RFRegions Financial Corporation

In addition, technology has lowered barriers to entry and made it possible for non-banks to offer products and services, such as loans and payment services, that traditionally were banking products, and made it possible for technology companies to compete with financial institutions in providing electronic, internet-based, and mobile phone–based financial solutions. Competition with non-banks, including technology companies, to provide financial products and services is intensifying. In particular, the activity of fintechs has grown significantly over recent years and is expected to continue to grow. Fintechs have and may continue to offer bank or bank-like products. For example, a number of fintechs have applied for, and in some cases been granted, bank or industrial loan charters. In addition, other fintechs have partnered with existing banks to allow them to offer deposit products to their customers. Regulatory changes, such as the revisions to the FDIC’s rules on brokered deposits intended to reflect recent technological changes and innovations, may also make it easier for fintechs to partner with banks and offer deposit products. In addition to fintechs, traditional technology companies have begun to make efforts toward providing financial services directly to their customers and are expected to continue to explore new ways to do so. Many of these companies, including our competitors, have fewer regulatory constraints, and some have lower cost structures, in part due to lack of physical locations. Regions provides an array of digital products and services to our customers and we expect a bank’s digital offerings to be a key competitive differentiator. The move toward digital banking and financial services, and customer expectations regarding digital offerings, will require us to invest greater resources in technological improvements and may put us at a disadvantage to banks and non-banks with greater resources to spend on technology.

In the fourth quarter of 2024, 2025, the Company added $3.0 $3.5 billion in forward-starting interest rate receive-fixed swaps (floating rate loan hedges) with a receive rate of 3.6 3.4 percent, which will become active throughout 2026 with 5-year maturities, to partially hedge 2026 expected fixed-rate loan turnover. A portion of these hedges were terminated subsequent to December 31, 2025, consistent with the timing of the fixed-rate loan production the swaps were intended to hedge. Additionally, subsequent to December 31, 2025, the Company continued the execution of this strategy and added $1.25 billion in forward-starting receive-fixed swaps with a receive rate of 3.5 percent, which will become active in both July the third and fourth quarters of 2026 and July 2028 and mature in July 2031. The Company also added $2.0 billion in pay-fixed interest rate swaps (AFS securities hedges) with an average pay rate of 3.9 percent and an average maturity in 2030 to reduce AOCI volatility in the AFS securities portfolio. As an offset to the interest rate risk associated with these pay-fixed fair value hedges, 5-year maturities. Separately, the Company added $2.0 billion in spot-starting a $250 million forward-starting receive-fixed interest rate swaps (floating rate loan hedges) swap with an average a receive rate of 3.8 percent and an average maturity percent, which becomes active in 2030. Cash flow swaps (floating rate loan hedges) typically have the first quarter of 2029 with a different day count convention than fair value swaps (AFS securities hedges), resulting in a lower fixed rate. 3-year maturity.

Foreclosed property and other real estate is carried in other assets at the lower of the recorded investment in the loan or fair value less estimated costs to sell the property. The fair value for foreclosed property that is based on either observable transactions of similar instruments or formally committed sale prices is classified as a Level 2 measurement. If no formally committed sale price is available, Regions also obtains valuations from professional valuation experts and/or third party appraisers. Updated valuations are obtained on at least an annual basis. Foreclosed property exceeding established dollar thresholds is valued based on appraisals. Appraisals are performed by third-parties with appropriate professional certifications and conform to generally accepted appraisal standards as evidenced by the Uniform Standards of Professional Appraisal Practice. Regions’ policies related to appraisals conform to regulations established by the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and other regulatory guidance. Professional valuations are considered Level 2 measurements because they are based largely on observable inputs. Regions has a centralized appraisal review function that is responsible for reviewing appraisals for compliance with banking regulations and guidelines as well as appraisal standards. Based on these reviews, Regions may make adjustments to the market value conclusions determined in the appraisals of real estate (either as other real estate or loans held for sale) when the appraisal review function determines that the valuation is based

Regions sells commercial loans to Fannie Mae through the DUS lending program and through other platforms. The DUS program provides liquidity to the multi-family housing market. Regions services loans sold to Fannie Mae and is required to provide a loss share guarantee equal to one-third of the principal balance for the majority of the commercial servicing portfolio. At December 31, 2025 and 2024, the Company's DUS servicing portfolio totaled approximately $7.8 billion and $7.0 billion, respectively. Regions has additional loans sold to Fannie Mae outside of the DUS program that are also subject to a loss share guarantee and at December 31, 2024 2025 and 2023, 2024, these serviced loans totaled approximately $665 $823 million and $653 $665 million, respectively. Regions' maximum quantifiable contingent liability related to all loans subject to a loss share guarantee was approximately $2.4 $2.7 billion and $2.3 $2.4 billion at December 31, 2024 2025 and 2023, 2024, respectively. The Company would be liable for this amount only if all of the loans it services for Fannie Mae, for which the Company retains some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement. Therefore, the maximum quantifiable contingent liability is not representative of the actual loss the Company would be expected to incur. The estimated fair value of the associated loss share guarantee recorded as a liability on the Company's consolidated balance sheets was immaterial at both December 31, 2024 2025 and 2023. 2024. Refer to Note 1 for additional information.