KeyBank 2014 Annual Report Download - page 71

growth in new high credit quality loan commitments and utilization with clients in our middle market segment
and Institutional and Capital Markets business. Our two largest industry classifications — services and
manufacturing — increased by .3% and 9%, respectively, when compared to one year ago. The services and
manufacturing industries represented 22% and 17%, respectively, of the total commercial, financial and
agricultural loan portfolio at December 31, 2014, and 24% and 17%, respectively, at December 31, 2013. At the
end of each period provided in Figure 16 above, loans in the services and manufacturing industry classifications
accounted for approximately 40% of our total commercial, financial and agricultural loan portfolio.
Services, manufacturing, and public utilities are focus areas where we maintain dedicated industry verticals that
are staffed by relationship managers who possess deep industry experience and knowledge. Our loans in the
services classification grew by $17 million, or .3%, compared to last year. Loans in the manufacturing
classification grew by $383 million, or 9% compared to the same period one year ago. Increases in lending to
large corporate, middle market, and business banking clients accounted for the majority of the growth in this
classification.
Our loans in the financial services and transportation classifications increased 32% and 48%, respectively,
compared to the prior year. The increase in financial services loans was primarily attributable to higher issuances
of revolving facilities to finance companies and additional REIT balances. The increase in transportation loans
was primarily attributable to loan growth for rail cars and shipping containers.
Our oil and gas loan portfolio focuses on lending to middle market companies and represents 2% of total loans
outstanding at December 31, 2014. We have over 10 years of experience in energy lending with over 20
specialists dedicated to oil and gas. Credit quality on these loans remains solid.
Commercial real estate loans. CRE loans represent 16% of our total loan portfolio at December 31, 2014, and
December 31, 2013. These CRE loans, including both owner- and nonowner-occupied properties, represented
22% of our commercial loan portfolio at December 31, 2014, compared to 23% one year ago. These loans have
increased $334 million, or 3.8%, to $9.1 billion at December 31, 2014, from $8.8 billion at December 31, 2013.
Our CRE lending business is conducted through two primary sources: our 12-state banking franchise, and
KeyBank Real Estate Capital, a national line of business that cultivates relationships with owners of CRE located
both within and beyond the branch system. This line of business deals primarily with nonowner-occupied
properties (generally properties for which at least 50% of the debt service is provided by rental income from
nonaffiliated third parties) and accounted for approximately 61% of our average year-to-date CRE loans,
compared to 56% one year ago. KeyBank Real Estate Capital generally focuses on larger owners and operators
of CRE.
Figure 17 includes commercial mortgage and construction loans in both Key Community Bank and Key
Corporate Bank. As shown in Figure 17, this loan portfolio is diversified by both property type and geographic
location of the underlying collateral.
As presented in Figure 17, at December 31, 2014, our CRE portfolio included mortgage loans of $8 billion and
construction loans of $1.1 billion, representing 14% and 2%, respectively, of our total loans. Nonowner-occupied
loans represented 11% of our total loans and owner-occupied loans represented 5% of our total loans. The
average size of mortgage loans originated during 2014 was $4.9 million, and our largest mortgage loan at
December 31, 2014, had a balance of $105 million. At December 31, 2014, our average construction loan
commitment was $5.9 million. Our largest construction loan commitment was $49.8 million, and our largest
construction loan amount outstanding was $42.2 million.
Also shown in Figure 17, at December 31, 2014, 70% of our CRE loans were for nonowner-occupied properties,
compared to 67% at December 31, 2013. Approximately 15% and 16% of these loans were construction loans at
December 31, 2014, and 2013, respectively. Typically, these properties are not fully leased at the origination of
the loan. The borrower relies upon additional leasing through the life of the construction loan to provide the cash
flow necessary to support debt service payments. A significant decline in economic growth, and in turn, in rental
rates and occupancy, would adversely affect our portfolio of construction loans.
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