Huntington National Bank 2014 Annual Report Download - page 51

45
As shown in the table above, our loan portfolio is diversified by consumer and commercial credit. At the corporate level, we
manage the credit exposure in part via a credit concentration policy. The policy designates specific loan types, collateral types, and
loan structures to be formally tracked and assigned limits as a percentage of capital. C&I lending by NAICS categories, specific limits
for CRE primary project types, loans secured by residential real estate, shared national credit exposure, and designated high risk loan
definitions represent examples of specifically tracked components of our concentration management process. Currently there are no
identified concentrations that exceed the established limit. Our concentration management process is approved by our board level Risk
Oversight Committee and is one of the strategies utilized to ensure a high quality, well diversified portfolio that is consistent with our
overall objective of maintaining an aggregate moderate-to-low risk profile.
The table below provides our total loan and lease portfolio segregated by the type of collateral securing the loan or lease. The
changes in the collateral composition are consistent with the portfolio growth metrics, with increases noted in the residential and
vehicle categories. The increase in the unsecured exposure is centered in high quality commercial credit customers.
Table 10 - Loan and Lease Portfolio by Collateral Type
At December 31,
(dollar amounts in millions) 2014 2013 2012 2011 2010
Secured loans:
Real estate - commercial $8,631 18 % $8,622 20 % $9,128 22 % $9,557 25 % $10,389 27 %
Real estate - consumer 14,322 30 13,657 32 13,305 33 13,444 35 12,214 32
Vehicles 10,932 23 8,989 21 6,659 16 6,021 15 7,134 19
Receivables/Inventory 5,968 13 5,534 13 5,178 13 4,450 11 3,763 10
Machinery/Equipment 3,863 8 2,738 6 2,749 7 1,994 5 1,766 5
Securities/Deposits 964 2 786 2 826 2 800 2 734 2
Other 919 2 1,016 2 1,090 3 1,018 3 990 2
Total secured loans and leases 45,599 96 41,342 96 38,935 96 37,284 96 36,990 97
Unsecured loans and leases 2,057 4 1,778 4 1,793 4 1,640 4 1,117 3
Total loans and leases $47,656 100 % $43,120 100 % $40,728 100 % $38,924 100 % $38,107 100 %
Commercial Credit
The primary factors considered in commercial credit approvals are the financial strength of the borrower, assessment of the
borrower’s management capabilities, cash flows from operations, industry sector trends, type and sufficiency of collateral, type of
exposure, transaction structure, and the general economic outlook. While these are the primary factors considered, there are a number
of other factors that may be considered in the decision process. We utilize a centralized preview and senior loan approval committee,
led by our chief credit officer. The risk rating (see next paragraph) and complexity of the credit determines the threshold for approval
of the senior loan committee with a minimum credit exposure of $10.0 million. For loans not requiring senior loan committee
approval, with the exception of small business loans, credit officers who understand each local region and are experienced in the
industries and loan structures of the requested credit exposure are involved in all loan decisions and have the primary credit authority.
For small business loans, we utilize a centralized loan approval process for standard products and structures. In this centralized
decision environment, certain individuals who understand each local region may make credit-extension decisions to preserve our
commitment to the communities we operate in. In addition to disciplined and consistent judgmental factors, a sophisticated credit
scoring process is used as a primary evaluation tool in the determination of approving a loan within the centralized loan approval
process.
In commercial lending, on-going credit management is dependent on the type and nature of the loan. We monitor all significant
exposures on an on-going basis. All commercial credit extensions are assigned internal risk ratings reflecting the borrower’s PD and
LGD. This two-dimensional rating methodology provides granularity in the portfolio management process. The PD is rated and
applied at the borrower level. The LGD is rated and applied based on the specific type of credit extension and the quality and lien
position associated with the underlying collateral. The internal risk ratings are assessed at origination and updated at each periodic
monitoring event. There is also extensive macro portfolio management analysis on an on-going basis. We continually review and
adjust our risk-rating criteria based on actual experience, which provides us with the current risk level in the portfolio and is the basis
for determining an appropriate allowance for credit losses (ACL) amount for the commercial portfolio. A centralized portfolio
management team monitors and reports on the performance of the entire commercial portfolio, including small business loans, to
provide consistent oversight.