Huntington National Bank 2012 Annual Report Download - page 61

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The following table reflects TDR activity for each of the past two years:
Table 17 - Troubled Debt Restructured Loan Activity
(dollar amounts in thousands) 2012 2011
TDRs, beginning of period $ 805,650 $ 666,880
N
ew TDRs(1) 597,425 583,439
Payments (191,035) (138,467)
Charge-offs (81,115) (37,341)
Sales (13,787) (54,715)
Refinanced to non-TDR --- (40,091)
Transfer to OREO (21,709) (5,016)
Restructured TDRs - accruing(2) (153,583) (154,945)
Restructured TDRs - nonaccruing(2) (63,080) (47,659)
Other (3,141) 33,565
TDRs, end of period $ 875,625 $ 805,650
(1) 2012 includes $79.5 million of Chapter 7 bankruptcy loans.
(2) Represents existing TDRs that were reunderwritten with new terms providing a concession. A
corresponding amount is included in the New TDRs amount above.
ACL
(This section should be read in conjunction with 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 (net of 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 2012 was $147.4 million, compared with
$174.1 million in 2011.
We regularly evaluate the appropriateness of the ACL by performing 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. We evaluate 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, we also consider the impact of
collateral value trends and portfolio diversification.
Our ACL evaluation process includes the on-going assessment of credit quality metrics, and a comparison of certain ACL
benchmarks to current performance. While the total ACL balance has declined in recent quarters, all of the relevant benchmarks
remain strong.
We have incorporated recent regulatory guidance which focused on home equity loans, specifically junior-lien loans when the
related first-lien loan is delinquent, into our ACL adequacy analysis processes. As we evaluated this guidance in the context of the
continued economic strain on some of our borrowers, we determined it was appropriate to assess borrower risk at a more granular
level in order to ensure we had identified the incurred risk embedded within our portfolios secured by residential real estate,
particularly the home equity junior-lien portfolio. In addition to the updated FICO score for each borrower and the delinquency status
of each Huntington loan, our analysis also considers any non-delinquent Huntington loan secured by residential real estate when the
borrower has a significant delinquency on the most recent credit bureau report. Additionally, beginning in 2012, a reserve amount
associated with estimated incurred losses due to maturity risk in the home equity line-of-credit portfolio is included in the home equity
ALLL.