Regions Bank 2012 Annual Report Download - page 5

REGIONS 2012 ANNUAL REPORT
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These weren’t our only achievements in 2012. We
also received upgrades in our credit ratings, invested
in new risk-management resources and made
further improvements in our loan portfolio. None of
these achievements could have occurred without
the dedication and determination of our team.
Our associates rose to the many challenges of the
past three years and achieved some of the highest
customer-service ratings in the financial industry.
As optimistic as I am in my outlook for Regions, I
need to acknowledge the many challenges that
our industry still faces – not the least of which is
that the pace of economic recovery remains slow.
We are encouraged by the recent improvement in
the housing recovery, but our internal forecast at
Regions is that the U.S. economy may not grow by
more than 2% in 2013. This means we could still
face challenges in finding demand for credit from
consumers and businesses.
In addition, our industry is still resolving the legal and
regulatory overhang from the crisis and adjusting to
a new, more comprehensive framework that is still
being implemented. Given the many complexities in
the Dodd-Frank Wall Street Reform and Consumer
Protection Act, regulators have implemented less
than half of the regulations required by Dodd-Frank –
which means our industry will continue to adjust
and comply with the many additional regulations
and interpretations.
But from my perspective, these challenges are
far less daunting than the ones the industry faced
a few years ago. And our performance in 2012
gives me confidence that we are moving forward
and positioned to achieve growth and operating
performance that has not been possible in recent
years. Let’s look at a few other measures of our
2012 performance, as our progress there provides
the foundation on which to build. Specifically, we
believe three key factors to our improved results
have been the improvement in the quality of our
loan portfolio, our ability to reduce our already low
funding costs, and our expense disciplines.
Lending –
Lower Losses, Better Balance
Through the efforts of our risk management team,
our workout specialists and our bankers, we made
measurable improvements in the quality and
performance of our loan portfolio. The provision
we set aside for loan losses totaled $213 million in
2012. The company’s loan loss allowance to non-
performing loan coverage ratio was 1.14 times and
the allowance for loan losses was 2.59% of all loans
outstanding as of December 31, 2012. It is worth
noting that charge-offs started trending down in
2012, and net charge-offs declined 47% for the full
year – the lowest annual level since 2008.
Total new and renewed loan production was a strong
$57 billion for the full year. New production totaled
$28 billion, up 14% from the prior year. However,
our total loan portfolio fell by 5% to $74 billion as we
continued to experience declines in investor real estate
and consumers and small business owners continued
to deleverage. We expect our lending production to
remain strong in 2013, and one of our top priorities
is to increase consumer lending. At the end of
2012, consumer lending represented 39% of our
loan portfolio, with business services comprising the
remaining 61%. Many of our peer banks have a better
balance between consumer and business lending, and
we are striving to achieve a similar balance.
In some lending segments we did see growth. Our
consumer portfolio, excluding real estate, grew 10%.
This was due in part to the 26% increase in auto
loans we made through our growing network of over
1,900 dealers, and our move in 2011 to reacquire
our Regions-branded credit card portfolio. We also
instituted many new programs to grow our credit card
portfolio. For instance, we made enhancements to the
technology platforms in our branches that inform our
tellers which customers are the best candidates for
various banking products, including our credit card.
In our commercial and industrial portfolio, loan
demand remained strong throughout 2012. This
success was driven in part by our integrated approach