KeyBank 2014 Annual Report Download - page 193

“Income (loss) from discontinued operations, net of taxes” on the income statement includes (i) the changes in
fair value of the assets and liabilities of the education loan securitization trusts and the loans at fair value in
portfolio (discussed later in this note), and (ii) the interest income and expense from the loans and the securities
of the trusts and the loans in portfolio at both amortized cost and fair value. These amounts are shown separately
in the following table. Gains and losses attributable to changes in fair value are recorded as a component of
“noninterest income” or “noninterest expense.” Interest income and expense related to the loans and securities
are shown as a component of “net interest income.”
The components of “income (loss) from discontinued operations, net of taxes” for the education lending business
are as follows:
Year ended December 31,
in millions 2014 2013 2012
Net interest income $77$ 105 $ 119
Provision (credit) for loan and lease losses 21 20 9
Net interest income (expense) after provision for loan and lease losses 56 85 110
Noninterest income (111) (136) (49)
Noninterest expense 24 28 36
Income (loss) before income taxes (79) (79) 25
Income taxes (30) (29) 9
Income (loss) from discontinued operations, net of taxes (a) $ (49) $ (50) $ 16
(a) Includes after-tax charges of $32 million for 2014, $40 million for 2013, and $50 million for 2012, determined by applying a matched
funds transfer pricing methodology to the liabilities assumed necessary to support the discontinued operations.
The discontinued assets and liabilities of our education lending business included on the balance sheet are as
follows:
December 31,
in millions 2014 2013
Held-to-maturity securities $1 —
Trust loans at fair value —$ 1,960
Portfolio loans at fair value 191 147
Loans, net of unearned income (a) 2,104 2,390
Less: Allowance for loan and lease losses 29 39
Net loans 2,266 4,458
Trust accrued income and other assets at fair value —20
Accrued income and other assets 38 45
Total assets $ 2,305 $ 4,523
Trust accrued expense and other liabilities at fair value —$20
Trust securities at fair value —1,834
Total liabilities —$ 1,854
(a) At December 31, 2014, and December 31, 2013, unearned income was less than $1 million.
The discontinued education lending business consists of loans in portfolio (recorded at fair value) and loans in
portfolio (recorded at carrying value with appropriate valuation reserves). The assets and liabilities in the
securitization trusts (recorded at fair value) were removed with the deconsolidation of the securitization trusts on
September 30, 2014.
At December 31, 2014, education loans include 1,612 TDRs with a recorded investment of approximately $17
million (pre-modification and post-modification). A specifically allocated allowance of $1 million was assigned
to these loans as of December 31, 2014. There have been no significant payment defaults. There are no
significant commitments outstanding to lend additional funds to these borrowers. Additional information
regarding TDR classification and ALLL methodology is provided in Note 5 (“Asset Quality”).
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