Huntington National Bank 2008 Annual Report Download - page 54

Net Charge-offs (NCOs)
(This section should be read in conjunction with Significant Items 1 and 2.)
Table 30 reflects NCO detail for each of the last five years.
Table 30 — Net Loan and Lease Charge-offs
(in thousands) 2008 2007 2006 2005 2004
Year Ended December 31,
Net charge-offs by loan and lease type:
Commercial:
Franklin Credit Management Corporation $423,269 $308,496
(1)
$—$—$—
Other commercial and industrial 102,896 37,344 20,868 25,000 6,573
Commercial and industrial 526,165 345,840 20,868 25,000 6,573
Construction 6,626 11,854 3,553 135 2,425
Commercial 62,114 27,250 3,230 4,439 6,459
Commercial real estate 68,740 39,104 6,783 4,574 8,884
Total commercial 594,905 384,944 27,651 29,574 15,457
Consumer:
Automobile loans 41,228 17,185 8,330 11,988 28,574
Automobile leases 13,337 10,507 10,445 11,664 10,837
Automobile loans and leases 54,565 27,692 18,775 23,652 39,411
Home equity 67,556 34,426 21,854 17,619 15,074
Residential mortgage 21,247 11,371 4,505 2,332 1,760
Other loans 19,794 19,198 9,591 6,880 6,833
Total consumer 163,162 92,687 54,725 50,483 63,078
Total net charge-offs $758,067 $477,631 $82,376 $80,057 $78,535
Net charge-offs — annualized percentages:
Commercial:
Franklin Credit Management Corporation 39.01% 20.27%—%—%—%
Other commercial and industrial 0.82 0.41 0.28 0.41 0.12
Commercial and industrial 3.87 3.25 0.28 0.41 0.12
Construction 0.32 0.77 0.28 0.01 0.17
Commercial 0.81 0.52 0.10 0.16 0.23
Commercial real estate 0.71 0.57 0.15 0.10 0.20
Total commercial 2.55 2.21 0.23 0.28 0.16
Consumer:
Automobile loans 1.12 0.65 0.40 0.59 1.25
Automobile leases 1.57 0.71 0.51 0.48 0.49
Automobile loans and leases 1.21 0.67 0.46 0.53 0.88
Home equity 0.91 0.56 0.44 0.37 0.36
Residential mortgage 0.42 0.23 0.10 0.06 0.05
Other loans 2.86 3.63 2.18 1.79 1.74
Total consumer 0.92 0.59 0.39 0.37 0.51
Net charge-offs as a % of average loans 1.85% 1.44%0.32% 0.33% 0.35%
(1) 2007 includes charge-offs totaling $397.0 million associated with the Franklin restructuring. These charge-offs were reduced by the unamortized discount associated with the loans, and by other
amounts received by Franklin totaling $88.5 million, resulting in net charge-offs totaling $308.5 million.
Total commercial NCOs during 2008 were $594.9 million, or an annualized 2.55% of average related balances, compared with
$384.9 million or an annualized 2.21% in 2007. Both 2008 and 2007 included Franklin relationship-related NCOs of $423.3 million
and $308.5 million, respectively. Non-Franklin-related NCOs in 2008 were $102.9, compared with non-Franklin-related NCOs in
2007 of $37.3 million. The non-Franklin-related increase of $65.6 million in C&I NCOs reflected the continued economic weakness
in our regions as the increase was spread across all regions and consisted primarily of smaller loans, as well as the impact of the
Sky Financial acquisition. The $29.6 million increase in CRE NCOs was centered in the single family home builder portfolio spread
across our regions.
In reviewing commercial NCOs trends, it is helpful to understand that reserves for such loans are usually established in periods
prior to that in which any related NCOs are typically recognized. As the quality of a commercial credit deteriorates, it migrates
from a higher quality loan classification to a lower quality classification. As a part of our normal process, the credit is reviewed
and reserves are established or increased as warranted. It is usually not until a later period that the credit is resolved and a NCO is
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Management’s Discussion and Analysis Huntington Bancshares Incorporated