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.

Our nonperforming assets and past due loans were as follows:


in millions	March 31, 2015		December 31, 2014		March 31, 2014
Total nonperforming loans^{(a), (b)}	$	437	$	418	$	449
Nonperforming loans held for sale		—		—		1
OREO^(c)		20		18		12
Other nonperforming assets		—		—		7

Total nonperforming assets	$	457	$	436	$	469

Nonperforming assets from discontinued operations—education lending^(d)	$	8	$	11	$	20

Restructured loans included in nonperforming loans	$	141	$	157	$	178
Restructured loans with an allocated specific allowance^(e)		70		82		51
Specifically allocated allowance for restructured loans^(f)		39		34		32
Accruing loans past due 90 days or more	$	111	$	96	$	89
Accruing loans past due 30 through 89 days		216		235		267

(a)	Loan balances exclude $12 million, $13 million, and $16 million of PCI loans at March 31, 2015, December 31, 2014, and March 31, 2014, respectively.

(b)	Includes carrying value of consumer residential mortgage loans in the process of foreclosure of approximately $119 million at March 31, 2015.

(c)	Includes carrying value of foreclosed residential real estate of approximately $17 million at March 31, 2015.

(d)	Restructured loans of approximately $18 million, $17 million, and $15 million are included in discontinued operations at March 31, 2015, December 31, 2014, and March 31, 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 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 March 31, 2015, the outstanding unpaid principal balance and carrying value of all PCI loans was $19 million and $12 million, respectively. Changes in the accretable yield during the first quarter of 2015 included accretion and net reclassifications of less than $1 million, resulting in an ending balance of $5 million at March 31, 2015.

At March 31, 2015, the approximate carrying amount of our commercial nonperforming loans outstanding represented 79% of their original contractual amount, total nonperforming loans outstanding represented 81% of their original contractual amount owed, and nonperforming assets in total were carried at 81% of their original contractual amount.

At March 31, 2015, our 20 largest nonperforming loans totaled $123 million, representing 28% of total loans on nonperforming status. At March 31, 2014, our 20 largest nonperforming loans totaled $75 million, representing 17% of total loans on nonperforming status.

Nonperforming loans and loans held for sale reduced expected interest income by $4 million for the three months ended March 31, 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 March 31, 2015, December 31, 2014, and March 31, 2014:


March 31, 2015 in millions	Recorded Investment ^(a)		Unpaid Principal Balance ^(b)		Specific Allowance		Average Recorded Investment
With no related allowance recorded:
Commercial, financial and agricultural	$	20	$	51		—	$	13
Commercial real estate:
Commercial mortgage		14		19		—		14
Construction		7		7		—		6

Total commercial real estate loans		21		26		—		20

Total commercial loans		41		77		—		33

Real estate — residential mortgage		23		23		—		23
Home equity:
Key Community Bank		62		62		—		62
Other		1		2		—		1

Total home equity loans		63		64		—		63
Consumer other:
Marine		1		1		—		2

Total consumer other		1		1		—		2

Total consumer loans		87		88		—		88

Total loans with no related allowance recorded		128		165		—		121
With an allowance recorded:
Commercial, financial and agricultural		62		62	$	20		50
Commercial real estate:
Commercial mortgage		6		7		2		6
Construction		—		—		—		1

Total commercial real estate loans		6		7		2		7

Total commercial loans		68		69		22		57

Real estate — residential mortgage		32		32		5		32
Home equity:
Key Community Bank		49		49		16		48
Other		11		11		2		11

Total home equity loans		60		60		18		59
Consumer other — Key Community Bank		3		3		—		3
Credit cards		4		4		—		4
Consumer other:
Marine		41		41		4		42
Other		2		2		—		2

Total consumer other		43		43		4		44

Total consumer loans		142		142		27		142

Total loans with an allowance recorded		210		211		49		199

Total	$	338	$	376	$	49	$	320

(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, 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.


March 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	$	33	$	60		—	$	33
Commercial real estate:
Commercial mortgage		23		28		—		22
Construction		7		17		—		27

Total commercial real estate loans		30		45		—		49

Total commercial loans		63		105		—		82

Real estate — residential mortgage		26		26		—		26
Home equity:
Key Community Bank		70		70		—		69
Other		2		2		—		2

Total home equity loans		72		72		—		71
Consumer other:
Marine		2		2		—		3

Total consumer other		2		2		—		3

Total consumer loans		100		100		—		100

Total loans with no related allowance recorded		163		205		—		182
With an allowance recorded:
Commercial, financial and agricultural		7		10	$	2		12
Commercial real estate:
Commercial mortgage		2		2		1		4
Construction		—		—		—		1

Total commercial real estate loans		2		2		1		5

Total commercial loans		9		12		3		17

Real estate — residential mortgage		28		28		5		28
Home equity:
Key Community Bank		36		36		16		36
Other		11		11		2		11

Total home equity loans		47		47		18		47
Consumer other — Key Community Bank		3		3		—		3
Credit cards		4		4		1		4
Consumer other:
Marine		49		49		7		49
Other		1		1		—		1

Total consumer other		50		50		7		50

Total consumer loans		132		132		31		132

Total loans with an allowance recorded		141		144		34		149

Total	$	304	$	349	$	34	$	331

(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 three months ended March 31, 2015, and March 31, 2014, interest income recognized on the outstanding balances of accruing impaired loans totaled $1 million and $2 million, respectively.

At March 31, 2015, aggregate restructured loans (accrual and nonaccrual loans) totaled $268 million, compared to $270 million at December 31, 2014, and $294 million at March 31, 2014. We added $11 million in restructured loans during the first three months of 2015, which were offset by $13 million in payments and charge-offs.

A further breakdown of TDRs included in nonperforming loans by loan category as of March 31, 2015, follows:


March 31, 2015 dollars in millions	Number of loans		Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment
LOAN TYPE
Nonperforming:
Commercial, financial and agricultural		11	$	25	$	22
Commercial real estate:
Real estate — commercial mortgage		12		37		13

Total commercial real estate loans		12		37		13

Total commercial loans		23		62		35
Real estate — residential mortgage		383		22		22
Home equity:
Key Community Bank		1,071		76		70
Other		128		4		3

Total home equity loans		1,199		80		73
Consumer other — Key Community Bank		28		1		1
Credit cards		275		2		1
Consumer other:
Marine		117		8		8
Other		26		1		1

Total consumer other		143		9		9

Total consumer loans		2,028		114		106

Total nonperforming TDRs		2,051		176		141
Prior-year accruing^(a)
Commercial, financial and agricultural		17		6		3
Commercial real estate:
Real estate — commercial mortgage		1		2		1

Total commercial real estate loans		1		2		1

Total commercial loans		18		8		4
Real estate — residential mortgage		454		34		34
Home equity:
Key Community Bank		803		47		41
Other		339		10		8

Total home equity loans		1,142		57		49
Consumer other — Key Community Bank		51		2		2
Credit cards		519		4		2
Consumer other:
Marine		429		60		35
Other		76		2		1

Total consumer other		505		62		36

Total consumer loans		2,671		159		123

Total prior-year accruing TDRs		2,689		167		127

Total TDRs		4,740	$	343	$	268

(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:


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 March 31, 2014, follows:


			Pre-modification		Post-modification
			Outstanding		Outstanding
March 31, 2014	Number		Recorded		Recorded
dollars in millions	of loans		Investment		Investment
LOAN TYPE
Nonperforming:
Commercial, financial and agricultural		28	$	58	$	33
Commercial real estate:
Real estate — commercial mortgage		11		40		14
Real estate — construction		5		16		2

Total commercial real estate loans		16		56		16

Total commercial loans		44		114		49
Real estate — residential mortgage		687		42		42
Home equity:
Key Community Bank		1,190		73		69
Other		132		4		4

Total home equity loans		1,322		77		73
Consumer other — Key Community Bank		33		1		1
Credit cards		10		—		—
Consumer other:
Marine		210		14		12
Other		41		1		1

Total consumer other		251		15		13

Total consumer loans		2,303		135		129

Total nonperforming TDRs		2,347		249		178
Prior-year accruing^(a)
Commercial, financial and agricultural		42		7		4
Commercial real estate:
Real estate — commercial mortgage		4		18		8

Total commercial real estate loans		4		18		8

Total commercial loans		46		25		12
Real estate — residential mortgage		111		12		12
Home equity:
Key Community Bank		708		40		37
Other		312		9		8

Total home equity loans		1,020		49		45
Consumer other — Key Community Bank		51		2		2
Credit cards		785		5		5
Consumer other:
Marine		430		62		39
Other		68		2		1

Total consumer other		498		64		40

Total consumer loans		2,465		132		104

Total prior-year accruing TDRs		2,511		157		116

Total TDRs		4,858	$	406	$	294

(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 (“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 first three months of 2015, there were no significant commercial loan TDRs, and 89 consumer loan TDRs with a combined recorded investment of $4 million that experienced payment defaults from modifications resulting in TDR status during 2014. During the first three months of 2014, two commercial loan TDRs with a combined recorded investment of $11 million, and 157 consumer loan TDRs with a combined recorded investment of $4 million 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 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.


	March 31,		December 31,		March 31,
in millions	2015		2014		2014
Commercial loans:
Interest rate reduction	$	12	$	13	$	49
Forgiveness of principal		2		2		5
Other		25		25		7

Total	$	39	$	40	$	61

Consumer loans:
Interest rate reduction	$	140	$	140	$	142
Forgiveness of principal		4		4		5
Other		85		86		86

Total	$	229	$	230	$	233

Total commercial and consumer TDRs^(a)	$	268	$	270	$	294
Total loans		57,953		57,381		55,445

(a)	Commitments outstanding to lend additional funds to borrowers whose loan terms have been modified in TDRs are $5 million, $5 million, and $2 million at March 31, 2015, December 31, 2014, and March 31, 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 March 31, 2015, approximately $57.2 billion, or 98.7%, of our total loans were current. At March 31, 2015, total past due loans and nonperforming loans of $764 million represented approximately 1.3% of total loans.

The following aging analysis of past due and current loans as of March 31, 2015, December 31, 2014, and March 31, 2014, provides further information regarding Key’s credit exposure.


							90 and				Total Past
			30-59		60-89		Greater				Due and		Purchased
March 31, 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	$	28,603	$	36	$	11	$	35	$	98	$	180		—	$	28,783
Commercial real estate:
Commercial mortgage		8,080		5		18		29		30		82		—		8,162
Construction		1,114		10		4		2		12		28		—		1,142

Total commercial real estate loans		9,194		15		22		31		42		110		—		9,304
Commercial lease financing		4,017		9		6		12		20		47		—		4,064

Total commercial loans	$	41,814	$	60	$	39	$	78	$	160	$	337		—	$	42,151

Real estate — residential mortgage	$	2,129	$	12	$	5	$	2	$	72	$	91	$	11	$	2,231
Home equity:
Key Community Bank		10,012		39		23		13		182		257		1		10,270
Other		238		4		1		1		9		15		—		253

Total home equity loans		10,250		43		24		14		191		272		1		10,523
Consumer other — Key Community Bank		1,527		8		4		6		2		20		—		1,547
Credit cards		708		5		3		9		2		19		—		727
Consumer other:
Marine		707		8		4		2		9		23		—		730
Other		42		1		—		—		1		2		—		44

Total consumer other		749		9		4		2		10		25		—		774

Total consumer loans	$	15,363	$	77	$	40	$	33	$	277	$	427	$	12	$	15,802

Total loans	$	57,177	$	137	$	79	$	111	$	437	$	764	$	12	$	57,953


							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


			30-59		60-89		90 and Greater				Total Past Due and		Purchased
March 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	$	26,071	$	67	$	8	$	18	$	60	$	153		—	$	26,224
Commercial real estate:
Commercial mortgage		7,806		9		7		17		37		70	$	1		7,877
Construction		987		3		5		1		11		20		—		1,007

Total commercial real estate loans		8,793		12		12		18		48		90		1		8,884
Commercial lease financing		4,338		15		12		13		18		58		—		4,396

Total commercial loans	$	39,202	$	94	$	32	$	49	$	126	$	301	$	1	$	39,504

Real estate — residential mortgage	$	2,043	$	13	$	6	$	3	$	105	$	127	$	13	$	2,183
Home equity:
Key Community Bank		10,010		45		25		11		188		269		2		10,281
Other		296		5		2		1		11		19		—		315

Total home equity loans		10,306		50		27		12		199		288		2		10,596
Consumer other — Key Community Bank		1,415		8		5		6		2		21		—		1,436
Credit cards		671		7		4		15		1		27		—		698
Consumer other:
Marine		928		12		6		4		15		37		—		965
Other		59		2		1		—		1		4		—		63

Total consumer other		987		14		7		4		16		41		—		1,028

Total consumer loans	$	15,422	$	92	$	49	$	40	$	323	$	504	$	15	$	15,941

Total loans	$	54,624	$	186	$	81	$	89	$	449	$	805	$	16	$	55,445

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 $16 million of PCI loans at March 31, 2015, and March 31, 2014, respectively, based on bond rating, regulatory classification, and payment activity as of March 31, 2015, and March 31, 2014, are as follows:

Commercial Credit Exposure

Credit Risk Profile by Creditworthiness Category^(a)


March 31,
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	$	286	$	500	$	6	$	1	$	1	$	1	$	535	$	805	$	828	$	1,307
A		1,267		1,010		2		57		—		1		516		448		1,785		1,516
BBB — BB		25,684		23,361		7,604		7,267		992		826		2,842		2,964		37,122		34,418
B		648		551		325		337		127		84		104		101		1,204		1,073
CCC — C		898		802		225		214		22		95		67		78		1,212		1,189

Total	$	28,783	$	26,224	$	8,162	$	7,876	$	1,142	$	1,007	$	4,064	$	4,396	$	42,151	$	39,503

(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)}


March 31,
in millions
	Residential — Prime
GRADE	2015		2014
Pass	$	12,463	$	12,445
Substandard		279		319

Total	$	12,742	$	12,764

Credit Risk Profile Based on Payment Activity^(a)


March 31,	Consumer — Key Community Bank				Credit cards				Consumer — Marine				Consumer — Other				Total
in millions	2015		2014		2015		2014		2015		2014		2015		2014		2015		2014
Performing	$	1,545	$	1,434	$	725	$	697	$	721	$	950	$	43	$	62	$	3,034	$	3,143
Nonperforming		2		2		2		1		9		15		1		1		14		19

Total	$	1,547	$	1,436	$	727	$	698	$	730	$	965	$	44	$	63	$	3,048	$	3,162

(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 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 March 31, 2015, 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 March 31, 2015, the ALLL was $794 million, or 1.37% of loans, compared to $834 million, or 1.50% of loans, at March 31, 2014. At March 31, 2015, the ALLL was 181.7% of nonperforming loans, compared to 185.7% at March 31, 2014.

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


	Three months ended March 31,
in millions	2015			2014
Balance at beginning of period — continuing operations	$	794		$	848
Charge-offs		(47	)		(57	)
Recoveries		19			37

Net loans and leases charged off		(28	)		(20	)
Provision for loan and lease losses from continuing operations		29			6
Foreign currency translation adjustment		(1	)		—

Balance at end of period — continuing operations	$	794		$	834

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


	December 31,										March 31,
in millions	2014		Provision			Charge-offs			Recoveries		2015
Commercial, financial and agricultural	$	391	$	21		$	(12	)	$	5	$	405
Real estate — commercial mortgage		148		—			(2	)		2		148
Real estate — construction		28		1			(1	)		—		28
Commercial lease financing		56		(3	)		(2	)		4		55

Total commercial loans		623		19			(17	)		11		636
Real estate — residential mortgage		23		—			(2	)		—		21
Home equity:
Key Community Bank		66		(3	)		(7	)		2		58
Other		5		—			(1	)		1		5

Total home equity loans		71		(3	)		(8	)		3		63
Consumer other — Key Community Bank		22		3			(6	)		2		21
Credit cards		33		7			(8	)		—		32
Consumer other:
Marine		21		1			(5	)		3		20
Other		1		1			(1	)		—		1

Total consumer other:		22		2			(6	)		3		21

Total consumer loans		171		9			(30	)		8		158

Total ALLL — continuing operations		794		28	^(a)		(47	)		19		794
Discontinued operations		29		2			(10	)		4		25

Total ALLL — including discontinued operations	$	823	$	30		$	(57	)	$	23	$	819

(a)	Includes $1 million of foreign currency translation adjustment. Excludes provision for losses on lending-related commitments of $6 million.


	December 31,										March 31,
in millions	2013		Provision			Charge-offs			Recoveries		2014
Commercial, financial and agricultural	$	362	$	13		$	(12	)	$	10	$	373
Real estate — commercial mortgage		165		(3	)		(2	)		1		161
Real estate — construction		32		(7	)		(2	)		14		37
Commercial lease financing		62		1			(3	)		2		62

Total commercial loans		621		4			(19	)		27		633
Real estate — residential mortgage		37		(8	)		(3	)		1		27
Home equity:
Key Community Bank		84		3			(10	)		3		80
Other		11		2			(3	)		1		11

Total home equity loans		95		5			(13	)		4		91
Consumer other — Key Community Bank		29		2			(8	)		2		25
Credit cards		34		4			(6	)		—		32
Consumer other:
Marine		29		(2	)		(7	)		3		23
Other		3		1			(1	)		—		3

Total consumer other:		32		(1	)		(8	)		3		26

Total consumer loans		227		2			(38	)		10		201

Total ALLL — continuing operations		848		6	^(a)		(57	)		37		834
Discontinued operations		39		4			(13	)		4		34

Total ALLL — including discontinued operations	$	887	$	10		$	(70	)	$	41	$	868

(a)	Excludes credit for losses on lending-related commitments of $2 million.

Our ALLL from continuing operations decreased by $40 million, or 4.8%, from the first quarter of 2014 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 classified and nonperforming loans 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 2014 and into 2015 due to continued improved credit quality, solid 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 $338 million, with a corresponding allowance of $49 million at March 31, 2015. Loans outstanding collectively evaluated for impairment totaled $57.6 billion, with a corresponding allowance of $744 million at March 31, 2015. At March 31, 2015, PCI loans evaluated for impairment totaled $12 million, with a corresponding allowance of $1 million. There was no provision for loan and lease losses on these PCI loans during the quarter ended March 31, 2015. At March 31, 2014, the loans outstanding individually evaluated for impairment totaled $304 million, with a corresponding allowance of $34 million. Loans outstanding collectively evaluated for impairment totaled $55.1 billion, with a corresponding allowance of $799 million at March 31, 2014. At March 31, 2014, 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 quarter ended March 31, 2014.

A breakdown of the individual and collective ALLL and the corresponding loan balances as of March 31, 2015, follows:


	Allowance						Outstanding
March 31, 2015 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	$	20	$	385		—	$	28,783		$	82	$	28,701			—
Commercial real estate:
Commercial mortgage		2		146		—		8,162			20		8,142			—
Construction		—		28		—		1,142			7		1,135			—

Total commercial real estate loans		2		174		—		9,304			27		9,277			—
Commercial lease financing		—		55		—		4,064			—		4,064			—

Total commercial loans		22		614		—		42,151			109		42,042			—
Real estate — residential mortgage		5		15	$	1		2,231			55		2,165		$	11
Home equity:
Key Community Bank		16		42		—		10,270			111		10,158			1
Other		2		3		—		253			12		241			—

Total home equity loans		18		45		—		10,523			123		10,399			1
Consumer other — Key Community Bank		—		21		—		1,547			3		1,544			—
Credit cards		—		32		—		727			4		723			—
Consumer other:
Marine		4		16		—		730			42		688			—
Other		—		1		—		44			2		42			—

Total consumer other		4		17		—		774			44		730			—

Total consumer loans		27		130		1		15,802			229		15,561			12

Total ALLL — continuing operations		49		744		1		57,953			338		57,603			12
Discontinued operations		1		24		—		2,219	^(a)		18		2,201	^(a)		—

Total ALLL — including discontinued operations	$	50	$	768	$	1	$	60,172		$	356	$	59,804		$	12

(a)	Amount includes $187 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, 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 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 March 31, 2014, follows:


	Allowance						Outstanding
March 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	$	2	$	371		—	$	26,224		$	40	$	26,184		—
Commercial real estate:
Commercial mortgage		1		160		—		7,877			25		7,851	$	1
Construction		—		37		—		1,007			6		1,001		—

Total commercial real estate loans		1		197		—		8,884			31		8,852		1
Commercial lease financing		—		62		—		4,396			—		4,396		—

Total commercial loans		3		630		—		39,504			71		39,432		1
Real estate — residential mortgage		4		22	$	1		2,183			54		2,116		13
Home equity:
Key Community Bank		16		64		—		10,281			105		10,174		2
Other		2		9		—		315			13		302		—

Total home equity loans		18		73		—		10,596			118		10,476		2
Consumer other — Key Community Bank		—		25		—		1,436			4		1,432		—
Credit cards		1		31		—		698			4		694		—
Consumer other:
Marine		7		16		—		965			52		913		—
Other		1		2		—		63			1		62		—

Total consumer other		8		18		—		1,028			53		975		—

Total consumer loans		31		169		1		15,941			233		15,693		15

Total ALLL — continuing operations		34		799		1		55,445			304		55,125		16
Discontinued operations		1		33		—		4,382	^(a)		15		4,367		—

Total ALLL — including discontinued operations	$	35	$	832	$	1	$	59,827		$	319	$	59,492	$	16

(a)	Amount includes $2.0 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 $41 million at March 31, 2015. When combined with our ALLL, our total allowance for credit losses represented 1.44% of loans at March 31, 2015, compared to 1.57% at March 31, 2014.

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


	Three months ended March 31,
in millions	2015		2014
Balance at beginning of period	$	35	$	37
Provision (credit) for losses on lending-related commitments		6		(2	)

Balance at end of period	$	41	$	35