Huntington National Bank 2011 Annual Report Download - page 78

Compared with December 31, 2010, the AULC increased $6.3 million primarily resulting from the
downgrade of a commercial letter-of-credit associated with one relationship.
Credit quality trends within the entire loan and lease portfolio steadily improved throughout 2011 and 2010.
The ACL to total loans ratio declined to 2.60% at December 31, 2011, compared to 3.39% at December 31, 2010.
We believe the decline in the ratio is appropriate given the continued improvement in the risk profile of our loan
portfolio. Further, we believe that early identification of problem loans and aggressive action plans for these
problem loans, combined with originating high quality new loans will contribute to continued improvement in
our key credit quality metrics. However, the continued weakness in the residential real estate market and the
overall economic conditions remained stressed, and additional risks emerged throughout 2011. These additional
risks included the European banking sector stress, the continued budget issues in local governments, flat
domestic economic growth, and the variety of policy proposals regarding job growth, debt management, and
domestic tax policy. Continued high unemployment, among other factors, has slowed any significant recovery. In
the near-term, we anticipate modest improvement in the unemployment rate, however we remain concerned that
the U.S. and local government budget issues will continue to negatively impact the financial condition of some of
our retail and commercial borrowers. The pronounced downturn in the residential real estate market that began in
early 2007 has resulted in significantly lower residential real estate values. We have significant exposure to loans
secured by residential real estate and continue to be an active lender in our communities. The impact of the
downturn in real estate values has had a significant impact on some of our borrowers as evidenced by the higher
delinquencies and NCOs since late 2007. Although there was improvement in 2011, we believe the impact of
reduced property values and the continued weak economic conditions will continue to negatively impact us.
Given the combination of these noted factors, we believe that our ACL is appropriate and its coverage level is
reflective of the quality of our portfolio and the current operating environment.
NCOs
(This section should be read in conjunction with Significant Item 6, and Franklin-related Impacts located within
the Additional Disclosures section.)
Any loan in any portfolio may be charged-off prior to the policies described below if a loss confirming
event has occurred. Loss confirming events include, but are not limited to, bankruptcy (unsecured), continued
delinquency, foreclosure, or receipt of an asset valuation indicating a collateral deficiency and that asset is the
sole source of repayment.
C&I and CRE loans are either charged-off or written down to net realizable value at 90-days past due.
Automobile loans and other consumer loans are charged-off at 120-days past due. First-lien and second-lien
home equity loans are charged-off to the estimated fair value of the collateral, less anticipated selling costs, at
150-days past due and 120-days past due, respectively. Residential mortgages are charged-off to the estimated
fair value of the collateral at 150-days past due.
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