Huntington National Bank 2014 Annual Report Download - page 137

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TDR Concession Types
The Company’s standards relating to loan modifications consider, among other factors, minimum verified income requirements,
cash flow analysis, and collateral valuations. Each potential loan modification is reviewed individually and the terms of the loan are
modified to meet a borrower’s specific circumstances at a point in time. All commercial TDRs are reviewed and approved by our
SAD. The types of concessions provided to borrowers include:
x Interest rate reduction: A reduction of the stated interest rate to a nonmarket rate for the remaining original life of the debt.
x Amortization or maturity date change beyond what the collateral supports, including any of the following:
(1) Lengthens the amortization period of the amortized principal beyond market terms. This concession reduces the
minimum monthly payment and increases the amount of the balloon payment at the end of the term of the loan.
Principal is generally not forgiven.
(2) Reduces the amount of loan principal to be amortized and increases the amount of the balloon payment at the end
of the term of the loan. This concession also reduces the minimum monthly payment. Principal is generally not
forgiven.
(3) Extends the maturity date or dates of the debt beyond what the collateral supports. This concession generally
applies to loans without a balloon payment at the end of the term of the loan.
x Chapter 7 bankruptcy: A bankruptcy court’s discharge of a borrower’s debt is considered a concession when the borrower
does not reaffirm the discharged debt.
x Other: A concession that is not categorized as one of the concessions described above. These concessions include, but are
not limited to: principal forgiveness, collateral concessions, covenant concessions, and reduction of accrued interest.
Principal forgiveness may result from any TDR modification of any concession type. However, the aggregate amount of
principal forgiven as a result of loans modified as TDRs during the years ended December 31, 2014 and 2013, was not
significant.
Following is a description of TDRs by the different loan types:
Commercial loan TDRs – Commercial accruing TDRs often result from loans receiving a concession with terms that are not
considered a market transaction to Huntington. The TDR remains in accruing status as long as the customer is less than 90-days
past due on payments per the restructured loan terms and no loss is expected.
Commercial nonaccrual TDRs result from either: (1) an accruing commercial TDR being placed on nonaccrual status, or (2) a
workout where an existing commercial NAL is restructured and a concession was given. At times, these workouts restructure the
NAL so that two or more new notes are created. The primary note is underwritten based upon our normal underwriting standards
and is sized so projected cash flows are sufficient to repay contractual principal and interest. The terms on the secondary note(s)
vary by situation, and may include notes that defer principal and interest payments until after the primary note is repaid. Creating
two or more notes often allows the borrower to continue a project or weather a temporary economic downturn and allows
Huntington to right-size a loan based upon the current expectations for a borrower’s or project’s performance.
Our strategy involving TDR borrowers includes working with these borrowers to allow them to refinance elsewhere, as well
as allow them time to improve their financial position and remain our customer through refinancing their notes according to
market terms and conditions in the future. A subsequent refinancing or modification of a loan may occur when either the loan
matures according to the terms of the TDR-modified agreement or the borrower requests a change to the loan agreements. At that
time, the loan is evaluated to determine if it is creditworthy. It is subjected to the normal underwriting standards and processes
for other similar credit extensions, both new and existing. The refinanced note is evaluated to determine if it is considered a new
loan or a continuation of the prior loan. A new loan is considered for removal of the TDR designation, whereas a continuation of
the prior note requires a continuation of the TDR designation. In order for a TDR designation to be removed, the borrower must
no longer be experiencing financial difficulties and the terms of the refinanced loan must not represent a concession.
Residential Mortgage loan TDRs – Residential mortgage TDRs represent loan modifications associated with traditional first-lien
mortgage loans in which a concession has been provided to the borrower. The primary concessions given to residential mortgage
borrowers are amortization or maturity date changes and interest rate reductions. Residential mortgages identified as TDRs
involve borrowers unable to refinance their mortgages through the Company’s normal mortgage origination channels or through
other independent sources. Some, but not all, of the loans may be delinquent.
Automobile, Home Equity, and Other Consumer loan TDRs – The Company may make similar interest rate, term, and
principal concessions as with residential mortgage loan TDRs.