Regions Bank 2008 Annual Report Download - page 87

RESIDENTIAL HOMEBUILDER PORTFOLIO (In millions)
Lots, $967
Residential
Presold, $300
National
Homebuilders,
$285
Residential
Spec, $1,297
Land, $1,553
Central Florida Midsouth Midwest Southwest Other Total
Non-accruing .......................... $ 118 $ 64 $ 49 $ 31 $ 11 $ 23 $ 296
Accruing ............................. 1,316 979 1,071 411 246 83 4,106
Total Outstanding ...................... 1,434 1,043 1,120 442 257 106 4,402
1 Central consists of Alabama, Georgia, and South Carolina
2 Midsouth consists of North Carolina, Virginia and Tennessee
3 Midwest consists of Arkansas, Illinois, Indiana, Iowa, Kentucky, Missouri, and Texas
4 Southwest consists of Louisiana and Mississippi
Residential First Mortgage—The residential first mortgage portfolio contains one-to-four family residential
properties, which are secured principally by single-family residences. Loans of this type are generally smaller in
size and are geographically dispersed throughout Regions’ market areas, with some guaranteed by government
agencies or private mortgage insurers. Losses on the residential loan portfolio depend, to a large degree, on the
level of interest rates, the unemployment rate, economic conditions and collateral values. During 2008, losses on
single-family residences totaled 0.50 percent, 38 basis points higher than in the previous year, primarily driven
by declining property values and other influential economic factors, such as the unemployment rate, which
deteriorated substantially as the year progressed. Deterioration of the Company’s residential first mortgage
portfolio was most apparent in Florida, where property valuations declined significantly and unemployment rose
at a rapid pace. Regions expects losses on loans of this type to continue to increase during 2009, further driven by
continued rising unemployment and the continued housing slowdown throughout the U.S., including areas within
Regions’ operating footprint.
Home Equity—This portfolio contains home equity loans and lines of credit totaling $16.1 billion as of
year-end 2008. Substantially all of this portfolio was originated through Regions’ branch network. As a
percentage of outstanding home equity loans and lines, losses increased in 2008 to 1.46 percent from 0.27
percent in 2007. The deteriorating economic environment as described above, particularly with respect to
housing, caused the significant increase in loss rate. Florida real estate markets have been particularly affected.
Slightly more than one-third of Regions’ home equity portfolio is located in Florida and has suffered losses
reflective of the falling property values and demand in that geography.
Regions has been proactive in its management of its home equity and residential first mortgage portfolios,
focusing heavily on loss mitigation efforts, including providing comprehensive workout solutions to borrowers.
Evidence of these efforts is reflected in the balance of these lines and loans classified as troubled debt
restructurings (“TDRs”), which grew substantially in 2008. See Note 6 “Loans” to the consolidated financial
statements for further discussion. While the Company believes these efforts are having a beneficial effect, it also
expects home equity losses to remain at elevated levels in 2009 as slowing economic conditions and continued
anticipated pressure on home values are expected to continue to impact borrowers.
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