Quarterly report pursuant to Section 13 or 15(d)

Loans and Leases and Allowance for Credit Losses

v2.4.1.9
Loans and Leases and Allowance for Credit Losses
3 Months Ended
Mar. 31, 2015
Loans / Leases and Allowance for Credit Losses [Abstract]  
Loans / Leases AND ALLOWANCE FOR CREDIT LOSSES

3. 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 and leases are carried at the principal amount outstanding, net of unamortized deferred loan origination fees and costs and net of unearned income. At March 31, 2015, and December 31, 2014, the aggregate amount of these net unamortized deferred loan origination fees and net unearned income was $166.1 million and $178.7 million, respectively.

Loan and Lease Portfolio Composition

The following table provides a detailed listing of Huntington’s loan and lease portfolio at March 31, 2015 and December 31, 2014:

March 31, December 31,
(dollar amounts in thousands) 2015 2014
Loans and leases:
Commercial and industrial $ 20,108,742 $ 19,033,146
Commercial real estate 5,067,024 5,197,403
Automobile 7,802,542 8,689,902
Home equity 8,492,460 8,490,915
Residential mortgage 5,794,707 5,830,609
Other consumer 430,157 413,751
Loans and leases 47,695,632 47,655,726
Allowance for loan and lease losses (605,126) (605,196)
Net loans and leases $ 47,090,506 $ 47,050,530

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.

Macquarie acquisition

On March 31, 2015, Huntington completed its acquisition of Michigan-based Macquarie. Lease receivables with a fair value of $838.6 million, including a lease residual value of approximately $200 million, were transferred to Huntington. These leases were recorded at fair value. The fair values for the leases were estimated using discounted cash flow analyses using interest rates currently being offered for leases with similar terms (Level 3), and reflected an estimate of credit and other risk associated with the leases.

Camco Financial acquisition

On March 1, 2014, Huntington completed its acquisition of Camco Financial. Loans with a fair value of $559.4 million were transferred to Huntington.

Fidelity Bank acquisition

On March 30, 2012, Huntington acquired the loans of Fidelity Bank located in Dearborn, Michigan from the FDIC. Under the agreement, loans with a fair value of $523.9 million were acquired by Huntington.

Purchased Credit-Impaired Loans

Purchased loans with evidence of deterioration in credit quality since origination for which it is probable at acquisition that we will be unable to collect all contractually required payments are considered to be credit impaired. Purchased credit-impaired loans are initially recorded at fair value, which is estimated by discounting the cash flows expected to be collected at the acquisition date. Because the estimate of expected cash flows reflects an estimate of future credit losses expected to be incurred over the life of the loans, an allowance for credit losses is not recorded at the acquisition date. The excess of cash flows expected at acquisition over the estimated fair value, referred to as the accretable yield, is recognized in interest income over the remaining life of the loan, or pool of loans, on a level-yield basis. The difference between the contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference. A subsequent decrease in the estimate of cash flows expected to be received on purchased credit-impaired loans generally results in the recognition of an allowance for credit losses. Subsequent increases in cash flows result in reversal of any nonaccretable difference (or allowance for loan and lease losses to the extent any has been recorded) with a positive impact on interest income subsequently recognized. The measurement of cash flows involves assumptions and judgments for interest rates, prepayments, default rates, loss severity, and collateral values. All of these factors are inherently subjective and significant changes in the cash flow estimates over the life of the loan can result.

The following table presents a rollforward of the accretable yield for purchased credit impaired loans by acquisition for the three-month and three-month periods ended March 31, 2015 and 2014:

Three Months Ended
March 31, 2015
(dollar amounts in thousands) 2015 2014
Fidelity Bank
Balance, beginning of period $ 19,388 $ 27,995
Accretion (2,874) (4,004)
Reclassification from nonaccretable difference 3,677 767
Balance, end of period $ 20,191 $ 24,758
Camco Financial
Balance, beginning of period $ 824 $ ---
Impact of acquisition/purchase on March 1, 2014 --- 143
Accretion (336) (9)
Reclassification from nonaccretable difference 391 ---
Balance, end of period $ 879 $ 134

The allowance for loan losses recorded on the purchased credit-impaired loan portfolio at March 31, 2015 and December 31, 2014 was $2.4 million and $4.1 million, respectively. The following table reflects the ending and unpaid balances of all contractually required payments and carrying amounts of the acquired loans by acquisition at March 31, 2015 and December 31, 2014:

March 31, 2015 December 31, 2014
(dollar amounts in thousands) Ending Balance Unpaid Balance Ending Balance Unpaid Balance
Fidelity Bank
Commercial and industrial $ 20,522 $ 31,120 $ 22,405 $ 33,622
Commercial real estate 33,547 81,590 36,663 87,250
Residential mortgage 2,168 3,053 1,912 3,096
Other consumer 51 119 51 123
Total $ 56,288 $ 115,882 $ 61,031 $ 124,091
Camco Financial
Commercial and industrial $ 856 $ 1,674 $ 823 $ 1,685
Commercial real estate 1,797 2,624 1,708 3,826
Total $ 2,653 $ 4,298 $ 2,531 $ 5,511

Loan Purchases and Sales

The following table summarizes portfolio loan purchase and sale activity for the three-month periods ended March 31, 2015 and 2014

Commercial and Industrial Commercial Real Estate Automobile Home Equity Residential Mortgage Other Consumer Total
(dollar amounts in thousands)
Portfolio loans and leases purchased during the:
Three-month period ended March 31, 2015 $ 12,591 $ --- $ --- $ --- $ 31,634 $ --- $ 44,225
Three-month period ended March 31, 2014 $ 40,121 $ --- $ --- $ --- $ --- $ --- $ 40,121
Portfolio loans and leases sold or transferred to loans held for sale during the:
Three-month period ended March 31, 2015 $ 85,700 $ --- $ 1,061,859 (1) $ --- $ --- $ --- $ 1,147,559
Three-month period ended March 31, 2014 $ 54,258 $ 39 $ --- $ --- $ --- $ --- $ 54,297
(1) Reflects the transfer of approximately $1.0 billion in automobile loans to loans held-for-sale at March 31, 2015.

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 which continue to accrue interest at the rate guaranteed by the government agency. 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 charged-off 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, 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 March 31, 2015 and December 31, 2014:

March 31, December 31,
(dollar amounts in thousands) 2015 2014
Commercial and industrial:
Owner occupied $ 43,540 $ 41,285
Other commercial and industrial 89,823 30,689
Total commercial and industrial $ 133,363 $ 71,974
Commercial real estate:
Retail properties $ 25,863 $ 21,385
Multi family 7,107 9,743
Office 7,193 7,707
Industrial and warehouse 2,195 3,928
Other commercial real estate 6,905 5,760
Total commercial real estate $ 49,263 $ 48,523
Automobile $ 4,448 $ 4,623
Home equity:
Secured by first-lien $ 44,101 $ 46,938
Secured by junior-lien 35,145 31,622
Total home equity $ 79,246 $ 78,560
Residential mortgage $ 98,093 $ 96,564
Other consumer $ --- $ ---
Total nonaccrual loans $ 364,413 $ 300,244

The following table presents an aging analysis of loans and leases, including past due loans, by loan class at March 31, 2015 and December 31, 2014: (1)

March 31, 2015
90 or more
(dollar amounts in thousands) Past Due Total Loans days past due
30-59 Days 60-89 Days 90 or more days Total Current and Leases and accruing
Commercial and industrial:
Owner occupied $ 8,174 $ 3,016 $ 16,749 $ 27,939 $ 4,161,964 $ 4,189,903 $ ---
Purchased credit-impaired 879 10 3,861 4,750 16,628 21,378 3,861 (3)
Other commercial and industrial 25,176 2,315 11,427 38,918 15,858,543 15,897,461 2,074 (2)
Total commercial and industrial $ 34,229 $ 5,341 $ 32,037 $ 71,607 $ 20,037,135 $ 20,108,742 $ 5,935
Commercial real estate:
Retail properties $ 126 $ 23 $ 10,497 $ 10,646 $ 1,345,248 $ 1,355,894 $ ---
Multi family 1,068 630 4,063 5,761 1,023,952 1,029,713 ---
Office 780 405 1,240 2,425 945,988 948,413 ---
Industrial and warehouse 616 15 1,503 2,134 513,087 515,221 ---
Purchased credit-impaired 1,318 409 16,351 18,078 17,266 35,344 16,351 (3)
Other commercial real estate 384 117 5,249 5,750 1,176,689 1,182,439 ---
Total commercial real estate $ 4,292 $ 1,599 $ 38,903 $ 44,794 $ 5,022,230 $ 5,067,024 $ 16,351
Automobile $ 43,061 $ 6,971 $ 4,910 $ 54,942 $ 7,747,600 $ 7,802,542 $ 4,746
Home equity:
Secured by first-lien $ 14,382 $ 6,352 $ 31,197 $ 51,931 $ 5,102,806 $ 5,154,737 $ 4,367
Secured by junior-lien 19,414 10,463 7,033 36,910 3,300,813 3,337,723 6,765
Total home equity $ 33,796 $ 16,815 $ 38,230 $ 88,841 $ 8,403,619 $ 8,492,460 $ 11,132
Residential mortgage:
Residential mortgage $ 92,277 $ 37,179 $ 126,469 $ 255,925 $ 5,536,614 $ 5,792,539 $ 74,044
Purchased credit-impaired --- --- --- --- 2,168 2,168 ---
Total residential mortgage $ 92,277 $ 37,179 $ 126,469 $ 255,925 $ 5,538,782 $ 5,794,707 $ 74,044 (4)
Other consumer:
Other consumer $ 4,255 $ 1,032 $ 728 $ 6,015 $ 424,091 $ 430,106 $ 727
Purchased credit-impaired --- --- --- --- 51 51 ---
Total other consumer $ 4,255 $ 1,032 $ 728 $ 6,015 $ 424,142 $ 430,157 $ 727
Total loans and leases $ 211,910 $ 68,937 $ 241,277 $ 522,124 $ 47,173,508 $ 47,695,632 $ 112,935
December 31, 2014
90 or more
(dollar amounts in thousands) Past Due Total Loans days past due
30-59 Days 60-89 Days 90 or more days Total Current and Leases and accruing
Commercial and industrial:
Owner occupied $ 5,232 $ 2,981 $ 18,222 $ 26,435 $ 4,228,440 $ 4,254,875 $ ---
Purchased credit-impaired 846 - 4,937 5,783 17,445 23,228 4,937
Other commercial and industrial 15,330 1,536 9,101 25,967 14,729,076 14,755,043 ---
Total commercial and industrial $ 21,408 $ 4,517 $ 32,260 $ 58,185 $ 18,974,961 $ 19,033,146 $ 4,937 (3)
Commercial real estate:
Retail properties $ 7,866 $ - $ 4,021 $ 11,887 $ 1,345,859 $ 1,357,746 $ ---
Multi family 1,517 312 3,337 5,166 1,085,250 1,090,416 ---
Office 464 1,167 4,415 6,046 974,257 980,303 ---
Industrial and warehouse 688 - 2,649 3,337 510,064 513,401 ---
Purchased credit-impaired 89 289 18,793 19,171 19,200 38,371 18,793
Other commercial real estate 847 1,281 3,966 6,094 1,211,072 1,217,166 ---
Total commercial real estate $ 11,471 $ 3,049 $ 37,181 $ 51,701 $ 5,145,702 $ 5,197,403 $ 18,793 (3)
Automobile $ 56,272 $ 10,427 $ 5,963 $ 72,662 $ 8,617,240 $ 8,689,902 $ 5,703
Home equity
Secured by first-lien $ 15,036 $ 8,085 $ 33,014 $ 56,135 $ 5,072,669 $ 5,128,804 $ 4,471
Secured by junior-lien 22,473 12,297 33,406 68,176 3,293,935 3,362,111 7,688
Total home equity $ 37,509 $ 20,382 $ 66,420 $ 124,311 $ 8,366,604 $ 8,490,915 $ 12,159
Residential mortgage
Residential mortgage $ 102,702 $ 42,009 $ 139,379 $ 284,090 $ 5,544,607 $ 5,828,697 $ 88,052
Purchased credit-impaired - --- - - 1,912 1,912 -
Total residential mortgage $ 102,702 $ 42,009 $ 139,379 $ 284,090 $ 5,546,519 $ 5,830,609 $ 88,052 (5)
Other consumer
Other consumer $ 5,491 $ 1,086 $ 837 $ 7,414 $ 406,286 $ 413,700 $ 837
Purchased credit-impaired --- --- --- --- 51 51 ---
Total other consumer $ 5,491 $ 1,086 $ 837 $ 7,414 $ 406,337 $ 413,751 $ 837
Total loans and leases $ 234,853 $ 81,470 $ 282,040 $ 598,363 $ 47,057,363 $ 47,655,726 $ 130,481
(1) NALs are included in this aging analysis based on the loan's past due status.
(2) Amounts include leases acquired with the acquisition of Macquarie at March 31, 2015.
(3) 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.
(4) Includes $53,010 thousand guaranteed by the U.S. government.
(5) Includes $55,012 thousand 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. Also, the ACL determination includes the on-going assessment of credit quality metrics, and a comparison of certain ACL benchmarks to current performance. 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 greater than $1.0 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 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 using a 24-month emergence period.

In the case of more 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. Models utilized in the ALLL estimation process are subject to the Company’s model validation policies.

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.

During the 2015 first quarter, we reviewed our existing commercial and consumer credit models and enhanced certain processes and methods of ACL estimation. During this review, we analyzed the loss emergence periods used for consumer receivables collectively evaluated for impairment and, as a result, extended our loss emergence periods for products within these portfolios. As part of these enhancements to our credit reserve process, we evaluated the methods used to separately estimate economic risks inherent in our portfolios and decided to no longer utilize these separate estimation techniques. Economic risks are incorporated in our loss estimates elsewhere in our reserve calculation. The enhancements made to our credit reserve processes during the quarter allow for increased segmentation and analysis of the estimated incurred losses within our loan portfolios. The net ACL impact of these enhancements was immaterial.

The following table presents ALLL and AULC activity by portfolio segment for the three-month periods ended March 31, 2015 and 2014:

Commercial
and Commercial Home Residential Other
Industrial Real Estate Automobile Equity Mortgage Consumer Total
(dollar amounts in thousands)
Three-month period ended March 31, 2015:
ALLL balance, beginning of period $ 286,995 $ 102,839 $ 33,466 $ 96,413 $ 47,211 $ 38,272 $ 605,196
Loan charge-offs (24,612) (2,013) (8,103) (8,586) (4,863) (6,898) (55,075)
Recoveries of loans previously charged-off 13,209 6,025 3,855 3,961 2,047 1,546 30,643
Provision (reduction in allowance) for loan and lease losses 8,981 (6,099) 10,200 18,492 10,985 (15,904) 26,655
Allowance for loans sold or transferred to loans held for sale --- --- (2,293) --- --- --- (2,293)
ALLL balance, end of period $ 284,573 $ 100,752 $ 37,125 $ 110,280 $ 55,380 $ 17,016 $ 605,126
AULC balance, beginning of period $ 48,988 $ 6,041 $ --- $ 1,924 $ 8 $ 3,845 $ 60,806
Provision for unfunded loan commitments and letters of credit (6,673) (510) --- 715 1 403 (6,064)
AULC balance, end of period $ 42,315 $ 5,531 $ --- $ 2,639 $ 9 $ 4,248 $ 54,742
ACL balance, end of period $ 326,888 $ 106,283 $ 37,125 $ 112,919 $ 55,389 $ 21,264 $ 659,868

Commercial
and Commercial Home Residential Other
Industrial Real Estate Automobile Equity Mortgage Consumer Total
(dollar amounts in thousands)
Three-month period ended March 31, 2014:
ALLL balance, beginning of period $ 265,801 $ 162,557 $ 31,053 $ 111,131 $ 39,577 $ 37,751 $ 647,870
Loan charge-offs (16,337) (10,110) (8,044) (21,059) (8,986) (8,475) (73,011)
Recoveries of loans previously charged-off 7,731 11,097 3,402 5,372 1,127 1,296 30,025
Provision for loan and lease losses 9,784 (3,238) (1,233) 17,733 7,350 (2,235) 28,161
Allowance for loans sold or transferred to loans held for sale --- --- --- --- --- (1,127) (1,127)
ALLL balance, end of period $ 266,979 $ 160,306 $ 25,178 $ 113,177 $ 39,068 $ 27,210 $ 631,918
AULC balance, beginning of period $ 49,596 $ 9,891 $ --- $ 1,763 $ 9 $ 1,640 $ 62,899
Provision for unfunded loan commitments and letters of credit (3,280) (764) --- 28 (1) 486 (3,531)
AULC balance, end of period $ 46,316 $ 9,127 $ --- $ 1,791 $ 8 $ 2,126 $ 59,368
ACL balance, end of period $ 313,295 $ 169,433 $ 25,178 $ 114,968 $ 39,076 $ 29,336 $ 691,286

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 charged-off or written down to net realizable value 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 March 31, 2015 and December 31, 2014:

March 31, 2015
Credit Risk Profile by UCS classification
(dollar amounts in thousands) Pass OLEM Substandard Doubtful Total
Commercial and industrial:
Owner occupied $ 3,863,529 $ 140,076 $ 183,947 $ 2,351 $ 4,189,903
Purchased credit-impaired 3,863 679 16,646 190 21,378
Other commercial and industrial 15,036,890 358,359 499,354 2,858 15,897,461
Total commercial and industrial $ 18,904,282 $ 499,114 $ 699,947 $ 5,399 $ 20,108,742
Commercial real estate:
Retail properties $ 1,282,684 $ 8,824 $ 63,828 $ 558 $ 1,355,894
Multi family 987,543 11,143 29,525 1,502 1,029,713
Office 847,635 50,513 48,210 2,055 948,413
Industrial and warehouse 498,941 277 15,720 283 515,221
Purchased credit-impaired 6,404 854 26,291 1,795 35,344
Other commercial real estate 1,138,062 7,387 35,956 1,034 1,182,439
Total commercial real estate $ 4,761,269 $ 78,998 $ 219,530 $ 7,227 $ 5,067,024
Credit Risk Profile by FICO score (1)
750+ 650-749 <650 Other (2) Total
Automobile $ 3,535,817 $ 2,985,426 $ 1,062,789 $ 218,510 $ 7,802,542
Home equity:
Secured by first-lien $ 3,314,292 $ 1,461,774 $ 290,562 $ 88,109 $ 5,154,737
Secured by junior-lien 1,834,445 1,091,570 364,519 47,189 3,337,723
Total home equity $ 5,148,737 $ 2,553,344 $ 655,081 $ 135,298 $ 8,492,460
Residential mortgage:
Residential mortgage $ 3,368,487 $ 1,740,335 $ 639,632 $ 44,085 $ 5,792,539
Purchased credit-impaired 636 1,219 313 --- 2,168
Total residential mortgage $ 3,369,123 $ 1,741,554 $ 639,945 $ 44,085 $ 5,794,707
Other consumer:
Other consumer $ 196,239 $ 196,102 $ 29,047 $ 8,718 $ 430,106
Purchased credit-impaired --- 51 --- --- 51
Total other consumer $ 196,239 $ 196,153 $ 29,047 $ 8,718 $ 430,157
December 31, 2014
Credit Risk Profile by UCS classification
(dollar amounts in thousands) Pass OLEM Substandard Doubtful Total
Commercial and industrial:
Owner occupied $ 3,959,046 $ 117,637 $ 175,767 $ 2,425 $ 4,254,875
Purchased credit-impaired 3,915 741 14,901 3,671 23,228
Other commercial and industrial 13,925,334 386,666 440,036 3,007 14,755,043
Total commercial and industrial $ 17,888,295 $ 505,044 $ 630,704 $ 9,103 $ 19,033,146
Commercial real estate:
Retail properties $ 1,279,064 $ 10,204 $ 67,911 $ 567 $ 1,357,746
Multi family 1,044,521 12,608 32,322 965 1,090,416
Office 902,474 33,107 42,578 2,144 980,303
Industrial and warehouse 487,454 7,877 17,781 289 513,401
Purchased credit-impaired 6,914 803 25,460 5,194 38,371
Other commercial real estate 1,166,293 9,635 40,019 1,219 1,217,166
Total commercial real estate $ 4,886,720 $ 74,234 $ 226,071 $ 10,378 $ 5,197,403
Credit Risk Profile by FICO score (1)
750+ 650-749 <650 Other (2) Total
Automobile $ 4,165,811 $ 3,249,141 $ 1,028,381 $ 246,569 $ 8,689,902
Home equity:
Secured by first-lien $ 3,255,088 $ 1,426,191 $ 283,152 $ 164,373 $ 5,128,804
Secured by junior-lien 1,832,663 1,095,332 348,825 85,291 3,362,111
Total home equity $ 5,087,751 $ 2,521,523 $ 631,977 $ 249,664 $ 8,490,915
Residential mortgage
Residential mortgage $ 3,285,310 $ 1,785,137 $ 666,562 $ 91,688 $ 5,828,697
Purchased credit-impaired 594 1,135 183 --- 1,912
Total residential mortgage $ 3,285,904 $ 1,786,272 $ 666,745 $ 91,688 $ 5,830,609
Other consumer
Other consumer $ 195,128 $ 187,781 $ 30,582 $ 209 $ 413,700
Purchased credit-impaired --- 51 - --- 51
Total other consumer $ 195,128 $ 187,832 $ 30,582 $ 209 $ 413,751
(1) Reflects currently updated 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 outstanding balance of $1.0 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. 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 or discount. 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. The consumer portfolios are assessed on a pooled basis using a discounted cash flow basis.

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, 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 March 31, 2015 and December 31, 2014:

Commercial
and Commercial Home Residential Other
(dollar amounts in thousands) Industrial Real Estate Automobile Equity Mortgage Consumer Total
ALLL at March 31, 2015:
Portion of ALLL balance:
Attributable to purchased credit-impaired loans $ 2,103 $ --- $ --- $ --- $ 7 $ 259 $ 2,369
Attributable to loans individually evaluated for impairment 18,475 21,175 1,588 29,921 13,596 107 84,862
Attributable to loans collectively evaluated for impairment 263,995 79,577 35,537 80,359 41,777 16,650 517,895
Total ALLL balance $ 284,573 $ 100,752 $ 37,125 $ 110,280 $ 55,380 $ 17,016 $ 605,126
Loan and Lease Ending Balances at March 31, 2015:
Portion of loan and lease ending balance:
Attributable to purchased credit-impaired loans $ 21,378 $ 35,344 $ --- $ --- $ 2,168 $ 51 $ 58,941
Individually evaluated for impairment 320,088 205,452 30,159 323,416 373,709 5,045 1,257,869
Collectively evaluated for impairment 19,767,276 4,826,228 7,772,383 8,169,044 5,418,830 425,061 46,378,822
Total loans and leases evaluated for impairment $ 20,108,742 $ 5,067,024 $ 7,802,542 $ 8,492,460 $ 5,794,707 $ 430,157 $ 47,695,632

Commercial
and Commercial Home Residential Other
(dollar amounts in thousands) Industrial Real Estate Automobile Equity Mortgage Consumer Total
ALLL at December 31, 2014
Portion of ALLL balance:
Attributable to purchased credit-impaired loans $ 3,846 $ --- $ --- $ --- $ 8 $ 245 $ 4,099
Attributable to loans individually evaluated for impairment 11,049 18,887 1,531 26,027 16,535 214 74,243
Attributable to loans collectively evaluated for impairment 272,100 83,952 31,935 70,386 30,668 37,813 526,854
Total ALLL balance: $ 286,995 $ 102,839 $ 33,466 $ 96,413 $ 47,211 $ 38,272 $ 605,196
Loan and Lease Ending Balances at December 31, 2014
Portion of loan and lease ending balances:
Attributable to purchased credit-impaired loans $ 23,228 $ 38,371 $ --- $ --- $ 1,912 $ 51 $ 63,562
Individually evaluated for impairment 216,993 217,262 30,612 310,446 369,577 4,088 1,148,978
Collectively evaluated for impairment 18,792,925 4,941,770 8,659,290 8,180,469 5,459,120 409,612 46,443,186
Total loans and leases evaluated for impairment $ 19,033,146 $ 5,197,403 $ 8,689,902 $ 8,490,915 $ 5,830,609 $ 413,751 $ 47,655,726

The following tables present by class the ending, unpaid principal balance, and the related ALLL, along with the average balance and interest income recognized only for loans and leases individually evaluated for impairment and purchased credit-impaired loans: (1), (2)

Three Months Ended
March 31, 2015 March 31, 2015
Unpaid Interest
Ending Principal Related Average Income
(dollar amounts in thousands) Balance Balance (5) Allowance Balance Recognized
With no related allowance recorded:
Commercial and industrial:
Owner occupied $ 9,893 $ 10,551 $ --- $ 12,264 $ 74
Purchased credit-impaired --- --- --- --- ---
Other commercial and industrial 73,861 91,609 --- 41,552 338
Total commercial and industrial $ 83,754 $ 102,160 $ --- $ 53,816 $ 412
Commercial real estate:
Retail properties $ 49,892 $ 79,980 $ --- $ 57,556 $ 496
Multi family --- --- --- --- ---
Office 2,793 5,967 --- 1,680 31
Industrial and warehouse --- --- --- 526 7
Purchased credit-impaired 35,344 84,214 --- 36,857 1,925
Other commercial real estate 1,484 2,119 --- 4,354 46
Total commercial real estate $ 89,513 $ 172,280 $ --- $ 100,973 $ 2,505
Automobile $ --- $ --- $ --- $ --- $ ---
Home equity:
Secured by first-lien $ --- $ --- $ --- $ --- $ ---
Secured by junior-lien --- --- --- --- ---
Total home equity $ --- $ --- $ --- $ --- $ ---
Residential mortgage:
Residential mortgage $ --- $ --- $ --- $ --- $ ---
Purchased credit-impaired --- --- --- --- ---
Total residential mortgage $ --- $ --- $ --- $ --- $ ---
Other consumer
Other consumer $ --- $ --- $ --- $ --- $ ---
Purchased credit-impaired --- --- --- --- ---
Total other consumer $ --- $ --- $ --- $ --- $ ---
With an allowance recorded:
Commercial and industrial: (3)
Owner occupied $ 62,926 $ 76,673 $ 4,642 $ 50,705 $ 440
Purchased credit-impaired 21,378 32,794 2,103 22,303 1,164
Other commercial and industrial 173,408 192,178 13,833 148,098 1,036
Total commercial and industrial $ 257,712 $ 301,645 $ 20,578 $ 221,106 $ 2,640
Commercial real estate: (4)
Retail properties $ 47,628 $ 51,976 $ 6,681 $ 40,572 $ 363
Multi family 16,173 22,365 2,506 15,625 170
Office 48,423 53,794 7,524 50,628 563
Industrial and warehouse 7,167 10,764 543 7,949 82
Purchased credit-impaired --- --- --- --- ---
Other commercial real estate 31,892 38,911 3,921 29,605 354
Total commercial real estate $ 151,283 $ 177,810 $ 21,175 $ 144,379 $ 1,532
Automobile $ 30,159 $ 30,328 $ 1,588 $ 30,385 $ 561
Home equity:
Secured by first-lien $ 147,524 $ 153,314 $ 10,635 $ 146,545 $ 1,584
Secured by junior-lien 175,892 209,537 19,286 170,386 1,985
Total home equity $ 323,416 $ 362,851 $ 29,921 $ 316,931 $ 3,569
Residential mortgage (6):
Residential mortgage $ 373,709 $ 418,661 $ 13,596 $ 371,643 $ 3,122
Purchased credit-impaired 2,168 3,053 7 2,040 3
Total residential mortgage $ 375,877 $ 421,714 $ 13,603 $ 373,683 $ 3,125
Other consumer:
Other consumer $ 5,045 $ 5,045 $ 107 $ 4,566 $ 62
Purchased credit-impaired 51 118 259 51 118
Total other consumer $ 5,096 $ 5,163 $ 366 $ 4,617 $ 180

Three Months Ended
December 31, 2014 March 31, 2014
Unpaid Interest
Ending Principal Related Average Income
(dollar amounts in thousands) Balance Balance (5) Allowance Balance Recognized
With no related allowance recorded:
Commercial and industrial:
Owner occupied $ 13,536 $ 13,536 $ --- $ 4,906 $ 49
Purchased credit-impaired --- --- --- --- ---
Other commercial and industrial 24,309 26,858 --- 7,610 97
Total commercial and industrial $ 37,845 $ 40,394 $ --- $ 12,516 $ 146
Commercial real estate:
Retail properties $ 61,915 $ 91,627 $ --- $ 54,290 $ 605
Multi family --- --- --- --- ---
Office 1,130 3,574 --- 6,406 189
Industrial and warehouse 3,447 3,506 --- 9,087 108
Purchased credit-impaired 38,371 91,075 --- 79,396 2,666
Other commercial real estate 6,608 6,815 --- 5,827 57
Total commercial real estate $ 111,471 $ 196,597 $ --- $ 155,006 $ 3,625
Automobile $ --- $ --- $ --- $ --- $ ---
Home equity:
Secured by first-lien $ --- $ --- $ --- $ --- $ ---
Secured by junior-lien --- --- --- --- ---
Total home equity $ --- $ --- $ --- $ --- $ ---
Residential mortgage:
Residential mortgage $ --- $ --- $ --- $ --- $ ---
Purchased credit-impaired --- --- --- --- ---
Total residential mortgage $ --- $ --- $ --- $ --- $ ---
Other consumer
Other consumer $ --- $ --- $ --- $ --- $ ---
Purchased credit-impaired --- --- --- --- ---
Total other consumer $ --- $ --- $ --- $ --- $ ---
With an allowance recorded:
Commercial and industrial: (3)
Owner occupied $ 44,869 $ 53,639 $ 4,220 $ 39,229 $ 399
Purchased credit-impaired 23,228 35,307 3,846 35,961 1,265
Other commercial and industrial 134,279 162,908 6,829 51,532 592
Total commercial and industrial $ 202,376 $ 251,854 $ 14,895 $ 126,722 $ 2,256
Commercial real estate: (4)
Retail properties $ 37,081 $ 38,397 $ 3,536 $ 68,637 $ 577
Multi family 17,277 23,725 2,339 14,739 152
Office 52,953 56,268 8,399 51,189 536
Industrial and warehouse 8,888 10,396 720 9,196 48
Purchased credit-impaired --- --- --- --- ---
Other commercial real estate 27,963 33,472 3,893 44,090 474
Total commercial real estate $ 144,162 $ 162,258 $ 18,887 $ 187,851 $ 1,787
Automobile $ 30,612 $ 32,483 $ 1,531 $ 35,076 $ 683
Home equity:
Secured by first-lien $ 145,566 $ 157,978 $ 8,296 $ 112,420 $ 1,239
Secured by junior-lien 164,880 208,118 17,731 103,589 1,314
Total home equity $ 310,446 $ 366,096 $ 26,027 $ 216,009 $ 2,553
Residential mortgage (6):
Residential mortgage $ 369,577 $ 415,280 $ 16,535 $ 378,287 $ 2,864
Purchased credit-impaired 1,912 3,096 8 2,378 78
Total residential mortgage $ 371,489 $ 418,376 $ 16,543 $ 380,665 $ 2,942
Other consumer:
Other consumer $ 4,088 $ 4,209 $ 214 $ 1,444 $ 33
Purchased credit-impaired 51 123 245 128 4
Total other consumer $ 4,139 $ 4,332 $ 459 $ 1,572 $ 37

(1) These tables do not include loans fully charged-off.
(2) All automobile, home equity, residential mortgage, and other consumer impaired loans included in these tables are considered impaired due to their status as a TDR.
(3) At March 31, 2015, $70,957 thousand of the $257,712 thousand commercial and industrial loans with an allowance recorded were considered impaired due to their status as a TDR. At December 31, 2014, $62,737 thousand of the $202,376 thousand commercial and industrial loans with an allowance recorded were considered impaired due to their status as a TDR.
(4) At March 31, 2015, $29,126 thousand of the $151,283 thousand commercial real estate loans with an allowance recorded were considered impaired due to their status as a TDR. At December 31, 2014, $27,423 thousand of the $144,162 thousand commercial real estate loans with an allowance recorded were considered impaired due to their status as a TDR.
(5) The differences between the ending balance and unpaid principal balance amounts represent partial charge-offs.
(6) At March 31, 2015, $31,238 thousand of the $375,877 thousand residential mortgages loans with an allowance recorded were guaranteed by the U.S. government. At December 31, 2014, $24,470 thousand of the $371,489 thousand residential mortgage loans with an allowance recorded were guaranteed by the U.S. government.

TDR Loans

TDRs are modified loans where a concession was provided to a borrower experiencing financial difficulties. Loan modifications are considered TDRs when the concessions provided are not available to the borrower through either normal channels or other sources. However, not all loan modifications are TDRs.

TDR Concession Types

The Company’s standards relating to loan modifications consider, among other factors, minimum verified income requirements, cash flow analysis, and collateral valuations. Each potential loan modification is reviewed individually and the terms of the loan are modified to meet a borrower’s specific circumstances at a point in time. All commercial TDRs are reviewed and approved by our SAD. The types of concessions provided to borrowers include:

Interest rate reduction: A reduction of the stated interest rate to a nonmarket rate for the remaining original life of the debt.

Amortization or maturity date change beyond what the collateral supports, including any of the following:

(1) Lengthens the amortization period of the amortized principal beyond market terms. This concession reduces the minimum monthly payment and increases the amount of the balloon payment at the end of the term of the loan. Principal is generally not forgiven.

(2) Reduces the amount of loan principal to be amortized and increases the amount of the balloon payment at the end of the term of the loan. This concession also reduces the minimum monthly payment. Principal is generally not forgiven.

(3) Extends the maturity date or dates of the debt beyond what the collateral supports. This concession generally applies to loans without a balloon payment at the end of the term of the loan.

Chapter 7 bankruptcy: A bankruptcy court’s discharge of a borrower’s debt is considered a concession when the borrower does not reaffirm the discharged debt.

Other: A concession that is not categorized as one of the concessions described above. These concessions include, but are not limited to: principal forgiveness, collateral concessions, covenant concessions, and reduction of accrued interest.

Principal forgiveness may result from any TDR modification of any concession type. However, the aggregate amount of principal forgiven as a result of loans modified as TDRs during the three-month and three-month periods ended March 31, 2015 and 2014, was not significant.

Following is a description of TDRs by the different loan types:

Commercial loan TDRs – Commercial accruing TDRs often result from loans receiving a concession with terms that are not considered a market transaction to Huntington. The TDR remains in accruing status as long as the customer is less than 90-days past due on payments per the restructured loan terms and no loss is expected.

Commercial nonaccrual TDRs result from either: (1) an accruing commercial TDR being placed on nonaccrual status, or (2) a workout where an existing commercial NAL is restructured and a concession was given. At times, these workouts restructure the NAL so that two or more new notes are created. The primary note is underwritten based upon our normal underwriting standards and is sized so projected cash flows are sufficient to repay contractual principal and interest. The terms on the secondary note(s) vary by situation, and may include notes that defer principal and interest payments until after the primary note is repaid. Creating two or more notes often allows the borrower to continue a project or weather a temporary economic downturn and allows Huntington to right-size a loan based upon the current expectations for a borrower’s or project’s performance.

Our strategy involving TDR borrowers includes working with these borrowers to allow them to refinance elsewhere, as well as allow them time to improve their financial position and remain our customer through refinancing their notes according to market terms and conditions in the future. A subsequent refinancing or modification of a loan may occur when either the loan matures according to the terms of the TDR-modified agreement or the borrower requests a change to the loan agreements. At that time, the loan is evaluated to determine if it is creditworthy. It is subjected to the normal underwriting standards and processes for other similar credit extensions, both new and existing. The refinanced note is evaluated to determine if it is considered a new loan or a continuation of the prior loan. A new loan is considered for removal of the TDR designation, whereas a continuation of the prior note requires a continuation of the TDR designation. In order for a TDR designation to be removed, the borrower must no longer be experiencing financial difficulties and the terms of the refinanced loan must not represent a concession.

Residential Mortgage loan TDRs – Residential mortgage TDRs represent loan modifications associated with traditional first-lien mortgage loans in which a concession has been provided to the borrower. The primary concessions given to residential mortgage borrowers are amortization or maturity date changes and interest rate reductions. Residential mortgages identified as TDRs involve borrowers unable to refinance their mortgages through the Company’s normal mortgage origination channels or through other independent sources. Some, but not all, of the loans may be delinquent.

Automobile, Home Equity, and Other Consumer loan TDRs – The Company may make similar interest rate, term, and principal concessions as with residential mortgage loan TDRs.

TDR Impact on Credit Quality

Huntington’s ALLL is largely determined by updated risk ratings assigned to commercial loans, updated borrower credit scores on consumer loans, and borrower delinquency history in both the commercial and consumer portfolios. These updated risk ratings and credit scores consider the default history of the borrower, including payment redefaults. As such, the provision for credit losses is impacted primarily by changes in borrower payment performance rather than the TDR classification. TDRs can be classified as either accrual or nonaccrual loans. Nonaccrual TDRs are included in NALs whereas accruing TDRs are excluded from NALs as it is probable that all contractual principal and interest due under the restructured terms will be collected.

Our TDRs may include multiple concessions and the disclosure classifications are presented based on the primary concession provided to the borrower. The majority of our concessions for the C&I and CRE portfolios are the extension of the maturity date coupled with an increase in the interest rate. In these instances, the primary concession is the maturity date extension.

TDR concessions may also result in the reduction of the ALLL within the C&I and CRE portfolios. This reduction is derived from payments and the resulting application of the reserve calculation within the ALLL. The transaction reserve for non-TDR C&I and CRE loans is calculated based upon several estimated probability factors, such as PD and LGD, both of which were previously discussed. Upon the occurrence of a TDR in our C&I and CRE portfolios, the reserve is measured based on discounted expected cash flows or collateral value, less anticipated selling costs, of the modified loan in accordance with ASC 310-10. The resulting TDR ALLL calculation often results in a lower ALLL amount because (1) the discounted expected cash flows or collateral value, less anticipated selling costs, indicate a lower estimated loss, (2) if the modification includes a rate increase, the discounting of the cash flows on the modified loan, using the pre-modification interest rate, exceeds the carrying value of the loan, or (3) payments may occur as part of the modification. The ALLL for C&I and CRE loans may increase as a result of the modification, as the discounted cash flow analysis may indicate additional reserves are required.

TDR concessions on consumer loans may increase the ALLL. The concessions made to these borrowers often include interest rate reductions, and therefore, the TDR ALLL calculation results in a greater ALLL compared with the non-TDR calculation as the reserve is measured based on the estimation of the discounted expected cash flows or collateral value, less anticipated selling costs, on the modified loan in accordance with ASC 310-10. The resulting TDR ALLL calculation often results in a higher ALLL amount because (1) the discounted expected cash flows or collateral value, less anticipated selling costs, indicate a higher estimated loss or, (2) due to the rate decrease, the discounting of the cash flows on the modified loan, using the pre-modification interest rate, indicates a reduction in the expected cash flows or collateral value, less anticipated selling costs. In certain instances, the ALLL may decrease as a result of payments made in connection with the modification.

Commercial loan TDRs – In instances where the bank substantiates that it will collect its outstanding balance in full, the note is considered for return to accrual status upon the borrower sustaining sufficient cash flows for a six-month period of time. This six-month period could extend before or after the restructure date. If a charge-off was taken as part of the restructuring, any interest or principal payments received on that note are applied to first reduce the bank’s outstanding book balance and then to recoveries of charged-off principal, unpaid interest, and/or fee expenses while the TDR is in nonaccrual status.

Residential Mortgage, Automobile, Home Equity, and Other Consumer loan TDRs – Modified loans identified as TDRs are aggregated into pools for analysis. Cash flows and weighted average interest rates are used to calculate impairment at the pooled-loan level. Once the loans are aggregated into the pool, they continue to be classified as TDRs until contractually repaid or charged-off.

Residential mortgage loans not guaranteed by a U.S. government agency such as the FHA, VA, and the USDA, including TDR loans, are reported as accrual or nonaccrual based upon delinquency status. Nonaccrual TDRs are those that are greater than 150-days contractually past due. Loans guaranteed by U.S. government organizations continue to accrue interest upon delinquency.

The following tables present by class and by the reason for the modification, the number of contracts, post-modification outstanding balance, and the financial effects of the modification for the three-month periods ended March 31, 2015 and 2014:

New Troubled Debt Restructurings During The Three-Month Period Ended (1)
March 31, 2015 March 31, 2014
Post-modification Post-modification
Outstanding Financial Outstanding Financial
(dollar amounts in thousands) Number of Ending effects of Number of Ending effects of
Contracts Balance modification (2) Contracts Balance modification (2)
C&I - Owner occupied:
Interest rate reduction 1 $ 46 $ (1) 6 $ 924 $ (1)
Amortization or maturity date change 46 10,461 (174) 18 4,609 4
Other 3 613 (29) 2 840 (1)
Total C&I - Owner occupied 50 $ 11,120 $ (204) 26 $ 6,373 $ 2
C&I - Other commercial and industrial:
Interest rate reduction 1 $ 30 $ --- 10 $ 27,994 $ (147)
Amortization or maturity date change 117 80,376 814 54 32,600 937
Other 5 28,388 (430) 4 4,366 23
Total C&I - Other commercial and industrial 123 $ 108,794 $ 384 68 $ 64,960 $ 813
CRE - Retail properties:
Interest rate reduction 1 $ 1,657 $ (11) 3 $ 11,105 $ 421
Amortization or maturity date change 11 4,577 (199) 5 12,238 52
Other --- --- --- 6 9,897 (91)
Total CRE - Retail properties 12 $ 6,234 $ (210) 14 $ 33,240 $ 382
CRE - Multi family:
Interest rate reduction --- $ --- $ --- 10 $ 645 $ ---
Amortization or maturity date change 19 5,045 (1) 4 203 (1)
Other --- --- --- 2 323 ---
Total CRE - Multi family 19 $ 5,045 $ (1) 16 $ 1,171 $ (1)
CRE - Office:
Interest rate reduction --- $ --- $ --- 2 $ 120 $ (1)
Amortization or maturity date change 5 26,085 (31) 4 3,132 ---
Other --- --- --- 1 10,784 ---
Total CRE - Office 5 $ 26,085 $ (31) 7 $ 14,036 $ (1)