KeyBank 2014 Annual Report Download - page 75

As of December 31, 2014, we had $3.4 million of mortgage and construction loans that had a loan-to-value ratio
greater than 1.0, and were accounted for as performing loans. These loans were not considered impaired due to
one or more of the following factors: (i) underlying cash flow adequate to service the debt at a market rate of
return with adequate amortization; (ii) a satisfactory borrower payment history; and (iii) acceptable guarantor
support.
Consumer loan portfolio
Consumer loans outstanding decreased by $130 million, or .8%, from one year ago. The home equity portfolio is
the largest segment of our consumer loan portfolio. Approximately 97% of this portfolio at December 31, 2014,
originated from Key Community Bank within our 12-state footprint. The remainder of the portfolio, which has
been in an exit mode since the fourth quarter of 2007, was originated from the Consumer Finance line of business
and is now included in Other Segments. Home equity loans in Key Community Bank increased by $26 million,
or .3%, over the past 12 months as a result of stabilized home values, improved employment, and favorable
borrowing conditions.
As shown in Figure 13, we hold the first lien position for approximately 60% of the Key Community Bank home
equity portfolio at December 31, 2014, and 58% at December 31, 2013. For consumer loans with real estate
collateral, we track borrower performance monthly. Regardless of the lien position, credit metrics are refreshed
quarterly, including recent Fair Isaac Corporation scores as well as original and updated loan-to-value ratio. This
information is used in establishing the ALLL. Our methodology is described in Note 1 (“Summary of Significant
Accounting Policies”) under the heading “Allowance for Loan and Lease Losses.”
Regulatory guidance issued in January 2012 addressed specific risks and required actions within home equity
portfolios associated with second lien loans. This regulatory guidance related to the classification of second lien
home equity loans was implemented prospectively, and therefore prior periods were not adjusted. At
December 31, 2014, 40% of our home equity portfolio is secured by second lien mortgages. On at least a
quarterly basis, we continue to monitor the risk characteristics of these loans when determining whether our loss
estimation methods are appropriate.
Figure 19 summarizes our home equity loan portfolio by source at the end of each of the last five years, as well
as certain asset quality statistics and yields on the portfolio as a whole.
Figure 19. Home Equity Loans
December 31,
dollars in millions 2014 2013 2012 2011 2010
SOURCES OF YEAR END LOANS
Key Community Bank $ 10,366 $ 10,340 $ 9,816 $ 9,229 $ 9,514
Other 267 334 423 535 666
Total $ 10,633 $ 10,674 $ 10,239 $ 9,764 $ 10,180
Nonperforming loans at year end $ 195 $ 220 $ 231 (a), (b) $ 120 $ 120
Net loan charge-offs for the year 32 66 118 130 175
Yield for the year 4.02 % 4.07 % 4.21 % 4.34 % 4.45 %
(a) Includes $48 million of performing home equity second liens that are subordinate to first liens and 120 days or more past due or in
foreclosure, or for which the first mortgage delinquency timeframe is unknown. Such second liens are now being reported as
nonperforming loans based upon regulatory guidance issued in January 2012.
(b) Includes $72 million of performing secured loans that were discharged through Chapter 7 bankruptcy and not formally re-affirmed as
addressed in regulatory guidance that was updated in the third quarter of 2012. Such loans have been designated as nonperforming and
TDRs.
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