KEYCORP /NEW/ - FORM 8-K - EX-99.1 - PRESS RELEASE, DATED JANUARY 24, 2012 - January 24, 2012

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Exhibit 99.1

News

 

LOGO   

KeyCorp

127 Public Square

Cleveland, OH 44114

 

CONTACTS: ANALYSTS

      MEDIA
  Vernon L. Patterson      David Reavis
  216.689.0520      216.471.2886
  Vernon_Patterson@KeyBank.com      David_Reavis@KeyBank.com
  Kelly L. Lammers     
  216.689.3133     
  Kelly_L_Lammers@KeyBank.com     

 

INVESTOR

   KEY MEDIA

RELATIONS: www.key.com/ir

   NEWSROOM: www.key.com/newsroom

FOR IMMEDIATE RELEASE

KEYCORP REPORTS FOURTH QUARTER 2011

NET INCOME OF $201 MILLION AND

FULL YEAR NET INCOME OF $857 MILLION

 

  •  

Net income from continuing operations of $201 million, or $.21 per common share, for the fourth quarter of 2011

 

  •  

Full year net income from continuing operations of $857 million, or $.92 per common share

 

  •  

Net interest margin of 3.13%, up four basis points from the third quarter of 2011

 

  •  

Average total loans increased $656 million from the third quarter of 2011

 

  •  

Net charge-offs declined to $105 million, or .86% of average loan balances for the fourth quarter of 2011

 

  •  

Nonperforming loans declined to $727 million, or 1.47% of period-end loans, and nonperforming assets decreased to $859 million

 

  •  

Loan loss reserve at 2.03% of total period-end loans and 138% of nonperforming loans at December 31, 2011

 

  •  

VISA planned litigation escrow deposit resulted in a $24 million charge during the fourth quarter of 2011

 

  •  

Tier 1 common equity and Tier 1 risk-based capital ratios estimated at 11.28% and 13.01%, respectively, at December 31, 2011

CLEVELAND, January 24, 2012 – KeyCorp (NYSE: KEY) today announced fourth quarter net income from continuing operations attributable to Key common shareholders of $201 million, or $.21 per common share. Key’s fourth quarter 2011 results compare to net income from continuing operations attributable to Key common shareholders of $292 million, or $.33 per common share, for the fourth quarter of 2010. The results for the fourth quarter of 2011 were negatively impacted by a $24 million charge resulting from VISA’s late fourth quarter announcement of a planned litigation escrow deposit. In addition, Key recorded a $28

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 2

 

million gain on the sale of Tuition Management Systems during the fourth quarter of 2010. Fourth quarter 2011 net income attributable to Key common shareholders was $194 million compared to net income attributable to Key common shareholders of $279 million for the same quarter one year ago.

For 2011, net income from continuing operations attributable to Key common shareholders was $857 million, or $.92 per common share, compared to net income from continuing operations attributable to Key common shareholders of $413 million, or $.47 per common share, for 2010. The results for 2011 reflect lower credit costs and an improvement in noninterest expense as compared to 2010. Net income attributable to Key common shareholders for the year ended December 31, 2011, was $813 million compared to net income attributable to Key common shareholders of $390 million for 2010.

During the fourth quarter of 2011, the Company continued to benefit from improved asset quality. Nonperforming loans decreased by $341 million and nonperforming assets declined by $479 million from the year-ago quarter to $727 million and $859 million, respectively. Net charge-offs declined to $105 million, or .86% of average loan balances for the fourth quarter of 2011, compared to $256 million, or 2.00% of average loan balances for the same period one year ago.

Chairman and Chief Executive Officer Beth Mooney stated, “Key’s fourth quarter results reflect continued improvement in credit quality and the third consecutive quarter of growth in our commercial, financial and agricultural loan portfolio. We are encouraged by this growth and believe it demonstrates our ability to leverage the alignment of our franchise across business lines to support the needs of our clients. Further, these results confirm our belief that the inflection point for loan growth was reached in the third quarter of 2011.”

The Company originated new or renewed lending commitments to consumers and businesses of approximately $10.5 billion during the quarter and $36.6 billion for 2011. This annual amount compares to approximately $29.5 billion in 2010, an increase of 24%.

Mooney continued: “We are pleased by the positive survey results that tell us that Key’s customer satisfaction, loyalty and retention scores continue to exceed those of other large U.S. banks. This includes the customer satisfaction survey by American Customer Satisfaction Index showing that Key is one of only two large banks that improved its overall customer satisfaction score for two consecutive years. This accomplishment, in the face of an extremely difficult operating environment, demonstrates the success of our client-focused relationship strategy. Key also ranked fifth nationwide in overall customer satisfaction in the J.D. Power and Associates 2011 Small Business Banking Satisfaction Survey.”

At December 31, 2011, Key’s estimated Tier 1 common equity and Tier 1 risk-based capital ratios were 11.28% and 13.01%, compared to 11.28% and 13.49%, respectively, at September 30, 2011.

On January 12, 2012, Key signed a purchase and assumption agreement to acquire 37 retail banking branches in Buffalo and Rochester, NY. The deposits associated with these branches total approximately $2.4 billion, while loans total approximately $400 million.

“Viewed in a broader perspective, this acquisition marks an important milestone for Key,” said Mooney. “During the challenging last few years, we have focused on taking actions to strengthen our balance sheet, fortify our capital, effectively manage risk and expenses, and focus on our core relationship business. Those actions, while sometimes difficult, have now

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 3

 

positioned us so that we can, in a disciplined manner, act on opportunities to strengthen our franchise.”

The following table shows Key’s continuing and discontinued operating results for the comparative quarters and for the years ended December 31, 2011 and 2010.

Results of Operations

 

     Three months ended     Twelve months ended  

in millions, except per share amounts

    12-31-11     9-30-11     12-31-10     12-31-11     12-31-10  

Summary of operations

          

Income (loss) from continuing operations attributable to Key

   $ 207     $ 234     $ 333     $ 964     $ 577  

Income (loss) from discontinued operations, net of taxes (a)

      (7 )      (17 )      (13 )      (44 )      (23 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss) attributable to Key

   $ 200     $ 217     $ 320     $ 920     $ 554  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from continuing operations attributable to Key

   $ 207     $ 234     $ 333     $ 964     $ 577  

Less: Dividends on Series A Preferred Stock

     6       5       6       23       23  

Cash dividends on Series B Preferred Stock (b)

      —          —          31       31       125  

Amortization of discount on Series B Preferred Stock (b)

      —          —          4       53       16  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from continuing operations attributable to Key common shareholders

     201       229       292       857       413  

Income (loss) from discontinued operations, net of taxes (a)

      (7 )      (17 )      (13 )      (44 )      (23 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss) attributable to Key common shareholders

   $ 194     $ 212     $ 279     $ 813     $ 390  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Per common share — assuming dilution

          

Income (loss) from continuing operations attributable to Key common shareholders

   $ .21     $ .24     $ .33     $ .92     $ .47  

Income (loss) from discontinued operations, net of taxes (a)

      (.01 )      (.02 )      (.02 )      (.05 )      (.03 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss) attributable to Key common shareholders (c)

    $ .20     $ .22     $ .32     $ .87     $ .44  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(a) In September 2009, management decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank National Association. In April 2009, management decided to wind down the operations of Austin Capital Management, Ltd., a subsidiary that specialized in managing hedge fund investments for institutional customers. As a result of these decisions, Key has accounted for these businesses as discontinued operations. The loss from discontinued operations for the year ended December 31, 2011, was primarily attributable to fair value adjustments related to the education lending securitization trusts.
(b) The year ended December 31, 2011, includes a $49 million deemed dividend recorded in the first quarter of 2011 related to the repurchase of the $2.5 billion Series B Preferred Stock.
(c) Earnings per share may not foot due to rounding.

SUMMARY OF CONTINUING OPERATIONS

Taxable-equivalent net interest income was $563 million for the fourth quarter of 2011, and the net interest margin was 3.13%. These results compare to taxable-equivalent net interest income of $635 million and a net interest margin of 3.31% for the fourth quarter of 2010. The decrease in net interest income is attributable to both a decline in earning assets and the net interest margin. The net interest margin has been under pressure as a result of the continuation of the low rate environment contracting the spread between lending rates and funding costs.

Compared to the third quarter of 2011, taxable-equivalent net interest income increased by $8 million, and the net interest margin improved by four basis points. The improvement in the net interest income and net interest margin resulted from a decline in Key’s cost of funds due to rate reductions on deposits, maturities of higher rate certificates of deposit, and the impact of certain capital securities redemptions during the third and fourth quarters of 2011. In addition to the improved funding mix, a decrease in the balance of lower yielding short-term investments during the fourth quarter of 2011 also contributed to the margin improvement.

Key’s noninterest income was $414 million for the fourth quarter of 2011, compared to $526 million for the year-ago quarter. Investment banking and capital markets income decreased $39 million compared to the same period one year ago, which includes a $24 million charge resulting from VISA’s late fourth quarter announcement of a planned increase to its litigation escrow deposit. Other income also decreased from the year-ago quarter due to a

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 4

 

$28 million gain from the sale of Tuition Management Systems in the fourth quarter of 2010. Also contributing to the decline in noninterest income were decreases in operating lease income of $17 million and net securities gains (losses) of $12 million. Electronic banking fees also declined $13 million as a result of new government pricing controls on debit transactions which were effective October 1, 2011.

The major components of Key’s noninterest income for the past five quarters are shown in the following table.

Noninterest Income – Major Components

 

in millions

    4Q11     3Q11      2Q11      1Q11      4Q10  

Trust and investment services income

    $ 104     $ 107      $ 113      $ 110      $ 108  

Service charges on deposit accounts

      70       74        69        68        70  

Operating lease income

      25       30        32        35        42  

Letter of credit and loan fees

      56       55        47        55        51  

Corporate-owned life insurance income

      35       31        28        27        42  

Electronic banking fees

      18       33        33        30        31  

Insurance income

      11       13        14        15        12  

Net gains (losses) from loan sales

      27       18        11        19        29  

Net gains (losses) from principal investing

      (8 )      34        17        35        (6 ) 

Investment banking and capital markets income (loss)

      24       25        42        43        63  

Compared to the third quarter of 2011, noninterest income decreased by $69 million. The decrease was a result of lower net gains (losses) from principal investing (including results attributable to noncontrolling interests) of $42 million and a $10 million loss associated with the redemption of certain capital securities compared to a $13 million gain in the third quarter. Electronic banking fees also declined $15 million as a result of new government pricing controls on debit transactions which were effective October 1, 2011. These declines were partially offset by an increase in net gains (losses) from loan sales of $9 million.

Key’s noninterest expense was $717 million for the fourth quarter of 2011, compared to $744 million for the same period last year. The improvement in expense levels resulted from declines of $20 million in FDIC deposit insurance premiums, $10 million in operating lease expense and reductions across several other expense categories. These decreases were partially offset by a $21 million increase in employee benefits expense due to higher medical claims expense compared to the year ago quarter when Key recorded a reduced amount due to favorable experience. In addition, the fourth quarter reflected a credit of $11 million in the provision (credit) for losses on lending-related commitments compared to a credit of $26 million in the same period one year ago.

Compared to the third quarter of 2011, noninterest expense increased by $25 million. Business services and professional fees and miscellaneous expenses both increased by $10 million and personnel expense increased $5 million. Marketing expense also increased $8 million as Key continues to promote, support and advertise relationship-based products, services and capabilities. These increases were partially offset by a decrease of $10 million in the provision (credit) for losses on lending-related commitments.

ASSET QUALITY

Key’s provision for loan and lease losses was a credit of $22 million for the fourth quarter of 2011, compared to a credit of $97 million for the year-ago quarter and a charge of $10 million for the third quarter of 2011. Key’s allowance for loan and lease losses was $1 billion, or 2.03% of total period-end loans, at December 31, 2011, compared to 2.35% at September 30, 2011, and 3.20% at December 31, 2010.

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 5

 

Selected asset quality statistics for Key for each of the past five quarters are presented in the following table.

Selected Asset Quality Statistics from Continuing Operations

 

dollars in millions

   4Q11     3Q11     2Q11     1Q11     4Q10  

Net loan charge-offs

   $ 105     $ 109     $ 134     $ 193     $ 256  

Net loan charge-offs to average loans

     .86 %      .90 %      1.11 %      1.59 %      2.00 % 

Allowance for loan and lease losses

   $ 1,004     $ 1,131     $ 1,230     $ 1,372     $ 1,604  

Allowance for credit losses (a)

      1,049       1,187       1,287       1,441       1,677  

Allowance for loan and lease losses to period-end loans

     2.03 %      2.35 %      2.57 %      2.83 %      3.20 % 

Allowance for credit losses to period-end loans

     2.12       2.46       2.69       2.97       3.35  

Allowance for loan and lease losses to nonperforming loans

     138.10       143.53       146.08       155.03       150.19  

Allowance for credit losses to nonperforming loans

     144.29       150.63       152.85       162.82       157.02  

Nonperforming loans at period end

   $ 727     $ 788     $ 842     $ 885     $ 1,068  

Nonperforming assets at period end

     859       914       950       1,089       1,338  

Nonperforming loans to period-end portfolio loans

     1.47 %      1.64 %      1.76 %      1.82 %      2.13 % 

Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets

     1.73       1.89       1.98       2.23       2.66  

 

(a) Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related commitments.

Net loan charge-offs for the quarter totaled $105 million, or .86% of average loans. These results compare to $256 million, or 2.00%, for the same period last year and $109 million, or .90%, for the previous quarter. Net loan charge-offs have declined for the last eight consecutive quarters and were less than one percent of average loans for the second consecutive quarter.

Key’s net loan charge-offs by loan type for each of the past five quarters are shown in the following table.

Net Loan Charge-offs from Continuing Operations

 

dollars in millions

   4Q11     3Q11     2Q11     1Q11     4Q10  

Commercial, financial and agricultural

   $ 28     $ 23     $ 36     $ 32     $ 80  

Real estate — commercial mortgage

     23       25       12       43       52  

Real estate — construction (a)

      (6 )      8       24       30       28  

Commercial lease financing

     —          2       4       11       12  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial loans

     45       58       76       116       172  

Home equity — Key Community Bank

     20       18       27       24       26  

Home equity — Other

     9       8       10       14       13  

Marine

     14       11       4       19       17  

Other

     17       14       17       20       28  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total consumer loans

     60       51       58       77       84  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total net loan charge-offs

   $ 105     $ 109     $ 134     $ 193     $ 256  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net loan charge-offs to average loans from continuing operations

     .86 %      .90 %      1.11 %      1.59 %      2.00 % 

Net loan charge-offs from discontinued operations — education lending business

   $ 25     $ 31     $ 32     $ 35     $ 32  

 

(a) Credit amount indicates recoveries exceeded charge-offs.

Compared to the third quarter of 2011, net loan charge-offs in the commercial loan portfolio decreased by $13 million which was attributable to a decline in the real estate – construction category. As shown in the table on page 6, Key’s exit loan portfolio accounted for $22 million, or 21%, of Key’s total net loan charge-offs for the fourth quarter of 2011. Net charge-offs in the exit loan portfolio decreased by $5 million from the third quarter of 2011, primarily driven by a decrease in net charge-offs in the residential properties—homebuilder loan portfolio.

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 6

 

At December 31, 2011, Key’s nonperforming loans totaled $727 million and represented 1.47% of period-end portfolio loans, compared to 1.64% at September 30, 2011, and 2.13% at December 31, 2010. Nonperforming assets at December 31, 2011, totaled $859 million and represented 1.73% of portfolio loans and OREO and other nonperforming assets, compared to 1.89% at September 30, 2011, and 2.66% at December 31, 2010. The following table illustrates the trend in Key’s nonperforming assets by loan type over the past five quarters.

Nonperforming Assets from Continuing Operations

 

dollars in millions

   4Q11     3Q11     2Q11     1Q11     4Q10  

Commercial, financial and agricultural

   $ 188     $ 188     $ 213     $ 221     $ 242  

Real estate — commercial mortgage

     218       237       230       245       255  

Real estate — construction

     54       93       131       146       241  

Commercial lease financing

     27       31       41       42       64  

Total consumer loans

     240       239       227       231       266  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total nonperforming loans

     727       788       842       885       1,068  

Nonperforming loans held for sale

     46       42       42       86       106  

OREO and other nonperforming assets

     86       84       66       118       164  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total nonperforming assets

   $ 859     $ 914     $ 950     $ 1,089     $ 1,338  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Restructured loans — accruing and nonaccruing (a)

    $ 276     $ 277     $ 252     $ 242     $ 297  

Restructured loans included in nonperforming loans (a)

      191       178       144       136       202  

Nonperforming assets from discontinued operations — education lending business

     23       22       21       22       40  

Nonperforming loans to period-end portfolio loans

     1.47 %      1.64 %      1.76 %      1.82 %      2.13 % 

Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets

     1.73       1.89       1.98       2.23       2.66  

 

(a) Restructured loans (i.e. troubled debt restructurings) are those for which Key, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. These concessions are made to improve the collectability of the loan and generally take the form of a reduction of the interest rate, extension of the maturity date or reduction in the principal balance.

Nonperforming assets continued to decrease during the fourth quarter of 2011, representing the ninth consecutive quarterly decline. As shown in the following table, Key’s exit loan portfolio accounted for $119 million, or 13.9%, of Key’s total nonperforming assets at December 31, 2011.

The following table shows the composition of Key’s exit loan portfolio at December 31, 2011, and September 30, 2011, the net charge-offs recorded on this portfolio for the third and fourth quarters of 2011, and the nonperforming status of these loans at December 31, 2011, and September 30, 2011.

Exit Loan Portfolio from Continuing Operations

 

     Balance      Change     Net Loan      Balance on  
     Outstanding      12-31-11 vs.     Charge-offs      Nonperforming Status  

in millions

   12-31-11      9-30-11      9-30-11     4Q11(c)     3Q11      12-31-11      9-30-11  

Residential properties — homebuilder

   $ 41      $ 48      $ (7 )    $ (2 )    $ 4      $ 23      $ 28  

Marine and RV floor plan

     81        92        (11 )      2        3        45        38  

Commercial lease financing (a)

      1,669        1,728        (59 )      (2 )      —           7        9  
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

     

 

 

     

 

 

  

Total commercial loans

     1,791        1,868        (77 )      (2 )      7        75        75  

Home equity — Other

     535        565        (30 )      9        8        12        12  

Marine

     1,766        1,871        (105 )      14        11        31        32  

RV and other consumer

     125        131        (6 )      1        1        1        —     
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

     

 

 

     

 

 

  

Total consumer loans

     2,426        2,567        (141 )      24        20        44        44  
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

     

 

 

     

 

 

  

Total exit loans in loan portfolio

   $ 4,217      $ 4,435      $ (218 )    $ 22      $ 27      $ 119      $ 119  
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

     

 

 

     

 

 

  

Discontinued operations — education lending business (not included in exit loans above) (b)

    $ 5,812      $ 5,984      $ (172 )    $ 25      $ 31      $ 23      $ 22  

 

(a) Includes the business aviation, commercial vehicle, office products, construction and industrial leases, and Canadian lease financing portfolios; and all remaining balances related to lease in, lease out; sale in, sale out; service contract leases; and qualified technological equipment leases.
(b) Includes loans in Key’s consolidated education loan securitization trusts.

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 7

 

(c) Credit amounts indicate recoveries exceeded charge-offs.

CAPITAL

Key’s estimated risk-based capital ratios included in the following table continued to exceed all “well-capitalized” regulatory benchmarks at December 31, 2011.

Capital Ratios

 

     12-31-11     9-30-11     6-30-11     3-31-11     12-31-10  

Tier 1 common equity (a), (b)

      11.28 %      11.28 %      11.14 %      10.74 %      9.34 % 

Tier 1 risk-based capital (a)

      13.01       13.49       13.93       13.48       15.16  

Total risk-based capital (a)

      16.53       17.05       17.88       17.38       19.12  

Tangible common equity to tangible assets (b)

      9.88       9.82       9.67       9.16       8.19  

 

(a) 12-31-11 ratio is estimated.
(b) The table entitled “GAAP to Non-GAAP Reconciliations” presents the computations of certain financial measures related to “tangible common equity” and “Tier 1 common equity.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.

As shown in the preceding table, at December 31, 2011, Key’s estimated Tier 1 common equity and Tier 1 risk-based capital ratios stood at 11.28% and 13.01%, respectively. In addition, the tangible common equity ratio was 9.88% at December 31, 2011.

The changes in Key’s outstanding common shares over the past five quarters are summarized in the following table.

Summary of Changes in Common Shares Outstanding

 

in thousands

    4Q11      3Q11     2Q11     1Q11      4Q10  

Shares outstanding at beginning of period

      952,808        953,822       953,926       880,608        880,328  

Common shares issued

      —           —          —          70,621        —     

Shares reissued (returned) under employee benefit plans

      200        (1,014 )      (104 )      2,697        280  
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Shares outstanding at end of period

      953,008        952,808       953,822       953,926        880,608  
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

During the first quarter of 2011, Key successfully completed a $625 million common equity offering and a $1 billion debt offering. The proceeds from these offerings, along with other available funds, were used to repurchase the $2.5 billion of Fixed-Rate Perpetual Preferred Stock, Series B issued to the U.S. Treasury Department as a result of Key’s participation in the U.S. Treasury’s Capital Purchase Program.

LINE OF BUSINESS RESULTS

The following table shows the contribution made by each major business segment to Key’s taxable-equivalent revenue from continuing operations and income (loss) from continuing operations attributable to Key for the periods presented. The specific lines of business that comprise each of the major business segments are described under the heading “Line of Business Descriptions.” For more detailed financial information pertaining to each business segment and its respective lines of business, see the tables at the end of this release.

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 8

 

Major Business Segments

 

                       Percent change 4Q11 vs.  

dollars in millions

   4Q11     3Q11     4Q10     3Q11     4Q10  

Revenue from continuing operations (TE)

          

Key Community Bank

   $ 546     $ 565     $ 597        (3.4 )%      (8.5 )% 

Key Corporate Bank

     411       368       434        11.7       (5.3 ) 

Other Segments

     46       105       112        (56.2 )      (58.9 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Segments

     1,003       1,038       1,143        (3.4 )      (12.2 ) 

Reconciling Items

     (26 )      —          18        N/M        (244.4 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 977     $ 1,038     $ 1,161        (5.9 )%      (15.8 )% 
  

 

 

    

 

 

    

 

 

      

Income (loss) from continuing operations attributable to Key

          

Key Community Bank

   $ 40     $ 58     $ 58        (31.0 )%      (31.0 )% 

Key Corporate Bank

     156       122       289        27.9       (46.0 ) 

Other Segments

     24       55       3        (56.4 )      700.0  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Segments

     220       235       350        (6.4 )      (37.1 ) 

Reconciling Items

     (13 )      (1 )      (17 )      N/M        N/M   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 207     $ 234     $ 333        (11.5 )%      (37.8 )% 
  

 

 

    

 

 

    

 

 

      

TE = Taxable Equivalent, N/M = Not Meaningful

Key Community Bank

 

                         Percent change 4Q11 vs.  

dollars in millions

    4Q11     3Q11      4Q10      3Q11     4Q10  

Summary of operations

             

Net interest income (TE)

    $ 365     $ 371      $ 394         (1.6 )%      (7.4 )% 

Noninterest income

      181       194        203         (6.7 )      (10.8 ) 
  

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Total revenue (TE)

      546       565        597         (3.4 )      (8.5 ) 

Provision (credit) for loan and lease losses

      30       39        74         (23.1 )      (59.5 ) 

Noninterest expense

      477       456        457         4.6       4.4  
  

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Income (loss) before income taxes (TE)

      39       70        66         (44.3 )      (40.9 ) 

Allocated income taxes and TE adjustments

      (1 )      12        8         (108.3 )      (112.5 ) 
  

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Net income (loss) attributable to Key

    $ 40     $ 58      $ 58         (31.0 )%      (31.0 )% 
  

 

 

    

 

 

     

 

 

       

Average balances

             

Loans and leases

    $ 26,406     $ 26,270      $ 26,436         .5 %      (.1 )% 

Total assets

      29,867       29,681        29,830         .6       .1  

Deposits

      48,076       47,672        48,124         .8       (.1 ) 

Assets under management at period end

    $ 17,938     $ 17,195      $ 18,788         4.3  %      (4.5 )% 

TE = Taxable Equivalent, N/M = Not Meaningful

Additional Key Community Bank Data

 

                       Percent change 4Q11 vs.  

dollars in millions

    4Q11     3Q11     4Q10     3Q11     4Q10  

Average deposit balances

           

NOW and money market deposit accounts

    $ 22,524     $ 21,967     $ 20,513       2.5 %      9.8 % 

Savings deposits

      1,959       1,971       1,863       (.6 )      5.2  

Certificates of deposit ($100,000 or more)

      3,639       3,862       4,885       (5.8 )      (25.5 ) 

Other time deposits

      6,491       6,928       8,638       (6.3 )      (24.9 ) 

Deposits in foreign office

      393       336       421       17.0       (6.7 ) 

Noninterest-bearing deposits

      13,070       12,608       11,804       3.7       10.7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total deposits

    $ 48,076     $ 47,672     $ 48,124       .8 %      (.1 )% 
  

 

 

    

 

 

    

 

 

      

Home equity loans

           

Average balance

    $ 9,280     $ 9,388     $ 9,582      

Weighted-average loan-to-value ratio (at date of origination)

      70 %      70 %      70 %     

Percent first lien positions

      53       53       53      
  

 

 

    

 

 

    

 

 

      

Other data

           

Branches

      1,058       1,063       1,033      

Automated teller machines

      1,579       1,584       1,531      
  

 

 

    

 

 

    

 

 

      

Key Community Bank Summary of Operations

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 9

 

Key Community Bank recorded net income attributable to Key of $40 million for the fourth quarter of 2011, compared to net income attributable to Key of $58 million for the year-ago quarter.

Taxable-equivalent net interest income declined by $29 million, or 7%, from the fourth quarter of 2010. Average loans and leases and average deposits were essentially even with the level one year ago; however, given the continued low rate environment the value derived from these assets and deposits was less in the current period.

Noninterest income decreased by $22 million, or 11%, from the year-ago quarter. Electronic banking fees declined $13 million as a result of new government pricing controls on debit transactions which were effective October 1, 2011. Investment banking and capital markets income also decreased $5 million from one year ago.

The provision for loan and lease losses declined by $44 million, or 59%, compared to the fourth quarter of 2010 due to lower net charge-offs and nonperforming loans from the same period one year ago. Net charge-offs were $71 million for the fourth quarter of 2011, down $44 million from the $115 million incurred in the same period one year ago. Nonperforming loans declined to $415 million at December 31, 2011, down $82 million from one year ago.

Noninterest expense increased by $20 million, or 4%, from the year-ago quarter. Personnel expense increased $17 million and real estate costs associated with investments in Key’s branch network increased $18 million. These increases were partially offset by a reduction in FDIC deposit insurance premiums of $18 million from one year ago.

Key Corporate Bank

 

                       Percent change 4Q11 vs.  

dollars in millions

   4Q11     3Q11     4Q10     3Q11     4Q10  

Summary of operations

          

Net interest income (TE)

   $ 175     $ 170     $ 204        2.9 %      (14.2 )% 

Noninterest income

     236       198       230        19.2       2.6  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total revenue (TE)

     411       368       434        11.7       (5.3 ) 

Provision (credit) for loan and lease losses

     (61 )      (40 )      (263 )      N/M        N/M   

Noninterest expense

     227       216       240        5.1       (5.4 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) before income taxes (TE)

     245       192       457        27.6       (46.4 ) 

Allocated income taxes and TE adjustments

     89       70       168        27.1       (47.0 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss) attributable to Key

   $ 156     $ 122     $ 289        27.9 %      (46.0 )% 
  

 

 

    

 

 

    

 

 

      

Average balances

          

Loans and leases

   $ 17,783     $ 16,985     $ 18,602        4.7 %      (4.4 )% 

Loans held for sale

     356       273       253        30.4       40.7  

Total assets

     21,810       21,168       22,607        3.0       (3.5 ) 

Deposits

     11,162       10,544       12,766        5.9       (12.6 ) 

Assets under management at period end

   $ 31,603     $ 34,389     $ 41,027        (8.1 )%      (23.0 )% 

TE = Taxable Equivalent, N/M = Not Meaningful

Key Corporate Bank Summary of Operations

Key Corporate Bank recorded net income attributable to Key of $156 million for the fourth quarter of 2011, compared to net income attributable to Key of $289 million for the same period one year ago. This decrease was primarily driven by a $202 million reduction in a credit to the provision for loan and lease losses compared to the same period one year ago.

Taxable-equivalent net interest income decreased by $29 million, or 14%, compared to the fourth quarter of 2010, due to lower average deposits and average earning assets. Average deposits declined by $1.6 billion, or 13%, from one year ago primarily because Key moved $1.5 billion in escrow balances out of the Real Estate Capital line of business to a third party in

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 10

 

the first quarter of 2011. Average earning assets decreased by $969 million, or 5%, from the year-ago quarter, while lower levels of nonperforming assets and better pricing helped to partially offset volume-related declines.

Noninterest income increased by $6 million, or 3%, from the fourth quarter of 2010. Other income increased $22 million as a result of gains on the disposition of certain investments held by the Real Estate Capital line of business. This increase was partially offset by decreases in operating lease income of $8 million, investment banking and capital markets income of $5 million and trust and investment services income of $4 million.

The provision for loan and lease losses in the fourth quarter of 2011 was a credit of $61 million compared to a credit of $263 million for the same period one year ago. Key Corporate Bank continued to experience improved asset quality for the ninth quarter in a row. Net charge-offs were $12 million for the fourth quarter of 2011, down $49 million from the $61 million incurred in the same period one year ago. Nonperforming loans declined to $294 million at December 31, 2011, down $281 million from one year ago.

Noninterest expense decreased by $13 million, or 5%, from the fourth quarter of 2010. Contributing to the improvement in expense levels were decreases in various miscellaneous expense items of $22 million, operating lease expense of $6 million, and business services and professional fees of $4 million from the year-ago quarter. These improvements were partially offset by an increase in personnel expense of $12 million. In addition, the fourth quarter reflected a credit to the provision for losses on lending-related commitments of $10 million compared to a credit of $18 million for the same period one year ago.

Other Segments

Other Segments consist of Corporate Treasury, Key’s Principal Investing unit and various exit portfolios. Other Segments generated net income attributable to Key of $24 million for the fourth quarter of 2011, compared to net income attributable to Key of $3 million for the same period last year. These results were primarily attributable to a decrease in the provision for loan and lease losses of $81 million in the exit portfolio partially offset by decreases in various miscellaneous income items of $41 million and net interest income of $12 million.

Line of Business Descriptions

Key Community Bank

Regional Banking provides individuals with branch-based deposit and investment products, personal finance services and loans, including residential mortgages, home equity and various types of installment loans. This line of business also provides small businesses with deposit, investment and credit products, and business advisory services.

Regional Banking also offers financial, estate and retirement planning, and asset management services to assist high-net-worth clients with their banking, trust, portfolio management, insurance, charitable giving and related needs.

Commercial Banking provides midsize businesses with products and services that include commercial lending, cash management, equipment leasing, investment and employee benefit programs, succession planning, access to capital markets, derivatives and foreign exchange.

Key Corporate Bank

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 11

 

Real Estate Capital and Corporate Banking Services consists of two business units, Real Estate Capital and Corporate Banking Services.

Real Estate Capital is a national business that provides construction and interim lending, permanent debt placements and servicing, equity and investment banking, and other commercial banking products and services to developers, brokers and owner-investors. This unit deals primarily with nonowner-occupied properties (i.e., generally properties in which at least 50% of the debt service is provided by rental income from nonaffiliated third parties). Real Estate Capital emphasizes providing clients with finance solutions through access to the capital markets.

Corporate Banking Services provides cash management, interest rate derivatives, and foreign exchange products and services to clients served by both the Key Community Bank and Key Corporate Bank groups. Through its Public Sector and Financial Institutions businesses, Corporate Banking Services also provides a full array of commercial banking products and services to government and not-for-profit entities and community banks. A variety of cash management services are provided through the Global Treasury Management unit.

Equipment Finance meets the equipment leasing needs of companies worldwide and provides equipment manufacturers, distributors and resellers with financing options for their clients. Lease financing receivables and related revenues are assigned to other lines of business (primarily Institutional and Capital Markets and Commercial Banking) if those businesses are principally responsible for maintaining the relationship with the client.

Institutional and Capital Markets, through its KeyBanc Capital Markets unit, provides commercial lending, treasury management, investment banking, derivatives, foreign exchange, equity and debt underwriting and trading, and syndicated finance products and services to large corporations and middle-market companies.

Institutional and Capital Markets, through its Victory Capital Management unit, also manages or offers advice regarding investment portfolios for a national client base, including corporations, labor unions, not-for-profit organizations, governments and individuals. These portfolios may be managed in separate accounts, common funds or the Victory family of mutual funds.

Key traces its history back more than 160 years and is headquartered in Cleveland, Ohio. One of the nation’s largest bank-based financial services companies, Key has assets of approximately $89 billion at December 31, 2011.

Key provides deposit, lending, cash management and investment services to individuals and small businesses in 14 states under the name KeyBank National Association. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name.

For more information, visit https://www.key.com/. KeyBank is Member FDIC.

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 12

 

Notes to Editors:

A live Internet broadcast of KeyCorp’s conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts’ questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on Tuesday, January 24, 2012. An audio replay of the call will be available through January 31, 2012.

For up-to-date company information, media contacts and facts and figures about Key’s lines of business, visit our Media Newsroom at https://www.key.com/newsroom.

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Key’s financial condition, results of operations, earnings outlook, asset quality trends and profitability. Forward-looking statements are not historical facts but instead represent only management’s current expectations and forecasts regarding future events, many of which, by their nature, are inherently uncertain and outside of Key’s control. Key’s actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Factors that could cause Key’s actual results to differ materially from those described in the forward-looking statements can be found in KeyCorp’s Annual Report on Form 10-K for the year ended December 31, 2010, and its Quarterly Reports on Form 10-Q for the periods ended March 31, 2011, June 30, 2011, and September 30, 2011, which have been filed with the Securities and Exchange Commission and are available on Key’s website (www.key.com/ir) and on the Securities and Exchange Commission’s website (www.sec.gov). Forward-looking statements are not guarantees of future performance and should not be relied upon as representing management’s views as of any subsequent date. Key does not undertake any obligation to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

*****

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 13

 

Financial Highlights

(dollars in millions, except per share amounts)

 

     Three months ended  
     12-31-11     9-30-11     12-31-10  

Summary of operations

      

Net interest income (TE)

   $ 563     $ 555     $ 635  

Noninterest income

     414       483       526  
  

 

 

    

 

 

    

 

 

  

Total revenue (TE)

     977       1,038       1,161  

Provision (credit) for loan and lease losses

     (22 )      10       (97 ) 

Noninterest expense

     717       692       744  

Income (loss) from continuing operations attributable to Key

     207       234       333  

Income (loss) from discontinued operations, net of taxes (b)

      (7 )      (17 )      (13 ) 

Net income (loss) attributable to Key

     200       217       320  

Income (loss) from continuing operations attributable to Key common shareholders

   $ 201     $ 229     $ 292  

Income (loss) from discontinued operations, net of taxes (b)

      (7 )      (17 )      (13 ) 

Net income (loss) attributable to Key common shareholders

     194       212       279  

Per common share

      

Income (loss) from continuing operations attributable to Key common shareholders

   $ .21     $ .24     $ .33  

Income (loss) from discontinued operations, net of taxes (b)

      (.01 )      (.02 )      (.02 ) 

Net income (loss) attributable to Key common shareholders

     .20       .22       .32  

Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution

     .21       .24       .33  

Income (loss) from discontinued operations, net of taxes — assuming dilution (b)

      (.01 )      (.02 )      (.02 ) 

Net income (loss) attributable to Key common shareholders — assuming dilution

     .20       .22       .32  

Cash dividends paid

     .03       .03       .01  

Book value at period end

     10.09       10.09       9.52  

Tangible book value at period end

     9.11       9.10       8.45  

Market price at period end

     7.69       5.93       8.85  

Performance ratios

      

From continuing operations:

      

Return on average total assets

     1.01  %      1.14  %      1.53  % 

Return on average common equity

     8.26       9.52       13.71  

Net interest margin (TE)

     3.13       3.09       3.31  

From consolidated operations:

      

Return on average total assets

     .91  %      .98  %      1.36  % 

Return on average common equity

     7.97       8.82       13.10  

Net interest margin (TE)

     3.04       3.02       3.22  

Loan to deposit (d)

      87.00       85.71       90.30  

Capital ratios at period end

      

Key shareholders’ equity to assets

     11.16  %      11.09  %      12.10  % 

Tangible Key shareholders’ equity to tangible assets

     10.21       10.15       11.20  

Tangible common equity to tangible assets (a)

      9.88       9.82       8.19  

Tier 1 common equity (a), (c)

      11.28       11.28       9.34  

Tier 1 risk-based capital (c)

      13.01       13.49       15.16  

Total risk-based capital (c)

      16.53       17.05       19.12  

Leverage (c)

      11.70       11.93       13.02  

Asset quality — from continuing operations

      

Net loan charge-offs

   $ 105     $ 109     $ 256  

Net loan charge-offs to average loans

     .86  %      .90  %      2.00  % 

Allowance for loan and lease losses

   $ 1,004     $ 1,131     $ 1,604  

Allowance for credit losses

     1,049       1,187       1,677  

Allowance for loan and lease losses to period-end loans

     2.03  %      2.35  %      3.20  % 

Allowance for credit losses to period-end loans

     2.12       2.46       3.35  

Allowance for loan and lease losses to nonperforming loans

     138.10       143.53       150.19  

Allowance for credit losses to nonperforming loans

     144.29       150.63       157.02  

Nonperforming loans at period end

   $ 727     $ 788     $ 1,068  

Nonperforming assets at period end

     859       914       1,338  

Nonperforming loans to period-end portfolio loans

     1.47  %      1.64  %      2.13  % 

Nonperforming assets to period-end portfolio loans plus

      

OREO and other nonperforming assets

     1.73       1.89       2.66  

Trust and brokerage assets

      

Assets under management

   $ 49,541     $ 51,584     $ 59,815  

Nonmanaged and brokerage assets

     30,639       28,007       28,069  

Other data

      

Average full-time equivalent employees

     15,381       15,490       15,424  

Branches

     1,058       1,063       1,033  

Taxable-equivalent adjustment

   $ 6     $ 6     $ 6  

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 14

 

Financial Highlights (continued)

(dollars in millions, except per share amounts)

 

     Twelve months ended  
     12-31-11     12-31-10  

Summary of operations

    

Net interest income (TE)

   $ 2,292     $ 2,537  

Noninterest income

     1,808       1,954  
  

 

 

    

 

 

  

Total revenue (TE)

     4,100       4,491  

Provision (credit) for loan and lease losses

     (60 )      638  

Noninterest expense

     2,790       3,034  

Income (loss) from continuing operations attributable to Key

     964       577  

Income (loss) from discontinued operations, net of taxes (b)

      (44 )      (23 ) 

Net income (loss) attributable to Key

     920       554  

Income (loss) from continuing operations attributable to Key common shareholders

   $ 857     $ 413  

Income (loss) from discontinued operations, net of taxes (b)

      (44 )      (23 ) 

Net income (loss) attributable to Key common shareholders

     813       390  

Per common share

    

Income (loss) from continuing operations attributable to Key common shareholders

   $ .92     $ .47  

Income (loss) from discontinued operations, net of taxes (b)

      (.05 )      (.03 ) 

Net income (loss) attributable to Key common shareholders

     .87       .45  

Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution

      .92       .47  

Income (loss) from discontinued operations, net of taxes — assuming dilution (b)

      (.05 )      (.03 ) 

Net income (loss) attributable to Key common shareholders — assuming dilution

     .87       .44  

Cash dividends paid

     .10       .04  

Performance ratios

    

From continuing operations:

    

Return on average total assets

     1.17  %      .66  % 

Return on average common equity

     9.26       5.06  

Net interest margin (TE)

     3.16       3.26  

From consolidated operations:

    

Return on average total assets

     1.04  %      .59  % 

Return on average common equity

     8.79       4.78  

Net interest margin (TE)

     3.09       3.16  

Asset quality — from continuing operations

    

Net loan charge-offs

   $ 541     $ 1,570  

Net loan charge-offs to average loans

     1.11  %      2.91  % 

Other data

    

Average full-time equivalent employees

     15,381       15,610  

Taxable-equivalent adjustment

   $ 25     $ 26  

 

(a) The following table entitled “GAAP to Non-GAAP Reconciliations” presents the computations of certain financial measures related to “tangible common equity” and “Tier 1 common equity.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.
(b) In September 2009, management decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank National Association. In April 2009, management decided to wind down the operations of Austin Capital Management, Ltd., a subsidiary that specialized in managing hedge fund investments for institutional customers. As a result of these decisions, Key has accounted for these businesses as discontinued operations.
(c) 12-31-11 ratio is estimated.
(d) Represents period-end consolidated total loans and loans held for sale (excluding education loans in the securitization trusts) divided by period-end consolidated total deposits (excluding deposits in foreign office).

TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 15

 

GAAP to Non-GAAP Reconciliations

(dollars in millions, except per share amounts)

The table below presents the computations of certain financial measures related to “tangible common equity,” “Tier 1 common equity” and “pre-provision net revenue.” The tangible common equity ratio has become a focus of some investors, and management believes that this ratio may assist investors in analyzing Key’s capital position absent the effects of intangible assets and preferred stock. Traditionally, the banking regulators have assessed bank and bank holding company capital adequacy based on both the amount and composition of capital, the calculation of which is prescribed in federal banking regulations. As a result of the Supervisory Capital Assessment Program, the Federal Reserve has focused its assessment of capital adequacy on a component of Tier 1 capital, known as Tier 1 common equity. Because the Federal Reserve has long indicated that voting common shareholders’ equity (essentially Tier 1 capital less preferred stock, qualifying capital securities and noncontrolling interests in subsidiaries) generally should be the dominant element in Tier 1 capital, such a focus is consistent with existing capital adequacy guidelines and does not imply a new or ongoing capital standard. Because Tier 1 common equity is neither formally defined by GAAP nor prescribed in amount by federal banking regulations, this measure is considered to be a non-GAAP financial measure. Since analysts and banking regulators may assess Key’s capital adequacy using tangible common equity and Tier 1 common equity, management believes it is useful to provide investors the ability to assess Key’s capital adequacy on these same bases. The table also reconciles the GAAP performance measures to the corresponding non-GAAP measures.

The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of the provision for loan and lease losses makes it easier to analyze the results by presenting them on a more comparable basis.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. To mitigate these limitations, Key has procedures in place to ensure that these measures are calculated using the appropriate GAAP or regulatory components, and to ensure that Key’s performance is properly reflected to facilitate period-to-period comparisons. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.

 

     Three months ended  
     12-31-11     9-30-11     12-31-10  

Tangible common equity to tangible assets at period end

      

Key shareholders’ equity (GAAP)

   $ 9,905     $ 9,901     $ 11,117  

Less: Intangible assets

     934       935       938  

Preferred Stock, Series B

     —          —          2,446  

Preferred Stock, Series A

     291       291       291  
  

 

 

    

 

 

    

 

 

  

Tangible common equity (non-GAAP)

   $ 8,680     $ 8,675     $ 7,442  
  

 

 

    

 

 

    

 

 

  

Total assets (GAAP)

   $ 88,785     $ 89,262     $ 91,843  

Less: Intangible assets

     934       935       938  
  

 

 

    

 

 

    

 

 

  

Tangible assets (non-GAAP)

   $ 87,851     $ 88,327     $ 90,905  
  

 

 

    

 

 

    

 

 

  

Tangible common equity to tangible assets ratio (non-GAAP)

     9.88 %      9.82 %      8.19 % 

Tier 1 common equity at period end

      

Key shareholders’ equity (GAAP)

   $ 9,905     $ 9,901     $ 11,117  

Qualifying capital securities

     1,046       1,377       1,791  

Less: Goodwill

     917       917       917  

Accumulated other comprehensive income (loss) (a)

      (72 )      88       (66 ) 

Other assets (b)

      72       72       248  
  

 

 

    

 

 

    

 

 

  

Total Tier 1 capital (regulatory)

     10,034       10,201       11,809  

Less: Qualifying capital securities

     1,046       1,377       1,791  

Preferred Stock, Series B

     —          —          2,446  

Preferred Stock, Series A

     291       291       291  
  

 

 

    

 

 

    

 

 

  

Total Tier 1 common equity (non-GAAP)

   $ 8,697     $ 8,533     $ 7,281  
  

 

 

    

 

 

    

 

 

  

Net risk-weighted assets (regulatory) (b), (c)

    $ 77,125     $ 75,643     $ 77,921  

Tier 1 common equity ratio (non-GAAP) (c)

      11.28 %      11.28 %      9.34 % 

Pre-provision net revenue

      

Net interest income (GAAP)

   $ 557     $ 549     $ 629  

Plus: Taxable-equivalent adjustment

     6       6       6  

Noninterest income

     414       483       526  

Less: Noninterest expense

     717       692       744  
  

 

 

    

 

 

    

 

 

  

Pre-provision net revenue from continuing operations (non-GAAP)

   $ 260     $ 346     $ 417  
  

 

 

    

 

 

    

 

 

  

 

(a) Includes net unrealized gains or losses on securities available for sale (except for net unrealized losses on marketable equity securities), net gains or losses on cash flow hedges, and amounts resulting from the December 31, 2006 adoption and subsequent application of the applicable accounting guidance for defined benefit and other postretirement plans.
(b) Other assets deducted from Tier 1 capital and net risk-weighted assets consist of disallowed deferred tax assets of $158 million at December 31, 2010, disallowed intangible assets (excluding goodwill) and deductible portions of nonfinancial equity investments. There were no disallowed deferred tax assets at December 31, 2011 and September 30, 2011.
(c) 12-31-11 amount is estimated.

GAAP = U.S. generally accepted accounting principles

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 16

 

Consolidated Balance Sheets

(dollars in millions)

 

     12-31-11     9-30-11     12-31-10  

Assets

       

Loans

    $ 49,575     $ 48,195     $ 50,107  

Loans held for sale

      728       479       467  

Securities available for sale

      16,012       17,612       21,933  

Held-to-maturity securities

      2,109       1,176       17  

Trading account assets

      623       729       985  

Short-term investments

      3,519       4,766       1,344  

Other investments

      1,163       1,210       1,358  
  

 

 

    

 

 

    

 

 

  

Total earning assets

      73,729       74,167       76,211  

Allowance for loan and lease losses

      (1,004 )      (1,131 )      (1,604 ) 

Cash and due from banks

      694       828       278  

Premises and equipment

      944       924       908  

Operating lease assets

      350       393       509  

Goodwill

      917       917       917  

Other intangible assets

      17       18       21  

Corporate-owned life insurance

      3,256       3,227       3,167  

Derivative assets

      945       940       1,006  

Accrued income and other assets

      3,077       2,946       3,876  

Discontinued assets

      5,860       6,033       6,554  
  

 

 

    

 

 

    

 

 

  

Total assets

    $ 88,785     $ 89,262     $ 91,843  
  

 

 

    

 

 

    

 

 

  

Liabilities

       

Deposits in domestic offices:

       

NOW and money market deposit accounts

    $ 27,954     $ 27,548     $ 27,066  

Savings deposits

      1,962       1,968       1,879  

Certificates of deposit ($100,000 or more)

      4,111       4,457       5,862  

Other time deposits

      6,243       6,695       8,245  
  

 

 

    

 

 

    

 

 

  

Total interest-bearing deposits

      40,270       40,668       43,052  

Noninterest-bearing deposits

      21,098       19,803       16,653  

Deposits in foreign office — interest-bearing

      588       561       905  
  

 

 

    

 

 

    

 

 

  

Total deposits

      61,956       61,032       60,610  

Federal funds purchased and securities sold under repurchase agreements

      1,711       1,728       2,045  

Bank notes and other short-term borrowings

      337       519       1,151  

Derivative liabilities

      1,026       1,141       1,142  

Accrued expense and other liabilities

      1,763       1,556       1,931  

Long-term debt

      9,520       10,717       10,592  

Discontinued liabilities

      2,550       2,651       2,998  
  

 

 

    

 

 

    

 

 

  

Total liabilities

      78,863       79,344       80,469  

Equity

       

Preferred stock, Series A

      291       291       291  

Preferred stock, Series B

      —          —          2,446  

Common shares

      1,017       1,017       946  

Common stock warrant

      —          —          87  

Capital surplus

      4,194       4,191       3,711  

Retained earnings

      6,246       6,079       5,557  

Treasury stock, at cost

      (1,815 )      (1,820 )      (1,904 ) 

Accumulated other comprehensive income (loss)

      (28 )      143       (17 ) 
  

 

 

    

 

 

    

 

 

  

Key shareholders’ equity

      9,905       9,901       11,117  

Noncontrolling interests

      17       17       257  
  

 

 

    

 

 

    

 

 

  

Total equity

      9,922       9,918       11,374  
  

 

 

    

 

 

    

 

 

  

Total liabilities and equity

    $ 88,785     $ 89,262     $ 91,843  
  

 

 

    

 

 

    

 

 

  

Common shares outstanding (000)

      953,008       952,808       880,608  

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 17

 

Consolidated Statements of Income

(dollars in millions, except per share amounts)

 

     Three months ended     Twelve months ended  
     12-31-11     9-30-11     12-31-10     12-31-11     12-31-10  

Interest income

          

Loans

   $ 542     $ 543     $ 617     $ 2,206     $ 2,653  

Loans held for sale

     4       3       4       14       17  

Securities available for sale

     128       140       170       583       644  

Held-to-maturity securities

     9       2       —          12       2  

Trading account assets

     5       5       8       26       37  

Short-term investments

     1       3       1       6       6  

Other investments

     9       9       11       42       49  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total interest income

     698       705       811       2,889       3,408  

Interest expense

          

Deposits

     85       95       124       390       671  

Federal funds purchased and securities sold under repurchase agreements

     1       1       2       5       6  

Bank notes and other short-term borrowings

     2       3       3       11       14  

Long-term debt

     53       57       53       216       206  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total interest expense

     141       156       182       622       897  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net interest income

     557       549       629       2,267       2,511  

Provision (credit) for loan and lease losses

     (22 )      10       (97 )      (60 )      638  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net interest income (expense) after provision for loan and lease losses

     579       539       726       2,327       1,873  

Noninterest income

          

Trust and investment services income

     104       107       108       434       444  

Service charges on deposit accounts

     70       74       70       281       301  

Operating lease income

     25       30       42       122       173  

Letter of credit and loan fees

     56       55       51       213       194  

Corporate-owned life insurance income

     35       31       42       121       137  

Net securities gains (losses) (a)

      —          —          12       1       14  

Electronic banking fees

     18       33       31       114       117  

Gains on leased equipment

     9       7       6       25       20  

Insurance income

     11       13       12       53       64  

Net gains (losses) from loan sales

     27       18       29       75       76  

Net gains (losses) from principal investing

     (8 )      34       (6 )      78       66  

Investment banking and capital markets income (loss)

     24       25       63       134       145  

Other income

     43       56       66       157       203  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total noninterest income

     414       483       526       1,808       1,954  

Noninterest expense

          

Personnel

     387       382       365       1,520       1,471  

Net occupancy

     66       65       70       258       270  

Operating lease expense

     18       23       28       94       142  

Computer processing

     42       40       45       166       185  

Business services and professional fees

     57       47       56       186       176  

FDIC assessment

     7       7       27       52       124  

OREO expense, net

     5       1       10       13       68  

Equipment

     25       26       26       103       100  

Marketing

     24       16       22       60       72  

Provision (credit) for losses on lending-related commitments

     (11 )      (1 )      (26 )      (28 )      (48 ) 

Other expense

     97       86       121       366       474  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total noninterest expense

     717       692       744       2,790       3,034  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from continuing operations before income taxes

     276       330       508       1,345       793  

Income taxes

     69       95       172       369       186  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from continuing operations

     207       235       336       976       607  

Income (loss) from discontinued operations, net of taxes

     (7 )      (17 )      (13 )      (44 )      (23 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss)

     200       218       323       932       584  

Less: Net income (loss) attributable to noncontrolling interests

     —          1       3       12       30  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss) attributable to Key

   $ 200     $ 217     $ 320     $ 920     $ 554  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from continuing operations attributable to Key common shareholders

   $ 201     $ 229     $ 292     $ 857     $ 413  

Net income (loss) attributable to Key common shareholders

     194       212       279       813       390  

Per common share

          

Income (loss) from continuing operations attributable to Key common shareholders

   $ .21     $ .24     $ .33     $ .92     $ .47  

Income (loss) from discontinued operations, net of taxes

     (.01 )      (.02 )      (.02 )      (.05 )      (.03 ) 

Net income (loss) attributable to Key common shareholders

     .20       .22       .32       .87       .45  

Per common share — assuming dilution

          

Income (loss) from continuing operations attributable to Key common shareholders

   $ .21     $ .24     $ .33     $ .92     $ .47  

Income (loss) from discontinued operations, net of taxes

     (.01 )      (.02 )      (.02 )      (.05 )      (.03 ) 

Net income (loss) attributable to Key common shareholders

     .20       .22       .32       .87       .44  

Cash dividends declared per common share

   $ .03     $ .03     $ .01     $ .10     $ .04  

Weighted-average common shares outstanding (000)

     948,658       948,702       875,501       931,934       874,748  

Weighted-average common shares and potential common shares outstanding (000) (b)

      951,684       950,686       900,263       935,801       878,153  

 

(a) For the three months ended December 31, 2011, September 30, 2011, and December 31, 2010, Key did not have any impairment losses related to securities.
(b) Assumes conversion of stock options and/or Preferred Series A shares, as applicable.

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 18

 

Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations

(dollars in millions)

 

    Fourth Quarter 2011     Third Quarter 2011     Fourth Quarter 2010  
    Average
Balance		     Interest (a)     Yield/Rate  (a)     Average
Balance		     Interest (a)     Yield/Rate  (a)     Average
Balance		     Interest (a)     Yield/Rate  (a)  

Assets

                 

Loans: (b), (c)

                  

Commercial, financial and agricultural

  $ 18,323     $ 179        3.88 %    $ 17,381     $ 175        3.98 %    $ 16,562     $ 189        4.51 % 

Real estate — commercial mortgage

    8,090       92        4.48        7,978       89        4.47        9,514       117        4.89   

Real estate — construction

    1,380       16        4.68        1,545       18        4.46        2,531       26        4.15   

Commercial lease financing

    5,982       69        4.62        6,045       72        4.80        6,484       82        5.08   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial loans

    33,775       356        4.19        32,949       354        4.27        35,091       414        4.69   

Real estate — residential mortgage

    1,918       24        5.15        1,853       25        5.23        1,837       25        5.43   

Home equity:

                 

Key Community Bank

    9,280       96        4.10        9,388       97        4.12        9,583       101        4.16   

Other

    553       11        7.68        582       11        7.69        686       13        7.58   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total home equity loans

    9,833       107        4.30        9,970       108        4.33        10,269       114        4.39   

Consumer other — Key Community Bank

    1,191       30        9.62        1,169       28        9.60        1,170       30        10.38   

Consumer other:

                 

Marine

    1,820       29        6.35        1,928       30        6.29        2,295       36        6.30   

Other

    127       2        7.87        139       3        7.89        167       3        7.98   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total consumer other

    1,947       31        6.44        2,067       33        6.40        2,462       39        6.41   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total consumer loans

    14,889       192        5.12        15,059       194        5.14        15,738       208        5.27   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total loans

    48,664       548        4.47        48,008       548        4.54        50,829       622        4.87   

Loans held for sale

    440       4        3.36        341       3        3.75        403       4        3.16   

Securities available for sale (b), (e)

     16,790       128        3.16        18,165       141        3.16        21,257       171        3.27   

Held-to-maturity securities (b)

     1,648       9        2.12        354       2        2.59        17       —          11.92   

Trading account assets

    736       5        2.72        869       5        2.45        967       8        3.22   

Short-term investments

    2,929       1        .26        3,348       3        .25        2,521       1        .22   

Other investments (e)

     1,181       9        2.98        1,190       9        2.94        1,400       11        2.86   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total earning assets

    72,388       704        3.90        72,275       711        3.93        77,394       817        4.22   

Allowance for loan and lease losses

    (1,057 )          (1,176 )          (1,789 )     

Accrued income and other assets

    9,942           10,360           11,025      

Discontinued assets — education lending business

    5,912           6,079           6,674      
 

 

 

        

 

 

        

 

 

      

Total assets

  $ 87,185         $ 87,538         $ 93,304      
 

 

 

        

 

 

        

 

 

      

Liabilities

                 

NOW and money market deposit accounts

  $ 27,722       15        .22      $ 26,917       18        .26      $ 27,047       21        .30   

Savings deposits

    1,964       —          .06        1,980       —          .06        1,873       —          .06   

Certificates of deposit ($100,000 or more) (f)

     4,275       32        2.97        4,762       36        3.03        6,341       49        3.05   

Other time deposits

    6,505       37        2.24        6,942       40        2.28        8,664       53        2.43   

Deposits in foreign office

    650       1        .25        675       1        .28        1,228       1        .32   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total interest-bearing deposits

    41,116       85        .82        41,276       95        .91        45,153       124        1.09   

Federal funds purchased and securities sold under repurchase agreements

    1,747       1        .25        1,724       1        .28        2,236       2        .31   

Bank notes and other short-term borrowings

    471       2        1.87        598       3        1.85        480       3        2.77   

Long-term debt (f), (g)

     7,020       53        3.21        7,777       57        3.14        7,525       53        3.02   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total interest-bearing liabilities

    50,354       141        1.12        51,375       156        1.21        55,394       182        1.31   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Noninterest-bearing deposits

    18,464           17,624           16,841      

Accrued expense and other liabilities

    2,496           2,612           2,965      

Discontinued liabilities — education lending business (d), (g)

     5,912           6,079           6,674      
 

 

 

        

 

 

        

 

 

      

Total liabilities

    77,226           77,690           81,874      

Equity

                 

Key shareholders’ equity

    9,943           9,831           11,183      

Noncontrolling interests

    16           17           247      
 

 

 

        

 

 

        

 

 

      

Total equity

    9,959           9,848           11,430      
 

 

 

        

 

 

        

 

 

      

Total liabilities and equity

  $ 87,185         $ 87,538         $ 93,304      
 

 

 

        

 

 

        

 

 

      

Interest rate spread (TE)

        2.78 %          2.72 %          2.91 % 
     

 

 

        

 

 

        

 

 

  

Net interest income (TE) and net interest margin (TE)

      563        3.13 %        555        3.09 %        635        3.31 % 
     

 

 

        

 

 

        

 

 

  

TE adjustment (b)

       6            6            6     
   

 

 

        

 

 

        

 

 

    

Net interest income, GAAP basis

    $ 557          $ 549          $ 629     
   

 

 

        

 

 

        

 

 

    

 

(a) Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (d) below, calculated using a matched funds transfer pricing methodology.
(b) Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%.
(c) For purposes of these computations, nonaccrual loans are included in average loan balances.
(d) Discontinued liabilities include the liabilities of the education lending business and the dollar amount of any additional liabilities assumed necessary to support the assets associated with this business.
(e) Yield is calculated on the basis of amortized cost.
(f) Rate calculation excludes basis adjustments related to fair value hedges.
(g) A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying our matched funds transfer pricing methodology to discontinued operations.

TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 19

 

Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations

(dollars in millions)

 

     Twelve months ended December 31, 2011     Twelve months ended December 31, 2010  
     Average
Balance		     Interest(a)     Yield/Rate(a)     Average
Balance		     Interest(a)     Yield/Rate(a)  

Assets

            

Loans: (b), (c)

             

Commercial, financial and agricultural

   $ 17,240     $ 702        4.07 %    $ 17,500     $ 813        4.64 % 

Real estate — commercial mortgage

     8,437       380        4.50        10,027       491        4.90   

Real estate — construction

     1,677       73        4.36        3,495       149        4.26   

Commercial lease financing

     6,113       296        4.85        6,754       352        5.21   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial loans

     33,467       1,451        4.34        37,776       1,805        4.78   

Real estate — residential mortgage

     1,850       97        5.25        1,828       102        5.57   

Home equity:

            

Key Community Bank

     9,390       387        4.12        9,773       411        4.20   

Other

     598       46        7.66        751       57        7.59   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total home equity loans

     9,988       433        4.34        10,524       468        4.45   

Consumer other — Key Community Bank

     1,167       113        9.62        1,158       132        11.44   

Consumer other:

            

Marine

     1,992       125        6.28        2,497       155        6.23   

Other

     142       11        7.87        188       15        7.87   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total consumer other

     2,134       136        6.38        2,685       170        6.34   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total consumer loans

     15,139       779        5.14        16,195       872        5.39   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total loans

     48,606       2,230        4.59        53,971       2,677        4.96   

Loans held for sale

     387       14        3.58        453       17        3.62   

Securities available for sale (b), (e)

      18,766       584        3.20        18,800       646        3.50   

Held-to-maturity securities (b)

      514       12        2.35        20       2        10.56   

Trading account assets

     878       26        2.97        1,068       37        3.47   

Short-term investments

     2,543       6        .25        2,684       6        .24   

Other investments (e)

      1,264       42        3.14        1,442       49        3.08   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total earning assets

     72,958       2,914        4.02        78,438       3,434        4.39   

Allowance for loan and lease losses

     (1,250 )          (2,207 )     

Accrued income and other assets

     10,385           11,243      

Discontinued assets — education lending business

     6,203           6,677      
  

 

 

        

 

 

      

Total assets

   $ 88,296         $ 94,151      
  

 

 

        

 

 

      

Liabilities

            

NOW and money market deposit accounts

   $ 27,001       71        .26      $ 25,712       91        .35   

Savings deposits

     1,958       1        .06        1,867       1        .06   

Certificates of deposit ($100,000 or more) (f)

      4,931       149        3.02        8,486       275        3.24   

Other time deposits

     7,185       166        2.31        10,545       301        2.86   

Deposits in foreign office

     807       3        .30        926       3        .34   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total interest-bearing deposits

     41,882       390        .93        47,536       671        1.41   

Federal funds purchased and securities sold under repurchase agreements

     1,981       5        .27        2,044       6        .31   

Bank notes and other short-term borrowings

     619       11        1.84        545       14        2.63   

Long-term debt (f), (g)

      7,293       216        3.18        7,211       206        3.09   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total interest-bearing liabilities

     51,775       622        1.21        57,336       897        1.58   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Noninterest-bearing deposits

     17,381           15,856      

Accrued expense and other liabilities

     2,687           3,131      

Discontinued liabilities — education lending business (d), (g)

      6,203           6,677      
  

 

 

        

 

 

      

Total liabilities

     78,046           83,000      

Equity

            

Key shareholders’ equity

     10,133           10,895      

Noncontrolling interests

     117           256      
  

 

 

        

 

 

      

Total equity

     10,250           11,151      
  

 

 

        

 

 

      

Total liabilities and equity

   $ 88,296         $ 94,151      
  

 

 

        

 

 

      

Interest rate spread (TE)

         2.81 %          2.81 % 
      

 

 

        

 

 

  

Net interest income (TE) and net interest margin (TE)

       2,292        3.16 %        2,537        3.26 % 
      

 

 

        

 

 

  

TE adjustment (b)

        25            26     
    

 

 

        

 

 

    

Net interest income, GAAP basis

     $ 2,267          $ 2,511     
    

 

 

        

 

 

    

 

(a) Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (d) below, calculated using a matched funds transfer pricing methodology.
(b) Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%.
(c) For purposes of these computations, nonaccrual loans are included in average loan balances.
(d) Discontinued liabilities include the liabilities of the education lending business and the dollar amount of any additional liabilities assumed necessary to support the assets associated with this business.
(e) Yield is calculated on the basis of amortized cost.
(f) Rate calculation excludes basis adjustments related to fair value hedges.
(g) A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying our matched funds transfer pricing methodology to discontinued operations.

TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 20

 

Noninterest Income  
(in millions)  
     Three months ended     Twelve months ended  
     12-31-11     9-30-11     12-31-10     12-31-11     12-31-10  

Trust and investment services income (a)

    $ 104     $ 107     $ 108     $ 434     $ 444  

Service charges on deposit accounts

     70       74       70       281       301  

Operating lease income

     25       30       42       122       173  

Letter of credit and loan fees

     56       55       51       213       194  

Corporate-owned life insurance income

     35       31       42       121       137  

Net securities gains (losses)

     —          —          12       1       14  

Electronic banking fees

     18       33       31       114       117  

Gains on leased equipment

     9       7       6       25       20  

Insurance income

     11       13       12       53       64  

Net gains (losses) from loan sales

     27       18       29       75       76  

Net gains (losses) from principal investing

     (8 )      34       (6 )      78       66  

Investment banking and capital markets income (loss) (a)

      24       25       63       134       145  

Other income

     43       56       66       157       203  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total noninterest income

   $ 414     $ 483     $ 526     $ 1,808     $ 1,954  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

(a) Additional detail provided in tables below.

          
Trust and Investment Services Income   
(in millions)  
     Three months ended     Twelve months ended  
     12-31-11     9-30-11     12-31-10     12-31-11     12-31-10  

Brokerage commissions and fee income

   $ 33     $ 34     $ 32     $ 132     $ 134  

Personal asset management and custody fees

     38       37       38       153       149  

Institutional asset management and custody fees

     33       36       38       149       161  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total trust and investment services income

   $ 104     $ 107     $ 108     $ 434     $ 444  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Investment Banking and Capital Markets Income (Loss)   
(in millions)  
     Three months ended     Twelve months ended  
     12-31-11     9-30-11     12-31-10     12-31-11     12-31-10  

Investment banking income

   $ 25     $ 16     $ 33     $ 92     $ 112  

Income (loss) from other investments

     3       6       —          21       6  

Dealer trading and derivatives income (loss)

     (15 )      (8 )      18       (22 )      (16 ) 

Foreign exchange income

     11       11       12       43       43  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total investment banking and capital markets income (loss)

   $ 24     $ 25     $ 63     $ 134     $ 145  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 21

 

Noninterest Expense  
(dollars in millions)  
     Three months ended     Twelve months ended  
     12-31-11     9-30-11     12-31-10     12-31-11     12-31-10  

Personnel (a)

    $ 387     $ 382     $ 365     $ 1,520     $ 1,471  

Net occupancy

     66       65       70       258       270  

Operating lease expense

     18       23       28       94       142  

Computer processing

     42       40       45       166       185  

Business services and professional fees

     57       47       56       186       176  

FDIC assessment

     7       7       27       52       124  

OREO expense, net

     5       1       10       13       68  

Equipment

     25       26       26       103       100  

Marketing

     24       16       22       60       72  

Provision (credit) for losses on lending-related commitments

     (11 )      (1 )      (26 )      (28 )      (48 ) 

Other expense

     97       86       121       366       474  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total noninterest expense

   $ 717     $ 692     $ 744     $ 2,790     $ 3,034  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average full-time equivalent employees (b)

      15,381       15,490       15,424       15,381       15,610  

(a) Additional detail provided in table below.

          

(b) The number of average full-time equivalent employees has not been adjusted for discontinued operations.

  

Personnel Expense  
(in millions)  
     Three months ended     Twelve months ended  
     12-31-11     9-30-11     12-31-10     12-31-11     12-31-10  

Salaries

   $ 234     $ 233     $ 232     $ 919     $ 913  

Incentive compensation

     82       78       85       306       266  

Employee benefits

     55       54       34       229       224  

Stock-based compensation

     13       11       11       45       52  

Severance

     3       6       3       21       16  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total personnel expense

   $ 387     $ 382     $ 365     $ 1,520     $ 1,471  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 22

 

Loan Composition  
(dollars in millions)  
                       Percent change 12-31-11 vs.  
     12-31-11     9-30-11     12-31-10     9-30-11     12-31-10  

Commercial, financial and agricultural

   $ 19,378     $ 17,848     $ 16,441       8.6  %      17.9  % 

Commercial real estate:

          

Commercial mortgage

     8,037       7,958       9,502       1.0       (15.4 ) 

Construction

     1,312       1,456       2,106       (9.9 )      (37.7 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial real estate loans

     9,349       9,414       11,608       (.7 )      (19.5 ) 

Commercial lease financing

     6,055       5,957       6,471       1.6       (6.4 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial loans

     34,782       33,219       34,520       4.7       .8  

Residential — prime loans:

          

Real estate — residential mortgage

     1,946       1,875       1,844       3.8       5.5  

Home equity:

          

Key Community Bank

     9,229       9,347       9,514       (1.3 )      (3.0 ) 

Other

     535       565       666       (5.3 )      (19.7 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total home equity loans

     9,764       9,912       10,180       (1.5 )      (4.1 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total residential — prime loans

     11,710       11,787       12,024       (.7 )      (2.6 ) 

Consumer other — Key Community Bank

     1,192       1,187       1,167       .4       2.1  

Consumer other:

          

Marine

     1,766       1,871       2,234       (5.6 )      (20.9 ) 

Other

     125       131       162       (4.6 )      (22.8 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total consumer — indirect loans

     1,891       2,002       2,396       (5.5 )      (21.1 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total consumer loans

     14,793       14,976       15,587       (1.2 )      (5.1 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total loans (a)

    $ 49,575     $ 48,195     $ 50,107       2.9  %      (1.1 )% 
  

 

 

    

 

 

    

 

 

      
Loans Held for Sale Composition  
(dollars in millions)  
                       Percent change 12-31-11 vs.  
     12-31-11     9-30-11     12-31-10     9-30-11     12-31-10  

Commercial, financial and agricultural

   $ 19     $ 29     $ 196       (34.5 )%      (90.3 )% 

Real estate — commercial mortgage

     567       325       118       74.5       380.5  

Real estate — construction

     35       20       35       75.0       —     

Commercial lease financing

     12       26       8       (53.8 )      50.0  

Real estate — residential mortgage

     95       79       110       20.3       (13.6 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total loans held for sale (b)

    $ 728     $ 479     $ 467       52.0  %      55.9  % 
  

 

 

    

 

 

    

 

 

      
Summary of Changes in Loans Held for Sale  
(dollars in millions)  
     4Q11     3Q11     2Q11     1Q11     4Q10  

Balance at beginning of period

   $ 479     $ 381     $ 426     $ 467     $ 637  

New originations

     1,235       853       914       980       1,053  

Transfers from held to maturity, net

     19       23       16       32       —     

Loan sales

     (932 )      (759 )      (1,039 )      (991 )      (1,174 ) 

Loan draws (payments), net

     (72 )      1       73       (62 )      (49 ) 

Transfers to OREO / valuation adjustments

     (1 )      (20 )      (9 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance at end of period

   $ 728     $ 479     $ 381     $ 426     $ 467  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(a) Excluded at December 31, 2011, September 30, 2011, and December 31, 2010, are loans in the amount of $5.8 billion, $6.0 billion, and $6.5 billion, respectively, related to the discontinued operations of the education lending business.
(b) Excluded at December 31, 2010, are loans held for sale in the amount of $15 million related to the discontinued operations of the education lending business. There were no loans held for sale in the discontinued operations of the education lending business at December 31, 2011, and September 30, 2011.

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 23

 

Summary of Loan and Lease Loss Experience from Continuing Operations

(dollars in millions)

 

     Three months ended     Twelve months ended  
     12-31-11     9-30-11     12-31-10     12-31-11     12-31-10  

Average loans outstanding

   $ 48,664     $ 48,008     $ 50,829     $ 48,606     $ 53,971  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Allowance for loan and lease losses at beginning of period

   $ 1,131     $ 1,230     $ 1,957     $ 1,604     $ 2,534  

Loans charged off:

          

Commercial, financial and agricultural

     45       31       104       169       565  

Real estate — commercial mortgage

     24       27       73       113       360  

Real estate — construction

     2       19       49       83       380  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial real estate loans

     26       46       122       196       740  

Commercial lease financing

     6       10       20       42       88  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial loans

     77       87       246       407       1,393  

Real estate — residential mortgage

     7       5       11       29       36  

Home equity:

          

Key Community Bank

     22       25       28       100       123  

Other

     10       9       13       45       62  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total home equity loans

     32       34       41       145       185  

Consumer other — Key Community Bank

     11       11       16       45       64  

Consumer other:

          

Marine

     20       18       25       80       129  

Other

     2       2       4       9       15  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total consumer other

     22       20       29       89       144  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total consumer loans

     72       70       97       308       429  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total loans charged off

     149       157       343       715       1,822  

Recoveries:

          

Commercial, financial and agricultural

     17       8       24       50       87  
          

Real estate — commercial mortgage

     1       2       21       10       30  

Real estate — construction

     8       11       21       27       44  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial real estate loans

     9       13       42       37       74  

Commercial lease financing

     6       8       8       25       25  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial loans

     32       29       74       112       186  

Real estate — residential mortgage

     —          1       —          3       2  

Home equity:

          

Key Community Bank

     2       7       2       11       7  

Other

     1       1       —          4       3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total home equity loans

     3       8       2       15       10  

Consumer other — Key Community Bank

     2       2       2       8       7  

Consumer other:

          

Marine

     6       7       8       32       43  

Other

     1       1       1       4       4  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total consumer other

     7       8       9       36       47  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total consumer loans

     12       19       13       62       66  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total recoveries

     44       48       87       174       252  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net loan charge-offs

     (105 )      (109 )      (256 )      (541 )      (1,570 ) 

Provision (credit) for loan and lease losses

     (22 )      10       (97 )      (60 )      638  

Foreign currency translation adjustment

     —          —          —          1       2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Allowance for loan and lease losses at end of period

   $ 1,004     $ 1,131     $ 1,604     $ 1,004     $ 1,604  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Liability for credit losses on lending-related commitments at beginning of period

    $ 56     $ 57     $ 99     $ 73     $ 121  

Provision (credit) for losses on lending-related commitments

     (11 )      (1 )      (26 )      (28 )      (48 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Liability for credit losses on lending-related commitments at end of period (a)

    $ 45     $ 56     $ 73     $ 45     $ 73  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total allowance for credit losses at end of period

   $ 1,049     $ 1,187     $ 1,677     $ 1,049     $ 1,677  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net loan charge-offs to average loans

     .86 %      .90 %      2.00 %      1.11 %      2.91 % 

Allowance for loan and lease losses to period-end loans

     2.03       2.35       3.20       2.03       3.20  

Allowance for credit losses to period-end loans

     2.12       2.46       3.35       2.12       3.35  

Allowance for loan and lease losses to nonperforming loans

     138.10       143.53       150.19       138.10       150.19  

Allowance for credit losses to nonperforming loans

     144.29       150.63       157.02       144.29       157.02  

Discontinued operations — education lending business:

          

Loans charged off

   $ 31     $ 34     $ 34     $ 138     $ 129  

Recoveries

     6       3       2       15       8  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net loan charge-offs

   $ (25 )    $ (31 )    $ (32 )    $ (123 )    $ (121 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(a)

Included in “accrued expense and other liabilities” on the balance sheet.

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 24

 

Summary of Nonperforming Assets and Past Due Loans From Continuing Operations

(dollars in millions)

 

     12-31-11     9-30-11     6-30-11     3-31-11     12-31-10  

Commercial, financial and agricultural

   $ 188     $ 188     $ 213     $ 221     $ 242  

Real estate — commercial mortgage

     218       237       230       245       255  

Real estate — construction

     54       93       131       146       241  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial real estate loans

     272       330       361       391       496  

Commercial lease financing

     27       31       41       42       64  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial loans

     487       549       615       654       802  

Real estate — residential mortgage

     87       88       79       84       98  

Home equity:

          

Key Community Bank

     108       102       101       99       102  

Other

     12       12       11       13       18  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total home equity loans

     120       114       112       112       120  

Consumer other — Key Community Bank

     1       4       3       3       4  

Consumer other:

          

Marine

     31       32       32       31       42  

Other

     1       1       1       1       2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total consumer other

     32       33       33       32       44  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total consumer loans

     240       239       227       231       266  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total nonperforming loans

     727       788       842       885       1,068  

Nonperforming loans held for sale

     46       42       42       86       106  

OREO

     65       63       52       97       129  

Other nonperforming assets

     21       21       14       21       35  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total nonperforming assets

   $ 859     $ 914     $ 950     $ 1,089     $ 1,338  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Accruing loans past due 90 days or more

   $ 164     $ 118     $ 118     $ 153     $ 239  

Accruing loans past due 30 through 89 days

     441       478       465       474       476  

Restructured loans — accruing and nonaccruing (a)

      276       277       252       242       297  

Restructured loans included in nonperforming loans (a)

      191       178       144       136       202  

Nonperforming assets from discontinued operations — education lending business

     23       22       21       22       40  

Nonperforming loans to period-end portfolio loans

     1.47 %      1.64 %      1.76 %      1.82 %      2.13 % 

Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets

     1.73       1.89       1.98       2.23       2.66  

 

(a) Restructured loans (i.e. troubled debt restructurings) are those for which Key, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. These concessions are made to improve the collectability of the loan and generally take the form of a reduction of the interest rate, extension of the maturity date or reduction in the principal balance.

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 25

 

Summary of Changes in Nonperforming Loans From Continuing Operations

(in millions)

 

     4Q11     3Q11     2Q11     1Q11     4Q10  

Balance at beginning of period

    $ 788     $ 842     $ 885     $ 1,068     $ 1,372  

Loans placed on nonaccrual status

      230       292       410       335       544  

Charge-offs

      (149 )      (157 )      (177 )      (232 )      (343 ) 

Loans sold

      (28 )      (16 )      (11 )      (74 )      (162 ) 

Payments

      (70 )      (125 )      (156 )      (114 )      (250 ) 

Transfers to OREO

      (12 )      (11 )      (6 )      (12 )      (14 ) 

Transfers to nonperforming loans held for sale

      (19 )      (24 )      (15 )      (39 )      (41 ) 

Transfers to other nonperforming assets

      (4 )      (3 )      —          (2 )      (3 ) 

Loans returned to accrual status

      (9 )      (10 )      (88 )      (45 )      (35 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance at end of period

    $ 727     $ 788     $ 842     $ 885     $ 1,068  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Summary of Changes in Nonperforming Loans Held For Sale From Continuing Operations

(in millions)

 

     4Q11     3Q11     2Q11     1Q11     4Q10  

Balance at beginning of period

    $ 42     $ 42     $ 86     $ 106     $ 230  

Transfers in

      19       24       15       39       41  

Net advances / (payments)

      (3 )      (5 )      (13 )      (20 )      (26 ) 

Loans sold

      (11 )      (5 )      (37 )      (38 )      (139 ) 

Transfers to OREO

      (1 )      (19 )      (5 )      —          —     

Valuation adjustments

      —          (1 )      (4 )      (1 )      —     

Loans returned to accrual status / other

      —          6       —          —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance at end of period

    $ 46     $ 42     $ 42     $ 86     $ 106  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations

(in millions)

 

     4Q11     3Q11     2Q11     1Q11     4Q10  

Balance at beginning of period

    $ 63     $ 52     $ 97     $ 129     $ 163  

Properties acquired — nonperforming loans

      13       30       11       12       14  

Valuation adjustments

      (4 )      (3 )      (7 )      (11 )      (9 ) 

Properties sold

      (7 )      (16 )      (49 )      (33 )      (39 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance at end of period

    $ 65     $ 63     $ 52     $ 97     $ 129  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 26

 

Line of Business Results

(dollars in millions)

Key Community Bank

 

                                   Percent change 4Q11 vs.  
     4Q11     3Q11     2Q11     1Q11     4Q10     3Q11     4Q10  

Summary of operations

               

Total revenue (TE)

    $ 546     $ 565     $ 559     $ 565     $ 597       (3.4 )%      (8.5 )% 

Provision (credit) for loan and lease losses

      30       39       79       11       74       (23.1 )      (59.5 ) 

Noninterest expense

      477       456       447       446       457       4.6       4.4  

Net income (loss) attributable to Key

      40       58       34       81       58       (31.0 )      (31.0 ) 

Average loans and leases

      26,406       26,270       26,242       26,312       26,436       .5       (.1 ) 

Average deposits

      48,076       47,672       47,719       48,108       48,124       .8       (.1 ) 

Net loan charge-offs

      71       60       79       76       115       18.3       (38.3 ) 

Net loan charge-offs to average loans

      1.07 %      .91 %      1.21 %      1.17 %      1.73 %      N/A        N/A   

Nonperforming assets at period end

    $ 415     $ 439     $ 455     $ 475     $ 497       (5.5 )      (16.5 ) 

Return on average allocated equity

      5.14 %      7.37 %      4.28 %      10.07 %      6.83 %      N/A        N/A   

Average full-time equivalent employees

      8,633       8,641       8,504       8,378       8,291       (.1 )      4.1  

Supplementary information (lines of business)

               

Regional Banking

               

Total revenue (TE)

    $ 430     $ 448     $ 449     $ 448     $ 470       (4.0 )%      (8.5 )% 

Provision (credit) for loan and lease losses

      54       48       63       17       77       12.5       (29.9 ) 

Noninterest expense

      429       407       398       400       413       5.4       3.9  

Net income (loss) attributable to Key

      (18 )      10       6       33       4       (280.0 )      (550.0 ) 

Average loans and leases

      17,360       17,407       17,495       17,597       17,810       (.3 )      (2.5 ) 

Average deposits

      41,226       41,204       41,710       42,189       42,371       .1       (2.7 ) 

Net loan charge-offs

      59       53       65       62       77       11.3       (23.4 ) 

Net loan charge-offs to average loans

      1.35 %      1.21 %      1.49 %      1.43 %      1.72 %      N/A        N/A   

Nonperforming assets at period end

    $ 287     $ 292     $ 302     $ 294     $ 326       (1.7 )      (12.0 ) 

Return on average allocated equity

      (3.27 )%      1.80 %      1.08 %      5.96 %      .69 %      N/A        N/A   

Average full-time equivalent employees

      8,258       8,275       8,138       8,009       7,930       (.2 )      4.1  

Commercial Banking

               

Total revenue (TE)

    $ 116     $ 117     $ 110     $ 117     $ 127       (.9 )%      (8.7 )% 

Provision (credit) for loan and lease losses

      (24 )      (9 )      16       (6 )      (3 )      N/M        N/M   

Noninterest expense

      48       49       49       46       44       (2.0 )      9.1  

Net income (loss) attributable to Key

      58       48       28       48       54       20.8       7.4  

Average loans and leases

      9,046       8,863       8,747       8,715       8,626       2.1       4.9  

Average deposits

      6,850       6,468       6,009       5,919       5,753       5.9       19.1  

Net loan charge-offs

      12       7       14       14       38       71.4       (68.4 ) 

Net loan charge-offs to average loans

      .53 %      .31 %      .64 %      .65 %      1.75 %      N/A        N/A   

Nonperforming assets at period end

    $ 128     $ 147     $ 153     $ 181     $ 171       (12.9 )      (25.1 ) 

Return on average allocated equity

      25.51 %      20.59 %      11.72 %      19.20 %      19.86 %      N/A        N/A   

Average full-time equivalent employees

      375       366       366       369       361       2.5       3.9  

KeyCorp Reports Fourth Quarter and Full Year 2011

January 24, 2012

Page 27

 

Line of Business Results (continued)

(dollars in millions)

 

Key Corporate Bank

 

  
                                   Percent change
4Q11 vs.		  
     4Q11     3Q11     2Q11     1Q11     4Q10     3Q11     4Q10  

Summary of operations

                  

Total revenue (TE)

    $ 411     $ 368     $ 388     $ 403     $ 434          11.7  %      (5.3 )% 

Provision (credit) for loan and lease losses

      (61 )      (40 )      (76 )      (21 )      (263 )         N/M        N/M   

Noninterest expense

      227       216       206       228       240          5.1       (5.4 ) 

Net income (loss) attributable to Key

      156       122       163       125       289          27.9       (46.0 ) 

Average loans and leases

      17,783       16,985       17,168       17,677       18,602          4.7       (4.4 ) 

Average loans held for sale

      356       273       302       275       253          30.4       40.7  

Average deposits

      11,162       10,544       10,195       11,282       12,766          5.9       (12.6 ) 

Net loan charge-offs

      12       22       29       75       61          (45.5 )      (80.3 ) 

Net loan charge-offs to average loans

      .27 %      .51 %      .68 %      1.72 %      1.30 %         N/A        N/A   

Nonperforming assets at period end

    $ 294     $ 326     $ 339     $ 427     $ 575          (9.8 )      (48.9 ) 

Return on average allocated equity

      30.43 %      22.54 %      28.61 %      19.82 %      41.07 %         N/A        N/A   

Average full-time equivalent employees

      2,286       2,288       2,191       2,155       2,169          (.1 )      5.4  

Supplementary information (lines of business)

                  

Real Estate Capital and Corporate Banking Services

                  

Total revenue (TE)

    $ 175     $ 144     $ 154     $ 165     $ 177          21.5  %      (1.1 )% 

Provision (credit) for loan and lease losses

      (31 )      (38 )      (49 )      9       (211 )         N/M        N/M   

Noninterest expense

      63       65       49       69       83          (3.1 )      (24.1 ) 

Net income (loss) attributable to Key

      90       74       96       56       192          21.6       (53.1 ) 

Average loans and leases

      7,445       7,088       7,713       8,583       9,381          5.0       (20.6 ) 

Average loans held for sale

      216       173       229       140       199          24.9       8.5  

Average deposits

      7,643       7,286       7,371       8,611       10,409          4.9       (26.6 ) 

Net loan charge-offs

      10       19       26       65       57          (47.4 )      (82.5 ) 

Net loan charge-offs to average loans

      .53 %      1.06 %      1.35 %      3.07 %      2.41 %         N/A        N/A   

Nonperforming assets at period end

    $ 209     $ 240     $ 245     $ 334     $ 442          (12.9 )      (52.7 ) 

Return on average allocated equity

      35.04 %      26.47 %      31.36 %      15.42 %      46.14 %         N/A        N/A   

Average full-time equivalent employees

      953       942       902       882       889          1.2       7.2  

Equipment Finance

                  

Total revenue (TE)

    $ 62     $ 68     $ 63     $ 63     $ 66          (8.8 )%      (6.1 )% 

Provision (credit) for loan and lease losses

      (15 )      (8 )      (30 )      (26 )      (16 )         N/M        N/M   

Noninterest expense

      48       45       45       52       52          6.7       (7.7 ) 

Net income (loss) attributable to Key

      18       20       30       23       19          (10.0 )      (5.3 ) 

Average loans and leases

      4,680       4,619       4,545       4,621       4,656          1.3       .5  

Average loans held for sale

      10       7       —          4       —             42.9       N/M   

Average deposits

      9       11       12       6       2          (18.2 )      350.0  

Net loan charge-offs

      (1 )      (1 )      2       10       7          —          (114.3 ) 

Net loan charge-offs to average loans

      (.08 )%      (.09 )%      .18 %      .88 %      .60 %         N/A        N/A   

Nonperforming assets at period end

    $ 41     $ 31     $ 39     $ 44     $ 68          32.3       (39.7 ) 

Return on average allocated equity

      24.80 %      25.76 %      37.96 %      28.53 %      22.04 %         N/A        N/A   

Average full-time equivalent employees

      517       511       511       521       529          1.2       (2.3 ) 

Institutional and Capital Markets

                  

Total revenue (TE)

    $ 174     $ 156     $ 171     $ 175     $ 191          11.5  %      (8.9 )% 

Provision (credit) for loan and lease losses

      (15 )      6       3       (4 )      (36 )         (350.0 )      N/M   

Noninterest expense

      116       106       112       107       105          9.4       10.5  

Net income (loss) attributable to Key

      48       28       37       46       78          71.4       (38.5 ) 

Average loans and leases

      5,658       5,278       4,910       4,473       4,565          7.2       23.9  

Average loans held for sale

      130       93       73       131       54          39.8       140.7  

Average deposits

      3,510       3,247       2,812       2,665       2,355          8.1       49.0  

Net loan charge-offs

      3       4       1       —          (3 )         (25.0 )      N/M   

Net loan charge-offs to average loans

      .21 %      .30 %      .08 %      —          (.26 )%         N/A        N/A   

Nonperforming assets at period end

    $ 44     $ 55     $ 55     $ 49     $ 65          (20.0 )      (32.3 ) 

Return on average allocated equity

      26.19 %      15.22 %      20.05 %      24.61 %      38.73 %         N/A        N/A   

Average full-time equivalent employees

      816       835       778       752       751          (2.3 )      8.7  

TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful

KEYCORP /NEW/ Reports