Huntington National Bank 2015 Annual Report Download - page 58

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on the risk rating methodology. Both macro-level and loan-level stress-test scenarios based on existing and forecast market conditions
are part of the on-going portfolio management process for the CRE portfolio.
Dedicated real estate professionals originate and manage the portfolio. The portfolio is diversified by project type and loan size,
and this diversification represents a significant portion of the credit risk management strategies employed for this portfolio.
Subsequent to the origination of the loan, the Credit Review group provides an independent review and assessment of the quality of
the underwriting and risk of new loan originations.
Appraisal values are obtained in conjunction with all originations and renewals, and on an as needed basis, in compliance with
regulatory requirements and to ensure appropriate decisions regarding the on-going management of the portfolio reflect the changing
market conditions. Appraisals are obtained from approved vendors and are reviewed by an internal appraisal review group comprised
of certified appraisers to ensure the quality of the valuation used in the underwriting process. We continue to perform on-going
portfolio level reviews within the CRE portfolio. These reviews generate action plans based on occupancy levels or sales volume
associated with the projects being reviewed. This highly individualized process requires working closely with all of our borrowers, as
well as an in-depth knowledge of CRE project lending and the market environment.
Consumer Credit
Consumer credit approvals are based on, among other factors, the financial strength and payment history of the borrower, type
of exposure, and transaction structure. Consumer credit decisions are generally made in a centralized environment utilizing decision
models. Importantly, certain individuals who understand each local region have the authority to make credit extension decisions to
preserve our focus on the local communities in which we operate. Each credit extension is assigned a specific PD and LGD. The PD is
generally based on the borrower’s most recent credit bureau score (FICO), which we update quarterly, providing an ongoing view of
the borrowers PD. The LGD is related to the type of collateral associated with the credit extension, which typically does not change
over the course of the loan term. This allows Huntington to maintain a current view of the customer for credit risk management and
ACL purposes.
In consumer lending, credit risk is managed from a segment (i.e., loan type, collateral position, geography, etc.) and vintage
performance analysis. All portfolio segments are continuously monitored for changes in delinquency trends and other asset quality
indicators. We make extensive use of portfolio assessment models to continuously monitor the quality of the portfolio, which may
result in changes to future origination strategies. The ongoing analysis and review process results in a determination of an appropriate
ALLL amount for our consumer loan portfolio. The independent risk management group has a consumer process review component to
ensure the effectiveness and efficiency of the consumer credit processes.
Collection action is initiated as needed through a centrally managed collection and recovery function. The collection group
employs a series of collection methodologies designed to maintain a high level of effectiveness while maximizing efficiency. In
addition to the consumer loan portfolio, the collection group is responsible for collection activity on all sold and securitized consumer
loans and leases. Collection practices include a single contact point for the majority of the residential real estate secured portfolios.
AUTOMOBILE PORTFOLIO
Our strategy in the automobile portfolio continues to focus on high quality borrowers as measured by both FICO and internal
custom scores, combined with appropriate LTVs, terms, and profitability. Our strategy and operational capabilities allow us to
appropriately manage the origination quality across the entire portfolio, including our newer markets. Although increased origination
volume and entering new markets can be associated with increased risk levels, we believe our disciplined strategy and operational
processes significantly mitigate these risks.
We have continued to consistently execute our value proposition and take advantage of available market opportunities.
Importantly, we have maintained our high credit quality standards while expanding the portfolio.
RESIDENTIAL REAL ESTATE SECURED PORTFOLIOS
The properties securing our residential mortgage and home equity portfolios are primarily located within our geographic
footprint. Huntington continues to support our local markets with consistent underwriting across all residential secured products. The
residential-secured portfolio originations continue to be of high quality, with the majority of the negative credit impact coming from
loans originated in 2006 and earlier. Our portfolio management strategies associated with our Home Savers group allow us to focus on
effectively helping our customers with appropriate solutions for their specific circumstances.