Huntington National Bank 2004 Annual Report Download - page 111

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HUNTINGTON BANCSHARES INCORPORATED
R ELATED P ARTY T RANSACTIONS
Huntington has made loans to its officers, directors, and their associates. These loans were made in the ordinary course of business
under normal credit terms, including interest rate and collateralization, and do not represent more than the normal risk of collection.
These loans to related parties are summarized as follows:
Year Ended
(in thousands of dollars) December 31, 2004
Balance, beginning of year $ 81,357
Loans made 171,313
Repayments (179,044)
Changes due to status of executive officers and directors 12,392
Balance, end of year $ 86,018
N ON -P ERFORMING A SSETS AND P AST D UE L OANS
At December 31, 2004 and 2003, loans in non-accrual status and loans past due 90 days or more and still accruing interest, were as
follows:
At December 31,
(in thousands of dollars) 2004 2003
Commercial and industrial $ 34,692 $ 43,387
Commercial real estate 8,670 22,399
Residential mortgage 13,545 9,695
Home equity(1) 7,055 —
Total non-performing loans 63,962 75,481
Other real estate, net(2) 44,606 11,905
Total non-performing assets $ 108,568 $ 87,386
Accruing Loans Past Due 90 Days or More $ 54,283 $ 55,913
(1) As of September 30, 2004, the Company adopted a policy, consistent with its policy for residential mortgage loans, of placing home equity loans and lines on nonaccrual status when they become
greater than 180 days past due.
(2) At December 31, 2004, other real estate owned included $35.7 million of properties that relate to the work-out of $5.9 million of mezzanine loans. These properties are subject to $29.8 million of
non-recourse debt to another financial institution. Both properties are in contract for sale in the first half of 2005.
The amount of interest that would have been recorded under the original terms for total loans classified as non-accrual or
renegotiated was $3.3 million for 2004, $6.3 million for 2003, and $12.6 million for 2002. Amounts actually collected and recorded as
interest income for these loans totaled $1.9 million, $3.0 million, and $5.1 million for 2004, 2003, and 2002, respectively.
5. LOAN SALES AND SECURITIZATIONS
A
UTOMOBILE LOANS
Huntington sold $1.5 billion and $2.1 billion of automobile loans in 2004 and 2003, respectively. Pre-tax gains from the sales of
automobile loans totaled $14.2 million and $40.0 million in 2004 and 2003, respectively. No sales of automobile loans were made
in 2002.
A servicing asset is established at their initial carrying value based on the relative fair value at the time of the sale. Huntington has used
the following assumptions to measure fair value at the time of the sale: estimated servicing income of 1.00%, estimated adequate
compensation for servicing of approximately 0.50%, other ancillary fees received of approximately 0.12% to 0.15% and an estimated
return on payments prior to remittance to investors. The asset is then amortized against the actual cash flows received from the
investor over time. Impairment, if any, is recognized when carrying value exceeds the fair value as determined by calculating the
present value of expected net future cash flows. The primary risk characteristic for measuring servicing assets is payoff rates of
the underlying loan pools. Valuation calculations rely heavily on the predicted payoff assumption, and if actual payoff is quicker
than expected, then future value would be impaired. Other impairment concerns would be changes to the other assumptions
mentioned above.
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