KeyBank 2006 Annual Report Download - page 82

82
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES
7. LOANS AND LOANS HELD FOR SALE
Commercial and consumer lease financing receivables primarily are
direct financing leases, but also include leveraged leases. The composition
of the net investment in direct financing leases is as follows:
December 31,
in millions 2006 2005
Direct financing lease receivable $6,955 $7,324
Unearned income (738) (763)
Unguaranteed residual value 549 520
Deferred fees and costs 72 54
Net investment in direct financing leases $6,838 $7,135
Minimum future lease payments to be received at December 31, 2006, are as follows:
2007 — $2.3 billion; 2008 — $1.9 billion; 2009 — $1.1 billion; 2010 — $677 million;
2011 — $337 million; and all subsequent years — $384 million.
Key’s loans held for sale by category are summarized as follows:
December 31,
in millions 2006 2005
Commercial, financial and agricultural $47 $ 85
Real estate — commercial mortgage 946 525
Real estate — construction 36 51
Commercial lease financing 3—
Real estate — residential mortgage 21 11
Home equity 180 —
Education 2,390 2,687
Automobile 14 22
Total loans held for sale $3,637 $3,381
Key’s loans by category are summarized as follows:
December 31,
in millions 2006 2005
Commercial, financial and agricultural
a
$21,412 $20,579
Commercial real estate:
Commercial mortgage 8,426 8,360
Construction 8,209 7,109
Total commercial real estate loans 16,635 15,469
Commercial lease financing
a
10,259 10,352
Total commercial loans 48,306 46,400
Real estate — residential mortgage 1,442 1,458
Home equity
b
10,826 13,488
Consumer — direct 1,536 1,794
Consumer — indirect:
Marine 3,077 2,715
Other 639 623
Total consumer — indirect loans 3,716 3,338
Total consumer loans 17,520 20,078
Total loans $65,826 $66,478
Key uses interest rate swaps to manage interest rate risk; these swaps modify the repricing
characteristics of certain loans. For moreinformation about such swaps, see Note 19
(“Derivatives and Hedging Activities”), which begins on page 100.
a
On March 31, 2006, Key reclassified $792 million of loans from the commercial lease
financing component of the commercial loan portfolio to the commercial, financial
and agricultural component to more accurately reflect the nature of these receivables.
Balances presented for prior periods were not reclassified as the historical data was
not available.
b
On August 1, 2006, Key transferred $2.5 billion of home equity loans from the loan
portfolio to loans held for sale in connection with an expected sale of the Champion
Mortgage finance business.
Changes in the allowance for loan losses are summarized as follows:
Year ended December 31,
in millions 2006 2005 2004
Balance at beginning of year $ 966 $1,138 $1,406
Charge-offs (268) (409) (583)
Recoveries 98 94 152
Net loans charged off (170) (315) (431)
Provision for loan losses from
continuing operations 150 143 185
Provision for loan losses from
discontinued operations (3) — —
Reclassification of allowance
for credit losses on lending-
related commitments
a
—— (70)
Allowance related to loans
acquired, net —— 48
Foreign currency translation
adjustment 1——
Balance at end of year $ 944 $966 $1,138
a
Included in “accrued expense and other liabilities” on the consolidated balance sheet.
Changes in the allowance for credit losses on lending-related commitments
are summarized as follows:
Year ended December 31,
in millions 2006 2005 2004
Balance at beginning of year $59 $66 —
Reclassification of allowance
for credit losses —— $70
Credit for losses on lending-
related commitments (6) (7) (4)
Balance at end of year
a
$53 $59 $66
a
Included in “accrued expense and other liabilities” on the consolidated balance sheet.
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