Quarterly report pursuant to Section 13 or 15(d)

Loans and Leases and Allowance for Credit Losses

v2.3.0.15
Loans and Leases and Allowance for Credit Losses
9 Months Ended
Sep. 30, 2011
Loans / Leases and Allowance for Credit Losses [Abstract]  
Loans / Leases AND ALLOWANCE FOR CREDIT LOSSES

3. Loans / Leases AND ALLOWANCE FOR CREDIT LOSSES

 

Loan and Lease Portfolio Composition

 

The following table provides a detail listing of Huntington's loan and lease portfolio at September 30, 2011, December 31, 2010, and September 30, 2010:

 

          September 30,     December 31,     September 30,
(dollar amounts in thousands)   2011     2010     2010
                       
Loans and leases:                
    Commercial and industrial $ 13,938,885   $ 13,063,293   $ 12,424,529
    Commercial real estate   5,934,444     6,651,156     6,912,573
    Automobile   5,558,415     5,614,711     5,385,196
    Home equity   8,078,887     7,713,154     7,689,420
    Residential mortgage   4,986,023     4,500,366     4,511,272
    Other consumer   515,240     563,827     577,597
  Loans and leases   39,011,894     38,106,507     37,500,587
  Allowance for loan and lease losses   (1,019,710)     (1,249,008)     (1,336,352)
Net loans and leases $ 37,992,184   $ 36,857,499   $ 36,164,235
                       

 

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 the C&I portfolio are: owner occupied and other C&I. The classes within the CRE portfolio are: retail properties, multi family, office, industrial and warehouse, and other CRE. The classes within the home equity portfolio are: first-lien loans and second-lien loans. The automobile, residential mortgage, and other consumer portfolios are not further segregated into classes.

 

Pledged Loans and Leases

 

The Bank has access to the Federal Reserve's discount window and advances from the FHLB – Cincinnati. As of September 30, 2011, these borrowings and advances are secured by $18.1 billion of loans and securities.

 

Loan Purchases and Sales

 

The following table summarizes significant portfolio loan purchase and sale activity for the nine-month period ended September 30, 2011:

 

                                 
      Commercial Commercial   Home Residential Other  
  and Industrial Real Estate Automobile Equity Mortgage Consumer Total
  (dollar amounts in thousands)                            
                                 
  Portfolio loans purchased during the:                            
    Three-month period ended September 30, 2011 $ --- $ --- $ 59,578(1) $ --- $ --- $ --- $ 59,578
    Nine-month period ended September 30, 2011   ---   ---   59,578(1)   ---   ---   ---   59,578
                                 
  Portfolio loans sold or transferred to loans held for sale during the:                            
    Three-month period ended September 30, 2011   48,530   ---   1,000,033   ---   ---   ---   1,048,563
    Nine-month period ended September 30, 2011   204,012   56,123   1,000,033   ---   170,757   ---   1,430,925
                                 
  (1) Reflected the purchase of $59.6 million of automobile loans as a result of exercising a clean-up call option related to loans previously sold under Huntington's automobile loan sale program.

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.

 

All classes within the C&I and CRE portfolios are placed on nonaccrual status at no greater than 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. First-lien and second-lien home equity portfolio are placed on nonaccrual status at 150-days past due and 120-days past due, respectively. Automobile and other consumer loans are not placed on nonaccrual status, but 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.

 

Regarding all classes within all portfolios, when, in Management's judgment, the borrower's ability to make required principal and interest payments resumes and collectability is no longer in doubt, and the loan has been brought current with respect to principal and interest, 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:

 

      2011   2010
(dollar amounts in thousands)   September 30,   December 31,
           
Commercial and industrial:        
  Owner occupied $ 98,998 $ 138,822
  Other commercial and industrial   110,634   207,898
Total commercial and industrial   209,632   346,720
           
Commercial real estate:        
  Retail properties   51,342   96,644
  Multi family   38,301   44,819
  Office   37,010   47,950
  Industrial and warehouse   49,102   39,770
  Other commercial real estate   81,331   134,509
Total commercial real estate   257,086   363,692
           
Automobile   ---   ---
Home equity:        
  Secured by first-lien   17,771   10,658
  Secured by second-lien   19,385   11,868
Residential mortgage   61,129   45,010
Other consumer   ---   ---
Total nonaccrual loans $ 565,003 $ 777,948

The following table presents an aging analysis of loans and leases, including past due loans, by loan class: (1)

 

September 30, 2011
                              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 $ 16,165 $ 7,883 $ 63,265 $ 87,313   $ 3,890,718 $ 3,978,031   $ ---
  Other commercial and industrial   16,426   7,776   63,410   87,612     9,873,242   9,960,854     ---
Total commercial and industrial $ 32,591 $ 15,659 $ 126,675 $ 174,925   $ 13,763,960 $ 13,938,885   $ ---
                                   
Commercial real estate:                                
  Retail properties $ 9,160 $ 8,919 $ 33,148 $ 51,227   $ 1,597,313 $ 1,648,540   $ ---
  Multi family   7,884   1,181   27,229   36,294     968,020   1,004,314     ---
  Office   1,252   706   31,729   33,687     977,554   1,011,241     ---
  Industrial and warehouse   2,775   1,175   25,384   29,334     704,663   733,997     ---
  Other commercial real estate   12,862   13,166   59,853   85,881     1,450,471   1,536,352     ---
Total commercial real estate $ 33,933 $ 25,147 $ 177,343 $ 236,423   $ 5,698,021 $ 5,934,444   $ ---
                                   
Automobile $ 38,866   9,699 $ 5,722 $ 54,287   $ 5,504,128 $ 5,558,415   $ 5,722
Home equity:                                
  Secured by first-lien   20,043   8,972   27,333   56,348     3,532,416   3,588,764     9,561
  Secured by second-lien   29,642   15,108   30,243   74,993     4,415,130   4,490,123     10,859
Residential mortgage   144,074   46,791   172,435   363,300     4,622,723   4,986,023     117,263(2)
Other consumer   6,455   1,972   2,033   10,460     504,780   515,240     2,033
                                   
December 31, 2010
                              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 $ 16,393 $ 9,084 $ 80,114 $ 105,591   $ 3,717,872 $ 3,823,463   $ ---
  Other commercial and industrial   34,723   35,698   110,491   180,912     9,058,918   9,239,830     ---
Total commercial and industrial $ 51,116 $ 44,782 $ 190,605 $ 286,503   $ 12,776,790 $ 13,063,293   $ ---
                                   
Commercial real estate:                                
  Retail properties $ 23,726 $ 694 $ 72,856 $ 97,276   $ 1,664,941 $ 1,762,217   $ ---
  Multi family   8,993   8,227   31,519   48,739     1,072,877   1,121,616     ---
  Office   20,888   6,032   36,401   63,321     1,059,806   1,123,127     ---
  Industrial and warehouse   4,073   7,782   13,006   24,861     828,091   852,952     ---
  Other commercial real estate   45,792   9,243   91,718   146,753     1,644,491   1,791,244     ---
Total commercial real estate $ 103,472 $ 31,978 $ 245,500 $ 380,950   $ 6,270,206 $ 6,651,156   $ ---
                                   
Automobile $ 47,981 $ 12,246 $ 7,721 $ 67,948   $ 5,546,763 $ 5,614,711   $ 7,721
Home equity:                                
  Secured by first-lien   14,810   8,166   18,630   41,606     2,999,146   3,040,752     7,972
  Secured by second-lien   36,488   16,551   27,392   80,431     4,591,971   4,672,402     15,525
Residential mortgage   115,290   57,580   197,280   370,150     4,130,216   4,500,366     152,271(3)
Other consumer   7,204   2,280   2,456   11,940     551,887   563,827     2,456
                                   
(1) NALs are included in this aging analysis based on the loan's past due status.
(2) Includes $84,413 thousand guaranteed by the U.S. government.
(3) Includes $98,288 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 declining residential real estate values; the diversification of CRE loans, particularly loans secured by retail properties; and the amount of C&I loans to businesses in areas of Ohio and Michigan that have historically experienced less economic growth compared with other footprint markets. Also, the ACL assessment 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 ACL is increased through a provision for credit losses that is charged to earnings, based on Management's quarterly evaluation of the factors previously mentioned, and is reduced by charge-offs, net of recoveries, and the ACL associated with securitized or sold loans.

 

The ALLL consists of two components: (1) the transaction reserve, which includes 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 C&I and CRE loan greater than $1 million. For the C&I and CRE portfolios, the estimate of loss based on pools of loans and leases with similar characteristics is made by applying a PD factor and a LGD factor to each individual loan based on a continuously 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 calculation 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, however, 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 borrowers past and current payment performance, and this information is used to estimate expected losses over the subsequent 12-month period. The performance of first-lien loans ahead of our second-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 needed.

 

The general reserve consists of economic reserve and risk-profile reserve components. The economic reserve component considers the potential impact of changing market and economic conditions on portfolio performance. The risk-profile component considers 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 following table presents ALLL and AULC activity by portfolio segment for the three-month and nine-month periods ended September 30, 2011:

 

      Commercial Commercial   Home Residential Other    
  and Industrial Real Estate Automobile Equity Mortgage Consumer Total
(dollar amounts in thousands)                            
                                 
Three-month period ended September 30, 2011:                            
                                 
  ALLL balance, beginning of period $ 281,016 $ 463,874 $ 55,428 $ 146,444 $ 98,992 $ 25,372 $ 1,071,126
    Loan charge-offs   (28,624)   (29,621)   (8,087)   (27,916)   (13,422)   (8,229)   (115,899)
    Recoveries of loans previously charged-off   10,733   5,181   4,224   1,694   1,860   1,652   25,344
    Provision for loan and lease losses   22,129   (20,539)   4,565   19,394   11,544   8,774   45,867
    Allowance for loans sold or transferred to loans held for sale   ---   ---   (6,728)   ---   ---   ---   (6,728)
                                 
  ALLL balance, end of period $ 285,254 $ 418,895 $ 49,402 $ 139,616 $ 98,974 $ 27,569 $ 1,019,710
                                 
  AULC balance, beginning of period $ 31,341 $ 6,632 $ --- $ 2,249 $ 1 $ 837 $ 41,060
    Provision for unfunded loan commitments and letters of credit   (882)   (1,316)   ---   (67)   ---   (16)   (2,281)
                                 
  AULC balance, end of period $ 30,459 $ 5,316 $ --- $ 2,182 $ 1 $ 821 $ 38,779
                                 
  ACL balance, end of period $ 315,713 $ 424,211 $ 49,402 $ 141,798 $ 98,975 $ 28,390 $ 1,058,489
                                 
Nine-month period ended September 30, 2011:                            
                                 
  ALLL balance, beginning of period $ 340,614 $ 588,251 $ 49,488 $ 150,630 $ 93,289 $ 26,736 $ 1,249,008
    Loan charge-offs   (110,590)   (146,991)   (24,939)   (83,598)   (53,773)   (23,716)   (443,607)
    Recoveries of loans previously charged-off   31,804   27,273   14,109   5,220   6,824   5,205   90,435
    Provision for loan and lease losses   23,426   (49,638)   17,472   67,364   54,148   19,344   132,116
    Allowance for loans sold or transferred to loans held for sale   ---   ---   (6,728)   ---   (1,514)   ---   (8,242)
                                 
  ALLL balance, end of period $ 285,254 $ 418,895 $ 49,402 $ 139,616 $ 98,974 $ 27,569 $ 1,019,710
                                 
  AULC balance, beginning of period $ 32,726 $ 6,158 $ --- $ 2,348 $ 1 $ 894 $ 42,127
    Provision for unfunded loan commitments and letters of credit   (2,267)   (842)   ---   (166)   ---   (73)   (3,348)
                                 
  AULC balance, end of period $ 30,459 $ 5,316 $ --- $ 2,182 $ 1 $ 821 $ 38,779
                                 
  ACL balance, end of period $ 315,713 $ 424,211 $ 49,402 $ 141,798 $ 98,975 $ 28,390 $ 1,058,489

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.

 

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 second-lien home equity loans are charged-off to the estimated fair value of the collateral at 150-days past due and 120-days past due, respectively. Residential mortgages are charged-off to the estimated fair value of the collateral 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 = Potentially weak loans. 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 inadequately protect Huntington's position in the future.

 

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 generally based on the borrower's most recent credit bureau score (FICO), which we update quarterly. A HYPERLINK "http://www.investorglossary.com/fico-score.htm" FICO credit bureau score is a HYPERLINK "http://www.investorglossary.com/credit-score.htm" credit score developed by Fair Isaac Corporation based on data provided by the credit bureaus. The FICO 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 FICO credit bureau score, the higher likelihood of repayment and therefore, an indicator of lower credit risk

The following table presents loan and lease balances by credit quality indicator:

 

    September 30, 2011
  Credit Risk Profile by UCS classification
(dollar amounts in thousands) Pass OLEM Substandard Doubtful Total
Commercial and industrial:                    
  Owner occupied $ 3,531,028 $ 108,665 $ 337,037 $ 1,301 $ 3,978,031
  Other commercial and industrial   9,318,615   204,594   432,760   4,885   9,960,854
Total commercial and industrial $ 12,849,643 $ 313,259 $ 769,797 $ 6,186 $ 13,938,885
                       
Commercial real estate:                    
  Retail properties $ 1,303,839 $ 133,512 $ 211,189 $ - $ 1,648,540
  Multi family   849,886   52,630   101,548   250   1,004,314
  Office   849,981   91,098   70,034   128   1,011,241
  Industrial and warehouse   634,183   26,074   73,740   -   733,997
  Other commercial real estate   1,094,653   107,116   333,876   707   1,536,352
Total commercial real estate $ 4,732,542 $ 410,430 $ 790,387 $ 1,085 $ 5,934,444
                       
    Credit Risk Profile by FICO score (1)
    750+ 650-749 <650 Other (2) Total
Automobile $ 2,552,438 $ 2,200,114 $ 697,307 $ 108,556 $ 5,558,415
Home equity:                    
  Secured by first-lien   2,039,431   1,219,344   318,745   11,244   3,588,764
  Secured by second-lien   2,168,899   1,686,926   633,704   594   4,490,123
Residential mortgage   2,301,637   1,731,554   718,477   234,355   4,986,023
Other consumer   196,729   212,512   84,725   21,274   515,240
                       
                       
                       
    December 31, 2010
  Credit Risk Profile by UCS classification
(dollar amounts in thousands) Pass OLEM Substandard Doubtful Total
Commercial and industrial:                    
  Owner occupied $ 3,265,266 $ 159,398 $ 392,969 $ 5,830 $ 3,823,463
  Other commercial and industrial   8,434,969   264,679   524,867   15,315   9,239,830
Total commercial and industrial $ 11,700,235 $ 424,077 $ 917,836 $ 21,145 $ 13,063,293
                       
Commercial real estate:                    
  Retail properties $ 1,283,667 $ 128,067 $ 350,478 $ 5 $ 1,762,217
  Multi family   898,935   78,577   143,689   415   1,121,616
  Office   867,970   122,173   132,833   151   1,123,127
  Industrial and warehouse   668,452   72,177   112,323   -   852,952
  Other commercial real estate   1,220,708   88,288   481,136   1,112   1,791,244
Total commercial real estate $ 4,939,732 $ 489,282 $ 1,220,459 $ 1,683 $ 6,651,156
                       
    Credit Risk Profile by FICO score (1)
    750+ 650-749 <650 Other (2) Total
Automobile $ 2,516,130 $ 2,267,363 $ 724,584 $ 106,634 $ 5,614,711
Home equity:                    
  Secured by first-lien   1,643,792   1,082,143   313,961   856   3,040,752
  Secured by second-lien   2,224,545   1,768,450   678,738   669   4,672,402
Residential mortgage   1,978,843   1,580,266   795,676   145,581   4,500,366
Other consumer   206,952   234,558   102,254   20,063   563,827
                       
(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 million or greater are evaluated on a quarterly basis for impairment. Generally, consumer loans within any class are not individually evaluated on a regular basis for impairment.

 

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 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. When the contractual interest rate is variable, the effective interest rate of the loan changes over time. A specific reserve is established as a component of the ALLL when a loan has been determined to be impaired. Subsequent to the initial measurement of impairment, if there is a significant change to the impaired loan's expected future cash flows, or if actual cash flows are significantly different from the cash flows previously estimated, Huntington recalculates the impairment and appropriately adjusts the specific reserve. Similarly, if Huntington measures impairment based on the observable market price of an impaired loan or the fair value of the collateral of an impaired collateral dependent loan, Huntington will adjust the specific reserve.

 

When a loan within any class is impaired, the accrual of interest income is discontinued unless the receipt of principal and interest is no longer in doubt. Interest income on TDRs is accrued when all principal and interest is expected to be collected under the post-modification terms. Cash receipts received on nonaccruing impaired loans within any class are generally applied entirely against principal until the loan has been collected in full, 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 table presents summarized data for impaired loans and the related ALLL by portfolio segment:

                                 
                                 
      Commercial Commercial     Residential Other  
  and Industrial Real Estate Automobile Home Equity Mortgage Consumer Total
                                 
ALLL at September 30, 2011:                            
(dollar amounts in thousands)                            
                                 
  Portion of ending balance:                            
                                 
    Attributable to loans individually evaluated for impairment $ 31,249 $ 61,472 $ 1,344 $ 1,610 $ 14,757 $ 311 $ 110,743
    Attributable to loans collectively evaluated for impairment   254,005   357,423   48,058   138,006   84,217   27,258   908,967
  Total ALLL balance at September 30, 2011 $ 285,254 $ 418,895 $ 49,402 $ 139,616 $ 98,974 $ 27,569 $ 1,019,710
                                 
  ALLL associated with portfolio loans acquired with deteriorated credit quality $ --- $ --- $ --- $ --- $ --- $ --- $ ---
                                 
Loans and Leases at September 30, 2011:                            
(dollar amounts in thousands)                            
                                 
  Portion of loans and leases at September 30, 2011:                            
                                 
    Individually evaluated for impairment   161,939   400,952   37,371   47,877   325,242   4,626   978,007
    Collectively evaluated for impairment   13,776,946   5,533,492   5,521,044   8,031,010   4,660,781   510,614   38,033,887
  Total loans evaluated for impairment $ 13,938,885 $ 5,934,444 $ 5,558,415 $ 8,078,887 $ 4,986,023 $ 515,240 $ 39,011,894
                                 
  Portfolio loans acquired with deteriorated credit quality $ --- $ --- $ --- $ --- $ --- $ --- $ ---
                                 

                                 
                                 
                   
  Commercial and Industrial Commercial Real Estate Automobile Home Equity Residential Mortgage Other Consumer Total
                                 
ALLL at December 31, 2010                            
(dollar amounts in thousands)                            
                                 
  Portion of ALLL balance at December 31, 2010:                            
                                 
    Attributable to loans individually evaluated for impairment $ 63,307 $ 65,130 $ 1,477 $ 1,498 $ 11,780 $ 668 $ 143,860
    Attributable to loans collectively evaluated for impairment   277,307   523,121   48,011   149,132   81,509   26,068   1,105,148
  ALLL balance at December 31, 2010: $ 340,614 $ 588,251 $ 49,488 $ 150,630 $ 93,289 $ 26,736 $ 1,249,008
                                 
  ALLL associated with portfolio loans acquired with deteriorated credit quality $ --- $ - $ - $ - $ - $ - $ -
                                 
Loans and Leases at December 31, 2010:                            
(dollar amounts in thousands)                            
                                 
  Portion of loans and leases at December 31, 2010:                            
                                 
    Individually evaluated for impairment   198,120   310,668   29,764   37,257   334,207   9,565   919,581
    Collectively evaluated for impairment   12,865,173   6,340,488   5,584,947   7,675,897   4,166,159   554,262   37,186,926
  Total loans evaluated for impairment $ 13,063,293 $ 6,651,156 $ 5,614,711 $ 7,713,154 $ 4,500,366 $ 563,827 $ 38,106,507
                                 
  Portfolio loans acquired with deteriorated credit quality $ --- $ --- $ --- $ --- $ --- $ --- $ ---
                                 

The following tables present detailed impaired loan information by class: (1), (2)

 

                    Three Months Ended   Nine Months Ended
  September 30, 2011   September 30, 2011   September 30, 2011
          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 $ 10,105 $ 14,456 $ -   $ 4,284 $ 122   $ 7,121 $ 139
    Other commercial and industrial   3,782   6,165   -     3,324   37     6,102   162
  Total commercial and industrial $ 13,887 $ 20,621 $ -   $ 7,608 $ 159   $ 13,223 $ 301
                                     
  Commercial real estate:                                
    Retail properties $ 43,746 $ 55,370 $ -   $ 29,895 $ 348   $ 21,158 $ 362
    Multi family   21,156   21,345   -     16,187   188     12,951   499
    Office   1,105   1,431   -     1,542   -     1,804   -
    Industrial and warehouse   1,866   2,908   -     3,098   36     2,755   41
    Other commercial real estate   23,032   42,611   -     27,559   251     25,988   609
  Total commercial real estate $ 90,905 $ 123,665 $ -   $ 78,281 $ 823   $ 64,656 $ 1,511
                                     
  Automobile $ - $ - $ -   $ - $ -   $ - $ -
  Home equity:                                
    Secured by first-lien   -   -   -     -   -     -   -
    Secured by second-lien   -   -   -     -   -     -   -
  Residential mortgage   -   -   -     -   -     -   -
  Other consumer   -   -   -     -   -     -   -
                                     
With an allowance recorded:                                
  Commercial and industrial: (3)                                
    Owner occupied $ 40,311 $ 58,925 $ 5,891   $ 49,354 $ 499   $ 56,747 $ 1,362
    Other commercial and industrial   107,741   138,751   25,358     102,193   946     99,629   2,246
  Total commercial and industrial $ 148,052 $ 197,676 $ 31,249   $ 151,547 $ 1,445   $ 156,376 $ 3,608
                                     
  Commercial real estate: (4)                                
    Retail properties $ 118,010 $ 146,923 $ 29,030   $ 99,018 $ 863   $ 96,231 $ 1,975
    Multi family   22,365   29,085   4,170     23,943   130     29,348   625
    Office   24,863   41,496   3,490     25,061   53     27,716   197
    Industrial and warehouse   50,423   61,563   7,141     54,345   166     44,649   588
    Other commercial real estate   94,386   131,350   17,641     107,635   873     85,949   1,510
  Total commercial real estate $ 310,047 $ 410,417 $ 61,472   $ 310,002 $ 2,085   $ 283,893 $ 4,895
                                     
  Automobile $ 37,371 $ 37,371 $ 1,344   $ 33,215 $ 847   $ 31,451 $ 2,154
  Home equity:                                
    Secured by first-lien   32,681   32,681   638     27,758   354     24,734   816
    Secured by second-lien   15,196   15,196   972     14,714   187     15,746   550
  Residential mortgage   325,242   347,843   14,757     329,685   3,038     335,400   9,848
  Other consumer   4,626   4,626   311     6,768   41     8,068   373

                     
  December 31, 2010    
          Unpaid            
      Ending Principal Related      
(dollar amounts in thousands) Balance Balance (5) Allowance      
                           
With no related allowance recorded:                      
  Commercial and industrial:                      
    Owner occupied $ 13,750 $ 26,603 $ ---          
    Other commercial and industrial   11,127   22,688   ---          
  Total commercial and industrial $ 24,877 $ 49,291 $ ---          
                           
  Commercial real estate:                      
    Retail properties $ 31,972 $ 67,487 $ ---          
    Multi family   5,058   5,675   ---          
    Office   2,270   3,562   ---          
    Industrial and warehouse   3,305   6,912   ---          
    Other commercial real estate   26,807   58,996   ---          
  Total commercial real estate $ 69,412 $ 142,632 $ ---          
                           
  Automobile $ --- $ --- $ ---          
  Home equity:                      
    Secured by first-lien   ---   ---   ---          
    Secured by second-lien   ---   ---   ---          
  Residential mortgage   ---   ---   ---          
  Other consumer   ---   ---   ---          
                           
With an allowance recorded:                      
  Commercial and industrial:                      
    Owner occupied $ 63,951 $ 85,279 $ 14,322          
    Other commercial and industrial   109,292   154,424   48,986          
  Total commercial and industrial $ 173,243 $ 239,703 $ 63,308          
                           
  Commercial real estate:                      
    Retail properties $ 74,732 $ 120,051 $ 14,846          
    Multi family   38,758   39,299   7,760          
    Office   26,595   31,261   9,466          
    Industrial and warehouse   34,588   44,168   10,453          
    Other commercial real estate   66,583   104,485   22,604          
  Total commercial real estate $ 241,256 $ 339,264 $ 65,129          
                           
  Automobile $ 29,764 $ 29,764 $ 1,477          
  Home equity:                      
    Secured by first-lien   20,553   20,675   511          
    Secured by second-lien   16,704   17,060   987          
  Residential mortgage   334,207   347,571   11,780          
  Other consumer   9,565   9,565   668          
                           
(1) These tables do not include loans fully charged-off.
(2) All automobile, home equity, residential mortgage, and other consumer impaired loans included in the tables below are considered impaired due to their status as a TDR.
(3) At September 30, 2011, $32,685 thousand of the $148,052 thousand commercial and industrial loans with an allowance recorded were considered impaired due to their status as a TDR.
(4) At September 30, 2011, $26,916 thousand of the $310,047 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 the unpaid principal balance amounts represent partial charge-offs.

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 loan modifications, including those classified as TDRs, are reviewed and approved. 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:

     

  • 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 then end of the term of the loan. Principal is generally not forgiven.
  • Reduces the amount of loan principal to be amortized. This concession also 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.
  • 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.

 

  • 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 nine-month periods ended September 30, 2011, was not significant.

 

TDRs by Loan Type

 

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. Additionally, if a charge-off was taken as part of the restructuring, the TDR status is not considered for removal. The TDR status on commercial loans is considered for removal if the loan is subsequently modified at market terms.

 

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.

 

Other Consumer loan TDRs – Generally, these are TDRs associated with home equity borrowings and automobile loans. 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 driven 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. 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.

 

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.

 

Residential Mortgage 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 table presents new TDR activity by class for the three-month and nine-month periods ended September 30, 2011:

 

      New Troubled Debt Restructurings During The
      Three-Month Period Ended September 30, 2011
               
        Post-modification Net change in  
(dollar amounts in thousands)   Number of Outstanding ALLL resulting  
    Contracts Balance (1) from modification  
                 
C&I - Owner occupied:              
                 
  Interest rate reduction   3 $ 638 $ (68)  
  Amortization or maturity date change   16   11,023   (1,085)  
  Other   2   729   (1)  
Total C&I - Owner occupied   21 $ 12,390 $ (1,154)  
                 
C&I - Other commercial and industrial:              
                 
  Interest rate reduction   6 $ 18,292 $ 1,225  
  Amortization or maturity date change   11   2,175   13  
  Other   2   3,027   64  
Total C&I - Other commercial and industrial   19 $ 23,494 $ 1,302  
                 
CRE - Retail properties:              
                 
  Interest rate reduction   2 $ 19,883 $ 5,603  
  Amortization or maturity date change   7   17,984   1,012  
  Other   1   2,595   5  
Total CRE - Retail properties   10 $ 40,462 $ 6,620  
                 
CRE - Multi family:              
                 
  Interest rate reduction   4 $ 1,275 $ 103  
  Amortization or maturity date change   1   1,066   (51)  
  Other   ---   ---   ---  
Total CRE - Multi family   5 $ 2,341 $ 52  
                 
CRE - Office:              
                 
  Interest rate reduction   --- $ --- $ ---  
  Amortization or maturity date change   ---   ---   ---  
  Other   ---   ---   ---  
Total CRE - Office   --- $ --- $ ---  
                 
CRE - Industrial and warehouse:              
                 
  Interest rate reduction   --- $ --- $ ---  
  Amortization or maturity date change   2   229   (2)  
  Other   1   2,147   (145)  
Total CRE - Industrial and Warehouse   3 $ 2,376 $ (147)  
                 
CRE - Other commercial real estate:              
                 
  Interest rate reduction   10 $ 7,834 $ (374)  
  Amortization or maturity date change   12   31,470   (365)  
  Other   2   2,492   ---  
Total CRE - Other commercial real estate   24 $ 41,796 $ (739)  
                 
Automobile:              
                 
  Interest rate reduction   12 $ 147 $ 3  
  Amortization or maturity date change   822   7,687   (68)  
  Other   ---   ---   ---  
Total Automobile   834 $ 7,834 $ (65)  
                 
Residential mortgage:              
                 
  Interest rate reduction   2 $ 181 $ ---  
  Amortization or maturity date change   164   22,120   649  
  Other   5   600   33  
Total Residential mortgage   171 $ 22,901 $ 682  
                 
First-lien home equity:              
                 
  Interest rate reduction   48 $ 5,857 $ 1,016  
  Amortization or maturity date change   49   5,820   111  
  Other   ---   ---   ---  
Total First-lien home equity   97 $ 11,677 $ 1,127  
                 
Second-lien home equity:              
                 
  Interest rate reduction   55 $ 2,992 $ 22  
  Amortization or maturity date change   44   1,631   40  
  Other   ---   ---   ---  
Total Second-lien home equity   99 $ 4,623 $ 62  
                 
Other consumer:              
                 
  Interest rate reduction   6 $ 561 $ 48  
  Amortization or maturity date change   50   348   (18)  
  Other   ---   ---   ---  
Total Other consumer   56 $ 909 $ 30  

      New Troubled Debt Restructurings During The
      Nine-Month Period Ended September 30, 2011
             
        Post-modification Net change in  
(dollar amounts in thousands)   Number of Outstanding ALLL resulting  
    Contracts Balance (1) from modification  
                 
C&I - Owner occupied:              
                 
  Interest rate reduction   27 $ 12,240 $ (749)  
  Amortization or maturity date change   35   19,294   (1,733)  
  Other   4   3,072   243  
Total C&I - Owner occupied   66 $ 34,606 $ (2,239)  
                 
C&I - Other commercial and industrial:              
                 
  Interest rate reduction   18 $ 21,382 $ 1,067  
  Amortization or maturity date change   41   23,145   (2,651)  
  Other   17   25,421   (3,020)  
Total C&I - Other commercial and industrial   76 $ 69,948 $ (4,604)  
                 
CRE - Retail properties:              
                 
  Interest rate reduction   8 $ 46,534 $ 4,359  
  Amortization or maturity date change   14   25,689   1,858  
  Other   6   14,253   (1,974)  
Total CRE - Retail properties   28 $ 86,476 $ 4,243  
                 
CRE - Multi family:              
                 
  Interest rate reduction   10 $ 4,378 $ (9)  
  Amortization or maturity date change   5   2,256   25  
  Other   ---   ---   ---  
Total CRE - Multi family   15 $ 6,634 $ 16  
                 
CRE - Office:              
                 
  Interest rate reduction   3 $ 1,505 $ 259  
  Amortization or maturity date change   2   1,238   97  
  Other   ---   ---   ---  
Total CRE - Office   5 $ 2,743 $ 356  
                 
CRE - Industrial and warehouse:              
                 
  Interest rate reduction   1 $ 2,165 $ (299)  
  Amortization or maturity date change   6   19,300   (5,446)  
  Other   1   2,147   (145)  
Total CRE - Industrial and Warehouse   8 $ 23,612 $ (5,890)  
                 
CRE - Other commercial real estate:              
                 
  Interest rate reduction   15 $ 17,893 $ (1,180)  
  Amortization or maturity date change   48   103,120   (3,602)  
  Other   5   8,199   32  
Total CRE - Other commercial real estate   68 $ 129,212 $ (4,750)  
                 
Automobile:              
                 
  Interest rate reduction   14 $ 186 $ 3  
  Amortization or maturity date change   1,534   13,832   (113)  
  Other   ---   ---   ---  
Total Automobile   1,548 $ 14,018 $ (110)  
                 
Residential mortgage:              
                 
  Interest rate reduction   8 $ 6,604 $ (589)  
  Amortization or maturity date change   499   67,351   2,289  
  Other   18   3,555   115  
Total Residential mortgage   525 $ 77,510 $ 1,815  
                 
First-lien home equity:              
                 
  Interest rate reduction   95 $ 11,836 $ 1,899  
  Amortization or maturity date change   75   9,073   587  
  Other   ---   ---   ---  
Total First-lien home equity   170 $ 20,909 $ 2,486  
                 
Second-lien home equity:              
                 
  Interest rate reduction   109 $ 5,480 $ 287  
  Amortization or maturity date change   89   2,975   59  
  Other   ---   ---   ---  
Total Second-lien home equity   198 $ 8,455 $ 346  
                 
Other consumer:              
                 
  Interest rate reduction   11 $ 837 $ 73  
  Amortization or maturity date change   57   363   (19)  
  Other   ---   ---   ---  
Total Other consumer   68 $ 1,200 $ 54  
                 
(1) Post-modification balances approximate pre-modification balances. The aggregate amount of charge-offs as a result of a restructuring are not significant.  

All classes within the C&I and CRE portfolios are considered as redefaulted at 90-days past due. Automobile loans and other consumer loans are considered as redefaulted at 120-days past due. Residential mortgage loans are considered as redefaulted at 150-days past due. The first-lien and second-lien home equity portfolios are considered as redefaulted at 150-days past due and 120-days past due, respectively.

 

The following table presents TDRs modified within the previous twelve months that have subsequently redefaulted during the three-month and nine-month periods ended September 30, 2011:

 

      Troubled Debt Restructurings Within The Previous Twelve Months
      That Have Subsequently Defaulted During The (1)
      Three-month period ended September 30, 2011   Nine-month period ended September 30, 2011
                   
                   
(dollar amounts in thousands)   Number of Ending   Number of Ending
    Contracts Balance   Contracts Balance
                 
                   
C&I - Owner occupied:                
                   
  Interest rate reduction   --- $ ---   9 $ 3,850
  Amortization or maturity date change   3   3,224   7   4,072
  Other   ---   ---   2   2,352
Total C&I - Owner occupied   3 $ 3,224   18 $ 10,274
                   
C&I - Other commercial and industrial:                
                   
  Interest rate reduction   --- $ ---   1 $ 193
  Amortization or maturity date change   2   9,300   6   9,932
  Other   ---   ---   ---   ---
Total C&I - Other commercial and industrial   2 $ 9,300   7 $ 10,125
                   
CRE - Retail Properties:                
                   
  Interest rate reduction   --- $ ---   --- $ ---
  Amortization or maturity date change   ---   ---   1   796
  Other   ---   ---   ---   ---
Total CRE - Retail properties   --- $ ---   1 $ 796
                   
CRE - Multi family:                
                   
  Interest rate reduction   2 $ 812   4 $ 1,180
  Amortization or maturity date change   ---   ---   2   465
  Other   ---   ---   ---   ---
Total CRE - Multi family   2 $ 812   6 $ 1,645
                   
CRE - Office:                
                   
  Interest rate reduction   --- $ ---   1 $ 116
  Amortization or maturity date change   ---   ---   1   334
  Other   ---   ---   ---   ---
Total CRE - Office   --- $ ---   2 $ 450
                   
CRE - Industrial and Warehouse:                
                   
  Interest rate reduction   --- $ ---   --- $ ---
  Amortization or maturity date change   2   229   7   2,581
  Other   ---   ---   ---   ---
Total CRE - Industrial and Warehouse   2 $ 229   7 $ 2,581
                   
CRE - Other commercial real estate:                
                   
  Interest rate reduction   2 $ 132   7 $ 2,214
  Amortization or maturity date change   ---   ---   10   2,037
  Other   ---   ---   ---   ---
Total CRE - Other commercial real estate   2 $ 132   17 $ 4,251
                   
Automobile:                
                   
  Interest rate reduction   --- $ ---   1 $ ---(2)
  Amortization or maturity date change   41   ---(2)   112   ---(2)
  Other   ---   ---   ---   ---
Total Automobile   41 $