Quarterly report pursuant to Section 13 or 15(d)

LOANS / LEASES AND ALLOWANCE FOR CREDIT LOSSES

v3.5.0.2
LOANS / LEASES AND ALLOWANCE FOR CREDIT LOSSES
6 Months Ended
Jun. 30, 2016
Receivables [Abstract]  
LOANS / LEASES AND ALLOWANCE FOR CREDIT LOSSES
LOANS / LEASES AND ALLOWANCE FOR CREDIT LOSSES
Loans and leases for which Huntington has the intent and ability to hold for the foreseeable future, or until maturity or payoff, are classified in the Unaudited Condensed Consolidated Balance Sheets as loans and leases. Except for loans which are accounted for at fair value, loans are carried at the principal amount outstanding, net of unamortized premiums and discounts and deferred loan fees and costs, which resulted in a net premium of $270 million and $262 million at June 30, 2016 and December 31, 2015, respectively.
Loan and Lease Portfolio Composition
The following table provides a detailed listing of Huntington’s loan and lease portfolio at June 30, 2016 and December 31, 2015:
(dollar amounts in thousands)
June 30,
2016
 
December 31,
2015
Loans and leases:
 
 
 
Commercial and industrial
$
21,372,474

 
$
20,559,834

Commercial real estate
5,322,068

 
5,268,651

Automobile
10,380,644

 
9,480,678

Home equity
8,447,066

 
8,470,482

Residential mortgage
6,377,017

 
5,998,400

Other consumer
644,152

 
563,054

Loans and leases
52,543,421

 
50,341,099

Allowance for loan and lease losses
(623,064
)
 
(597,843
)
Net loans and leases
$
51,920,357

 
$
49,743,256


As shown in the table above, the primary loan and lease portfolios are: C&I, CRE, automobile, home equity, residential mortgage, and other consumer. For ACL purposes, these portfolios are further disaggregated into classes. The classes within each portfolio are as follows:
Portfolio
Class
Commercial and industrial
Owner occupied
 
Purchased credit-impaired
 
Other commercial and industrial
 
 
Commercial real estate
Retail properties
 
Multi-family
 
Office
 
Industrial and warehouse
 
Purchased credit-impaired
 
Other commercial real estate
 
 
Automobile
NA (1)
 
 
Home equity
Secured by first-lien
 
Secured by junior-lien
 
 
Residential mortgage
Residential mortgage
 
Purchased credit-impaired
 
 
Other consumer
Other consumer
 
Purchased credit-impaired
(1)
Not applicable. The automobile loan portfolio is not further segregated into classes.
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Loan Purchases and Sales
The following table summarizes significant portfolio loan purchase and sale activity for the three-month and six-month periods ended June 30, 2016 and 2015. The table below excludes mortgage loans originated for sale.
(dollar amounts in thousands)
Commercial
and Industrial
 
Commercial
Real Estate
 
Automobile
 
 
Home
Equity
 
Residential
Mortgage
 
Other
Consumer
 
Total
Portfolio loans and leases purchased or transferred from held for sale during the:
Three-month period ended June 30, 2016
$
35,198

 
$

 
$


 
$

 
$
1,669

 
$

 
$
36,867

Six-month period ended June 30, 2016
$
338,172

 
$

 
$


 
$

 
$
3,813

 
$

 
$
341,985

Three-month period ended June 30, 2015
31,905

 

 

 
 

 
2,754

 
$

 
34,659

Six-month period ended June 30, 2015
44,496

 

 

 
 

 
6,637

 

 
51,133

Portfolio loans and leases sold or transferred to loans held for sale during the:
Three-month period ended June 30, 2016
$
96,278

 
$

 
$

 
 
$

 
$

 
$

 
$
96,278

Six-month period ended June 30, 2016
$
240,797

 
$

 
$


 
$

 
$

 
$

 
$
240,797

Three-month period ended June 30, 2015
100,202

 

 

 
 

 

 

 
100,202

Six-month period ended June 30, 2015
185,902

 

 
764,540

(1)
 

 

 

 
950,442

(1)
Reflects the transfer of approximately $1.0 billion automobile loans to loans held-for-sale at March 31, 2015, net of approximately $262 million of automobile loans transferred back to loans and leases in the 2015 second quarter.
NALs and Past Due Loans
Loans are considered past due when the contractual amounts due with respect to principal and interest are not received within 30 days of the contractual due date.
Any loan in any portfolio may be placed on nonaccrual status prior to the policies described below when collection of principal or interest is in doubt. When a borrower with debt is discharged in a Chapter 7 bankruptcy and not reaffirmed by the borrower, the loan is determined to be collateral dependent and placed on nonaccrual status.
All classes within the C&I and CRE portfolios (except for purchased credit-impaired loans) are placed on nonaccrual status at 90-days past due. Residential mortgage loans are placed on nonaccrual status at 150-days past due, with the exception of residential mortgages guaranteed by government organizations. First-lien home equity loans are placed on nonaccrual status at 150-days past due. Junior-lien home equity loans are placed on nonaccrual status at the earlier of 120-days past due or when the related first-lien loan has been identified as nonaccrual. Automobile and other consumer loans are generally charged-off when the loan is 120-days past due.
For all classes within all loan portfolios, when a loan is placed on nonaccrual status, any accrued interest income is reversed with current year accruals charged to interest income, and prior year amounts are recognized as a credit loss.
For all classes within all loan portfolios, cash receipts received on NALs are applied entirely against principal until the loan or lease has been collected in full, after which time any additional cash receipts are recognized as interest income. However, for secured non-reaffirmed debt in a Chapter 7 bankruptcy, payments are applied to principal and interest when the borrower has demonstrated a capacity to continue payment of the debt and collection of the debt is reasonably assured. For unsecured non-reaffirmed debt in a Chapter 7 bankruptcy where the carrying value has been fully charged-off, payments are recorded as loan recoveries.
Regarding all classes within the C&I and CRE portfolios, the determination of a borrower’s ability to make the required principal and interest payments is based on an examination of the borrower’s current financial statements, industry, management capabilities, and other qualitative measures. For all classes within the consumer loan portfolio, the determination of a borrower’s ability to make the required principal and interest payments is based on multiple factors, including number of days past due and, in some instances, an evaluation of the borrower’s financial condition. When, in Management’s judgment, the borrower’s ability to make required principal and interest payments resumes and collectability is no longer in doubt, supported by sustained repayment history, the loan or lease is returned to accrual status. For these loans that have been returned to accrual status, cash receipts are applied according to the contractual terms of the loan.
The following table presents NALs by loan class at June 30, 2016 and December 31, 2015:
(dollar amounts in thousands)
June 30,
2016
 
December 31,
2015
Commercial and industrial:
 
 
 
Owner occupied
$
27,624

 
$
35,481

Other commercial and industrial
262,187

 
139,714

Total commercial and industrial
289,811

 
175,195

Commercial real estate:
 
 
 
Retail properties
2,345

 
7,217

Multi-family
5,819

 
5,819

Office
10,742

 
10,495

Industrial and warehouse
1,864

 
2,202

Other commercial real estate
2,893

 
3,251

Total commercial real estate
23,663

 
28,984

Automobile
5,049

 
6,564

Home equity:
 
 
 
Secured by first-lien
33,279

 
35,389

Secured by junior-lien
23,566

 
30,889

Total home equity
56,845

 
66,278

Residential mortgage
85,174

 
94,560

Other consumer
5

 

Total nonaccrual loans
$
460,547

 
$
371,581



The following table presents an aging analysis of loans and leases, including past due loans, by loan class at June 30, 2016 and December 31, 2015: (1)
 
June 30, 2016
 
Past Due
 
 
 
Total Loans
and Leases
 
90 or more
days past due
and accruing
 
(dollar amounts in thousands)
30-59 Days
 
60-89 Days
 
90 or more days
Total
 
Current
 
 
 
Commercial and industrial:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Owner occupied
$
3,143

 
$
3,336

 
$
10,779

 
$
17,258

 
$
3,934,039

 
$
3,951,297

 
$

 
Purchased credit-impaired
178

 
172

 
3,750

 
4,100

 
5,076

 
9,176

 
3,750

(2)
Other commercial and industrial
16,936

 
7,229

 
44,420

 
68,585

 
17,343,416

 
17,412,001

 
1,866

(3)
Total commercial and industrial
20,257

 
10,737

 
58,949

 
89,943

 
21,282,531

 
21,372,474

 
5,616

 
Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail properties
86

 
199

 
810

 
1,095

 
1,600,914

 
1,602,009

 

 
Multi-family
507

 
802

 
1,892

 
3,201

 
999,638

 
1,002,839

 

 
Office

 
40

 
10,519

 
10,559

 
845,284

 
855,843

 

 
Industrial and warehouse
156

 
324

 
894

 
1,374

 
490,912

 
492,286

 

 
Purchased credit-impaired

 
335

 
10,799

 
11,134

 
5,939

 
17,073

 
10,799

(2)
Other commercial real estate
351

 
620

 
1,713

 
2,684

 
1,349,334

 
1,352,018

 

 
Total commercial real estate
1,100

 
2,320

 
26,627

 
30,047

 
5,292,021

 
5,322,068

 
10,799

 
Automobile
61,988

 
13,900

 
5,589

 
81,477

 
10,299,167

 
10,380,644

 
5,452

 
Home equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured by first-lien
12,311

 
7,008

 
24,565

 
43,884

 
5,198,668

 
5,242,552

 
4,775

 
Secured by junior-lien
15,514

 
6,844

 
21,261

 
43,619

 
3,160,895

 
3,204,514

 
2,804

 
Total home equity
27,825

 
13,852

 
45,826

 
87,503

 
8,359,563

 
8,447,066

 
7,579

 
Residential mortgage:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
86,760

 
35,127

 
110,859

 
232,746

 
6,143,167

 
6,375,913

 
67,488

(4)
Purchased credit-impaired

 

 

 

 
1,104

 
1,104

 

 
Total residential mortgage
86,760

 
35,127

 
110,859

 
232,746

 
6,144,271

 
6,377,017

 
67,488

 
Other consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other consumer
7,323

 
2,377

 
1,645

 
11,345

 
632,807

 
644,152

 
1,645

 
Purchased credit-impaired

 

 

 

 

 

 

 
Total other consumer
7,323

 
2,377

 
1,645

 
11,345

 
632,807

 
644,152

 
1,645

 
Total loans and leases
$
205,253

 
$
78,313

 
$
249,495

 
$
533,061

 
$
52,010,360

 
$
52,543,421

 
$
98,579

 

 
December 31, 2015
 
Past Due
 
 
 
Total Loans
and Leases
 
90 or more
days past due
and accruing
 
(dollar amounts in thousands)
30-59 Days
 
60-89 Days
 
90 or more days
Total
 
Current
 
 
 
Commercial and industrial:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Owner occupied
$
11,947

 
$
3,613

 
$
13,793

 
$
29,353

 
$
3,983,447

 
$
4,012,800

 
$

 
Purchased credit-impaired
292

 
1,436

 
5,949

 
7,677

 
13,340

 
21,017

 
5,949

(2)
Other commercial and industrial
32,476

 
8,531

 
27,236

 
68,243

 
16,457,774

 
16,526,017

 
2,775

(3)
Total commercial and industrial
44,715

 
13,580

 
46,978

 
105,273

 
20,454,561

 
20,559,834

 
8,724


Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail properties
1,823

 
195

 
3,637

 
5,655

 
1,501,054

 
1,506,709

 

 
Multi family
961

 
1,137

 
2,691

 
4,789

 
1,073,429

 
1,078,218

 

 
Office
5,022

 
256

 
3,016

 
8,294

 
886,331

 
894,625

 

 
Industrial and warehouse
93

 

 
373

 
466

 
503,701

 
504,167

 

 
Purchased credit-impaired
102

 
3,818

 
9,549

 
13,469

 
289

 
13,758

 
9,549

(2)
Other commercial real estate
1,231

 
315

 
2,400

 
3,946

 
1,267,228

 
1,271,174

 

 
Total commercial real estate
9,232

 
5,721

 
21,666

 
36,619

 
5,232,032

 
5,268,651

 
9,549


Automobile
69,553

 
14,965

 
7,346

 
91,864

 
9,388,814

 
9,480,678

 
7,162

 
Home equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured by first-lien
18,349

 
7,576

 
26,304

 
52,229

 
5,139,256

 
5,191,485

 
4,499

 
Secured by junior-lien
18,128

 
9,329

 
29,996

 
57,453

 
3,221,544

 
3,278,997

 
4,545

 
Total home equity
36,477

 
16,905

 
56,300

 
109,682

 
8,360,800

 
8,470,482

 
9,044

 
Residential mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
102,670

 
34,298

 
119,354

 
256,322

 
5,740,624

 
5,996,946

 
69,917

(5)
Purchased credit-impaired
103

 

 

 
103

 
1,351

 
1,454

 

 
Total residential mortgage
102,773

 
34,298

 
119,354

 
256,425

 
5,741,975

 
5,998,400

 
69,917


Other consumer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other consumer
6,469

 
1,852

 
1,395

 
9,716

 
553,286

 
563,002

 
1,394

 
Purchased credit-impaired

 

 

 

 
52

 
52

 

 
Total other consumer
6,469

 
1,852

 
1,395

 
9,716

 
553,338

 
563,054

 
1,394

 
Total loans and leases
$
269,219

 
$
87,321

 
$
253,039

 
$
609,579

 
$
49,731,520

 
$
50,341,099

 
$
105,790

 
(1)
NALs are included in this aging analysis based on the loan’s past due status.
(2)
Amounts represent accruing purchased impaired loans related to acquisitions. Under the applicable accounting guidance (ASC 310-30), the loans were recorded at fair value upon acquisition and remain in accruing status.
(3)
Amounts include Huntington Technology Finance administrative lease delinquencies.
(4)
Includes $56 million guaranteed by the U.S. government.
(5)
Includes $56 million guaranteed by the U.S. government.
Allowance for Credit Losses
Huntington maintains two reserves, both of which reflect Management’s judgment regarding the appropriate level necessary to absorb credit losses inherent in our loan and lease portfolio: the ALLL and the AULC. Combined, these reserves comprise the total ACL. The determination of the ACL requires significant estimates, including the timing and amounts of expected future cash flows on impaired loans and leases, consideration of current economic conditions, and historical loss experience pertaining to pools of homogeneous loans and leases, all of which may be susceptible to change.
The appropriateness of the ACL is based on Management’s current judgments about the credit quality of the loan portfolio. These judgments consider on-going evaluations of the loan and lease portfolio, including such factors as the differing economic risks associated with each loan category, the financial condition of specific borrowers, the level of delinquent loans, the value of any collateral and, where applicable, the existence of any guarantees or other documented support. Further, Management evaluates the impact of changes in interest rates and overall economic conditions on the ability of borrowers to meet their financial obligations when quantifying our exposure to credit losses and assessing the appropriateness of our ACL at each reporting date. In addition to general economic conditions and the other factors described above, additional factors also considered include: the impact of increasing or decreasing residential real estate values; the diversification of CRE loans; the development of new or expanded Commercial business segments such as healthcare, ABL, and energy, and the overall condition of the manufacturing industry. Management’s determinations regarding the appropriateness of the ACL are reviewed and approved by the Company’s board of directors.
The ALLL consists of two components: (1) the transaction reserve, which includes a loan level allocation, specific reserves related to loans considered to be impaired, and loans involved in troubled debt restructurings, and (2) the general reserve. The transaction reserve component includes both (1) an estimate of loss based on pools of commercial and consumer loans and leases with similar characteristics, and (2) an estimate of loss based on an impairment review of each impaired C&I and CRE loan where obligor balance is greater than $1 million. For the C&I and CRE portfolios, the estimate of loss based on pools of loans and leases with similar characteristics is made by applying a PD factor and a LGD factor to each individual loan based on a regularly updated loan grade, using a standardized loan grading system. The PD factor and an LGD factor are determined for each loan grade using statistical models based on historical performance data. The PD factor considers on-going reviews of the financial performance of the specific borrower, including cash flow, debt-service coverage ratio, earnings power, debt level, and equity position, in conjunction with an assessment of the borrower’s industry and future prospects. The LGD factor considers analysis of the type of collateral and the relative LTV ratio. These reserve factors are developed and updated periodically based on credit migration models that track historical movements of loans between loan ratings over time and a combination of long-term average loss experience of our own portfolio and external industry data.
In the case of other homogeneous portfolios, such as automobile loans, home equity loans, and residential mortgage loans, the determination of the transaction reserve also incorporates PD and LGD factors. The estimate of loss is based on pools of loans and leases with similar characteristics. The PD factor considers current credit scores unless the account is delinquent, in which case a higher PD factor is used. The credit score provides a basis for understanding the borrower’s past and current payment performance, and this information is used to estimate expected losses over the emergence period. The performance of first-lien loans ahead of our junior-lien loans is available to use as part of our updated score process. The LGD factor considers analysis of the type of collateral and the relative LTV ratio. Credit scores, models, analyses, and other factors used to determine both the PD and LGD factors are updated frequently to capture the recent behavioral characteristics of the subject portfolios, as well as any changes in loss mitigation or credit origination strategies, and adjustments to the reserve factors are made as required.
The general reserve consists of our risk-profile reserve components, which includes items unique to our structure, policies, processes, and portfolio composition, as well as qualitative measurements and assessments of the loan portfolios including, but not limited to, management quality, concentrations, portfolio composition, industry comparisons, and internal review functions.
The estimate for the AULC is determined using the same procedures and methodologies as used for the ALLL. The loss factors used in the AULC are the same as the loss factors used in the ALLL while also considering a historical utilization of unused commitments. The AULC is reflected in accrued expenses and other liabilities in the Unaudited Condensed Consolidated Balance Sheet.
The ACL is increased through a provision for credit losses that is charged to earnings, based on Management’s quarterly evaluation of the factors previously mentioned, and is reduced by charge-offs, net of recoveries, and the ACL associated with securitized or sold loans.
The following table presents ALLL and AULC activity by portfolio segment for the three-month and six-month periods ended June 30, 2016 and 2015:
(dollar amounts in thousands)
Commercial
and Industrial
 
Commercial
Real Estate
 
Automobile
 
Home
Equity
 
Residential
Mortgage
 
Other
Consumer
 
Total
Three-month period ended June 30, 2016:
 
 
 
 
 
 
 
 
 
 
 
 
 
ALLL balance, beginning of period
$
320,367

 
$
102,074

 
$
48,032

 
$
78,102

 
$
40,842

 
$
24,302

 
$
613,719

Loan charge-offs
(14,743
)
 
(2,190
)
 
(8,850
)
 
(5,910
)
 
(2,923
)
 
(8,929
)
 
(43,545
)
Recoveries of loans previously charged-off
11,041

 
2,863

 
4,530

 
4,832

 
2,147

 
1,377

 
26,790

Provision (reduction in allowance) for loan and lease losses
6,800

 
(1,705
)
 
6,819

 
(542
)
 
2,312

 
12,402

 
26,086

Write-downs of loans sold or transferred to loans held for sale

 

 

 

 
14

 

 
14

ALLL balance, end of period
$
323,465

 
$
101,042

 
$
50,531

 
$
76,482

 
$
42,392

 
$
29,152

 
$
623,064

AULC balance, beginning of period
$
58,385

 
$
7,487

 
$

 
$
2,110

 
$
20

 
$
7,323

 
$
75,325

Provision (reduction in allowance) for unfunded loan commitments and letters of credit
(2,343
)
 
188

 

 
40

 
(11
)
 
549

 
(1,577
)
AULC balance, end of period
$
56,042

 
$
7,675

 
$

 
$
2,150

 
$
9

 
$
7,872

 
$
73,748

ACL balance, end of period
$
379,507

 
$
108,717

 
$
50,531

 
$
78,632

 
$
42,401

 
$
37,024

 
$
696,812

Six-month period ended June 30, 2016:
 
 
 
 
 
 
 
 
 
 
 
 
 
ALLL balance, beginning of period
$
298,746

 
$
100,007

 
$
49,504

 
$
83,671

 
$
41,646

 
$
24,269

 
$
597,843

Loan charge-offs
(31,566
)
 
(14,316
)
 
(20,336
)
 
(13,620
)
 
(5,683
)
 
(17,716
)
 
(103,237
)
Recoveries of loans previously charged-off
21,350

 
32,465

 
9,246

 
8,861

 
3,260

 
2,748

 
77,930

Provision (reduction in allowance) for loan and lease losses
34,935

 
(17,114
)
 
12,117

 
(2,430
)
 
3,065

 
19,851

 
50,424

Write-downs of loans sold or transferred to loans held for sale

 

 

 

 
104

 

 
104

ALLL balance, end of period
$
323,465

 
$
101,042

 
$
50,531

 
$
76,482

 
$
42,392

 
$
29,152

 
$
623,064

AULC balance, beginning of period
$
55,886

 
$
7,562

 
$

 
$
2,068

 
$
18

 
$
6,547

 
$
72,081

Provision for (reduction in allowance) unfunded loan commitments and letters of credit
156

 
113

 

 
82

 
(9
)
 
1,325

 
1,667

AULC balance, end of period
$
56,042

 
$
7,675

 
$

 
$
2,150

 
$
9

 
$
7,872

 
$
73,748

ACL balance, end of period
$
379,507

 
$
108,717

 
$
50,531

 
$
78,632

 
$
42,401

 
$
37,024

 
$
696,812

(dollar amounts in thousands)
Commercial
and Industrial
 
Commercial
Real Estate
 
Automobile
 
Home
Equity
 
Residential
Mortgage
 
Other
Consumer
 
Total
Three-month period ended June 30, 2015:
 
 
 
 
 
 
 
 
 
 
 
 
 
ALLL balance, beginning of period
$
284,573

 
$
100,752

 
$
37,125

 
$
110,280

 
$
55,380

 
$
17,016

 
$
605,126

Loan charge-offs
(12,213
)
 
(8,288
)
 
(7,691
)
 
(8,629
)
 
(3,610
)
 
(6,539
)
 
(46,970
)
Recoveries of loans previously charged-off
7,802

 
2,763

 
4,249

 
3,979

 
1,468

 
1,334

 
21,595

Provision for (reduction in allowance) loan and lease losses
4,879

 
(3,167
)
 
5,418

 
5,548

 
(1,559
)
 
8,671

 
19,790

Allowance for loans sold or transferred to loans held for sale

 

 
1

 

 

 

 
1

ALLL balance, end of period
$
285,041

 
$
92,060

 
$
39,102

 
$
111,178

 
$
51,679

 
$
20,482

 
$
599,542

AULC balance, beginning of period
$
42,315

 
$
5,531

 
$

 
$
2,639

 
$
9

 
$
4,248

 
$
54,742

Provision for (reduction in allowance) unfunded loan commitments and letters of credit
(466
)
 
247

 

 
(117
)
 
8

 
957

 
629

AULC balance, end of period
$
41,849

 
$
5,778

 
$

 
$
2,522

 
$
17

 
$
5,205

 
$
55,371

ACL balance, end of period
$
326,890

 
$
97,838

 
$
39,102

 
$
113,700

 
$
51,696

 
$
25,687

 
$
654,913

Six-month period ended June 30, 2015:
 
 
 
 
 
 
 
 
 
 
 
 
 
ALLL balance, beginning of period
$
286,995

 
$
102,839

 
$
33,466

 
$
96,413

 
$
47,211

 
$
38,272

 
$
605,196

Loan charge-offs
(36,825
)
 
(10,301
)
 
(15,794
)
 
(17,215
)
 
(8,473
)
 
(13,437
)
 
(102,045
)
Recoveries of loans previously charged-off
21,011

 
8,788

 
8,104

 
7,940

 
3,515

 
2,880

 
52,238

Provision for (reduction in allowance) loan and lease losses
13,860

 
(9,266
)
 
15,618

 
24,040

 
9,426

 
(7,233
)
 
46,445

Allowance for loans sold or transferred to loans held for sale

 

 
(2,292
)
 

 

 

 
(2,292
)
ALLL balance, end of period
$
285,041

 
$
92,060

 
$
39,102

 
$
111,178

 
$
51,679

 
$
20,482

 
$
599,542

AULC balance, beginning of period
$
48,988

 
$
6,041

 
$

 
$
1,924

 
$
8

 
$
3,845

 
$
60,806

Provision for (reduction in allowance) unfunded loan commitments and letters of credit
(7,139
)
 
(263
)
 

 
598

 
9

 
1,360

 
(5,435
)
AULC balance, end of period
$
41,849

 
$
5,778

 
$

 
$
2,522

 
$
17

 
$
5,205

 
$
55,371

ACL balance, end of period
$
326,890

 
$
97,838

 
$
39,102

 
$
113,700

 
$
51,696

 
$
25,687

 
$
654,913


Any loan in any portfolio may be charged-off prior to the policies described below if a loss confirming event has occurred. Loss confirming events include, but are not limited to, bankruptcy (unsecured), continued delinquency, foreclosure, or receipt of an asset valuation indicating a collateral deficiency and that asset is the sole source of repayment. Additionally, discharged, collateral dependent non-reaffirmed debt in Chapter 7 bankruptcy filings will result in a charge-off to estimated collateral value, less anticipated selling costs.
C&I and CRE loans are either fully or partially charged-off at 90-days past due. Automobile loans and other consumer loans are charged-off at 120-days past due. First-lien and junior-lien home equity loans are charged-off to the estimated fair value of the collateral, less anticipated selling costs, at 150-days past due and 120-days past due, respectively. Residential mortgages are charged-off to the estimated fair value of the collateral, less anticipated selling costs, at 150-days past due.
Credit Quality Indicators
To facilitate the monitoring of credit quality for C&I and CRE loans, and for purposes of determining an appropriate ACL level for these loans, Huntington utilizes the following categories of credit grades:
Pass - Higher quality loans that do not fit any of the other categories described below.
OLEM - The credit risk may be relatively minor yet represent a risk given certain specific circumstances. If the potential weaknesses are not monitored or mitigated, the loan may weaken or the collateral may be inadequate to protect Huntington’s position in the future. For these reasons, Huntington considers the loans to be potential problem loans.
Substandard - Inadequately protected loans by the borrower’s ability to repay, equity, and/or the collateral pledged to secure the loan. These loans have identified weaknesses that could hinder normal repayment or collection of the debt. It is likely Huntington will sustain some loss if any identified weaknesses are not mitigated.
Doubtful - Loans that have all of the weaknesses inherent in those loans classified as Substandard, with the added elements of the full collection of the loan is improbable and that the possibility of loss is high.
The categories above, which are derived from standard regulatory rating definitions, are assigned upon initial approval of the loan or lease and subsequently updated as appropriate.
Commercial loans categorized as OLEM, Substandard, or Doubtful are considered Criticized loans. Commercial loans categorized as Substandard or Doubtful are also considered Classified loans.
For all classes within all consumer loan portfolios, each loan is assigned a specific PD factor that is partially based on the borrower’s most recent credit bureau score, which we update quarterly. A credit bureau score is a credit score developed by Fair Isaac Corporation based on data provided by the credit bureaus. The credit bureau score is widely accepted as the standard measure of consumer credit risk used by lenders, regulators, rating agencies, and consumers. The higher the credit bureau score, the higher likelihood of repayment and therefore, an indicator of higher credit quality.
Huntington assesses the risk in the loan portfolio by utilizing numerous risk characteristics. The classifications described above, and also presented in the table below, represent one of those characteristics that are closely monitored in the overall credit risk management processes.
The following table presents each loan and lease class by credit quality indicator at June 30, 2016 and December 31, 2015:
 
June 30, 2016
 
Credit Risk Profile by UCS Classification
(dollar amounts in thousands)
Pass
 
OLEM
 
Substandard
 
Doubtful
 
Total
Commercial and industrial:
 
 
 
 
 
 
 
 
 
Owner occupied
$
3,708,602

 
$
83,694

 
$
158,248

 
$
753

 
$
3,951,297

Purchased credit-impaired
1,484

 
293

 
7,379

 
20

 
9,176

Other commercial and industrial
16,315,278

 
316,141

 
776,383

 
4,199

 
17,412,001

Total commercial and industrial
20,025,364

 
400,128

 
942,010

 
4,972

 
21,372,474

Commercial real estate:
 
 
 
 
 
 
 
 
 
Retail properties
1,582,809

 
8,297

 
10,903

 

 
1,602,009

Multi-family
959,152

 
28,778

 
14,573

 
336

 
1,002,839

Office
787,401

 
34,957

 
33,098

 
387

 
855,843

Industrial and warehouse
469,083

 
4,500

 
18,703

 

 
492,286

Purchased credit-impaired
3,157

 
228

 
12,151

 
1,537

 
17,073

Other commercial real estate
1,316,273

 
4,584

 
30,343

 
818

 
1,352,018

Total commercial real estate
5,117,875

 
81,344

 
119,771

 
3,078

 
5,322,068

 
 
 
 
 
 
 
 
 
 
 
Credit Risk Profile by FICO Score (1)
 
750+
 
650-749
 
<650
 
Other (2)
 
Total
Automobile
5,205,064

 
3,779,606

 
1,116,762

 
279,212

 
10,380,644

Home equity:
 
 
 
 
 
 
 
 
 
Secured by first-lien
3,346,422

 
1,463,054

 
264,024

 
169,052

 
5,242,552

Secured by junior-lien
1,818,244

 
982,067

 
289,865

 
114,338

 
3,204,514

Total home equity
5,164,666

 
2,445,121

 
553,889

 
283,390

 
8,447,066

Residential mortgage:
 
 
 
 
 
 
 
 
 
Residential mortgage
3,886,423

 
1,848,386

 
522,665

 
118,439

 
6,375,913

Purchased credit-impaired
320

 
331

 
453

 

 
1,104

Total residential mortgage
3,886,743

 
1,848,717

 
523,118

 
118,439

 
6,377,017

Other consumer:
 
 
 
 
 
 
 
 
 
Other consumer
257,518

 
313,712

 
59,699

 
13,223

 
644,152

Purchased credit-impaired

 

 

 

 

Total other consumer
$
257,518

 
$
313,712

 
$
59,699

 
$
13,223

 
$
644,152


 
December 31, 2015
 
Credit Risk Profile by UCS Classification
(dollar amounts in thousands)
Pass
 
OLEM
 
Substandard
 
Doubtful
 
Total
Commercial and industrial:
 
 
 
 
 
 
 
 
 
Owner occupied
$
3,731,113

 
$
114,490

 
$
165,301

 
$
1,896

 
$
4,012,800

Purchased credit-impaired
3,051

 
674

 
15,661

 
1,631

 
21,017

Other commercial and industrial
15,523,625

 
284,175

 
714,615

 
3,602

 
16,526,017

Total commercial and industrial
19,257,789

 
399,339

 
895,577

 
7,129

 
20,559,834

Commercial real estate:
 
 
 
 
 
 
 
 
 
Retail properties
1,473,014

 
10,865

 
22,830

 

 
1,506,709

Multi-family
1,029,138

 
28,862

 
19,898

 
320

 
1,078,218

Office
822,824

 
35,350

 
36,011

 
440

 
894,625

Industrial and warehouse
493,402

 
259

 
10,450

 
56

 
504,167

Purchased credit-impaired
7,194

 
397

 
6,167

 

 
13,758

Other commercial real estate
1,240,482

 
4,054

 
25,811

 
827

 
1,271,174

Total commercial real estate
5,066,054

 
79,787

 
121,167

 
1,643

 
5,268,651

 
 
 
 
 
 
 
 
 
 
 
Credit Risk Profile by FICO Score (1)
 
750+
 
650-749
 
<650
 
Other (2)
 
Total
Automobile
4,680,684

 
3,454,585

 
1,086,914

 
258,495

 
9,480,678

Home equity:
 
 
 
 
 
 
 
 
 
Secured by first-lien
3,369,657

 
1,441,574

 
258,328

 
121,926

 
5,191,485

Secured by junior-lien
1,841,084

 
1,024,851

 
323,998

 
89,064

 
3,278,997

Total home equity
5,210,741

 
2,466,425

 
582,326

 
210,990

 
8,470,482

Residential mortgage
 
 
 
 
 
 
 
 
 
Residential mortgage
3,563,683

 
1,813,002

 
567,688

 
52,573

 
5,996,946

Purchased credit-impaired
381

 
777

 
296

 

 
1,454

Total residential mortgage
3,564,064

 
1,813,779

 
567,984

 
52,573

 
5,998,400

Other consumer
 
 
 
 
 
 
 
 
 
Other consumer
233,969

 
269,694

 
49,650

 
9,689

 
563,002

Purchased credit-impaired

 
52

 

 

 
52

Total other consumer
$
233,969

 
$
269,746

 
$
49,650

 
$
9,689

 
$
563,054


(1)
Reflects most recent customer credit scores.
(2)
Reflects deferred fees and costs, loans in process, loans to legal entities, etc.
Impaired Loans
For all classes within the C&I and CRE portfolios, all loans with an obligor balance of $1 million or greater are considered for individual evaluation on a quarterly basis for impairment. Generally, consumer loans within any class are not individually evaluated on a regular basis for impairment. However, certain home equity and residential mortgage loans are measured for impairment based on the underlying collateral value. All TDRs, regardless of the outstanding balance amount, are also considered to be impaired. Loans acquired with evidence of deterioration of credit quality since origination for which it is probable at acquisition that all contractually required payments will not be collected are also considered to be impaired.
Once a loan has been identified for an assessment of impairment, the loan is considered impaired when, based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. This determination requires significant judgment and use of estimates, and the eventual outcome may differ significantly from those estimates.
When a loan in any class has been determined to be impaired, the amount of the impairment is measured using the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, the observable market price of the loan, or the fair value of the collateral, less anticipated selling costs, if the loan is collateral dependent. When the present value of expected future cash flows is used, the effective interest rate is the original contractual interest rate of the loan adjusted for any premium, discount, fees, or costs. A specific reserve is established as a component of the ALLL when a commercial loan has been determined to be impaired. Subsequent to the initial measurement of impairment, if there is a significant change to the impaired loan’s expected future cash flows, or if actual cash flows are significantly different from the cash flows previously estimated, Huntington recalculates the impairment and appropriately adjusts the specific reserve. Similarly, if Huntington measures impairment based on the observable market price of an impaired loan or the fair value of the collateral of an impaired collateral dependent loan, Huntington will adjust the specific reserve.
When a loan within any class is impaired, the accrual of interest income is discontinued unless the receipt of principal and interest is no longer in doubt. Interest income on TDRs is accrued when all principal and interest is expected to be collected under the post-modification terms. Cash receipts received on nonaccruing impaired loans within any class are generally applied entirely against principal until the loan has been collected in full (including already charged-off portion), after which time any additional cash receipts are recognized as interest income. Cash receipts received on accruing impaired loans within any class are applied in the same manner as accruing loans that are not considered impaired.
The following tables present the balance of the ALLL attributable to loans by portfolio segment individually and collectively evaluated for impairment and the related loan and lease balance at June 30, 2016 and December 31, 2015:
(dollar amounts in thousands)
Commercial
and
Industrial
 
Commercial
Real Estate
 
Automobile
 
Home
Equity
 
Residential
Mortgage
 
Other
Consumer
 
Total
ALLL at June 30, 2016:
 
 
 
 
 
 
 
 
 
 
 
 
 
Portion of ALLL balance:
 
 
 
 
 
 
 
 
 
 
 
 
 
Attributable to purchased credit-impaired loans
$

 
$

 
$

 
$

 
$

 
$

 
$

Attributable to loans individually evaluated for impairment
30,636

 
4,894

 
1,795

 
12,962

 
16,513

 
309

 
67,109

Attributable to loans collectively evaluated for impairment
292,829

 
96,148

 
48,736

 
63,520

 
25,879

 
28,843

 
555,955

Total ALLL balance
$
323,465

 
$
101,042

 
$
50,531

 
$
76,482

 
$
42,392

 
$
29,152

 
$
623,064

Loan and Lease Ending Balances at June 30, 2016:
 
 
 
 
 
 
 
 
 
 
 
 
Portion of loan and lease ending balance:
 
 
 
 
 
 
 
 
 
 
 
 
 
Attributable to purchased credit-impaired loans
$
9,176

 
$
17,073

 
$

 
$

 
$
1,104

 
$

 
$
27,353

Individually evaluated for impairment
579,003

 
108,187

 
30,800

 
244,917

 
347,412

 
4,664

 
1,314,983

Collectively evaluated for impairment
20,784,295

 
5,196,808

 
10,349,844

 
8,202,149

 
6,028,501

 
639,488

 
51,201,085

Total loans and leases evaluated for impairment
$
21,372,474


$
5,322,068


$
10,380,644


$
8,447,066


$
6,377,017


$
644,152


$
52,543,421

(dollar amounts in thousands)
Commercial
and
Industrial
 
Commercial
Real Estate
 
Automobile
 
Home
Equity
 
Residential
Mortgage
 
Other
Consumer
 
Total
ALLL at December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
Portion of ALLL balance:
 
 
 
 
 
 
 
 
 
 
 
 
 
Attributable to purchased credit-impaired loans
$
2,602

 
$

 
$

 
$

 
$
127

 
$

 
$
2,729

Attributable to loans individually evaluated for impairment
19,314