KeyBank 2006 Annual Report Download - page 53

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53
MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES
Nonperforming assets. Figure 33 shows the composition of Key’s
nonperforming assets, which at December 31, 2006, were at their
lowest level in twelve years. These assets totaled $273 million at
December 31, 2006, and represented .41% of loans, other real estate
owned (known as “OREO”) and other nonperforming assets, compared
to $307 million, or .46%, at December 31, 2005. See Note 1 under the
headings “Impaired and Other Nonaccrual Loans” and “Allowance for
Loan Losses” on pages 68 and 69 for a summary of Key’s nonaccrual
and charge-off policies.
December 31,
dollars in millions 2006 2005 2004 2003 2002
Commercial, financial and agricultural $38 $ 63 $ 42 $252 $448
Real estate — commercial mortgage 48 38 25 79 146
Real estate — construction 10 2 20 25 50
Total commercial real estate loans
a
58 40 45 104 196
Commercial lease financing 22 39 84 103 69
Total commercial loans 118 142 171 459 713
Real estate — residential mortgage 34 46 46 45 47
Home equity 50 79 80 153 146
Consumer — direct 22 3 14 13
Consumer — indirect 11 882324
Total consumer loans 97 135 137 235 230
Total nonperforming loans 215 277 308 694 943
Nonperforming loans held for sale 33 8 — —
OREO 57 25 53 61 48
Allowance for OREO losses (3) (2) (4) (4) (3)
OREO, net of allowance 54 23 49 57 45
Other nonperforming assets
b
141425
Total nonperforming assets $273 $307 $379 $753 $993
Accruing loans past due 90 days or more $120 $ 90 $122 $152 $198
Accruing loans past due 30 through 89 days 644 491 491 613 790
Nonperforming loans to year-end portfolio loans .33% .42% .49% 1.16% 1.58%
Nonperforming assets to year-end portfolio loans
plus OREO and other nonperforming assets .41 .46 .60 1.26 1.66
a
See Figure15 and the accompanying discussion on page 38 for more information related to Key’s commercial real estate portfolio.
b
Primarily collateralized mortgage-backed securities.
FIGURE 33. SUMMARY OF NONPERFORMING ASSETS AND PAST DUE LOANS
Most of the 2006 reduction in nonperforming assets occurred within
three loan portfolios: commercial, financial and agricultural; commercial
lease financing and home equity.The decreases in the two commercial
portfolios were due in part to an improved risk profile, while the decrease
in nonperforming home equity loans was attributable to the November
2006 sale of the nonprime mortgage loan portfolio held by the Champion
Mortgage finance business. These reductions were partially offset by an
increase in OREO.
At December 31, 2006, Key’s 20 largest nonperforming loans totaled
$67 million, representing 31% of total loans on nonperforming status.
The level of Key’s delinquent loans rose during 2006, following a
downwardtrend over the past several years. Over the course of a
normal business cycle, fluctuations in the level of Key’s delinquent
loans are to be expected.
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