Huntington National Bank 2003 Annual Report Download - page 61

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MANAGEMENT’S DISCUSSION AND ANALYSIS
Table 14—Summary of Allowance for Loan and Lease Losses and Related Statistics
(in thousands of dollars) 2003 2002 2001 2000 1999
Balance, Beginning of Year $ 336,648 $ 369,332 $ 264,929 $ 273,931 $ 273,125
Loan and Lease Losses
C&I (99,339) (128,868) (65,743) (18,013) (16,203)
CRE (13,045) (19,875) (4,521) (1,760) (3,037)
Total Commercial (112,384) (148,743) (70,264) (19,773) (19,240)
Consumer
Automobile loans and leases (63,521) (59,010) (71,638) (47,687) (42,783)
Home equity (17,175) (15,312) (16,384) (7,979) (7,233)
Residential mortgage (915) (888) (879) (1,140) (1,404)
Other consumer loans (7,539) (10,399) (15,375) (9,246) (28,422)
Total Consumer (89,150) (85,609) (104,276) (66,052) (79,842)
Total Loan and Lease Losses (201,534) (234,352) (174,540) (85,825) (99,082)
Recoveries of Loan and Lease Losses
C&I 14,481 11,106 6,175 4,201 5,303
CRE 2,527 2,234 792 433 1,452
Total Commercial 17,008 13,340 6,967 4,634 6,755
Consumer
Automobile loans and leases 17,528 18,464 16,567 15,407 14,201
Home equity 2,570 1,806 1,796 1,070 1,137
Residential mortgage 83 16 94 133 268
Other consumer loans 2,536 3,814 2,847 2,934 7,192
Total Consumer 22,717 24,100 21,304 19,544 22,798
Total Recoveries 39,725 37,440 28,271 24,178 29,553
Net Loan and Lease Losses (161,809) (196,912) (146,269) (61,647) (69,529)
Provision for loan and lease losses 163,993 194,426 257,326 61,464 70,335
Allowance for loans sold (12,537) (22,297) — — —
Allowance of securitized loans (1) 8,959 (9,165) (6,654) (16,719) —
Allowance of loans and leases acquired — 1,264 — 7,900 —
Balance, End of Year $ 335,254 $ 336,648 $ 369,332 $ 264,929 $ 273,931
Net loan and lease losses as a % of average total loans
and leases 0.81% 1.13% 0.81% 0.35% 0.39%
ALLL as a % of total period end loans and leases 1.59 1.81 2.00 1.50 1.52
(1) 2003 reflects a $10.3 million addition related to adoption of FIN 46.
Market Risk
Market risk is the potential for declines in the fair value of financial instruments due to changes in interest rates, exchange rates, and
equity prices. The company incurs market risk in the normal course of business. Market risk represents the risk of loss due to changes
in the market value of the company’s assets and liabilities. Market risk arises when the company extends fixed-rate loans, purchases
fixed-rate securities, originates fixed-rate certificates of deposit (CDs), obtains funding through fixed-rate borrowings, and leases
automobiles and equipment based on expected lease residual values. Market risk arising from changes in interest rates, which affects
the market values of fixed-rate assets and liabilities, is interest rate risk. The management of interest rate risk is discussed in further
detail below. Market risk arising from the possibility that the uninsured residual value of leased assets will be different at the end of the
lease term than was estimated at the lease’s inception is residual value risk. Residual value risk is discussed below. From time to time,
the company also has small exposures to trading risk and foreign exchange risk. At December 31, 2003, the company had $7.6 million
of trading assets, primarily in its broker/dealer subsidiaries.
HUNTINGTON BANCSHARES INCORPORATED 59