5. Asset Quality

We assess the credit quality of the loan portfolio by monitoring net credit losses, levels of nonperforming assets and delinquencies, and credit quality ratings as defined by management.

Our nonperforming assets and past due loans were as follows:


December 31,
in millions	2014		2013

Total nonperforming loans^(a)	$	418	$	508
Nonperforming loans held for sale		—		1
OREO		18		15
Other nonperforming assets		—		7
Total nonperforming assets	$	436	$	531

Nonperforming assets from discontinued operations — education lending^(b)	$	11	$	25


Restructured loans included in nonperforming loans	$	157	$	214
Restructured loans with an allocated specific allowance^(c)		82		71
Specifically allocated allowance for restructured loans^(d)		34		35
Accruing loans past due 90 days or more	$	96	$	71
Accruing loans past due 30 through 89 days		235		318

(a)	Loan balances exclude $13 million and $16 million of PCI loans at December 31, 2014, and December 31, 2013, respectively.

(b)	Includes restructured loans of approximately $17 million and $13 million at December 31, 2014, and December 31, 2013, respectively. See Note 13 (“Acquisitions and Discontinued Operations”) for further discussion.

(c)	Included in individually impaired loans allocated a specific allowance.

(d)	Included in allowance for individually evaluated impaired loans.

We evaluate purchased loans for impairment in accordance with the applicable accounting guidance. Purchased loans that have evidence of deterioration in credit quality since origination and for which it is probable, at acquisition, that all contractually required payments will not be collected are deemed PCI and initially recorded at fair value without recording an allowance for loan losses. At the date of acquisition, the estimated gross contractual amount receivable of all PCI loans totaled $41 million. The estimated cash flows not expected to be collected (the nonaccretable amount) were $11 million, and the accretable amount was approximately $5 million. The difference between the fair value and the cash flows expected to be collected from the purchased loans is accreted to interest income over the remaining term of the loans.

At December 31, 2014, the outstanding unpaid principal balance and carrying value of all PCI loans was $20 million and $13 million, respectively. Changes in the accretable yield during 2014 included accretion and net reclassifications of less than $1 million, resulting in an ending balance of $5 million at December 31, 2014.

At December 31, 2014, the approximate carrying amount of our commercial nonperforming loans outstanding represented 74% of their original contractual amount, total nonperforming loans outstanding represented 79% of their original contractual amount owed, and nonperforming assets in total were carried at 79% of their original contractual amount.

At December 31, 2014, our 20 largest nonperforming loans totaled $88 million, representing 21% of total loans on nonperforming status. At December 31, 2013, the 20 largest nonperforming loans totaled $86 million, representing 17% of total loans on nonperforming status.

Nonperforming loans and loans held for sale reduced expected interest income by $16 million for the year ended December 31, 2014, and $23 million for the year ended December 31, 2013.

The following tables set forth a further breakdown of individually impaired loans as of December 31, 2014, and December 31, 2013:


December 31, 2014 in millions	Recorded Investment		^(a)	Unpaid Principal Balance		^(b)	Specific Allowance		Average Recorded Investment
With no related allowance recorded:
Commercial, financial and agricultural	$	6		$	17			—	$	8
Commercial real estate:
Commercial mortgage		15			20			—		19
Construction		5			6			—		7
Total commercial real estate loans		20			26			—		26
Total commercial loans		26			43			—		34
Real estate — residential mortgage		24			24			—		30

Home equity:
Key Community Bank		62			63			—		63
Other		1			1			—		2
Total home equity loans		63			64			—		65
Consumer other:
Marine		2			2			—		2
Total consumer other		2			2			—		2
Total consumer loans		89			90			—		97
Total loans with no related allowance recorded		115			133			—		131

With an allowance recorded:
Commercial, financial and agricultural		37			37		$	9		28
Commercial real estate:
Commercial mortgage		6			6			2		6
Construction		3			3			1		2
Total commercial real estate loans		9			9			3		8
Total commercial loans		46			46			12		36

Real estate — residential mortgage		31			31			5		25

Home equity:
Key Community Bank		46			46			16		43
Other		11			11			2		11
Total home equity loans		57			57			18		54

Consumer other — Key Community Bank		4			4			—		3
Credit cards		4			4			—		4
Consumer other:
Marine		43			43			5		45
Other		2			2			—		2
Total consumer other		45			45			5		47
Total consumer loans		141			141			28		133
Total loans with an allowance recorded		187			187			40		169
Total	$	302		$	320		$	40	$	300

(a)	The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our consolidated balance sheet.

(b)	The Unpaid Principal Balance represents the customer’s legal obligation to us.


December 31, 2013 in millions	Recorded Investment		^(a)	Unpaid Principal Balance		^(b)	Specific Allowance		Average Recorded Investment
With no related allowance recorded:
Commercial, financial and agricultural	$	33		$	69			—	$	33
Commercial real estate:
Commercial mortgage		21			25			—		55
Construction		48			131			—		48
Total commercial real estate loans		69			156			—		103
Total commercial loans		102			225			—		136

Real estate — residential mortgage		27			27			—		24

Home equity:
Key Community Bank		67			67			—		66
Other		2			2			—		2
Total home equity loans		69			69			—		68
Consumer other:
Marine		3			3			—		2
Total consumer other		3			3			—		2
Total consumer loans		99			99			—		94
Total loans with no related allowance recorded		201			324			—		230

With an allowance recorded:
Commercial, financial and agricultural		17			20		$	8		25
Commercial real estate:
Commercial mortgage		6			6			2		7
Construction		2			12			—		1
Total commercial real estate loans		8			18			2		8
Total commercial loans		25			38			10		33

Real estate — residential mortgage		29			29			9		23

Home equity:
Key Community Bank		35			35			10		29
Other		10			11			1		9
Total home equity loans		45			46			11		38

Consumer other — Key Community Bank		3			3			1		2
Credit cards		5			5			1		3
Consumer other:
Marine		49			49			10		55
Other		1			1			—		1
Total consumer other		50			50			10		56
Total consumer loans		132			133			32		122
Total loans with an allowance recorded		157			171			42		155
Total	$	358		$	495		$	42	$	385

(a)	The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our consolidated balance sheet.

(b)	The Unpaid Principal Balance represents the customer’s legal obligation to us.

For the years ended December 31, 2014, 2013, and 2012, interest income recognized on the outstanding balances of accruing impaired loans totaled $7 million, $6 million, and $5 million, respectively.

At December 31, 2014, aggregate restructured loans (accrual and nonaccrual loans) totaled $270 million, compared to $338 million at December 31, 2013. We added $93 million in restructured loans during 2014, which were offset by $161 million in payments and charge-offs.

A further breakdown of TDRs included in nonperforming loans by loan category as of December 31, 2014, follows:


December 31, 2014 dollars in millions	Number of loans		Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment
LOAN TYPE
Nonperforming:
Commercial, financial and agricultural		14	$	25	$	23
Commercial real estate:
Real estate — commercial mortgage		10		38		13
Real estate — construction		1		5		—
Total commercial real estate loans		11		43		13
Total commercial loans		25		68		36
Real estate — residential mortgage		453		27		27
Home equity:
Key Community Bank		1,184		79		72
Other		158		4		4
Total home equity loans		1,342		83		76
Consumer other — Key Community Bank		37		2		1
Credit cards		290		2		2
Consumer other:
Marine		206		17		14
Other		38		1		1
Total consumer other		244		18		15
Total consumer loans		2,366		132		121
Total nonperforming TDRs		2,391		200		157

Prior-year accruing^(a)
Commercial, financial and agricultural		20		6		3
Commercial real estate:
Real estate — commercial mortgage		1		2		1
Total commercial real estate loans		1		2		1
Total commercial loans		21		8		4
Real estate — residential mortgage		381		29		29
Home equity:
Key Community Bank		674		41		36
Other		310		9		8
Total home equity loans		984		50		44
Consumer other — Key Community Bank		45		2		2
Credit cards		514		4		2
Consumer other:
Marine		373		54		31
Other		67		2		1
Total consumer other		440		56		32
Total consumer loans		2,364		141		109
Total prior-year accruing TDRs		2,385		149		113
Total TDRs		4,776	$	349	$	270

(a)	All TDRs that were restructured prior to January 1, 2014, and are fully accruing.

A further breakdown of TDRs included in nonperforming loans by loan category as of December 31, 2013, follows:


December 31, 2013 dollars in millions	Number of loans		Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment
LOAN TYPE
Nonperforming:
Commercial, financial and agricultural		33	$	72	$	34
Commercial real estate:
Real estate — commercial mortgage		11		41		14
Real estate — construction		6		19		4
Total commercial real estate loans		17		60		18
Total commercial loans		50		132		52
Real estate — residential mortgage		676		43		43
Home equity:
Key Community Bank		1,708		91		86
Other		227		6		6
Total home equity loans		1,935		97		92
Consumer other — Key Community Bank		49		2		1
Credit cards		629		5		4
Consumer other:
Marine		360		24		21
Other		50		1		1
Total consumer other		410		25		22
Total consumer loans		3,699		172		162
Total nonperforming TDRs		3,749		304		214

Prior-year accruing^(a)
Commercial, financial and agricultural		50		7		3
Commercial real estate:
Real estate — commercial mortgage		4		18		10
Real estate — construction		1		23		42
Total commercial real estate loans		5		41		52
Total commercial loans		55		48		55
Real estate — residential mortgage		119		12		12
Home equity:
Key Community Bank		161		17		17
Other		212		7		6
Total home equity loans		373		24		23
Consumer other — Key Community Bank		31		1		1
Credit cards		240		2		1
Consumer other:
Marine		272		51		31
Other		54		1		1
Total consumer other		326		52		32
Total consumer loans		1,089		91		69
Total prior-year accruing TDRs		1,144		139		124
Total TDRs		4,893	$	443	$	338

(a)	All TDRs that were restructured prior to January 1, 2013, and are fully accruing.

We classify loan modifications as TDRs when a borrower is experiencing financial difficulties and we have granted a concession without commensurate financial, structural, or legal consideration. All commercial and consumer loan TDRs, regardless of size, are individually evaluated for impairment to determine the probable loss content and are assigned a specific loan allowance if deemed appropriate. This designation has the effect of moving the loan from the general reserve methodology (i.e., collectively evaluated) to the specific reserve methodology (i.e., individually evaluated) and may impact the ALLL through a charge-off or increased loan loss provision. These components affect the ultimate allowance level. Additional information regarding TDRs for discontinued operations is provided in Note 13 (“Acquisitions and Discontinued Operations”).

Commercial loan TDRs are considered defaulted when principal and interest payments are 90 days past due. Consumer loan TDRs are considered defaulted when principal and interest payments are more than 60 days past due. During the year ended December 31, 2014, there were no significant commercial loan TDRs, and 84 consumer loan TDRs with a combined recorded investment of $4 million that experienced payment defaults from modifications resulting in TDR status during 2013. During the year ended December 31, 2013, there were no significant commercial loan TDRs, and 672 consumer loan TDRs with a combined recorded investment of $31 million that experienced payment defaults from modifications resulting in TDR status during 2012. As TDRs are individually evaluated for impairment under the specific reserve methodology, subsequent defaults do not generally have a significant additional impact on the ALLL.

Our loan modifications are handled on a case-by-case basis and are negotiated to achieve mutually agreeable terms that maximize loan collectability and meet the borrower’s financial needs. Our concession types are primarily interest rate reductions, forgiveness of principal, and other modifications. The commercial TDR other concession category includes modification of loan terms, covenants, or conditions. The consumer TDR other concession category primarily includes those borrowers that are discharged through Chapter 7 bankruptcy and have not been formally re-affirmed.

The following table shows the post-modification outstanding recorded investment by concession type for our commercial and consumer accruing and nonaccruing TDRs and other selected financial data.


December 31, in millions	2014		2013
Commercial loans:
Interest rate reduction	$	13	$	95
Forgiveness of principal		2		5
Other		25		7
Total	$	40	$	107

Consumer loans:
Interest rate reduction	$	140	$	130
Forgiveness of principal		4		5
Other		86		96
Total	$	230	$	231

Total commercial and consumer TDRs^(a)	$	270	$	338
Total loans		57,381		54,457

(a)	Commitments outstanding to lend additional funds to borrowers whose loan terms have been modified in TDRs are $5 million and $15 million at December 31, 2014, and December 31, 2013, respectively.

Our policies for determining past due loans, placing loans on nonaccrual, applying payments on nonaccrual loans, and resuming accrual of interest for our commercial and consumer loan portfolios are disclosed in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Nonperforming Loans.”

At December 31, 2014, approximately $56.6 billion, or 98.7%, of our total loans were current. At December 31, 2014, total past due loans and nonperforming loans of $749 million represented approximately 1.3% of total loans.

The following aging analysis of past due and current loans as of December 31, 2014, and December 31, 2013, provides further information regarding Key’s credit exposure.


December 31, 2014 in millions	Current		30-59 Days Past Due		60-89 Days Past Due		90 and Greater Days Past Due		Nonperforming Loans		Total Past Due and Nonperforming Loans		Purchased Credit Impaired		Total Loans
LOAN TYPE
Commercial, financial and agricultural	$	27,858	$	19	$	14	$	32	$	59	$	124		—	$	27,982
Commercial real estate:
Commercial mortgage		7,981		6		10		16		34		66		—		8,047
Construction		1,084		2		—		1		13		16		—		1,100
Total commercial real estate loans		9,065		8		10		17		47		82		—		9,147
Commercial lease financing		4,172		30		21		11		18		80		—		4,252
Total commercial loans	$	41,095	$	57	$	45	$	60	$	124	$	286		—	$	41,381


Real estate — residential mortgage	$	2,111	$	12	$	7	$	4	$	79	$	102	$	12	$	2,225
Home equity:
Key Community Bank		10,098		46		22		14		185		267		1		10,366
Other		249		5		2		1		10		18		—		267
Total home equity loans		10,347		51		24		15		195		285		1		10,633
Consumer other — Key Community Bank		1,541		9		3		5		2		19		—		1,560
Credit cards		733		6		4		9		2		21		—		754
Consumer other:
Marine		746		11		5		2		15		33		—		779
Other		46		1		—		1		1		3		—		49
Total consumer other		792		12		5		3		16		36		—		828
Total consumer loans	$	15,524	$	90	$	43	$	36	$	294	$	463	$	13	$	16,000

Total loans	$	56,619	$	147	$	88	$	96	$	418	$	749	$	13	$	57,381


December 31, 2013 in millions	Current		30-59 Days Past Due		60-89 Days Past Due		90 and Greater Days Past Due		Nonperforming Loans		Total Past Due and Nonperforming Loans		Purchased Credit Impaired		Total Loans
LOAN TYPE
Commercial, financial and agricultural	$	24,823	$	39	$	8	$	16	$	77	$	140		—	$	24,963
Commercial real estate:
Commercial mortgage		7,638		20		7		17		37		81	$	1		7,720
Construction		1,068		10		—		1		14		25		—		1,093
Total commercial real estate loans		8,706		30		7		18		51		106		1		8,813
Commercial lease financing		4,463		32		33		4		19		88		—		4,551
Total commercial loans	$	37,992	$	101	$	48	$	38	$	147	$	334	$	1	$	38,327

Real estate — residential mortgage	$	2,038	$	19	$	5	$	4	$	107	$	135	$	14	$	2,187
Home equity:
Key Community Bank		10,038		51		31		14		205		301		1		10,340
Other		308		6		4		1		15		26		—		334
Total home equity loans		10,346		57		35		15		220		327		1		10,674
Consumer other — Key Community Bank		1,426		8		5		7		3		23		—		1,449
Credit cards		698		11		5		4		4		24		—		722
Consumer other:
Marine		979		15		6		2		26		49		—		1,028
Other		65		2		1		1		1		5		—		70
Total consumer other		1,044		17		7		3		27		54		—		1,098
Total consumer loans	$	15,552	$	112	$	57	$	33	$	361	$	563	$	15	$	16,130

Total loans	$	53,544	$	213	$	105	$	71	$	508	$	897	$	16	$	54,457

The prevalent risk characteristic for both commercial and consumer loans is the risk of loss arising from an obligor’s inability or failure to meet contractual payment or performance terms. Evaluation of this risk is stratified and monitored by the loan risk rating grades assigned for the commercial loan portfolios and the regulatory risk ratings assigned for the consumer loan portfolios.

Most extensions of credit are subject to loan grading or scoring. Loan grades are assigned at the time of origination, verified by credit risk management, and periodically re-evaluated thereafter. This risk rating methodology blends our judgment with quantitative modeling. Commercial loans generally are assigned two internal risk ratings. The first rating reflects the probability that the borrower will default on an obligation; the second rating reflects expected recovery rates on the credit facility. Default probability is determined based on, among other factors, the financial strength of the borrower, an assessment of the borrower’s management, the borrower’s competitive position within its industry sector, and our view of industry risk in the context of the general economic outlook. Types of exposure, transaction structure, and collateral, including credit risk mitigants, affect the expected recovery assessment.

Credit quality indicators for loans are updated on an ongoing basis. Bond rating classifications are indicative of the credit quality of our commercial loan portfolios and are determined by converting our internally assigned risk rating grades to bond rating categories. Payment activity and the regulatory classifications of pass and substandard are indicators of the credit quality of our consumer loan portfolios.

Credit quality indicators for our commercial and consumer loan portfolios, excluding $13 million and $16 million of PCI loans at December 31, 2014, and December 31, 2013, respectively, based on bond rating, regulatory classification, and payment activity as of December 31, 2014, and December 31, 2013, are as follows:

Commercial Credit Exposure

Credit Risk Profile by Creditworthiness Category^(a)


December 31, in millions
	Commercial, financial and agricultural				RE — Commercial				RE — Construction				Commercial Lease				Total
RATING^{(b), (c)}		2014		2013		2014		2013		2014		2013		2014		2013		2014		2013
AAA — AA	$	311	$	402	$	2	$	2	$	1	$	1	$	513	$	656	$	827	$	1,061
A		1,272		882		1		56		—		1		608		631		1,881		1,570
BBB — BB		24,949		22,368		7,527		7,129		956		920		2,952		3,080		36,384		33,497
B		686		521		287		282		105		32		112		117		1,190		952
CCC — C		764		790		230		250		38		139		67		67		1,099		1,246
Total	$	27,982	$	24,963	$	8,047	$	7,719	$	1,100	$	1,093	$	4,252	$	4,551	$	41,381	$	38,326

(a)	Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.

(b)	Our bond rating to internal loan grade conversion system is as follows: AAA - AA = 1, A = 2, BBB - BB = 3 - 13, B = 14 - 16, and CCC - C = 17 - 20.

(c)	Our internal loan grade to regulatory-defined classification is as follows: Pass = 1-16, Special Mention = 17, Substandard = 18, Doubtful = 19, and Loss = 20.

Consumer Credit Exposure

Credit Risk Profile by Regulatory Classifications^{(a), (b)}


December 31, in millions
	Residential — Prime
GRADE		2014		2013
Pass	$	12,552	$	12,500
Substandard		293		346
Total	$	12,845	$	12,846

Credit Risk Profile Based on Payment Activity^(a)


December 31, in millions	Consumer — Key Community Bank				Credit cards				Consumer — Marine				Consumer — Other				Total
December 31, in millions		2014		2013		2014		2013		2014		2013		2014		2013		2014		2013
Performing	$	1,558	$	1,446	$	752	$	718	$	764	$	1,002	$	48	$	69	$	3,122	$	3,235
Nonperforming		2		3		2		4		15		26		1		1		20		34
Total	$	1,560	$	1,449	$	754	$	722	$	779	$	1,028	$	49	$	70	$	3,142	$	3,269

(a)	Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.

(b)	Our past due payment activity to regulatory classification conversion is as follows: pass = less than 90 days; and substandard = 90 days and greater plus nonperforming loans.

We determine the appropriate level of the ALLL on at least a quarterly basis. The methodology is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses.” We apply expected loss rates to existing loans with similar risk characteristics as noted in the credit quality indicator table above and exercise judgment to assess the impact of factors such as changes in economic conditions, changes in credit policies or underwriting standards, and changes in the level of credit risk associated with specific industries and markets.

For all commercial and consumer loan TDRs, regardless of size, as well as impaired commercial loans with an outstanding balance of $2.5 million or greater, we conduct further analysis to determine the probable loss content and assign a specific allowance to the loan if deemed appropriate. We estimate the extent of the individual impairment for commercial loans and TDRs by comparing the recorded investment of the loan with the estimated present value of its future cash flows, the fair value of its underlying collateral, or the loan’s observable market price. Secured consumer loan TDRs that are discharged through Chapter 7 bankruptcy and not formally re-affirmed are adjusted to reflect the fair value of the underlying collateral, less costs to sell. Non-Chapter 7 consumer loan TDRs are combined in homogenous pools and assigned a specific allocation based on the estimated present value of future cash flows using the loan’s effective interest rate. A specific allowance also may be assigned — even when sources of repayment appear sufficient — if we remain uncertain about whether the loan will be repaid in full. On at least a quarterly basis, we evaluate the appropriateness of our loss estimation methods to reduce differences between estimated incurred losses and actual losses. The ALLL at December 31, 2014, represents our best estimate of the probable credit losses inherent in the loan portfolio at that date.

Although quantitative modeling factors such as default probability and expected recovery rates are constantly changing as the financial strength of the borrower and overall economic conditions change, we have not changed the accounting policies or methodology that we use to estimate the ALLL.

Commercial loans generally are charged off in full or charged down to the fair value of the underlying collateral when the borrower’s payment is 180 days past due. Most consumer loans are charged off when payments are 120 days past due. Home equity and residential mortgage loans generally are charged down to the fair value of the underlying collateral when payment is 180 days past due. Credit card loans, and similar unsecured products, are charged off when payments are 180 days past due.

At December 31, 2014, the ALLL was $794 million, or 1.38% of loans, compared to $848 million, or 1.56% of loans, at December 31, 2013. At December 31, 2014, the ALLL was 190% of nonperforming loans, compared to 166.9% at December 31, 2013.

A summary of the changes in the ALLL for the periods indicated is presented in the table below:


December 31, in millions	2014			2013			2012
Balance at beginning of period — continuing operations	$	848		$	888		$	1,004
Charge-offs		(211	)		(308	)		(508	)
Recoveries		98			140			163
Net loans and leases charged off		(113	)		(168	)		(345	)
Provision for loan and lease losses from continuing operations		59			130			229
Foreign currency translation adjustment		—			(2	)		—
Balance at end of period — continuing operations	$	794		$	848		$	888

The changes in the ALLL by loan category for the periods indicated are as follows:


	December 31,										December 31,
in millions	2013		Provision			Charge-offs			Recoveries		2014
Commercial, financial and agricultural	$	362	$	41		$	(45	)	$	33	$	391
Real estate — commercial mortgage		165		(15	)		(6	)		4		148
Real estate — construction		32		(16	)		(5	)		17		28
Commercial lease financing		62		(6	)		(10	)		10		56
Total commercial loans		621		4			(66	)		64		623
Real estate — residential mortgage		37		(6	)		(10	)		2		23
Home equity:
Key Community Bank		84		10			(37	)		9		66
Other		11		(2	)		(9	)		5		5
Total home equity loans		95		8			(46	)		14		71
Consumer other — Key Community Bank		29		17			(30	)		6		22
Credit cards		34		32			(34	)		1		33
Consumer other:
Marine		29		6			(23	)		9		21
Other		3		(2	)		(2	)		2		1
Total consumer other:		32		4			(25	)		11		22
Total consumer loans		227		55			(145	)		34		171
Total ALLL — continuing operations		848		59			(211	)		98		794
Discontinued operations		39		21			(45	)		14		29
Total ALLL — including discontinued operations	$	887	$	80			$ (256	)	$	112	$	823


	December 31,										December 31,
in millions	2012		Provision			Charge-offs			Recoveries		2013
Commercial, financial and agricultural	$	327	$	58		$	(62	)	$	39	$	362
Real estate — commercial mortgage		198		(40	)		(20	)		27		165
Real estate — construction		41		(20	)		(3	)		14		32
Commercial lease financing		55		19			(27	)		15		62
Total commercial loans		621		17			(112	)		95		621
Real estate — residential mortgage		30		25			(20	)		2		37
Home equity:
Key Community Bank		105		31			(62	)		10		84
Other		25		—			(20	)		6		11
Total home equity loans		130		31			(82	)		16		95
Consumer other — Key Community Bank		38		15			(31	)		7		29
Credit cards		26		35			(30	)		3		34
Consumer other:
Marine		39		4			(29	)		15		29
Other		4		1			(4	)		2		3
Total consumer other:		43		5			(33	)		17		32
Total consumer loans		267		111			(196	)		45		227
Total ALLL — continuing operations		888		128	^(a)		(308	)		140		848
Discontinued operations		55		21			(55	)		18		39
Total ALLL — including discontinued operations	$	943	$	149			$ (363	)	$	158	$	887

(a)	Includes $2 million of foreign currency translation adjustment.


	December 31,										December 31,
in millions	2011		Provision			Charge-offs			Recoveries		2012
Commercial, financial and agricultural	$	334	$	10		$	(80	)	$	63	$	327
Real estate — commercial mortgage		272		5			(102	)		23		198
Real estate — construction		63		(3	)		(24	)		5		41
Commercial lease financing		78		(18	)		(27	)		22		55
Total commercial loans		747		(6	)		(233	)		113		621
Real estate — residential mortgage		37		17			(27	)		3		30
Home equity:
Key Community Bank		103		90			(99	)		11		105
Other		29		26			(35	)		5		25
Total home equity loans		132		116			(134	)		16		130
Consumer other — Key Community Bank		41		29			(38	)		6		38
Credit cards		—		37			(11	)		—		26
Consumer other:
Marine		46		30			(59	)		22		39
Other		1		6			(6	)		3		4
Total consumer other:		47		36			(65	)		25		43
Total consumer loans		257		235			(275	)		50		267
Total ALLL — continuing operations		1,004		229			(508	)		163		888
Discontinued operations		104		9			(75	)		17		55
Total ALLL — including discontinued operations	$	1,108	$	238			$ (583	)	$	180	$	943

Our ALLL from continuing operations decreased by $54 million, or 6.4%, since 2013 primarily because of the improvement in the credit quality of our loan portfolios. The quality of new loan originations as well as decreasing levels of criticized, classified, and nonperforming loans and net loan charge-offs also resulted in a reduction in our general allowance. Our general allowance applies expected loss rates to our existing loans with similar risk characteristics as well as any adjustments to reflect our current assessment of qualitative factors such as changes in economic conditions, underwriting standards, and concentrations of credit. Our delinquency trends declined during 2013 and into 2014 due to continued improved credit quality, a modest level of loan growth, relatively stable economic conditions, and continued run-off in our exit loan portfolio, reflecting our effort to maintain a moderate enterprise risk tolerance.

For continuing operations, the loans outstanding individually evaluated for impairment totaled $302 million, with a corresponding allowance of $40 million at December 31, 2014. Loans outstanding collectively evaluated for impairment totaled $57.1 billion, with a corresponding allowance of $753 million at December 31, 2014. At December 31, 2014, PCI loans evaluated for impairment totaled $13 million, with a corresponding allowance of $1 million. There was no provision for loan and lease losses on these PCI loans during the year ended December 31, 2014. At December 31, 2013, the loans outstanding individually evaluated for impairment totaled $358 million, with a corresponding allowance of $42 million. Loans outstanding collectively evaluated for impairment totaled $54.1 billion, with a corresponding allowance of $805 million at December 31, 2013. At December 31, 2013, PCI loans evaluated for impairment totaled $16 million, with a corresponding allowance of $1 million. There was no provision for loan and lease losses on these PCI loans during the year ended December 31, 2013.

A breakdown of the individual and collective ALLL and the corresponding loan balances as of December 31, 2014, follows:


	Allowance						Outstanding
December 31, 2014 in millions	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Purchased Credit Impaired		Loans			Individually Evaluated for Impairment		Collectively Evaluated for Impairment			Purchased Credit Impaired
Commercial, financial and agricultural	$	9	$	382		—	$	27,982		$	43	$	27,939			—
Commercial real estate:
Commercial mortgage		2		146		—		8,047			21		8,025		$	1
Construction		1		27		—		1,100			8		1,092			—
Total commercial real estate loans		3		173		—		9,147			29		9,117			1
Commercial lease financing		—		56		—		4,252			—		4,252			—
Total commercial loans		12		611		—		41,381			72		41,308			1
Real estate — residential mortgage		5		17	$	1		2,225			55		2,159			11
Home equity:
Key Community Bank		16		50		—		10,366			108		10,257			1
Other		2		3		—		267			12		255			—
Total home equity loans		18		53		—		10,633			120		10,512			1
Consumer other — Key Community Bank		—		22		—		1,560			4		1,556			—
Credit cards		—		33		—		754			4		750			—
Consumer other:
Marine		5		16		—		779			45		734			—
Other		—		1		—		49			2		47			—
Total consumer other		5		17		—		828			47		781			—
Total consumer loans		28		142		1		16,000			230		15,758			12
Total ALLL — continuing operations		40		753		1		57,381			302		57,066			13
Discontinued operations		1		28		—		2,295	^(a)		17		2,278	^(a)		—
Total ALLL — including discontinued operations	$	41	$	781	$	1	$	59,676		$	319	$	59,344		$	13

(a)	Amount includes $191 million of portfolio loans carried at fair value that are excluded from ALLL consideration.

A breakdown of the individual and collective ALLL and the corresponding loan balances as of December 31, 2013, follows:


	Allowance						Outstanding
December 31, 2013 in millions	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Purchased Credit Impaired		Loans			Individually Evaluated for Impairment		Collectively Evaluated for Impairment			Purchased Credit Impaired
Commercial, financial and agricultural	$	8	$	354		—	$	24,963		$	50	$	24,913			—
Commercial real estate:
Commercial mortgage		2		163		—		7,720			27		7,692		$	1
Construction		—		32		—		1,093			50		1,043			—
Total commercial real estate loans		2		195		—		8,813			77		8,735			1
Commercial lease financing		—		62		—		4,551			—		4,551			—
Total commercial loans		10		611		—		38,327			127		38,199			1
Real estate — residential mortgage		9		27	$	1		2,187			56		2,117			14
Home equity:
Key Community Bank		10		74		—		10,340			102		10,237			1
Other		1		10		—		334			12		322			—
Total home equity loans		11		84		—		10,674			114		10,559			1
Consumer other — Key Community Bank		1		28		—		1,449			3		1,446			—
Credit cards		1		33		—		722			5		717			—
Consumer other:
Marine		10		19		—		1,028			52		976			—
Other		—		3		—		70			1		69			—
Total consumer other		10		22		—		1,098			53		1,045			—
Total consumer loans		32		194		1		16,130			231		15,884			15
Total ALLL — continuing operations		42		805		1		54,457			358		54,083			16
Discontinued operations		1		38		—		4,497	^(a)		13		4,484	^(a)		—
Total ALLL — including discontinued operations	$	43	$	843	$	1	$	58,954		$	371	$	58,567		$	16

(a)	Amount includes $2.1 billion of loans carried at fair value that are excluded from ALLL consideration.

The liability for credit losses inherent in lending-related unfunded commitments, such as letters of credit and unfunded loan commitments, is included in “accrued expense and other liabilities” on the balance sheet. We establish the amount of this reserve by considering both historical trends and current market conditions quarterly, or more often if deemed necessary. Our liability for credit losses on lending-related commitments is $36 million at December 31, 2014. When combined with our ALLL, our total allowance for credit losses represented 1.45% of loans at December 31, 2014, compared to 1.63% at December 31, 2013.

Changes in the liability for credit losses on unfunded lending-related commitments are summarized as follows:


Year ended December 31, in millions	2014			2013		2012
Balance at beginning of period	$	37		$	29	$	45
Provision (credit) for losses on lending-related commitments		(1	)		8		(16	)
Balance at end of period	$	36		$	37	$	29