Huntington National Bank 2015 Annual Report Download - page 120

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which continue to accrue interest at the rate guaranteed by the government agency. We are reimbursed from the government agency
for reasonable expenses incurred in servicing loans.
For all classes within all loan portfolios, when a loan is placed on nonaccrual status, any accrued interest income is reversed
with current year accruals charged to interest income, and prior year amounts charged-off as a credit loss.
For all classes within all loan portfolios, cash receipts received on NALs are applied against principal until the loan or lease has
been collected in full, after which time any additional cash receipts are recognized as interest income. However, for secured non-
reaffirmed debt in a Chapter 7 bankruptcy, payments are applied to principal and interest when the borrower has demonstrated a
capacity to continue payment of the debt and collection of the debt is reasonably assured. For unsecured non-reaffirmed debt in a
Chapter 7 bankruptcy where the carrying value has been fully charged-off, payments are recorded as loan recoveries.
Regarding all classes within the C&I and CRE portfolios, the determination of a borrower’s ability to make the required
principal and interest payments is based on an examination of the borrower’s current financial statements, industry, management
capabilities, and other qualitative measures. For all classes within the consumer loan portfolio, the determination of a borrower’s
ability to make the required principal and interest payments is based on multiple factors, including number of days past due and, in
some instances, an evaluation of the borrower’s financial condition. When, in management’s judgment, the borrower’s ability to make
required principal and interest payments resumes and collectability is no longer in doubt, supported by sustained repayment history,
the loan is returned to accrual status. For these loans that have been returned to accrual status, cash receipts are applied according to
the contractual terms of the loan.
Charge-off of Uncollectible Loans — 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. Additionally, discharged, collateral dependent non-reaffirmed debt in Chapter 7 bankruptcy filings will result in a charge-
off to estimated collateral value, less anticipated selling costs.
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 junior-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.
Impaired Loans — For all classes within the C&I and CRE portfolios, all loans with an obligor balance of $1.0 million or
greater are evaluated on a quarterly basis for impairment. Except for TDRs, consumer loans within any class are generally not
individually evaluated on a regular basis for impairment. All TDRs, regardless of the outstanding balance amount, are also considered
to be impaired. Loans acquired with evidence of deterioration in credit quality since origination for which it is probable at acquisition
that all contractually required payments will not be collected are also considered to be impaired.
Once a loan has been identified for an assessment of impairment, the loan is considered impaired when, based on current
information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be
collected. This determination requires significant judgment and use of estimates, and the eventual outcome may differ significantly
from those estimates.
When a loan in any class has been determined to be impaired, the amount of the impairment is measured using the present value
of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, the observable market price of
the loan, or the fair value of the collateral, less anticipated selling costs, if the loan is collateral dependent. When the present value of
expected future cash flows is used, the effective interest rate is the original contractual interest rate of the loan adjusted for any cost,
fee, premium, or discount. When the contractual interest rate is variable, the effective interest rate of the loan changes over time. A
specific reserve is established as a component of the ALLL when a loan has been determined to be impaired. Subsequent to the initial
measurement of impairment, if there is a significant change to the impaired loan’s expected future cash flows, or if actual cash flows
are significantly different from the cash flows previously estimated, Huntington recalculates the impairment and appropriately adjusts
the specific reserve. Similarly, if Huntington measures impairment based on the observable market price of an impaired loan or the fair
value of the collateral of an impaired collateral dependent loan, Huntington will adjust the specific reserve.
When a loan within any class is impaired, the accrual of interest income is discontinued unless the receipt of principal and
interest is no longer in doubt. Interest income on TDRs is accrued when all principal and interest is expected to be collected under the
post-modification terms. Cash receipts received on nonaccruing impaired loans within any class are generally applied entirely against
principal until the loan has been collected in full (including already charged-off portion), after which time any additional cash receipts
are recognized as interest income. Cash receipts received on accruing impaired loans within any class are applied in the same manner
as accruing loans that are not considered impaired.