Regions Bank 2008 Annual Report Download - page 93
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NON-PERFORMING ASSETS
Non-performing assets consists of loans on non-accrual status and foreclosed properties. Loans are placed
on non-accrual status when management has determined that payment of all contractual principal and interest is
in doubt, or the loan is past due 90 days or more as to principal and interest unless well-secured and in the
process of collection. Uncollected interest income accrued on non-accrual loans in the current year is reversed
and charged to interest income. Uncollected interest accrued from prior years on loans placed on non-accrual
status in the current year is charged against the allowance for loan losses.
At December 31, 2008, non-performing assets totaled $1.7 billion, or 1.76 percent of ending loans,
compared to $864.1 million, or 0.90 percent of loans, at December 31, 2007. Non-performing assets, excluding
loans held for sale, increased $430.7 million to $1.3 billion, or 1.33 percent, compared to $864.1 million, or 0.90
percent in 2007. The increase in non-performing assets during the year ended December 31, 2008 was primarily
driven by construction and commercial real estate loans, including the residential homebuilder portfolio, due to
the widespread decline in residential property values. Of the $4.4 billion residential homebuilder portfolio,
approximately $296.2 million was on non-accrual status as of December 31, 2008. During 2008, Regions
disposed of or designated as held for sale approximately $1.6 billion of loans and foreclosed properties, partially
offsetting the otherwise higher level of non-performing assets.
Foreclosed properties, a subset of non-performing assets, totaled $264.6 million at December 31, 2008 and
$120.5 million at December 31, 2007. Regions’ foreclosed properties are composed primarily of a number of
small to medium-size properties that are diversified geographically throughout the franchise. Foreclosed
properties are recorded at the lower of the recorded investment in the loan or fair value less the estimated cost to
sell. Table 24 “Non-Performing Assets” presents information on non-performing loans and foreclosed properties
acquired in settlement of loans.
Changes in economic conditions and real estate demand in Regions’ markets are likely to keep the level of
non-performing assets elevated during 2009.
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