Loan Losses, GSE Exposure Push Three Ohio Banks into Red

A trio of Ohio-based banks have reported third quarter losses, with exposure to residential lending adding to credit woes at National City Corp., Fifth Third Bancorp, and KeyCorp. KeyCorp has reduced its residential construction loan exposure by $1.3 billion from a year earlier, CEO Henry Meyer said in the company's earnings release. He also noted that Key does not have a subprime mortgage portfolio. KeyCorp lost $36 million in the third quarter, in large measure because the firm increased its loan loss reserve by $133 million, raising the reserve to 2% of total loans. National City Corporation's loss narrowed to $729 million for the third quarter from $1.8 billion in the second. National City said that charge-offs on its $21 billion "exit portfolio," consisting mostly of broker-originated home equity loans, nonprime mortgages, and construction loans, continue to drive credit loss activity. The company noted that this portfolio is running off at a rate of $500 per month and that National City has no option-ARM portfolio. Fifth Third Bancorp said a $51 million impairment to its investment in the preferred stock of Fannie Mae and Freddie Mac contributed to the company's $56 million third quarter loss. On the positive side, Fifth Third benefited from a $22 million gain to hedges used for its mortgage servicing rights asset that do not qualify for hedge accounting treatment.