UPDATE 3-Regions Financial plans $1.25 bln stock offer

* Needs to plug $2.5 billion capital shortfall

* May swap common stock for preferred, subordinated debt

* Shares down 4.2 percent (Adds preferred securities swap details, Geithner comments)

By Jonathan Stempel

NEW YORK, May 20 (Reuters) - Regions Financial Corp (RF.N: Quote, Profile, Research) said it plans to sell $1.25 billion of stock, half of the sum that U.S. regulators ordered the large Southeast regional bank to raise to withstand a potentially deep recession.

The Birmingham, Alabama-based lender is publicly offering $1 billion of common stock and $250 million of preferred shares automatically convertible into common stock.

It also proposed to exchange as many as 138 million common shares for some trust preferred securities at a discount to face value, according to regulatory filings.

Regions was one of 19 large banks to undergo government "stress tests," and was one of 10 told to raise capital. Its $2.5 billion shortfall is roughly two-thirds of Regions' market value, which was $3.8 billion on Tuesday, and the offerings would heavily dilute the investments of current shareholders.

The bank announced its offerings after several rivals conducted big stock sales this month, including $13.5 billion by Bank of America Corp (BAC.N: Quote, Profile, Research).