SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk may exist when a number of borrowers are engaged in similar activities, or activities in the same geographic region, and have similar economic characteristics that would cause them to be similarly impacted by changes in economic or other conditions. Concentrations of both on-balance sheet and off-balance sheet credit risk are controlled and monitored as part of credit policies. The Corporation is a regional financial services holding company with a geographic concentration of its on-balance-sheet and off-balance-sheet activities in Michigan, California and Texas.
As outlined below, the Corporation has a concentration of credit risk with the automotive industry. Loans to automotive dealers and to borrowers involved with automotive production are reported as automotive, as management believes these loans have similar economic characteristics that might cause them to react similarly to changes in economic conditions. This aggregation involves the exercise of judgment. Included in automotive production are: (a) original equipment manufacturers and Tier 1 and Tier 2 suppliers that produce components used in vehicles and whose primary revenue source is automotive-related (“primary” defined as greater than 50%) and (b) other manufacturers that produce components used in vehicles and whose primary revenue source is automotive-related. Loans less than $1 million and loans recorded in the Small Business loan portfolio were excluded from the definition. Outstanding loans, included in "commercial loans" on the consolidated balance sheets, and total exposure from loans, unused commitments and standby letters of credit to companies related to the automotive industry were as follows:
|
| | | | | | | |
(in millions) | | | |
December 31 | 2013 | | 2012 |
Automotive loans: | | | |
Production | $ | 1,229 |
| | $ | 1,248 |
|
Dealer | 5,854 |
| | 5,198 |
|
Total automotive loans | $ | 7,083 |
| | $ | 6,446 |
|
Total automotive exposure: | | | |
Production | $ | 2,316 |
| | $ | 2,230 |
|
Dealer | 6,857 |
| | 6,294 |
|
Total automotive exposure | $ | 9,173 |
| | $ | 8,524 |
|
Further, the Corporation’s portfolio of commercial real estate loans, which includes real estate construction and commercial mortgage loans, was as follows.
|
| | | | | | | |
(in millions) | | | |
December 31 | 2013 | | 2012 |
Real estate construction loans: | | | |
Commercial Real Estate business line (a) | $ | 1,447 |
| | $ | 1,049 |
|
Other business lines (b) | 315 |
| | 191 |
|
Total real estate construction loans | 1,762 |
| | 1,240 |
|
Commercial mortgage loans: | | | |
Commercial Real Estate business line (a) | 1,678 |
| | 1,873 |
|
Other business lines (b) | 7,109 |
| | 7,599 |
|
Total commercial mortgage loans | 8,787 |
| | 9,472 |
|
Total commercial real estate loans | $ | 10,549 |
| | $ | 10,712 |
|
Total unused commitments on commercial real estate loans | $ | 1,780 |
| | $ | 1,523 |
|
| |
(a) | Primarily loans to real estate developers. |
| |
(b) | Primarily loans secured by owner-occupied real estate. |
