Huntington National Bank 2008 Annual Report Download - page 99

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Huntington’s loan and lease portfolio includes lease financing receivables consisting of direct financing leases on equipment, which
are included in commercial and industrial loans, and on automobiles. Net investments in lease financing receivables by category at
December 31 were as follows:
(in thousands) 2008 2007
At December 31,
Commercial and industrial
Lease payments receivable $1,119,487 $ 977,183
Estimated residual value of leased assets 56,705 52,438
Gross investment in commercial lease financing receivables 1,176,192 1,029,621
Net deferred origination costs 3,946 4,469
Unearned income (151,296) (139,422)
Total net investment in commercial lease financing receivables $1,028,842 $ 894,668
Consumer
Lease payments receivable $ 246,919 $ 543,640
Estimated residual value of leased assets 362,512 740,621
Gross investment in consumer lease financing receivables 609,431 1,284,261
Net deferred origination fees (840) (1,368)
Unearned income (45,174) (103,388)
Total net investment in consumer lease financing receivables $ 563,417 $1,179,505
The future lease rental payments due from customers on direct financing leases at December 31, 2008, totaled $1.4 billion and
were as follows: $0.5 billion in 2009; $0.4 billion in 2010; $0.3 billion in 2011; $0.1 billion in 2012; and $0.1 billion in 2013 and
thereafter.
Other than the credit risk concentrations described below, there were no other concentrations of credit risk greater than 10% of
total loans in the loan and lease portfolio at December 31, 2008.
FRANKLIN CREDIT MANAGEMENT RELATIONSHIP
Franklin is a specialty consumer finance company primarily engaged in the servicing and resolution of performing, reperforming,
and nonperforming residential mortgage loans. Franklin’s portfolio consists of loans secured by 1-4 family residential real estate
that generally fall outside the underwriting standards of the Federal National Mortgage Association (FNMA or Fannie Mae) and
the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) and involve elevated credit risk as a result of the nature
or absence of income documentation, limited credit histories, and higher levels of consumer debt, or past credit difficulties.
Through the fourth quarter of 2007, Franklin purchased these loan portfolios at a discount to the unpaid principal balance and
originated loans with interest rates and fees calculated to provide a rate of return adjusted to reflect the elevated credit risk
inherent in these types of loans. Franklin originated nonprime loans through its wholly owned subsidiary, Tribeca Lending Corp.,
and has generally held for investment the loans acquired and a significant portion of the loans originated.
Loans to Franklin are funded by a bank group, of which we are the lead bank and largest participant. The loans participated to
other banks have no recourse to Huntington. The term debt exposure is secured by approximately 30,000 individual first- and
second-priority lien residential mortgages. In addition, pursuant to an exclusive lockbox arrangement, we receive substantially all
payments made to Franklin on these individual mortgages.
The following table details Huntington’s loan relationship with Franklin as of December 31, 2008:
COMMERCIAL LOANS TO FRANKLIN
(in thousands) Franklin Tribeca
Bank Group
Exposure
Participated
to others
Previously
charged off
(1)
Huntington
Total
Variable rate, term loan (Facility A) $ 502,436 $ 355,451 $ 857,887 $(144,789) $ (62,873) $650,225
Variable rate, subordinated term loan (Facility B) 314,013 96,226 410,239 (68,149) (342,090) —
Fixed rate, junior subordinated term loan (Facility C) 125,000 — 125,000 (8,224) (116,776) —
Line of credit facility 1,958 — 1,958 — (1,958) —
Other variable rate term loans 40,937 — 40,937 (20,468) (20,469) —
Subtotal 984,344 451,677 1,436,021 $(241,630) $(544,166) $650,225
Participated to others (150,271) (91,359) (241,630)
Total principal owed to Huntington 834,073 360,318 1,194,391
Previously charged off
(1)
(435,097) (109,069) (544,166)
Total book value of loans $ 398,976 $ 251,249 $ 650,225
(1) Includes $4.1 million of interest payments received and applied to the recorded balance.
97
Notes to Consolidated Financial Statements Huntington Bancshares Incorporated