$	736	$	758		$	2,205	$	2,247
Securities - taxable	154		144			464		452
Loans held for sale	5		6			17		23
Trading account securities	—		1			2		2
Other interest-earning assets	2		2			6		5
Total interest income	897		911			2,694		2,729
Interest expense on:
Deposits	26		31			78		106
Short-term borrowings	—		1			1		2
Long-term borrowings	50		55			156		191
Total interest expense	76		87			235		299
Net interest income	821		824			2,459		2,430
Provision for loan losses	24		18			61		59
Net interest income after provision for loan losses	797		806			2,398		2,371
Non-interest income:
Service charges on deposit accounts	181		190			528		549
Card and ATM fees	85		82			248		239
Mortgage income	39		52			122		193
Securities gains (losses), net	7		3			15		26
Other	166		168			460		486
Total non-interest income	478		495			1,373		1,493
Non-interest expense:
Salaries and employee benefits	456		455			1,354		1,354
Net occupancy expense	92		92			275		274
Furniture and equipment expense	73		71			213		209
Other	205		266			621		773
Total non-interest expense	826		884			2,463		2,610
Income from continuing operations before income taxes	449		417			1,308		1,254
Income tax expense	127		124			380		360
Income from continuing operations	322		293			928		894
Discontinued operations:
Income (loss) from discontinued operations before income taxes	5		(1		)	26		1
Income tax expense (benefit)	2		(1		)	10		—
Income (loss) from discontinued operations, net of tax	3		—			16		1
Net income	$	325	$	293		$	944	$	895
Net income from continuing operations available to common shareholders	$	302	$	285		$	892	$	870
Net income available to common shareholders	$	305	$	285		$	908	$	871
Weighted-average number of shares outstanding:
Basic	1,378		1,388			1,378		1,401
Diluted	1,389		1,405			1,390		1,415
Earnings per common share from continuing operations:
Basic	$	0.22	$	0.21		$	0.65	$	0.62
Diluted	0.22		0.20			0.64		0.61
Earnings per common share:
Basic	$	0.22	$	0.21		$	0.66	$	0.62
Diluted	0.22		0.20			0.65		0.62
Cash dividends declared per common share	0.05		0.03			0.13		0.07

See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)



	Three Months Ended September 30
	2014			2013
	(In millions)
Net income	$	325		$	293
Other comprehensive income (loss), net of tax:
Unrealized losses on securities transferred to held to maturity:
Unrealized losses on securities transferred to held to maturity during the period (net of zero and zero tax effect, respectively)	—			—
Less: reclassification adjustments for amortization of unrealized losses on securities transferred to held to maturity (net of ($1) and ($2) tax effect, respectively)	(2		)	(2		)
Net change in unrealized losses on securities transferred to held to maturity, net of tax	2			2
Unrealized gains (losses) on securities available for sale:
Unrealized holding gains (losses) arising during the period (net of ($53) and $26 tax effect, respectively)	(87		)	43
Less: reclassification adjustments for securities gains (losses) realized in net income (net of $2 and $1 tax effect, respectively)	5			2
Net change in unrealized gains (losses) on securities available for sale, net of tax	(92		)	41
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Unrealized holding gains (losses) on derivatives arising during the period (net of ($10) and $18 tax effect, respectively)	(16		)	28
Less: reclassification adjustments for gains (losses) realized in net income (net of $13 and $10 tax effect, respectively)	21			16
Net change in unrealized gains (losses) on derivative instruments, net of tax	(37		)	12
Defined benefit pension plans and other post employment benefits:
Net actuarial gains (losses) arising during the period (net of zero and zero tax effect, respectively)	—			—
Less: reclassification adjustments for amortization of actuarial loss and prior service cost realized in net income, and other (net of ($2) and ($7) tax effect, respectively)	(5		)	(12		)
Net change from defined benefit pension plans, net of tax	5			12
Other comprehensive income (loss), net of tax	(122		)	67
Comprehensive income (loss)	$	203		$	360

	Nine Months Ended September 30
	2014			2013
	(In millions)
Net income	$	944		$	895
Other comprehensive income (loss), net of tax:
Unrealized losses on securities transferred to held to maturity:
Unrealized losses on securities transferred to held to maturity during the period (net of zero and ($43) tax effect, respectively)	—			(68		)
Less: reclassification adjustments for amortization of unrealized losses on securities transferred to held to maturity (net of ($4) and ($2) tax effect, respectively)	(6		)	(2		)
Net change in unrealized losses on securities transferred to held to maturity, net of tax	6			(66		)
Unrealized gains (losses) on securities available for sale:
Unrealized holding gains (losses) arising during the period (net of $87 and ($232) tax effect, respectively)	143			(378		)
Less: reclassification adjustments for securities gains (losses) realized in net income (net of $5 and $9 tax effect, respectively)	10			17
Net change in unrealized gains (losses) on securities available for sale, net of tax	133			(395		)
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Unrealized holding gains (losses) on derivatives arising during the period (net of $30 and ($6) tax effect, respectively)	48			(10		)
Less: reclassification adjustments for gains (losses) realized in net income (net of $35 and $22 tax effect, respectively)	56			36
Net change in unrealized gains (losses) on derivative instruments, net of tax	(8		)	(46		)
Defined benefit pension plans and other post employment benefits:
Net actuarial gains (losses) arising during the period (net of $2 and zero tax effect, respectively)	1			(2		)
Less: reclassification adjustments for amortization of actuarial loss and prior service cost realized in net income, and other (net of ($6) and $(19) tax effect, respectively)	(13		)	(33		)
Net change from defined benefit pension plans, net of tax	14			31
Other comprehensive income (loss), net of tax	145			(476		)
Comprehensive income (loss)	$	1,089		$	419

See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY



	Preferred Stock				Common Stock					Additional Paid-In Capital			Retained Earnings (Deficit)			Treasury Stock, At Cost			Accumulated Other Comprehensive Income (Loss), Net			Total
	Shares	Amount			Shares		Amount			Additional Paid-In Capital			Retained Earnings (Deficit)			Treasury Stock, At Cost			Accumulated Other Comprehensive Income (Loss), Net			Total
	(In millions, except share and per share data)
BALANCE AT JANUARY 1, 2013	1	$	482		1,413		$	15		$	19,652		$	(3,338	)	$	(1,377	)	$	65		$	15,499
Net income	—	—			—		—			—			895			—			—			895
Unrealized losses on securities transferred to held to maturity, net of tax	—	—			—		—			—			—			—			(68		)	(68		)
Amortization of unrealized losses on securities transferred to held to maturity, net of tax	—	—			—		—			—			—			—			2			2
Net change in unrealized gains and losses on securities available for sale, net of tax and reclassification adjustment	—	—			—		—			—			—			—			(395		)	(395		)
Net change in unrealized gains and losses on derivative instruments, net of tax and reclassification adjustment	—	—			—		—			—			—			—			(46		)	(46		)
Net change from defined benefit pension plans, net of tax	—	—			—		—			—			—			—			31			31
Cash dividends declared—$0.07 per share	—	—			—		—			(97		)	—			—			—			(97		)
Preferred stock dividends	—	(24		)	—		—			—			—			—			—			(24		)
Common stock transactions:
Impact of share repurchase	—	—			(36	)	(1		)	(339		)	—			—			—			(340		)
Impact of stock transactions under compensation plans, net	—	—			1		—			32			—			—			—			32
BALANCE AT SEPTEMBER 30, 2013	1	$	458		1,378		$	14		$	19,248		$	(2,443	)	$	(1,377	)	$	(411	)	$	15,489

BALANCE AT JANUARY 1, 2014	1	$	450		1,378		$	14		$	19,216		$	(2,216	)	$	(1,377	)	$	(319	)	$	15,768
Net income	—	—			—		—			—			944			—			—			944
Amortization of unrealized losses on securities transferred to held to maturity, net of tax	—	—			—		—			—			—			—			6			6
Net change in unrealized gains and losses on securities available for sale, net of tax and reclassification adjustment	—	—			—		—			—			—			—			133			133
Net change in unrealized gains and losses on derivative instruments, net of tax and reclassification adjustment	—	—			—		—			—			—			—			(8		)	(8		)
Net change from defined benefit pension plans, net of tax	—	—			—		—			—			—			—			14			14
Cash dividends declared—$0.13 per share	—	—			—		—			(180		)	—			—			—			(180		)
Preferred stock dividends	—	(36		)	—		—			—			—			—			—			(36		)
Preferred stock transactions:
Net proceeds from issuance of 500 thousand shares of Series B, fixed to floating rate, non-cumulative perpetual preferred stock, including related surplus	—	486			—		—			—			—			—			—			486
Common stock transactions:
Impact of share repurchase	—	—			(1	)	—			(8		)	—			—			—			(8		)
Impact of stock transactions under compensation plans, net	—	—			2		—			41			—			—			—			41
BALANCE AT SEPTEMBER 30, 2014	1	$	900		1,379		$	14		$	19,069		$	(1,272	)	$	(1,377	)	$	(174	)	$	17,160

See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Nine Months Ended September 30
	2014			2013
	(In millions)
Operating activities:
Net income	$	944		$	895
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan losses	61			59
Depreciation, amortization and accretion, net	391			497
Provision for losses on other real estate, net	(13		)	14
Securities (gains) losses, net	(15		)	(26		)
Deferred income tax expense	176			310
Originations and purchases of loans held for sale	(1,848		)	(3,373		)
Proceeds from sales of loans held for sale	1,948			4,156
Gain on TDRs held for sale, net	(35		)	—
(Gain) loss on sale of loans, net	(89		)	(101		)
(Gain) loss on early extinguishment of debt	—			61
(Gain) loss on sale of other assets	—			(24		)
Net change in operating assets and liabilities:
Trading account securities	8			(3		)
Other interest-earning assets	(5		)	795
Interest receivable	3			13
Other assets	(69		)	331
Other liabilities	64			(451		)
Other	(3		)	(7		)
Net cash from operating activities	1,518			3,146
Investing activities:
Proceeds from maturities of securities held to maturity	130			41
Proceeds from sales of securities available for sale	1,384			3,543
Proceeds from maturities of securities available for sale	2,350			4,611
Purchases of securities available for sale	(4,524		)	(5,888		)
Proceeds from sales of loans	649			152
Purchases of loans	(814		)	(733		)
Purchases of mortgage servicing rights	(12		)	(28		)
Net change in loans	(1,662		)	(1,970		)
Net purchases of premises and equipment and other assets	(164		)	(122		)
Net cash from investing activities	(2,663		)	(394		)
Financing activities:
Net change in deposits	1,677			(3,153		)
Net change in short-term borrowings	(289		)	199
Proceeds from long-term borrowings	—			750
Payments on long-term borrowings	(1,001		)	(1,719		)
Cash dividends on common stock	(180		)	(97		)
Cash dividends on preferred stock	(36		)	(24		)
Repurchase of common stock	(8		)	(340		)
Net proceeds from issuance of preferred stock	486			—
Other	6			2
Net cash from financing activities	655			(4,382		)
Net change in cash and cash equivalents	(490		)	(1,630		)
Cash and cash equivalents at beginning of year	5,273			5,489
Cash and cash equivalents at end of period	$	4,783		$	3,859

See notes to consolidated financial statements.

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REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Three and Nine Months Ended September 30, 2014 and 2013

NOTE 1. BASIS OF PRESENTATION

Regions Financial Corporation (“Regions” or "the Company”) provides a full range of banking and bank-related services to individual and corporate customers through its subsidiaries and branch offices located primarily in Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, Texas and Virginia. The Company is subject to competition from other financial institutions, is subject to the regulations of certain government agencies and undergoes periodic examinations by certain of those regulatory authorities.

The accounting and reporting policies of Regions and the methods of applying those policies that materially affect the consolidated financial statements conform with accounting principles generally accepted in the United States (“GAAP”) and with general financial services industry practices. The accompanying interim financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and notes to the consolidated financial statements necessary for a complete presentation of financial position, results of operations, comprehensive income and cash flows in conformity with GAAP. In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the consolidated financial statements have been included. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto in Regions’ Form 10-K for the year ended December 31, 2013 . Regions has evaluated all subsequent events for potential recognition and disclosure through the filing date of this Form 10-Q.

On January 11, 2012, Regions entered into an agreement to sell Morgan Keegan & Company, Inc. (“Morgan Keegan”) and related affiliates. The transaction closed on April 2, 2012. See Note 2 and Note 14 for further details. Results of operations for the entities sold are presented separately as discontinued operations for all periods presented on the consolidated statements of income. This presentation is consistent with the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2013 .

Certain amounts in prior period financial statements have been reclassified to conform to the current period presentation. For example, the "card and ATM fees" line item on the consolidated statements of income represents the combined amounts of credit card/bank card income and debit card and ATM related revenue. Debit card and ATM related revenue was previously included in the "service charges on deposit accounts" line item. Credit card/bank card income was previously included in the "other" non-interest income line item. These reclassifications are immaterial and have no effect on net income, comprehensive income, total assets or total stockholders’ equity as previously reported.

NOTE 2. DISCONTINUED OPERATIONS

On January 11, 2012, Regions entered into a stock purchase agreement to sell Morgan Keegan and related affiliates to Raymond James Financial, Inc. (“Raymond James”). The transaction closed on April 2, 2012. Regions Investment Management, Inc. (formerly known as Morgan Asset Management, Inc.) and Regions Trust were not included in the sale. In connection with the closing of the sale, Regions agreed to indemnify Raymond James for all litigation matters related to pre-closing activities. See Note 14 for related disclosure.

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The following table represents the condensed results of operations for discontinued operations:



	Three Months Ended September 30					Nine Months Ended September 30
	2014		2013			2014			2013
	(In millions, except per share data)
Non-interest income:
Insurance proceeds	$	19	$	—		$	19		$	—
Total non-interest income	19		—			19			—
Non-interest expense:
Professional and legal expenses	14		3			(8		)	(1		)
Other	—		(2		)	1			—
Total non-interest expense	14		1			(7		)	(1		)
Income (loss) from discontinued operations before income taxes	5		(1		)	26			1
Income tax expense (benefit)	2		(1		)	10			—
Income (loss) from discontinued operations, net of tax	$	3	$	—		$	16		$	1
Earnings (loss) per common share from discontinued operations:
Basic	$	0.00	$	(0.00	)	$	0.01		$	0.00
Diluted	$	0.00	$	(0.00	)	$	0.01		$	0.00

NOTE 3. SECURITIES

The amortized cost, gross unrealized gains and losses, and estimated fair value of securities held to maturity and securities available for sale are as follows:



	September 30, 2014
			Recognized in OCI ⁽¹⁾							Not recognized in OCI
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(In millions)
Securities held to maturity:
U.S. Treasury securities	$	1	$	—	$	—		$	1	$	—	$	—		$	1
Federal agency securities	351		—		(13		)	338		4		—			342
Mortgage-backed securities:
Residential agency	1,745		—		(74		)	1,671		10		(5		)	1,676
Commercial agency	219		—		(7		)	212		—		(7		)	205
	$	2,316	$	—	$	(94	)	$	2,222	$	14	$	(12	)	$	2,224

Securities available for sale:
U.S. Treasury securities	$	61	$	—	$	—		$	61						$	61
Federal agency securities	68		1		—			69							69
Obligations of states and political subdivisions	3		—		—			3							3
Mortgage-backed securities:
Residential agency	16,362		236		(78		)	16,520							16,520
Residential non-agency	8		1		—			9							9
Commercial agency	1,608		7		(12		)	1,603							1,603
Commercial non-agency	1,493		11		(16		)	1,488							1,488
Corporate and other debt securities	1,973		43		(22		)	1,994							1,994
Equity securities	622		10		—			632							632
	$	22,198	$	309	$	(128	)	$	22,379						$	22,379

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________

(1) The gross unrealized losses recognized in other comprehensive income (OCI) on held to maturity securities resulted from a transfer of available for sale securities to held to maturity in the second quarter of 2013.



	December 31, 2013
			Recognized in OCI ⁽¹⁾							Not recognized in OCI
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(In millions)
Securities held to maturity:
U.S. Treasury securities	$	1	$	—	$	—		$	1	$	—	$	—		$	1
Federal agency securities	351		—		(15		)	336		—		(3		)	333
Mortgage-backed securities:
Residential agency	1,878		—		(81		)	1,797		—		(37		)	1,760
Commercial agency	227		—		(8		)	219		—		(6		)	213
	$	2,457	$	—	$	(104	)	$	2,353	$	—	$	(46	)	$	2,307

Securities available for sale:
U.S. Treasury securities	$	56	$	—	$	—		$	56						$	56
Federal agency securities	88		1		—			89							89
Obligations of states and political subdivisions	5		—		—			5							5
Mortgage-backed securities:
Residential agency	15,664		183		(170		)	15,677							15,677
Residential non-agency	8		1		—			9							9
Commercial agency	947		4		(16		)	935							935
Commercial non-agency	1,232		12		(33		)	1,211							1,211
Corporate and other debt securities	2,855		44		(72		)	2,827							2,827
Equity securities	664		12		—			676							676
	$	21,519	$	257	$	(291	)	$	21,485						$	21,485

_________

During the second quarter of 2013, Regions transferred securities with a fair value of $2.4 billion from available for sale to held to maturity. Management determined it has both the positive intent and ability to hold these securities to maturity. The securities were reclassified at fair value at the time of transfer and represented a non-cash transaction. Accumulated other comprehensive income included net pre-tax unrealized losses of $111 million on the securities at the date of transfer. These unrealized losses and the offsetting OCI components are being amortized into net interest income over the remaining life of the related securities as a yield adjustment, resulting in no impact on future net income.

Equity securities in the tables above included the following amortized cost related to Federal Reserve Bank stock and Federal Home Loan Bank (“FHLB”) stock. Shares in the Federal Reserve Bank and FHLB are accounted for at amortized cost, which approximates fair value.



	September 30, 2014		December 31, 2013
	(In millions)
Federal Reserve Bank	$	477	$	472
Federal Home Loan Bank	16		67

Securities with carrying values of $12.5 billion at both September 30, 2014 and December 31, 2013 were pledged to secure public funds, trust deposits and certain borrowing arrangements.

The amortized cost and estimated fair value of securities available for sale and securities held to maturity at September 30, 2014 , by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

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	Amortized Cost		Estimated Fair Value
	(In millions)
Securities held to maturity:
Due in one year or less	$	1	$	1
Due after one year through five years	1		1
Due after five years through ten years	350		341
Mortgage-backed securities:
Residential agency	1,745		1,676
Commercial agency	219		205
	$	2,316	$	2,224
Securities available for sale:
Due in one year or less	$	69	$	69
Due after one year through five years	749		764
Due after five years through ten years	968		968
Due after ten years	319		326
Mortgage-backed securities:
Residential agency	16,362		16,520
Residential non-agency	8		9
Commercial agency	1,608		1,603
Commercial non-agency	1,493		1,488
Equity securities	622		632
	$	22,198	$	22,379

The following tables present gross unrealized losses and the related estimated fair value of securities available for sale and held to maturity at September 30, 2014 and December 31, 2013 . For securities transferred to held to maturity from available for sale, the analysis in the tables below is comparing the securities' original amortized cost to its current estimated fair value. These securities are segregated between investments that have been in a continuous unrealized loss position for less than twelve months and for twelve months or more.



	September 30, 2014
	Less Than Twelve Months					Twelve Months or More					Total
	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
	(In millions)
Securities held to maturity:
Federal agency securities	$	—	$	—		$	341	$	(9	)	$	341	$	(9	)
Mortgage-backed securities:
Residential agency	—		—			1,674		(69		)	1,674		(69		)
Commercial agency	—		—			205		(14		)	205		(14		)
	$	—	$	—		$	2,220	$	(92	)	$	2,220	$	(92	)

Securities available for sale:
U.S. Treasury securities	$	14	$	—		$	5	$	—		$	19	$	—
Federal agency securities	—		—			8		—			8		—
Mortgage-backed securities:
Residential agency	3,288		(14		)	2,944		(64		)	6,232		(78		)
Residential non-agency	1		—			—		—			1		—
Commercial agency	556		(4		)	343		(8		)	899		(12		)
Commercial non-agency	320		(2		)	565		(14		)	885		(16		)
All other securities	275		(2		)	492		(20		)	767		(22		)
	$	4,454	$	(22	)	$	4,357	$	(106	)	$	8,811	$	(128	)

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	December 31, 2013
	Less Than Twelve Months					Twelve Months or More					Total
	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
	(In millions)
Securities held to maturity:
Federal agency securities	$	190	$	(9	)	$	142	$	(8	)	$	332	$	(17	)
Mortgage-backed securities:
Residential agency	1,236		(77		)	521		(41		)	1,757		(118		)
Commercial agency	212		(15		)	—		—			212		(15		)
	$	1,638	$	(101	)	$	663	$	(49	)	$	2,301	$	(150	)

Securities available for sale:
U.S. Treasury securities	$	15	$	—		$	1	$	—		$	16	$	—
Federal agency securities	3		—			9		—			12		—
Mortgage-backed securities:
Residential agency	6,153		(161		)	270		(9		)	6,423		(170		)
Commercial agency	610		(17		)	—		—			610		(17		)
Commercial non-agency	711		(30		)	62		(3		)	773		(33		)
All other securities	1,422		(58		)	209		(13		)	1,631		(71		)
	$	8,914	$	(266	)	$	551	$	(25	)	$	9,465	$	(291	)

The number of individual securities in an unrealized loss position in the tables above decrease d from 1,052 at December 31, 2013 to 834 at September 30, 2014 . The decrease in the number of securities and the total amount of unrealized losses from year-end 2013 was primarily due to changes in interest rates. In instances where an unrealized loss did occur, there was no indication of an adverse change in credit on any of the underlying securities in the tables above. Management believes no individual unrealized loss represented an other-than-temporary impairment as of those dates. The Company does not intend to sell, and it is not more likely than not that the Company will be required to sell, the securities before the recovery of their amortized cost basis, which may be at maturity.

At June 30, 2014, the Company made the decision to sell approximately $328 million of certain other securities available for sale that remained on the Company's balance sheet. As the Company intended to sell these securities, each security reflecting an unrealized loss was considered to have an other-than-temporary impairment. The table below reflects total other-than-temporary impairment losses recorded during the second quarter of 2014. All of these securities were subsequently sold during the third quarter of 2014.

Gross realized gains and gross realized losses on sales of securities available for sale, as well as other-than-temporary impairment losses are shown in the table below. The cost of securities sold is based on the specific identification method.



	Three Months Ended September 30						Nine Months Ended September 30
	2014			2013			2014			2013
	(In millions)
Gross realized gains	$	9		$	7		$	25		$	52
Gross realized losses	(2		)	(4		)	(8		)	(26		)
Other-than-temporary-impairment ("OTTI")	—			—			(2		)	—
Securities gains, net	$	7		$	3		$	15		$	26

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NOTE 4. LOANS AND THE ALLOWANCE FOR CREDIT LOSSES

LOANS

The following table presents the distribution of Regions' loan portfolio by segment and class, net of unearned income:



	September 30, 2014		December 31, 2013
	(In millions, net of unearned income)
Commercial and industrial	$	31,857	$	29,413
Commercial real estate mortgage—owner-occupied	8,666		9,495
Commercial real estate construction—owner-occupied	350		310
Total commercial	40,873		39,218
Commercial investor real estate mortgage	4,940		5,318
Commercial investor real estate construction	1,878		1,432
Total investor real estate	6,818		6,750
Residential first mortgage	12,264		12,163
Home equity	10,968		11,294
Indirect	3,543		3,075
Consumer credit card	964		948
Other consumer	1,177		1,161
Total consumer	28,916		28,641
	$	76,607	$	74,609

During the three months ended September 30, 2014 and 2013 , Regions purchased approximately $296 million and $277 million , respectively, in indirect loans from a third party. During the nine months ended September 30, 2014 and 2013 , the comparable loan purchase amounts were approximately $814 million and $733 million , respectively.

At September 30, 2014 , $13.2 billion in loans held by Regions were pledged to secure borrowings from the FHLB. At September 30, 2014 , an additional $29.4 billion of loans held by Regions were pledged to the Federal Reserve Bank.

ALLOWANCE FOR CREDIT LOSSES

Regions determines the appropriate level of the allowance on at least a quarterly basis. Refer to Note 1 “Summary of Significant Accounting Policies” to the consolidated financial statements to the Annual Report on Form 10-K for the year ended December 31, 2013, for a description of the methodology.

ROLLFORWARD OF ALLOWANCE FOR CREDIT LOSSES

The following tables present analyses of the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 2014 and 2013 . The total allowance for loan losses and the related loan portfolio ending balances as of September 30, 2014 and 2013 are disaggregated to detail the amounts derived through individual evaluation and collective evaluation for impairment. The allowance for loan losses related to individually evaluated loans is attributable to reserves for non-accrual loans and leases greater than or equal to $2.5 million and all troubled debt restructurings ("TDRs"). The allowance for loan losses and the loan portfolio ending balances related to collectively evaluated loans is attributable to the remainder of the portfolio.

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	Three Months Ended September 30, 2014
	Commercial			Investor Real Estate			Consumer			Total
	(In millions)
Allowance for loan losses, July 1, 2014	$	705		$	190		$	334		$	1,229
Provision (credit) for loan losses	18			(23		)	29			24
Loan losses:
Charge-offs	(49		)	(5		)	(66		)	(120		)
Recoveries	21			6			18			45
Net loan losses	(28		)	1			(48		)	(75		)
Allowance for loan losses, September 30, 2014	695			168			315			1,178
Reserve for unfunded credit commitments, July 1, 2014	$	74		$	12		$	3		$	89
Provision (credit) for unfunded credit losses	(21		)	(3		)	—			(24		)
Reserve for unfunded credit commitments, September 30, 2014	53			9			3			65
Allowance for credit losses, September 30, 2014	$	748		$	177		$	318		$	1,243



	Three Months Ended September 30, 2013
	Commercial			Investor Real Estate			Consumer			Total
	(In millions)
Allowance for loan losses, July 1, 2013	$	764		$	342		$	530		$	1,636
Provision (credit) for loan losses	29			(37		)	26			18
Loan losses:
Charge-offs	(54		)	(13		)	(89		)	(156		)
Recoveries	17			8			17			42
Net loan losses	(37		)	(5		)	(72		)	(114		)
Allowance for loan losses, September 30, 2013	756			300			484			1,540
Reserve for unfunded credit commitments, July 1, 2013	$	60		$	9		$	4		$	73
Provision (credit) for unfunded credit losses	3			(1		)	(1		)	1
Reserve for unfunded credit commitments, September 30, 2013	63			8			3			74
Allowance for credit losses, September 30, 2013	$	819		$	308		$	487		$	1,614



	Nine Months Ended September 30, 2014
	Commercial			Investor Real Estate			Consumer			Total
	(In millions)
Allowance for loan losses, January 1, 2014	$	711		$	236		$	394		$	1,341
Provision (credit) for loan losses	62			(68		)	67			61
Loan losses:
Charge-offs	(130		)	(21		)	(203		)	(354		)
Recoveries	52			21			57			130
Net loan losses	(78		)	—			(146		)	(224		)
Allowance for loan losses, September 30, 2014	695			168			315			1,178
Reserve for unfunded credit commitments, January 1, 2014	63			12			3			78
Provision (credit) for unfunded credit losses	(10		)	(3		)	—			(13		)
Reserve for unfunded credit commitments, September 30, 2014	53			9			3			65
Allowance for credit losses, September 30, 2014	$	748		$	177		$	318		$	1,243
Portion of ending allowance for loan losses:
Individually evaluated for impairment	$	204		$	80		$	79		$	363
Collectively evaluated for impairment	491			88			236			815
Total allowance for loan losses	$	695		$	168		$	315		$	1,178
Portion of loan portfolio ending balance:
Individually evaluated for impairment	$	758		$	466		$	849		$	2,073
Collectively evaluated for impairment	40,115			6,352			28,067			74,534
Total loans evaluated for impairment	$	40,873		$	6,818		$	28,916		$	76,607

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	Nine Months Ended September 30, 2013
	Commercial			Investor Real Estate			Consumer			Total
	(In millions)
Allowance for loan losses, January 1, 2013	$	847		$	469		$	603		$	1,919
Provision (credit) for loan losses	86			(136		)	109			59
Loan losses:
Charge-offs	(230		)	(59		)	(281		)	(570		)
Recoveries	53			26			53			132
Net loan losses	(177		)	(33		)	(228		)	(438		)
Allowance for loan losses, September 30, 2013	756			300			484			1,540
Reserve for unfunded credit commitments, January 1, 2013	69			10			4			83
Provision (credit) for unfunded credit losses	(6		)	(2		)	(1		)	(9		)
Reserve for unfunded credit commitments, September 30, 2013	63			8			3			74
Allowance for credit losses, September 30, 2013	$	819		$	308		$	487		$	1,614
Portion of ending allowance for loan losses:
Individually evaluated for impairment	$	261		$	159		$	162		$	582
Collectively evaluated for impairment	495			141			322			958
Total allowance for loan losses	$	756		$	300		$	484		$	1,540
Portion of loan portfolio ending balance:
Individually evaluated for impairment	$	1,184		$	1,006		$	1,589		$	3,779
Collectively evaluated for impairment	38,622			5,924			27,567			72,113
Total loans evaluated for impairment	$	39,806		$	6,930		$	29,156		$	75,892

PORTFOLIO SEGMENT RISK FACTORS

The following describe the risk characteristics relevant to each of the portfolio segments.

Commercial —The commercial loan portfolio segment includes commercial and industrial loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases or other expansion projects. Commercial also includes owner-occupied commercial real estate loans to operating businesses, which are loans for long-term financing of land and buildings, and are repaid by cash flow generated by business operations. Owner-occupied 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. Collection risk in this portfolio is driven by the creditworthiness of underlying borrowers, particularly cash flow from customers’ business operations.

Investor Real Estate —Loans for real estate development are repaid through cash flow 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 sale of real estate or income generated from the real estate collateral. A portion of Regions’ investor real estate portfolio segment consists of loans secured by residential product types (land, single-family and condominium loans) within Regions’ markets. Additionally, these loans are made to finance income-producing properties such as apartment buildings, office and industrial buildings, and retail shopping centers. Loans in this portfolio segment are particularly sensitive to valuation of real estate.

Consumer —The consumer loan portfolio segment includes residential first mortgage, home equity, indirect, consumer credit card, and other consumer loans. 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. Home equity lending includes both home equity loans and lines of credit. This type of lending, which is secured by a first or second mortgage on the borrower’s residence, allows customers to borrow against the equity in their home. Real estate market values as of the time the loan or line is secured directly affect the amount of credit extended and, in addition, changes in these values impact the depth of potential losses. Indirect lending, which is lending initiated through third-party business partners, largely consists of loans made through automotive dealerships. Consumer credit card includes Regions branded consumer credit card accounts. Other consumer loans include direct consumer installment loans and overdrafts. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.

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CREDIT QUALITY INDICATORS

The following tables present credit quality indicators for the loan portfolio segments and classes, excluding loans held for sale, as of September 30, 2014 and December 31, 2013 . Commercial and investor real estate loan portfolio segments are detailed by categories related to underlying credit quality and probability of default. Regions assigns these categories at loan origination and reviews the relationship utilizing a risk-based approach on, at minimum, an annual basis or at any time management becomes aware of information affecting the borrowers' ability to fulfill their obligations. Both quantitative and qualitative factors are considered in this review process. These categories are utilized to develop the associated allowance for credit losses.


•	Pass—includes obligations where the probability of default is considered low;


•	Special Mention—includes obligations that have potential weakness which may, if not reversed or corrected, weaken the credit or inadequately protect the Company’s position at some future date. Obligations in this category may also be subject to economic or market conditions which may, in the future, have an adverse effect on debt service ability;


•	Substandard Accrual—includes obligations that exhibit a well-defined weakness which presently jeopardizes debt repayment, even though they are currently performing. These obligations are characterized by the distinct possibility that the Company may incur a loss in the future if these weaknesses are not corrected;


•	Non-accrual—includes obligations where management has determined that full payment of principal and interest is in doubt.

Substandard accrual and non-accrual loans are often collectively referred to as “classified.” Special mention, substandard accrual, and non-accrual loans are often collectively referred to as “criticized and classified.” Classes in the consumer portfolio segment are disaggregated by accrual status.



	September 30, 2014
	Pass		Special Mention		Substandard Accrual		Non-accrual		Total
	(In millions)
Commercial and industrial	$	30,449	$	742	$	467	$	199	$	31,857
Commercial real estate mortgage—owner-occupied	7,750		292		346		278		8,666
Commercial real estate construction—owner-occupied	339		6		3		2		350
Total commercial	$	38,538	$	1,040	$	816	$	479	$	40,873
Commercial investor real estate mortgage	$	4,369	$	229	$	209	$	133	$	4,940
Commercial investor real estate construction	1,799		28		49		2		1,878
Total investor real estate	$	6,168	$	257	$	258	$	135	$	6,818

					Accrual		Non-accrual		Total
					(In millions)
Residential first mortgage					$	12,147	$	117	$	12,264
Home equity					10,862		106		10,968
Indirect					3,543		—		3,543
Consumer credit card					964		—		964
Other consumer					1,177		—		1,177
Total consumer					$	28,693	$	223	$	28,916
									$	76,607

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	December 31, 2013
	Pass		Special Mention		Substandard Accrual		Non-accrual		Total
	(In millions)
Commercial and industrial	$	28,282	$	395	$	479	$	257	$	29,413
Commercial real estate mortgage—owner-occupied	8,593		191		408		303		9,495
Commercial real estate construction—owner-occupied	264		25		4		17		310
Total commercial	$	37,139	$	611	$	891	$	577	$	39,218
Commercial investor real estate mortgage	$	4,479	$	269	$	332	$	238	$	5,318
Commercial investor real estate construction	1,335		47		40		10		1,432
Total investor real estate	$	5,814	$	316	$	372	$	248	$	6,750

					Accrual		Non-accrual		Total
					(In millions)
Residential first mortgage					$	12,017	$	146	$	12,163
Home equity					11,183		111		11,294
Indirect					3,075		—		3,075
Consumer credit card					948		—		948
Other consumer					1,161		—		1,161
Total consumer					$	28,384	$	257	$	28,641
									$	74,609

AGING ANALYSIS

The following tables include an aging analysis of days past due (DPD) for each portfolio segment and class as of September 30, 2014 and December 31, 2013 :



	September 30, 2014
	Accrual Loans
	30-59 DPD		60-89 DPD		90+ DPD		Total 30+ DPD		Total Accrual		Non-accrual		Total
	(In millions)
Commercial and industrial	$	16	$	41	$	5	$	62	$	31,658	$	199	$	31,857
Commercial real estate mortgage—owner-occupied	26		12		6		44		8,388		278		8,666
Commercial real estate construction—owner-occupied	2		—		—		2		348		2		350
Total commercial	44		53		11		108		40,394		479		40,873
Commercial investor real estate mortgage	16		22		5		43		4,807		133		4,940
Commercial investor real estate construction	10		2		—		12		1,876		2		1,878
Total investor real estate	26		24		5		55		6,683		135		6,818
Residential first mortgage	101		62		252		415		12,147		117		12,264
Home equity	73		42		66		181		10,862		106		10,968
Indirect	38		9		6		53		3,543		—		3,543
Consumer credit card	8		5		11		24		964		—		964
Other consumer	15		3		3		21		1,177		—		1,177
Total consumer	235		121		338		694		28,693		223		28,916
	$	305	$	198	$	354	$	857	$	75,770	$	837	$	76,607

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	December 31, 2013
	Accrual Loans
	30-59 DPD		60-89 DPD		90+ DPD		Total 30+ DPD		Total Accrual		Non-accrual		Total
	(In millions)
Commercial and industrial	$	29	$	14	$	6	$	49	$	29,156	$	257	$	29,413
Commercial real estate mortgage—owner-occupied	30		26		6		62		9,192		303		9,495
Commercial real estate construction—owner-occupied	—		—		—		—		293		17		310
Total commercial	59		40		12		111		38,641		577		39,218
Commercial investor real estate mortgage	29		6		6		41		5,080		238		5,318
Commercial investor real estate construction	4		1		—		5		1,422		10		1,432
Total investor real estate	33		7		6		46		6,502		248		6,750
Residential first mortgage	130		74		248		452		12,017		146		12,163
Home equity	95		51		75		221		11,183		111		11,294
Indirect	39		11		5		55		3,075		—		3,075
Consumer credit card	8		5		12		25		948		—		948
Other consumer	14		5		4		23		1,161		—		1,161
Total consumer	286		146		344		776		28,384		257		28,641
	$	378	$	193	$	362	$	933	$	73,527	$	1,082	$	74,609

IMPAIRED LOANS

The following tables present details related to the Company’s impaired loans as of September 30, 2014 and December 31, 2013 . Loans deemed to be impaired include all TDRs and all non-accrual commercial and investor real estate loans (including those less than $2.5 million ), excluding leases. Loans which have been fully charged-off do not appear in the tables below.



	Non-accrual Impaired Loans As of September 30, 2014
					Book Value ⁽³⁾
	Unpaid Principal Balance ⁽¹⁾		Charge-offs and Payments Applied ⁽²⁾		Total Impaired Loans on Non-accrual Status		Impaired Loans on Non-accrual Status with No Related Allowance		Impaired Loans on Non-accrual Status with Related Allowance		Related Allowance for Loan Losses		Coverage % ⁽⁴⁾
	(Dollars in millions)
Commercial and industrial	$	238	$	51	$	187	$	18	$	169	$	72	51.7	%
Commercial real estate mortgage—owner-occupied	310		32		278		42		236		87		38.4
Commercial real estate construction—owner-occupied	2		—		2		—		2		1		50.0
Total commercial	550		83		467		60		407		160		44.2
Commercial investor real estate mortgage	177		44		133		13		120		36		45.2
Commercial investor real estate construction	10		8		2		—		2		1		90.0
Total investor real estate	187		52		135		13		122		37		47.6
Residential first mortgage	88		27		61		—		61		8		39.8
Home equity	24		7		17		—		17		1		33.3
Total consumer	112		34		78		—		78		9		38.4
	$	849	$	169	$	680	$	73	$	607	$	206	44.2	%

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	Accruing Impaired Loans As of September 30, 2014
	Unpaid Principal Balance ⁽¹⁾		Charge-offs and Payments Applied ⁽²⁾		Book Value ⁽³⁾		Related Allowance for Loan Losses		Coverage % ⁽⁴⁾
	(Dollars in millions)
Commercial and industrial	$	102	$	3	$	99	$	21	23.5	%
Commercial real estate mortgage—owner-occupied	177		8		169		22		16.9
Commercial real estate construction—owner-occupied	23		—		23		1		4.3
Total commercial	302		11		291		44		18.2
Commercial investor real estate mortgage	298		10		288		35		15.1
Commercial investor real estate construction	43		—		43		8		18.6
Total investor real estate	341		10		331		43		15.5
Residential first mortgage	399		8		391		55		15.8
Home equity	365		6		359		15		5.8
Indirect	1		—		1		—		—
Consumer credit card	2		—		2		—		—
Other consumer	18		—		18		—		—
Total consumer	785		14		771		70		10.7
	$	1,428	$	35	$	1,393	$	157	13.4	%



	Total Impaired Loans As of September 30, 2014
					Book Value ⁽³⁾
	Unpaid Principal Balance ⁽¹⁾		Charge-offs and Payments Applied ⁽²⁾		Total Impaired Loans		Impaired Loans with No Related Allowance		Impaired Loans with Related Allowance		Related Allowance for Loan Losses		Coverage % ⁽⁴⁾
	(Dollars in millions)
Commercial and industrial	$	340	$	54	$	286	$	18	$	268	$	93	43.2	%
Commercial real estate mortgage—owner-occupied	487		40		447		42		405		109		30.6
Commercial real estate construction—owner-occupied	25		—		25		—		25		2		8.0
Total commercial	852		94		758		60		698		204		35.0
Commercial investor real estate mortgage	475		54		421		13		408		71		26.3
Commercial investor real estate construction	53		8		45		—		45		9		32.1
Total investor real estate	528		62		466		13		453		80		26.9
Residential first mortgage	487		35		452		—		452		63		20.1
Home equity	389		13		376		—		376		16		7.5
Indirect	1		—		1		—		1		—		—
Consumer credit card	2		—		2		—		2		—		—
Other consumer	18		—		18		—		18		—		—
Total consumer	897		48		849		—		849		79		14.2
	$	2,277	$	204	$	2,073	$	73	$	2,000	$	363	24.9	%

_________


(1)	Unpaid principal balance represents the contractual obligation due from the customer and includes the net book value plus charge-offs and payments applied.


(2)	Charge-offs and payments applied represents cumulative partial charge-offs taken, as well as interest payments received that have been applied against the outstanding principal balance.


(3)	Book value represents the unpaid principal balance less charge-offs and payments applied; it is shown before any allowance for loan losses.


(4)	Coverage % represents charge-offs and payments applied plus the related allowance as a percent of the unpaid principal balance.

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	Non-accrual Impaired Loans As of December 31, 2013
					Book Value ⁽³⁾
	Unpaid Principal Balance ⁽¹⁾		Charge-offs and Payments Applied ⁽²⁾		Total Impaired Loans on Non-accrual Status		Impaired Loans on Non-accrual Status with No Related Allowance		Impaired Loans on Non-accrual Status with Related Allowance		Related Allowance for Loan Losses		Coverage % ⁽⁴⁾
	(Dollars in millions)
Commercial and industrial	$	280	$	48	$	232	$	45	$	187	$	72	42.9	%
Commercial real estate mortgage—owner-occupied	343		40		303		54		249		92		38.5
Commercial real estate construction—owner-occupied	17		—		17		—		17		8		47.1
Total commercial	640		88		552		99		453		172		40.6
Commercial investor real estate mortgage	306		68		238		17		221		68		44.4
Commercial investor real estate construction	15		5		10		—		10		3		53.3
Total investor real estate	321		73		248		17		231		71		44.9
Residential first mortgage	112		37		75		—		75		12		43.8
Home equity	17		—		17		—		17		1		5.9
Total consumer	129		37		92		—		92		13		38.8
	$	1,090	$	198	$	892	$	116	$	776	$	256	41.7	%



	Accruing Impaired Loans As of December 31, 2013
	Unpaid Principal Balance ⁽¹⁾		Charge-offs and Payments Applied ⁽²⁾		Book Value ⁽³⁾		Related Allowance for Loan Losses		Coverage % ⁽⁴⁾
	(Dollars in millions)
Commercial and industrial	$	245	$	2	$	243	$	34	14.7	%
Commercial real estate mortgage—owner-occupied	209		7		202		23		14.4
Commercial real estate construction—owner-occupied	25		—		25		1		4.0
Total commercial	479		9		470		58		14.0
Commercial investor real estate mortgage	435		11		424		39		11.5
Commercial investor real estate construction	89		—		89		8		9.0
Total investor real estate	524		11		513		47		11.1
Residential first mortgage	397		8		389		60		17.1
Home equity	373		—		373		24		6.4
Indirect	1		—		1		—		—
Consumer credit card	2		—		2		—		—
Other consumer	26		—		26		1		3.8
Total consumer	799		8		791		85		11.6
	$	1,802	$	28	$	1,774	$	190	12.1	%

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	Total Impaired Loans As of December 31, 2013
					Book Value ⁽³⁾
	Unpaid Principal Balance ⁽¹⁾		Charge-offs and Payments Applied ⁽²⁾		Total Impaired Loans		Impaired Loans with No Related Allowance		Impaired Loans with Related Allowance		Related Allowance for Loan Losses		Coverage % ⁽⁴⁾
	(Dollars in millions)
Commercial and industrial	$	525	$	50	$	475	$	45	$	430	$	106	29.7	%
Commercial real estate mortgage—owner-occupied	552		47		505		54		451		115		29.3
Commercial real estate construction—owner-occupied	42		—		42		—		42		9		21.4
Total commercial	1,119		97		1,022		99		923		230		29.2
Commercial investor real estate mortgage	741		79		662		17		645		107		25.1
Commercial investor real estate construction	104		5		99		—		99		11		15.4
Total investor real estate	845		84		761		17		744		118		23.9
Residential first mortgage	509		45		464		—		464		72		23.0
Home equity	390		—		390		—		390		25		6.4
Indirect	1		—		1		—		1		—		—
Consumer credit card	2		—		2		—		2		—		—
Other consumer	26		—		26		—		26		1		3.8
Total consumer	928		45		883		—		883		98		15.4
	$	2,892	$	226	$	2,666	$	116	$	2,550	$	446	23.2	%

________


(1)	Unpaid principal balance represents the contractual obligation due from the customer and includes the net book value plus charge-offs and payments applied.


(2)	Charge-offs and payments applied represents cumulative partial charge-offs taken, as well as interest payments received that have been applied against the outstanding principal balance.


(3)	Book value represents the unpaid principal balance less charge-offs and payments applied; it is shown before any allowance for loan losses.


(4)	Coverage % represents charge-offs and payments applied plus the related allowance as a percent of the unpaid principal balance.

The following table presents the average balances of total impaired loans and interest income for the three and nine months ended September 30, 2014 and 2013 . Interest income recognized represents interest on accruing loans modified in a TDR. TDRs are considered impaired loans.



	Three Months Ended September 30								Nine Months Ended September 30
	2014				2013				2014				2013
	Average Balance		Interest Income Recognized		Average Balance		Interest Income Recognized		Average Balance		Interest Income Recognized		Average Balance		Interest Income Recognized
	(In millions)
Commercial and industrial	$	296	$	2	$	636	$	4	$	382	$	7	$	649	$	10
Commercial real estate mortgage—owner-occupied	464		2		551		2		491		9		598		8
Commercial real estate construction—owner-occupied	30		1		40		—		36		1		38		1
Total commercial	790		5		1,227		6		909		17		1,285		19
Commercial investor real estate mortgage	446		4		940		7		532		18		1,071		24
Commercial investor real estate construction	44		—		108		1		68		2		121		5
Total investor real estate	490		4		1,048		8		600		20		1,192		29
Residential first mortgage	451		3		1,163		9		454		10		1,176		28
Home equity	379		5		401		5		383		15		411		16
Indirect	1		—		1		—		1		—		1		—
Consumer credit card	2		—		2		—		2		—		1		—
Other consumer	19		—		30		1		22		1		34		2
Total consumer	852		8		1,597		15		862		26		1,623		46
Total impaired loans	$	2,132	$	17	$	3,872	$	29	$	2,371	$	63	$	4,100	$	94

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In addition to the impaired loans detailed in the tables above, there were approximately $38 million in non-performing loans classified as held for sale at September 30, 2014 , compared to $82 million at December 31, 2013 . The loans are carried at an amount approximating a price which is expected to be recoverable through the loan sale market. During the three months ended September 30, 2014 and 2013 , approximately $36 million and $27 million , respectively, in non-performing loans were transferred to held for sale; these amounts are net of charge-offs of $11 million and $14 million , respectively, recorded upon transfer. During the nine months ended September 30, 2014 and 2013 , approximately $69 million and $96 million , respectively, in non-performing loans were transferred to held for sale; these amounts are net of charge-offs of $26 million and $55 million , respectively, recorded upon transfer. At September 30, 2014 and December 31, 2013 , non-accrual loans including loans held for sale totaled $875 million and $1.2 billion , respectively.

TROUBLED DEBT RESTRUCTURINGS

The majority of Regions’ commercial and investor real estate TDRs are the result of renewals of classified loans at an interest rate that is not considered to be a market rate. Consumer TDRs primarily involve an interest rate concession and not a forgiveness of principal. Accordingly, the financial impact of the modifications is best illustrated by the impact to the allowance calculation at the loan or pool level, as a result of the loans being considered impaired due to their status as TDRs. Regions most often does not record a charge-off at the modification date.

None of the modified consumer loans listed in the following TDR disclosures were collateral-dependent at the time of modification. At September 30, 2014 , approximately $73 million in residential first mortgage TDRs were in excess of 180 days past due and were considered collateral-dependent. At September 30, 2014 , approximately $8 million in home equity first lien TDRs were in excess of 180 days past due and approximately $6 million in home equity second lien TDRs were in excess of 120 days past due, both of which were considered collateral-dependent.

Further discussion related to TDRs, including their impact on the allowance for loan losses and designation of TDRs in periods subsequent to the modification is included in Note 1 in the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2013 .

The following tables present the end of period balance for loans modified in a TDR during the periods presented by portfolio segment and class, and the financial impact of those modifications. The tables include modifications made to new TDRs, as well as renewals of existing TDRs. The end of period balance, for the period in which it was added, of total loans first reported as new TDRs totaled approximately $316 million and $607 million for the nine months ended September 30, 2014 and 2013 , respectively.



	Three Months Ended September 30, 2014
				Financial Impact of Modifications Considered TDRs
	Number of Obligors	Recorded Investment		Increase in Allowance at Modification
	(Dollars in millions)
Commercial and industrial	67	$	72	$	2
Commercial real estate mortgage—owner-occupied	61	49		1
Commercial real estate construction—owner-occupied	—	—		—
Total commercial	128	121		3
Commercial investor real estate mortgage	43	66		1
Commercial investor real estate construction	8	24		1
Total investor real estate	51	90		2
Residential first mortgage	144	26		4
Home equity	142	8		—
Consumer credit card	40	1		—
Indirect and other consumer	77	1		—
Total consumer	403	36		4
	582	$	247	$	9

Table of Contents



	Three Months Ended September 30, 2013
				Financial Impact of Modifications Considered TDRs
	Number of Obligors	Recorded Investment		Increase in Allowance at Modification
	(Dollars in millions)
Commercial and industrial	109	$	135	$	1
Commercial real estate mortgage—owner-occupied	93	78		1
Commercial real estate construction—owner-occupied	2	3		—
Total commercial	204	216		2
Commercial investor real estate mortgage	98	173		1
Commercial investor real estate construction	21	25		—
Total investor real estate	119	198		1
Residential first mortgage	293	47		5
Home equity	172	10		1
Consumer credit card	57	1		—
Indirect and other consumer	76	1		—
Total consumer	598	59		6
	921	$	473	$	9



	Nine Months Ended September 30, 2014
				Financial Impact of Modifications Considered TDRs
	Number of Obligors	Recorded Investment		Increase in Allowance at Modification
	(Dollars in millions)
Commercial and industrial	216	$	236	$	4
Commercial real estate mortgage—owner-occupied	218	196		4
Commercial real estate construction—owner-occupied	3	3		—
Total commercial	437	435		8
Commercial investor real estate mortgage	193	274		5
Commercial investor real estate construction	36	39		1
Total investor real estate	229	313		6
Residential first mortgage	408	71		11
Home equity	481	28		—
Consumer credit card	104	1		—
Indirect and other consumer	194	3		—
Total consumer	1,187	103		11
	1,853	$	851	$	25

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	Nine Months Ended September 30, 2013
				Financial Impact of Modifications Considered TDRs
	Number of Obligors	Recorded Investment		Increase in Allowance at Modification
	(Dollars in millions)
Commercial and industrial	335	$	445	$	2
Commercial real estate mortgage—owner-occupied	272	251		3
Commercial real estate construction—owner-occupied	5	30		—
Total commercial	612	726		5
Commercial investor real estate mortgage	321	569		3
Commercial investor real estate construction	64	77		—
Total investor real estate	385	646		3
Residential first mortgage	965	169		19
Home equity	451	29		3
Consumer credit card	202	3		—
Indirect and other consumer	234	3		—
Total consumer	1,852	204		22
	2,849	$	1,576	$	30

Defaulted TDRs

The following table presents TDRs by portfolio segment and class which defaulted during the three and nine months ended September 30, 2014 and 2013 , and which were modified in the previous twelve months (i.e., the twelve months prior to the default). For purposes of this disclosure, default is defined as 90 days past due and still accruing for the consumer portfolio segment, and placement on non-accrual status for the commercial and investor real estate portfolio segments. Consideration of defaults in the calculation of the allowance for loan losses is described in detail in the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2013 .



	Three Months Ended September 30				Nine Months Ended September 30
	2014		2013		2014		2013
	(In millions)
Defaulted During the Period, Where Modified in a TDR Twelve Months Prior to Default
Commercial and industrial	$	2	$	1	$	48	$	29
Commercial real estate mortgage—owner-occupied	10		5		17		28
Total commercial	12		6		65		57
Commercial investor real estate mortgage	1		5		5		60
Commercial investor real estate construction	—		19		1		24
Total investor real estate	1		24		6		84
Residential first mortgage	2		11		14		40
Home equity	—		1		2		4
Total consumer	2		12		16		44
	$	15	$	42	$	87	$	185

Commercial and investor real estate loans that were on non-accrual status at the time of the latest modification are not included in the default table above, as they are already considered to be in default at the time of the restructuring. At September 30, 2014 , approximately $73 million of commercial and investor real estate loans modified in a TDR during the three months ended September 30, 2014 were on non-accrual status. Approximately 13.1 percent of this amount was 90 days past due.

At September 30, 2014 , Regions had restructured binding unfunded commitments totaling $151 million where a concession was granted and the borrower was in financial difficulty.

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NOTE 5. SERVICING OF FINANCIAL ASSETS

RESIDENTIAL MORTGAGE BANKING ACTIVITIES

The fair value of residential mortgage servicing rights is calculated using various assumptions including future cash flows, market discount rates, expected prepayment rates, servicing costs and other factors. A significant change in prepayments of mortgages in the servicing portfolio could result in significant changes in the valuation adjustments, thus creating potential volatility in the carrying amount of residential mortgage servicing rights. The Company compares fair value estimates and assumptions to observable market data where available, and also considers recent market activity and actual portfolio experience.

The table below presents an analysis of residential mortgage servicing rights under the fair value measurement method:



	Three Months Ended September 30						Nine Months Ended September 30
	2014			2013			2014			2013
	(In millions)
Carrying value, beginning of period	$	276		$	276		$	297		$	191
Additions	9			13			24			73
Increase (decrease) in fair value:
Due to change in valuation inputs or assumptions	(3		)	—			(28		)	45
Economic amortization associated with borrower repayments	(5		)	(8		)	(16		)	(28		)
Carrying value, end of period	$	277		$	281		$	277		$	281

On March 29, 2013, the Company completed a transaction to purchase the rights to service approximately $3 billion in residential mortgage loans. The residential mortgage servicing rights asset was increased by the purchase price of approximately $28 million in the first quarter of 2013.

Data and assumptions used in the fair value calculation, as well as the valuation’s sensitivity to rate fluctuations, related to residential mortgage servicing rights (excluding related derivative instruments) are as follows:



	September 30
	2014			2013
	(Dollars in millions)
Unpaid principal balance	$	26,943		$	28,234
Weighted-average prepayment speed (CPR; percentage)	10.9		%	9.4		%
Estimated impact on fair value of a 10% increase	$	(15	)	$	(12	)
Estimated impact on fair value of a 20% increase	$	(28	)	$	(24	)
Option-adjusted spread (basis points)	789			1,014
Estimated impact on fair value of a 10% increase	$	(8	)	$	(10	)
Estimated impact on fair value of a 20% increase	$	(17	)	$	(20	)
Weighted-average coupon interest rate	4.5		%	4.5		%
Weighted-average remaining maturity (months)	279			279
Weighted-average servicing fee (basis points)	27.8			27.7

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, the effect of an adverse variation in a particular assumption on the fair value of the residential mortgage servicing rights is calculated without changing any other assumption, while in reality changes in one factor may result in changes in another, which may either magnify or counteract the effect of the change. The derivative instruments utilized by Regions would serve to reduce the estimated impacts to fair value included in the table above.

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The following table presents servicing related fees, which includes contractually specified servicing fees, late fees and other ancillary income resulting from the servicing of residential mortgage loans:



	Three Months Ended September 30				Nine Months Ended September 30
	2014		2013		2014		2013
	(In millions)
Servicing related fees and other ancillary income	$	21	$	22	$	64	$	64

Loans are sold in the secondary market with standard representations and warranties regarding certain characteristics such as the quality of the loan, the absence of fraud, the eligibility of the loan for sale and the future servicing associated with the loan. Regions may be required to repurchase these loans at par, or make-whole or indemnify the purchasers for losses incurred when representations and warranties are breached.

Regions maintains a repurchase liability related to mortgage loans sold with representations and warranty provisions. This repurchase liability is reported in other liabilities on the consolidated balance sheets and reflects management’s estimate of losses based on historical repurchase and loss trends, as well as other factors that may result in anticipated losses different from historical loss trends. Adjustments to this reserve are recorded in other non-interest expense on the consolidated statements of income. The table below presents an analysis of Regions’ repurchase liability related to mortgage loans sold with representations and warranty provisions:



	Three Months Ended September 30						Nine Months Ended September 30
	2014			2013			2014			2013
	(In millions)
Beginning balance	$	34		$	40		$	39		$	40
Additions (reductions), net	(5		)	8			(3		)	23
Losses	(1		)	(8		)	(8		)	(23		)
Ending balance	$	28		$	40		$	28		$	40

For the periods presented, settled repurchase claims were related to one or more of the following alleged breaches: 1) eligibility or guideline violations; 2) missing or incorrect documents per investor guidelines; or 3) misrepresentation or fraud by the borrower. These claims stem primarily from loans originated in the 2006—2008 time period.

COMMERCIAL MORTGAGE BANKING ACTIVITIES

On July 18, 2014, Regions was approved as a Fannie Mae Delegated Underwriting and Servicing ("DUS") lender and acquired a DUS servicing portfolio totaling approximately $1.0 billion . The Fannie Mae DUS program provides liquidity to the multi-family housing market. As part of the transaction, Regions recorded $12 million in commercial mortgage servicing rights and $15 million in intangible assets associated with the DUS license purchased.

As of September 30, 2014, the DUS servicing portfolio remained at approximately $1.0 billion , and the related commercial MSRs and DUS license intangible asset were approximately $12 million and $15 million , respectively.

Commercial MSRs are recorded in other assets on the Consolidated Balance Sheets at the lower of cost or market and are amortized in proportion to, and over the estimated period, that net servicing income is expected to be received based on projections of the amount and timing of estimated future net cash flows. The amount and timing of estimated future net cash flows are updated based on actual results and updated projections. Regions will periodically evaluate its commercial MSRs for impairment.

The intangible asset associated with the DUS license purchased is recorded in other identifiable intangible assets on the Consolidated Balance Sheets, and is a non-amortizing intangible asset. This investment will be evaluated for impairment annually or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

NOTE 6. GOODWILL

Goodwill allocated to each reportable segment is presented as follows:



	September 30, 2014		December 31, 2013
	(In millions)
Business Services	$	2,552	$	2,552
Consumer Services	1,797		1,797
Wealth Management	467		467
	$	4,816	$	4,816

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Regions evaluates each reporting unit’s goodwill for impairment on an annual basis in the fourth quarter, or more often if events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. A detailed description of the Company's methodology and valuation approaches used to determine the estimated fair value of each reporting unit is included in the consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2013. Adverse changes in the economic environment, declining operations, or other factors could result in a decline in the implied fair value of goodwill.

During the third quarter of 2014, Regions assessed events and circumstances for all three reporting units as of September 30, 2014 and through the date of the filing of this Quarterly Report on Form 10-Q that could potentially indicate goodwill impairment. The indicators assessed included:


•	Recent operating performance,


•	Changes in market capitalization,


•	Regulatory actions and assessments,


•	Changes in the business climate (including legislation, legal factors, and competition),


•	Company-specific factors (including changes in key personnel, asset impairments, and business dispositions), and


•	Trends in the banking industry.

Results of the 2013 annual test indicated that the estimated fair value of each reporting unit exceeded its carrying amount as of the test date. Additionally, after assessing the indicators noted above, Regions determined that it was not more likely than not that the fair value of each of its reporting units had declined below their carrying values as of September 30, 2014 . Therefore, Regions determined that a test of goodwill impairment was not required for each of Regions’ reporting units for the September 30, 2014 interim period.

NOTE 7. STOCKHOLDERS’ EQUITY AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

PREFERRED STOCK

The following table presents a summary of the non-cumulative perpetual preferred stock as of September 30, 2014 :



	As of September 30, 2014
	Issuance Date	Earliest Redemption Date	Liquidation Amount		Carrying Amount		Dividend Rate
	(Dollars in millions)
Series A	11/1/2012	12/15/2017	$	500	$	427	6.375	%
Series B	4/29/2014	9/15/2024	500		473		6.375	%	⁽¹⁾
			$	1,000	$	900

_________

(1) Dividends, if declared, will be paid quarterly at an annual rate equal to (i) for each period beginning prior to September 15, 2024, 6.375%, and (ii) for each period beginning on or after September 15, 2024, three-month LIBOR plus 3.536% .

For each preferred stock issuance listed above, Regions issued depositary shares, each representing a 1/40th ownership interest in a share of the Company's preferred stock, with a liquidation preference of $1,000.00 per share of preferred stock (equivalent to $25.00 per depositary share). Dividends on the preferred stock, if declared, accrue and are payable quarterly in arrears. The preferred stock has no stated maturity and redemption is solely at Regions' option, subject to regulatory approval, in whole, or in part, after the earliest redemption date or in whole, but not in part, within 90 days following a regulatory capital treatment event for the Series A preferred stock or at any time following a regulatory capital treatment event for the Series B preferred stock.

The Board of Directors declared $8 million in cash dividends on Series A Preferred Stock during each of the first, second, and third quarters of both 2014 and 2013. There were no cash dividends on Series B Preferred Stock during the second quarter of 2014 because the initial quarterly dividend was declared on July 17, 2014. Series B Preferred Stock dividends were $12 million for the third quarter of 2014. Because the Company was in a retained deficit position, preferred dividends were recorded as a reduction of preferred stock, including related surplus.

COMMON STOCK

On March 19, 2013, Regions' Board of Directors authorized a $350 million common stock repurchase plan, permitting repurchases from the beginning of the second quarter of 2013 through the end of the first quarter of 2014. During the first quarter of 2014, Regions repurchased approximately 1 million shares of common stock under this plan at a total cost of approximately $8 million . As of March 31, 2014, Regions had repurchased approximately 37 million shares of common stock at a total cost of approximately $347 million . The total cost paid to repurchase common shares under this plan includes the full amount paid as part

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of a contractual repurchase agreement. All common shares repurchased under this plan were immediately retired and therefore are not included in treasury stock. On April 1, 2014, the remaining approximately $3 million available under this plan expired.

During the first quarter of 2014, Regions received no objection to its 2014 capital plan from the Federal Reserve that was submitted as part of the Comprehensive Capital Analysis and Review ("CCAR") process. On April 24, 2014, Regions' Board of Directors approved an increase of its quarterly common stock dividend to $0.05 per share effective with the quarterly dividend to be paid in July 2014. The Board also authorized a new $350 million common stock repurchase plan, permitting repurchases from the beginning of the second quarter of 2014 through the end of the first quarter of 2015. There were no shares repurchased under this plan as of September 30, 2014. However, the Company began purchasing shares in October 2014, and as of November 4, 2014, Regions had repurchased approximately 11.6 million shares of common stock at a total cost of approximately $114.7 million . These shares were immediately retired upon repurchase and therefore will not be included in treasury stock.

The Board of Directors declared a $0.05 per share cash dividend on common stock for the second and third quarter s of 2014 , and a $0.03 per share cash dividend for the first quarter of 2014, totaling $0.13 per share cash dividend for the first nine months of 2014. The Board of Directors declared a $0.03 per share cash dividend on common stock for the second and third quarters of 2013 and a $0.01 per share cash dividend for the first quarter of 2013, totaling $0.07 per share cash dividend for the first nine months of 2013.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Activity within the balances in accumulated other comprehensive income (loss) is shown in the following tables:



	Three Months Ended September 30, 2014
	Unrealized losses on securities transferred to held to maturity			Unrealized gains (losses) on securities available for sale			Unrealized gains (losses) on derivative instruments designated as cash flow hedges			Defined benefit pension plans and other post employment benefits			Accumulated other comprehensive income (loss), net of tax
	(In millions)
Beginning of period	$	(60	)	$	203		$	44		$	(239	)	$	(52	)
Net change	2			(92		)	(37		)	5			(122		)
End of period	$	(58	)	$	111		$	7		$	(234	)	$	(174	)



	Three Months Ended September 30, 2013
	Unrealized losses on securities transferred to held to maturity			Unrealized gains (losses) on securities available for sale		Unrealized gains (losses) on derivative instruments designated as cash flow hedges		Defined benefit pension plans and other post employment benefits			Accumulated other comprehensive income (loss), net of tax
	(In millions)
Beginning of period	$	(68	)	$	—	$	35	$	(445	)	$	(478	)
Net change	2			41		12		12			67
End of period	$	(66	)	$	41	$	47	$	(433	)	$	(411	)



	Nine Months Ended September 30, 2014
	Unrealized losses on securities transferred to held to maturity			Unrealized gains (losses) on securities available for sale			Unrealized gains (losses) on derivative instruments designated as cash flow hedges			Defined benefit pension plans and other post employment benefits			Accumulated other comprehensive income (loss), net of tax
	(In millions)
Beginning of period	$	(64	)	$	(22	)	$	15		$	(248	)	$	(319	)
Net change	6			133			(8		)	14			145
End of period	$	(58	)	$	111		$	7		$	(234	)	$	(174	)

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	Nine Months Ended September 30, 2013
	Unrealized losses on securities transferred to held to maturity			Unrealized gains (losses) on securities available for sale			Unrealized gains (losses) on derivative instruments designated as cash flow hedges			Defined benefit pension plans and other post employment benefits			Accumulated other comprehensive income (loss), net of tax
	(In millions)
Beginning of period	$	—		$	436		$	93		$	(464	)	$	65
Net change	(66		)	(395		)	(46		)	31			(476		)
End of period	$	(66	)	$	41		$	47		$	(433	)	$	(411	)

The following tables present amounts reclassified out of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2014 and 2013:



	Three Months Ended September 30, 2014			Three Months Ended September 30, 2013
Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss) ⁽¹⁾			Amount Reclassified from Accumulated Other Comprehensive Income (Loss) ⁽¹⁾			Affected Line Item in the Consolidated Statements of Income
	(In millions)
Unrealized losses on securities transferred to held to maturity:
	$	(3	)	$	(4	)	Net interest income
	1			2			Tax (expense) or benefit
	$	(2	)	$	(2	)	Net of tax
Unrealized gains and (losses) on available-for-sale securities:
	$	7		$	3		Securities gains, net
	(2		)	(1		)	Tax (expense) or benefit
	$	5		$	2		Net of tax

Gains and (losses) on cash flow hedges:
Interest rate contracts	$	34		$	26		Net interest income
	(13		)	(10		)	Tax (expense) or benefit
	$	21		$	16		Net of tax

Amortization of defined benefit pension items:
Prior-service cost	$	—		$	—		⁽²⁾
Actuarial gains/(losses)	(7		)	(19		)	⁽²⁾
	(7		)	(19		)	Total before tax
	2			7			Tax (expense) or benefit
	$	(5	)	$	(12	)	Net of tax

Total reclassifications for the period	$	19		$	4		Net of tax

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	Nine Months Ended September 30, 2014			Nine Months Ended September 30, 2013
Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss) ⁽¹⁾			Amount Reclassified from Accumulated Other Comprehensive Income (Loss) ⁽¹⁾			Affected Line Item in the Consolidated Statements of Income
	(In millions)
Unrealized losses on securities transferred to held to maturity:
	$	(10	)	$	(4	)	Net interest income
	4			2			Tax (expense) or benefit
	$	(6	)	$	(2	)	Net of tax
Unrealized gains and (losses) on available-for-sale securities:
	$	15		$	26		Securities gains, net
	(5		)	(9		)	Tax (expense) or benefit
	$	10		$	17		Net of tax

Gains and (losses) on cash flow hedges:
Interest rate contracts	$	91		$	58		Net interest income
	(35		)	(22		)	Tax (expense) or benefit
	$	56		$	36		Net of tax

Amortization of defined benefit pension items:
Prior-service cost	$	(1	)	$	—		⁽²⁾
Actuarial gains/(losses)	(18		)	(52		)	⁽²⁾
	(19		)	(52		)	Total before tax
	6			19			Tax (expense) or benefit
	$	(13	)	$	(33	)	Net of tax

Total reclassifications for the period	$	47		$	18		Net of tax

_________

(1) Amounts in parentheses indicate reductions to net income.

(2) These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension cost and are included in salaries and employee benefits on the consolidated statements of income (see Note 10 for additional details).

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NOTE 8. EARNINGS PER COMMON SHARE

The following table sets forth the computation of basic earnings per common share and diluted earnings per common share:



	Three Months Ended September 30						Nine Months Ended September 30
	2014			2013			2014			2013
	(In millions, except per share amounts)
Numerator:
Income from continuing operations	$	322		$	293		$	928		$	894
Preferred stock dividends	(20		)	(8		)	(36		)	(24		)
Income from continuing operations available to common shareholders	302			285			892			870
Income (loss) from discontinued operations, net of tax	3			—			16			1
Net income available to common shareholders	$	305		$	285		$	908		$	871
Denominator:
Weighted-average common shares outstanding—basic	1,378			1,388			1,378			1,401
Potential common shares	11			17			12			14
Weighted-average common shares outstanding—diluted	1,389			1,405			1,390			1,415
Earnings per common share from continuing operations available to common shareholders ⁽¹⁾ :
Basic	$	0.22		$	0.21		$	0.65		$	0.62
Diluted	0.22			0.20			0.64			0.61
Earnings (loss) per common share from discontinued operations ⁽¹⁾ :
Basic	0.00			(0.00		)	0.01			0.00
Diluted	0.00			(0.00		)	0.01			0.00
Earnings per common share ⁽¹⁾ :
Basic	0.22			0.21			0.66			0.62
Diluted	0.22			0.20			0.65			0.62

________


(1)	Certain per share amounts may not appear to reconcile due to rounding.

For earnings (loss) per common share from discontinued operations, basic and diluted weighted-average common shares outstanding are the same for the three months ended September 30, 2014 due to a net loss.

The effect from the assumed exercise of 23 million and 24 million stock options for the three and nine months ended September 30, 2014 , respectively, was not included in the above computations of diluted earnings per common share because such amounts would have had an antidilutive effect on earnings per common share. The effect from the assumed exercise of 24 million and 25 million stock options for the three and nine months ended September 30, 2013 , respectively, was not included in the above computations of diluted earnings per common share because such amounts would have had an antidilutive effect on earnings per common share.

NOTE 9. SHARE-BASED PAYMENTS

Regions administers long-term incentive compensation plans that permit the granting of incentive awards in the form of stock options, restricted stock awards, performance awards and stock appreciation rights. While Regions has the ability to issue stock appreciation rights, none have been issued to date. The terms of all awards issued under these plans are determined by the Compensation Committee of the Board of Directors; however, no awards may be granted after the tenth anniversary from the date the plans were initially approved by shareholders. Incentive awards usually vest based on employee service, generally within three years from the date of the grant. The contractual lives of options granted under these plans are typically ten years from the date of the grant.

On May 13, 2010, the shareholders of the Company approved the Regions Financial Corporation 2010 Long-Term Incentive Plan (“2010 LTIP”), which permits the Company to grant to employees and directors various forms of incentive compensation. These forms of incentive compensation are similar to the types of compensation approved in prior plans. The 2010 LTIP authorizes 100 million common share equivalents available for grant, where grants of options count as one share equivalent and grants of full value awards (e.g., shares of restricted stock, restricted stock units and performance stock units) count as 2.25 share equivalents.

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Unless otherwise determined by the Compensation Committee of the Board of Directors, grants of restricted stock, restricted stock units, and performance stock units accrue dividends, or their notional equivalent, as they are declared by the Board of Directors, and are paid upon vesting of the award. Upon adoption of the 2010 LTIP, Regions closed all prior long-term incentive plans to new grants, and, accordingly, prospective grants must be made under the 2010 LTIP or a successor plan. All existing grants under prior long-term incentive plans were unaffected by adoption of the 2010 LTIP. The number of remaining share equivalents available for future issuance under the 2010 LTIP was approximately 42 million at September 30, 2014 .

STOCK OPTIONS

The following table summarizes the activity related to stock options:



	Nine Months Ended September 30
	2014				2013
	Number of Options		Weighted-Average Exercise Price		Number of Options		Weighted-Average Exercise Price
Outstanding at beginning of period	32,127,235		$	22.81	38,258,204		$	23.09
Granted	—		—		—		—
Exercised	(2,166,521	)	4.52		(810,936	)	5.22
Canceled/Forfeited	(4,486,405	)	30.44		(3,699,256	)	25.91
Outstanding at end of period	25,474,309		$	23.02	33,748,012		$	23.21
Exercisable at end of period	25,474,309		$	23.02	33,277,791		$	23.45

RESTRICTED STOCK AWARDS AND PERFORMANCE STOCK AWARDS

During the first nine months of 2014 and 2013 , Regions made restricted stock grants that vest upon service conditions and restricted stock unit and performance stock unit grants that vest based upon service conditions and performance conditions. Dividend payments during the vesting period are deferred to the end of the vesting term. The fair value of these restricted shares, restricted stock units and performance stock units was estimated based upon the fair value of the underlying shares on the date of the grant. The valuation was not adjusted for the deferral of dividends.

The following table summarizes the activity related to restricted stock awards and performance stock awards:



	Nine Months Ended September 30
	2014				2013
	Number of Shares		Weighted-Average Grant Date Fair Value		Number of Shares		Weighted-Average Grant Date Fair Value
Non-vested at beginning of period	16,212,198		$	6.83	11,945,179		$	6.15
Granted	5,368,113		11.22		6,327,865		8.04
Vested	(2,623,699	)	6.82		(1,481,659	)	6.75
Forfeited	(459,102	)	8.06		(375,850	)	6.38
Non-vested at end of period	18,497,510		$	8.07	16,415,535		$	6.82

NOTE 10. PENSION AND OTHER POSTRETIREMENT BENEFITS

Regions has a defined benefit pension plan qualified under the Internal Revenue Code covering only certain employees as the pension plan is closed to new entrants. The Company also sponsors a supplemental executive retirement program (the "SERP"), which is a non-qualified pension plan that provides certain senior executive officers defined benefits in relation to their compensation.

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Net periodic pension cost, which is recorded in salaries and employee benefits on the consolidated statements of income, included the following components:



	Qualified Plan						Non-qualified Plans				Total
	Three Months Ended September 30
	2014			2013			2014		2013		2014			2013
	(In millions)
Service cost	$	9		$	9		$	1	$	1	$	10		$	10
Interest cost	21			21			2		2		23			23
Expected return on plan assets	(34		)	(33		)	—		—		(34		)	(33		)
Amortization of actuarial loss	6			18			1		1		7			19
Amortization of prior service cost	—			—			—		—		—			—
Net periodic pension cost	$	2		$	15		$	4	$	4	$	6		$	19



	Qualified Plan						Non-qualified Plans				Total
	Nine Months Ended September 30
	2014			2013			2014		2013		2014			2013
	(In millions)
Service cost	$	25		$	28		$	3	$	3	$	28		$	31
Interest cost	65			63			5		4		70			67
Expected return on plan assets	(103		)	(99		)	—		—		(103		)	(99		)
Amortization of actuarial loss	16			50			2		2		18			52
Amortization of prior service cost	—			—			1		—		1			—
Settlement charge	—			—			3		—		3			—
Net periodic pension cost	$	3		$	42		$	14	$	9	$	17		$	51

The settlement charge relates to the settlement of liabilities under the SERP for certain executive officers during the second quarter of 2014.

Regions' policy for funding the qualified pension plan is to contribute annually at least the amount required by Internal Revenue Service minimum funding standards. During the third quarter of 2014, Regions made a contribution of approximately $3 million to the plan.

Regions also provides other postretirement benefits such as defined benefit health care plans and life insurance plans that cover certain retired employees. There was no material impact from other postretirement benefits on the consolidated financial statements for the nine months ended September 30, 2014 or 2013 .

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NOTE 11. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

The following tables present the notional amount and estimated fair value of derivative instruments on a gross basis as of September 30, 2014 and December 31, 2013 .



	September 30, 2014						December 31, 2013
	Notional Amount		Estimated Fair Value				Notional Amount		Estimated Fair Value
	Notional Amount		Gain ⁽¹⁾		Loss ⁽¹⁾		Notional Amount		Gain ⁽¹⁾		Loss ⁽¹⁾
	(In millions)
Derivatives in fair value hedging relationships:
Interest rate swaps	$	3,388	$	15	$	29	$	4,241	$	70	$	29
Derivatives in cash flow hedging relationships:
Interest rate swaps	7,550		10		59		5,800		5		80
Total derivatives designated as hedging instruments	$	10,938	$	25	$	88	$	10,041	$	75	$	109
Derivatives not designated as hedging instruments:
Interest rate swaps	$	46,606	$	858	$	914	$	46,591	$	1,078	$	1,142
Interest rate options	3,085		12		2		2,865		9		4
Interest rate futures and forward commitments	18,101		1		3		13,357		9		2
Other contracts	2,678		51		43		2,535		48		44
Total derivatives not designated as hedging instruments	$	70,470	$	922	$	962	$	65,348	$	1,144	$	1,192
Total derivatives	$	81,408	$	947	$	1,050	$	75,389	$	1,219	$	1,301

_________


(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.

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, 2013 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, which includes long-term debt and certificates of deposit. These agreements involve the receipt of fixed-rate amounts in exchange for floating-rate interest payments over the life of the agreements. Regions enters into interest rate swap agreements to manage interest rate exposure on certain of the Company's fixed-rate available for sale securities. These agreements involve the payment of fixed-rate amounts in exchange for floating-rate interest receipts. Regions also enters into forward sale commitments to hedge changes in the fair value of available-for-sale securities.

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 swap agreements to manage overall cash flow changes related to interest rate risk exposure on LIBOR-based loans. The agreements effectively modify the Company’s exposure to interest rate risk by utilizing receive fixed/pay LIBOR interest rate swaps.

Regions issues long-term fixed-rate debt for various funding needs. Regions may enter into receive LIBOR/pay fixed forward starting swaps to hedge risks of changes in the projected quarterly interest payments attributable to changes in the benchmark interest rate ("LIBOR") during the time leading up to the probable issuance date of the new long-term fixed-rate debt.

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Regions recognized an unrealized after-tax gain of $40 million and $70 million in accumulated other comprehensive income (loss) at September 30, 2014 and 2013 , respectively, related to terminated cash flow hedges of loan and debt instruments which will be amortized into earnings in conjunction with the recognition of interest payments through 2017. Regions recognized pre-tax income of $14 million and $12 million during the three months ended September 30, 2014 and 2013 , respectively, and pre-tax income of $37 million and $35 million during the nine months ended September 30, 2014 and 2013 , respectively, related to the amortization of cash flow hedges of loan and debt instruments.

Regions expects to reclassify out of accumulated other comprehensive income (loss) and into earnings approximately $120 million in pre-tax income due to the receipt or payment of interest payments on all cash flow hedges within the next twelve months. Included in this amount is $44 million in pre-tax net gains related to the amortization of discontinued cash flow hedges. The maximum length of time over which Regions is hedging its exposure to the variability in future cash flows for forecasted transactions is approximately seven years as of September 30, 2014 .

The following tables present the effect of hedging derivative instruments on the consolidated statements of income:



	Gain or (Loss) Recognized in Income on Derivatives						Location of Amounts Recognized in Income on Derivatives and Related Hedged Item	Gain or (Loss) Recognized in Income on Related Hedged Item
	Three Months Ended September 30							Three Months Ended September 30
	2014			2013				2014			2013
	(In millions)							(In millions)
Fair Value Hedges:
Interest rate swaps on:
Debt/CDs	$	4		$	11		Interest expense	$	7		$	1
Debt/CDs	(11		)	7			Other non-interest expense	10			(6		)
Securities available for sale	(4		)	(1		)	Interest expense	—			—
Securities available for sale	—			2			Other non-interest expense	(2		)	(2		)
Total	$	(11	)	$	19			$	15		$	(7	)



	Effective Portion ⁽³⁾
	Gain or (Loss) Recognized in AOCI ⁽¹⁾					Location of Amounts Reclassified from AOCI into Income	Gain or (Loss) Reclassified from AOCI into Income ⁽²⁾
	Three Months Ended September 30						Three Months Ended September 30
	2014			2013			2014		2013
	(In millions)						(In millions)
Cash Flow Hedges:
Interest rate swaps	$	(37	)	$	10	Interest income on loans	$	34	$	30
Forward starting swaps	—			2		Interest expense on debt	—		(4		)
Total	$	(37	)	$	12		$	34	$	26

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	Gain or (Loss) Recognized in Income on Derivatives						Location of Amounts Recognized in Income on Derivatives and Related Hedged Item	Gain or (Loss) Recognized in Income on Related Hedged Item
	Nine Months Ended September 30							Nine Months Ended September 30
	2014			2013				2014		2013
	(In millions)							(In millions)
Fair Value Hedges:
Interest rate swaps on:
Debt/CDs	$	19		$	47		Interest expense	$	15	$	6
Debt/CDs	(25		)	(65		)	Other non-interest expense	27		58
Securities available for sale	(12		)	(2		)	Interest expense	—		—
Securities available for sale	(32		)	16			Other non-interest expense	25		(17		)
Total	$	(50	)	$	(4	)		$	67	$	47



	Effective Portion ⁽³⁾
	Gain or (Loss) Recognized in AOCI ⁽¹⁾						Location of Amounts Reclassified from AOCI into Income	Gain or (Loss) Reclassified from AOCI into Income ⁽²⁾
	Nine Months Ended September 30							Nine Months Ended September 30
	2014			2013				2014			2013
	(In millions)							(In millions)
Cash Flow Hedges:
Interest rate swaps	$	(11	)	$	(53	)	Interest income on loans	$	96		$	70
Forward starting swaps	3			7			Interest expense on debt	(5		)	(12		)
Total	$	(8	)	$	(46	)		$	91		$	58

____

(1) After-tax

(2) Pre-tax

(3) All cash flow hedges were highly effective for all periods presented, and the change in fair value attributed to hedge ineffectiveness was not material.

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS

The Company maintains a derivatives trading portfolio of interest rate swaps, option contracts, and futures and forward commitments used to meet the needs of its customers. The portfolio is primarily used to help clients manage market risk. The Company is subject to the credit risk that a counterparty will fail to perform. The Company is also subject to market risk, which is evaluated by the Company and monitored by the asset/liability management process. Separate derivative contracts are entered into to reduce overall market exposure to pre-defined limits. The contracts in this portfolio do not qualify for hedge accounting and are marked-to-market through earnings and included in other assets and other liabilities.

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, 2014 and December 31, 2013 , Regions had $312 million and $267 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, which are recorded at fair value with changes in fair value recorded in mortgage income. At September 30, 2014 and December 31, 2013 , Regions had $697 million and $636 million , respectively, in total notional amount related to these forward sale commitments.

Regions has elected to account for residential mortgage servicing rights at fair market value with any changes to fair value being recorded within 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 consolidated statement of income effect of changes in the fair value of its residential mortgage servicing rights. As of both September 30, 2014 and December 31, 2013 , the total notional amount related to these contracts was $3.4 billion .

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 three and nine months ended September 30, 2014 and 2013 :

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	Three Months Ended September 30						Nine Months Ended September 30
Derivatives Not Designated as Hedging Instruments	2014			2013			2014		2013
	(In millions)
Capital markets fee income and other ⁽¹⁾ :
Interest rate swaps	$	5		$	5		$	10	$	17
Interest rate options	—			—			—		2
Interest rate futures and forward commitments	1			—			—		1
Other contracts	2			1			8		10
Total capital markets fee income and other	8			6			18		30
Mortgage income:
Interest rate swaps	1			1			19		(26		)
Interest rate options	(3		)	9			3		(10		)
Interest rate futures and forward commitments	9			(59		)	1		(28		)
Total mortgage income	7			(49		)	23		(64		)
	$	15		$	(43	)	$	41	$	(34	)

______

(1) Capital markets fee income and other is included in Other income on the consolidated statements of income.

Credit risk, defined as all positive exposures not collateralized with cash or other assets or reserved for, at September 30, 2014 and December 31, 2013 , totaled approximately $343 million and $453 million , respectively. This amount represents the net credit risk on all trading and other derivative positions held by Regions.

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. Credit derivatives, whereby Regions has purchased credit protection, entitle Regions to receive a payment from the counterparty when the customer fails to make payment on any amounts due to Regions upon early termination of the swap transaction and have maturities between 2015 and 2020. Credit derivatives whereby Regions has sold credit protection have maturities between 2015 and 2020. For contracts where Regions sold credit protection, Regions would be required to make payment to the counterparty when 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, 2014 was approximately $60 million . This scenario would only occur if variable interest rates were at zero percent and all counterparties defaulted with zero recovery. The fair value of sold protection at September 30, 2014 and 2013 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 value of all derivative instruments with any credit-risk-related contingent features that were in a liability position on September 30, 2014 and December 31, 2013, was $294 million and $364 million , respectively, for which Regions had posted collateral of $311 million and $409 million , respectively, in the normal course of business.

OFFSETTING

Regions engages in derivatives transactions with dealers and customers. These derivatives transactions are subject to enforceable master netting agreements, which include a right of setoff by the non-defaulting or non-affected party upon early termination of the derivatives transaction. The following table presents the Company's gross derivative positions, including collateral posted or received, as of September 30, 2014 and December 31, 2013 .

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	Offsetting Derivative Assets				Offsetting Derivative Liabilities
	September 30, 2014		December 31, 2013		September 30, 2014		December 31, 2013
	(In millions)
Gross amounts subject to offsetting	$	903	$	1,165	$	1,000	$	1,257
Gross amounts not subject to offsetting	44		54		50		44
Gross amounts recognized	947		1,219		1,050		1,301
Gross amounts offset in the consolidated balance sheets ⁽¹⁾	595		774		966		1,233
Net amounts presented in the consolidated balance sheets	352		445		84		68
Gross amounts not offset in the consolidated balance sheets:
Financial instruments	9		10		—		—
Cash collateral received/posted	—		—		52		24
Net amounts	$	343	$	435	$	32	$	44

________

(1)

At September 30, 2014 , gross amounts of derivative assets and liabilities offset in the consolidated balance sheets presented above include cash collateral received of $24 million and cash collateral posted of $396 million . At December 31, 2013, gross amounts of derivative assets and liabilities offset in the consolidated balance sheets presented above include cash collateral received of $42 million and cash collateral posted of $501 million .

Gross amounts not subject to offsetting consist primarily of derivatives cleared through central clearing houses and interest rate lock commitments to originate mortgage loans. Regions does not have legal assurance that the clearing house contracts are master netting agreements, and therefore has not offset them on its balance sheet.

NOTE 12. FAIR VALUE MEASUREMENTS

Fair value guidance establishes a framework for using fair value to measure assets and liabilities and defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) as opposed to the price that would be paid to acquire the asset or received to assume the liability (an entry price). A fair value measure should reflect the assumptions that market participants would use in pricing the asset or liability, including the assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of nonperformance. Required disclosures include stratification of balance sheet amounts measured at fair value based on inputs the Company uses to derive fair value measurements. These strata include:


•	Level 1 valuations, where the valuation is based on quoted market prices for identical assets or liabilities traded in active markets (which include exchanges and over-the-counter markets with sufficient volume),


•	Level 2 valuations, where the valuation is based on quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market, and

•

Level 3 valuations, where the valuation is generated from model-based techniques that use significant assumptions not observable in the market, but observable based on Company-specific data. These unobservable assumptions reflect the Company’s own estimates for assumptions that market participants would use in pricing the asset or liability. Valuation techniques typically include option pricing models, discounted cash flow models and similar techniques, but may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability.

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, 2013 for a description of valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis. Regions rarely transfers assets and liabilities measured at fair value between Level 1 and Level 2 measurements. There were no such transfers during the nine month periods ended September 30, 2014 and 2013 . Trading account securities and securities available for sale may be periodically transferred to or from Level 3 valuation based on management’s conclusion regarding the best method of pricing for an individual security. Such transfers are accounted for as if they occur at the beginning of a reporting period.

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The following table presents assets and liabilities measured at estimated fair value on a recurring basis and non-recurring basis as of September 30, 2014 and December 31, 2013 :



	September 30, 2014								December 31, 2013
	Level 1		Level 2		Level 3		Total Estimated Fair Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Recurring fair value measurements
Trading account securities	$	103	$	—	$	—	$	103	$	111	$	—	$	—	$	111
Securities available for sale:
U.S. Treasury securities	$	61	$	—	$	—	$	61	$	56	$	—	$	—	$	56
Federal agency securities	—		69		—		69		—		89		—		89
Obligations of states and political subdivisions	—		3		—		3		—		5		—		5
Mortgage-backed securities (MBS):
Residential agency	—		16,520		—		16,520		—		15,677		—		15,677
Residential non-agency	—		—		9		9		—		—		9		9
Commercial agency	—		1,603		—		1,603		—		935		—		935
Commercial non-agency	—		1,488		—		1,488		—		1,211		—		1,211
Corporate and other debt securities	—		1,991		3		1,994		—		2,825		2		2,827
Equity securities ⁽¹⁾	139		—		—		139		137		—		—		137
Total securities available for sale	$	200	$	21,674	$	12	$	21,886	$	193	$	20,742	$	11	$	20,946
Mortgage loans held for sale	$	—	$	456	$	—	$	456	$	—	$	429	$	—	$	429
Residential mortgage servicing rights	$	—	$	—	$	277	$	277	$	—	$	—	$	297	$	297
Derivative assets:
Interest rate swaps	$	—	$	883	$	—	$	883	$	—	$	1,153	$	—	$	1,153
Interest rate options	—		3		9		12		—		4		5		9
Interest rate futures and forward commitments	—		1		—		1		—		9		—		9
Other contracts	—		51		—		51		—		48		—		48
Total derivative assets	$	—	$	938	$	9	$	947	$	—	$	1,214	$	5	$	1,219
Derivative liabilities:
Interest rate swaps	$	—	$	1,002	$	—	$	1,002	$	—	$	1,251	$	—	$	1,251
Interest rate options	—		2		—		2		—		4		—		4
Interest rate futures and forward commitments	—		3		—		3		—		2		—		2
Other contracts	—		43		—		43		—		44		—		44
Total derivative liabilities	$	—	$	1,050	$	—	$	1,050	$	—	$	1,301	$	—	$	1,301
Nonrecurring fair value measurements
Loans held for sale	$	—	$	—	$	37	$	37	$	—	$	—	$	596	$	596
Foreclosed property and other real estate	—		34		8		42		—		49		18		67

_________

(1) Excludes Federal Reserve Bank and Federal Home Loan Bank Stock totaling $477 million and $16 million at September 30, 2014 and $472 million and $67 million at December 31, 2013 , respectively.

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 the Asset and Liability Management Committee of the Company in a holistic approach to managing price fluctuation risks.

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The following tables illustrate a rollforward for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2014 and 2013 . The tables do not reflect the change in fair value attributable to any related economic hedges the Company used to mitigate the interest rate risk associated with these assets and liabilities. The net changes in realized gains (losses) included in earnings related to Level 3 assets and liabilities held at September 30, 2014 and 2013 are not material.



	Three Months Ended September 30, 2014

	Opening Balance July 1, 2014		Total Realized / Unrealized Gains or Losses				Purchases	Sales	Issuances	Settlements		Transfers into Level 3	Transfers out of Level 3	Closing Balance September 30, 2014
	Opening Balance July 1, 2014		Included in Earnings			Included in Other Compre- hensive Income (Loss)	Purchases	Sales	Issuances	Settlements		Transfers into Level 3	Transfers out of Level 3	Closing Balance September 30, 2014
	(In millions)
Level 3 Instruments Only
Securities available for sale:
Residential non-agency MBS	$	9	—			—	—	—	—	—		—	—	$	9
Corporate and other debt securities	2		—			—	1	—	—	—		—	—	3
Total securities available for sale	$	11	—			—	1	—	—	—		—	—	$	12
Residential mortgage servicing rights	$	276	(8	)	⁽¹⁾	—	9	—	—	—		—	—	$	277
Total interest rate options derivatives, net	$	12	20		⁽¹⁾	—	—	—	—	(23	)	—	—	$	9



	Three Months Ended September 30, 2013

	Opening Balance July 1, 2013		Total Realized / Unrealized Gains or Losses				Purchases	Sales	Issuances	Settlements		Transfers into Level 3	Transfers out of Level 3	Closing Balance September 30, 2013
	Opening Balance July 1, 2013		Included in Earnings			Included in Other Compre- hensive Income (Loss)	Purchases	Sales	Issuances	Settlements		Transfers into Level 3	Transfers out of Level 3	Closing Balance September 30, 2013
	(In millions)
Level 3 Instruments Only
Securities available for sale:
Residential non-agency MBS	$	11	—			—	—	—	—	(1	)	—	—	$	10
Corporate and other debt securities	2		—			—	—	—	—	—		—	—	2
Total securities available for sale	$	13	—			—	—	—	—	(1	)	—	—	$	12
Residential mortgage servicing rights	$	276	(9	)	⁽¹⁾	—	14	—	—	—		—	—	$	281
Total interest rate options derivatives, net	$	2	24		⁽¹⁾	—	—	—	—	(14	)	—	—	$	12

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	Nine Months Ended September 30, 2014

	Opening Balance January 1, 2014		Total Realized / Unrealized Gains or Losses				Purchases	Sales	Issuances	Settlements		Transfers into Level 3	Transfers out of Level 3	Closing Balance September 30, 2014
	Opening Balance January 1, 2014		Included in Earnings			Included in Other Compre- hensive Income (Loss)	Purchases	Sales	Issuances	Settlements		Transfers into Level 3	Transfers out of Level 3	Closing Balance September 30, 2014
	(In millions)
Level 3 Instruments Only
Securities available for sale:
Residential non-agency MBS	$	9	—			—	—	—	—	—		—	—	$	9
Corporate and other debt securities	2		—			—	4	—	—	(3	)	—	—	3
Total securities available for sale	$	11	—			—	4	—	—	(3	)	—	—	$	12
Residential mortgage servicing rights	$	297	(44	)	⁽¹⁾	—	24	—	—	—		—	—	$	277
Total interest rate options derivatives, net	$	5	70		⁽¹⁾	—	—	—	—	(66	)	—	—	$	9



	Nine Months Ended September 30, 2013

	Opening Balance January 1, 2013		Total Realized / Unrealized Gains or Losses			Purchases	Sales	Issuances	Settlements		Transfers into Level 3	Transfers out of Level 3	Closing Balance September 30, 2013
	Opening Balance January 1, 2013		Included in Earnings		Included in Other Compre- hensive Income (Loss)	Purchases	Sales	Issuances	Settlements		Transfers into Level 3	Transfers out of Level 3	Closing Balance September 30, 2013
	(In millions)
Level 3 Instruments Only
Securities available for sale:
Residential non-agency MBS	$	13	—		—	—	—	—	(3	)	—	—	$	10
Corporate and other debt securities	2		—		—	—	—	—	—		—	—	2
Total securities available for sale	$	15	—		—	—	—	—	(3	)	—	—	$	12
Residential mortgage servicing rights	$	191	17	⁽¹⁾	—	73	—	—	—		—	—	$	281
Total interest rate options derivatives, net	$	22	65	⁽¹⁾	—	—	—	—	(75	)	—	—	$	12

_________

(1) Included in mortgage income.

The following table presents the fair value adjustments related to non-recurring fair value measurements:



	Three Months Ended September 30						Nine Months Ended September 30
	2014			2013			2014			2013
	(In millions)
Loans held for sale	$	(11	)	$	(16	)	$	(34	)	$	(58	)
Foreclosed property and other real estate	(4		)	(8		)	(18		)	(27		)

The following tables present detailed information regarding assets and liabilities measured at fair value using significant unobservable inputs (Level 3) as of September 30, 2014 and December 31, 2013 . 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, 2014 and December 31, 2013 are included. Following the tables are a description of the valuation technique and the sensitivity of the technique to changes in the significant unobservable input.

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	September 30, 2014
	Level 3 Estimated Fair Value at September 30, 2014	Valuation Technique	Unobservable Input(s)	Quantitative Range of Unobservable Inputs and (Weighted-Average)
	(Dollars in millions)
Recurring fair value measurements:
Securities available for sale:
Residential non-agency MBS	$9	Discounted cash flow	Spread to LIBOR	5.3% - 49.8% (12.8%)
			Weighted-average prepayment speed (CPR; percentage)	6.1% - 13.3% (9.5%)
			Probability of default	1.4%
			Loss severity	36.8%
Corporate and other debt securities	$3	Market comparable	Evaluated quote on same issuer/comparable bond	99.8% - 99.9% (99.8%)
			Comparability adjustments	0.07%
Residential mortgage servicing rights ⁽¹⁾	$277	Discounted cash flow	Weighted-average prepayment speed (CPR; percentage)	9.2% - 25.2% (10.9%)
			Option-adjusted spread (percentage)	6.4% - 13.5% (7.9%)
Derivative assets:
Interest rate options	$9	Discounted cash flow	Weighted-average prepayment speed (CPR; percentage)	9.2% - 25.2% (10.9%)
			Option-adjusted spread (percentage)	6.4% - 13.5% (7.9%)
			Pull-through	45.9% - 99.1% (85.6%)
Nonrecurring fair value measurements:
Loans held for sale	$37	Commercial and investor real estate loans held for sale are valued based on multiple data points, including discount to appraised value of collateral based on recent market activity for sales of similar loans	Appraisal comparability adjustment (discount)	13.3% - 97.2% (50.8%)
Foreclosed property and other real estate	$8	Discount to appraised value of property based on recent market activity for sales of similar properties	Appraisal comparability adjustment (discount)	25.0% - 100.0% (44.2%)

_________

(1) See Note 5 for additional disclosures related to assumptions used in the fair value calculation for residential mortgage servicing rights.

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	December 31, 2013
	Level 3 Estimated Fair Value at December 31, 2013	Valuation Technique	Unobservable Input(s)	Quantitative Range of Unobservable Inputs and (Weighted-Average)
	(Dollars in millions)
Recurring fair value measurements:
Securities available for sale:
Residential non-agency MBS	$9	Discounted cash flow	Spread to LIBOR	5.4% - 49.9% (14.9%)
			Weighted-average prepayment speed (CPR; percentage)	8.6% - 13.1% (10.0%)
			Probability of default	1.3%
			Loss severity	38.4%
Corporate and other debt securities	$2	Market comparable	Evaluated quote on same issuer/comparable bond	99.0% - 100.0% (99.6%)
			Comparability adjustments	0.96%
Residential mortgage servicing rights ⁽¹⁾	$297	Discounted cash flow	Weighted-average prepayment speed (CPR; percentage)	6.9% - 24.8% (8.2%)
			Option-adjusted spread (percentage)	7.0% - 23.6% (9.0%)
Derivative assets:
Interest rate options	$5	Discounted cash flow	Weighted-average prepayment speed (CPR; percentage)	6.9% - 24.8% (8.2%)
			Option-adjusted spread (percentage)	7.0% - 23.6% (9.0%)
			Pull-through	10.8% - 99.7% (32.2%)
Nonrecurring fair value measurements:
Loans held for sale	$61	Commercial and investor real estate loans held for sale are valued based on multiple data points, including discount to appraised value of collateral based on recent market activity for sales of similar loans	Appraisal comparability adjustment (discount)	1.0% - 99.2% (49.6%)
	$535	Residential first mortgage loans held for sale not carried at fair value on a recurring basis are valued based on estimated third-party valuations utilizing recent sales data for similar transactions	Estimated third-party valuations utilizing available sales data for similar transactions (discount to par)	17.0% - 26.0% (23.5%)
Foreclosed property and other real estate	$18	Discount to appraised value of property based on recent market activity for sales of similar properties	Appraisal comparability adjustment (discount)	30.0% - 100.0% (42.3%)

_________

(1) See Note 7 to the consolidated financial statements of the Annual Report on Form 10-K for the year ended December 31, 2013 for additional disclosures related to assumptions used in the fair value calculation for residential mortgage servicing rights.

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RECURRING FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS

Securities available for sale

Mortgage-backed securities: residential non-agency —The fair value reported in this category relates to retained interests in legacy securitizations. Significant unobservable inputs include the spread to LIBOR, constant prepayment rate, probability of default, and loss severity in the event of default. Significant increases in any of these inputs in isolation would result in significantly lower fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for loss severity and a directionally opposite change in the assumption used for prepayment rates.

Corporate and other debt securities —Significant unobservable inputs include evaluated quotes on comparable bonds for the same issuer and management-determined comparability adjustments. Changes in the evaluated quote on comparable bonds would result in a directionally similar change in the fair value of the other debt securities.

Residential mortgage servicing rights

The significant unobservable inputs used in the fair value measurement of residential mortgage servicing rights ("MSR") are option adjusted spreads (“OAS”) and prepayment speed. This method 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 such as 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. See Note 5 for these amounts and additional disclosures related to assumptions used in the fair value calculation for MSRs.

Derivative assets

Interest rate options —These instruments are interest rate lock agreements made in the normal course of originating residential mortgage loans. Significant unobservable inputs in the fair value measurement are OAS, prepayment speeds, and pull-through. The impact of OAS and prepayment speed inputs in the valuation of these derivative instruments are consistent with the MSR discussion above. Pull-through is an estimate of the number of interest rate lock commitments that will ultimately become funded loans. Increases or decreases in the pull-through assumption will have a corresponding impact on the value of these derivative assets.

NON-RECURRING FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS

Loans held for sale

Commercial and investor real estate loans held for sale are valued based on multiple data points indicating the fair value for each loan. The primary data point for loans held for sale is a discount to the appraised value of the underlying collateral, which considers the return required by potential buyers of the loans. Management establishes this discount or comparability adjustment based on recent sales of loans secured by similar property types. As liquidity in the market increases or decreases, the comparability adjustment and the resulting asset valuation are impacted.

Residential first mortgage loans transferred to held for sale were valued based on estimated third-party valuations utilizing recent sales data from similar transactions. Broker opinion statements were also obtained as additional evidence to support the third-party valuations. The discounts taken were intended to represent the perspective of a market participant, considering among other things, required investor returns which include liquidity discounts reflected in similar bulk transactions.

Foreclosed property and other real estate

Foreclosed property and other real estate are valued based on offered quotes as available. If no sales contract is pending for a specific property, management establishes a comparability adjustment to the appraised value based on historical activity considering proceeds for properties sold versus the corresponding appraised value. Increases or decreases in realization for properties sold impact the comparability adjustment for similar assets remaining on the balance sheet.

FAIR VALUE OPTION

Regions has elected the fair value option for all FNMA and FHLMC eligible residential mortgage loans held for sale. These elections allow 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. Regions has not elected the fair value option for other loans held for sale primarily because they are not economically hedged using derivative instruments. Fair values of 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 in the consolidated balance sheets.

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The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for mortgage loans held for sale measured at fair value:



	September 30, 2014						December 31, 2013
	Aggregate Fair Value		Aggregate Unpaid Principal		Aggregate Fair Value Less Aggregate Unpaid Principal		Aggregate Fair Value		Aggregate Unpaid Principal		Aggregate Fair Value Less Aggregate Unpaid Principal
	(In millions)
Mortgage loans held for sale, at fair value	$	456	$	441	$	15	$	429	$	424	$	5

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 in the consolidated statements of income. The following table details net gains resulting from changes in fair value of these loans which were recorded in mortgage income in the consolidated statements of income during the three and nine months ended September 30, 2014 and 2013 , 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.



	Mortgage loans held for sale, at fair value
	Three Months Ended September 30					Nine Months Ended September 30
	2014			2013		2014		2013
	(In millions)
Net gains (losses) resulting from changes in fair value	$	(6	)	$	38	$	11	$	(24	)

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, 2014 are as follows:



	September 30, 2014
	Carrying Amount		Estimated Fair Value ⁽¹⁾		Level 1		Level 2		Level 3
	(In millions)
Financial assets:
Cash and cash equivalents	$	4,783	$	4,783	$	4,783	$	—	$	—
Trading account securities	103		103		103		—		—
Securities held to maturity	2,222		2,224		1		2,223		—
Securities available for sale	22,379		22,379		200		22,167		12
Loans held for sale	504		504		—		456		48
Loans (excluding leases), net of unearned income and allowance for loan losses ⁽²⁾⁽³⁾	73,695		68,691		—		—		68,691
Other interest-earning assets	91		91		—		91		—
Derivative assets	947		947		—		938		9
Financial liabilities:
Derivative liabilities	1,050		1,050		—		1,050		—
Deposits	94,130		94,104		—		94,104		—
Short-term borrowings	1,893		1,893		—		1,893		—
Long-term borrowings	3,813		4,172		—		3,813		359
Loan commitments and letters of credit	103		578		—		—		578
Indemnification obligation	208		193		—		—		193

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_________


(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 interest rates, market liquidity and credit spreads as appropriate.

(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. In the current whole loan market, financial investors are generally requiring a higher rate of return than the return inherent in loans if held to maturity. The fair value discount at September 30, 2014 was $5.0 billion or 6.8 percent.


(3)	Excluded from this table is the lease carrying amount of $1.7 billion at September 30, 2014 .

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, 2013 are as follows:



	December 31, 2013
	Carrying Amount		Estimated Fair Value ⁽¹⁾		Level 1		Level 2		Level 3
	(In millions)
Financial assets:
Cash and cash equivalents	$	5,273	$	5,273	$	5,273	$	—	$	—
Trading account securities	111		111		111		—		—
Securities held to maturity	2,353		2,307		1		2,306		—
Securities available for sale	21,485		21,485		193		21,281		11
Loans held for sale	1,055		1,055		—		429		626
Loans (excluding leases), net of unearned income and allowance for loan losses ⁽²⁾⁽³⁾	71,594		66,167		—		—		66,167
Other interest-earning assets	86		86		—		86		—
Derivative assets	1,219		1,219		—		1,214		5
Financial liabilities:
Derivative liabilities	1,301		1,301		—		1,301		—
Deposits	92,453		92,460		—		92,460		—
Short-term borrowings	2,182		2,182		—		2,182		—
Long-term borrowings	4,830		5,085		—		—		5,085
Loan commitments and letters of credit	117		621		—		—		621
Indemnification obligation	260		243		—		—		243

_________


(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 interest rates, market liquidity and credit spreads as appropriate.

(2)


(3)	Excluded from this table is the lease carrying amount of $1.7 billion at December 31, 2013 .

NOTE 13. BUSINESS SEGMENT INFORMATION

Each of Regions’ reportable segments is a strategic business unit that serves specific needs of Regions’ customers based on the products and services provided. The segments are based on the manner in which management views the financial performance of the business. The Company has three reportable segments: Business Services, Consumer Services and Wealth Management, with the remainder split between Discontinued Operations and Other. The application and development of management reporting methodologies is a dynamic process and is subject to periodic enhancements. As these enhancements are made, financial results presented may be periodically revised.

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The following tables present financial information for each reportable segment for the period indicated.



	Three Months Ended September 30, 2014
	Business Services		Consumer Services		Wealth Management		Other			Continuing Operations		Discontinued Operations		Consolidated
	(In millions)
Net interest income (loss)	$	453	$	455	$	43	$	(130	)	$	821	$	—	$	821
Provision (credit) for loan losses	27		48		—		(51		)	24		—		24
Non-interest income	130		250		90		8			478		19		497
Non-interest expense	241		455		111		19			826		14		840
Income (loss) before income taxes	315		202		22		(90		)	449		5		454
Income tax expense (benefit)	120		77		8		(78		)	127		2		129
Net income (loss)	$	195	$	125	$	14	$	(12	)	$	322	$	3	$	325
Average assets	$	53,266	$	28,781	$	2,933	$	33,808		$	118,788	$	—	$	118,788



	Three Months Ended September 30, 2013
	Business Services		Consumer Services		Wealth Management		Other			Continuing Operations		Discontinued Operations			Consolidated
	(In millions)
Net interest income (loss)	$	472	$	460	$	44	$	(152	)	$	824	$	—		$	824
Provision (credit) for loan losses	40		67		6		(95		)	18		—			18
Non-interest income	114		270		112		(1		)	495		—			495
Non-interest expense	252		496		114		22			884		1			885
Income (loss) before income taxes	294		167		36		(80		)	417		(1		)	416
Income tax expense (benefit)	112		63		14		(65		)	124		(1		)	123
Net income (loss)	$	182	$	104	$	22	$	(15	)	$	293	$	—		$	293
Average assets	$	52,568	$	28,972	$	3,002	$	32,375		$	116,917	$	—		$	116,917



	Nine Months Ended September 30, 2014
	Business Services		Consumer Services		Wealth Management		Other			Continuing Operations		Discontinued Operations			Consolidated
	(In millions)
Net interest income (loss)	$	1,361	$	1,360	$	129	$	(391	)	$	2,459	$	—		$	2,459
Provision (credit) for loan losses	79		143		1		(162		)	61		—			61
Non-interest income	349		739		273		12			1,373		19			1,392
Non-interest expense	763		1,336		322		42			2,463		(7		)	2,456
Income (loss) before income taxes	868		620		79		(259		)	1,308		26			1,334
Income tax expense (benefit)	330		235		30		(215		)	380		10			390
Net income (loss)	$	538	$	385	$	49	$	(44	)	$	928	$	16		$	944
Average assets	$	53,182	$	28,662	$	2,954	$	33,409		$	118,207	$	—		$	118,207

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	Nine Months Ended September 30, 2013
	Business Services		Consumer Services		Wealth Management		Other			Continuing Operations		Discontinued Operations			Consolidated
	(In millions)
Net interest income (loss)	$	1,395	$	1,383	$	135	$	(483	)	$	2,430	$	—		$	2,430
Provision (credit) for loan losses	205		215		18		(379		)	59		—			59
Non-interest income	343		822		290		38			1,493		—			1,493
Non-interest expense	718		1,442		328		122			2,610		(1		)	2,609
Income (loss) before income taxes	815		548		79		(188		)	1,254		1			1,255
Income tax expense (benefit)	310		208		30		(188		)	360		—			360
Net income	$	505	$	340	$	49	$	—		$	894	$	1		$	895
Average assets	$	49,081	$	29,010	$	3,039	$	36,958		$	118,088	$	—		$	118,088

NOTE 14. COMMITMENTS, CONTINGENCIES AND GUARANTEES

COMMERCIAL COMMITMENTS

Regions issues off-balance sheet financial instruments in connection with lending activities. The credit risk associated with these instruments is essentially the same as that involved in extending loans to customers and is subject to Regions’ normal credit approval policies and procedures. Regions measures inherent risk associated with these instruments by recording a reserve for unfunded commitments based on an assessment of the likelihood that the guarantee will be funded and the creditworthiness of the customer or counterparty. Collateral is obtained based on management’s assessment of the creditworthiness of the customer.

Credit risk associated with these instruments is represented by the contractual amounts indicated in the following table:



	September 30, 2014		December 31, 2013
	(In millions)
Unused commitments to extend credit	$	42,657	$	41,885
Standby letters of credit	1,608		1,629
Commercial letters of credit	47		36
Liabilities associated with standby letters of credit	37		37
Assets associated with standby letters of credit	36		38
Reserve for unfunded credit commitments	65		78

Unused commitments to extend credit —To accommodate the financial needs of its customers, Regions makes commitments under various terms to lend funds to consumers, businesses and other entities. These commitments include (among others) credit card and other revolving credit agreements, term loan commitments and short-term borrowing agreements. Many of these loan commitments have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of these commitments are expected to expire without being funded, the total commitment amounts do not necessarily represent future liquidity requirements.

Standby letters of credit —Standby letters of credit are also issued to customers which commit Regions to make payments on behalf of customers if certain specified future events occur. Regions has recourse against the customer for any amount required to be paid to a third party under a standby letter of credit. Historically, a large percentage of standby letters of credit expire without being funded. The contractual amount of standby letters of credit represents the maximum potential amount of future payments Regions could be required to make and represents Regions’ maximum credit risk.

Commercial letters of credit —Commercial letters of credit are issued to facilitate foreign or domestic trade transactions for customers. As a general rule, drafts will be drawn when the goods underlying the transaction are in transit.

LEGAL CONTINGENCIES

Regions, its affiliates and subsidiaries, and current and former officers, directors and employees, are sometimes collectively referred to as Regions and certain Related Persons. Regions and its subsidiaries are subject to loss contingencies related to litigation, claims, investigations and legal and administrative cases and proceedings arising in the ordinary course of business. Regions evaluates these contingencies based on information currently available, including advice of counsel. Regions establishes accruals for those matters when a loss contingency is considered probable and the related amount is reasonably estimable. Any accruals

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are periodically reviewed and may be adjusted as circumstances change. Some of Regions' exposure with respect to loss contingencies may be offset by applicable insurance coverage. In determining the amounts of any accruals or estimates of possible loss contingencies however, Regions does not take into account the availability of insurance coverage. To the extent that Regions has an insurance recovery, the proceeds are recorded in the period the recovery is received.

In addition, as previously discussed, Regions has agreed to indemnify Raymond James for all legal matters resulting from pre-closing activities in conjunction with the sale of Morgan Keegan and recorded an indemnification obligation at fair value in the second quarter of 2012. The indemnification obligation had a carrying amount of approximately $208 million and an estimated fair value of approximately $193 million as of September 30, 2014 (see Note 12).

When it is practicable, Regions estimates possible loss contingencies, whether or not there is an accrued probable loss. When Regions is able to estimate such possible losses, and when it is reasonably possible Regions could incur losses in excess of amounts accrued, Regions is required to make a disclosure of the aggregate estimation. Regions currently estimates that it is reasonably possible that it may experience losses in excess of what Regions has accrued in an aggregate amount up to approximately $ 170 million as of September 30, 2014 , with it also being reasonably possible that Regions could incur no losses in excess of amounts accrued. As available information changes, the matters for which Regions is able to estimate, as well as the estimates themselves will be adjusted accordingly. The reasonably possible estimate includes legal contingencies that are subject to the indemnification agreement with Raymond James.

Assessments of litigation and claims exposure are difficult because they involve inherently unpredictable factors including, but not limited to, the following: whether the proceeding is in the early stages; whether damages are unspecified, unsupported, or uncertain; whether there is a potential for punitive or other pecuniary damages; whether the matter involves legal uncertainties, including novel issues of law; whether the matter involves multiple parties and/or jurisdictions; whether discovery has begun or is not complete; whether meaningful settlement discussions have commenced; and whether the lawsuit involves class allegations. Assessments of class action litigation, which is generally more complex than other types of litigation, are particularly difficult, especially in the early stages of the proceeding when it is not known if a class will be certified or how a potential class, if certified, will be defined. As a result, Regions may be unable to estimate reasonably possible losses with respect to some of the matters disclosed below, and the aggregated estimated amount provided above may not include an estimate for every matter disclosed below.

Beginning in December 2007, Regions and certain of its affiliates were named in class-action lawsuits filed in federal and state courts on behalf of investors who purchased shares of certain Regions Morgan Keegan Select Funds (the “Funds”) and stockholders of Regions. These cases have been consolidated into class-actions and stockholder derivative actions for the open-end and closed-end Funds. The Funds were formerly managed by Regions Investment Management, Inc. (“Regions Investment Management”). Regions Investment Management no longer manages these Funds, which were transferred to Hyperion Brookfield Asset Management (“Hyperion”) in 2008. Certain of the Funds have since been terminated by Hyperion. The complaints contain various allegations, including claims that the Funds and the defendants misrepresented or failed to disclose material facts relating to the activities of the Funds. Plaintiffs have requested equitable relief and unspecified monetary damages. Settlement discussions are ongoing in certain cases, and the U.S. District Court for the Western District of Tennessee has granted final approval of a settlement in the closed-end Funds class-action and shareholder derivative case as well as preliminary approval of a settlement in a consolidated class action under the Employment Retirement Income Security Act. Certain of the shareholders in these Funds and other interested parties have entered into arbitration proceedings and individual civil claims, in lieu of participating in the class actions. These lawsuits and proceedings are subject to the indemnification agreement with Raymond James discussed above.

In October 2010, a purported class-action lawsuit was filed by Regions’ stockholders in the U.S. District Court for the Northern District of Alabama (the “District Court”) against Regions and certain former officers of Regions (the "2010 Claim"). The 2010 Claim alleges violations of the federal securities laws, including allegations that materially false and misleading statements were included in filings made with the Securities and Exchange Commission ("SEC"). The plaintiffs have requested equitable relief and unspecified monetary damages. In June 2011, the trial court denied Regions’ motion to dismiss the 2010 Claim. In June 2012, the trial court granted class certification. The Eleventh Circuit Court of Appeals on September 5, 2014, vacated certification in part and remanded the 2010 Claim to District Court for further review of the class certification issue.

In July 2006, Morgan Keegan and a former Morgan Keegan analyst were named as defendants in a lawsuit filed by a Canadian insurance and financial services company and its American subsidiary in the Circuit Court of Morris County, New Jersey. Plaintiffs alleged claims under a civil Racketeer Influenced and Corrupt Organizations (“RICO”) statute and claims for commercial disparagement, tortious interference with contractual relationships, tortious interference with prospective economic advantage and common law conspiracy. Plaintiffs allege that defendants engaged in a multi-year conspiracy to publish and disseminate false and defamatory information about plaintiffs to improperly drive down plaintiffs’ stock price, so that others could profit from short positions. Plaintiffs allege that defendants’ actions damaged their reputations and harmed their business relationships. Plaintiffs seek monetary damages for a number of categories of alleged damages, including lost insurance business, lost financings and increased financing costs, increased audit fees and directors and officers insurance premiums and lost acquisitions. In September 2012, the trial court dismissed the case with prejudice. Plaintiffs have filed an appeal. This matter is subject to the indemnification agreement with Raymond James.

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The SEC and states of Missouri and Texas are investigating alleged securities law violations by Morgan Keegan in the underwriting and sale of certain municipal bonds. An enforcement action brought by the Missouri Secretary of State in April 2013, seeking monetary penalties and other relief, was dismissed and refiled in November 2013. A civil action was brought by institutional investors of the bonds in March 2012, seeking a return of their investment and unspecified compensatory and punitive damages. Trial of this case is currently set for March 2015 in the Circuit Court for Cole County, Missouri. A class action was brought on behalf of retail purchasers of the bonds in September 2012, seeking unspecified compensatory and punitive damages. In September 2014, the District Court for the Western District of Missouri granted class certification. The trial date which was originally set for September 2014 has been postponed and a new date has not been scheduled at this time. Other individual investors and investor groups have also filed arbitration claims or separate civil claims, which are pending in various stages. These matters are subject to the indemnification agreement with Raymond James.

Regions is involved in formal and informal information-gathering requests, investigations, reviews, examinations and proceedings by various governmental regulatory agencies, law enforcement authorities and self-regulatory bodies regarding Regions’ business, Regions' business practices and policies and the conduct of persons with whom Regions does business. Additional inquiries will arise from time to time. In connection with those inquiries, Regions receives document requests, subpoenas and other requests for information. The inquiries, including those described below, could develop into administrative, civil or criminal proceedings or enforcement actions that could result in consequences that have a material effect on Regions' consolidated financial position, results of operations or cash flows as a whole. Such consequences could include adverse judgments, findings, settlements, penalties, fines, orders, injunctions, restitution, or alterations in our business practices, and could result in additional expenses and collateral costs, including reputational damage.

In 2013, Regions received investigative requests from government agencies regarding its residential mortgage loan origination, underwriting and quality control practices for Federal Housing Administration insured loans made by Regions. More recently, in September 2014, Regions received an investigative request from the Office of Inspector General of the Federal Housing Finance Agency regarding its residential mortgage loan origination, underwriting and quality control practices for loans Regions sold to Fannie Mae and Freddie Mac. These inquiries are part of industry-wide investigations, and Regions is cooperating with the inquiries. Many institutions have settled these matters on terms that included large monetary penalties, including, in some cases, civil money penalties under applicable banking laws. The Company cannot predict the ultimate outcome of the investigations concerning its practices, however it is possible that these investigations could result in the payment of a monetary penalty which may adversely affect results of operations.

While the final outcome of litigation and claims exposures or of any inquiries is inherently unpredictable, management is currently of the opinion that the outcome of pending and threatened litigation and inquiries will not have a material effect on Regions’ business, consolidated financial position, results of operations or cash flows as a whole. However, in the event of unexpected future developments, it is reasonably possible that an adverse outcome in any of the matters discussed above could be material to Regions’ business, consolidated financial position, results of operations or cash flows for any particular reporting period of occurrence.

GUARANTEES

INDEMNIFICATION OBLIGATION

As discussed in Note 2, on April 2, 2012 (“Closing Date”), Regions closed the sale of Morgan Keegan and related affiliates to Raymond James. In connection with the sale, Regions agreed to indemnify Raymond James for all legal matters related to pre-closing activities, including matters filed subsequent to the Closing Date that relate to actions that occurred prior to closing. Losses under the indemnification include legal and other expenses, such as costs for judgments, settlements and awards associated with the defense and resolution of the indemnified matters. The maximum potential amount of future payments that Regions could be required to make under the indemnification is indeterminable due to the indefinite term of some of the obligations. However, Regions expects the majority of ongoing legal matters to be resolved within approximately two years.

As of the Closing Date, the fair value of the indemnification obligation, which includes defense costs and unasserted claims, was approximately $385 million , of which approximately $256 million was recognized as a reduction to the gain on sale of Morgan Keegan. The fair value was determined through the use of a present value calculation that takes into account the future cash flows that a market participant would expect to receive from holding the indemnification liability as an asset. Regions performed a probability-weighted cash flow analysis and discounted the result at a credit-adjusted risk free rate. The fair value of the indemnification liability includes amounts that Regions had previously determined meet the definition of probable and reasonably estimable. Adjustments to the indemnification obligation are recorded within professional and legal expenses within discontinued operations (see Note 2). As of September 30, 2014 , the carrying value of the indemnification obligation was approximately $208 million .

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VISA INDEMNIFICATION

As a member of the Visa USA network, Regions, along with other members, indemnified Visa USA against litigation. On October 3, 2007, Visa USA was restructured and acquired several Visa affiliates. In conjunction with this restructuring, Regions' indemnification of Visa USA was modified to cover specific litigation (“covered litigation”).

A portion of Visa's proceeds from its initial public offering ("IPO") was escrowed to fund the covered litigation. During the first quarter of 2013, Visa made a settlement payment related to the covered litigation which reduced Regions' share of the escrow account to approximately zero at March 31, 2013. Regions made a corresponding adjustment to reduce its liability to approximately zero at March 31, 2013. The balances related to the escrow and the corresponding liability are approximately zero as of September 30, 2014 . To the extent that the amount available under the escrow arrangement, or subsequent fundings of the escrow account via reductions in the class B share conversion ratio, is insufficient to fully resolve the covered litigation, Visa will enforce the indemnification obligations of Visa USA's members for any excess amount. At this time, Regions has concluded that it is not probable that covered litigation exposure will exceed the class B share value.

NOTE 15. RECENT ACCOUNTING PRONOUNCEMENTS

In July 2013, the Financial Accounting Standards Board ("FASB") issued final guidance on the presentation of certain unrecognized tax benefits in the financial statements. This guidance requires unrecognized tax benefits to be presented as a decrease in a deferred tax asset for a net operating loss carryforward, similar tax loss or tax credit carryforward if certain criteria are met. In situations in which a net operating loss carryforward, a similar tax loss or tax credit carryforward is not available at the reporting date under the tax law of the jurisdiction or the tax law of the jurisdiction does not require, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit will be presented in the financial statements as a liability and will not be combined with deferred tax assets. This guidance became effective for fiscal years and interim periods within those years beginning after December 15, 2013 and was adopted by Regions on a prospective basis with the first quarter of 2014 financial reporting. The guidance did not have a material impact upon adoption.

In January 2014, the FASB issued new accounting guidance related to the accounting for investments in qualified affordable housing projects. The guidance allows the holder of low income housing tax credit ("LIHTC") investments to apply a proportional amortization method that would recognize the cost of the investment as a part of income tax expense, provided that the investment meets certain criteria. The guidance is silent regarding statement of financial position classification. Regions believes it would not be appropriate to classify the investment as a deferred tax asset. The decision to apply the proportional amortization method is an accounting policy election. Entities may also elect to continue to account for these investments using the equity method. The guidance will be applied retrospectively and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Early adoption is permitted. Regions is in the process of reviewing the potential impact the adoption of this guidance will have to its consolidated financial statements.

In January 2014, the FASB issued new accounting guidance regarding the reclassification of residential real estate collateralized consumer mortgage loans upon foreclosures. The guidance requires reclassification of a consumer mortgage loan to other real estate owned upon obtaining legal title to the residential property, which could occur either through foreclosure or through a deed in lieu of foreclosure or similar legal agreement. The existence of a borrower redemption right will not prevent the lender from reclassifying a loan to other real estate once the lender obtains legal title to the property. In addition, entities are required to disclose the amount of foreclosed residential real estate properties and the recorded investment in residential real estate mortgage loans in the process of foreclosure on both an interim and annual basis. The guidance may be applied prospectively or on a modified retrospective basis in fiscal years, and interim periods within those fiscal years, beginning after December 15, 2014. Early adoption is permitted. Regions believes that adoption of this guidance will not have a material impact to its consolidated financial statements.

In May 2014, the FASB and the International Accounting Standards Board (“IASB”) jointly issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under U.S. GAAP and International Financial Reporting Standards ("IFRS"). The standard’s core principle is that an entity will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The guidance may be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initial application recognized at the date of initial application for fiscal years and interim periods within those years beginning after December 15, 2016. Early application is not permitted. Regions is in the process of reviewing the potential impact the adoption of this guidance will have to its consolidated financial statements.

In June 2014, the FASB issued new accounting guidance that requires two accounting changes related to the transfer and servicing of repurchase agreements and similar transactions. First, the amendments in the update change the accounting for repurchase-to-maturity transactions to secured borrowing accounting. Second, for repurchase financing arrangements, the amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty, which will result in secured borrowing accounting for the repurchase agreement. The amendments in the update also require certain disclosures for transfers of financial assets and repurchase agreements. The accounting changes

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are effective for fiscal years and interim periods within those years beginning after December 15, 2014. The changes should be applied as a cumulative-effect adjustment to retained earnings at the beginning of the period of adoption. The disclosure of certain transactions accounted for as a sale is required to be presented for fiscal years and interim periods within those years beginning after December 15, 2014 and the disclosure for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowing is required to be presented for fiscal years beginning after December 15, 2014, and for interim periods beginning after March 15, 2015. Early application is not permitted. Regions is in the process of reviewing the potential impact the adoption of this guidance will have to its consolidated financial statements.

In June 2014, the FASB issued new accounting guidance that requires a performance target that affects vesting and that could be achieved after the requisite service period to be treated as a performance condition. An entity should apply existing guidance that relates to awards with performance conditions that affect vesting to account for such awards. The guidance may be applied prospectively or retrospectively and is effective for fiscal years and interim periods within those years beginning after December 15, 2015. Early adoption is permitted. This guidance will not have a material impact upon adoption as Regions has no share-based grants with performance targets that could be achieved after the requisite service period.

In August 2014, the FASB issued new accounting guidance regarding the classification and measurement of foreclosed mortgage loans that are guaranteed by the government (including loans guaranteed by the FHA and the VA). The guidance addresses diversity in practice by requiring creditors to derecognize the mortgage loan upon foreclosure and to recognize a separate other receivable if the following conditions are met: (a) the government guarantee of the loan is not separable from the loan before foreclosure; (b) upon foreclosure, the creditor has the intent to convey the real estate to the guarantor and to make a claim on the guarantee, and also has the ability to make a recovery under the claim; and (c) claim amounts based on the fair value of the property are fixed upon foreclosure. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. The guidance may be applied prospectively or on a modified retrospective basis in fiscal years, and interim periods within those fiscal years, beginning after December 15, 2014. The transition method applied should be the same as the transition method applied upon implementation of the new accounting guidance issued in January 2014, described above, regarding the reclassification of residential real estate collateralized consumer mortgage loans upon foreclosures. Early adoption is permitted. Regions believes that adoption of this guidance will not have a material impact to its consolidated financial statements.

In August 2014, the FASB issued new accounting guidance to offer a measurement alternative for reporting entities that consolidate a collateralized financing entity ("CFE") in which the financial assets and financial liabilities are measured at fair value, with changes in fair values reflected in earnings. Under the measurement alternative, the reporting entity could elect to measure both the CFE’s financial assets and financial liabilities using the fair value of either the CFE’s financial assets or financial liabilities, whichever is more observable. Regions is in the process of reviewing the potential impact the adoption of this guidance will have to its consolidated financial statements.

In August 2014, the FASB issued new accounting guidance that requires management to evaluate whether there are conditions and events that raise substantial doubt about an entity’s ability to continue as a going concern. The guidance is intended to incorporate into GAAP a requirement that management perform a going concern evaluation similar to the auditor’s evaluation required by standards issued by the Public Company Accounting Oversight Board ("PCAOB") and American Institute of Certified Public Accountants ("AICPA"). The guidance is effective for all entities for annual periods ending after December 15, 2016 and for annual and interim periods thereafter. Early application is permitted. Regions believes the adoption of this guidance will not have a material impact upon adoption.

Further information related to recent accounting pronouncements and accounting changes adopted by Regions prior to the first quarter of 2014 is included in the Annual Report on Form 10-K for the year ended December 31, 2013 .

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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 to the Securities and Exchange Commission (“SEC”) and updates Regions’ Annual Report on Form 10-K for the year ended December 31, 2013 , 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 the Form 10-K. Certain prior period amounts presented in this discussion and analysis have been reclassified to conform to current period classifications, except as otherwise noted. The emphasis of this discussion will be on the three and nine months ended September 30, 2014 compared to the three and nine months ended September 30, 2013 for the consolidated statements of income. For the consolidated balance sheet, the emphasis of this discussion will be the balances as of September 30, 2014 compared to December 31, 2013 .

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 3 and 4 for additional information regarding forward-looking statements.

CORPORATE PROFILE

Regions is a financial holding company headquartered in Birmingham, Alabama, which operates in the South, Midwest and Texas. Regions provides traditional commercial, retail and mortgage banking services, as well as other financial services in the fields of asset management, wealth management, securities brokerage, insurance and other specialty financing.

Regions conducts its banking operations through Regions Bank, an Alabama chartered commercial bank that is a member of the Federal Reserve System. At September 30, 2014 , Regions operated 1,671 total branch outlets in Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, Texas and Virginia. Regions operates under three reportable business segments: Business Services, Consumer Services, and Wealth Management with the remainder split between Discontinued Operations and Other. See Note 13 “Business Segment Information” to the consolidated financial statements for more information regarding Regions’ segment reporting structure. Regions also provides full-line insurance brokerage services primarily through Regions Insurance, Inc. which is included in the Wealth Management segment.

On January 11, 2012, Regions entered into a stock purchase agreement to sell Morgan Keegan & Company, Inc. (“Morgan Keegan”) and related affiliates to Raymond James Financial, Inc. (“Raymond James”). The sale closed on April 2, 2012. Regions Investment Management, Inc. and Regions Trust were not included in the sale; they are included in the Wealth Management segment. See Note 2 “Discontinued Operations” to the consolidated financial statements for further discussion.

Regions’ profitability, like that of many other financial institutions, is dependent on its ability to generate revenue from net interest income and non-interest income sources. Net interest income is the difference between the interest income Regions receives on interest-earning assets, such as loans and securities, 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, insurance activities, capital markets, and other customer services which Regions provides. Results of operations are also affected by the provision for loan losses and non-interest expenses such as salaries and employee benefits, occupancy, professional and legal expenses, deposit administrative fees, 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 and prevailing market rates on competing products in Regions’ market areas.

Regions’ business strategy has been and continues to be focused on providing a competitive mix of products and services, delivering quality customer service and maintaining a branch distribution network with offices in convenient locations.

THIRD QUARTER OVERVIEW

Regions reported net income available to common shareholders of $305 million , or $0.22 per diluted share, in the third quarter of 2014 compared to net income available to common shareholders of $285 million , or $0.20 per diluted share, in the third quarter of 2013 . Lower non-interest expenses were partially offset by lower non-interest income compared to the prior year period.

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For the third quarter of 2014 , net interest income (taxable-equivalent basis) from continuing operations totaled $837 million , essentially flat compared to the third quarter of 2013 . The net interest margin (taxable-equivalent basis) was 3.18 percent for the third quarter of 2014 and 3.24 percent in the third quarter of 2013 . Although the average balance of loans has increased for the third quarter of 2014 compared to the third quarter of 2013, loan yields declined. The average balance of other interest-earning assets, which consists primarily of excess cash held at the Federal Reserve, also increased during this period, but continues to yield only 25 basis points. Rates paid on interest-bearing liabilities also declined during this period, but not enough to offset the reduction in yields on earning assets. These factors collectively drove the 6 basis point compression in net interest margin. Total deposit costs were 11 basis points for the third quarter of 2014 , as compared to 13 basis points for the third quarter of 2013 . Total funding costs, which include deposits, short-term borrowings and long-term debt, were 30 basis points for the third quarter of 2014 , as compared to 35 basis points for the third quarter of 2013 .

The provision for loan losses totaled $24 million in the third quarter of 2014 compared to $18 million during the third quarter of 2013 . Credit metrics, including net charge-offs and non-accrual loan balances, showed continued improving trends through the first nine months of 2014 compared to 2013 .

Net charge-offs totaled $75 million, or an annualized 0.39 percent of average loans, in the third quarter of 2014 , compared to $114 million, or an annualized 0.60 percent for the third quarter of 2013 . Net charge-offs were lower across most major loan categories when comparing the third quarter of 2014 period to the prior year period.

The allowance for loan losses at September 30, 2014 was 1.54 percent of total loans, net of unearned income, compared to 1.80 percent at December 31, 2013 . Total non-performing assets were $1.0 billion at September 30, 2014 , compared to $1.3 billion at December 31, 2013 .

Non-interest income from continuing operations for the third quarter of 2014 was $478 million , compared to $495 million for the third quarter of 2013 . During the third quarter of 2013, the Company divested a non-core portion of a Wealth Management business which resulted in a pre-tax gain of $24 million, and during the third quarter of 2014, certain leveraged leases were terminated resulting in a $9 million pre-tax gain.

Total non-interest expense from continuing operations was $826 million in the third quarter of 2014 , a $58 million decrease from the third quarter of 2013 , driven primarily by decreased deposit administration fees and a benefit in the provision for unfunded credit losses.

A discussion of activity within discontinued operations is included at the end of the Management’s Discussion and Analysis section of this report.

TOTAL ASSETS

Regions’ total assets at September 30, 2014 were $119.2 billion , compared to $117.4 billion at December 31, 2013 . The increase in total assets from year-end 2013 resulted primarily from a $2.0 billion increase in loans and an $894 million increase in securities available for sale. These increases were offset by a $510 million decrease in cash and cash equivalents and a $551 million decrease in loans held for sale as a result of the sale of certain primarily accruing residential first mortgage loans classified as troubled debt restructurings ("TDRs"). See the "Loans Held For Sale" section for further information. Funding for this net asset growth came primarily from increases in low-cost deposits.

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SECURITIES

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

Table 1—Securities



	September 30, 2014		December 31, 2013
	(In millions)
U.S. Treasury securities	$	62	$	57
Federal agency securities	407		425
Obligations of states and political subdivisions	3		5
Mortgage-backed securities:
Residential agency	18,191		17,474
Residential non-agency	9		9
Commercial agency	1,815		1,154
Commercial non-agency	1,488		1,211
Corporate and other debt securities	1,994		2,827
Equity securities	632		676
	$	24,601	$	23,838

Regions maintains a highly rated securities portfolio consisting primarily of agency mortgage-backed securities. Total securities at September 30, 2014 increased $763 million from year-end 2013 primarily due to market rate improvements in the fair value of the available for sale securities portfolio as well as additional portfolio purchases.

Securities available for sale, which constitute the majority of the securities portfolio, are an important tool used to manage interest rate sensitivity and provide a primary source of liquidity for the Company. See the "Market Risk-Interest Rate Risk" and "Liquidity Risk" sections for more information.

LOANS HELD FOR SALE

Loans held for sale totaled $504 million at September 30, 2014 , consisting primarily of $457 million of residential real estate mortgage loans and $38 million of non-performing investor real estate loans. At December 31, 2013 , loans held for sale totaled $1.1 billion , consisting primarily of $963 million of residential real estate mortgage loans, including $535 million of certain primarily accruing residential first mortgage loans classified as TDRs that were transferred to loans held for sale in the fourth quarter of 2013, and $82 million of non-performing investor real estate loans. Substantially all of the TDR loans held for sale were sold in the first quarter of 2014. The level of residential real estate mortgage loans held for sale that are part of the Company's mortgage originations to be sold in the secondary market fluctuates depending on the timing of origination and sale to third parties.

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LOANS

Loans, net of unearned income, represented approximately 73 percent of Regions’ interest-earning assets at September 30, 2014 . The following table presents the distribution of Regions’ loan portfolio by portfolio segment and class, net of unearned income:

Table 2—Loan Portfolio



	September 30, 2014		December 31, 2013
	(In millions, net of unearned income)
Commercial and industrial	$	31,857	$	29,413
Commercial real estate mortgage—owner-occupied	8,666		9,495
Commercial real estate construction—owner-occupied	350		310
Total commercial	40,873		39,218
Commercial investor real estate mortgage	4,940		5,318
Commercial investor real estate construction	1,878		1,432
Total investor real estate	6,818		6,750
Residential first mortgage	12,264		12,163
Home equity	10,968		11,294
Indirect	3,543		3,075
Consumer credit card	964		948
Other consumer	1,177		1,161
Total consumer	28,916		28,641
	$	76,607	$	74,609

PORTFOLIO CHARACTERISTICS

The following sections describe the composition of the portfolio segments and classes in Table 2 and explain changes in balances from the 2013 year-end. See Note 4 “Loans and the Allowance for Credit Losses” to the consolidated financial statements for additional discussion.

Regions has a diversified loan portfolio, in terms of product type, collateral and geography. At September 30, 2014 , commercial loans represented 53 percent of total loans, net of unearned income, investor real estate loans represented 9 percent, residential first mortgage loans totaled 16 percent, home equity lending totaled 14 percent, indirect loans equaled 5 percent, other consumer loans totaled 2 percent and consumer credit card loans made up the remaining 1 percent of loans. Following is a discussion of risk characteristics of each loan type.

Loans, net of unearned income, totaled $76.6 billion at September 30, 2014 , an increase of approximately $2.0 billion from year-end 2013 levels. Continued growth in commercial and industrial and indirect auto loan portfolios, along with increases in commercial investor real estate construction loans, more than offset declines in commercial real estate mortgage, investor real estate mortgage and home equity lending during the first nine months of 2014 .

Commercial —The commercial portfolio segment includes commercial and industrial loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases and other expansion projects. Commercial and industrial loans have increased $2.4 billion or 8 percent since year-end due to Regions’ integrated approach to specialized lending. Commercial also includes owner-occupied commercial real estate mortgage loans to operating businesses, which are loans for long-term financing of land and buildings, and are repaid by cash flow generated by business operations. These loans declined $829 million or 9 percent from year-end 2013 as a result of continued customer deleveraging. Owner-occupied 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. During the first nine months of 2014, total commercial loan balances increased approximately $1.7 billion , or 4 percent.

Investor Real Estate —Loans for real estate development are repaid through cash flow 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 sale of real estate or income generated from the real estate collateral. A portion of Regions’ investor real estate 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 investor real estate loans increased $68 million from 2013 year-end balances.

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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. These loans experienced a $101 million increase from year-end 2013 , as prepayments have slowed. Approximately $277 million of these 10 and 15-year fixed rate loans were retained on the balance sheet through the first nine months of 2014 .

Home Equity— Home equity lending includes both home equity loans and lines of credit. This type of lending, which is secured by a first or second mortgage on the borrower’s residence, allows customers to borrow against the equity in their home. Substantially all of this portfolio was originated through Regions’ branch network. During the first nine months , home equity balances decreased $326 million , driven by continued consumer deleveraging and refinancing.

Indirect— Indirect lending, which is lending initiated through third-party business partners, largely consists of loans made through automotive dealerships. This portfolio class increased $468 million from year-end 2013 , reflecting continued growing demand for automobile loans.

Consumer Credit Card— Consumer credit card lending represents primarily open-ended variable interest rate consumer credit card loans. These balances increased $16 million during the first nine months of 2014.

Other Consumer —Other consumer loans include direct consumer installment loans, overdrafts and other revolving loans. Other consumer loans increased $16 million during the first nine months of 2014.

CREDIT QUALITY

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, certain loan products, or certain regions of the country.

Commercial

The commercial portfolio segment generated the majority of the Company's loan growth in the first nine months of 2014 , particularly commercial and industrial loans. Over half of the Company’s total loans are included in the commercial portfolio segment. These balances are spread across numerous industries, as disclosed in "Table 11—Selected Industry Balances" in the Annual Report on Form 10-K for the year ended December 31, 2013 . The Company manages the related risks to this portfolio by setting certain lending limits for each significant industry. At September 30, 2014 and December 31, 2013 , no single industry exceeded 15 percent of the total commercial portfolio balance.

Home Equity

The home equity portfolio totaled $11.0 billion at September 30, 2014 as compared to $11.3 billion at December 31, 2013 . Substantially all of this portfolio was originated through Regions’ branch network.

The following table presents information regarding the future principal payment reset dates for the Company's home equity lines of credit as of September 30, 2014 . 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 3—Home Equity Lines of Credit - Future Principal Payment Resets



	First Lien		% of Total		Second Lien		% of Total		Total
	(Dollars in millions)
2014	$	9	0.10	%	$	71	0.82	%	$	80
2015	23		0.27		166		1.93		189
2016	29		0.34		39		0.45		68
2017	5		0.06		12		0.14		17
2018	15		0.17		26		0.30		41
2019-2023	1,211		14.07		1,079		12.53		2,290
2024-2028	2,749		31.94		3,051		35.45		5,800
Thereafter	70		0.81		53		0.62		123
Total	$	4,111	47.76	%	$	4,497	52.24	%	$	8,608

Of the $11.0 billion home equity portfolio at September 30, 2014 , approximately $8.6 billion were home equity lines of credit and $2.4 billion were closed-end home equity loans (primarily originated as amortizing loans). Beginning in May 2009, new home equity lines of credit have a 10-year draw period and a 10-year repayment period. Previously, the home equity lines of credit had a 20-year term with a balloon payment upon maturity or a 5-year draw period with a balloon payment upon maturity. The term “balloon payment” means there are no principal payments required until the balloon payment is due for interest-only lines of credit. As of September 30, 2014 , none of Regions' home equity lines of credit have converted to mandatory amortization

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under the contractual terms. As presented in the table above, the majority of home equity lines of credit will either mature with a balloon payment or convert to amortizing status after fiscal year 2020.

Of the $8.6 billion of home equity lines of credit as of September 30, 2014 , approximately 91 percent require monthly interest-only payments while the remaining approximately 9 percent require a payment equal to 1.5 percent of the outstanding balance, which would include some principal repayment. As of September 30, 2014 , approximately 29 percent of borrowers were only paying the minimum amount due on the home equity line. In addition, approximately 58 percent of the home equity lines of credit balances have the option to amortize either all or a portion of their balance. As of September 30, 2014 , approximately $277 million of the home equity line of credit balances have elected this option.

Regions is unable to track payment status on first liens held by another institution, including payment status related to loan modifications. When Regions’ second lien position becomes delinquent, an attempt is made to contact the first lien holder and inquire as to the payment status of the first lien. However, Regions does not continuously monitor the payment status of the first lien position. Short sale offers and settlement agreements are often received by the home equity junior lien holders well before the loan balance reaches the delinquency threshold for charge-off consideration, potentially resulting in a full balance payoff/charge-off. Regions is presently monitoring the status of all first lien position loans that the Company owns or services and has a second lien, and is taking appropriate action when delinquent. Regions services the first lien on approximately 23 percent of the entire second lien home equity portfolio as of September 30, 2014 . Regions believes that the results related to the non-Regions-serviced first liens would not be significantly different than that of the portfolio which Regions services.

Indirect

Regions re-entered the indirect automotive lending market in October 2010 and has experienced steady portfolio growth. Regions is focused on prudent growth strategies by establishing mutually beneficial, prime lending relationships with a select group of franchised new car dealers. Regions' credit policy stipulates that it originates only prime quality auto loans. Purchased loans, which are primarily prime quality auto loans, are monitored on a regular basis with performance having been consistent with the originated portfolio.

Other Consumer Credit Quality Data

The Company calculates an estimate of the current value of property secured as collateral for both home equity and residential first mortgage lending products (“current LTV”). The estimate is based on home price indices compiled by a third party. The third party data indicates trends for Metropolitan Statistical Areas (“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 and home equity classes of the consumer portfolio segment. Current LTV data for the remaining loans in the portfolio is not available, primarily because some of the loans are serviced by others. Data may also not be 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. The balances in the “Above 100%” category as a percentage of the portfolio balances decreased from 6 percent to 4 percent in the residential first mortgage portfolio and from 13 percent to 7 percent in the home equity portfolio when comparing December 31, 2013 to September 30, 2014, respectively.

Table 4—Estimated Current Loan to Value Ranges



	September 30, 2014						December 31, 2013
	Residential First Mortgage		Home Equity				Residential First Mortgage		Home Equity
	Residential First Mortgage		1st Lien		2nd Lien		Residential First Mortgage		1st Lien		2nd Lien
	(In millions)
Estimated current loan to value:
Above 100%	$	430	$	187	$	617	$	733	$	416	$	1,034
80% - 100%	1,695		527		1,107		2,050		737		1,294
Below 80%	9,613		5,210		2,771		8,899		4,646		2,501
Data not available	526		190		359		481		199		467
	$	12,264	$	6,114	$	4,854	$	12,163	$	5,998	$	5,296

Regions qualitatively considers factors such as periodic updates of FICO scores, unemployment, home prices, and geography as credit quality indicators for consumer loans. FICO scores are obtained at origination as part of Regions' formal underwriting process. Refreshed FICO scores are obtained by the Company quarterly for all revolving accounts and home equity lines of credit

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and semi-annually for all other consumer loans. The following tables present estimated current FICO score data for components of classes of the consumer portfolio segment. Current FICO data is not available for the remaining loans in the portfolio for various reasons; for example, if customers do not use sufficient credit, an updated score may not be available. Residential first mortgage and home equity balances with FICO scores below 620 were 7 percent of the combined portfolios for both September 30, 2014 and December 31, 2013 .

Table 5—Estimated Current FICO Score Ranges



	September 30, 2014
	Residential First Mortgage		Home Equity				Indirect		Consumer Credit Card		Other Consumer
	Residential First Mortgage		1st Lien		2nd Lien		Indirect		Consumer Credit Card		Other Consumer
	(In millions)
Below 620	$	869	$	354	$	338	$	330	$	45	$	77
620 - 680	994		552		504		500		143		137
681-720	1,355		754		631		569		225		176
Above 720	8,036		4,209		3,212		1,969		550		474
Data not available	1,010		245		169		175		1		313
	$	12,264	$	6,114	$	4,854	$	3,543	$	964	$	1,177



	December 31, 2013
	Residential First Mortgage		Home Equity				Indirect		Consumer Credit Card		Other Consumer
	Residential First Mortgage		1st Lien		2nd Lien		Indirect		Consumer Credit Card		Other Consumer
	(In millions)
Below 620	$	886	$	324	$	322	$	312	$	38	$	87
620 - 680	1,022		533		527		470		130		142
681-720	1,341		725		672		511		216		177
Above 720	8,091		4,052		3,491		1,599		563		425
Data not available	823		364		284		183		1		330
	$	12,163	$	5,998	$	5,296	$	3,075	$	948	$	1,161

ALLOWANCE FOR CREDIT LOSSES

The allowance for credit losses ("allowance") consists of two components: the allowance for loan and lease losses and the reserve for unfunded credit commitments. The allowance represents management’s estimate of probable credit losses inherent in the loan and credit commitment portfolios as of period-end. Regions determines its allowance in accordance with applicable accounting literature as well as regulatory guidance related to receivables and contingencies. Binding unfunded credit commitments include items such as letters of credit, financial guarantees and binding unfunded loan commitments. Additional discussion of the methodology used to calculate the allowance is included in Note 1 “Summary of Significant Accounting Policies” and Note 6 “Allowance for Credit Losses” to the consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2013, as well as related discussion in Management’s Discussion and Analysis.

The allowance for loan losses totaled $1.2 billion at September 30, 2014 compared to $1.3 billion at December 31, 2013 . The allowance for loan losses as a percentage of net loans was 1.54 percent at September 30, 2014 and 1.80 percent at December 31, 2013 . The reserve for unfunded credit commitments was $65 million at September 30, 2014 and $78 million at December 31, 2013 . Net charge-offs as a percentage of average loans (annualized) were 0.39 percent and 0.78 percent in the first nine months of 2014 and 2013 , respectively. Net charge-offs were lower across most categories, period over period. The provision for loan losses totaled $24 million in the third quarter of 2014 compared to $18 million during the third quarter of 2013 . The provision for loan losses totaled $61 million for the nine months ended September 30, 2014 compared to $59 million for the first nine months of 2013 . Net charge-offs exceeded the provision for loan losses for the third quarters and first nine months of 2014 and 2013 , primarily resulting from continued improving credit metrics such as lower levels of non-accrual and criticized and classified loans, as well as problem loan resolutions.

Management considers the current level of allowance appropriate to absorb losses inherent in the loan and credit commitment portfolios. Management’s determination of the appropriateness of the allowance requires the use of judgments and estimations that may change in the future. Changes in the factors used by management to determine the appropriateness of the allowance or the availability of new information could cause the allowance to be increased or decreased in future periods. Management expects the allowance for credit losses to total loans ratio to vary over time due to changes in portfolio balances, economic conditions,

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loan mix and collateral values, or variations in other factors that may affect inherent losses. In addition, bank regulatory agencies, as part of their examination process, may require changes in the level of the allowance based on their judgments and estimates.

Management expects that net loan charge-offs in 2014 will continue to improve compared to 2013 . Economic trends such as real estate valuations, interest rates and unemployment will impact the future levels of net charge-offs and provision and may result in volatility during the remainder of 2014. Additionally, changes in circumstances related to individually large credits or certain portfolios may result in volatility. Details regarding the allowance and net charge-offs, including an analysis of activity from the previous year’s totals, are included in Table 6 “Allowance for Credit Losses.”

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Activity in the allowance for credit losses is summarized as follows:

Table 6—Allowance for Credit Losses



	Nine Months Ended September 30
	2014			2013
	(Dollars in millions)
Allowance for loan losses at beginning of year	$	1,341		$	1,919
Loans charged-off:
Commercial and industrial	80			137
Commercial real estate mortgage—owner-occupied	48			92
Commercial real estate construction—owner-occupied	2			1
Commercial investor real estate mortgage	20			58
Commercial investor real estate construction	1			1
Residential first mortgage	29			57
Home equity	70			125
Indirect	27			23
Consumer credit card	28			29
Other consumer	49			47
	354			570
Recoveries of loans previously charged-off:
Commercial and industrial	40			32
Commercial real estate mortgage—owner-occupied	12			19
Commercial real estate construction—owner-occupied	—			2
Commercial investor real estate mortgage	17			22
Commercial investor real estate construction	4			4
Residential first mortgage	7			4
Home equity	25			27
Indirect	10			8
Consumer credit card	4			3
Other consumer	11			11
	130			132
Net charge-offs:
Commercial and industrial	40			105
Commercial real estate mortgage—owner-occupied	36			73
Commercial real estate construction—owner-occupied	2			(1		)
Commercial investor real estate mortgage	3			36
Commercial investor real estate construction	(3		)	(3		)
Residential first mortgage	22			53
Home equity	45			98
Indirect	17			15
Consumer credit card	24			26
Other consumer	38			36
	224			438
Provision for loan losses	61			59
Allowance for loan losses at September 30	$	1,178		$	1,540
Reserve for unfunded credit commitments at beginning of year	$	78		$	83
Provision (credit) for unfunded credit losses	(13		)	(9		)
Reserve for unfunded credit commitments at September 30	$	65		$	74
Allowance for credit losses at September 30	$	1,243		$	1,614
Loans, net of unearned income, outstanding at end of period	$	76,607		$	75,892
Average loans, net of unearned income, outstanding for the period	$	75,940		$	74,615
Ratios:
Allowance for loan losses at end of period to loans, net of unearned income	1.54		%	2.03		%
Allowance for loan losses at end of period to non-performing loans, excluding loans held for sale	1.41x			1.14x
Net charge-offs as percentage of average loans, net of unearned income (annualized)	0.39		%	0.78		%

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TROUBLED DEBT RESTRUCTURINGS (TDRs)

Residential first mortgage, home equity, indirect, consumer credit card and other consumer TDRs are consumer loans modified under the Customer Assistance Program ("CAP"). Commercial and investor real estate loan modifications are not the result of a formal program, but represent situations where modification was offered as a workout alternative. Renewals of classified commercial and investor real estate loans are considered to be TDRs, even if no reduction in interest rate is offered, if the existing terms are considered to be below market. More detailed information is included in Note 4 "Loans and the Allowance For Credit Losses" to the consolidated financial statements. The following table summarizes TDRs for the periods presented:

Table 7—Troubled Debt Restructurings



	September 30, 2014				December 31, 2013
	Loan Balance		Allowance for Loan Losses		Loan Balance		Allowance for Loan Losses
	(In millions)
Accruing:
Commercial	$	289	$	43	$	468	$	58
Investor real estate	328		43		511		46
Residential first mortgage	330		46		307		48
Home equity	351		15		361		23
Indirect	1		—		1		—
Consumer credit card	2		—		2		—
Other consumer	18		—		26		—
	1,319		147		1,676		175
Non-accrual status or 90 days past due and still accruing:
Commercial	145		47		156		48
Investor real estate	70		17		157		41
Residential first mortgage	122		17		156		24
Home equity	25		1		30		2
	362		82		499		115
Total TDRs - Loans	$	1,681	$	229	$	2,175	$	290

TDRs - Held For Sale	13		—		579		—
Total TDRs	$	1,694	$	229	$	2,754	$	290

_________

Note: All loans listed in the table above are considered impaired under applicable accounting literature. The majority of TDRs held for sale at December 31, 2013 were residential first mortgage loans transfered during the fourth quarter.

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The following table provides an analysis of the changes in commercial and investor real estate TDRs. Loans that may be modified more than once are reported as TDR inflows only in the period they are first modified. Other than resolutions such as charge-offs, foreclosures, sales and transfers to held for sale, Regions may remove loans held for investment from TDR classification, but only if the borrower's financial condition improves such that the borrower is no longer in financial difficulty, and the loan is subsequently refinanced or restructured at market terms and qualifies as a new loan.

Table 8—Analysis of Changes in Commercial and Investor Real Estate TDRs



	Nine Months Ended September 30, 2014
	Commercial			Investor Real Estate
	(In millions)
Balance, beginning of period	$	624		$	668
Inflows	155			87
Outflows
Charge-offs	(24		)	(9		)
Foreclosure	(2		)	(3		)
Payments, sales and other ⁽¹⁾	(319		)	(345		)
Balance, end of period	$	434		$	398



	Nine Months Ended September 30, 2013
	Commercial			Investor Real Estate
	(In millions)
Balance, beginning of period	$	791		$	1,124
Inflows	347			186
Outflows
Charge-offs	(53		)	(20		)
Foreclosure	(2		)	(10		)
Payments, sales and other ⁽¹⁾	(355		)	(419		)
Balance, end of period	$	728		$	861

(1) The majority of this category consists of payments and sales. "Other" outflows include normal amortization/accretion of loan basis adjustments and loans transferred to held for sale. It also includes $70 million of commercial loans and $45 million of investor real estate loans refinanced or restructured as new loans and removed from TDR classification for the nine months ended September 30, 2014. No loans were removed from TDR classification in 2013 as a result of being refinanced or restructured as new loans.

Changes in TDRs related to the consumer portfolio segment are primarily due to inflows from CAP modifications and outflows from payments and charge-offs. As detailed in Note 1 "Summary of Significant Accounting Policies" to the consolidated financial statements in Regions' Annual Report on Form 10-K for the year ended December 31, 2013, Regions expects consumer loans modified through CAP to continue to be identified as TDRs for the remaining term of the loan.

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NON-PERFORMING ASSETS

Non-performing assets are summarized as follows:

Table 9—Non-Performing Assets



	September 30, 2014			December 31, 2013
	(Dollars in millions)
Non-performing loans:
Commercial and industrial	$	199		$	257
Commercial real estate mortgage—owner-occupied	278			303
Commercial real estate construction—owner-occupied	2			17
Total commercial	479			577
Commercial investor real estate mortgage	133			238
Commercial investor real estate construction	2			10
Total investor real estate	135			248
Residential first mortgage	117			146
Home equity	106			111
Total consumer	223			257
Total non-performing loans, excluding loans held for sale	837			1,082
Non-performing loans held for sale	38			82
Total non-performing loans ⁽¹⁾	875			1,164
Foreclosed properties	125			136
Total non-performing assets ⁽¹⁾	$	1,000		$	1,300
Accruing loans 90 days past due:
Commercial and industrial	$	5		$	6
Commercial real estate mortgage—owner-occupied	6			6
Total commercial	11			12
Commercial investor real estate mortgage	5			6
Total investor real estate	5			6
Residential first mortgage ⁽²⁾	131			142
Home equity	66			75
Indirect	6			5
Consumer credit card	11			12
Other consumer	3			4
Total consumer	217			238
	$	233		$	256
Restructured loans not included in the categories above	$	1,319		$	1,676
Restructured loans held for sale not included in the categories above	$	1		$	545
Non-performing loans, ⁽¹⁾ including loans held for sale to loans	1.14		%	1.56		%
Non-performing assets ⁽¹⁾ to loans, foreclosed properties and non-performing loans held for sale	1.30		%	1.74		%

_________


(1)	Excludes accruing loans 90 days past due.


(2)	Excludes residential first mortgage loans that are 100% guaranteed by the Federal Housing Administration (FHA) and all guaranteed loans sold to the Government National Mortgage Association (GNMA) where Regions has the right but not the obligation to repurchase. Total 90 days or more past due guaranteed loans excluded were $121 million at September 30, 2014 and $106 million at December 31, 2013 .

Non-performing assets totaled $1.0 billion at September 30, 2014 , compared to $1.3 billion at December 31, 2013 . The decrease in non-performing assets during the first nine months of 2014 reflects the Company's continuing efforts to work through problem assets.

Based on current expectations for the economy, management anticipates non-performing assets to continue to improve in 2014 as compared to 2013 . Economic trends such as real estate valuations, interest rates and unemployment, as well as the level

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of disposition activity, will impact the future level of non-performing assets. Circumstances related to individually large credits could also result in volatility throughout the remainder of 2014 .

Loans past due 90 days or more and still accruing, excluding government guaranteed loans, were $233 million at September 30, 2014 , a decrease from $256 million at December 31, 2013 .

At September 30, 2014 , Regions had approximately $125 million to $200 million of potential problem commercial and investor real estate loans that were not included in non-accrual loans, but for which management had concerns as to the ability of such borrowers to comply with their present loan repayment terms. This is a likely estimate of the amount of commercial and investor real estate loans that may migrate to non-accrual status in the next quarter.

In order to arrive at the estimate of potential problem loans, personnel from geographic regions forecast certain larger dollar loans that may potentially be downgraded to non-accrual at a future time, depending on the occurrence of future events. These personnel consider a variety of factors, including the borrower’s capacity and willingness to meet the contractual repayment terms, make principal curtailments or provide additional collateral when necessary, and provide current and complete financial information including global cash flows, contingent liabilities and sources of liquidity. A probability weighting is assigned to the listing of loans due to the inherent level of uncertainty related to potential actions that a borrower or guarantor may take to prevent the loan from reaching problem status. Regions assigns the probability weighting based on an assessment of the likelihood that the necessary actions required to prevent problem loan status will occur. Additionally, for other loans (for example, smaller dollar loans), a factor based on trends and experience is applied to determine the estimate of potential future downgrades. Because of the inherent uncertainty in forecasting future events, the estimate of potential problem loans ultimately represents the estimated aggregate dollar amounts of loans as opposed to an individual listing of loans.

The majority of the loans on which the potential problem loan estimate is based are considered criticized and classified. Detailed disclosures for substandard accrual loans (as well as other credit quality metrics) are included in Note 4 “Loans and the Allowance for Credit Losses” to the consolidated financial statements.

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

Table 10—Analysis of Non-Accrual Loans



	Non-Accrual Loans, Excluding Loans Held for Sale Nine Months Ended September 30, 2014
	Commercial			Investor Real Estate			Consumer ⁽¹⁾			Total
	(In millions)
Balance at beginning of period	$	577		$	248		$	257		$	1,082
Additions	462			85			(32		)	515
Net payments/other activity	(260		)	(138		)	—			(398		)
Return to accrual	(86		)	(21		)	—			(107		)
Charge-offs on non-accrual loans ⁽²⁾	(126		)	(21		)	(1		)	(148		)
Transfers to held for sale ⁽³⁾	(56		)	(12		)	(1		)	(69		)
Transfers to foreclosed properties	(21		)	(6		)	—			(27		)
Sales	(11		)	—			—			(11		)
Balance at end of period	$	479		$	135		$	223		$	837

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	Non-Accrual Loans, Excluding Loans Held for Sale Nine Months Ended September 30, 2013
	Commercial			Investor Real Estate			Consumer ⁽¹⁾			Total
	(In millions)
Balance at beginning of period	$	862		$	477		$	342		$	1,681
Additions	621			234			(51		)	804
Net payments/other activity	(282		)	(178		)	—			(460		)
Return to accrual	(134		)	(107		)	—			(241		)
Charge-offs on non-accrual loans ⁽²⁾	(222		)	(57		)	(1		)	(280		)
Transfers to held for sale ⁽³⁾	(54		)	(40		)	(2		)	(96		)
Transfers to foreclosed properties	(21		)	(16		)	—			(37		)
Sales	(11		)	(6		)	—			(17		)
Balance at end of period	$	759		$	307		$	288		$	1,354

________


(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 additions line, due to the relative immateriality of consumer non-accrual loans.


(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 of $26 million and $55 million recorded upon transfer for the nine months ended September 30, 2014 and 2013 , respectively.

The following table provides an analysis of non-performing loans held for sale for the nine months ended September 30, 2014 and 2013 :

Table 11—Non-Performing Loans Held For Sale



	Nine Months Ended September 30
	2014			2013
	(In millions)
Balance at beginning of period	$	82		$	89
Transfers in	88			96
Sales	(78		)	(96		)
Writedowns	(6		)	(1		)
Loans moved from held for sale/other activity	(47		)	(33		)
Transfers to foreclosed properties	(1		)	(12		)
Balance at end of period	$	38		$	43

ALL OTHER INTEREST-EARNING ASSETS

All other interest-earning assets, which consist of interest-bearing deposits in other banks, federal funds sold and securities purchased under agreements to resell, trading account securities, and other interest-earning assets, decreased approximately $602 million from year-end 2013 to September 30, 2014 , primarily due to a reduction in interest-bearing deposits in other banks as a result of normal day-to-day operating variations.

GOODWILL

Goodwill totaled $4.8 billion at both September 30, 2014 and December 31, 2013 and is allocated to each of Regions’ reportable segments (each a reporting unit), at which level goodwill is tested for impairment on an annual basis or more often if events and circumstances indicate the fair value of the reporting unit may have declined below the carrying value (refer to Note 1 “Summary of Significant Accounting Policies” to the 2013 consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2013 for further discussion of when Regions tests goodwill for impairment and the Company's methodology and valuation approaches used to determine the estimated fair value of each reporting unit).

The result of the assessment performed for the third quarter of 2014 did not indicate that the estimated fair values of the Company’s reporting units (Business Services, Consumer Services and Wealth Management) had declined below their respective

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carrying values; therefore, Regions determined that a test of goodwill impairment was not required for each of Regions’ reporting units for the September 30, 2014 interim period.

FORECLOSED PROPERTIES

Other real estate and certain other assets acquired in foreclosure are reported at the lower of the investment in the loan or fair value of the property less estimated costs to sell. The following table summarizes foreclosed property activity for the nine months ended September 30, 2014 and 2013 :

Table 12—Foreclosed Properties



	Nine Months Ended September 30
	2014			2013
	(In millions)
Balance at beginning of period	$	136		$	149
Transfer from loans	123			189
Foreclosed property sold	(114		)	(157		)
Valuation adjustments, payments and other	(20		)	(34		)
Balance at end of period	$	125		$	147

_________

Note: Approximately 74 percent and 78 percent of the ending balances at September 30, 2014 and 2013 , respectively, relate to properties transferred into foreclosed properties during the previous twelve months.

Valuation adjustments are primarily recorded in other non-interest expense; adjustments are also recorded as a charge to the allowance for loan losses if incurred within 60 days after the date of transfer from loans. Valuation adjustments are primarily the cost of adjusting foreclosed properties to estimated fair value after these assets have been classified as foreclosed properties. Foreclosed property sold amounts represent the net book value of the properties sold.

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 providing convenient branch locations for its customers. Regions also serves customers through providing centralized, high-quality banking services and alternative product delivery channels such as internet banking.

The following table summarizes deposits by category:

Table 13—Deposits



	September 30, 2014		December 31, 2013
	(In millions)
Non-interest-bearing demand	$	31,388	$	30,083
Savings	6,385		6,050
Interest-bearing transaction	21,152		20,789
Money market—domestic	26,195		25,635
Money market—foreign	243		220
Low-cost deposits	85,363		82,777
Time deposits	8,767		9,608
Customer deposits	94,130		92,385
Corporate treasury time deposits	—		68
	$	94,130	$	92,453

Total deposits at September 30, 2014 increased approximately $1.7 billion compared to year-end 2013 levels. The growth was primarily driven by increases in non-interest-bearing demand, interest-bearing transaction and money market—domestic, which were partially offset by continued declines in time deposits.

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SHORT-TERM BORROWINGS

The following is a summary of short-term borrowings:

Table 14—Short-Term Borrowings



	September 30, 2014		December 31, 2013
	(In millions)
Company funding sources:
Federal funds purchased	$	—	$	11

Customer-related borrowings:
Securities sold under agreements to repurchase	1,893		2,171
	$	1,893	$	2,182

COMPANY FUNDING SOURCES

In the near term, Regions expects the use of wholesale unsecured borrowings, such as Federal funds purchased, to remain relatively low. Short-term secured borrowings, such as securities sold under agreements to repurchase and Federal Home Loan Bank ("FHLB") advances, are a core portion of Regions funding strategy and can fluctuate significantly on a day-to-day basis, depending on funding needs and which sources of funds are used to satisfy those needs. All such arrangements are considered typical of the banking industry and are accounted for as borrowings.

Due to the uncertainty and inconsistency of the short-term funding markets during the recession, Regions had taken an approach to maintain higher levels of cash at the Federal Reserve Bank. These higher levels of cash negated the need to occasionally borrow short-term funds to cover normal monthly cash flow needs. As the economy continues to improve, Regions expects to reduce the amount of excess cash held at the Federal Reserve Bank and will utilize short-term secured funding markets as needed to augment its cash position. The securities financing market and short-term FHLB advances continue to provide reliable funding at attractive rates. There were no short-term FHLB advances outstanding at September 30, 2014 or December 31, 2013 . See the "Liquidity Risk" section for further detail of Regions' borrowing capacity with the FHLB.

Selected data for short-term borrowings used for funding purposes is presented below:



	Three Months Ended September 30
	2014			2013
	(Dollars in millions)
Federal funds purchased:
Balance at quarter-end	$	—		$	13
Average outstanding (based on average daily balances)	—			14
Maximum amount outstanding at any month-end during the quarter	—			14
Weighted-average interest rate at quarter-end	—		%	0.1		%
Weighted-average interest rate on amounts outstanding during the quarter (based on average daily balances)	—		%	0.1		%
Securities sold under agreements to repurchase:
Balance at quarter-end	$	—		$	—
Average outstanding (based on average daily balances)	—			216
Maximum amount outstanding at any month-end during the quarter	—			—
Weighted-average interest rate at quarter-end	—		%	—		%
Weighted-average interest rate on amounts outstanding during the quarter (based on average daily balances)	—		%	0.1		%

CUSTOMER-RELATED BORROWINGS

Repurchase agreements are also offered as short-term investment opportunities for commercial banking customers. At the end of each business day, customer balances are swept into the agreement account. In exchange for cash, Regions sells the customer securities with a commitment to repurchase them on the following business day. The repurchase agreements are collateralized to allow for market fluctuations. Securities from Regions Bank’s investment portfolio are used as collateral. From the customer’s perspective, the investment earns more than a traditional money market instrument. From Regions’ standpoint, the repurchase

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agreements are similar to deposit accounts, although they are not insured by the Federal Deposit Insurance Corporation ("FDIC") or guaranteed either directly by the United States or one of its agencies. Regions Bank does not manage the level of these investments on a daily basis as the transactions are initiated by the customers. The level of these borrowings can fluctuate significantly on a day-to-day basis.

LONG-TERM BORROWINGS

Long-term borrowings are summarized as follows:

Table 15—Long-Term Borrowings



	September 30, 2014			December 31, 2013
	(In millions)
Regions Financial Corporation (Parent):
7.75% senior notes due November 2014	$	350		$	349
5.75% senior notes due June 2015	499			498
2.00% senior notes due May 2018	748			748
7.75% subordinated notes due September 2024	100			100
6.75% subordinated debentures due November 2025	160			161
7.375% subordinated notes due December 2037	300			300
Valuation adjustments on hedged long-term debt	(8		)	5
	2,149			2,161
Regions Bank:
Federal Home Loan Bank advances	8			1,009
5.20% subordinated notes due April 2015	350			349
7.50% subordinated notes due May 2018	750			750
6.45% subordinated notes due June 2037	497			497
Other long-term debt	57			58
Valuation adjustments on hedged long-term debt	2			6
	1,664			2,669
	$	3,813		$	4,830

Long-term borrowings decreased approximately $1.0 billion since year-end 2013 due primarily to maturities of FHLB advances. FHLB advances have a weighted-average interest rate of 1.7 percent and 1.4 percent at September 30, 2014 and December 31, 2013 , respectively, with a weighted average maturity of 8.03 years as of September 30, 2014 .

STOCKHOLDERS’ EQUITY

Stockholders’ equity was $17.2 billion at September 30, 2014 as compared to $15.8 billion at December 31, 2013 . During the first nine months of 2014 , net income increased stockholders’ equity by $944 million , while cash dividends on common stock reduced equity by $180 million. Changes in accumulated other comprehensive income increased equity by $145 million, primarily due to improvements in the fair value of securities available for sale.

Regions’ Board of Directors declared a cash dividend for both the third and second quarters of 2014 of $0.05 per common share and $0.03 per common share for the first quarter of 2014. The Board declared a $0.01 per share, $0.03 per share, and $0.03 per share cash dividend for the first, second, and third quarters of 2013, respectively. The Board of Directors also declared $20 million in cash dividends on preferred stock during the third quarter of 2014 compared to $8 million in preferred stock dividends in the first and second quarters of 2014 and $8 million in each of the first three quarters of 2013. Due to the timing of the second quarter of 2014 preferred stock issuance, preferred dividends in the third quarter reflect a longer coupon period. Based on the current amount of preferred stock outstanding, total third quarter 2014 preferred dividends were approximately $4 million higher than the amount expected for future quarterly coupon periods.

On April 29, 2014, Regions completed the issuance of $500 million in depositary shares each representing a fractional ownership interest in a share of the Company's 6.375% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series B, par value $1.00 per share ("Series B Preferred Stock"), with a liquidation preference of $1,000 per share of Series B Preferred Stock (equivalent to $25 per depositary share). Dividends, if declared, will be paid quarterly at an annual rate equal to (i) for each period beginning prior to September 15, 2024, 6.375%, and (ii) for each period beginning on or after September 15, 2024, three-month LIBOR plus 3.536%. The net proceeds from the issuance increased equity by approximately $486 million.

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On April 24, 2014, Regions' Board of Directors authorized a new $350 million common stock repurchase plan, permitting repurchases from the beginning of the second quarter of 2014 through the end of the first quarter of 2015. There were no shares repurchased under this plan as of September 30, 2014. However, the Company began purchasing shares in October 2014, and as of November 4, 2014, Regions had repurchased approximately 11.6 million shares of common stock at a total cost of approximately $114.7 million. These shares were immediately retired upon repurchase and therefore will not be included in treasury stock.

Regions’ ratio of stockholders’ equity to total assets was 14.39 percent at September 30, 2014 and 13.43 percent at December 31, 2013 . Regions’ ratio of tangible common stockholders’ equity (stockholder's equity less preferred stock, goodwill and other identifiable intangibles and the related deferred tax liability) to total tangible assets was 9.92 percent at September 30, 2014 , compared to 9.24 percent at December 31, 2013 (see Table 18 “GAAP to Non-GAAP Reconciliation” for further discussion).

See Note 7 “Stockholders’ Equity and Accumulated Other Comprehensive Income (Loss)” for additional information.

REGULATORY CAPITAL REQUIREMENTS

CURRENT CAPITAL RULES

Regions and Regions Bank are required to comply with regulatory capital requirements established by Federal and State banking agencies. These regulatory capital requirements involve quantitative measures of the Company’s assets, liabilities and certain off-balance sheet items, and also qualitative judgments by the regulators. Failure to meet minimum capital requirements can subject the Company to a series of increasingly restrictive regulatory actions. Currently, there are two basic measures of capital adequacy: a risk-based measure and a leverage measure. See Table 16 "Regulatory Capital Requirements" for tabular presentation of the applicable holding company and bank regulatory capital requirements.

In recent years, the Federal Reserve and banking regulators began supplementing their assessment of the capital adequacy of a bank based on a variation of Tier 1 capital, known as Tier 1 common equity. This measure has been a key component of assessments of capital adequacy under the CCAR process. While not currently prescribed in amount by federal banking regulations (under Basel I), analysts and banking regulators have assessed Regions’ capital adequacy using the tangible common stockholders’ equity and/or the Tier 1 common equity measure. Because tangible common stockholders’ equity and Tier 1 common equity are not formally defined by GAAP or prescribed in amount by federal banking regulations (under Basel I), these measures are currently considered to be non-GAAP financial measures and other entities may calculate them differently than Regions’ disclosed calculations (see Table 18 “GAAP to Non-GAAP Reconciliation” for further details). The Board of Governors of the Federal Reserve System assesses banks' capital levels in periods of stress against a minimum Tier 1 common (non-GAAP) capital level of 5 percent.

BASEL III AND THE NEW CAPITAL RULES

In July 2013, Regions' and Regions Bank's primary federal regulator, the Federal Reserve, published final rules (the “New Capital Rules”) establishing a new comprehensive capital framework for U.S. banking organizations. The New Capital Rules implement the Basel Committee's December 2010 framework known as “Basel III” for strengthening international capital standards as well as certain provisions of the Dodd-Frank Act. The New Capital Rules substantially revise the risk-based capital requirements applicable to bank holding companies and depository institutions, including the Company and the Bank, compared to the current U.S. risk-based capital rules. The New Capital Rules define the components of capital and address other issues affecting the numerator in banking institutions' regulatory capital ratios. The New Capital Rules also address risk weights and other issues affecting the denominator in banking institutions' regulatory capital ratios and replace the existing risk-weighting approach, which was derived from Basel I capital accords of the Basel Committee, with a more risk-sensitive approach based, in part, on the standardized approach in the Basel Committee's 2004 “Basel II” capital accords. The New Capital Rules also implement the requirements of Section 939A of the Dodd-Frank Act to remove references to credit ratings from the federal banking agencies' rules. The New Capital Rules are effective for Regions and Regions Bank on January 1, 2015 (subject to a phase-in period).

The New Capital Rules, among other things, (i) introduce a new capital measure called “Common Equity Tier 1” (“CET1”), (ii) specify that Tier 1 capital consist of CET1 and “Additional Tier 1 capital” instruments meeting specified requirements, (iii) define CET1 narrowly by requiring that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital and (iv) expand the scope of the deductions/adjustments to capital as compared to existing regulations.

Under the New Capital Rules, the initial minimum capital ratios, as applicable to Regions, as of January 1, 2015 will be as follows:


•	4.5% CET1 to risk-weighted assets.


•	6.0% Tier 1 capital to risk-weighted assets.


•	8.0% Total capital to risk-weighted assets.

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The New Capital Rules also introduce a new capital conservation buffer designed to absorb losses during periods of economic stress. The capital conservation buffer is composed entirely of CET1, on top of these minimum risk-weighted asset ratios. In addition, the New Capital Rules provide for a countercyclical capital buffer applicable only to certain covered institutions. It is not expected that the countercyclical capital buffer will be applicable to Regions or Regions Bank. Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer (or below the combined capital conservation buffer and countercyclical capital buffer, when the latter is applied) will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall.

When fully phased-in on January 1, 2019, the New Capital Rules will require Regions and Regions Bank to maintain such additional capital conservation buffer of 2.5% of CET1 to risk-weighted assets, effectively resulting in minimum ratios of (i) CET1 to risk-weighted assets of at least 7%, (ii) Tier 1 capital to risk-weighted assets of at least 8.5%, and (iii) Total capital to risk-weighted assets of at least 10.5%.

The New Capital Rules provide for a number of deductions from and adjustments to CET1. These include, for example, the requirement that mortgage servicing rights, certain deferred tax assets and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 10% of CET1 or all such categories in the aggregate exceed 15% of CET1. Under current capital standards, the effects of accumulated other comprehensive income items included in capital are excluded for the purposes of determining regulatory capital ratios. Under the New Capital Rules, the effects of certain accumulated other comprehensive items are not excluded; however, non-advanced approaches banking organizations, including Regions and Regions Bank, may make a one-time permanent election to continue to exclude these items. Regions and Regions Bank expect to make this election in order to avoid significant variations in the level of capital depending upon the impact of interest rate fluctuations on the fair value of its securities portfolio. The New Capital Rules also preclude certain hybrid securities, such as trust preferred securities, as Tier 1 capital of bank holding companies, subject to phase-out. As of September 30, 2014 , Regions did not have any remaining hybrid securities subject to disallowance.

Implementation of the deductions and other adjustments to CET1 will begin on January 1, 2015 and will be phased-in over a 4-year period (beginning at 40% on January 1, 2015 and an additional 20% per year thereafter). The implementation of the capital conservation buffer will begin on January 1, 2016 at the 0.625% level and be phased in over a 4-year period (increasing by that amount on each subsequent January 1, until it reaches 2.5% on January 1, 2019).

With respect to Regions Bank, the New Capital Rules also revise the “prompt corrective action” regulations pursuant to Section 38 of the Federal Deposit Insurance Act, by (i) introducing a CET1 ratio requirement at each level (other than critically undercapitalized), with the required CET1 ratio being 6.5% for well-capitalized status; (ii) increasing the minimum Tier 1 capital ratio requirement for each category, with the minimum Tier 1 capital ratio for well-capitalized status being 8% (as compared to the current 6%); and (iii) eliminating the current provision that provides that a bank with a composite supervisory rating of 1 may have a 3% leverage ratio and still be adequately capitalized. The New Capital Rules do not change the total risk-based capital requirement for any “prompt corrective action” category.

The New Capital Rules prescribe a standardized approach for risk weightings that expands the risk-weighting categories from the current four Basel I-derived categories (0%, 20%, 50% and 100%) to a much larger and more risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0% for U.S. government and agency securities, to 600% for certain equity exposures, and resulting in higher risk weights for a variety of asset categories. Specific changes to current rules impacting Regions' determination of risk-weighted assets include, among other things:


•	Applying a 150% risk weight instead of a 100% risk weight for certain high volatility commercial real estate acquisition, development and construction loans.


•	Assigning a 150% risk weight to exposures (other than secured exposures including residential mortgage exposures) that are 90 days or more past due (currently set at 100%).


•	Providing for a 20% credit conversion factor for the unused portion of a commitment with an original maturity of less than one year that is not unconditionally cancellable (currently set at 0%).


•	Providing for a risk weight, generally not less than 20% with certain exceptions, for securities lending transactions based on the risk weight category of the underlying collateral securing the transaction (currently set at between 20% and 100% for on balance sheet transactions).


•	Providing for a 100% risk weight for claims on securities firms (currently set at 20%).


•	Eliminating the current 50% cap on the risk weight for over-the-counter derivative exposures.


•	Replacing the existing Ratings Based Approach for certain asset-backed securities with a Simplified Supervisory Formula Approach ("SSFA") which results in risk weights ranging from 20% to 1,250%.


•	Applying a 250% risk weight to the portion of mortgage servicing rights and deferred tax assets that are includible in capital (currently set at 100%).

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In addition, the New Capital Rules also provide more advantageous risk weights for derivatives and repurchase-style transactions cleared through a qualifying central counterparty and increase the scope of eligible guarantors and eligible collateral for purposes of credit risk mitigation. As of September 30, 2014 , the increase in Regions' Basel III risk-weighted assets versus risk-weighted assets as calculated under Basel I was due primarily to:


•	Applying a 150% risk weight to high volatility commercial real estate exposures.


•	Applying a 20% conversion factor to the unused portion of commitments of less than one year.


•	Applying a 250% risk weight to the portion of mortgage servicing rights and deferred tax assets that are includible in capital.

The New Capital Rules do not address the proposed Liquidity Coverage Ratio Test and Net Stable Funding Ratio Test called for by the proposed Basel III framework. See the "Supervision and Regulation -- Capital Requirements -- Leverage Requirements" subsection of the "Business" sections of Regions' Annual Report on Form 10-K for the year ended December 31, 2013 for more information on these proposed requirements.

Regions continues to evaluate the impact of the final U.S. rules implementing Basel III as well as any potential future Systemically Important Financial Institutions ("SIFI") surcharges for regional banks. The Company’s estimated CET1 ratio as of September 30, 2014 , based on Regions’ current interpretation of the final Basel III requirements was approximately 11.22% and therefore exceeded the Basel III minimum of 7 percent for CET1. Because the Basel III capital calculations will not be fully phased-in until 2019, are not formally defined by GAAP, and because the calculations currently include the Company's interpretations of the requirements including informal feedback received through the regulatory process and are therefore likely to change as clarifying guidance becomes available, these measures are considered to be non-GAAP financial measures, and other entities may calculate them differently than Regions’ disclosed calculations (see Table 18 “GAAP to Non-GAAP Reconciliation” for further details).

LIQUIDITY COVERAGE RATIO ("LCR")

On October 24, 2013, the Federal Reserve Board, the Office of the Comptroller of the Currency ("OCC"), and the FDIC released an NPR ("notice of proposed rulemaking") proposing a quantitative liquidity requirement, including a "modified" LCR that will apply to banks including Regions, that are not internationally active and are between $50 billion and $250 billion in assets. The comment period on these proposed rules ended on January 31, 2014.

On September 3, 2014, the Federal Reserve Board, the OCC and the FDIC released the final version of the LCR, which requires modified LCR banks to hold high-quality liquid assets sufficient to cover 70 percent of projected net cash outflows under a prescribed 30-day liquidity stress scenario. The implementation date was delayed for modified LCR banks until January 2016, and the daily reporting requirement was replaced with a monthly reporting structure. In 2016, the minimum phased-in requirement will be 90 percent, followed by full 100 percent compliance in January 2017. The Company anticipates being fully compliant with the LCR requirements upon implementation without having to make any significant changes to its current balance sheet. However, should Regions’ cash position or investment mix change in the future, Regions’ ability to meet the liquidity coverage ratio may be impacted.

See the “Supervision and Regulation—Capital Requirements” subsection of the “Business” section and the “Risk Factors” section of Regions' Annual Report on Form 10-K for the year ended December 31, 2013 for more information.

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Table 16—Regulatory Capital Requirements



	September 30, 2014 Ratio ⁽¹⁾		December 31, 2013 Ratio		To Be Well Capitalized
Tier 1 common (non-GAAP):
Regions Financial Corporation	11.79	%	11.21	%	NA ⁽²⁾
Tier 1 capital:
Regions Financial Corporation	12.70	%	11.68	%	6.00	%
Regions Bank	12.37		12.46		6.00
Total capital:
Regions Financial Corporation	15.49	%	14.73	%	10.00	%
Regions Bank	14.59		14.94		10.00
Leverage ⁽³⁾ :
Regions Financial Corporation	10.97	%	10.03	%	5.00	%
Regions Bank	10.66		10.67		5.00

_________


(1)	Current quarter ratios are estimated.


(2)	The Board of Governors of the Federal Reserve System assesses banks' capital levels in periods of stress against a minimum Tier 1 common capital level of 5%.


(3)	The Leverage ratio requires an additional 100 to 200 basis-point cushion, in certain circumstances, of adjusted quarterly average assets.

RATINGS

Table 17 “Credit Ratings” reflects the debt ratings information of Regions Financial Corporation and Regions Bank by Standard & Poor's ("S&P"), Moody’s, Fitch and Dominion Bond Rating Service ("DBRS") as of September 30, 2014 and December 31, 2013 .

Table 17—Credit Ratings



	As of September 30, 2014
	S&P	Moody’s	Fitch	DBRS
Regions Financial Corporation
Senior notes	BBB-	Ba1	BBB-	BBB
Subordinated notes	BB+	Ba2	BB+	BBBL
Regions Bank
Short-term debt	A-2	P-3	F3	R-2H
Long-term bank deposits	BBB	Baa3	BBB	BBBH
Long-term debt	BBB	Baa3	BBB-	BBBH
Subordinated debt	BBB-	Ba1	BB+	BBB
Outlook	Positive	Positive	Positive	Stable



	As of December 31, 2013
	S&P	Moody’s	Fitch	DBRS
Regions Financial Corporation
Senior notes	BBB-	Ba1	BBB-	BBB
Subordinated notes	BB+	Ba2	BB+	BBBL
Regions Bank
Short-term debt	A-2	P-3	F3	R-2H
Long-term bank deposits	BBB	Baa3	BBB	BBBH
Long-term debt	BBB	Baa3	BBB-	BBBH
Subordinated debt	BBB-	Ba1	BB+	BBB
Outlook	Positive	Stable	Positive	Stable

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In general, ratings agencies base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity, asset quality, business mix, probability of government support, and level and quality of earnings. Any downgrade in credit ratings by one or more ratings agencies may impact Regions in several ways, including, but not limited to, Regions’ access to the capital markets or short-term funding, borrowing cost and capacity, collateral requirements, acceptability of its letters of credit, and funding of variable rate demand notes ("VRDNs"), thereby potentially adversely impacting Regions’ financial condition and liquidity. See the “Risk Factors” section in the Annual Report on Form 10-K for the year ended December 31, 2013 for more information.

On September 30, 2014, Moody’s revised the rating outlook of Regions Financial Corporation and its subsidiaries, including its lead bank, Regions Bank, to positive from stable and affirmed existing ratings. The change in outlook is attributable to continued improvement in asset quality and capital levels as well as enhanced risk management surrounding asset concentration limits.

On October 7, 2014, Fitch Ratings upgraded the long term and short term debt ratings of both Regions Bank and Regions Financial Corporation to ‘BBB’ from ‘BBB-’ and to ‘F2’ from ‘F3’, respectively. Additionally, the Rating Outlook for both the Bank and Holding company were revised to Stable from Positive. The upgrade was supported by asset quality improvement, a strong capital profile and liquidity position, and a generally recovering overall risk position.

A security rating is not a recommendation to buy, sell or hold securities, and the ratings are subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating.

NON-GAAP MEASURES

The table below presents computations of earnings and certain other financial measures, which exclude certain significant items that are included in the financial results presented in accordance with GAAP. These non-GAAP financial measures include “adjusted fee income ratio”, “adjusted efficiency ratio”, “return on average tangible common stockholders’ equity”, average and end of period “tangible common stockholders’ equity”, “Tier 1 common equity”, and “Basel III CET1” and related ratios. Regions believes that expressing earnings and certain other financial measures excluding these significant items provides a meaningful base for period-to-period comparisons, which management believes will assist investors in analyzing the operating results of the Company and predicting future performance. These non-GAAP financial measures are also used by management to assess the performance of Regions’ business because management does not consider the activities related to the adjustments to be indications of ongoing operations. Regions believes that presentation of these non-GAAP financial measures will permit investors to assess the performance of the Company on the same basis as that applied by management. Management and the Board of Directors utilize these non-GAAP financial measures as follows:


•	Preparation of Regions’ operating budgets


•	Monthly financial performance reporting


•	Monthly close-out reporting of consolidated results (management only)


•	Presentations to investors of Company performance

The adjusted efficiency ratio (non-GAAP), which is a measure of productivity, is generally calculated as non-interest expense divided by total revenue on a taxable-equivalent basis. The adjusted fee income ratio (non-GAAP) is generally calculated as non-interest income divided by total revenue on a taxable-equivalent basis. Management uses these ratios to monitor performance and believes these measures provide meaningful information to investors. Non-interest expense (GAAP) is presented excluding adjustments to arrive at adjusted non-interest expense (non-GAAP), which is the numerator for the adjusted efficiency ratio. Non-interest income (GAAP) is presented excluding adjustments to arrive at adjusted non-interest income (non-GAAP), which is the numerator for the adjusted fee income ratio. Net interest income on a taxable-equivalent basis and non-interest income are added together to arrive at total revenue on a taxable-equivalent basis. Adjustments are made to arrive at adjusted total revenue on a taxable-equivalent basis (non-GAAP), which is the denominator for the adjusted efficiency and adjusted fee income ratios.

Tangible common stockholders’ equity ratios have become a focus of some investors in analyzing the capital position of the Company absent the effects of intangible assets and preferred stock. Traditionally, the Federal Reserve and other banking regulatory bodies have assessed a bank’s capital adequacy based on Tier 1 capital, the calculation of which is codified in federal banking regulations. In connection with the Federal Reserve’s CCAR process, these regulators are supplementing their assessment of the capital adequacy of a bank based on a variation of Tier 1 capital, known as Tier 1 common equity. Analysts and banking regulators have assessed Regions’ capital adequacy using the tangible common stockholders’ equity and/or the Tier 1 common equity measure. Because tangible common stockholders’ equity and Tier 1 common equity are not formally defined by GAAP, these measures are considered to be non-GAAP financial measures and other entities may calculate them differently than Regions’ disclosed calculations. Since analysts and banking regulators may assess Regions’ capital adequacy using tangible common stockholders’ equity and Tier 1 common equity, Regions believes that it is useful to provide investors the ability to assess Regions’ capital adequacy on these same bases.

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Tier 1 common equity is often expressed as a percentage of risk-weighted assets. Under the current risk-based capital framework, a bank’s balance sheet assets and credit equivalent amounts of off-balance sheet items are assigned to one of four broad risk categories. The aggregated dollar amount in each category is then multiplied by the risk weighting assigned to that category. The resulting weighted values from each of the four categories are added together and this sum is the risk-weighted assets total that makes up the denominator of certain risk-based capital ratios. Tier 1 capital is then divided by this denominator (risk-weighted assets) to determine the Tier 1 capital ratio. Adjustments are made to Tier 1 capital to arrive at Tier 1 common equity (non-GAAP). Tier 1 common equity is also divided by the risk-weighted assets to determine the Tier 1 common equity ratio (non-GAAP). The amounts disclosed as risk-weighted assets are calculated consistent with banking regulatory requirements.

Regions currently calculates its risk-based capital ratios under guidelines adopted by the Federal Reserve based on the 1988 Capital Accord (“Basel I”) of the Basel Committee on Banking Supervision (the “Basel Committee”). In December 2010, the Basel Committee released its final framework for Basel III, which will strengthen international capital and liquidity regulations. When fully phased-in, Basel III will increase capital requirements through higher minimum capital levels as well as through increases in risk-weights for certain exposures. Additionally, the final Basel III rules place greater emphasis on common equity. In July 2013, the Federal Reserve released final rules detailing the U.S. implementation of Basel III. Regions, as a non-advanced approaches bank, will begin transitioning to the Basel III framework in January 2015 subject to a phase-in period extending through January 2019. Regions is currently evaluating the impact of the final Basel III rules. Accordingly, the calculations provided below are estimates. Because the Basel III implementation regulations will not be fully phased-in until 2019, are not formally defined by GAAP, and because the calculations currently include the Company's interpretations of the requirements including informal feedback received through the regulatory process and are therefore likely to change as clarifying guidance becomes available, these measures are considered to be non-GAAP financial measures, and other entities may calculate them differently from Regions’ disclosed calculations. Since analysts and banking regulators may assess Regions’ capital adequacy using the Basel III framework, Regions believes that it is useful to provide investors information enabling them to assess Regions’ capital adequacy on the same basis.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. Although these non-GAAP financial measures are frequently used by stakeholders in the evaluation of a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP. In particular, a measure of earnings that excludes selected items does not represent the amount that effectively accrues directly to stockholders.

The following tables provide: 1) a reconciliation of net income (GAAP) to net income available to common shareholders (GAAP), 2) a reconciliation of non-interest expense from continuing operations (GAAP) to adjusted non-interest expense (non-GAAP), 3) a reconciliation of non-interest income from continuing operations (GAAP) to adjusted non-interest income (non-GAAP), 4) a computation of adjusted total revenue (non-GAAP), 5) a computation of the adjusted efficiency ratio (non-GAAP), 6) a computation of the adjusted fee income ratio (non-GAAP), 7) a reconciliation of average and ending stockholders’ equity (GAAP) to average and ending tangible common stockholders’ equity (non-GAAP) and calculations of related ratios (non-GAAP), 8) a reconciliation of stockholders’ equity (GAAP) to Tier 1 capital (regulatory) and to Tier 1 common equity (non-GAAP) and calculations of related ratios, and 9) a reconciliation of stockholders’ equity (GAAP) to Basel III CET1 (non-GAAP) and calculation of the related ratio based on Regions’ current understanding of the Basel III requirements. The estimate at both September 30, 2014 and December 31, 2013 are based on the final rule released in July 2013.

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Table 18—GAAP to Non-GAAP Reconciliation



		Three Months Ended September 30						Nine Months Ended September 30
		2014			2013			2014			2013
		(Dollars in millions, except per share data)
INCOME (LOSS)
Net income (GAAP)		$	325		$	293		$	944		$	895
Preferred dividends (GAAP)		(20		)	(8		)	(36		)	(24		)
Net income available to common shareholders (GAAP)	A	$	305		$	285		$	908		$	871
ADJUSTED FEE INCOME AND EFFICIENCY RATIOS
Non-interest expense from continuing operations (GAAP)		$	826		$	884		$	2,463		$	2,610
Significant items:
Branch consolidation and property and equipment charges		—			—			(6		)	—
Gain on sale of TDRs held for sale, net		—			—			35			—
Loss on early extinguishment of debt		—			(5		)	—			(61		)
Regulatory (charge) credit		—			—			7			—
Adjusted non-interest expense (non-GAAP)	B	$	826		$	879		$	2,499		$	2,549
Net interest income (GAAP)		$	821		$	824		$	2,459		$	2,430
Taxable-equivalent adjustment		16			14			46			40
Net interest income from continuing operations, taxable-equivalent basis		837			838			2,505			2,470
Non-interest income from continuing operations (GAAP)		478			495			1,373			1,493
Significant items:
Securities gains, net		(7		)	(3		)	(15		)	(26		)
Gain on sale of other assets		—			(24		)	—			(24		)
Leveraged lease termination gains, net		(9		)	—			(10		)	—
Adjusted non-interest income (non-GAAP)	C	462			468			1,348			1,443
Adjusted total revenue, taxable-equivalent basis (non-GAAP)	D	$	1,299		$	1,306		$	3,853		$	3,913
Adjusted efficiency ratio (non-GAAP)	B/D	63.59		%	67.29		%	64.85		%	65.13		%
Adjusted fee income ratio (non-GAAP)	C/D	35.60		%	35.90		%	34.99		%	36.90		%
RETURN ON AVERAGE TANGIBLE COMMON STOCKHOLDERS’ EQUITY
Average stockholders’ equity (GAAP)		$	17,049		$	15,317		$	16,581		$	15,504
Less: Average intangible assets (GAAP)		5,105			5,129			5,105			5,123
Average deferred tax liability related to intangibles (GAAP)		(182		)	(188		)	(184		)	(189		)
Average preferred stock (GAAP)		903			460			710			468
Average tangible common stockholders’ equity (non-GAAP)	E	$	11,223		$	9,916		$	10,950		$	10,102
Return on average tangible common stockholders’ equity (non-GAAP) ⁽¹⁾	A/E	10.78		%	11.41		%	11.09		%	11.53		%

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		September 30, 2014			December 31, 2013
		(Dollars in millions, except per share data)
TANGIBLE COMMON RATIOS
Ending stockholders’ equity (GAAP)		$	17,160		$	15,768
Less: Ending intangible assets (GAAP)		5,103			5,111
Ending deferred tax liability related to intangibles (GAAP)		(181		)	(188		)
Ending preferred stock (GAAP)		900			450
Ending tangible common stockholders’ equity (non-GAAP)	F	$	11,338		$	10,395
Ending total assets (GAAP)		$	119,226		$	117,396
Less: Ending intangible assets (GAAP)		5,103			5,111
Ending deferred tax liability related to intangibles (GAAP)		(181		)	(188		)
Ending tangible assets (non-GAAP)	G	$	114,304		$	112,473
End of period shares outstanding	H	1,379			1,378
Tangible common stockholders’ equity to tangible assets (non-GAAP)	F/G	9.92		%	9.24		%
Tangible common book value per share (non-GAAP)	F/H	$	8.23		$	7.54
TIER 1 COMMON RISK-BASED RATIO ⁽²⁾
Stockholders’ equity (GAAP)		$	17,160		$	15,768
Accumulated other comprehensive (income) loss		174			319
Non-qualifying goodwill and intangibles		(4,808		)	(4,798		)
Disallowed servicing assets		(29		)	(31		)
Tier 1 capital (regulatory)		12,497			11,258
Preferred stock (GAAP)		(900		)	(450		)
Tier 1 common equity (non-GAAP)	I	$	11,597		$	10,808
Risk-weighted assets (regulatory)	J	$	98,381		$	96,416
Tier 1 common risk-based ratio (non-GAAP)	I/J	11.79		%	11.21		%
BASEL III COMMON EQUITY TIER 1 RATIO ⁽²⁾
Stockholders’ equity (GAAP)		$	17,160		$	15,768
Non-qualifying goodwill and intangibles ⁽³⁾		(4,918		)	(4,922		)
Adjustments, including all components of accumulated other comprehensive income, disallowed deferred tax assets, threshold deductions and other adjustments		36			130
Preferred stock (GAAP)		(900		)	(450		)
Basel III common equity Tier 1 (non-GAAP)	K	$	11,378		$	10,526
Basel III risk-weighted assets (non-GAAP) ⁽⁴⁾	L	$	101,390		$	99,483
Basel III common equity Tier 1 ratio (non-GAAP)	K/L	11.22		%	10.58		%

_________


(1)	Income statement amounts have been annualized in calculation.


(2)	Current quarter amount and the resulting ratio are estimated.


(3)	Under Basel III, in addition to goodwill and other identified intangibles, regulatory capital must be reduced by purchased credit card relationship intangible assets. The majority of these assets are allowed in Basel I capital.


(4)	Regions continues to develop systems and internal controls to precisely calculate risk-weighted assets as required by Basel III. This amount is a reasonable approximation, based on our understanding of the requirements.

NET INTEREST INCOME AND MARGIN

The following table presents an analysis of net interest income (on a taxable-equivalent basis), the net interest margin, and the net interest spread for the three and nine months ended September 30, 2014 and 2013 :

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Table 19—Consolidated Average Daily Balances and Yield/Rate Analysis for Continuing Operations



	Three Months Ended September 30
	2014							2013
	Average Balance			Income/ Expense		Yield/ Rate		Average Balance			Income/ Expense		Yield/ Rate
	(Dollars in millions; yields on taxable-equivalent basis)
Assets
Interest-earning assets:
Federal funds sold and securities purchased under agreements to resell	$	4		$	—	0.86	%	$	—		$	—	—	%
Trading account securities	101			—		0.94		107			1		1.52
Securities:
Taxable	24,264			154		2.51		24,074			144		2.38
Tax-exempt	3			—		—		5			—		—
Loans held for sale	512			5		3.95		751			6		3.34
Loans, net of unearned income ⁽¹⁾⁽²⁾	76,279			752		3.91		75,359			772		4.07
Other interest-earning assets	3,266			2		0.25		2,447			2		0.25
Total interest-earning assets	104,429			913		3.47		102,743			925		3.57
Allowance for loan losses	(1,214		)					(1,613		)
Cash and due from banks	1,781							1,781
Other non-earning assets	13,792							14,006
	$	118,788						$	116,917
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Savings	$	6,429		1		0.11		$	6,076		1		0.10
Interest-bearing checking	20,944			5		0.10		19,613			5		0.09
Money market	26,558			7		0.11		26,250			9		0.13
Time deposits	8,856			13		0.56		10,417			16		0.60
Total interest-bearing deposits ⁽³⁾	62,787			26		0.17		62,356			31		0.19
Federal funds purchased and securities sold under agreements to repurchase	1,796			—		0.06		1,982			1		0.07
Other short-term borrowings	—			—		—		381			—		0.20
Long-term borrowings	3,820			50		5.12		4,845			55		4.57
Total interest-bearing liabilities	68,403			76		0.44		69,564			87		0.49
Non-interest-bearing deposits ⁽³⁾	31,184			—		—		29,724			—		—
Total funding sources	99,587			76		0.30		99,288			87		0.35
Net interest spread						3.03							3.08
Other liabilities	2,168							2,312
Stockholders’ equity	17,033							15,317
	$	118,788						$	116,917
Net interest income/margin on a taxable-equivalent basis from continuing operations ⁽⁴⁾				$	837	3.18	%				$	838	3.24	%

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_________


(1)	Loans, net of unearned income include non-accrual loans for all periods presented.


(2)	Interest income includes net loan fees of $18 million and $21 million for the three months ended September 30, 2014 and 2013 , respectively.


(3)	Total deposit costs may be calculated by dividing total interest expense on deposits by the sum of interest-bearing deposits and non-interest-bearing deposits. The rates for total deposit costs equal 0.11% and 0.13% for the three months ended September 30, 2014 and 2013 , respectively.


(4)	The computation of taxable-equivalent net interest income is based on the statutory federal income tax rate of 35%, adjusted for applicable state income taxes net of the related federal tax benefit.



	Nine Months Ended September 30
	2014							2013
	Average Balance			Income/ Expense		Yield/ Rate		Average Balance			Income/ Expense		Yield/ Rate
	(Dollars in millions; yields on taxable-equivalent basis)
Assets
Interest-earning assets:
Federal funds sold and securities purchased under agreements to resell	$	10		$	—	0.86	%	$	—		$	—	—	%
Trading account securities	109			2		2.68		115			2		1.71
Securities:
Taxable	23,999			464		2.58		25,881			452		2.34
Tax-exempt	3			—		—		6			—		—
Loans held for sale	592			17		3.92		944			23		3.29
Loans, net of unearned income ⁽¹⁾⁽²⁾	75,940			2,251		3.96		74,615			2,287		4.10
Other interest-earning assets	3,192			6		0.25		2,377			5		0.25
Total interest-earning assets	103,845			2,740		3.53		103,938			2,769		3.56
Allowance for loan losses	(1,260		)					(1,737		)
Cash and due from banks	1,788							1,764
Other non-earning assets	13,834							14,123
	$	118,207						$	118,088
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Savings	$	6,378		5		0.11		$	6,052		4		0.09
Interest-bearing checking	20,737			14		0.09		19,893			15		0.10
Money market	26,296			22		0.11		25,896			27		0.14
Time deposits	9,112			37		0.53		11,572			60		0.70
Total interest-bearing deposits ⁽³⁾	62,523			78		0.17		63,413			106		0.22
Federal funds purchased and securities sold under agreements to repurchase	1,968			1		0.08		2,020			2		0.09
Other short-term borrowings	18			—		0.23		240			—		0.19
Long-term borrowings	4,205			156		4.95		5,329			191		4.80
Total interest-bearing liabilities	68,714			235		0.46		71,002			299		0.56
Non-interest-bearing deposits ⁽³⁾	30,776			—		—		29,433			—		—
Total funding sources	99,490			235		0.32		100,435			299		0.40
Net interest spread						3.07							3.00
Other liabilities	2,146							2,153
Stockholders’ equity	16,571							15,500
	$	118,207						$	118,088
Net interest income/margin on a taxable-equivalent basis from continuing operations ⁽⁴⁾				$	2,505	3.23	%				$	2,470	3.18	%

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_________


(1)	Loans, net of unearned income include non-accrual loans for all periods presented.


(2)	Interest income includes net loan fees of $59 million and $57 million for the nine months ended September 30, 2014 and 2013 , respectively.


(3)	Total deposit costs may be calculated by dividing total interest expense on deposits by the sum of interest-bearing deposits and non-interest-bearing deposits. The rates for total deposit costs equal 0.11% and 0.15% for the nine months ended September 30, 2014 and 2013 , respectively.


(4)	The computation of taxable-equivalent net interest income is based on the statutory federal income tax rate of 35%, adjusted for applicable state income taxes net of the related federal tax benefit.

For the third quarter of 2014 , net interest income (taxable-equivalent basis) totaled $837 million compared to $838 million in the third quarter of 2013 . The net interest margin (taxable-equivalent basis) was 3.18 percent for the third quarter of 2014 and 3.24 percent for the third quarter of 2013 . Although earning assets increased over this period, the associated yields declined primarily due to reduced market rates on loans and securities. These declines in yield were only partially offset by declines in funding costs. In addition, average balances of cash held at the Federal Reserve increased over this period, but continue to yield only 25 basis points. For the first nine months of 2014 and 2013 , net interest income (taxable-equivalent basis) totaled $2.5 billion for both periods. The net interest margin (taxable-equivalent basis) was 3.23 percent for the first nine months of 2014, compared to 3.18 percent for the first nine months of 2013 . Net interest margin increased primarily as a result of declines in overall deposits and total interest-bearing liabilities.

Regions has been able to maintain a relatively stable net interest margin in recent quarters primarily due to improvements in deposit and borrowing costs. Due to the decline in interest rates that has persisted and a competitive pricing environment for assets, management currently expects some modest net interest margin compression in the near term. Assuming rates remain at their current level, management expects one to three basis points of net interest margin compression during the fourth quarter of 2014. The Company does, however, expect net interest income to grow concurrent with loan growth.

MARKET RISK—INTEREST RATE RISK

Regions’ primary market risk is interest rate risk, including uncertainty with respect to absolute interest rate levels as well as uncertainty with respect to relative interest rate levels, which is impacted by both the shape and the slope of the various yield curves that affect the financial products and services that the Company offers. To quantify this risk, Regions measures the change in its net interest income in various interest rate scenarios compared to a base case scenario. Net interest income sensitivity is a useful short-term indicator of Regions’ interest rate risk.

Sensitivity Measurement —Financial simulation models are Regions’ primary tools used to measure interest rate exposure. Using a wide range of sophisticated simulation techniques provides management with extensive information on the potential impact to net interest income caused by changes in interest rates. Models are structured to simulate cash flows and accrual characteristics of Regions’ balance sheet. Assumptions are made about the direction and volatility of interest rates, the slope of the yield curve, and the changing composition of the balance sheet that result from both strategic plans and from customer behavior. Among the assumptions are expectations of balance sheet growth and composition, the pricing and maturity characteristics of existing business and the characteristics of future business. Interest rate-related risks are expressly considered, such as pricing spreads, the lag time in pricing deposit accounts, prepayments and other option risks. Regions considers these factors, as well as the degree of certainty or uncertainty surrounding their future behavior.

The primary objective of asset/liability management at Regions is to coordinate balance sheet composition with interest rate risk management to sustain a reasonable and stable net interest income throughout various interest rate cycles. In computing interest rate sensitivity for measurement, Regions compares a set of alternative interest rate scenarios to the results of a base case scenario based on “market forward rates.” The standard set of interest rate scenarios includes the traditional instantaneous parallel rate shifts of plus 100 and 200 basis points. Regions also prepares a minus 50 basis points scenario, as minus 100 and 200 basis scenarios are of limited use in the current rate environment. Up-rate scenarios of greater magnitude are also analyzed, and are of increased importance as the current and historic low levels of interest rates increase the relative likelihood of a rapid and substantial increase in interest rates. Regions also includes simulations of gradual interest rate movements that may more realistically mimic potential interest rate movements. These gradual scenarios include curve steepening, flattening, and parallel movements of various magnitudes phased in over a six-month period, and include rate shifts of minus 50 basis points and plus 100 and 200 basis points.

Exposure to Interest Rate Movements— As of September 30, 2014 , Regions was moderately asset sensitive to both gradual and instantaneous parallel yield curve shifts as compared to the base case for the measurement horizon ending September 2015 . The estimated exposure associated with the parallel yield curve shift of minus 50 basis points in the table below reflects the combined impacts of movements in short-term and long-term rates. Long-term interest rate reductions will drive yields lower on certain fixed rate loans newly originated or renewed, prospective yields lower on certain investment portfolio purchases, as well as higher amortization of premium on existing securities in the investment portfolio. The decline in short-term interest rates (such as the Fed Funds rate and the rate of Interest on Excess Reserves) will lead to a reduction of yield on assets and liabilities contractually tied to such rates, but since rates have been at low levels for such an extended period, it is expected that declines in deposit costs will only partially offset the decline in asset yields.

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Long-term interest rates have recently remained range-bound after having risen significantly in mid-year 2013, but short-term rates have remained stable. As described above, with respect to sensitivity to long-term rates, the balance sheet is estimated to be moderately asset sensitive. The primary factors are that higher long-term rates will drive higher rates on loans and securities newly originated or renewed, as well as induce a slower pace of premium amortization on certain securities within the investment portfolio. Current simulation models estimate that, as compared to the base case, net interest income over a 12 month horizon would respond favorably by approximately $105 million if long-term rates were to immediately and on a sustained basis exceed the base scenario by 100 basis points. Conversely, if long-term rates were to immediately and on a sustained basis underperform the base case by 50 basis points, then net interest income, as compared to the base case, would decline by approximately $53 million.

The table below summarizes Regions' positioning in various parallel yield curve shifts. The scenarios are inclusive of all interest rate risk hedging activities.

Table 20—Interest Rate Sensitivity



	Estimated Annual Change in Net Interest Income September 30, 2014
	(In millions)
Gradual Change in Interest Rates
+ 200 basis points		$242
+ 100 basis points	134
- 50 basis points	(65		)

Instantaneous Change in Interest Rates
+ 200 basis points		$279
+ 100 basis points	167
- 50 basis points	(94		)

Interest rate movements may also have an impact on the value of Regions’ securities portfolio, which can directly impact the carrying value of stockholders’ equity. Regions from time to time may hedge these price movements with derivatives (as discussed below).

Derivatives —Regions uses financial derivative instruments for management of interest rate sensitivity. The Asset and Liability Committee (“ALCO”), which consists of members of Regions’ senior management team, in its oversight role for the management of interest rate sensitivity, approves the use of derivatives in balance sheet hedging strategies. The most common derivatives Regions employs are forward rate contracts, Eurodollar futures contracts, interest rate swaps, options on interest rate swaps, interest rate caps and floors, and forward sale commitments. Derivatives are also used to offset the risks associated with customer derivatives, which include interest rate, credit and foreign exchange risks.

Forward rate contracts are commitments to buy or sell financial instruments at a future date at a specified price or yield. A Eurodollar futures contract is a future on a Eurodollar deposit. Eurodollar futures contracts subject Regions to market risk associated with changes in interest rates. Because futures contracts are cash settled daily, there is minimal credit risk associated with Eurodollar futures. Interest rate swaps are contractual agreements typically entered into to exchange fixed for variable (or vice versa) streams of interest payments. The notional principal is not exchanged but is used as a reference for the size of interest settlements. Interest rate options are contracts that allow the buyer to purchase or sell a financial instrument at a predetermined price and time. Forward sale commitments are contractual obligations to sell market instruments at a future date for an already agreed-upon price. Foreign currency contracts involve the exchange of one currency for another on a specified date and at a specified rate. These contracts are executed on behalf of the Company's customers and are used to manage fluctuations in foreign exchange rates. The Company is subject to the credit risk that another party will fail to perform.

Regions has made use of interest rate swaps to effectively convert a portion of its fixed-rate funding position and available for sale securities portfolios to a variable-rate position and, in some cases, to effectively convert a portion of its variable-rate loan portfolios to fixed-rate. Regions also uses derivatives to manage interest rate and pricing risk associated with its mortgage origination business. In the period of time that elapses between the origination and sale of mortgage loans, changes in interest rates have the potential to cause a decline in the value of the loans in this held-for-sale portfolio. Futures contracts and forward sale commitments are used to protect the value of the loan pipeline and loans held for sale from changes in interest rates and pricing.

Regions manages the credit risk of these instruments in much the same way as it manages credit risk of the loan portfolios by establishing credit limits for each counterparty and through collateral agreements for dealer transactions. For non-dealer transactions, the need for collateral is evaluated on an individual transaction basis and is primarily dependent on the financial strength of the counterparty. Credit risk is also reduced significantly by entering into legally enforceable master netting agreements.

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When there is more than one transaction with a counterparty and there is a legally enforceable master netting agreement in place, the exposure represents the net of the gain and loss positions with and collateral received from and/or posted to that counterparty. The majority of interest rate derivatives traded by Regions are subject to mandatory clearing. The counterparty risk for cleared trades effectively moves from the executing broker to the clearinghouse allowing Regions to benefit from the risk mitigation controls in place at the respective clearinghouse. The “Credit Risk” section in Regions’ Annual Report on Form 10-K for the year ended December 31, 2013 contains more information on the management of credit risk.

Regions also uses derivatives to meet the needs of its customers. Interest rate swaps, interest rate options and foreign exchange forwards are the most common derivatives sold to customers. Other derivatives instruments with similar characteristics are used to hedge market risk and minimize volatility associated with this portfolio. Instruments used to service customers are held in the trading account, with changes in value recorded in the consolidated statements of income.

The primary objective of Regions’ hedging strategies is to mitigate the impact of interest rate changes, from an economic perspective, on net interest income and the net present value of its balance sheet. The overall effectiveness of these hedging strategies is subject to market conditions, the quality of Regions’ execution, the accuracy of its valuation assumptions, counterparty credit risk and changes in interest rates. See Note 11 “Derivative Financial Instruments and Hedging Activities” to the consolidated financial statements for a tabular summary of Regions’ quarter-end derivatives positions and further discussion.

Regions accounts for residential mortgage servicing rights at fair market value with any changes to fair value being recorded within mortgage income. Regions enters into derivative and balance sheet transactions to mitigate the impact of market value fluctuations related to residential mortgage servicing rights. Derivative instruments entered into in the future could be materially different from the current risk profile of Regions’ current portfolio.

MARKET RISK—PREPAYMENT RISK

Regions, like most financial institutions, is subject to changing prepayment speeds on mortgage-related assets under different interest rate environments. Prepayment risk is a significant risk to earnings and specifically to net interest income. For example, mortgage loans and other financial assets may be prepaid by a debtor, so that the debtor may refinance its obligations at lower rates. As loans and other financial assets prepay in a falling rate environment, Regions must reinvest these funds in lower-yielding assets. Prepayments of assets carrying higher rates reduce Regions’ interest income and overall asset yields. Conversely, in a rising rate environment, these assets will prepay at a slower rate, resulting in opportunity cost by not having the cash flow to reinvest at higher rates. Prepayment risk can also impact the value of securities and the carrying value of equity. Regions’ greatest exposures to prepayment risks primarily rest in its mortgage-backed securities portfolio, the mortgage fixed-rate loan portfolio and the mortgage servicing asset, all of which tend to be sensitive to interest rate movements. Each of these assets is also exposed to prepayment risk due to factors which are not necessarily the result of interest rates, but rather due to changes in policies or programs related, either directly or indirectly, to the U.S. Government's governance over certain lending and financing within the mortgage market. Such policies can work to either encourage or discourage financing dynamics and represent a risk that is extremely difficult to forecast and may be the result of non-economic factors. The Company attempts to monitor and manage such exposures within reasonable expectations while acknowledging all such risks cannot be foreseen or avoided. Further, Regions has prepayment risk that would be reflected in non-interest income in the form of servicing income on loans sold. Regions actively monitors prepayment exposure as part of its overall net interest income forecasting and interest rate risk management. In particular, because current interest rates are relatively low, Regions is actively managing exposure to declining prepayments that are expected to coincide with increasing interest rates in both the loan and securities portfolio.

LIQUIDITY RISK

Liquidity is an important factor in the financial condition of Regions and affects Regions’ ability to meet the borrowing needs and deposit withdrawal requirements of its customers. On September 3, 2014, the Federal Reserve Board, the OCC and the FDIC released the final version of the Liquidity Coverage Ratio. The rule is designed to ensure that financial institutions have the necessary assets on hand to withstand short-term liquidity disruptions. See the "Liquidity Coverage Ratio" discussion included in the "Regulatory Capital Requirements" section of Management's Discussion and Analysis for additional information.

Regions intends to fund its obligations primarily through cash generated from normal operations. In addition to these obligations, Regions has obligations related to potential litigation contingencies. See Note 14 “Commitments, Contingencies and Guarantees” to the consolidated financial statements for additional discussion of the Company’s funding requirements.

Assets, consisting principally of loans and securities, are funded by customer deposits, purchased funds, borrowed funds and stockholders’ equity. Regions’ goal in liquidity management is to satisfy the cash flow requirements of depositors and borrowers, while at the same time meeting the Company’s cash flow needs. The challenges of the recent recession and the recovery in the current market environment demonstrate the importance of having and using various sources of liquidity to satisfy the Company’s funding requirements.

In order to ensure an appropriate level of liquidity is maintained, Regions performs specific procedures including scenario analyses and stress testing at the bank, holding company, and affiliate levels. Regions updated its liquidity policy related to minimum

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holding company cash requirements during the fourth quarter of 2013. The new policy requires the holding company to maintain cash sufficient to cover the greater of (1) 18 months of debt service and other cash needs or (2) a minimum cash balance of $500 million. Compliance with the holding company cash requirements will be reported to the Risk Committee of the Board of Directors on a quarterly basis. Regions has minimum liquidity requirements for the Bank and subsidiaries. The Bank's funding and contingency planning does not currently include any reliance on unsecured sources. Risk limits are established within the Company's Asset and Liability Committee ("ALCO"), which regularly reviews compliance with the established limits.

The securities portfolio is one of Regions’ primary sources of liquidity. Proceeds from maturities and principal and interest payments of securities provide a constant flow of funds available for cash needs (see Note 3 “Securities” to the consolidated financial statements). The agency guaranteed mortgage portfolio is another source of liquidity in various secured borrowing capacities.

Maturities in the loan portfolio also provide a steady flow of funds. Additional funds are provided from payments on consumer loans and one-to-four family residential first mortgage loans. In addition, liquidity needs can also be met by borrowing funds in state and national money markets, although Regions does not currently rely on unsecured wholesale market funding. Regions’ liquidity has been further enhanced by its relatively stable customer deposit base.

As the economy continues to improve, Regions has been able to decrease the higher levels of excess cash held with the Federal Reserve Bank due to the uncertainty and inconsistency in the funding markets during the recession. The balance with the Federal Reserve Bank is the primary component of the balance sheet line item, “interest-bearing deposits in other banks.” At September 30, 2014 , Regions had approximately $3.0 billion in cash on deposit with the Federal Reserve. Regions’ borrowing availability with the Federal Reserve Bank as of September 30, 2014 , based on assets pledged as collateral on that date, was $21.3 billion.

Regions periodically accesses funding markets through sales of securities with agreements to repurchase. Repurchase agreements are also offered through a commercial banking sweep product as a short-term investment opportunity for customers. All such arrangements are considered typical of the banking industry and are accounted for as borrowings.

Regions’ financing arrangement with the FHLB adds additional flexibility in managing the Company's liquidity position. As of September 30, 2014 , Regions’ borrowing availability from the FHLB totaled $9.8 billion. FHLB borrowing capacity is contingent on the amount of collateral pledged to the FHLB. Regions Bank pledged certain residential first mortgage loans on one-to-four family dwellings and home equity lines of credit as collateral for the FHLB advances outstanding. Additionally, investment in FHLB stock is required in relation to the level of outstanding borrowings. Regions held $16 million in FHLB stock at September 30, 2014 . The FHLB has been and is expected to continue to be a reliable and economical source of funding.

In February 2013, Regions filed a shelf registration statement with the U.S. Securities and Exchange Commission. This shelf registration does not have a capacity limit and can be utilized by Regions to issue various debt and/or equity securities. The registration statement will expire in February 2016.

Regions’ Bank Note program allows Regions Bank to issue up to $5 billion aggregate principal amount of bank notes outstanding at any one time. No issuances have been made under this program as of September 30, 2014 . Notes issued under the program may be senior notes with maturities from 30 days to 15 years and subordinated notes with maturities from 5 years to 30 years. These notes are not deposits and they are not insured or guaranteed by the FDIC.

Regions may, from time to time, consider opportunistically retiring outstanding issued securities, including subordinated debt and preferred shares in privately negotiated or open market transactions for cash or common shares. Regulatory approval would be required for retirement of some instruments.

CREDIT RISK

Regions’ objective regarding credit risk is to maintain a high-quality credit portfolio that provides for stable credit costs with acceptable volatility through an economic cycle. Regions has a diversified loan portfolio in terms of product type, collateral and geography. See Table 2 for further details of each loan portfolio segment. See the “Portfolio Characteristics” and “Credit Risk” sections of the Annual Report on Form 10-K for the year ended December 31, 2013 for a discussion of risk characteristics of each loan type.

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INFORMATION SECURITY RISK

Operational risks comprise several elements, including information security risks. Information security risks such as evolving and adaptive cyber attacks, for large financial institutions such as Regions have generally increased in recent years in part because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, nation-states, activists and other external parties. Regions spends significant resources on operational and information security. Regions is a member of the Financial Services Information Sharing and Analysis Center ("FS-ISAC"). The FS-ISAC is a nonprofit organization and is funded entirely by its member firms and sponsors. Total membership exceeds 1,000 organizations focused in the financial services sector, both domestically and internationally. The overall objective of FS-ISAC is to protect the financial services sector against cyber and physical threats and risk. It acts as a trusted third party that provides anonymity to allow members to submit threat, vulnerability and incident information in a non-attributable and trusted manner so information that would normally not be shared is instead provided for the good of the membership. In addition to FS-ISAC, Regions is a member of BITS, the technology arm of the Financial Services Roundtable. BITS serves the financial community and its members by providing industry best practices on a variety of security and fraud topics. Regions also maintains a close working relationship with its regulators and law enforcement partners to keep them updated on pertinent risks.

Denial of service attacks, hacking or terrorist activities could disrupt the Company or the Company's customers' or other third parties' business operations. For example, during 2013, a group launched several denial of service attacks against a number of large financial services institutions, including Regions. These events did not result in a breach of Regions' client data, and account information remained secure; however, the attacks did adversely affect the performance of Regions Bank's website, www.regions.com , and, in some instances, temporarily prevented customers from accessing Regions Bank's secure websites. In addition, some outbound internet slowness existed. The 2013 events were all resolved during the same business day of the attack. In all cases, the attacks primarily resulted in inconvenience to employees and customers. Regions engages employees from all business groups, not just information technology, to combat these attacks. Regions did not experience any denial of service attacks during the first nine months of 2014.

Even if Regions successfully prevents data breaches to its own networks, the Company may still incur losses that result from customers' account information obtained through breaches of retailers' networks where customers have transacted business. Fraud losses, as well as the costs of investigations and re-issuing new customer cards impact Regions' results.

Regions will continue to commit the resources necessary to mitigate these growing risks, as well as continue to develop and enhance controls, processes and systems to protect our networks, computers, and data from attacks or unauthorized access. In addition, Regions has contracts with vendors to provide denial of service mitigation and these vendors have also continued to commit the necessary resources to support Regions in the event of an attack.

PROVISION FOR LOAN LOSSES

The provision for loan losses is used to maintain the allowance for loan losses at a level that in management’s judgment is appropriate to absorb probable losses inherent in the portfolio at the balance sheet date. The provision for loan losses totaled $24 million in the third quarter of 2014 compared to $18 million during the third quarter of 2013 . The provision for loan losses totaled $61 million in the first nine months of 2014 compared to $59 million in the first nine months of 2013 . Net charge-offs as a percentage of average loans (annualized) were 0.39 percent and 0.78 percent in the first nine months of 2014 and 2013 , respectively. Net charge-offs were lower across most major loan categories when comparing the 2014 period to the prior year period. Net charge-offs exceeded provision for loan losses for the third quarter and first nine months of 2014 primarily due to the continued improving credit metrics, including lower levels of non-accrual loans and criticized and classified loans (see Table 6 “Allowance for Credit Losses”), as well as problem loan resolutions.

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NON-INTEREST INCOME

The following table presents a summary of non-interest income. For expanded discussion of certain significant non-interest income items, refer to the discussion of each component following the table presented.

Table 21—Non-Interest Income from Continuing Operations



	Three Months Ended September 30
	2014			2013
	(In millions)
Service charges on deposit accounts ⁽¹⁾	$	181		$	190
Card and ATM fees ⁽¹⁾	85			82
Mortgage income	39			52
Investment management and trust fee income	47			50
Insurance commissions and fees	31			27
Capital markets fee income and other	24			18
Bank-owned life insurance	20			18
Commercial credit fee income	16			16
Investment services fee income	12			10
Securities gains, net	7			3
Net loss from affordable housing	(19		)	(18		)
Gain on sale of other assets	—			24
Other miscellaneous income	35			23
	$	478		$	495



	Nine Months Ended September 30
	2014			2013
	(In millions)
Service charges on deposit accounts ⁽¹⁾	$	528		$	549
Card and ATM fees ⁽¹⁾	248			239
Mortgage income	122			193
Investment management and trust fee income	143			148
Insurance commissions and fees	93			86
Capital markets fee income and other	53			58
Bank-owned life insurance	62			62
Commercial credit fee income	46			49
Investment services fee income	33			26
Securities gains, net	15			26
Net loss from affordable housing	(54		)	(50		)
Gain on sale of other assets	—			24
Other miscellaneous income	84			83
	$	1,373		$	1,493

_______

(1)

"Card and ATM fees" line item represents the combined amounts of credit card/bank card income and debit card and ATM related revenue. Credit card/bank card income was previously reported as a separate line item. Debit card and ATM related revenue was previously included in the "service charges on deposit accounts" line item. All prior periods presented have been reclassified to conform to this presentation.

Service charges on deposit accounts— Service charges on deposit accounts include non-sufficient fund fees and other customer account fees. Income from service charges on deposit accounts decrease d $9 million for the third quarter of 2014 as compared to the third quarter of 2013 . Income from service charges on deposit accounts decrease d $21 million for the first nine months of 2014 as compared to the first nine months of 2013 . The decrease s during the third quarter and first nine months of 2014 compared to the prior year were driven primarily by continued changes in customer behavior and due to the Company's decision to transition out of certain small credit product offerings.

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Regions will begin piloting a revision to its posting order process for customer deposit accounts during the first quarter of 2015. The piloting results will be utilized to help develop final posting order process decisions as well as customer communications. Full implementation is not expected until the second half of 2015, and the Company's current modeling estimates the impact will decrease service charges on deposit accounts in the range of $10 million to $15 million per quarter on a pre-tax basis. There are many variables included in the current modeling, including the assumption of a static population as well as numerous overlapping policies such as funds availability, all of which will impact this estimate.

Mortgage income— Mortgage income decrease d $13 million for the third quarter of 2014 as compared to the third quarter of 2013 , and decreased $71 million for the first nine months of 2014 as compared to the same period in 2013. The decrease s were driven by lower mortgage production as consumer demand for mortgage loans slowed due to rising mortgage interest rates.

Investment management and trust fee income— Investment management and trust fee income decreased $3 million and $5 million, respectively, for the third quarter and the first nine months of 2014 as compared to the same periods in 2013. The third quarter and first nine months of 2013 included approximately $4 million and $12 million, respectively, of investment management and trust fee income associated with a non-core portion of a Wealth Management business that was sold in the third quarter of 2013. The sale resulted in a pre-tax gain of $24 million.

Capital markets fee income and other— Capital markets fee income and other, which primarily relates to activities such as securities underwriting and placement, loan syndications, foreign exchange and customer derivatives, increased $6 million for the third quarter of 2014 compared to the third quarter of 2013 , and decreased $5 million for the first nine months of 2014 compared to the first nine months of 2013 . The increase in the quarterly period was primarily due to increased customer debt placement transactions and higher market valuation adjustments on customer derivatives. The year to date decrease was primarily driven by a slow down in demand for customer derivatives, given the low interest rate environment.

Securities gains (losses), net— Net securities gains increase d $4 million for the third quarter of 2014 as compared to the third quarter of 2013, and decreased $11 million for the first nine months of 2014 as compared to the first nine months of 2013. Net securities gains result from the Company's asset/liability management process. See Note 3 "Securities" to the consolidated financial statements for more information.

NON-INTEREST EXPENSE

The following table presents a summary of non-interest expense. For expanded discussion of certain significant non-interest expense items, refer to the discussion of each component following the table presented.

Table 22—Non-Interest Expense from Continuing Operations



	Three Months Ended September 30
	2014			2013
	(In millions)
Salaries and employee benefits	$	456		$	455
Net occupancy expense	92			92
Furniture and equipment expense	73			71
Professional and legal expenses	36			34
Deposit administrative fee	20			35
Outside services	32			27
Marketing	23			26
Loss on early extinguishment of debt	—			5
Provision (credit) for unfunded credit losses	(24		)	1
Other miscellaneous expenses	118			138
	$	826		$	884

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	Nine Months Ended September 30
	2014			2013
	(In millions)
Salaries and employee benefits	$	1,354		$	1,354
Net occupancy expense	275			274
Furniture and equipment expense	213			209
Professional and legal expenses	108			86
Deposit administrative fee	55			105
Outside services	94			75
Marketing	71			73
Regulatory charge (credit)	(7		)	—
Gain on sale of TDRs held for sale, net	(35		)	—
Loss on early extinguishment of debt	—			61
Provision (credit) for unfunded credit losses	(13		)	(9		)
Other miscellaneous expenses	348			382
	$	2,463		$	2,610

Salaries and employee benefits— Salaries and employee benefits were essentially flat for the third quarter and first nine months of 2014 when compared to the same periods of 2013 . Headcount decreased from 24,068 at September 30, 2013 to 23,599 at September 30, 2014 .

Professional and legal expenses— Professional and legal expenses increased $2 million for the third quarter of 2014 when compared to the third quarter of 2013, and increased $22 million for the first nine months of 2014 when compared to the same period in 2013. The year-to-date increase includes the recognition of recoveries in 2013 from previously established legal accruals that were not repeated in 2014 .

Deposit administrative fee— Deposit administrative fees decreased $15 million for the third quarter of 2014 when compared to the third quarter of 2013 , and decreased $50 million for the first nine months of 2014 as compared to the same period in 2013 . The decreases were primarily related to continued improvement in performance metrics and a reduction in higher risk loans, both of which impact the fee calculation. The year-to-date 2014 period also included refunds of previously incurred fees recognized during the second quarter of 2014 .

Outside services— Outside services increased $5 million for the third quarter of 2014 when compared to the third quarter of 2013 , and increased $19 million for the first nine months of 2014 as compared to the same period of 2013. The increases were primarily due to the use of temporary staffing on compliance and regulatory related projects as well as increased servicing costs related to continued purchases of indirect loans from a third party.

Regulatory charge (credit)— In the fourth quarter of 2013 , Regions recorded a non-tax deductible regulatory charge of $58 million related to previously disclosed inquiries from government authorities. These matters were settled in the second quarter of 2014 for $7 million less than originally estimated.

Gain on sale of TDRs held for sale, net— During the fourth quarter of 2013 , Regions transferred approximately $535 million of certain primarily accruing residential first mortgage loans classified as TDRs to loans held for sale. During the first quarter of 2014 , substantially all of these loans were sold resulting in a $35 million net gain.

Loss on early extinguishment of debt— During the third quarter of 2013, the Company incurred $5 million in losses related to the early extinguishment of long-term debt at Regions Bank. During the second quarter of 2013 , the Company incurred $56 million in early extinguishment losses related to the tender or redemption of certain senior debt securities and preferred stock, as well as the redemption of select trust preferred securities. Approximately $29 million of the $61 million in 2013 year-to-date losses were non-deductible for income tax purposes.

Provision (credit) for unfunded credit losses— During the third quarter of 2014, the Company realized a $24 million recovery resulting from a large credit funding during the quarter and was therefore included in the loan portfolio on the balance sheet. For the first nine months of 2014, the Company realized a net credit for unfunded credit losses that was $4 million more than the net credit realized for the same period of 2013.

Other miscellaneous expenses— Other miscellaneous expenses decreased $20 million for the third quarter of 2014 when compared to the third quarter of 2013, and decreased $34 million for the first nine months of 2014 as compared to the same period in 2013. The decreases are primarily due to declines in mortgage repurchase costs as well as increased gains from the sale of loans held for sale and foreclosed properties.

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INCOME TAXES

The Company’s income tax expense from continuing operations for the three months ended September 30, 2014 was $127 million compared to income tax expense of $124 million for the same period in 2013 , resulting in effective tax rates of 28.3 percent and 29.7 percent, respectively. The effective tax rate is higher in the prior comparable period principally due to a higher valuation allowance and a non-recurring gain related to the sale of non-core assets.

Income tax expense from continuing operations for the nine months ended September 30, 2014 was $380 million compared to an income tax expense of $360 million for the same period in 2013 , resulting in effective tax rates of 29.0 percent and 28.7 percent, respectively.

The Company’s effective tax rate is affected by recurring items such as affordable housing tax credits, bank-owned life insurance and tax-exempt income, which are expected to be generally consistent in the near term. The effective tax rate is also affected by items that may occur in any given period but are not consistent from period to period, such as the termination of certain leveraged leases and changes in the valuation allowance. Accordingly, the comparability of the effective tax rate from period to period may be impacted.

At September 30, 2014 , the Company reported a net deferred tax asset of $347 million, compared to $612 million at December 31, 2013 . The decrease in the net deferred asset is primarily due to a change in market valuation on securities available for sale, the utilization of federal tax credit carryforwards, and a decrease in the allowance for loan losses.

DISCONTINUED OPERATIONS

Morgan Keegan was sold on April 2, 2012. Regions reported income from discontinued operations of $3 million , or $0.00 per diluted common share, for the third quarter of 2014, compared to essentially breaking even for the third quarter of 2013 . For the nine months ended September 30, 2014 , Regions reported income from discontinued operations of $16 million , or $0.01 per diluted common share, compared to income from discontinued operations of $1 million , or $0.00 per diluted common share, for the nine months ended September 30, 2013 . The third quarter and first nine months of 2014 income from discontinued operations was primarily the result of further reductions in the indemnification liability reflecting updated assumptions, as well as insurance proceeds recognized in the third quarter of 2014.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Reference is made to pages 82 through 84 included in Management’s Discussion and Analysis.

Item 4. Controls and Procedures

Based on an evaluation, as of the end of the period covered by this Form 10-Q, under the supervision and with the participation of Regions’ management, including its Chief Executive Officer and Chief Financial Officer, the Chief Executive Officer and Chief Financial Officer have concluded that Regions’ disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) are effective. During the quarter ended September 30, 2014 , there have been no changes in Regions’ internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Regions’ internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Information required by this item is set forth in Note 14, “Commitments, Contingencies and Guarantees” in the Notes to the Consolidated Financial Statements (Unaudited) in Part I. Item 1. of this report, which is incorporated herein by reference.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Information concerning Regions’ repurchases of its outstanding common stock during the three month period ended September 30, 2014 , is set forth in the following table.

Issuer Purchases of Equity Securities



Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Approximate Dollar Value of Shares That May Yet Be Purchased Under Publicly Announced Plans or Programs
July 1-31, 2014	—	$	—	—	$	350,000,000
August 1-31, 2014	—	$	—	—	$	350,000,000
September 1-30, 2014	—	$	—	—	$	350,000,000
Total 3rd Quarter	—	$	—	—	$	350,000,000

Restrictions on Dividends and Repurchase of Stock

Holders of Regions common stock are only entitled to receive such dividends as Regions’ Board of Directors may declare out of funds legally available for such payments. Furthermore, holders of Regions common stock are subject to the prior dividend rights of any holders of Regions preferred stock then outstanding.

Regions understands the importance of returning capital to shareholders. Management will continue to execute the capital planning process, including evaluation of the amount of the common dividend, with the Board of Directors and in conjunction with the regulatory supervisors, subject to the Company’s results of operations. Also, Regions is a bank holding company, and its ability to declare and pay dividends is dependent on certain federal regulatory considerations, including the guidelines of the Federal Reserve regarding capital adequacy and dividends.

On November 1, 2012, Regions completed the sale of 20,000,000 depositary shares each representing a 1/40th ownership interest in a share of its 6.375% Non-Cumulative Perpetual Preferred Stock, Series A, par value $1.00 per share (“Series A Preferred Stock”), with a liquidation preference of $1,000 per share of Series A Preferred Stock (equivalent to $25 per depositary share). The terms of the Series A Preferred Stock prohibit Regions from declaring or paying any dividends on any junior series of its capital stock, including its common stock, or from repurchasing, redeeming or acquiring such junior stock, unless Regions has declared and paid full dividends on the Series A Preferred Stock for the most recently completed dividend period. The Series A Preferred Stock is redeemable at Regions’ option in whole or in part, from time to time, on any dividend payment date on or after December 15, 2017, or in whole, but not in part, at any time within 90 days following a regulatory capital treatment event (as defined in the certificate of designations establishing the Series A Preferred Stock).

On April 29, 2014, Regions completed the sale of 20,000,000 depositary shares each representing a 1/40th ownership interest in a share of its 6.375% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series B, par value $1.00 per share (“Series B Preferred Stock”), with a liquidation preference of $1,000 per share of Series B Preferred Stock (equivalent to $25 per depositary share). The terms of the Series B Preferred Stock prohibit Regions from declaring or paying any dividends on any junior series of its capital stock, including its common stock, or from repurchasing, redeeming or acquiring such junior stock, unless Regions has declared and paid full dividends on the Series B Preferred Stock for the most recently completed dividend period. The Series B Preferred Stock is redeemable at Regions’ option in whole or in part, from time to time, on any dividend payment date on or after September 15, 2024, or in whole but not in part, at any time following a regulatory capital treatment event (as defined in the certificate of designations establishing the Series B Preferred Stock).

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Item 6. Exhibits

The following is a list of exhibits including items incorporated by reference



3.1		Amended and Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to Form 10-Q Quarterly Report filed by registrant on August 6, 2012.

3.2		Certificate of Designations, incorporated by reference to Exhibit 3.3 to Form 8-A filed by registrant on November 1, 2012.

3.3		Certificate of Designations of Regions Financial Corporation, filed with the Secretary of State of the State of Delaware and effective April 28, 2014, incorporated by reference to Exhibit 3.3 to the Form 8-A filed by registrant on April 28, 2014.

3.4		By-laws as amended and restated, incorporated by reference to Exhibit 3.2 to Form 8-K Current Report filed by registrant on May 14, 2010.

10.1		Amendment Number Three to the AmSouth Bancorporation Deferred Compensation Plan.

10.2		Regions Financial Corporation Use of Corporate Aircraft Policy, amended and restated August 2014.

10.3		Amendment Number One to the Regions Financial Corporation Amended and Restated Management Incentive Plan.

12		Computation of Ratio of Earnings to Fixed Charges.

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		Interactive Data File

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by undersigned thereunto duly authorized.




DATE: November 5, 2014		Regions Financial Corporation

		/ S / H ARDIE B. K IMBROUGH , J R .
		Hardie B. Kimbrough, Jr. Executive Vice President and Controller (Chief Accounting Officer and Authorized Officer)

EXHIBIT 10.1

AMENDMENT NUMBER THREE

TO THE

AMSOUTH BANCORPORATION

DEFERRED COMPENSATION PLAN

Regions Financial Corporation, successor to AmSouth Bancorporation, hereby amends the Plan as follows:

WHEREAS, Regions Financial Corporation (the “Company”), successor to AmSouth Bancorporation, desires to amend the Plan to reflect that the Stable Principal Fund is no longer an investment option available under the Plan; and

WHEREAS, pursuant to Section 9.1 of the Plan, the Company is authorized to amend the Plan.

NOW, THEREFORE, the Company, in accordance with the provisions of the Plan pertaining to amendments thereof, hereby amends the Plan, effective as of July 3, 2014, as follows:

1. In Section 6.1(a), delete the third sentence therein and insert in its place thereof the following: “Participants with no investment elections in the Regions Financial Corporation 401(k) Plan, successor to the Thrift Plan, will be deemed to have their Accounts invested in a default investment reasonably selected by Committee.”

2. All other terms, conditions, and provisions of the Plan not herein modified shall remain in full force and effect.

EXHIBIT 10.2

August 2014

REGIONS FINANCIAL CORPORATION

USE OF CORPORATE AIRCRAFT POLICY

OBJECTIVE

Regions Financial Corporation (“Regions”) has designed this Use of Corporate Aircraft Policy (this “Policy”) to set forth the criteria and procedures applicable to the use of all aircraft operated by Regions and/or its subsidiaries or affiliates (collectively, the “Company”). This Policy is intended to comply with Company objectives and applicable laws, rules, and regulations and shall be amended from time to time as necessary or appropriate to ensure continued compliance with such laws, rules, and regulations as in effect at such time. In addition, the following key points are addressed in this Policy:


1.	Who has access to the aircraft?


2.	For what purposes may the aircraft be used?


3.	In which circumstances is use of the aircraft to be paid for by the passenger?


4.	What are the tax and disclosure implications of aircraft use?

SCOPE

This Policy is applicable to use of all aircraft operated by the Company (“Company Aircraft”).

PURPOSE OF COMPANY AIRCRAFT

The Company operates Company Aircraft to provide business and non-business air transportation services for Company executives, associates and directors, and their guests, and to transport Company property. The Company shall not offer common carriage or transportation for hire and shall seek reimbursement for transportation only as described in this Policy.

Use of Company Aircraft maximizes productivity and availability of key personnel by permitting them to travel more efficiently, allowing them to focus their time and energy on achieving Company objectives. Use of Company Aircraft also ensures added measures of security for passengers by reducing the risk of potential or actual known or unknown threats to high profile personnel.

DEFINITIONS

This Policy will reference different types of usage of the aircraft, which are defined as follows:

Business Travel means travel primarily within the scope of the business of the Company.

•

Examples of Business Travel include, but are not limited to, travel to attend meetings with Company customers, travel to attend Company, Board or Board Committee meetings, and other travel that generally furthers the business purposes of the Company. The mere fact that a passenger also accomplishes a personal goal or receives a personal benefit shall not preclude the travel from being deemed Business Travel, provided the accomplishment of the personal goal or receipt of a personal benefit is incidental to the overall business-related purpose of the trip.


•	If questions arise over the characterization of a flight as Business Travel or Personal Travel, the Chief Executive Officer (“CEO”) of the Company or his or her designee shall determine the appropriate characterization, unless the passenger is the CEO,

in which case the determination shall be made by the Compensation Committee of the Board of Directors of Regions, or the full Board of Directors of Regions.

Personal Travel means travel that is not primarily within the scope of the business of the Company.


•	Examples of Personal Travel include, but are not limited to, travel for vacation, travel to attend a family function (such as a funeral, birth, or other occasion), and travel to receive medical treatment (other than medical services required by the Company).


•	Personal Travel includes trips in which a business objective is achieved if that business objective is merely incidental to the overall personal purpose of the trip.

•

A trip may include both Personal Travel and Business Travel. For example, travel from Point A to Point C with a stop in Point B may be both Personal Travel and Business Travel if the trip from Point A to Point C is purely for business purposes, but the stop in Point B is for personal purposes. However, if a stop between Point A and Point C is necessary (such as for refueling) and Point B creates no additional expense to the Company over the least expensive location for a stop, then the stop at Point B shall be considered incidental to the business purpose of the trip, notwithstanding any personal benefit that the passenger may receive by stopping at Point B.

Incremental Cost means the actual cost to the Company of a passenger’s travel over the cost the Company would have incurred absent that passenger’s travel.


•	For example, if an associate traveling on Business Travel takes along a spouse or other personal guest, any additional costs specifically attributable to the travel of the spouse or guest are Incremental Costs.


•	The Incremental Cost of a trip includes only the costs applicable to the trip, not the cost of owning and maintaining the aircraft.

Deadhead Flights are flights the Company Aircraft makes without passengers that are directly related to Business Travel or Personal Travel. Deadhead Flights will be deemed to have the same character as the Business Travel or Personal Travel they facilitate. For example, if an associate travels on business, the flight of Company Aircraft to pick him up before his Business Travel would be deemed Business Travel, as would the return of the aircraft after dropping him off at the end of his travel.

Reimbursable Amount means the specific items listed in 14 C.F.R. §91.501(d) which may be paid by a Permitted Person to the Company if the Permitted Person has entered into a time sharing arrangement with the Company. These items include the costs of the following:


1.	Fuel, oil, lubricants, and other additives.


2.	Travel expenses of the crew, including food, lodging, and ground transportation.


3.	Hangar and tie-down costs away from the aircraft's base of operation.


4.	Insurance obtained for the specific flight.


5.	Landing fees, airport taxes, and similar assessments.


6.	Customs, foreign permit, and similar fees directly related to the flight.


7.	In-flight food and beverages.


8.	Passenger ground transportation.


9.	Flight planning and weather contract services.


10.	An additional charge of up to 100% of the cost of fuel, oil, lubricants, and other additives.

ACCESS TO AIRCRAFT

The following “Permitted Persons” shall have access to the aircraft, in the following order of priority:


1.	The Chairman of the Board of Directors and the CEO.


2.	The Lead Independent Director of the Board of Directors of Regions (the “Board”).


3.	Board Members to facilitate their efficient attendance at Board and Board Committee meetings.


4.	Executive Council and Operating Committee members.


5.	Other members of senior management, as approved by the CEO.


6.	In appropriate circumstances, associates with a business related purpose for the travel and contractors, consultants, customers, potential customers, and other individuals who have a business relationship with the Company, all as approved by the CEO, provided however that the CEO shall, in a case by case basis, determine whether such individual may be in a higher priority category.

Permitted Persons shall be permitted to bring spouses and other personal guests on otherwise-approved Business Travel and Personal Travel, provided the Permitted Person accompanies the guest on the flight. Generally, spouses and guests of Permitted Persons are not permitted to fly on the Company Aircraft unaccompanied by the Permitted Person, with exceptions to be specified by the CEO, or in the case of the CEO, by the Lead Independent Director of the Board.

Generally, use of the Company Aircraft for customer business development or for civic, charitable or humanitarian reasons requires the written approval of the CEO.

TREATMENT OF TRAVEL

Business Travel

Policy: Commercial travel for business purposes is encouraged except in cases where travel by Company Aircraft offers distinct advantages to the Company. In support of this principle, Permitted Persons shall be permitted to use Company Aircraft for appropriate Business Travel, subject to reasonable restrictions for scheduling and availability. Additionally, Permitted Persons are encouraged to schedule their Business Travel to coincide with the travel of other Permitted Persons so as to minimize the Incremental Cost to the Company. Where possible, Deadhead Flights are to be avoided.

Tax Considerations :


•	If the travel is solely Business Travel, the Permitted Person should have no tax consequences if traveling alone or in the company of other Permitted Persons.

•

If the Business Travel includes one or more personal flights, the Company shall value the personal portion using the Standard Industry Fare Level (“SIFL”) rates as periodically published by the U.S. Department of Transportation and shall include such amount in the Permitted Person’s taxable income reported to the Internal Revenue Service (“IRS”) for the year of travel, to the extent that such amount exceeds the amount paid by the Permitted Person to the Company for the trip, if any.


•	If the Permitted Person is accompanied by a spouse or other guest, the spouse’s or guest’s travel shall be valued using the SIFL rates and shall be included in the Permitted Person’s taxable income for the year of travel, to the extent that such amount exceeds the amount paid by the Permitted Person to the Company for the trip, if any.

SEC Reporting: If the Permitted Person is a named executive officer (“NEO”) under the reporting rules of the Securities and Exchange Commission (“SEC”), the following shall apply:


•	If the travel is solely Business Travel, there shall not be any amount reportable.


•	If the travel includes one or more personal flights, the Company shall report the Incremental Cost of the Personal Travel as a perquisite in its annual proxy filings.


•	If the Permitted Person is accompanied by a spouse or other guest, any non-deminimis Incremental Cost of the spouse’s or guest’s travel shall be treated as a perquisite in the Company’s annual proxy filings.


•	The amount reported shall not include any amount paid by the Permitted Person to the Company for the trip, if any.

Cost Allocation : In general, the Company will pay 100% of the cost of Business Travel. However, in unusual circumstances, Business Travel may be contingent upon the Permitted Person entering into a time sharing agreement and reimbursing the Company for the reimbursable amount.

Personal Travel

Policy: The CEO shall have use of the Company Aircraft for Personal Travel without reimbursement to the Company up to a maximum value of $100,000 per year. The annual maximum value shall be determined based on calculating the full Incremental Cost for the operation of the aircraft as required under SEC rules for proxy reporting and as determined by the Company from time to time. In the event the value of any Personal Travel by the CEO exceeds $100,000 annually, the CEO shall be required to reimburse the Company for the full Incremental Costs of such use under a time sharing agreement entered into between the CEO and the Company.

Permitted Persons other than the CEO are encouraged to use commercial aircraft for Personal Travel. However, with advance approval of the CEO or his designee, a Permitted Person may use the Company Aircraft for Personal Travel in the following circumstances:


•	Allowing the spouse or other guest of the Permitted Person to travel with the Permitted Person, where the Permitted Person is engaged in Business Travel. Except in unusual circumstances, a spouse or guest will be permitted only when the spouse or guest does not preclude Business Travel of other Permitted Persons on the same trip.


•	Appending Personal Travel to Business Travel in appropriate circumstances.


•	Combining Personal Travel and Business Travel where the Business Travel would be allowed if the purpose of the Personal Travel did not exist.


•	The Company requests that the Permitted Person use Company Aircraft for security reasons or other reasons that have a business value to the Company.


•	In the case of a medical or family emergency.

Tax Considerations :

•

If the travel is solely Personal Travel, the Company shall value the Personal Travel using SIFL rates and shall include such amount in the Permitted Person’s taxable income reported to the IRS for the year of travel, to the extent that such amount exceeds the amount paid by the Permitted Person to the Company for the trip, if any. In valuing the Personal Travel, any legs of travel that qualify as Business Travel will be disregarded.


•	If the Permitted Person is accompanied by a spouse or other guest, the spouse’s or guest’s travel shall be valued using the SIFL rates and shall be included in the Permitted Person’s taxable income reported to the IRS for the year of travel, to the extent that such amount exceeds the amount paid by the Permitted Person to the Company for the trip, if any.

SEC Reporting: If the Permitted Person is an NEO under the reporting rules of the SEC, the following shall apply:


•	The Company shall report the Incremental Cost of the Personal Travel as a perquisite in its annual proxy filings.


•	If the Permitted Person is accompanied by a spouse or other guest, the non-deminimis Incremental Cost of the spouse’s or guest’s travel shall be treated as a perquisite to the NEO in the Company’s annual proxy filings.


•	The amount reported shall not include any amount paid by the Permitted Person to the Company for the trip, if any.

Cost Allocation : If the Permitted Person has entered into a time sharing agreement, the Company will seek reimbursement for Personal Travel as provided for in the agreement up to the maximum reimbursable amount where permissible, provided however that under appropriate circumstances, the Company may waive reimbursement subject to appropriate SEC and tax reporting.

NO GROSS-UPS; TAX TREATMENT

Use of the Company Aircraft is provided as a convenience to Permitted Persons and their guests. As such, the Company makes no promises or guarantees as to the tax treatment of any travel. Therefore, Permitted Persons and their guests shall be solely responsible for the tax consequences of their Personal Travel. The Company shall not provide any NEO or Director with any type of gross-up or other tax protection related to use of the Company Aircraft. In the event the IRS recharacterizes a flight as Personal Travel or otherwise determines that the taxable amount exceeds the amount reported by the Company, the Permitted Person or guest shall be solely responsible for any additional tax or penalties.

SEATING CAPACITY RULE

Permitted Persons are encouraged to coordinate their travel to coincide with the Business Travel of other Permitted Persons. As such, the Company will make available to Permitted Persons the “seating capacity rule” described in the U.S. Treasury regulations. Pursuant to this rule, if at least 50% of the aircraft’s seating capacity is used for Business Travel, the Personal Travel of a Permitted Person on the same flight may be valued at $0. As required by the U.S. Treasury regulations, this Policy applies only to Permitted Persons who are associates (not including non-employee Directors) of the Company and to their spouses and dependent children.

SCHEDULING

The CEO or his designee shall establish a procedure for scheduling the use of Company Aircraft. The CEO may designate one or more associates of the Company as an Aviation Department to whom all such scheduling requests may be directed.

In general, the Permitted Person shall submit a completed, signed trip request form to the Aviation Department as far in advance as possible.

Cancellations should be made as far in advance as possible, and any cancellations after 4:00 p.m. Central Time on the day before a flight will result in the person requesting the flight being charged a fee equal to the

cost of fuel for the cancelled flight. This fee may be waived if the cancellation was due to extraordinary circumstances.

The Aviation Department will determine if the aircraft, crew, and other resources are available for the trip. If a trip request is not ideally suited for the Company’s aircraft, or if the trip request cannot be accommodated, the Aviation Department will inform the Permitted Person at the earliest possible date.

The Aviation Department may cancel or reschedule flights to ensure compliance with this Policy or to facilitate higher priority flights.

In the event of multiple trip requests for the same aircraft at the same time, the Chief Administrative Officer shall assist in prioritizing the trip requests. First priority shall go to the Business Travel expected to provide the greatest benefit to the Company.

OTHER CONSIDERATIONS


•	Deadhead Flights are discouraged.


•	Flights should be scheduled, where possible, to make the most efficient and cost effective use of Company Aircraft, taking into account other Permitted Persons who may use the aircraft for Business Travel.


•	Short flight segments of less than 115 land miles will not be permitted unless such segment is a business-related stop on a longer trip that constitutes Business Travel. Other exceptions to this Policy shall be made at the discretion of the CEO but shall generally be only for critical business matters.


•	Permitted Persons should be considerate of the wait time of pilots and flight crew in scheduling their flights, particularly regarding overnight stays. Generally, overnight stays are to be avoided, and the Company may seek reimbursement of the costs of overnight stays even in the event of Business Travel if the CEO deems that an overnight stay could reasonably have been avoided.


•	No more than three persons with the titles of “Senior Executive Vice President” and above should travel together without the approval of the CEO.

All usage of Company Aircraft must be in accordance with all applicable laws, rules and regulations. Situations not specifically discussed in this Policy should be addressed in accordance with the intent and spirit of this Policy. Any questions should be directed to the Director of Human Resources or his or her designees.

EXHIBIT 10.3

AMENDMENT NUMBER ONE TO THE

REGIONS FINANCIAL CORPORATION

AMENDED AND RESTATED MANAGEMENT INCENTIVE PLAN

WHEREAS, Regions Financial Corporation (the “Corporation”) hereto established and maintains the Regions Financial Corporation Amended and Restated Management Incentive Plan (the “Plan”);

WHEREAS, the Corporation desires to amend the Plan to clarify the definition of “retirement” for purposes of the Plan to reflect the manner in which the Plan has been administered and to be consistent with how retirement is defined in certain other plans sponsored by the Corporation; and

WHEREAS, pursuant to Section 8.3 of the Plan, the Compensation Committee of the Corporation (the “Committee”) is authorized to amend the Plan in its sole discretion.

NOW, THEREFORE, the Committee, in accordance with the provisions of the Plan pertaining to amendments thereof, hereby amends the Plan, effective as of August 21, 2014, as follows:

1. Amend Section 3.1 by inserting the following paragraph as a new paragraph at the end thereof:

“‘Retirement’ means a Participant experiences a separation from service (other than for ‘cause’) at a time when the Participant is: (1) at least sixty five (65) years old; or (2) at least fifty-five (55) years old and has a minimum ten (10) years of service with the Corporation or any of its subsidiaries in which the Corporation has a direct or indirect ownership or other equity interest. ‘Cause’ shall mean (i) termination of employment by the Corporation or a subsidiary due to a material violation of the Corporation’s code of business conduct and ethics, the Participant’s fiduciary duties to the Corporation, or any law, provided such violation has materially harmed the Corporation or (ii) the occurrence of any event constituting ‘cause’ within the meaning of a Participant’s then-applicable employment agreement with the Corporation or a subsidiary.”

2. All other terms, conditions, and provisions of the Plan not herein modified shall remain in full force and effect.

* * * * *

EXHIBIT 12

Regions Financial Corporation

Computation of Ratio of Earnings to Fixed Charges

(from continuing operations)

(Unaudited)



	Three Months Ended September 30				Nine Months Ended September 30
	2014		2013		2014		2013
	(Dollars in millions)
Excluding Interest on Deposits
Income from continuing operations before income taxes	$	449	$	417	$	1,308	$	1,254
Fixed charges excluding preferred stock dividends	64		70		199		234
Income for computation excluding interest on deposits	513		487		1,507		1,488
Interest expense excluding interest on deposits	50		56		157		193
One-third of rent expense	14		14		42		41
Preferred stock dividends	20		8		36		24
Fixed charges including preferred stock dividends	84		78		235		258
Ratio of earnings to fixed charges, excluding interest on deposits	6.12x		6.24x		6.42x		5.77x
Including Interest on Deposits
Income from continuing operations before income taxes	$	449	$	417	$	1,308	$	1,254
Fixed charges excluding preferred stock dividends	90		101		277		340
Income for computation including interest on deposits	539		518		1,585		1,594
Interest expense including interest on deposits	76		87		235		299
One-third of rent expense	14		14		42		41
Preferred stock dividends	20		8		36		24
Fixed charges including preferred stock dividends	110		109		313		364
Ratio of earnings to fixed charges, including interest on deposits	4.89x		4.78x		5.06x		4.38x

EXHIBIT 31.1

CERTIFICATIONS

I, O. B. Grayson Hall, Jr., certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Regions Financial Corporation;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 5, 2014

/ S / O. B. G RAYSON H ALL , J R .

O. B. Grayson Hall, Jr.

Chairman, President and

Chief Executive Officer

EXHIBIT 31.2

CERTIFICATIONS

I, David J. Turner, Jr., certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Regions Financial Corporation;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 5, 2014

/ S / D AVID J. T URNER , J R .

David J. Turner, Jr.

Senior Executive Vice President and

Chief Financial Officer

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Regions Financial Corporation (the “Company”) on Form 10-Q for the quarter ending September 30, 2014 (the “Report”), I, O. B. Grayson Hall, Jr., Chief Executive Officer of the Company, and David J. Turner, Jr., Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:


1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



/ S / O. B. G RAYSON H ALL , J R .		/ S / D AVID J. T URNER , J R .
O. B. Grayson Hall, Jr. Chief Executive Officer		David J. Turner, Jr. Chief Financial Officer

DATE: November 5, 2014

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to Regions Financial Corporation and will be retained by Regions Financial Corporation and furnished to the Securities and Exchange Commission or its staff upon request.