KeyBank 2006 Annual Report Download - page 54

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54
MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES
Credit exposure by industry classification in the largest sector of Key’s
loan portfolio, “commercial, financial and agricultural loans,” is
presented in Figure 34. The types of activity that caused the change in
Key’s nonperforming loans during 2006 are summarized in Figure 35.
Nonperforming Loans
December 31, 2006 Total Loans % of Loans
dollars in millions Commitments
a
Outstanding Amount Outstanding
Industry classification:
Manufacturing $10,572 $ 3,769 $ 2 .1%
Services 9,639 2,992 10 .3
Retail trade 6,033 3,409 3 .1
Public utilities 3,876 575 — —
Property management 3,482 1,551 — —
Financial services 3,298 1,258 1 .1
Wholesale trade 3,199 1,395 2 .1
Building contractors 2,428 1,049 3 .3
Insurance 2,331 113 — —
Transportation 2,195 1,515 5 .3
Public administration 1,088 388 — —
Agriculture/forestry/fishing 947 597 2 .3
Communications 885 316 — —
Mining 802 262 — —
Individuals 38 17 — —
Other 3,005 2,206 10 .5
Total $53,818 $21,412 $38 .2%
a
Total commitments include unfunded loan commitments, unfunded letters of credit (net of amounts conveyed to others) and loans outstanding.
FIGURE 34. COMMERCIAL, FINANCIAL AND AGRICULTURAL LOANS
2006 Quarters
in millions 2006 Fourth Third Second First 2005
BALANCE AT BEGINNING OF PERIOD $ 277 $223 $279 $295 $277 $308
Loans placed on nonaccrual status 447 115 134 98 100 361
Charge-offs (268) (74) (70) (59) (65) (315)
Loans sold (35) (5) (22) (6) (2) (10)
Payments (126) (23) (43) (45) (15) (41)
Transfer to held-for-sale portfolio
a
(55) — (55) — — —
Transfers to OREO (16) (12) — (4) — (16)
Loans returned to accrual status (9) (9) — — — (10)
BALANCE AT END OF PERIOD $ 215 $215 $223 $279 $295 $277
a
On August 1, 2006, Key transferred approximately $55 million of home equity loans from nonperforming loans to nonperforming loans held for sale in connection with an expected sale of the
Champion Mortgage finance business.
FIGURE 35. SUMMARYOF CHANGES IN NONPERFORMING LOANS
Liquidity risk management
Key defines “liquidity” as the ongoing ability to accommodate liability
maturities and deposit withdrawals, meet contractual obligations, and
fund asset growth and new business transactions at a reasonable cost,
in a timely manner and without adverse consequences. Liquidity
management involves maintaining sufficient and diverse sources of
funding to accommodate planned as well as unanticipated changes in
assets and liabilities under both normal and adverse conditions.
Key manages liquidity for all of its affiliates on an integrated basis. This
approach considers the unique funding sources available to each entity
and the differences in their capabilities to manage through adverse
conditions. It also recognizes that the access of all affiliates to money
market funding would be similarly affected by adverse market conditions
or other events that could negatively affect the level or cost of liquidity.
As part of the management process, Key’s management has established
guidelines or target ranges that relate to the maturities of various types
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