Build the downside case

Company overview

Regions is a regional bank holding company with $161.3bn of assets at 30 June 2026, serving customers across the South, Midwest and Texas through more than 1,200 banking offices [R3,R7]. It reports three segments: Corporate Bank, Consumer Bank and Wealth Management. The Corporate Bank earned $483M of net interest income in the second quarter of 2026, 37.8% of the group total, plus $242M of non-interest income, including $84M of capital markets income and $28M of commercial credit fees (Exhibit 4).

Lending is the core of the model. Loans were $99,200M at 30 June 2026, and C&I loans of $51,841M were 52.3% of the book, up from $48,790M at the end of 2025, after two years of decline from $50,865M at the end of 2023 and $49,671M at the end of 2024. Regions' 10-K for 2025 says C&I loans fell in 2025 "due to strategic runoff in leveraged lending, continued portfolio resolutions, and loans refinancing off the balance sheet through the debt capital markets" (MD&A, Portfolio characteristics, p.59) [R1]; for 2024 it cited "lower line of credit utilization and loans refinanced off the Company's balance sheet through the debt capital markets" (10-K for 2024, MD&A, p.62) [R20]. C&I loans yielded 5.36% in the quarter on a taxable-equivalent basis. The bank funds them with $130,710M of deposits, of which $39,952M sit in the Corporate Bank. Unused commitments to extend credit were $70,469M (Exhibit 3).

Return on average tangible common equity (ROATCE) was 19.01% in the second quarter of 2026, and the net interest margin 3.66% (Exhibit 2). Business criticized loans fell from 7.22% of business loans in the second quarter of 2025 to 5.01% a year later. Regions is a standardized-approach, Category IV bank with a stress capital buffer of 2.5% (Exhibit 5).

Regions is building fee businesses around the Corporate Bank. In July 2026 it closed the acquisition of The Frazer Lanier Company, a municipal and corporate investment bank [R6]. On 26 August 2026 it launched Regions Whole Loan Advisory, which helps banks and investors buy and sell whole-loan portfolios [R7]. On 7 October 2026 it launched a Materials and Infrastructure Group in Corporate Banking [R18]. In June 2024 its chief executive described private credit providers as competitors that offer more leverage, longer terms and larger loans than Regions would [R19].

Direct lenders compete with banks for middle-market and sponsor-backed loans and price above the syndicated market. In the twelve months to 30 June 2026, direct lending buyout loans priced at SOFR + 497bp against SOFR + 340bp for broadly syndicated loans, a premium of 155bp (140bp year to date) (PitchBook LCD data cited by Portage Point) [R17]. With 1M CME Term SOFR at 3.925% on 9 October 2026 [R14], the direct lending spread implies an all-in coupon of about 8.89% before fees. The Term SOFR curve slopes upward, to 4.472% for 12 months on the same date [R14]. Federal Reserve staff found that private credit borrowers financed in 2025 had median leverage of 5.0x debt to EBITDA and average interest cover of 2.2x, against 3.2x and 3.7x for leveraged loan borrowers (FEDS Note, 11 August 2026, Table 1) [R21]. The Federal Reserve's target range has been 3.75%–4.00% since 16 September 2026 [R16].

How your summary is assessed. Your executive summary is scored out of 100 on the platform's six rubric areas, read the way a client steering committee reads a consulting recommendation. The deck is read only to confirm that it tells the same story; the summary carries the grade. thesis: the recommendation (15 points): The answer in the opening paragraph: which option Regions should pursue, on what conditions, with two or three reasons drawn from the client's own data rather than adjectives; business_risk: strategic and partner risk (15 points): The few risks that decide whether the strategy works for Regions, ranked, each explained as a mechanism with evidence from the briefing book and a mitigant or open question. Generic risks that would fit any bank earn little; financial_analysis: sizing and option economics (20 points): Sizing and option economics that reconcile to the exhibits, with each assumption labelled, and the base rate, its date and its source stated next to any all-in rate; downside_case: scenarios (20 points): Scenarios anchored in Regions' own history and in the rate stress named in question 4, carried through to income, capital and return, with a plain statement of what would change the answer; structure: partnership design (15 points): A judgement on the terms that protect Regions, not a description of them: economics, control of credit decisions and of the client, conflicts, exits and capital treatment, and the changes you would push for; communication: executive communication (15 points): One to two pages a committee can read in one sitting, answer first, a figure behind each important claim, and the same numbers and recommendation in the summary and the deck. Four checks are reported but carry no points: whether your figures tie to the briefing book, whether you answered the questions asked, how far you go beyond restating the packet, and polish. At Intermediate level the scenarios must rest on the client's own history, and the summary must judge whether the proposed terms protect Regions.

Your executive summary should answer

1. 01Size the issue. Using Exhibits 1–4 and 8, describe what is at stake: C&I's share of loans and its growth from December 2025 to June 2026; the C&I yield against the indicative direct lending all-in coupon (1M CME Term SOFR of 3.925% on 9 October 2026 plus the LTM spread, Exhibit 7); and the annual net interest income, CET1 capital and relationship revenue that the declined or lost requests in Exhibit 8 represent. State your funding cost, risk weight and other assumptions.
2. 02Option economics. For options A–D, estimate the annual fee income, net interest income, CET1 capital consumed or released and return on allocated CET1 for a year of activity at the Exhibit 8 volume. Label every assumption and compare each option with Regions' ROATCE (Exhibit 2).
3. 03Precedents and partner choice. Which precedent in Exhibit 6 is closest to what Regions should do, and why? Set out three to five criteria for choosing a partner.
4. 04Scenarios. Test your recommended option against (i) a credit downturn, using Regions' own weakest quarter in Exhibit 2 (name it and the metric) and a stress you justify for the partner portfolio; (ii) a forward-curve +100bp rate stress (Exhibit 7), showing its effect on the interest cover of a typical private credit borrower and on your option's income and return on CET1; (iii) the partner underperforming or withdrawing; and (iv) competitive response and cannibalisation of Regions' own C&I loans, revolvers and fees, including the special mention and substandard loans in Exhibit 3. What would break the recommendation?
5. 05Partnership design. Specify the economics split, exclusivity, governance and credit decisions, conflicts when a shared borrower gets into trouble, Regions' balance-sheet commitment, exit rights and the regulatory capital treatment you would seek. What would you negotiate hardest?
6. 06Recommendation. State your recommendation up front in the executive summary, with the two or three reasons tied to Regions' data, the conditions, a 90-day plan and what would change your view. Support it with the 10–12 slide deck.

Financials ($M)

Term sheet

Facility

None: strategy engagement, not a financing (HYPOTHETICAL engagement for Regions Financial Corporation)

Objective

Recommend whether Regions should respond to private credit in its middle market and, if so, which model to pursue and how to implement it

Scope

Options A–D in section 1; market sizing using Regions' own data; fee, net interest income, capital and return economics for each option; risks and scenarios; partnership design and partner selection criteria; a 90-day implementation plan

Out of scope

Naming or approaching a specific partner; legal and regulatory opinions; changes to credit policy

Information provided

Public filings and releases (Exhibits 1–7); Corporate Banking pipeline review (Exhibit 8, HYPOTHETICAL); stakeholder interviews (section 8)

Deliverables

Executive summary of one to two pages (graded) and a 10–12 slide recommendation deck as a supporting file; optional backup model. Deliverable format pending approval

Timing

Steering committee on Thursday 15 October 2026

Governance

Steering committee: Chief Financial Officer (chair), Head of Corporate Banking, Chief Risk Officer, Head of Capital Markets

Confidentiality and conflicts

Halden Street has no mandate from any private credit manager on this topic

Exhibit 3: Loan book and C&I credit quality ($M; 30 Jun 2026 unless the row states another date)

Total loans

99,200

C&I loans

51,841

C&I special mention / substandard accrual / non-accrual

543 / 801 / 412

C&I loans, 31 Dec 2023 / 31 Dec 2024 / 31 Dec 2025

50,865 / 49,671 / 48,790

Financial services industry exposure, 31 Dec 2025: loans / unfunded commitments (10-K Table 11)

8,499 / 9,811

C&I yield, Q2-26 (taxable-equivalent)

5.36%

Unused commitments to extend credit

70,469

Exhibit 4: Corporate Bank segment, Q2-26 ($M)

Net interest income

483

Non-interest income

242

Capital markets income

84

Income before income taxes

346

Exhibit 6: Bank–private credit partnership precedents (as announced in each release)

Citi–Apollo (Sep 2024)

$25bn direct lending program; Citi originates, Apollo and partners fund

Wells Fargo–Centerbridge (Sep 2023)

Overland BDC, ≥$5bn investible capital; Wells Fargo sources and holds a minority stake

PNC–TCW (May 2024)

Joint platform, $2.5bn first-year equity; PNC anchor investor

Fifth Third–Eldridge (Jul 2025)

Private credit for Commercial Bank clients; terms not disclosed

Texas Capital–Phoenix (Jun 2026)

Spurstone Credit, perpetual non-traded fund; Texas Capital minority investor in the adviser

Exhibit 7: Market context (dated as shown)

1M CME Term SOFR (9 Oct 2026, CME via global-rates.com)

3.925%

3M / 6M / 12M CME Term SOFR (9 Oct 2026)

4.039% / 4.193% / 4.472%

Rate stress used in this case (parallel shift to the forward curve)

+100bp

Private credit borrowers, 2025 issuance: median leverage / average interest cover (Fed FEDS Note)

5.0x / 2.2x

Leveraged loan borrowers, 2025 issuance: median leverage / average interest cover

3.2x / 3.7x

Direct lending / BSL spread, LTM to 30 Jun 2026

SOFR + 497bp / SOFR + 340bp

Direct lending premium over BSL, LTM

155bp

Exhibit 8: Client-provided pipeline data (HYPOTHETICAL) (HYPOTHETICAL; not Regions data)

H1: requests declined or lost, 12 months to Jun-26 ($M)

2,400

H1: relationships

38

H2: share declined on leverage

70%

H3: non-credit revenue per relationship ($M a year)

0.35