Huntington National Bank 2015 Annual Report Download - page 56

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in the machinery/equipment and vehicle categories. The increase in machinery/equipment reflects the addition of approximately $0.8
billion in equipment leases related to the acquisition of Huntington Technology Finance.
The increase in the unsecured exposure is centered in high quality commercial credit customers.
Table 9 - Loan and Lease Portfolio by Collateral Type
(dollar amounts in millions)
At December 31,
2015 2014 2013 2012 2011
Secured loans:
Real estate—commercial $ 8,296 16% $ 8,631 18% $ 8,622 20% $ 9,128 22% $ 9,557 25%
Real estate—consumer 14,469 29 14,322 30 13,657 32 13,305 33 13,444 35
Vehicles 11,880 (1) 24 10,932 23 8,989 21 6,659 16 6,021 15
Receivables/Inventory 5,961 12 5,968 13 5,534 13 5,178 13 4,450 11
Machinery/Equipment 5,171 (2) 10 3,863 8 2,738 6 2,749 7 1,994 5
Securities/Deposits 974 2 964 2 786 2 826 2 800 2
Other 987 2 919 2 1,016 2 1,090 3 1,018 3
Total secured loans and leases 47,738 95 45,599 96 41,342 96 38,935 96 37,284 96
Unsecured loans and leases 2,603 5 2,057 4 1,778 4 1,793 4 1,640 4
Total loans and leases $50,341 100% $47,656 100% $ 43,120 100% $40,728 100% $ 38,924 100%
(1) 2015 includes a decrease of approximately $0.8 billion in automobile loans resulting from an automobile securitization
transaction.
(2) Reflects the addition of approximately $0.8 billion in equipment leases related to the acquisition of Huntington Technology
Finance.
Commercial Credit
The primary factors considered in commercial credit approvals are the financial strength of the borrower, assessment of the
borrower’s management capabilities, cash flows from operations, industry sector trends, type and sufficiency of collateral, type of
exposure, transaction structure, and the general economic outlook. While these are the primary factors considered, there are a number
of other factors that may be considered in the decision process. We utilize a centralized preview and senior loan approval committee,
led by our chief credit officer. The risk rating (see next paragraph) and complexity of the credit determines the threshold for approval
of the senior loan committee with a minimum credit exposure of $10.0 million. For loans not requiring senior loan committee
approval, with the exception of small business loans, credit officers who understand each local region and are experienced in the
industries and loan structures of the requested credit exposure are involved in all loan decisions and have the primary credit authority.
For small business loans, we utilize a centralized loan approval process for standard products and structures. In this centralized
decision environment, certain individuals who understand each local region may make credit-extension decisions to preserve our
commitment to the communities in which we operate. In addition to disciplined and consistent judgmental factors, a sophisticated
credit scoring process is used as a primary evaluation tool in the determination of approving a loan within the centralized loan
approval process.
In commercial lending, on-going credit management is dependent on the type and nature of the loan. We monitor all significant
exposures on an on-going basis. All commercial credit extensions are assigned internal risk ratings reflecting the borrower’s PD and
LGD. This two-dimensional rating methodology provides granularity in the portfolio management process. The PD is rated and
applied at the borrower level. The LGD is rated and applied based on the specific type of credit extension and the quality and lien
position associated with the underlying collateral. The internal risk ratings are assessed at origination and updated at each periodic
monitoring event. There is also extensive macro portfolio management analysis on an on-going basis. We continually review and
adjust our risk-rating criteria based on actual experience, which provides us with the current risk level in the portfolio and is the basis
for determining an appropriate allowance for credit losses (ACL) amount for the commercial portfolio. A centralized portfolio
management team monitors and reports on the performance of the entire commercial portfolio, including small business loans, to
provide consistent oversight.
In addition to the initial credit analysis conducted during the approval process, our Credit Review group performs testing to
provide an independent review and assessment of the quality and risk of new loan originations. This group is part of our Risk
Management area and conducts portfolio reviews on a risk-based cycle to evaluate individual loans, validate risk ratings, and test the
consistency of credit processes.