Huntington National Bank 2011 Annual Report Download - page 61

Automobile — Automobile loans and leases are primarily comprised of loans made through automotive
dealerships and include exposure in selected states outside of our primary banking markets. No state outside
of our primary banking market represented more than 3% of our total automobile portfolio at December 31,
2011. In late 2011, we expanded into Minnesota and Wisconsin, and in 2010, we expanded into eastern
Pennsylvania and five New England states. The expansions were based on hiring experienced colleagues
within the new markets that have existing dealer relationships. We have a loan securitization strategy to
maintain any growth within our established portfolio concentration limits.
Home equity — Home equity lending includes both home equity loans and lines-of-credit. This type of
lending, which is secured by a first-lien or second-lien on the borrower’s residence, allows customers to
borrow against the equity in their home. Given the current low interest rate environment, many borrowers
have utilized the line-of-credit home equity product as the primary source of financing their home versus
residential mortgages. As a result, the proportion of the home equity portfolio secured by a first-lien has
increased significantly over the past three years, positively impacting the portfolio’s performance. The
portfolio’s credit risk profile is substantially reduced when we hold a first-lien position. During 2011, 70%
of our home equity portfolio originations were secured by a first-lien. The first-lien position combined with
continued high average FICO scores significantly reduces the PD associated with these loans. The
combination provides a strong base when assessing the expected future performance of this portfolio. Real
estate market values at the time of origination directly affect the amount of credit extended and, in the event
of default, subsequent changes in these values impact the severity of losses. We actively manage the
extension of credit and the amount of credit extended through a combination of criteria including financial
position, debt-to-income policies, and LTV policy limits.
Residential mortgages — Residential mortgages represent loans to consumers for the purchase or
refinance of a residence. These loans are generally financed over a 15-year to 30-year term, and in most
cases, are extended to borrowers to finance their primary residence. Generally, our practice is to sell a
significant portion of our fixed-rate originations in the secondary market. As such, at December 31, 2011,
50% of our total residential mortgage portfolio were ARMs. These ARMs primarily consist of a fixed-rate
of interest for the first 3 to 5 years, and then adjust annually. We are subject to repurchase risk associated
with residential mortgage loans sold in the secondary market. An appropriate level of accounting reserve for
representations and warranties related to residential mortgage loans sold has been established to address this
repurchase risk inherent in the portfolio (see Operational Risk discussion).
Other consumer loans/leases — Primarily consists of consumer loans not secured by real estate,
including personal unsecured loans.
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