Huntington National Bank 2012 Annual Report Download - page 57

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Several government programs continued to impact the residential mortgage portfolio, including various refinance programs such
as HAMP and HARP, which positively affected the availability of credit for the industry. During the year ended December 31, 2012,
we closed $810 million in HARP residential mortgages and $19 million in HAMP residential mortgages. The HARP residential
mortgage loans are considered current and are either part of our residential mortgage portfolio or serviced for others. The HAMP
refinancings are associated with residential mortgages that are serviced for others. We are subject to repurchase risk associated with
residential mortgage loans sold in the secondary market. An appropriate level of reserve for representations and warranties related to
residential mortgage loans sold has been established to address this repurchase risk inherent in the portfolio (see Operational Risk
discussion).
Credit Quality
(This section should be read in conjunction with Note 3 of the Notes to Consolidated Financial Statements.)
We believe the most meaningful way to assess overall credit quality performance is through an analysis of credit quality
performance ratios. This approach forms the basis of most of the discussion in the sections immediately following: NPAs and NALs,
TDRs, ACL, and NCOs. In addition, we utilize delinquency rates, risk distribution and migration patterns, and product segmentation
in the analysis of our credit quality performance.
Credit quality performance in 2012 reflected overall continued improvement. NALs declined 25% to $407.6 million at
December 31, 2012, compared to December 31, 2011, despite the impact of $60.1 million of NAL additions as a result of Chapter 7
bankruptcy loans. NCOs declined 22% compared to the prior year despite the $34.6 impact of NCOs related to Chapter 7 bankruptcy
loans. Commercial criticized and classified loans declined significantly reflecting the continued improvement in the commercial
portfolio. The ACL to total loans ratio declined to 1.99% and our ACL coverage ratios improved as a result of asset quality
improvement.
NPAs, NALs, and TDRs
(This section should be read in conjunction with Note 3 of the Notes to Consolidated Financial Statements.)
NPAs and NALs
NPAs consist of (1) NALs, which represent loans and leases no longer accruing interest, (2) impaired loans held for sale, (3)
OREO properties, and (4) other NPAs. Any loan in our portfolio may be placed on nonaccrual status prior to the policies described
below when collection of principal or interest is in doubt. Also, when a borrower with discharged non-reaffirmed debt in a Chapter 7
bankruptcy is identified and the loan is determined to be collateral dependent, the consumer loan is placed on nonaccrual status.
C&I and CRE loans are placed on nonaccrual status at 90-days past due. With the exception of residential mortgage loans
guaranteed by government organizations which continue to accrue interest, residential mortgage loans are placed on nonaccrual status
at 150-days past due. First-lien home equity loans are placed on nonaccrual status at 150-days past due. Junior-lien home equity
loans are placed on nonaccrual status at the earlier of 120-days past due or when the related first-lien loan has been identified as
nonaccrual. Automobile and other consumer loans are generally charged-off when the loan is 120-days past due.
When interest accruals are suspended, accrued interest income is reversed with current year accruals charged to earnings and
prior year amounts generally charged-off as a credit loss. When, in our judgment, the borrower’s ability to make required interest and
principal payments has resumed and collectability is no longer in doubt, the loan or lease is returned to accrual status.