KeyBank 2014 Annual Report Download - page 153

Most extensions of credit are subject to loan grading or scoring. Loan grades are assigned at the time of
origination, verified by credit risk management, and periodically re-evaluated thereafter. This risk rating
methodology blends our judgment with quantitative modeling. Commercial loans generally are assigned two
internal risk ratings. The first rating reflects the probability that the borrower will default on an obligation; the
second rating reflects expected recovery rates on the credit facility. Default probability is determined based on,
among other factors, the financial strength of the borrower, an assessment of the borrower’s management, the
borrower’s competitive position within its industry sector, and our view of industry risk in the context of the
general economic outlook. Types of exposure, transaction structure, and collateral, including credit risk
mitigants, affect the expected recovery assessment.
Credit quality indicators for loans are updated on an ongoing basis. Bond rating classifications are indicative of
the credit quality of our commercial loan portfolios and are determined by converting our internally assigned risk
rating grades to bond rating categories. Payment activity and the regulatory classifications of pass and
substandard are indicators of the credit quality of our consumer loan portfolios.
Credit quality indicators for our commercial and consumer loan portfolios, excluding $13 million and $16
million of PCI loans at December 31, 2014, and December 31, 2013, respectively, based on bond rating,
regulatory classification, and payment activity as of December 31, 2014, and December 31, 2013, are as follows:
Commercial Credit Exposure
Credit Risk Profile by Creditworthiness Category (a)
December 31,
in millions
Commercial, financial and
agricultural RE — Commercial RE — Construction Commercial Lease Total
RATING (b), (c) 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
AAA — AA $ 311 $ 402 $2$2$1$1$ 513 $ 656 $ 827 $ 1,061
A1,272 882 156 —1608 631 1,881 1,570
BBB — BB 24,949 22,368 7,527 7,129 956 920 2,952 3,080 36,384 33,497
B686 521 287 282 105 32 112 117 1,190 952
CCC — C 764 790 230 250 38 139 67 67 1,099 1,246
Total $ 27,982 $ 24,963 $ 8,047 $ 7,719 $ 1,100 $ 1,093 $ 4,252 $ 4,551 $ 41,381 $ 38,326
(a) Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.
(b) Our bond rating to internal loan grade conversion system is as follows: AAA - AA = 1, A = 2, BBB - BB = 3 - 13, B = 14 - 16, and
CCC - C = 17 - 20.
(c) Our internal loan grade to regulatory-defined classification is as follows: Pass = 1-16, Special Mention = 17, Substandard = 18,
Doubtful = 19, and Loss = 20.
Consumer Credit Exposure
Credit Risk Profile by Regulatory Classifications (a), (b)
December 31,
in millions
Residential — Prime
GRADE 2014 2013
Pass $ 12,552 $ 12,500
Substandard 293 346
Total $ 12,845 $ 12,846
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