KeyBank 2014 Annual Report Download - page 186

critical to the valuation of servicing assets. At December 31, 2014, a 1.00% decrease in the value assigned to the
escrow deposits would cause a $64 million decrease in the fair value of our mortgage servicing assets. An
increase in the assumed default rate of commercial mortgage loans of 1.00% would cause a $7 million decrease
in the fair value of our mortgage servicing assets.
Contractual fee income from servicing commercial mortgage loans totaled $46 million for the year ended
December 31, 2014, and $58 million for the year ended December 31, 2013. We have elected to account for
servicing assets using the amortization method. The amortization of servicing assets is determined in proportion
to, and over the period of, the estimated net servicing income. The amortization of servicing assets for each
period, as shown in the table at the beginning of this note, is recorded as a reduction to fee income. Both the
contractual fee income and the amortization are recorded in “mortgage servicing fees” on the income statement.
Additional information pertaining to the accounting for mortgage and other servicing assets is included in Note 1
(“Summary of Significant Accounting Policies”) under the heading “Servicing Assets” and Note 13
(“Acquisitions and Discontinued Operations”) under the heading “Mortgage Servicing Rights” in this report.
10. Goodwill and Other Intangible Assets
Goodwill represents the amount by which the cost of net assets acquired in a business combination exceeds their
fair value. Other intangible assets are primarily the net present value of future economic benefits to be derived
from the purchase of credit card receivable assets and core deposits. Additional information pertaining to our
accounting policy for goodwill and other intangible assets is summarized in Note 1 (“Summary of Significant
Accounting Policies”) under the heading “Goodwill and Other Intangible Assets.”
Our annual goodwill impairment testing is performed as of October 1 each year. On that date in 2014, we
determined that the estimated fair value of the Key Community Bank unit was 26% greater than its carrying
amount; in 2013, the excess was 23%. On that date in 2014, we determined that the estimated fair value of the
Key Corporate Bank unit was 16% greater than its carrying amount. There previously had been no goodwill
associated with our Key Corporate Bank unit since the first quarter of 2009, when we recorded a $223 million
pre-tax impairment charge and wrote off all of the remaining goodwill that had been assigned to that unit. If
actual results, market conditions, and economic conditions were to differ from the assumptions and data used in
this goodwill impairment testing, the estimated fair value of the Key Community Bank and Key Corporate Bank
units could change. The carrying amounts of the Key Community Bank and Key Corporate Bank units represent
the average equity based on risk-weighted regulatory capital for goodwill impairment testing and management
reporting purposes.
Based on our quarterly review of impairment indicators during 2014 and 2013, it was not necessary to perform
further reviews of goodwill recorded in our Key Community Bank or Key Corporate Bank units. We will
continue to monitor the Key Community Bank unit as appropriate since it is particularly dependent upon
economic conditions that impact consumer credit risk and behavior.
Changes in the carrying amount of goodwill by reporting unit are presented in the following table.
in millions
Key
Community
Bank
Key
Corporate
Bank Total
BALANCE AT DECEMBER 31, 2012 $ 979 — $ 979
Impairment losses based on results of interim impairment testing — — —
BALANCE AT DECEMBER 31, 2013 979 — 979
Impairment losses based on results of interim impairment testing — — —
Acquisition of Pacific Crest Securities — $ 78 78
BALANCE AT DECEMBER 31, 2014 $ 979 $ 78 $ 1,057
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