Huntington National Bank 2011 Annual Report Download - page 75

ACL
(This section should be read in conjunction with Significant Item 6, and Note 3 of the Notes to Consolidated
Financial Statements.)
We maintain two reserves, both of which in our judgment are appropriate to absorb credit losses inherent in
our loan and lease portfolio: the ALLL and the AULC. Combined, these reserves comprise the total ACL. Our
Credit Administration group is responsible for developing the methodology assumptions and estimates used in
the calculation, as well as determining the appropriateness of the ACL. The ALLL represents the estimate of
losses inherent in the loan portfolio at the reported date. Additions to the ALLL result from recording provision
expense for loan losses or increased risk levels resulting from loan risk-rating downgrades, while reductions
reflect charge-offs, recoveries, decreased risk levels resulting from loan risk-rating upgrades, or the sale of loans.
The AULC is determined by applying the transaction reserve process to the unfunded portion of the loan
exposures adjusted by an applicable funding expectation.
A provision for credit losses is recorded to adjust the ACL to the level we have determined to be appropriate
to absorb credit losses inherent in our loan and lease portfolio. The provision for credit losses in 2011 was
$174.1 million, compared with $634.5 million in 2010.
While the total ACL balance declined in 2011, and the resulting ACL-to-loan coverage ratio declined to
2.60% from 3.39%, all of the ACL coverage benchmarks improved as a result of the improvement in the
underlying quality of the portfolio. The coverage ratios associated with NALs, commercial Criticized, and
commercial Classified loans all showed significant improvement in 2011 despite the decline in the ACL level.
61