KeyBank 2008 Annual Report Download - page 68

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66
MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES
Management anticipates that Key’s nonperforming loans will continue
to increase in 2009 and that net loan charge-offs will remain elevated.
As a result, the allowance for loan losses may be increased in future
periods until credit trends level off.
The composition of Key’s exit loan portfolio at December 31, 2008, the
net charge-offs recorded on this portfolio for the second half of 2008,
and the nonperforming status of these loans at December 31 areshown
in Figure40. This portfolio, which has decreased by $911 million
since June 30, 2008, accounted for 44% of Key’s net loan charge-offs for
the second half of 2008 and 33% of nonperforming assets outstanding
at the end of the year. At December 31, 2008, the exit loan portfolio
represented 12% of Key’s total loans and loans held for sale.
Figure 41 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’snonperforming
loans during 2008 are summarized in Figure42.
Net Loan Balance on
Balance Charge-offs Nonperforming
Outstanding at from July 1, 2008 to Status at
in millions December 31, 2008 December 31, 2008 December 31, 2008
Residential properties — homebuilder $ 883 $105 $254
Residential properties — held for sale 88 —
(a)
88
Total residential properties 971 105 342
Marine and RV floor plan 945 14 91
Total commercial loans 1,916 119 433
Private education 2,871 73 —
Home equity — National Banking 1,051 29 15
Marine 3,401 41 26
RV and other consumer 283 7 7
Total consumer loans 7,606 150 48
Total loans in exit portfolios $9,522 $269 $481
(a)
Declines in the fair values of loans held for sale are recognized as charges to “net (losses) gains from loan securitizations and sales.” As shown in Figure 36 on page 63, Key recorded realized
and unrealized losses of $45 million on loans held for sale in the exit portfolio during the second half of 2008.
FIGURE 40. EXIT LOAN PORTFOLIO
Nonperforming Loans
December 31, 2008 Total Loans %of Loans
dollars in millions Commitments
(a)
Outstanding Amount Outstanding
Industry classification:
Services $12,323 $ 4,778 $ 21 .4%
Manufacturing 9,690 4,067 54 1.3
Public utilities 4,987 1,564 1 .1
Financial services 4,251 1,861 10 .5
Wholesale trade 3,869 1,771 10 .6
Dealer floor plan 3,392 2,418 132 5.5
Property management 3,029 1,827 45 2.5
Retail trade 2,789 1,197 9 .8
Building contractors 2,100 875 69 7.9
Insurance 1,908 346 — —
Transportation 1,894 1,387 53 3.8
Mining 1,264 677 — —
Public administration 964 360 1 .3
Agriculture/forestry/fishing 867 524 3 .6
Communications 743 287 — —
Individuals 16 9 — —
Other 3,595 3,312 7 .2
Total $57,681 $27,260 $415 1.5%
(a)
Total commitments include unfunded loan commitments, unfunded letters of credit (net of amounts conveyed to others) and loans outstanding.
FIGURE 41. COMMERCIAL, FINANCIAL AND AGRICULTURAL LOANS