Asset Quality | 4. 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. Nonperforming loans are loans for which we do not accrue interest income, and include commercial and consumer loans and leases, as well as current year TDRs and nonaccruing TDR loans from prior years. Nonperforming loans do not include loans held for sale or PCI loans. Nonperforming assets include nonperforming loans, nonperforming loans held for sale, OREO, and other nonperforming assets. Our nonperforming assets and past due loans were as follows: in millions September 30, December 31, September 30, Total nonperforming loans (a), (b) $ 400 $ 418 $ 401 Nonperforming loans held for sale — — — OREO (c) 17 18 16 Other nonperforming assets — — 1 Total nonperforming assets $ 417 $ 436 $ 418 Nonperforming assets from discontinued operations—education lending (d) $ 8 $ 11 $ 9 Restructured loans included in nonperforming loans $ 159 $ 157 $ 137 Restructured loans with an allocated specific allowance (e) 71 82 115 Specifically allocated allowance for restructured loans (f) 29 34 30 Accruing loans past due 90 days or more $ 54 $ 96 $ 71 Accruing loans past due 30 through 89 days 271 235 340 (a) Loan balances exclude $12 million, $13 million, and $14 million of PCI loans at September 30, 2015, December 31, 2014, and September 30, 2014, respectively. (b) Includes carrying value of consumer residential mortgage loans in the process of foreclosure of approximately $114 million at September 30, 2015. (c) Includes carrying value of foreclosed residential real estate of approximately $13 million at September 30, 2015. (d) Restructured loans of approximately $20 million, $17 million, and $16 million are included in discontinued operations at September 30, 2015, December 31, 2014, and September 30, 2014, respectively. See Note 11 (“Acquisitions and Discontinued Operations”) for further discussion. (e) Included in individually impaired loans allocated a specific allowance. (f) 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 2012 acquisition date, 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 September 30, 2015, the outstanding unpaid principal balance and carrying value of all PCI loans was $18 million and $12 million, respectively. Changes in the accretable yield during the first nine months of 2015 included accretion and net reclassifications of less than $1 million, resulting in an ending balance of $5 million at September 30, 2015. At September 30, 2015, the approximate carrying amount of our commercial nonperforming loans outstanding represented 74% of their original contractual amount owed, 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 owed. At September 30, 2015, our 20 largest nonperforming loans totaled $112 million, representing 28% of total loans on nonperforming status. At September 30, 2014, our 20 largest nonperforming loans totaled $72 million, representing 18% of total loans on nonperforming status. Nonperforming loans and loans held for sale reduced expected interest income by $12 million for the nine months ended September 30, 2015, and $16 million for the year ended December 31, 2014. The following tables set forth a further breakdown of individually impaired loans as of September 30, 2015, December 31, 2014, and September 30, 2014: Unpaid Average September 30, 2015 Recorded Principal Specific Recorded in millions Investment (a) Balance (b) Allowance Investment With no related allowance recorded: Commercial, financial and agricultural $ 30 $ 54 — $ 19 Commercial real estate: Commercial mortgage 9 12 — 10 Construction 5 5 — 6 Total commercial real estate loans 14 17 — 16 Total commercial loans 44 71 — 35 Real estate — residential mortgage 22 22 — 22 Home equity: Key Community Bank 58 58 — 59 Other 2 2 — 2 Total home equity loans 60 60 — 61 Consumer other: Marine 1 1 — 1 Total consumer other 1 1 — 1 Total consumer loans 83 83 — 84 Total loans with no related allowance recorded 127 154 — 119 With an allowance recorded: Commercial, financial and agricultural 43 56 $ 9 58 Commercial real estate: Commercial mortgage 5 6 1 6 Total commercial real estate loans 5 6 1 6 Total commercial loans 48 62 10 64 Real estate — residential mortgage 33 33 5 33 Home equity: Key Community Bank 54 54 17 53 Other 10 10 1 10 Total home equity loans 64 64 18 63 Consumer other — Key Community Bank 3 3 — 3 Credit cards 3 3 1 3 Consumer other: Marine 38 38 2 39 Other 2 2 — 2 Total consumer other 40 40 2 41 Total consumer loans 143 143 26 143 Total loans with an allowance recorded 191 205 36 207 Total $ 318 $ 359 $ 36 $ 326 (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. Unpaid Average December 31, 2014 Recorded Principal Specific Recorded in millions Investment (a) Balance (b) Allowance 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. Unpaid Average September 30, 2014 Recorded Principal Specific Recorded in millions Investment (a) Balance (b) Allowance Investment With no related allowance recorded: Commercial, financial and agricultural $ 11 $ 20 — $ 12 Commercial real estate: Commercial mortgage 22 27 — 23 Construction 9 20 — 7 Total commercial real estate loans 31 47 — 30 Total commercial loans 42 67 — 42 Real estate — residential mortgage 36 36 — 30 Home equity: Key Community Bank 64 64 — 65 Other 2 2 — 2 Total home equity loans 66 66 — 67 Consumer other: Marine 2 2 — 2 Total consumer other 2 2 — 2 Total consumer loans 104 104 — 99 Total loans with no related allowance recorded 146 171 — 141 With an allowance recorded: Commercial, financial and agricultural 20 21 $ 7 12 Commercial real estate: Commercial mortgage 7 7 2 5 Total commercial real estate loans 7 7 2 5 Total commercial loans 27 28 9 17 Real estate — residential mortgage 19 19 4 24 Home equity: Key Community Bank 41 41 16 39 Other 11 11 2 11 Total home equity loans 52 52 18 50 Consumer other — Key Community Bank 3 3 — 3 Credit cards 3 3 1 3 Consumer other: Marine 46 46 5 47 Other 2 2 1 2 Total consumer other 48 48 6 49 Total consumer loans 125 125 29 129 Total loans with an allowance recorded 152 153 38 146 Total $ 298 $ 324 $ 38 $ 287 (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 each of the nine months ended September 30, 2015, and September 30, 2014, interest income recognized on the outstanding balances of accruing impaired loans totaled $5 million. At September 30, 2015, aggregate restructured loans (accrual and nonaccrual loans) totaled $287 million, compared to $270 million at December 31, 2014, and $264 million at September 30, 2014. We added $87 million in restructured loans during the first nine months of 2015, which were partially offset by $70 million in payments and charge-offs. A further breakdown of TDRs included in nonperforming loans by loan category as of September 30, 2015, follows: Pre-modification Post-modification Outstanding Outstanding September 30, 2015 Number Recorded Recorded dollars in millions of Loans Investment Investment LOAN TYPE Nonperforming: Commercial, financial and agricultural 12 $ 56 $ 50 Commercial real estate: Real estate — commercial mortgage 11 30 7 Total commercial real estate loans 11 30 7 Total commercial loans 23 86 57 Real estate — residential mortgage 356 21 21 Home equity: Key Community Bank 1,093 79 70 Other 122 3 3 Total home equity loans 1,215 82 73 Consumer other — Key Community Bank 26 1 1 Credit cards 314 2 2 Consumer other: Marine 92 6 5 Other 16 — — Total consumer other 108 6 5 Total consumer loans 2,019 112 102 Total nonperforming TDRs 2,042 198 159 Prior-year accruing: (a) Commercial, financial and agricultural 12 6 3 Commercial real estate: Real estate — commercial mortgage 1 2 1 Total commercial real estate loans 1 2 1 Total commercial loans 13 8 4 Real estate — residential mortgage 499 36 36 Home equity: Key Community Bank 794 49 42 Other 327 10 8 Total home equity loans 1,121 59 50 Consumer other — Key Community Bank 45 2 1 Credit cards 473 2 2 Consumer other: Marine 398 59 33 Other 68 2 2 Total consumer other 466 61 35 Total consumer loans 2,604 160 124 Total prior-year accruing TDRs 2,617 168 128 Total TDRs 4,659 $ 366 $ 287 (a) All TDRs that were restructured prior to January 1, 2015, and are fully accruing. A further breakdown of TDRs included in nonperforming loans by loan category as of December 31, 2014, follows: Pre-modification Post-modification Outstanding Outstanding December 31, 2014 Number Recorded Recorded dollars in millions of Loans Investment 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 September 30, 2014, follows: Pre-modification Post-modification Outstanding Outstanding September 30, 2014 Number Recorded Recorded dollars in millions of Loans Investment Investment LOAN TYPE Nonperforming: Commercial, financial and agricultural 20 $ 16 $ 9 Commercial real estate: Real estate — commercial mortgage 12 39 14 Real estate — construction 3 15 1 Total commercial real estate loans 15 54 15 Total commercial loans 35 70 24 Real estate — residential mortgage 464 28 28 Home equity: Key Community Bank 1,125 70 64 Other 133 4 4 Total home equity loans 1,258 74 68 Consumer other — Key Community Bank 31 1 1 Credit cards 156 1 1 Consumer other: Marine 211 16 14 Other 40 1 1 Total consumer other 251 17 15 Total consumer loans 2,160 121 113 Total nonperforming TDRs 2,195 191 137 Prior-year accruing: (a) Commercial, financial and agricultural 25 6 3 Commercial real estate: Real estate — commercial mortgage 4 18 8 Total commercial real estate loans 4 18 8 Total commercial loans 29 24 11 Real estate — residential mortgage 359 28 28 Home equity: Key Community Bank 731 45 40 Other 325 10 8 Total home equity loans 1,056 55 48 Consumer other — Key Community Bank 53 2 2 Credit cards 564 4 3 Consumer other: Marine 402 58 34 Other 72 2 1 Total consumer other 474 60 35 Total consumer loans 2,506 149 116 Total prior-year accruing TDRs 2,535 173 127 Total TDRs 4,730 $ 364 $ 264 (a) All TDRs that were restructured prior to January 1, 2014, 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 11. 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 three months ended September 30, 2015, there were no significant commercial loan TDRs, and 61 consumer loan TDRs with a combined recorded investment of $3 million that experienced payment defaults from modifications resulting in TDR status during 2014. During the three months ended September 30, 2014, there were no significant commercial loan TDRs, and 93 consumer loan TDRs with a combined recorded investment of $4 million that experienced payment defaults from modifications resulting in TDR status during 2013. 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’ debts 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. in millions September 30, December 31, September 30, Commercial loans: Interest rate reduction $ 58 $ 13 $ 24 Forgiveness of principal 2 2 5 Other 1 25 6 Total $ 61 $ 40 $ 35 Consumer loans: Interest rate reduction $ 139 $ 140 $ 140 Forgiveness of principal 4 4 4 Other 83 86 85 Total $ 226 $ 230 $ 229 Total commercial and consumer TDRs (a) $ 287 $ 270 $ 264 Total loans 60,085 57,381 56,155 (a) Commitments outstanding to lend additional funds to borrowers whose loan terms have been modified in TDRs are $8 million, $5 million, and $1 million at September 30, 2015, December 31, 2014, and September 30, 2014, 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” beginning on page 116 of our 2014 Form 10-K. At September 30, 2015, approximately $59.3 billion, or 98.8%, of our total loans were current, compared to $56.6 billion, or 98.7%, at December 31, 2014, and $55.3 billion, or 98.5%, at September 30, 2014. At September 30, 2015, total past due loans and nonperforming loans of $724 million represented approximately 1.2% of total loans, compared to $749 million, or 1.3%, at December 31, 2014, and $813 million, or 1.5% at September 30, 2014. The following aging analysis of past due and current loans as of September 30, 2015, December 31, 2014, and September 30, 2014, provides further information regarding Key’s credit exposure. 90 and Total Past 30-59 60-89 Greater Due and Purchased September 30, 2015 Days Past Days Past Days Past Nonperforming Nonperforming Credit Total in millions Current Due Due Due Loans Loans Impaired Loans LOAN TYPE Commercial, financial and agricultural $ 30,901 $ 58 $ 30 $ 17 $ 89 $ 194 — $ 31,095 Commercial real estate: Commercial mortgage 8,127 18 7 5 23 53 — 8,180 Construction 1,060 1 — — 9 10 — 1,070 Total commercial real estate loans 9,187 19 7 5 32 63 — 9,250 Commercial lease financing 3,875 29 3 1 21 54 — 3,929 Total commercial loans $ 43,963 $ 106 $ 40 $ 23 $ 142 $ 311 — $ 44,274 Real estate — residential mortgage $ 2,171 $ 11 $ 4 $ 3 $ 67 $ 85 $ 11 $ 2,267 Home equity: Key Community Bank 10,027 49 20 11 174 254 1 10,282 Other 208 4 2 1 7 14 — 222 Total home equity loans 10,235 53 22 12 181 268 1 10,504 Consumer other — Key Community Bank 1,595 7 4 5 1 17 — 1,612 Credit cards 750 6 4 8 2 20 — 770 Consumer other: Marine 601 10 2 1 6 19 — 620 Other 34 1 1 1 1 4 — 38 Total consumer other 635 11 3 2 7 23 — 658 Total consumer loans $ 15,386 $ 88 $ 37 $ 30 $ 258 $ 413 $ 12 $ 15,811 Total loans $ 59,349 $ 194 $ 77 $ 53 $ 400 $ 724 $ 12 $ 60,085 90 and Total Past 30-59 60-89 Greater Due and Purchased December 31, 2014 Days Past Days Past Days Past Nonperforming Nonperforming Credit Total in millions Current Due Due Due Loans Loans Impaired 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 90 and Total Past 30-59 60-89 Greater Due and Purchased September 30, 2014 Days Past Days Past Days Past Nonperforming Nonperforming Credit Total in millions Current Due Due Due Loans Loans Impaired Loans LOAN TYPE Commercial, financial and agricultural $ 26,534 $ 50 $ 34 $ 18 $ 47 $ 149 — $ 26,683 Commercial real estate: Commercial mortgage 8,201 17 7 9 41 74 $ 1 8,276 Construction 1,017 3 2 — 14 19 — 1,036 Total commercial real estate loans 9,218 20 9 9 55 93 1 9,312 Commercial lease financing 4,017 74 24 6 14 118 — 4,135 Total commercial loans $ 39,769 $ 144 $ 67 $ 33 $ 116 $ 360 $ 1 $ 40,130 Real estate — residential mortgage $ 2,091 $ 17 $ 7 $ 5 $ 81 $ 110 $ 12 $ 2,213 Home equity: Key Community Bank 10,124 46 19 16 174 255 1 10,380 Other 266 4 2 1 10 17 — 283 Total home equity loans 10,390 50 21 17 184 272 1 10,663 Consumer other — Key Community Bank 1,528 7 3 6 2 18 — 1,546 Credit cards 705 5 4 9 1 19 — 724 Consumer other: Marine 796 11 4 1 16 32 — 828 Other 49 1 — — 1 2 — 51 Total consumer other 845 12 4 1 17 34 — 879 Total consumer loans $ 15,559 $ 91 $ 39 $ 38 $ 285 $ 453 $ 13 $ 16,025 Total loans $ 55,328 $ 235 $ 106 $ 71 $ 401 $ 813 $ 14 $ 56,155 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 $12 million and $14 million of PCI loans at September 30, 2015, and September 30, 2014, respectively, based on bond rating, regulatory classification, and payment activity as of September 30, 2015, and September 30, 2014, are as follows: Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category (a) September 30, in millions Commercial, financial and agricultural RE — Commercial RE — Construction Commercial Lease Total RATING (b), (c) 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 AAA — AA $ 384 $ 342 $ 3 $ 2 — $ 1 $ 501 $ 528 $ 888 $ 873 A 1,439 1,147 4 2 — — 478 596 1,921 1,745 BBB — BB 27,438 23,822 7,690 7,736 $ 935 895 2,808 2,848 38,871 35,301 B 639 594 272 298 89 100 88 75 1,088 1,067 CCC — C 1,195 778 211 238 46 40 54 88 1,506 1,144 Total $ 31,095 $ 26,683 $ 8,180 $ 8,276 $ 1,070 $ 1,036 $ 3,929 $ 4,135 $ 44,274 $ 40,130 (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) September 30, in millions Residential — Prime GRADE 2015 2014 Pass $ 12,496 $ 12,576 Substandard 263 287 Total $ 12,759 $ 12,863 Credit Risk Profile Based on Payment Activity (a) September 30, Consumer — Key Community Bank Credit cards Consumer — Marine Consumer — Other Total in millions 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 Performing $ 1,611 $ 1,544 $ 768 $ 723 $ 614 $ 812 $ 37 $ 50 $ 3,030 $ 3,129 Nonperforming 1 2 2 1 6 16 1 1 10 20 Total $ 1,612 $ 1,546 $ 770 $ 724 $ 620 $ 828 $ 38 $ 51 $ 3,040 $ 3,149 (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” beginning on page 117 of our 2014 Form 10-K. 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 qualitative 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. In the third quarter of 2015, we enhanced the approach used to determine the commercial reserve factors used in estimating the commercial ALLL, which had the effect of capturing certain elements in the commercial quantitative reserve component that had formerly been included in the commercial qualitative component. Under the enhanced methodology, we began utilizing more refined commercial estimated loss rates that represent cumulative losses over the estimated average time period from the onset of credit deterioration to the initial loss recorded for an individual loan. In addition, we began utilizing an enhanced framework to quantify commercial ALLL adjustments resulting from qualitative factors that may not be fully captured within the statistical analysis of incurred loss. The impact of these changes was largely neutral to the total ALLL at September 30, 2015. However, because the quantitative reserve is allocated to the business segments at a loan level, while the qualitative portion is allocated at the portfolio level, the impact of the methodology enhancements on the allowance for each portfolio caused the commercial portfolio ALLL to increase or decrease accordingly. The impact of the increases and decreases on the commercial portfolio ALLL was not significant. 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 September 30, 2015, represents our best estimate of the probable credit losses inherent in the loan portfolio at that date. 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. Consumer loans generally are charged off when payments are 120 days past due. Home equity and residential mortgage loans generally are charged down to net realizable value 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 September 30, 2015, the ALLL was $790 million, or 1.31% of loans, compared to $804 million, or 1.43% of loans, at September 30, 2014. At September 30, 2015, the ALLL was 197.5% of nonperforming loans, compared to 200.5% at September 30, 2014. A summary of the changes in the ALLL for the periods indicated is presented in the table below: Three months ended Nine months ended in millions 2015 2014 2015 2014 Balance at beginning of period — continuing operations $ 796 $ 814 $ 794 $ 848 Charge-offs (53 ) (49 ) (152 ) (162 ) Recoveries 12 18 47 81 Net loans and leases charged off (41 ) (31 ) (105 ) (81 ) Provision for loan and lease losses from continuing operations 36 21 102 37 Foreign currency translation adjustment (1 ) — (1 ) — Balance at end of period — continuing operations $ 790 $ 804 $ 790 $ 804 The changes in the ALLL by loan category for the periods indicated are as follows: in millions December 31, 2014 Provision Charge-offs Recoveries September 30, 2015 Commercial, financial and agricultural $ 391 $ 93 $ (59 ) $ 13 $ 438 Real estate — commercial mortgage 148 (9 ) (2 ) 2 139 Real estate — construction 28 (3 ) (1 ) 1 25 Commercial lease financing 56 (13 ) (5 ) 7 45 Total commercial loans 623 68 (67 ) 23 647 Real estate — residential mortgage 23 (1 ) (4 ) 1 19 Home equity: Key Community Bank 66 4 (21 ) 5 54 Other 5 (1 ) (4 ) 4 4 Total home equity loans 71 3 (25 ) 9 58 Consumer other — Key Community Bank 22 11 (18 ) 5 20 Credit cards 33 20 (23 ) 2 32 Consumer other: Marine 21 — (14 ) 6 13 Other 1 — (1 ) 1 1 Total consumer other: 22 — (15 ) 7 14 Total consumer loans 171 33 (85 ) 24 143 Total ALLL — continuing operations 794 101 (a) (152 ) 47 790 Discontinued operations 29 9 (25 ) 10 23 Total ALLL — including discontinued operations $ 823 $ 110 $ (177 ) $ 57 $ 813 (a) Includes a $1 million foreign currency translation adjustment. Excludes a provision for losses on lending-related commitments of $19 million. in millions December 31, 2013 Provision Charge-offs Recoveries September 30, 2014 Commercial, financial and agricultural $ 362 $ 32 $ (35 ) $ 27 $ 386 Real estate — commercial mortgage 165 (7 ) (3 ) 4 159 Real estate — construction 32 (16 ) (4 ) 16 28 Commercial lease financing 62 (9 ) (6 ) 8 55 Total commercial loans 621 — (48 ) 55 628 Real estate — residential mortgage 37 (10 ) (7 ) 2 22 Home equity: Key Community Bank 84 9 (29 ) 7 71 Other 11 (1 ) (8 ) 4 6 Total home equity loans 95 8 (37 ) 11 77 Consumer other — Key Community Bank 29 14 (23 ) 4 24 Credit cards 34 24 (27 ) 1 32 Consumer other: Marine 29 1 (18 ) 7 19 Other 3 — (2 ) 1 2 Total consumer other: 32 1 (20 ) 8 21 Total consumer loans 227 37 (114 ) 26 176 Total ALLL — continuing operations 848 37 (a) (162 ) 81 804 Disc |