Huntington National Bank 2003 Annual Report Download - page 114

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
N
ON
-P
ERFORMING
A
SSETS AND
P
AST
D
UE
L
OANS
At December 31, 2003 and 2002, the loans in non-accrual status and loans past due 90 days or more and still accruing interest, were as
follows:
(in thousands of dollars) 2003 2002
Commercial and industrial $43,387 $ 91,861
Commercial real estate 22,399 26,765
Residential mortgage 9,695 9,443
Total Non-performing Loans 75,481 128,069
Other real estate, net 11,905 8,654
Total Non-performing Assets $87,386 $136,723
Accruing Loans Past Due 90 Days or More $55,913 $ 61,526
The amount of interest that would have been recorded under the original terms for total loans classified as non-accrual or renegotiated
was $6.3 million for 2003, $12.6 million for 2002, and $10.3 million for 2001. Amounts actually collected and recorded as interest
income for these loans totaled $3.0 million, $5.1 million, and $4.9 million for 2003, 2002, and 2001, respectively.
7. Loan Sales and Securitizations
A
UTOMOBILE LOANS
During 2003, Huntington sold $2.1 billion of automobile loans, retaining only the right to service these loans. Also, during both 2003
and 2002, Huntington sold automobile loans in securitization transactions totaling $252.5 million and $480.0 million, respectively. For
the loans sold in securitization transactions, Huntington retained both the interest rate risk and the rights to future cash flows arising
after the investors in the securitization trusts have received their contractual return. These cash flows arise from cash reserve accounts,
loan collateral in excess of the note amounts issued by the securitization trusts, and excess interest collections. Huntington’s interests
are subordinate to investors’ interests. The investors and the securitization trusts have no recourse to Huntington’s other assets for
failure of debtors to pay when due.
As a result of adopting FIN 46 in the third quarter of 2003, one of the securitization trusts sponsored by Huntington was consolidated.
The impact of this consolidation was to reduce the outstanding automobile loans serviced by $1.0 billion, reduce the retained interest
asset by $142.3 million, and reduce the servicing asset by $11.7 million. Huntington has the option to repurchase all outstanding loan
receivables in the unconsolidated securitization trust when those receivables are less than 5% of the original loan receivables that
Huntington sold to the trust, which amounts to $25 million. Since this trust had $37.3 million of outstanding loan receivables at
December 31, 2003, it is likely that Huntington will be able to repurchase the outstanding loan receivable in 2004. Such a repurchase, if
made, is not expected to have a significant impact to the consolidated financial statements.
At December 31, 2003 and 2002, the fair value of Huntington’s retained interest in automobile loan securitizations was $6.3 million
and $160.0 million, respectively. Management periodically reviews the assumptions underlying these values. If these assumptions
change, the related asset and income would be affected. At December 31, 2003, cash of $41.4 million was held by the subsidiary
securitization trust and was restricted as to Huntington’s ability to withdraw this cash.
Huntington has retained servicing responsibilities and receives annual servicing fees of 1.0% of the outstanding loan balances.
Servicing income, net of amortization of capitalized servicing assets, amounted to $4.5 million in 2003, $1.0 million in 2002, and $3.6
million in 2001. There were no impairment charges related to Huntington’s retained interest in 2003. Impairment charges of retained
interests were $4.0 million in 2002 and $12.2 million in 2001. The unpaid principal balance of automobile loans serviced for third
parties was $1.8 billion, $1.1 billion, and $1.2 billion at December 31, 2003, 2002, and 2001, respectively. Changes in the carrying value
of automobile loan servicing rights for the three years ended December 31, 2003, were as follows:
(in thousands of dollars) 2003 2002 2001
Balance, Beginning of Year $ 12,676 $ 17,647 $22,718
New servicing assets 25,106 6,227 6,146
Amortization (8,434) (11,198) (9,917)
Impairment charges — — (1,300)
Adoption of FIN 46 (11,686) — —
Balance, End of Year $ 17,662 $ 12,676 $17,647
112 HUNTINGTON BANCSHARES INCORPORATED