Huntington National Bank 2014 Annual Report Download - page 49

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The maximum level of credit exposure to individual credit borrowers is limited by policy guidelines based on the perceived risk
of each borrower or related group of borrowers. All authority to grant commitments is delegated through the independent credit
administration function and is closely monitored and regularly updated. Concentration risk is managed through limits on loan type,
geography, industry, and loan quality factors. We focus predominantly on extending credit to retail and commercial customers with
existing or expandable relationships within our primary banking markets, although we will consider lending opportunities outside our
primary markets if we believe the associated risks are acceptable and aligned with strategic initiatives. Although we offer a broad set
of products, we continue to develop new lending products and opportunities. Each of these new products and opportunities goes
through a rigorous development and approval process prior to implementation to ensure our overall objective of maintaining an
aggregate moderate-to-low risk portfolio profile.
The checks and balances in the credit process and the separation of the credit administration and risk management functions are
designed to appropriately assess and sanction the level of credit risk being accepted, facilitate the early recognition of credit problems
when they occur, and to provide for effective problem asset management and resolution. For example, we do not extend additional
credit to delinquent borrowers except in certain circumstances that substantially improve our overall repayment or collateral coverage
position.
Our asset quality indicators reflected continued overall improvement of our credit quality performance in 2014.
Loan and Lease Credit Exposure Mix
At December 31, 2014, our loans and leases totaled $47.7 billion, representing a $4.6 billion, or 11%, increase compared to $43.1
billion at December 31, 2013. The majority of the portfolio growth occurred in the Automobile and C&I portfolios. Huntington
remained committed to a high quality origination strategy. The CRE portfolio remained relatively consistent, as a result of continued
runoff offset by new production within the requirements associated with achieving an acceptable return, our internal concentration
limits and increased competition for projects sponsored by high quality developers.
Total commercial loans and leases were $24.2 billion at December 31, 2014, and represented 51% of our total loan and lease
credit exposure. Our commercial loan portfolio is diversified along product type, customer size, and geography within our footprint,
and is comprised of the following (see Commercial Credit discussion):
C&I – C&I loans and leases are made to commercial customers for use in normal business operations to finance working capital
needs, equipment purchases, or other projects. The majority of these borrowers are customers doing business within our geographic
regions. C&I loans and leases are generally underwritten individually and secured with the assets of the company and/or the personal
guarantee of the business owners. The financing of owner occupied facilities is considered a C&I loan even though there is improved
real estate as collateral. This treatment is a result of the credit decision process, which focuses on cash flow from operations of the
business to repay the debt. The operation, sale, rental, or refinancing of the real estate is not considered the primary repayment source
for these types of loans. As we have expanded our C&I portfolio, we have developed a series of “vertical specialties” to ensure that
new products or lending types are embedded within a structured, centralized Commercial Lending area with designated experienced
credit officers. These specialties are comprised of either targeted industries (for example, Healthcare, Food & Agribusiness, Energy,
etc) and/or lending disciplines (Equipment Finance, ABL, etc), all of which requires a high degree of expertise and oversight to
effectively mitigate and monitor risk. As such, we have dedicated colleagues and teams focused on bringing value added expertise to
these specialty clients.
CRE – CRE loans consist of loans to developers and REITs supporting income-producing or for-sale commercial real estate
properties. We mitigate our risk on these loans by requiring collateral values that exceed the loan amount and underwriting the loan
with projected cash flow in excess of the debt service requirement. These loans are made to finance properties such as apartment
buildings, office and industrial buildings, and retail shopping centers, and are repaid through cash flows related to the operation, sale,
or refinance of the property.
Construction CRE – Construction CRE loans are loans to developers, companies, or individuals used for the construction of a
commercial or residential property for which repayment will be generated by the sale or permanent financing of the property. Our
construction CRE portfolio primarily consists of retail, multi family, office, and warehouse project types. Generally, these loans are
for construction projects that have been presold or preleased, or have secured permanent financing, as well as loans to real estate
companies with significant equity invested in each project. These loans are underwritten and managed by a specialized real estate
lending group that actively monitors the construction phase and manages the loan disbursements according to the predetermined
construction schedule.