Regions Financial Corp. said it expects its allowance for credit losses of $903 million as of the first six months of 2019 to increase by about $400 million to $600 million upon adoption of the planned current expected credit loss model, or CECL.
The estimate is based on the company's March 31 loan exposure balances and an internally developed macroeconomic forecast, the company said.
The estimated increase in the allowance is primarily the result of significant increases within residential first mortgage, home equity lending, consumer credit card and indirect-other consumer loan classes. Regions said residential first mortgage and home equity lending products are impacted by having the longest time to maturity.
The estimate, however, is subject to change based on continuing review and challenge of the models, assumptions, methodologies and judgments, the company said. The impact at adoption will also be influenced by the loan portfolio composition and quality at the adoption date, as well as macroeconomic conditions and forecasts at that time.
Regions posted second-quarter net income available to common shareholders of $374 million, or 37 cents per share, compared with $359 million, or 32 cents per share, in the second quarter of 2018.
The S&P Global Market Intelligence consensus estimate for GAAP EPS for the second quarter was 39 cents.