Loans / Leases AND ALLOWANCE FOR CREDIT LOSSES | 3. Loans / Leases AND ALLOWANCE FOR CREDIT LOSSES Loans and leases for which Huntington has the intent and ability to hold for the foreseeable future, or until maturity or payoff, are classified in the Unaudited Condensed Consolidated Balance Sheets as loans and leases. Except for loans which are accounted for at fair value, loans and leases are carried at the principal amount outstanding, net of unamortized deferred loan origination fees and costs . At June 30, 2015 , and December 31, 2014 , the aggregate amount of these net unamortized deferred loan origination fees and was $ 300.5 million and $ 178.7 million, respectively. Loan and Lease Portfolio Composition The followin g table provides a detailed listing of Huntington’s loan and lease portfolio at June 30, 2015 and December 31, 2014 : June 30, December 31, (dollar amounts in thousands) 2015 2014 Loans and leases: Commercial and industrial $ 20,002,676 $ 19,033,146 Commercial real estate 5,213,793 5,197,403 Automobile 8,549,081 8,689,902 Home equity 8,526,276 8,490,915 Residential mortgage 5,987,000 5,830,609 Other consumer 473,475 413,751 Loans and leases 48,752,301 47,655,726 Allowance for loan and lease losses (599,542) (605,196) Net loans and leases $ 48,152,759 $ 47,050,530 As shown in the table above, the primary loan and lease portfolios are: C&I, CRE, a utomobile, home equity, r esidential m ortgage, and o ther consumer. For ACL purposes, these portfolios are further disaggregated into classes. The classes within each portfolio are as follows: Portfolio Class Commercial and industrial Owner occupied Purchased credit-impaired Other commercial and industrial Commercial real estate Retail properties Multi family Office Industrial and warehouse Purchased credit-impaired Other commercial real estate Automobile NA (1) Home equity Secured by first-lien Secured by junior-lien Residential mortgage Residential mortgage Purchased credit-impaired Other consumer Other consumer Purchased credit-impaired (1) Not applicable. The automobile loan portfolio is not further segregated into classes. HTF acquisition On March 31 , 201 5, Huntington completed its acquisition of Macquarie Equipment Finance, which was re-branded Huntington Technology Finance (HTF) . Lease receivables with a fair value of $838.6 million, including a lease residual value of approximately $200 million, were acquired by Huntington. These leases were recorded at fair value . The fair values for the leases were estimated using discounted cash flow analyses using interest rates curre ntly being offered for leases with similar terms (Level 3), and reflected an estimate of credit and other risk associated with the leases . Camco Financial acquisition On March 1, 2014, Huntington completed its acquisition of Camco Financial. Loans with a fair value of $559.4 million were transferred to Huntington. Fidelity Bank acquisition On March 30, 2012, Huntington acquired the loans of Fidelity Bank located in Dearborn, Michigan from the FDIC. Under the agreement, loans with a fair value of $523.9 million were acquired by Huntington. Purchased Credit-Impaired Loans Purchased loans with evidence of deterioration in credit quality since origination for which it is probable at acquisition that we will be unable to collect all contractually required payments are considered to be credit impaired. Purchased credit-impaired loans are initially recorded at fair value, which is estimated by discounting the cash flows expected to be collected at the acquisition date. Because the estimate of expected cash flows reflects an estimate of future credit losses expected to be incurred over the life of the loans, an allowance for credit losses is not recorded at the acquisition date. The excess of cash flows expected at acquisition over the estimated fair value, referred to as the accretable yield, is recognized in interest income over the remaining life of the loan, or pool of loans, on a level-yield basis. The difference between the contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference. A subsequent decrease in the estimate of cash flows expected to be received on purchased credit-impaired loans generally results in the recognition of an allowance for credit losses. Subsequent increases in cash flows result in reversal of any nonaccretable difference (or allowance for loan and lease losses to the extent any has been recorded) with a positive impact on interest income subsequently recognized. The measurement of cash flows involves assumptions and judgments for interest rates, prepayments, default rates, loss severity, and collateral values. All of these factors are inherently subjective and significant changes in the cash flow estimates over the life of the loan can result . The following table presents a rollforward of the accretable yield for purchased credit impaired loans by acquisition f or the three-month and six-month periods ended June 30, 2015 and 2014 : Three Months Ended Six Months Ended June 30, 2015 June 30, 2015 (dollar amounts in thousands) 2015 2014 2015 2014 Fidelity Bank Balance, beginning of period $ 20,191 $ 24,758 $ 19,388 $ 27,995 Accretion (2,990) (3,647) (5,864) (7,651) Reclassification from nonaccretable difference 2,111 3,485 5,788 4,252 Balance, end of period $ 19,312 $ 24,596 $ 19,312 $ 24,596 Camco Financial Balance, beginning of period $ 879 $ 134 $ 824 $ --- Impact of acquisition/purchase on March 1, 2014 --- --- --- 143 Accretion (914) (5,173) (1,250) (5,182) Reclassification from nonaccretable difference 716 5,193 1,107 5,193 Balance, end of period $ 681 $ 154 $ 681 $ 154 The allowance for loan losses recorded on the purchased credit-impaired loan portfolio at June 30, 2015 and December 31, 2014 was $1.0 million and $4.1 million, respectively. The following table reflects the ending and unpaid balances of all contractually required payments and carrying amounts of the acquired loans by acquisition at June 30, 2015 and December 31, 2014 : June 30, 2015 December 31, 2014 (dollar amounts in thousands) Ending Balance Unpaid Balance Ending Balance Unpaid Balance Fidelity Bank Commercial and industrial $ 20,122 $ 29,969 $ 22,405 $ 33,622 Commercial real estate 25,742 71,953 36,663 87,250 Residential mortgage 2,040 3,017 1,912 3,096 Other consumer 51 114 51 123 Total $ 47,955 $ 105,053 $ 61,031 $ 124,091 Camco Financial Commercial and industrial $ --- $ --- $ 823 $ 1,685 Commercial real estate 1,849 2,603 1,708 3,826 Total $ 1,849 $ 2,603 $ 2,531 $ 5,511 Loan Purchases and Sales The followi ng table summarizes portfolio loan purchase and sale activity for the three-month and six-month periods ended June 30, 2015 and 2014 Commercial and Industrial Commercial Real Estate Automobile Home Equity Residential Mortgage Other Consumer Total (dollar amounts in thousands) Portfolio loans and leases purchased or transferred from held for sale during the: Three-month period ended June 30, 2015 $ 31,905 $ --- $ 262,037 (2) $ --- $ 75,403 $ --- $ 369,345 Six-month period ended June 30, 2015 $ 44,496 $ --- $ 262,037 (2) $ --- $ 107,037 $ --- $ 413,570 Three-month period ended June 30, 2014 $ 165,482 $ --- $ --- $ --- $ --- $ --- $ 165,482 Six-month period ended June 30, 2014 $ 205,603 $ --- $ --- $ --- $ --- $ --- $ 205,603 Portfolio loans and leases sold or transferred to loans held for sale during the: Three-month period ended June 30, 2015 $ 100,202 $ --- $ --- $ --- $ --- $ --- $ 100,202 Six-month period ended June 30, 2015 $ 185,902 $ --- $ 1,026,195 (1) $ --- $ --- --- $ 1,212,097 Three-month period ended June 30, 2014 $ 50,472 $ 7,395 $ --- $ --- $ --- $ 7,592 $ 65,459 Six-month period ended June 30, 2014 $ 104,731 $ 7,434 $ --- $ --- $ --- $ 7,592 $ 119,757 (1) Reflects the transfer of approximately $1.0 billion automobile loans to loans held-for-sale at March 31, 2015. (2) Includes loans Huntington no longer has the intent to sell and, therefore transferred back to the portfolio in the 2015 second quarter. NALs and Past Due Loans Loans are considered past due when the contractual amounts due with respect to principal and interest are not received within 30 days of the contractual due date. Any loan in any portfolio may be placed on nonaccrual status prior to the policies described below when collection of principal or interest is in doubt. When a borrower with debt is discharged in a Chapter 7 bankruptcy and not reaffirmed by the borrower, the loan is determined to be collateral dependent and placed on nonaccrual status. All classes within the C&I and CRE portfolios (except for purchased credit-impaired loans) are placed on nonaccrual status at 90 -days past due. Residential mo rtgage loans are placed on nonaccrual status at 150 -days past due, with the exception of residential mortgages guaranteed by government organizations . Firs t -lien home equity loans are placed on nonaccrual status at 150 -days past due. Junior -lien home equity loans are placed on nonaccrual status at the earlier of 120 -days past due or when the related first-lien loan has been identifie d as nonaccrual . Automobile and other consumer loans are generally charged-off when the loan is 120 -days past due. For all classes within all loan portfolios, when a loan is placed on nonaccrual status, any accrued interest income is rever sed 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 entirely 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-re affirmed 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 borrow er’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 a bility to make required principal and interest payments resumes and collectability is no longer in doubt , supported by sustained repayment history , the loan or lease 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 . The following table presents NALs by loan class at June 30, 2015 and December 31, 2014 : June 30, December 31, (dollar amounts in thousands) 2015 2014 Commercial and industrial: Owner occupied $ 44,864 $ 41,285 Other commercial and industrial 104,849 30,689 Total commercial and industrial $ 149,713 $ 71,974 Commercial real estate: Retail properties $ 18,314 $ 21,385 Multi family 5,647 9,743 Office 14,545 7,707 Industrial and warehouse 1,182 3,928 Other commercial real estate 4,200 5,760 Total commercial real estate $ 43,888 $ 48,523 Automobile $ 4,190 $ 4,623 Home equity: Secured by first-lien $ 42,424 $ 46,938 Secured by junior-lien 32,926 31,622 Total home equity $ 75,350 $ 78,560 Residential mortgage $ 91,198 $ 96,564 Other consumer $ --- $ --- Total nonaccrual loans $ 364,339 $ 300,244 The following table presents an aging analysis of loans and leases , including past due loans, by loan class at June 30, 2015 and December 31, 2014 : (1) June 30, 2015 90 or more (dollar amounts in thousands) Past Due Total Loans days past due 30-59 Days 60-89 Days 90 or more days Total Current and Leases and accruing Commercial and industrial: Owner occupied $ 8,420 $ 3,328 $ 23,594 $ 35,342 $ 4,164,517 $ 4,199,859 $ --- Purchased credit-impaired 409 --- 4,765 5,174 14,948 20,122 4,765 (3) Other commercial and industrial 28,636 18,363 22,282 69,281 15,713,414 15,782,695 1,856 (2) Total commercial and industrial $ 37,465 $ 21,691 $ 50,641 $ 109,797 $ 19,892,879 $ 20,002,676 $ 6,621 Commercial real estate: Retail properties $ 425 $ 1,167 $ 3,356 $ 4,948 $ 1,350,570 $ 1,355,518 $ --- Multi family 2,092 12 2,477 4,581 1,116,003 1,120,584 --- Office 3,090 --- 1,929 5,019 925,921 930,940 --- Industrial and warehouse 420 327 430 1,177 499,910 501,087 --- Purchased credit-impaired 1,166 2,012 10,920 14,098 13,493 27,591 10,920 (3) Other commercial real estate 310 105 4,052 4,467 1,273,606 1,278,073 --- Total commercial real estate $ 7,503 $ 3,623 $ 23,164 $ 34,290 $ 5,179,503 $ 5,213,793 $ 10,920 Automobile $ 50,355 $ 10,373 $ 4,388 $ 65,116 $ 8,483,965 $ 8,549,081 $ 4,269 Home equity: Secured by first-lien $ 16,903 $ 7,266 $ 29,861 $ 54,030 $ 5,151,027 $ 5,205,057 $ 4,879 Secured by junior-lien 23,663 9,564 33,872 67,099 3,254,120 3,321,219 6,834 Total home equity $ 40,566 $ 16,830 $ 63,733 $ 121,129 $ 8,405,147 $ 8,526,276 $ 11,713 Residential mortgage: Residential mortgage $ 92,554 $ 37,877 $ 118,641 $ 249,072 $ 5,735,888 $ 5,984,960 $ 72,509 Purchased credit-impaired --- --- --- --- 2,040 2,040 --- Total residential mortgage $ 92,554 $ 37,877 $ 118,641 $ 249,072 $ 5,737,928 $ 5,987,000 $ 72,509 (4) Other consumer: Other consumer $ 5,624 $ 1,120 $ 847 $ 7,591 $ 465,833 $ 473,424 $ 846 Purchased credit-impaired --- --- --- --- 51 51 --- Total other consumer $ 5,624 $ 1,120 $ 847 $ 7,591 $ 465,884 $ 473,475 $ 846 Total loans and leases $ 234,067 $ 91,514 $ 261,414 $ 586,995 $ 48,165,306 $ 48,752,301 $ 106,878 December 31, 2014 90 or more (dollar amounts in thousands) Past Due Total Loans days past due 30-59 Days 60-89 Days 90 or more days Total Current and Leases and accruing Commercial and industrial: Owner occupied $ 5,232 $ 2,981 $ 18,222 $ 26,435 $ 4,228,440 $ 4,254,875 $ --- Purchased credit-impaired 846 --- 4,937 5,783 17,445 23,228 4,937 Other commercial and industrial 15,330 1,536 9,101 25,967 14,729,076 14,755,043 --- Total commercial and industrial $ 21,408 $ 4,517 $ 32,260 $ 58,185 $ 18,974,961 $ 19,033,146 $ 4,937 (3) Commercial real estate: Retail properties $ 7,866 $ --- $ 4,021 $ 11,887 $ 1,345,859 $ 1,357,746 $ --- Multi family 1,517 312 3,337 5,166 1,085,250 1,090,416 --- Office 464 1,167 4,415 6,046 974,257 980,303 --- Industrial and warehouse 688 --- 2,649 3,337 510,064 513,401 --- Purchased credit-impaired 89 289 18,793 19,171 19,200 38,371 18,793 Other commercial real estate 847 1,281 3,966 6,094 1,211,072 1,217,166 --- Total commercial real estate $ 11,471 $ 3,049 $ 37,181 $ 51,701 $ 5,145,702 $ 5,197,403 $ 18,793 (3) Automobile $ 56,272 $ 10,427 $ 5,963 $ 72,662 $ 8,617,240 $ 8,689,902 $ 5,703 Home equity Secured by first-lien $ 15,036 $ 8,085 $ 33,014 $ 56,135 $ 5,072,669 $ 5,128,804 $ 4,471 Secured by junior-lien 22,473 12,297 33,406 68,176 3,293,935 3,362,111 7,688 Total home equity $ 37,509 $ 20,382 $ 66,420 $ 124,311 $ 8,366,604 $ 8,490,915 $ 12,159 Residential mortgage Residential mortgage $ 102,702 $ 42,009 $ 139,379 $ 284,090 $ 5,544,607 $ 5,828,697 $ 88,052 Purchased credit-impaired --- --- --- --- 1,912 1,912 --- Total residential mortgage $ 102,702 $ 42,009 $ 139,379 $ 284,090 $ 5,546,519 $ 5,830,609 $ 88,052 (5) Other consumer Other consumer $ 5,491 $ 1,086 $ 837 $ 7,414 $ 406,286 $ 413,700 $ 837 Purchased credit-impaired --- --- --- --- 51 51 --- Total other consumer $ 5,491 $ 1,086 $ 837 $ 7,414 $ 406,337 $ 413,751 $ 837 Total loans and leases $ 234,853 $ 81,470 $ 282,040 $ 598,363 $ 47,057,363 $ 47,655,726 $ 130,481 (1) NALs are included in this aging analysis based on the loan's past due status. (2) Amounts include HTF administrative lease delinquencies. (3) Amounts represent accruing purchased impaired loans related to acquisitions. Under the applicable accounting guidance (ASC 310-30), the loans were recorded at fair value upon acquisition and remain in accruing status. (4) Includes $50,640 thousand guaranteed by the U.S. government. (5) Includes $55,012 thousand guaranteed by the U.S. government. Allowance for Credit Losses Huntington maintains two reserves, both of which reflect Management’s judgment regarding the appropriate level necessary to absorb credit losses inherent in our loan and lease portfolio: the ALLL and the AULC. Combined, these reserves comprise the total ACL. The determination of the ACL requires significant estimates, including the timing and amounts of expected future cash flows on impaired loans and leases, consideration of current economic conditions, and historical loss e xperience pertaining to pools of homogeneous loans and leases, all of which may be susceptible to change. The appropriateness of the ACL is based on Management’s current judgments about the credit quality of the loan portfolio. These judgments consider on-going evaluations of the loan and lease portfolio, including such factors as the differing economic risks associated with each loan category, the financial condition of specific borrowers, the level of delinquent loans, the value of any collateral and, where applicable, the existence of any guarantees or other documented support. Further, Management evaluates the impact of changes in interest rates and overall economic conditions on the ability of borrowers to meet their financial obligations when quant ifying our exposure to credit losses and assessing the appropriateness of our ACL at each reporting date. In addition to general economic conditions and the other factors described above, additional factors also considered include: the impact of increasin g or decreasing residential real estate values; the diversification of CRE loans; the development of new or expanded Commercial business segments such as healthcare, ABL, and energy, and the overall condition of the manufacturing industry. Management’s determinations regarding the appropriateness of the ACL are reviewed and approved by the Company’s boa rd of directors. The ALLL consists of two components: (1) the transaction reserve, which includes a loan level allocation, specific reserves related to loans considered to be impaired, and loans involved in troubled debt restructurings, and (2) the genera l reserve. The transaction reserve component includes both (1) an estimate of loss based on pools of commercial and consumer loans and leases with similar characteristics and (2) an estimate of loss based on an impairment review of each impaired C&I and CRE loan greater than $ 1.0 million. For the C&I and CRE portfolios, the estimate of loss based on pools of loans and leases with similar characteristics is made by applying a PD factor and a LGD factor to each individual loan based on a regula rly updated loan grade, using a standardized loan grading system. The PD factor and an LGD factor are determined for each loan grade using statistical models based on historical performance data. The PD factor considers on-going reviews of the financial p erformance of the specific borrower, including cash flow, debt-service coverage ratio, earnings power, debt level, and equity position, in conjunction with an assessment of the borrower’s industry and future prospects. The LGD factor considers analysis of the type of collateral and the relative LTV ratio. These reserve factors are developed based on credit migration models that track historical movements of loans between loan ratings over time and a combination of long-term average loss experience of our own portfolio and external industry data using a 24-month loss emergence period. In the case of other homogeneous portfolios, such as automobile loans, home equity loans, and residential mortgage loans, the determination of the transaction reserve also incorporates PD and LGD factors. The estimate of loss is based on pools of loans and leases with similar characteristics. The PD factor considers current credit scores unless the account is delinquent, in which case a higher PD factor is used. The credi t score provides a basis for understanding the borrower’s past and current payment performance, and this information is used to estimate expected losses over the emergence period. The performance of first-lien loans ahead of our junior-lien loans is avail able to use as part of our updated score process. The LGD factor considers analysis of the type of collateral and the relative LTV ratio. Credit scores, models, analyses, and other factors used to determine both the PD and LGD factors are updated frequen tly to capture the recent behavioral characteristics of the subject portfolios, as well as any changes in loss mitigation or credit origination strategies, and adjustments to the reserve factors are made as required. Models utilized in the ALLL estimation process are subject to the Company’s model validation policies. The general reserve consists of our risk-profile reserve components , which includes items unique to our structure, policies, processes, and portfolio composition, as well as qualitative meas urements and assessments of the loan portfolios including, but not limited to, management quality, concentrations, portfolio composition, industry comparisons, and internal review functions. The estimate for the AULC is determined using the same procedures and methodologies as used for the ALLL. The loss factors used in the AULC are the same as the loss factors used in the ALLL while also considering a historical utilization of unused commitments. The AULC is reflected in accrued expenses and ot her liabilities in the Unaudited Condensed Consolidated Balance Sheet. The ACL is increased through a provision for credit losses that is charged to earnings, based on Management’s quarterly evaluation of the factors previously mentioned, and is reduced b y charge-offs, net of recoveries, and the ACL associated with securitized or sold loans. During the 2015 first quarter, we reviewed our existing commercial and consumer credit models and enhanced certain processes and methods of ACL estimation. During th is review, we analyzed the loss emergence periods used for consumer receivables collectively evaluated for impairment and, as a result, extended our loss emergence periods for products within these portfolios. As part of these enhancements to our credit r eserve process, we evaluated the methods used to separately estimate economic risks inherent in our portfolios and decided to no longer utilize these separate estimation techniques. Economic risks are incorporated in our loss estimates elsewhere in our re serve calculation. The enhancements made to our credit reserve processes during the quarter allow for increased segmentation and analysis of the estimated incurred losses within our loan portfolios. The net ACL impact of these enhancements was immaterial . The following table presents ALLL and AULC activity by portfolio segment for the three-month and six-month periods ended June 30, 2015 and 2014 : Commercial and Commercial Home Residential Other Industrial Real Estate Automobile Equity Mortgage Consumer Total (dollar amounts in thousands) Three-month period ended June 30, 2015: ALLL balance, beginning of period $ 284,573 $ 100,752 $ 37,125 $ 110,280 $ 55,380 $ 17,016 $ 605,126 Loan charge-offs (12,213) (8,288) (7,691) (8,629) (3,610) (6,539) (46,970) Recoveries of loans previously charged-off 7,802 2,763 4,249 3,979 1,468 1,334 21,595 Provision (reduction in allowance) for loan and lease losses 4,879 (3,167) 5,418 5,548 (1,559) 8,671 19,790 Allowance for loans sold or transferred to loans held for sale --- --- 1 --- --- --- 1 ALLL balance, end of period $ 285,041 $ 92,060 $ 39,102 $ 111,178 $ 51,679 $ 20,482 $ 599,542 AULC balance, beginning of period $ 42,315 $ 5,531 $ --- $ 2,639 $ 9 $ 4,248 $ 54,742 Provision (reduction in allowance) for unfunded loan commitments and letters of credit (466) 247 --- (117) 8 957 629 AULC balance, end of period $ 41,849 $ 5,778 $ --- $ 2,522 $ 17 $ 5,205 $ 55,371 ACL balance, end of period $ 326,890 $ 97,838 $ 39,102 $ 113,700 $ 51,696 $ 25,687 $ 654,913 Six-month period ended June 30, 2015: ALLL balance, beginning of period $ 286,995 $ 102,839 $ 33,466 $ 96,413 $ 47,211 $ 38,272 $ 605,196 Loan charge-offs (36,825) (10,301) (15,794) (17,215) (8,473) (13,437) (102,045) Recoveries of loans previously charged-off 21,011 8,788 8,104 7,940 3,515 2,880 52,238 Provision (reduction in allowance) for loan and lease losses 13,860 (9,266) 15,618 24,040 9,426 (7,233) 46,445 Allowance for loans sold or transferred to loans held for sale --- --- (2,292) --- --- --- (2,292) ALLL balance, end of period $ 285,041 $ 92,060 $ 39,102 $ 111,178 $ 51,679 $ 20,482 $ 599,542 AULC balance, beginning of period $ 48,988 $ 6,041 $ --- $ 1,924 $ 8 $ 3,845 $ 60,806 Provision for (reduction in allowance) unfunded loan commitments and letters of credit (7,139) (263) --- 598 9 1,360 (5,435) AULC balance, end of period $ 41,849 $ 5,778 $ --- $ 2,522 $ 17 $ 5,205 $ 55,371 ACL balance, end of period $ 326,890 $ 97,838 $ 39,102 $ 113,700 $ 51,696 $ 25,687 $ 654,913 Commercial and Commercial Home Residential Other Industrial Real Estate Automobile Equity Mortgage Consumer Total (dollar amounts in thousands) Three-month period ended June 30, 2014: ALLL balance, beginning of period $ 266,979 $ 160,306 $ 25,178 $ 113,177 $ 39,068 $ 27,210 $ 631,918 Loan charge-offs (23,245) (2,998) (6,632) (13,201) (6,062) (6,689) (58,827) Recoveries of loans previously charged-off 12,648 5,189 3,706 4,710 2,656 1,275 30,184 Provision for (reduction in allowance) loan and lease losses 22,130 (25,151) 4,906 1,257 11,529 17,155 31,826 Allowance for loans sold or transferred to loans held for sale --- --- --- --- --- --- --- ALLL balance, end of period $ 278,512 $ 137,346 $ 27,158 $ 105,943 $ 47,191 $ 38,951 $ 635,101 AULC balance, beginning of period $ 46,316 $ 9,127 $ --- $ 1,791 $ 8 $ 2,126 $ 59,368 Provision for (reduction in allowance) unfunded loan commitments and letters of credit (1,566) (1,597) --- 186 --- 536 (2,441) AULC balance, end of period $ 44,750 $ 7,530 $ --- $ 1,977 $ 8 $ 2,662 $ 56,927 ACL balance, end of period $ 323,262 $ 144,876 $ 27,158 $ 107,920 $ 47,199 $ 41,613 $ 692,028 Six-month period ended June 30, 2014: ALLL balance, beginning of period $ 265,801 $ 162,557 $ 31,053 $ 111,131 $ 39,577 $ 37,751 $ 647,870 Loan charge-offs (39,582) (13,108) (14,676) (34,260) (15,048) (15,164) (131,838) Recoveries of loans previously charged-off 20,379 16,286 7,108 10,082 3,783 2,571 60,209 Provision for (reduction in allowance) loan and lease losses 31,914 (28,389) 3,673 18,990 18,879 14,920 59,987 Allowance for loans sold or transferred to loans held for sale --- --- --- --- --- (1,127) (1,127) ALLL balance, end of period $ 278,512 $ 137,346 $ 27,158 $ 105,943 $ 47,191 $ 38,951 $ 635,101 AULC balance, beginning of period $ 49,596 $ 9,891 $ --- $ 1,763 $ 9 $ 1,640 $ 62,899 Provision for (reduction in allowance) unfunded loan commitments and letters of credit (4,846) (2,361) --- 214 (1) 1,022 (5,972) AULC balance, end of period $ 44,750 $ 7,530 $ --- $ 1,977 $ 8 $ 2,662 $ 56,927 ACL balance, end of period $ 323,262 $ 144,876 $ 27,158 $ 107,920 $ 47,199 $ 41,613 $ 692,028 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 va lue, 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 or written down to net realizable value 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, less anticipated selling costs, at 150 -days past due. Credit Quality Indicators To facilitate the monitoring of credit quality for C&I and CRE loans, and for purposes of determining an appropriat e ACL level for these loans, Huntington utilizes the following categories of credit grades: Pass - Higher quality loans that do not fit any of the other categories described below. OLEM - The credit risk may be relatively minor yet represent a ri sk given certain specific circumstances. If the potential weaknesses are not monitored or mitigated, the loan may weaken or the collateral may be inadequate to protect Huntington’s position in the future. For these reasons, Huntington considers the loans to be potential problem loans. Substandard - Inadequately protected loans by the borrower’s ability to repay, equity, and/or the collateral pledged to secure the loan. These loans have identified weaknesses that could hinder normal repayment or coll ection of the debt. It is likely Huntington will sustain some loss if any identified weaknesses are not mitigated. Doubtful - Loans that have all of the weaknesses inherent in those loans classified as Substandard, with the added elements of the full collection of the loan is improbable and that the possibility of loss is high. The categories above, which are derived from standard regulatory rating definitions, are assigned upon initial approval of the loan or lease and subsequently updated as approp riate. Commercial loans categorized as OLEM, Substandard, or Doubtful are considered Criticized loans. Commercial loans categorized as Substandard or Doubtful are also considered Classified loans. For all classes within all consumer loan portfolios, each loan is assigned a specific PD factor that is partially based on the borrower’s most recent credit bureau score, which we update quarterly. A credit bureau score is a credit score developed by Fair Isaac Corporation based on data provided by the cred it bureaus. The credit bureau score is widely accepted as the standard measure of consumer credit risk used by lenders, regulators, rating agencies, and consumers. The higher the credit bureau score, the higher likelihood of repayment and therefore, an i ndicator of higher credit quality. Huntington assesses the risk in the loan portfolio by utilizing numerous risk characteristics. The classifications described above, and also presented in the table below, represent one of those characteristics that are closely monitored in the overall credit risk management processes. The following table presents each loan and lease class by credit quality indicator at June 30, 2015 and December 31, 2014 : June 30, 2015 Credit Risk Profile by UCS classification (dollar amounts in thousands) Pass OLEM Substandard Doubtful Total Commercial and industrial: Owner occupied $ 3,875,455 $ 114,939 $ 207,241 $ 2,224 $ 4,199,859 Purchased credit-impaired 4,061 500 15,360 201 20,122 Other commercial and industrial 14,892,225 315,347 572,268 2,855 15,782,695 Total commercial and industrial $ 18,771,741 $ 430,786 $ 794,869 $ 5,280 $ 20,002,676 Commercial real estate: Retail properties $ 1,284,017 $ 13,750 $ 58,006 $ (255) $ 1,355,518 Multi family 1,084,707 12,041 23,345 491 1,120,584 Office 859,603 27,135 42,155 2,047 930,940 Industrial and warehouse 488,609 347 11,768 363 501,087 Purchased credit-impaired 8,923 158 16,656 1,854 27,591 Other commercial real estate 1,242,841 4,678 29,714 840 1,278,073 Total commercial real estate $ 4,968,700 $ 58,109 $ 181,644 $ 5,340 $ 5,213,793 Credit Risk Profile by FICO score (1) 750+ 650-749 <650 Other (2) Total Automobile $ 4,172,286 $ 3,177,579 $ 961,996 $ 237,220 $ 8,549,081 Home equity: Secured by first-lien $ 3,311,887 $ 1,438,410 $ 282,919 $ 171,841 $ 5,205,057 Secured by junior-lien 1,824,355 1,041,941 349,377 105,546 3,321,219 Total home equity $ 5,136,242 $ 2,480,351 $ 632,296 $ 277,387 $ 8,526,276 Residential mortgage: Residential mortgage $ 3,528,722 $ 1,795,997 $ 603,735 $ 56,506 $ 5,984,960 Purchased credit-impaired 636 723 681 --- 2,040 Total residential mortgage $ |