KeyBank 2007 Annual Report Download - page 56

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54
MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES
Nonperforming assets. Figure 35 shows the composition of Key’s
nonperforming assets. These assets totaled $764 million at December 31,
2007, and represented 1.08% of loans, other real estate owned (known
as “OREO”) and other nonperforming assets, compared to $273 million,
or .41%, at December 31, 2006. See Note 1 under the headings “Impaired
and Other Nonaccrual Loans” and “Allowance for Loan Losses” on
pages 66 and 67, respectively, for a summary of Key’s nonaccrual and
charge-off policies.
As shown in Figure 35, the growth in nonperforming assets over the past
twelve months reflected increases in both nonperforming loans and
other nonperforming assets. Most of the increase in nonperforming loans
occurred during the second half of 2007 and was attributable primarily
to deteriorating market conditions in the residential properties segment
of Key’s commercial real estate construction portfolio. The majority of
the increase in this segment relates to loans outstanding in Florida and
southern California. The growth in other nonperforming assets was
attributable to investments held by the Private Equity unit within Key’s
Real Estate Capital line of business. The increase in total nonperforming
assets was moderated by a reduction in OREO.
December 31,
dollars in millions 2007 2006 2005 2004 2003
Commercial, financial and agricultural $84 $ 38 $ 63 $ 42 $252
Real estate — commercial mortgage 41 48 38 25 79
Real estate — construction 415 10 2 20 25
Total commercial real estate loans
a
456 58 40 45 104
Commercial lease financing 28 22 39 84 103
Total commercial loans 568 118 142 171 459
Real estate — residential mortgage 28 34 46 46 45
Home equity 66 50 79 80 153
Consumer — direct 222314
Consumer — indirect 23 118823
Total consumer loans 119 97 135 137 235
Total nonperforming loans 687 215 277 308 694
Nonperforming loans held for sale 25 338—
OREO 21 57 25 53 61
Allowance for OREO losses (2) (3) (2) (4) (4)
OREO, net of allowance 19 54 23 49 57
Other nonperforming assets 33
b
1 4 14 2
Total nonperforming assets $764 $273 $307 $379 $753
Accruing loans past due 90 days or more $231 $120 $ 90 $122 $152
Accruing loans past due 30 through 89 days 843 644 491 491 613
Nonperforming loans to year-end portfolio loans .97% .33% .42% .49% 1.16%
Nonperforming assets to year-end portfolio loans
plus OREO and other nonperforming assets 1.08 .41 .46 .60 1.26
a
See Figure 17 and the accompanying discussion on page 36 for more information related to Key’s commercial real estate portfolio.
b
Primarily investments held by the Private Equity unit within Key’s Real Estate Capital line of business.
FIGURE 35. SUMMARY OF NONPERFORMING ASSETS AND PAST DUE LOANS
At December 31, 2007, Key’s 20 largest nonperforming loans totaled
$383 million, representing 56% of total loans on nonperforming status.
The level of Key’s delinquent loans rose during 2007, reflecting the
deterioration in the housing market.
Figure 36 shows credit exposure by industry classification in the largest
sector of Key’s loan portfolio, “commercial, financial and agricultural
loans.” The types of activity that caused the change in Key’s nonperforming
loans during 2007 are summarized in Figure 37.