Huntington National Bank 2013 Annual Report Download - page 54
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48
Our overall credit quality performance returned to normalized, pre-recession levels. NALs declined 21% to $322.1 million,
compared to December 31, 2012, as both the C&I and CRE portfolio segments showed declines. NCOs decreased 45% compared to
the prior year, as a result of significant declines in the C&I and CRE portfolios combined with significant recovery activity, and net
reductions in the Residential and Home Equity portfolios. The Home Equity portfolio in particular was significantly impacted by the
implementation of Chapter 7 bankruptcy regulatory accounting guidance, with an additional impact in 2013. Commercial classified
loans declined, reflecting the continued improvement across the portfolio. The ACL to total loans ratio declined to 1.65%, but our
coverage ratios as demonstrated by the ACL to NAL ratio of 221% remained strong.
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, or when repayment of principal and interest is in doubt.
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 loans are placed on nonaccrual, 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.