Huntington National Bank 2008 Annual Report Download - page 45

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As another assessment of the adequacy of our specific ALLL for Franklin, during the 2008 fourth quarter, we obtained updated
estimates of the fair values on all residential properties securing the Franklin first-lien mortgage loans, which included OREO. Our
share of the updated first-mortgage collateral, net of the other participants within the bank group, totaled $898 million at
December 31, 2008. We analyzed this value assuming a 40% discount to the fair value estimates to determine costs to sell the
underlying collateral and potential declines in the estimated values. We also included $23 million of other collateral, primarily cash,
that we have supporting these loans. Using the collateral values, we have collateral coverage of 108% against the exposure that we
have from the loan, net of its specific ALLL. In this analysis, we assigned no value to the portfolio of second-lien mortgage loans,
even though the portfolio is currently generating approximately $5 million per month of cash flow that is applied directly to the
recorded balance.
The U.S. government recently announced an industry-wide, six-month moratorium on mortgage foreclosures. While this will likely
have some impact on the performance of the mortgages representing the collateral for our loans to Franklin, we believe that its
short-term nature will not materially impact the cash flow assumptions used in our analysis supporting our 2008 fourth quarter
actions. Cash collections through mid-February 2009 remained consistent with our valuation analysis expectations.
Automotive Industry
The table below provides a summary of loans outstanding and total exposure from loans, unused commitments, and standby
letters of credit to companies related to the automotive industry.
Table 22 — Automotive Industry Exposure
(1)
(in millions)
Loans
Outstanding
% of Total
Loans
Total
Exposure
Loans
Outstanding
% of Total
Loans
Total
Exposure
2008 2007
December 31,
Suppliers:
Domestic $ 182 $ 331 $ 235 $ 351
Foreign 33 46 27 38
Total Suppliers 215 0.52% 377 261 0.64% 389
Dealer:
Floor plan — domestic 553 747 432 604
Floor plan — foreign 408 544 363 498
Other 346 464 286 395
Total Dealer 1,306 3.18 1,755 1,081 2.63 1,496
Total Automotive $1,521 3.70% $2,131 $1,342 3.27% $1,885
(1) Companies with ⬎25% of revenue derived from the automotive industry.
We do not have any direct exposure to any automobile manufacturing companies, including companies that currently have
significant operations within our geographic regions. However, we do have $377 million of exposure to companies that derive
more than 25% of their revenues from contracts with the automobile manufacturing companies. This low level of exposure is
reflective of our industry-level risk-limits approach. Our floorplan exposure is centered in large, multi-dealership entities. Client
selection is a primary focus for us in this industry.
43
Management’s Discussion and Analysis Huntington Bancshares Incorporated