Huntington National Bank 2009 Annual Report Download - page 92

T
he
$
614.0 million increase in CRE NCOs was primaril
y
centered in the sin
g
le famil
y
home builder an
d
the retail portfolios. These two se
g
ments of the CRE portfolio were the primar
y
drivers of the overall portfoli
o
performance in 2009. The impact was spread across our footprint, and included si
g
nificant char
g
e-off
s
associated with our relatively small out-of-market portfolio. We continued our ongoing portfolio managemen
t
e
ff
orts,
i
nc
l
u
di
n
g
o
b
ta
i
n
i
n
g
up
d
ate
d
appra
i
sa
l
s on propert
i
es an
d
assess
i
n
g
a pro
j
ect status w
i
t
hi
nt
h
e context
o
f
mar
k
et env
i
ronment expectat
i
ons. H
i
stor
i
ca
lly
,t
h
es
i
n
gl
e
f
am
ily h
ome
b
u
ild
er port
f
o
li
oan
d
reta
il
port
f
o
li
os
have been the hi
g
hest risk se
g
ments. Based on our portfolio mana
g
ement processes, includin
g
char
g
e-off
act
i
v
i
t
y
over t
h
e past two an
d
one
h
a
lf y
ears, we
b
e
li
eve t
h
e cre
di
t
i
ssues
i
nt
h
es
i
n
gl
e
f
am
ily h
ome
b
u
ild
e
r
port
f
o
li
o
h
ave
b
een a
dd
resse
d
.T
h
e reta
il
propert
y
port
f
o
li
o rema
i
ns more suscept
ibl
etot
h
eon
g
o
i
n
g
mar
k
et
di
srupt
i
on,
b
ut we a
l
so
b
e
li
eve t
h
at t
h
e com
bi
nat
i
on o
f
pr
i
or c
h
ar
g
e-o
ff
san
d
ex
i
st
i
n
g
reserve
b
a
l
ances pos
i
t
i
ons
us
w
ell to make effecti
v
e credit decisions in the future
.
In assess
i
n
g
commerc
i
a
l
NCOs tren
d
s,
i
t
i
s
h
e
l
p
f
u
l
to un
d
erstan
d
t
h
e process o
fh
ow t
h
ese
l
oans are
treated as the
y
deteriorate over time. Reserves for loans are established at ori
g
ination consistent with the level
o
f
r
i
s
k
assoc
i
ate
d
w
i
t
h
t
h
eor
igi
na
l
un
d
erwr
i
t
i
n
g
.I
f
t
h
e qua
li
t
y
o
f
a commerc
i
a
ll
oan
d
eter
i
orates,
i
tm
ig
rates
to a
l
ower qua
li
t
y
r
i
s
k
rat
i
n
g
as a resu
l
to
f
our norma
l
port
f
o
li
o mana
g
ement process, an
d
a
high
er reserv
e
amount is assi
g
ned. As a part of our normal portfolio mana
g
ement process, the loan is reviewed and reserve
s
are increased as warranted. Char
g
e-offs, if necessar
y
, are
g
enerall
y
reco
g
nized in a period after the reserve
s
were esta
bli
s
h
e
d
.I
f
t
h
e prev
i
ous
ly
esta
bli
s
h
e
d
reserves excee
d
t
h
at nee
d
e
d
to sat
i
s
f
actor
ily
reso
l
ve t
h
e pro
bl
e
m
cre
di
t, a re
d
uct
i
on
i
nt
h
e overa
ll l
eve
l
o
f
t
h
e reserve cou
ld b
e reco
g
n
i
ze
d
. In summar
y
,
if l
oan qua
li
t
y
deteriorates, the t
y
pical credit sequence for commercial loans are periods of reserve buildin
g
, followed b
y
periods of hi
g
her NCOs as previousl
y
established reserves are utilized. Additionall
y
, it is helpful to understan
d
t
h
at
i
ncreases
i
n reserves e
i
t
h
er prece
d
e or are
i
n con
j
unct
i
on w
i
t
hi
ncreases
i
n NALs. W
h
en a cre
di
t
i
s
c
l
ass
ifi
e
d
as NAL,
i
t
i
seva
l
uate
df
or spec
ifi
c reserves or c
h
ar
g
e-o
ff
. As a resu
l
t, an
i
ncrease
i
n NALs
d
oes not
necessaril
y
result in an increase in reserves or an expectation of hi
g
her future NCOs
.
T
otal consumer NCOs durin
g
2009 were
$
306.3 million, or an annualized 1.87%, compared wit
h
$163.2 million, or an annualized 0.92%, in 2008. The increases were s
p
read across all consumer loa
n
port
f
o
li
os,
b
ut part
i
cu
l
ar
l
y
i
nt
h
e res
id
ent
i
a
l
mortgage port
f
o
li
o.
Automobile loan and lease NCOs in 2009 increased
$
1.8 million, or 3%, com
p
ared with 2008. Th
e
performance of the portfolio relative to NCOs reflected the positive impact of increasin
g
used-vehicle prices
,
o
ff
set
by
t
h
e cont
i
nue
d
econom
i
c wea
k
ness
i
n our mar
k
ets. Per
f
ormance o
f
t
hi
s port
f
o
li
oon
b
ot
h
an a
b
so
l
ut
e
an
d
re
l
at
i
ve
b
as
i
s cont
i
nue
d
to
b
e cons
i
stent w
i
t
h
our v
i
ews re
g
ar
di
n
g
t
h
eun
d
er
lyi
n
g
qua
li
t
y
o
f
t
h
e port
f
o
li
o
.
The 2009 level of delinquencies have improved compared with 2008 levels, further supportin
g
our view o
f
fl
at-to-
i
mprove
d
per
f
ormance
g
o
i
n
gf
orwar
d
.
T
he NCO performance of our home equit
y
portfolio continued to be impacted b
y
lower housin
g
prices,
and the
g
eneral weak market conditions. While 2009 NCOs were hi
g
her compared with prior
y
ears, ther
e
cont
i
nue
d
to
b
ea
d
ec
li
n
i
n
g
tren
d
t
h
rou
gh
out 2009
i
nt
h
e ear
ly
-sta
g
e
d
e
li
nquenc
yl
eve
li
nt
h
e
h
ome equ
i
t
y
li
ne-o
f
-cre
di
t port
f
o
li
o, support
i
n
g
our
l
on
g
er-term pos
i
t
i
ve v
i
ew
f
or
h
ome equ
i
t
y
port
f
o
li
o per
f
ormance. A
l
s
o
contributin
g
to the NCO performance of our home equit
y
portfolio was a si
g
nificant increase in loss miti
g
atio
n
act
i
v
i
t
y
an
d
s
h
ort sa
l
es. We cont
i
nue to
b
e
li
eve t
h
at our more proact
i
ve
l
oss m
i
t
ig
at
i
on strate
gi
es are
i
nou
r
b
est
i
nterest, as we
ll
as t
h
at o
f
our customers. A
l
t
h
ou
gh
NCOs
h
ave
i
ncrease
d
over t
h
e course o
f
2009,
gi
ven
the market conditions,
p
erformance remained within ex
p
ectations.
Th
e
i
ncrease
i
n our res
id
ent
i
a
l
mort
g
a
g
e NCOs compare
d
w
i
t
h
t
h
epr
i
or
y
ear, re
fl
ecte
d
t
h
e cont
i
nue
d
ne
g
ative impacts resultin
g
from the
g
eneral weak economic conditions and housin
g
-related pressures. Th
e
increased NCOs were a direct result of our continued emphasis on loss miti
g
ation strate
g
ies, an increased
num
b
er o
f
s
h
ort sa
l
es, an
d
a more conservat
i
ve pos
i
t
i
on re
g
ar
di
n
g
t
h
et
i
m
i
n
g
o
fl
oss reco
g
n
i
t
i
on. Spec
ifi
ca
lly,
in 2009, we sold
$
44.8 million of underperformin
g
loans that resulted in
$
17.6 million of NCOs, and w
e
ad
j
usted the timin
g
of loss reco
g
nition that resulted in an additional $32.0 million of NCOs. We continued t
o
see some positive trends in earl
y
-sta
g
e delinquencies, indicatin
g
that even with the economic stress on ou
r
b
orrowers,
l
osses are expecte
d
to rema
i
n mana
g
ea
bl
e.
84