Quarterly report pursuant to Section 13 or 15(d)

Loans and Leases and Allowance for Credit Losses

v3.2.0.727
Loans and Leases and Allowance for Credit Losses
3 Months Ended
Jun. 30, 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. At June 30, 2015, and December 31, 2014, the aggregate amount of these net unamortized deferred loan origination fees and was $300.5 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 June 30, 2015 and December 31, 2014:

June 30, December 31,
(dollar amounts in thousands) 2015 2014
Loans and leases:
Commercial and industrial $ 20,002,676 $ 19,033,146
Commercial real estate 5,213,793 5,197,403
Automobile 8,549,081 8,689,902
Home equity 8,526,276 8,490,915
Residential mortgage 5,987,000 5,830,609
Other consumer 473,475 413,751
Loans and leases 48,752,301 47,655,726
Allowance for loan and lease losses (599,542) (605,196)
Net loans and leases $ 48,152,759 $ 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.

HTF acquisition

On March 31, 2015, Huntington completed its acquisition of Macquarie Equipment Finance, which was re-branded Huntington Technology Finance (HTF). Lease receivables with a fair value of $838.6 million, including a lease residual value of approximately $200 million, were acquired by 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 six-month periods ended June 30, 2015 and 2014:

Three Months Ended Six Months Ended
June 30, 2015 June 30, 2015
(dollar amounts in thousands) 2015 2014 2015 2014
Fidelity Bank
Balance, beginning of period $ 20,191 $ 24,758 $ 19,388 $ 27,995
Accretion (2,990) (3,647) (5,864) (7,651)
Reclassification from nonaccretable difference 2,111 3,485 5,788 4,252
Balance, end of period $ 19,312 $ 24,596 $ 19,312 $ 24,596
Camco Financial
Balance, beginning of period $ 879 $ 134 $ 824 $ ---
Impact of acquisition/purchase on March 1, 2014 --- --- --- 143
Accretion (914) (5,173) (1,250) (5,182)
Reclassification from nonaccretable difference 716 5,193 1,107 5,193
Balance, end of period $ 681 $ 154 $ 681 $ 154

The allowance for loan losses recorded on the purchased credit-impaired loan portfolio at June 30, 2015 and December 31, 2014 was $1.0 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 June 30, 2015 and December 31, 2014:

June 30, 2015 December 31, 2014
(dollar amounts in thousands) Ending Balance Unpaid Balance Ending Balance Unpaid Balance
Fidelity Bank
Commercial and industrial $ 20,122 $ 29,969 $ 22,405 $ 33,622
Commercial real estate 25,742 71,953 36,663 87,250
Residential mortgage 2,040 3,017 1,912 3,096
Other consumer 51 114 51 123
Total $ 47,955 $ 105,053 $ 61,031 $ 124,091
Camco Financial
Commercial and industrial $ --- $ --- $ 823 $ 1,685
Commercial real estate 1,849 2,603 1,708 3,826
Total $ 1,849 $ 2,603 $ 2,531 $ 5,511

Loan Purchases and Sales

The following table summarizes portfolio loan purchase and sale activity for the three-month and six-month periods ended June 30, 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 or transferred from held for sale during the:
Three-month period ended June 30, 2015 $ 31,905 $ --- $ 262,037 (2) $ --- $ 75,403 $ --- $ 369,345
Six-month period ended June 30, 2015 $ 44,496 $ --- $ 262,037 (2) $ --- $ 107,037 $ --- $ 413,570
Three-month period ended June 30, 2014 $ 165,482 $ --- $ --- $ --- $ --- $ --- $ 165,482
Six-month period ended June 30, 2014 $ 205,603 $ --- $ --- $ --- $ --- $ --- $ 205,603
Portfolio loans and leases sold or transferred to loans held for sale during the:
Three-month period ended June 30, 2015 $ 100,202 $ --- $ --- $ --- $ --- $ --- $ 100,202
Six-month period ended June 30, 2015 $ 185,902 $ --- $ 1,026,195 (1) $ --- $ --- --- $ 1,212,097
Three-month period ended June 30, 2014 $ 50,472 $ 7,395 $ --- $ --- $ --- $ 7,592 $ 65,459
Six-month period ended June 30, 2014 $ 104,731 $ 7,434 $ --- $ --- $ --- $ 7,592 $ 119,757
(1) Reflects the transfer of approximately $1.0 billion automobile loans to loans held-for-sale at March 31, 2015.
(2) Includes loans Huntington no longer has the intent to sell and, therefore transferred back to the portfolio 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 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, 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, 2015 and December 31, 2014:

June 30, December 31,
(dollar amounts in thousands) 2015 2014
Commercial and industrial:
Owner occupied $ 44,864 $ 41,285
Other commercial and industrial 104,849 30,689
Total commercial and industrial $ 149,713 $ 71,974
Commercial real estate:
Retail properties $ 18,314 $ 21,385
Multi family 5,647 9,743
Office 14,545 7,707
Industrial and warehouse 1,182 3,928
Other commercial real estate 4,200 5,760
Total commercial real estate $ 43,888 $ 48,523
Automobile $ 4,190 $ 4,623
Home equity:
Secured by first-lien $ 42,424 $ 46,938
Secured by junior-lien 32,926 31,622
Total home equity $ 75,350 $ 78,560
Residential mortgage $ 91,198 $ 96,564
Other consumer $ --- $ ---
Total nonaccrual loans $ 364,339 $ 300,244

The following table presents an aging analysis of loans and leases, including past due loans, by loan class at June 30, 2015 and December 31, 2014: (1)

June 30, 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 $ 8,420 $ 3,328 $ 23,594 $ 35,342 $ 4,164,517 $ 4,199,859 $ ---
Purchased credit-impaired 409 --- 4,765 5,174 14,948 20,122 4,765 (3)
Other commercial and industrial 28,636 18,363 22,282 69,281 15,713,414 15,782,695 1,856 (2)
Total commercial and industrial $ 37,465 $ 21,691 $ 50,641 $ 109,797 $ 19,892,879 $ 20,002,676 $ 6,621
Commercial real estate:
Retail properties $ 425 $ 1,167 $ 3,356 $ 4,948 $ 1,350,570 $ 1,355,518 $ ---
Multi family 2,092 12 2,477 4,581 1,116,003 1,120,584 ---
Office 3,090 --- 1,929 5,019 925,921 930,940 ---
Industrial and warehouse 420 327 430 1,177 499,910 501,087 ---
Purchased credit-impaired 1,166 2,012 10,920 14,098 13,493 27,591 10,920 (3)
Other commercial real estate 310 105 4,052 4,467 1,273,606 1,278,073 ---
Total commercial real estate $ 7,503 $ 3,623 $ 23,164 $ 34,290 $ 5,179,503 $ 5,213,793 $ 10,920
Automobile $ 50,355 $ 10,373 $ 4,388 $ 65,116 $ 8,483,965 $ 8,549,081 $ 4,269
Home equity:
Secured by first-lien $ 16,903 $ 7,266 $ 29,861 $ 54,030 $ 5,151,027 $ 5,205,057 $ 4,879
Secured by junior-lien 23,663 9,564 33,872 67,099 3,254,120 3,321,219 6,834
Total home equity $ 40,566 $ 16,830 $ 63,733 $ 121,129 $ 8,405,147 $ 8,526,276 $ 11,713
Residential mortgage:
Residential mortgage $ 92,554 $ 37,877 $ 118,641 $ 249,072 $ 5,735,888 $ 5,984,960 $ 72,509
Purchased credit-impaired --- --- --- --- 2,040 2,040 ---
Total residential mortgage $ 92,554 $ 37,877 $ 118,641 $ 249,072 $ 5,737,928 $ 5,987,000 $ 72,509 (4)
Other consumer:
Other consumer $ 5,624 $ 1,120 $ 847 $ 7,591 $ 465,833 $ 473,424 $ 846
Purchased credit-impaired --- --- --- --- 51 51 ---
Total other consumer $ 5,624 $ 1,120 $ 847 $ 7,591 $ 465,884 $ 473,475 $ 846
Total loans and leases $ 234,067 $ 91,514 $ 261,414 $ 586,995 $ 48,165,306 $ 48,752,301 $ 106,878
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 HTF administrative lease delinquencies.
(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 $50,640 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. 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 loss emergence period.

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. 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 and six-month periods ended June 30, 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 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 (reduction in allowance) for 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 (reduction in allowance) for 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 (reduction in allowance) for 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

Commercial
and Commercial Home Residential Other
Industrial Real Estate Automobile Equity Mortgage Consumer Total
(dollar amounts in thousands)
Three-month period ended June 30, 2014:
ALLL balance, beginning of period $ 266,979 $ 160,306 $ 25,178 $ 113,177 $ 39,068 $ 27,210 $ 631,918
Loan charge-offs (23,245) (2,998) (6,632) (13,201) (6,062) (6,689) (58,827)
Recoveries of loans previously charged-off 12,648 5,189 3,706 4,710 2,656 1,275 30,184
Provision for (reduction in allowance) loan and lease losses 22,130 (25,151) 4,906 1,257 11,529 17,155 31,826
Allowance for loans sold or transferred to loans held for sale --- --- --- --- --- --- ---
ALLL balance, end of period $ 278,512 $ 137,346 $ 27,158 $ 105,943 $ 47,191 $ 38,951 $ 635,101
AULC balance, beginning of period $ 46,316 $ 9,127 $ --- $ 1,791 $ 8 $ 2,126 $ 59,368
Provision for (reduction in allowance) unfunded loan commitments and letters of credit (1,566) (1,597) --- 186 --- 536 (2,441)
AULC balance, end of period $ 44,750 $ 7,530 $ --- $ 1,977 $ 8 $ 2,662 $ 56,927
ACL balance, end of period $ 323,262 $ 144,876 $ 27,158 $ 107,920 $ 47,199 $ 41,613 $ 692,028
Six-month period ended June 30, 2014:
ALLL balance, beginning of period $ 265,801 $ 162,557 $ 31,053 $ 111,131 $ 39,577 $ 37,751 $ 647,870
Loan charge-offs (39,582) (13,108) (14,676) (34,260) (15,048) (15,164) (131,838)
Recoveries of loans previously charged-off 20,379 16,286 7,108 10,082 3,783 2,571 60,209
Provision for (reduction in allowance) loan and lease losses 31,914 (28,389) 3,673 18,990 18,879 14,920 59,987
Allowance for loans sold or transferred to loans held for sale --- --- --- --- --- (1,127) (1,127)
ALLL balance, end of period $ 278,512 $ 137,346 $ 27,158 $ 105,943 $ 47,191 $ 38,951 $ 635,101
AULC balance, beginning of period $ 49,596 $ 9,891 $ --- $ 1,763 $ 9 $ 1,640 $ 62,899
Provision for (reduction in allowance) unfunded loan commitments and letters of credit (4,846) (2,361) --- 214 (1) 1,022 (5,972)
AULC balance, end of period $ 44,750 $ 7,530 $ --- $ 1,977 $ 8 $ 2,662 $ 56,927
ACL balance, end of period $ 323,262 $ 144,876 $ 27,158 $ 107,920 $ 47,199 $ 41,613 $ 692,028

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 or written down to net realizable value 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, 2015 and December 31, 2014:

June 30, 2015
Credit Risk Profile by UCS classification
(dollar amounts in thousands) Pass OLEM Substandard Doubtful Total
Commercial and industrial:
Owner occupied $ 3,875,455 $ 114,939 $ 207,241 $ 2,224 $ 4,199,859
Purchased credit-impaired 4,061 500 15,360 201 20,122
Other commercial and industrial 14,892,225 315,347 572,268 2,855 15,782,695
Total commercial and industrial $ 18,771,741 $ 430,786 $ 794,869 $ 5,280 $ 20,002,676
Commercial real estate:
Retail properties $ 1,284,017 $ 13,750 $ 58,006 $ (255) $ 1,355,518
Multi family 1,084,707 12,041 23,345 491 1,120,584
Office 859,603 27,135 42,155 2,047 930,940
Industrial and warehouse 488,609 347 11,768 363 501,087
Purchased credit-impaired 8,923 158 16,656 1,854 27,591
Other commercial real estate 1,242,841 4,678 29,714 840 1,278,073
Total commercial real estate $ 4,968,700 $ 58,109 $ 181,644 $ 5,340 $ 5,213,793
Credit Risk Profile by FICO score (1)
750+ 650-749 <650 Other (2) Total
Automobile $ 4,172,286 $ 3,177,579 $ 961,996 $ 237,220 $ 8,549,081
Home equity:
Secured by first-lien $ 3,311,887 $ 1,438,410 $ 282,919 $ 171,841 $ 5,205,057
Secured by junior-lien 1,824,355 1,041,941 349,377 105,546 3,321,219
Total home equity $ 5,136,242 $ 2,480,351 $ 632,296 $ 277,387 $ 8,526,276
Residential mortgage:
Residential mortgage $ 3,528,722 $ 1,795,997 $ 603,735 $ 56,506 $ 5,984,960
Purchased credit-impaired 636 723 681 --- 2,040
Total residential mortgage $ 3,529,358 $ 1,796,720 $ 604,416 $ 56,506 $ 5,987,000
Other consumer:
Other consumer $ 218,022 $ 220,435 $ 33,893 $ 1,074 $ 473,424
Purchased credit-impaired --- 51 --- --- 51
Total other consumer $ 218,022 $ 220,486 $ 33,893 $ 1,074 $ 473,475
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, 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. 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 June 30, 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 June 30, 2015:
Portion of ALLL balance:
Attributable to purchased credit-impaired loans $ 696 $ --- $ --- $ --- $ 258 $ 7 $ 961
Attributable to loans individually evaluated for impairment 15,570 13,285 1,471 25,933 10,066 122 66,447
Attributable to loans collectively evaluated for impairment 268,775 78,775 37,631 85,245 41,355 20,353 532,134
Total ALLL balance $ 285,041 $ 92,060 $ 39,102 $ 111,178 $ 51,679 $ 20,482 $ 599,542
Loan and Lease Ending Balances at June 30, 2015:
Portion of loan and lease ending balance:
Attributable to purchased credit-impaired loans $ 20,122 $ 27,591 $ --- $ --- $ 2,040 $ 51 $ 49,804
Individually evaluated for impairment 402,525 196,593 28,805 336,485 364,782 4,881 1,334,071
Collectively evaluated for impairment 19,580,029 4,989,609 8,520,276 8,189,791 5,620,178 468,543 47,368,426
Total loans and leases evaluated for impairment $ 20,002,676 $ 5,213,793 $ 8,549,081 $ 8,526,276 $ 5,987,000 $ 473,475 $ 48,752,301

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 Six Months Ended
June 30, 2015 June 30, 2015 June 30, 2015
Unpaid Interest Interest
Ending Principal Related Average Income Average Income
(dollar amounts in thousands) Balance Balance (5) Allowance Balance Recognized Balance Recognized
With no related allowance recorded:
Commercial and industrial:
Owner occupied $ 44,108 $ 51,709 $ --- $ 21,025 $ 72 $ 16,645 $ 147
Purchased credit-impaired --- --- --- --- --- --- ---
Other commercial and industrial 85,281 110,447 --- 71,905 498 56,728 836
Total commercial and industrial $ 129,389 $ 162,156 $ --- $ 92,930 $ 570 $ 73,373 $ 983
Commercial real estate:
Retail properties $ 53,513 $ 83,484 $ --- $ 50,905 $ 463 $ 54,231 $ 959
Multi family --- --- --- --- --- --- ---
Office 29,004 33,955 --- 11,515 86 6,597 117
Industrial and warehouse --- --- --- --- --- 263 7
Purchased credit-impaired 27,591 74,557 --- 31,468 2,163 33,769 3,941
Other commercial real estate 2,319 3,334 --- 1,838 16 3,096 62
Total commercial real estate $ 112,427 $ 195,330 $ --- $ 95,726 $ 2,728 $ 97,956 $ 5,086
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 $ 50,530 $ 57,310 $ 3,455 $ 59,605 $ 495 $ 55,448 $ 934
Purchased credit-impaired 20,122 29,969 696 20,750 1,577 21,576 2,874
Other commercial and industrial 222,606 228,512 12,115 183,095 1,339 61,833 1,086
Total commercial and industrial $ 293,258 $ 315,791 $ 16,266 $ 263,450 $ 3,411 $ 138,857 $ 4,894
Commercial real estate: (4)
Retail properties $ 38,132 $ 39,601 $ 4,651 $ 44,213 $ 418 $ 42,312 $ 780
Multi family 15,921 17,690 2,444 16,200 184 15,884 354
Office 25,617 30,019 2,146 40,710 450 45,644 1,013
Industrial and warehouse 6,098 6,297 507 5,835 81 7,079 163
Purchased credit-impaired --- --- --- --- --- --- ---
Other commercial real estate 25,989 32,728 3,537 29,405 335 29,254 689
Total commercial real estate $ 111,757 $ 126,335 $ 13,285 $ 136,363 $ 1,468 $ 140,173 $ 2,999
Automobile $ 28,805 $ 29,026 $ 1,471 $ 29,482 $ 544 $ 29,859 $ 1,105
Home equity:
Secured by first-lien $ 150,259 $ 155,467 $ 8,818 $ 148,892 $ 1,715 $ 147,783 $ 3,299
Secured by junior-lien 186,226 219,608 17,115 181,059 2,231 175,666 4,216
Total home equity $ 336,485 $ 375,075 $ 25,933 $ 329,951 $ 3,946 $ 323,449 $ 7,515
Residential mortgage (6):
Residential mortgage $ 364,782 $ 407,126 $ 10,066 $ 369,245 $ 2,978 $ 369,356 $ 6,100
Purchased credit-impaired 2,040 3,017 258 2,104 4 2,040 7
Total residential mortgage $ 366,822 $ 410,143 $ 10,324 $ 371,349 $ 2,982 $ 371,396 $ 6,107
Other consumer:
Other consumer $ 4,881 $ 4,881 $ 122 $ 4,963 $ 65 $ 4,671 $ 128
Purchased credit-impaired 51 114 7 51 160 51 291
Total other consumer $ 4,932 $ 4,995 $ 129 $ 5,014 $ 225 $ 4,722 $ 419

Three Months Ended Six Months Ended
December 31, 2014 June 30, 2014 June 30, 2014
Unpaid Interest Interest
Ending Principal Related Average Income Average Income
(dollar amounts in thousands) Balance Balance (5) Allowance Balance Recognized Balance Recognized
With no related allowance recorded:
Commercial and industrial:
Owner occupied $ 13,536 $ 13,536 $ --- $ 3,680 $ 35 $ 4,293 $ 84
Purchased credit-impaired --- --- --- --- --- --- ---
Other commercial and industrial 24,309 26,858 --- 7,558 89 7,584 186
Total commercial and industrial $ 37,845 $ 40,394 $ --- $ 11,238 $ 124 $ 11,877 $ 270
Commercial real estate:
Retail properties $ 61,915 $ 91,627 $ --- $ 55,039 $ 632 $ 54,665 $ 1,237
Multi family --- --- --- --- --- --- ---
Office 1,130 3,574 --- 2,394 40 4,400 229
Industrial and warehouse 3,447 3,506 --- 5,114 68 7,100 176
Purchased credit-impaired 38,371 91,075 --- 67,008 5,315 72,030 7,733
Other commercial real estate 6,608 6,815 --- 6,849 79 6,338 136
Total commercial real estate $ 111,471 $ 196,597 $ --- $ 136,404 $ 6,134 $ 144,533 $ 9,511
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 $ 40,748 $ 390 $ 39,796 $ 789
Purchased credit-impaired 23,228 35,307 3,846 35,887 3,282 35,767 4,775