Huntington National Bank 2011 Annual Report Download - page 67

region have the authority to make credit extension decisions to preserve our focus on the local communities we
operate in. Each credit extension is assigned a specific PD and LGD. The PD is generally based on the
borrower’s most recent credit bureau score (FICO), which we update quarterly, while the LGD is related to the
type of collateral and the LTV ratio associated with the credit extension.
In consumer lending, credit risk is managed from a segment (i.e., loan type, collateral position, geography,
etc.) and vintage performance analysis. All portfolio segments are continuously monitored for changes in
delinquency trends and other asset quality indicators. We make extensive use of portfolio assessment models to
continuously monitor the quality of the portfolio, which may result in changes to future origination strategies.
The on-going analysis and review process results in a determination of an appropriate ALLL amount for our
consumer loan portfolio. The independent risk management group has a consumer process review component to
ensure the effectiveness and efficiency of the consumer credit processes.
Collection action is initiated as needed through a centrally managed collection and recovery function. The
collection group employs a series of collection methodologies designed to maintain a high level of effectiveness
while maximizing efficiency. In addition to the consumer loan portfolio, the collection group is responsible for
collection activity on all sold and securitized consumer loans and leases. Collection practices include a single
contact point for the majority of the residential real estate secured portfolios.
AUTOMOBILE LOANS AND LEASES PORTFOLIO
Our strategy in the automobile loan and lease portfolio continued to focus on high quality borrowers as
measured by both FICO and internal custom scores, combined with appropriate LTV’s, terms, and a reasonable
level of profitability. Our strategy and operational capabilities allow us to appropriately manage the origination
quality across the entire portfolio, including our newer markets. Although increased origination volume and the
entering new markets can be associated with increased risk levels, we believe our strategy and operational
capabilities significantly mitigate these risks.
We continued to consistently execute our value proposition and took advantage of market opportunities that
allowed us to grow our automobile loan portfolio. The significant growth in the portfolio was accomplished
while maintaining high credit quality metrics. As we further execute our strategies and take advantage of these
opportunities, we have developed and implemented a loan securitization strategy to maintain any growth within
our established portfolio concentration limits. We have continued to expand our origination markets by entering
Minnesota and Wisconsin in late 2011, after entering Pennsylvania and five New England states in 2010. Our
market expansion strategy is based on hiring new colleagues with direct experience and established relationships
with automobile dealers in the specific market.
In the 2011 third quarter, we transferred $1.0 billion of automobile loans to a trust in a securitization
transaction. The securitization qualified for sale accounting. As a result of this transaction, we recognized a $15.5
million gain on sale, which is reflected in noninterest income and recorded a $16.0 million servicing asset, which
is reflected in accrued income and other assets. Additionally, in the 2011 fourth quarter, $1.3 billion of
automobile loans were transferred to loans held for sale, reflecting an automobile loan securitization planned for
the first half of 2012.
RESIDENTIAL REAL ESTATE-SECURED PORTFOLIOS
The properties securing our residential mortgage and home equity portfolios are primarily located
throughout our geographic footprint. The continued stress on home prices has caused the performance in these
portfolios to remain weaker than historical levels. We continue to evaluate all of our policies and processes
associated with managing these portfolios.
In 2011, we accelerated the timing of charge-off recognition in our residential mortgage portfolio. In
addition, we established a writedown policy for loans in short sale situations. Both of these policy changes
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