Huntington National Bank 2004 Annual Report Download - page 54

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MANAGEMENT’S DISCUSSION AND ANALYSIS HUNTINGTON BANCSHARES INCORPORATED
maximum of +/– 20% to reflect, among other factors, differences in local versus national economic conditions. This adjustment
capability is deemed necessary given the newness of the model and the continuing uncertainty of forecasting economic
environment changes.
This change in methodology allows for a more meaningful discussion of Management’s view of the current economic conditions and
the potential impact on the Company’s credit losses. The continued use of quantitative methodologies for the transaction reserve and
the introduction of the quantitative methodology for the economic component may have the impact of more period-to-period
fluctuation in the absolute and relative level of the reserve than exhibited in prior-period results.
P
ROCESS TO
D
ETERMINE THE
A
DEQUACY OF THE
AULC
The AULC is determined by applying the transaction reserve process to the unfunded portion of the portfolio adjusted by an
applicable funding percentage.
Table 14 — Allocation of Allowances for Credit Losses(1)
At December 31,
(in thousands of dollars) 2004 2003 2002 2001 2000
Commercial:
Middle market commercial
and industrial $ 87,485 19.8% $103,237 21.0% $106,998 25.6% $131,489 26.6% $ 63,962 28.5%
Middle market commercial real estate 54,927 14.9 63,294 15.1 35,658 15.5 43,574 14.8 33,094 14.1
Small business commercial and
industrial and commercial real estate 32,009 9.0 30,455 8.9 26,914 9.1 31,582 14.1 36,246 14.7
Total commercial 174,421 43.7 196,986 45.0 169,570 50.2 206,645 55.5 133,302 57.3
Consumer:
Automobile loans and leases 41,273 18.6 58,375 23.2 51,621 21.1 38,799 16.0 28,877 14.9
Home equity 29,275 19.3 25,995 17.7 16,878 16.9 24,054 19.0 19,246 11.9
Residential mortgage 18,995 16.3 11,124 12.0 8,566 9.4 6,013 6.1 4,421 6.0
Other loans 7,247 2.1 7,252 2.1 8,085 2.4 19,757 3.4 22,516 9.9
Total consumer 96,790 56.3 102,746 55.0 85,150 49.8 88,623 44.5 75,060 42.7
Total unallocated(2) —— — — 45,783 — 50,134 — 38,396 —
Total allowance for loan and lease losses $271,211 100.0% $299,732 100.0% $300,503 100.0% $345,402 100.0% $246,758 100.0%
Allowance for unfunded loan
commitments and letters of credit 33,187 35,522 36,145 23,930 18,171
Total allowances for credit losses $304,398 $335,254 $336,648 $369,332 $264,929
(1) Percentages represent the percentage of each loan and lease category to total loans and leases.
(2) Prior to 2003, the Company maintained an unallocated component of its ALLL. The unallocated component was eliminated in 2003 with the adoption of the more granular risk rating system with
most of the prior unallocated reserve absorbed into the transaction reserve.
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