Huntington National Bank 2005 Annual Report Download - page 54

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MANAGEMENT’S DISCUSSION AND ANALYSIS HUNTINGTON BANCSHARES INCORPORATED
commitments is delegated through the independent credit administration function and is monitored and regularly updated in a
centralized database.
Concentration risk is managed via limits on loan type, geography, industry, loan quality factors, and country limits. We have
focused on extending credit to commercial customers with existing or expandable relationships within our primary markets. As a
result, shared national credit exposure declined in 2002 and 2003. The on-going sale of automobile loans is an example of the
proactive management of concentration risk.
The checks and balances in the credit process and the independence of the credit administration and risk management functions
are designed to accurately assess the level of credit risk being accepted, facilitate the early recognition of credit problems when
they do occur, and to provide for effective problem asset management and resolution.
Credit Exposure Mix
(This section should be read in conjunction with Significant Factors 1 and 3.)
An overall corporate objective is to avoid undue portfolio concentrations. As shown in Table 10, at December 31, 2005, total
credit exposure from the loan and lease portfolio was $24.7 billion. Of this amount, $13.6 billion, or 55%, represented total
consumer loans and leases, $10.8 billion, or 44%, total commercial loans and leases, and $0.2 billion, or 1%, operating lease
assets.
A specific portfolio concentration objective has been to reduce the relative level of total automobile exposure (the sum of
automobile loans, automobile leases, securitized automobile loans, and operating lease assets) from 33% at the end of 2002. As
shown in Table 10, such exposure was 18% at December 31, 2005.
In contrast, another specific portfolio concentration objective has been to increase the relative level of lower-risk residential
mortgages and home equity loans. At December 31, 2005, such loans represented 36% of total credit exposure, up from 22% at
the end of 2002.
Since the end of 2002, the level of total commercial loans and leases has remained relatively constant at 42%-44% of total credit
exposure. However, middle market C&I loans declined to 19% at year-end 2004 from 22% at December 31, 2002, reflecting weak
demand, but also a specific objective to reduce exposure to large individual credits, as well as a strategy to focus on commercial
lending to customers with existing or potential relationships within our primary markets. During 2005, that concentration
increased to 21%, reflecting increased customer demand. Conversely, since the end of 2002, small business loans increased to 9%
from 8%, reflecting strategies to grow this important targeted business segment. (See Table 10.)
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