CLEVELAND, Jan. 21 /PRNewswire-FirstCall/ --
- Net loss from continuing operations of $.30 per common share for the fourth quarter
- Net interest margin improves to 3.04%, up 24 basis points from the prior quarter
- Nonperforming assets decline by $289 million from the prior quarter
- Loan loss reserve increased to $2.5 billion, or 4.31% of total loans
- Capital and liquidity positions remain strong
- Tier 1 risk-based capital ratio of 12.68%; Tier 1 common equity ratio of 7.46%
- $7.5 billion in new or renewed lending commitments originated
KeyCorp (NYSE: KEY) today announced a fourth quarter net loss from continuing operations attributable to Key common shareholders of $258 million, or $.30 per common share. These results compare to a net loss from continuing operations attributable to Key common shareholders of $524 million, or $1.07 per common share, for the fourth quarter of 2008.
During the fourth quarter, Key continued to increase its loan loss reserves by recording a $756 million provision for loan losses, which exceeded net charge-offs by $48 million. At the end of the quarter, Key’s allowance for loan losses was $2.5 billion, or 4.31% of total loans, up from $1.6 billion, or 2.24%, one year ago. The loss for the current quarter is largely the result of an increase in the provision for loan losses, write-downs of certain commercial real estate related investments, the provision for losses on lending-related commitments and costs associated with other real estate owned (“OREO”). These charges were offset in part by a $106 million credit to income taxes, due primarily to the settlement of IRS audits for the tax years 1997-2006. Included in the credit is a final adjustment of $80 million related to the resolution of certain lease financing tax issues.
For the full year, Key had a net loss from continuing operations attributable to Key common shareholders of $1.581 billion, or $2.27 per common share. Per share results for the current year are after preferred stock dividends of $294 million, or $.42 per common share. These dividends include a noncash deemed dividend of $114 million related to the exchange of Key common shares for Key’s Series A Preferred Stock as part of the company’s efforts to raise additional Tier 1 common equity, and cash dividend payments of $125 million made to the U.S. Treasury Department under the Capital Purchase Program. Results for the current year compare to a net loss from continuing operations attributable to Key common shareholders of $1.337 billion, or $2.97 per common share, for 2008.
Full-year results for both 2009 and 2008 were adversely affected by elevated provisions for loan losses and write-offs of certain intangible assets. In addition, 2008 results include a $1.011 billion after-tax charge recorded in the second quarter as a result of an adverse federal tax court ruling that impacted Key’s accounting for certain lease financing transactions.
“Although this remains a challenging environment, we are encouraged by the continued stabilization of the economy and some positive trends in our fourth quarter results,” said Chief Executive Officer Henry L. Meyer III. “Our net interest margin benefited from improved funding costs and better earning asset yields.”
Meyer continued: “Asset quality remains an area of focus for the company, however, during the fourth quarter we saw meaningful improvement in most of our credit metrics, including decreases in delinquencies, criticized and classified assets, nonperforming loans and nonperforming assets. In addition, our allowance for loan losses stood at 4.31% of total loans and 116% of nonperforming loans at December 31.”
Key’s estimated Tier 1 risk-based capital and Tier 1 common equity ratios were 12.68% and 7.46%, respectively, at December 31, 2009. These strong capital ratios reflect the successful capital raises and exchanges completed over the course of the year, whereby Key raised approximately $2.4 billion of new Tier 1 common equity.
The company originated approximately $7.5 billion in new or renewed lending commitments to consumers and businesses during the quarter, and $32 billion during the year. Key’s average deposits grew by $3 billion, or 5%, from the year-ago quarter.
Key has continued to invest in its relationship businesses, including its 14-state branch network. Key opened 38 new branches in 8 markets in 2009 and the company expects to open 40 additional new branches in 2010. The company has completed renovations on approximately 160 branches over the past two years and expects to renovate another 100 branches in 2010.
“We clearly have work remaining, but as we turn our sights to 2010, we believe our aggressive actions over the past two years to address asset quality, to strengthen capital, reserves and liquidity; and to invest in and reshape our businesses have Key on the right track, and will set the stage for us to emerge from this extraordinary period as a strong, competitive company,” concluded Meyer.
The following table shows Key’s continuing and discontinued operating results for comparative quarters and for the years ended December 31, 2009 and 2008.
Results of Operations
Three months ended Twelve months ended
---------------------------- -------------------
in millions, except
per share amounts 12-31-09 9-30-09 12-31-08 12-31-09 12-31-08
-----------------------------------------------------------------------
Summary of operations
Loss from continuing
operations
attributable to Key $(217) $(381) $(494) $(1,287) $(1,295)
Loss from discontinued
operations, net of
taxes (a) (7) (16) (30) (48) (173)
-------- -------- -------- -------- --------
Net loss attributable
to Key $(224) $(397) $(524) $(1,335) $(1,468)
======== ======== ======== ======== ========
Loss from continuing
operations
attributable to Key $(217) $(381) $(494) $(1,287) $(1,295)
Less: Dividends on
Series A Preferred
Stock 5 7 13 39 25
Noncash deemed
dividend - common
shares exchanged
for Series A
Preferred Stock - - - 114 -
Cash dividends on
Series B Preferred
Stock 31 31 15 125 15
Amortization of
discount on Series
B Preferred Stock 5 3 2 16 2
-------- -------- -------- -------- --------
Loss from continuing
operations attributable
to Key common
shareholders (258) (422) (524) (1,581) (1,337)
Loss from discontinued
operations, net of
taxes (a) (7) (16) (30) (48) (173)
-------- -------- -------- -------- --------
Net loss attributable
to Key common
shareholders $(265) $(438) $(554) $(1,629) $(1,510)
======== ======== ======== ======== ========
Per common share -
assuming dilution
Loss from continuing
operations
attributable to Key
common shareholders $(.30) $(.50) $(1.07) $(2.27) $(2.97)
Loss from discontinued
operations, net of
taxes (a) (.01) (.02) (.06) (.07) (.38)
-------- -------- -------- -------- --------
Net loss attributable
to Key common
shareholders (b) $(.30) $(.52) $(1.13) $(2.34) $(3.36)
======== ======== ======== ======== ========
(a) In September 2009, management made the decision 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 made the decision to curtail
the operations of Austin Capital Management, Ltd., an investment
subsidiary that specializes in managing hedge fund investments for its
institutional customer base. As a result of these decisions, Key has
accounted for these businesses as discontinued operations. Included
in the loss from discontinued operations for year ended December 31,
2009, is a $23 million after tax, or $.05 per common share, charge for
intangible assets impairment related to Austin Capital Management
recorded during the first quarter.
(b) Earnings per share may not foot due to rounding.
As shown in the following table, the comparability of Key’s earnings for the current, prior and year-ago quarters is affected by several significant items.
Significant Items Affecting the Comparability of Earnings
Fourth Quarter 2009 Third Quarter 2009
--------------------------- -------------------------
in millions,
except per Pre-tax After-tax Impact Pre-tax After-tax Impact
share amounts Amount Amount on EPS Amount Amount on EPS
------------------------------------------------------------------------
Credits (charges)
related to IRS audits
and leveraged
lease tax litigation - 106 $.12 - - -
Net gains (losses)
from principal
investing (a) $44 28 .03 $(3) $(2) -
Realized and
unrealized
losses on loan and
securities
portfolios held
for sale or
trading (92) (58) (.07) (59) (37) $(.04)
Provision for
loan losses
in excess of net
charge-offs (48) (31) (.04) (146) (91) (.11)
(Provision) credit
for losses on
lending-related
commitments (27) (17) (.02) (29) (18) (.02)
Severance and
other exit costs (5) (4) - (6) (4) -
Noncash charge for
intangible assets
impairment - - - (45) (28) (.03)
Gain (loss) related
to exchange of
common shares
for capital
securities - - - (17) (11) (.01)
U.S. taxes on
accumulated
earnings of Canadian
leasing operation - - - - - -
------------------------------------------------------------------------
Fourth Quarter 2008
Pre-tax After-tax Impact
in millions, except per share amounts Amount Amount on EPS
------------------------------------------------------------------------
Credits (charges) related to
leveraged lease tax litigation $(18) $120(b) $.24
Net gains (losses) from principal
investing (a) (33) (21) (.04)
Realized and unrealized losses on
loan and securities
portfolios held for sale or trading (18) (11) (.02)
Provision for loan losses in excess of
net charge-offs (242) (151) (.31)
(Provision) credit for losses on
lending-related commitments 5 3 .01
Severance and other exit costs (30) (19) (.04)
Noncash charge for intangible assets
impairment (465) (420) (.85)
Gain (loss) related to exchange of
common shares for capital securities - - -
U.S. taxes on accumulated earnings of
Canadian leasing operation - (68) (.14)
------------------------------------------------------------------------
(a) Excludes principal investing results attributable to noncontrolling
interests.
(b) Represents $120 million of previously accrued interest recovered in
connection with Key’s opt-in to the IRS global tax settlement.
EPS = Earnings per common share
SUMMARY OF CONTINUING OPERATIONS
Taxable-equivalent net interest income was $637 million for the fourth quarter of 2009, and the net interest margin was 3.04%. These results compare to taxable-equivalent net interest income of $624 million and a net interest margin of 2.79% for the fourth quarter of 2008. The net interest margin for the year-ago quarter was reduced by 8 basis points as a result of an agreement reached with the IRS on all material aspects related to the IRS global tax settlement pertaining to certain leveraged lease financing transactions. During the first half of 2009, the net interest margin remained under pressure as customers continued to paydown existing loans and new loan demand remained soft given the uncertain economic environment. During the second half of 2009, Key began to benefit from lower funding costs as higher costing certificates of deposit originated in the prior year began to mature and repriced to current market rates. In 2010, Key expects to realize additional benefits from the repricing of maturing certificates of deposit.
Compared to the third quarter of 2009, taxable-equivalent net interest income increased by $38 million, and the net interest margin rose by 24 basis points. Much of the improvement reflects reduced funding costs attributable to the repricing of certain deposits, and the shift to a lower cost mix of deposits. In addition, Key’s yield on earning assets increased as securities replaced federal funds sold as part of the company’s liquidity management strategy, and improved spreads were achieved on new loan volume.
Key’s noninterest income was $469 million for the fourth quarter of 2009, compared to $383 million for the year-ago quarter. The increase reflects net gains of $80 million from principal investing (including results attributable to noncontrolling interests) in the fourth quarter of 2009, compared to net losses of $37 million for the same period last year, and a $22 million increase in investment banking income. Additionally, during the fourth quarter of 2008, Key recorded net losses (included in miscellaneous income) of $39 million related to the volatility associated with the hedge accounting applied to debt instruments. These factors were offset in part by losses related to certain commercial real estate related investments, primarily due to changes in their fair values. Net losses from investments made by the Real Estate Capital and Corporate Banking Services line of business rose by $34 million from the fourth quarter of 2008. At December 31, 2009, the investments remaining in this portfolio had a carrying amount of approximately $63 million, representing 51% of Key’s original investment. Key also experienced a $31 million reduction in income from dealer trading and derivatives activities, including a $16 million loss recorded during the current quarter as a result of changes in the fair values of certain commercial mortgage-backed securities. At December 31, 2009, these securities had a carrying amount of approximately $29 million, representing 33% of their face value. The improvement in noninterest income was also moderated by lower income from trust and investment services, service charges on deposit accounts and operating leases.
The major components of Key’s fee-based income for the past five quarters are shown in the following table.
Fee-based Income – Major Components
in millions 4Q09 3Q09 2Q09 1Q09 4Q08
----------- ---- ---- ---- ---- ----
Trust and investment services
income $117 $113 $119 $110 $131
Service charges on deposit
accounts 82 83 83 82 90
Operating lease income 52 55 59 61 64
Letter of credit and loan fees 52 46 44 38 42
Corporate-owned life insurance
income 36 26 25 27 33
Electronic banking fees 27 27 27 24 25
Insurance income 16 18 16 18 15
Investment banking and capital
markets income (loss) (47) (26) 14 17 5
Net gains (losses) from principal
investing 80 (6) (6) (72) (37)
Compared to the third quarter of 2009, noninterest income increased by $87 million. The increase was driven by an $86 million improvement in principal investing results (including results attributable to noncontrolling interests) and a $10 million increase in income from corporate owned life insurance. Additionally, during the third quarter, the company incurred a $17 million loss associated with the exchange of common shares for capital securities. The positive effect of these factors was partially offset by a $21 million reduction in results from investment banking and capital markets activities, due primarily to changes in the fair values of certain commercial real estate related investments, and increases in a variety of other miscellaneous income components.
Key’s noninterest expense was $871 million for the fourth quarter of 2009, compared to $1.264 billion for the same period last year. Noninterest expense for the fourth quarter of 2008 was adversely affected by a goodwill impairment charge of $465 million. Excluding this charge, noninterest expense for the current quarter was up $72 million, or 9%, from the year-ago quarter. Personnel expense decreased by $5 million. Nonpersonnel expense rose by $77 million, reflecting increases of $34 million in the FDIC deposit insurance assessment, $32 million in the provision for losses on lending-related commitments and $19 million in costs associated with OREO, including write-downs and losses on sales.
Compared to the third quarter of 2009, noninterest expense decreased by $30 million. Personnel expense grew by $20 million, due to an adjustment to the year-to-date incentive compensation accruals. For the current year, incentive compensation, which includes commissions, decreased by $57 million, or 20%, compared to the prior year. Nonpersonnel expense decreased by $50 million, reflecting a $45 million write-off of intangible assets associated with Key’s equipment leasing business during the third quarter of 2009 and a $26 million reduction in costs associated with OREO. These items were partially offset by a $22 million increase in professional fees, due primarily to increased collection efforts on loans and higher legal expenses.
ASSET QUALITY
Key’s provision for loan losses was $756 million for the fourth quarter of 2009, compared to $551 million for the year-ago quarter and $733 million for the third quarter of 2009. Key’s provision for loan losses for the fourth quarter of 2009 exceeded net loan charge-offs by $48 million. As a result, Key’s allowance for loan losses was $2.5 billion, or 4.31% of total loans, at December 31, 2009, compared to 4.00% at September 30, 2009, and 2.24% at December 31, 2008.
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 4Q09 3Q09 2Q09 1Q09 4Q08
------------------- ---- ---- ---- ---- ----
Net loan charge-offs $708 $587 $502 $460 $309
Net loan charge-offs
to average loans 4.64% 3.59% 2.93% 2.60% 1.67%
Allowance for loan
losses $2,534 $2,485 $2,339 $2,016 $1,629
Allowance for credit
losses (a) 2,655 2,579 2,404 2,070 1,683
Allowance for loan
losses to period-end
loans 4.31% 4.00% 3.48% 2.88% 2.24%
Allowance for credit
losses to period-end
loans 4.52 4.15 3.58 2.96 2.31
Allowance for loan
losses to
nonperforming loans 115.87 108.52 107.05 116.20 133.42
Allowance for credit
losses to
nonperforming loans 121.40 112.62 110.02 119.31 137.84
Nonperforming loans at
period end $2,187 $2,290 $2,185 $1,735 $1,221
Nonperforming assets
at period end 2,510 2,799 2,548 1,994 1,460
Nonperforming loans to
period-end portfolio
loans 3.72% 3.68% 3.25% 2.48% 1.68%
Nonperforming assets
to period-end
portfolio loans plus
OREO and other
nonperforming assets 4.25 4.46 3.77 2.84 2.00
--------------------- ---- ---- ---- ---- ----
(a) Includes the allowance for loan losses plus the liability for
credit losses on lending-related commitments.
Net loan charge-offs for the quarter totaled $708 million, or 4.64% of average loans. These results compare to $309 million, or 1.67%, for the same period last year and $587 million, or 3.59%, for the previous 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 4Q09 3Q09 2Q09 1Q09 4Q08
------------------- ---- ---- ---- ---- ----
Commercial, financial and
agricultural $218 $168 $168 $232 $119
Real estate -- commercial mortgage 165 81 87 21 43
Real estate -- construction 181 216 133 104 49
Commercial lease financing 39 27 22 18 21
--- --- --- --- ---
Total commercial loans 603 492 410 375 232
Home equity -- Community Banking 27 25 24 17 14
Home equity -- National Banking 19 20 18 15 17
Marine 33 25 29 32 25
Other 26 25 21 21 21
--- --- --- --- ---
Total consumer loans 105 95 92 85 77
--- --- --- --- ---
Total net loan charge-offs $708 $587 $502 $460 $309
==== ==== ==== ==== ====
Net loan charge-offs to average
loans from continuing operations 4.64% 3.59% 2.93% 2.60% 1.67%
Net loan charge-offs from
discontinued operations - education
lending business $36 $38 $37 $32 $33
Compared to the third quarter of 2009, net loan charge-offs in the commercial loan portfolio increased by $111 million. The increase was attributable to an aggregate $131 million in net charge-offs recorded on two specific commercial real estate related relationships in the commercial and financial, and commercial real estate portfolios, as well as the continuation of elevated net charge-offs on other commercial real estate loans. The Real Estate Capital and Corporate Banking Services line of business within the National Banking group accounted for most of the growth in net charge-offs in the commercial real estate portfolio. The level of net charge-offs in the consumer portfolio rose by $10 million. As shown in the table below, Key’s exit loan portfolio accounted for $141 million, or 20%, of Key’s total net loan charge-offs for the fourth quarter of 2009. Net charge-offs in the exit portfolio increased by $4 million from the third quarter of 2009. Management expects Key’s net charge-offs to remain elevated in 2010, but anticipates that the level of net charge-offs will be lower than that experienced in 2009.
At December 31, 2009, Key’s nonperforming loans totaled $2.2 billion and represented 3.72% of period-end portfolio loans, compared to 3.68% at September 30, 2009, and 1.68% at December 31, 2008. Nonperforming assets at December 31, 2009, totaled $2.5 billion and represented 4.25% of portfolio loans, OREO and other nonperforming assets, compared to 4.46% at September 30, 2009, and 2.00% at December 31, 2008. 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 4Q09 3Q09 2Q09 1Q09 4Q08
-------------------------------------------------------------------------
Commercial, financial
and agricultural $580 $679 $700 $595 $415
Real estate - commercial
mortgage 473 566 454 310 128
Real estate - construction 566 702 716 546 436
Commercial lease financing 113 131 122 109 81
Total consumer loans 230 212 193 175 161
------ ------ ------ ------ ------
Total nonaccrual
loans 1,962 2,290 2,185 1,735 1,221
Restructured loans
accruing interest (a) 225 - - - -
------ ------ ------ ------ ------
Total nonperforming
loans 2,187 2,290 2,185 1,735 1,221
Nonperforming loans held
for sale 116 304 145 72 90
OREO and other
nonperforming assets 207 205 218 187 149
------ ------ ------ ------ ------
Total nonperforming
assets $2,510 $2,799 $2,548 $1,994 $1,460
====== ====== ====== ====== ======
Nonperforming loans to
period-end portfolio
loans 3.72% 3.68% 3.25% 2.48% 1.68%
Nonperforming assets to
period-end portfolio
loans, plus OREO and
other nonperforming
assets 4.25 4.46 3.77 2.84 2.00
-------------------------------------------------------------------------
(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. Restructured loans in compliance with their modified terms
continue to accrue interest. Amounts in prior periods are nominal,
thus not disclosed.
Nonperforming assets decreased during the fourth quarter of 2009, for the first time since the fourth quarter of 2006. Most of the reduction came from nonperforming loans held for sale and a decrease in nonaccrual loans in the commercial portfolio, resulting from the charge-off of two large commercial real estate related relationships in the Real Estate Capital and Corporate Banking Services line of business within the National Banking group. These reductions were offset in part by an increase in restructured loans accruing interest. Key is working closely with its customers to understand their financial difficulties, identify viable solutions and minimize the potential for loss. In that regard, Key has modified the terms of select loans, primarily those in the commercial real estate portfolio. Since these loans have demonstrated sustained payment capability, they continue to accrue interest. As shown in the following table, Key’s exit loan portfolio accounted for $599 million, or 24%, of Key’s total nonperforming assets at December 31, 2009, compared to $665 million, or 24%, at September 30, 2009.
The composition of Key’s exit loan portfolio at December 31, 2009, and September 30, 2009, the net charge-offs recorded on this portfolio for the fourth and third quarters of 2009, and the nonperforming status of these loans at December 31, 2009, and September 30, 2009, are shown in the following table.
Exit Loan Portfolio from Continuing Operations
Balance on
Balance Change Net Loan Nonperforming
Outstanding 12-31-09 vs. Charge-offs Status
----------- ------------ ---------------
in millions 12-31-09 9-30-09 9-30-09 4Q09 3Q09 12-31-09 9-30-09
------------------------------------------------------------------------
Residential
properties
-- homebuilder $379 $518 $(139) $53 $33 $211(b) $260
Residential
properties
-- held for sale 52 62 (10) - - 52 62
----- ----- ----- ----- ----- ----- -----
Total
residential
properties 431 580 (149) 53 33 263 322
Marine and RV
floor plan 427 511 (84) 16 25 93 142
Commercial lease
financing (a) 2,875 3,130 (255) 17 30 195 164
----- ----- ----- ----- ----- ----- -----
Total
commercial
loans 3,733 4,221 (488) 86 88 551 628
Home equity
-- National
Banking 834 880 (46) 19 20 20 21
Marine 2,787 2,943 (156) 33 25 26(b) 15
RV and other
consumer 216 231 (15) 3 4 2 1
----- ----- ----- ----- ----- ----- -----
Total
consumer
loans 3,837 4,054 (217) 55 49 48 37
----- ----- ----- ----- ----- ----- -----
Total exit
loans in
loan
portfolio $7,570 $8,275 $(705) $141 $137 $599 $665
====== ====== ===== ==== ==== ==== ====
Discontinued
operations
- education
lending
business $3,957 $3,912 $45 $36 $38 $13 $11
------------------------------------------------------------------------
(a) Includes the business aviation, commercial vehicle, office products,
construction and industrial, 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 restructured loans accruing interest in the amount of $11
million for residential properties-homebuilder and $3 million for
marine loans.
CAPITAL
Key’s risk-based capital ratios included in the following table continued to exceed all “well-capitalized” regulatory benchmarks at December 31, 2009.
Capital Ratios
12-31-09 9-30-09 6-30-09 3-31-09 12-31-08
-------- ------- ------- ------- --------
Tier 1 common equity (a) 7.46 % 7.64 % 7.36 % 5.62 % 5.62 %
Tier 1 risk-based
capital (a) 12.68 12.61 12.57 11.22 10.92
Total risk-based
capital (a) 16.85 16.65 16.67 15.18 14.82
Tangible common equity
to tangible assets 7.56 7.58 7.35 6.06 5.95
(a) 12-31-09 ratio is estimated.
Key completed a series of successful capital raises and exchanges during 2009 that generated approximately $2.4 billion of new Tier 1 common equity to bolster the company’s overall capital and to respond to the Supervisory Capital Assessment Program initiated by the U.S. Treasury Department and the federal banking regulators. As shown in the preceding table, at December 31, 2009, Key had a Tier 1 risk-based capital ratio of 12.68%, a Tier 1 common equity ratio of 7.46% and a tangible common equity ratio of 7.56%.
Transactions that caused the change 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 4Q09 3Q09 2Q09 1Q09 4Q08
---------------------------------------------------------------------
Shares outstanding at
beginning of period 878,559 797,246 498,573 495,002 494,765
Common shares
exchanged for capital
securities - 81,278 46,338 - -
Common shares exchanged
for Series A Preferred
Stock - - 46,602 - -
Common shares issued - - 205,439 - -
Shares reissued
(returned) under
employee benefit plans (24) 35 294 3,571 237
--- --- --- ----- ---
Shares outstanding at
end of period 878,535 878,559 797,246 498,573 495,002
======= ======= ======= ======= =======
During the fourth quarter of 2009, Key made a $31 million cash dividend payment to the U.S. Treasury Department. During 2009, Key made four quarterly dividend payments aggregating $125 million to the U.S. Treasury Department as a participant in the U.S. Treasury’s Capital Purchase Program.
LINE OF BUSINESS RESULTS
The following table shows the contribution made by each major business group 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 groups are described under the heading “Line of Business Descriptions.” For more detailed financial information pertaining to each business group and its respective lines of business, see the tables at the end of this release.
Major Business Groups
Percent change
4Q09 vs.
--------------
dollars in millions 4Q09 3Q09 4Q08 3Q09 4Q08
------------------- ---- ---- ---- ---- ----
Revenue from continuing
operations (TE)
-----------------------
Community Banking $651 $629 $641 3.5% 1.6%
National Banking (a) 421 450 506 (6.4) (16.8)
Other Segments (b) 73 (55) (82) N/M N/M
--- --- --- --- ---
Total Segments 1,145 1,024 1,065 11.8 7.5
Reconciling Items (39) (43) (58) 9.3 32.8
--- --- --- --- ----
Total $1,106 $981 $1,007 12.7% 9.8%
====== ==== ======
Income (loss) from
continuing operations
----------------------
attributable to Key
-------------------
Community Banking $(50) - $41 N/M N/M
National Banking (a) (291) $(359) (631) 18.9% 53.9%
Other Segments (b) 21 (28) (40) N/M N/M
--- --- --- --- ---
Total Segments (320) (387) (630) 17.3 49.2
Reconciling Items (c) 103 6 136 N/M (24.3)
--- --- --- --- -----
Total $(217) $(381) $(494) 43.0 56.1%
===== ===== =====
(a) National Banking’s results for the third quarter of 2009 include a $45
million ($28 million after tax) write-off of intangible assets, other
than goodwill, resulting from Key’s decision to cease lending in
certain equipment leasing markets. For the fourth quarter of 2008,
National Banking’s results include a noncash charge of $465 million
($420 million after tax) for intangible assets impairment. National
Banking’s taxable-equivalent revenue was reduced by $18 million during
the fourth quarter of 2008 as a result of its involvement with certain
leveraged lease financing transactions which were challenged by the
IRS.
(b) Other Segments’ results for the third quarter of 2009 include a $17
million ($11 million after tax) loss related to the exchange of Key
common shares for capital securities.
(c) For the fourth quarter of 2008, Reconciling Items include $120 million
of previously accrued interest recovered in connection with Key’s opt-
in to the IRSs global tax settlement.
TE = Taxable Equivalent, N/M = Not Meaningful
Community Banking
Percent change
4Q09 vs.
-----------------
dollars in millions 4Q09 3Q09 4Q08 3Q09 4Q08
------------------------------------------------------------------------
Summary of operations
Net interest income (TE) $ 454 $ 430 $ 448 5.6% 1.3%
Noninterest income 197 199 193 (1.0) 2.1
------- ------- ------- ------- -------
Total revenue (TE) 651 629 641 3.5 1.6
Provision for loan losses 228 143 102 59.4 123.5
Noninterest expense 503 486 473 3.5 6.3
------- ------- ------- ------- -------
Income (loss) before
income taxes (TE) (80) - 66 N/M N/M
Allocated income taxes
and TE adjustments (30) - 25 N/M N/M
------- ------- ------- ------- -------
Net income (loss)
attributable to Key $ (50) - $ 41 N/M N/M
======= ======= =======
Average balances
Loans and leases $26,667 $27,408 $29,164 (2.7)% (8.6)%
Total assets 29,577 30,302 32,204 (2.4) (8.2)
Deposits 52,529 52,954 51,051 (.8) 2.9
Assets under management
at period end $17,709 $17,090 $15,486 3.6% 14.4%
TE = Taxable Equivalent, N/M = Not Meaningful
Additional Community Banking Data
Percent
change 4Q09
vs.
-----------
dollars in millions 4Q09 3Q09 4Q08 3Q09 4Q08
------------------- ---- ---- ---- ---- ----
Average deposits
outstanding
NOW and money market
deposit accounts $17,921 $17,375 $17,700 3.1% 1.2 %
Savings deposits 1,785 1,776 1,695 .5 5.3
Certificates of
deposit ($100,000 or
more) 8,164 8,884 8,013 (8.1) 1.9
Other time deposits 13,708 14,705 14,558 (6.8) (5.8)
Deposits in foreign
office 529 477 980 10.9 (46.0)
Noninterest-bearing
deposits 10,422 9,737 8,105 7.0 28.6
------ ----- ----- --- ----
Total deposits $52,529 $52,954 $51,051 (.8)% 2.9%
======= ======= =======
Home equity loans
Average balance $10,098 $10,188 $10,036
Weighted-average
loan-to-value ratio
(at date of
origination) 70% 70% 70%
Percent first lien
positions 53 53 54
------------------ --- --- ---
Other data
Branches 1,007 1,003 986
Automated teller
machines 1,495 1,492 1,478
---------------- ----- ----- -----
Community Banking Summary of Operations
Community Banking recorded a net loss attributable to Key of $50 million for the fourth quarter of 2009, compared to net income of $41 million for the year-ago quarter. Increases in the provision for loan losses and noninterest expense caused the decline, and more than offset increases in net interest income and noninterest income.
Taxable-equivalent net interest income rose by $6 million, or 1%, from the fourth quarter of 2008, as higher-costing certificates of deposit originated in the prior year began to mature and repriced to current market rates. In addition, average deposits grew by $1.5 billion, or 3%, while the mix of these deposits changed. The increase in average deposits reflects strong growth in noninterest-bearing deposits and negotiable order of withdrawal (“NOW”) accounts, which more than offset declines in money market deposit accounts, and certificates of deposit.
Noninterest income rose by $4 million, or 2%, from the year-ago quarter, due to higher letter of credit fees and mortgage loan sale gains, and lower reserves on customer derivatives. These factors were partially offset by a reduction in service charges on deposit accounts, resulting from the continuation of changes in client behavior, and a decline in asset management and trust fees.
The provision for loan losses rose by $126 million, compared to the fourth quarter of 2008, reflecting a $69 million increase in net loan charge-offs, primarily from the commercial and home equity loan portfolios. Community Banking’s provision for loan losses for the fourth quarter of 2009 exceeded its net loan charge-offs by $93 million, as the company continued to increase reserves in light of the challenging credit conditions brought on by a weak economy.
Noninterest expense grew by $30 million, or 6%, from the year-ago quarter, due largely to a $26 million increase in the FDIC deposit insurance assessment and a higher provision for losses on lending-related commitments. The adverse effect of these factors was offset in part by lower computer processing and personnel expense. The lower personnel expense reflects a reduction in salaries expense, caused by a decrease of 620 average full-time equivalent employees from the year-ago quarter, and a decline in severance expense, partially offset by an increase in the cost of employee benefits.
National Banking
Percent change
4Q09 vs.
------------------
dollars in millions 4Q09 3Q09 4Q08 3Q09 4Q08
------------------------------------------------------------------------
Summary of operations
Net interest income (TE) $269 $256 $278 5.1% (3.2)%
Noninterest income 152 194 228 (21.6) (33.3)
------- ------- ------- ------- -------
Total revenue (TE) 421 450 506 (6.4) (16.8)
Provision for loan losses 530 593 444 (10.6) 19.4
Noninterest expense (a) 356 435 791 (18.2) (55.0)
------- ------- ------- ------- -------
Loss from continuing
operations before income
taxes (TE) (465) (578) (729) 19.6 36.2
Allocated income taxes
and TE adjustments (175) (217) (98) 19.4 (78.6)
------- ------- ------- ------- -------
Loss from continuing
operations (290) (361) (631) 19.7 54.0
Loss from
discontinued operations,
net of taxes (7) (16) (30) 56.3 76.7
------- ------- ------- ------- -------
Net loss (297) (377) (661) 21.2 55.1
Less: Net income (loss)
attributable to
noncontrolling
interests 1 (2) - N/M N/M
------- ------- ------- ------- -------
Net loss attributable
to Key $(298) $(375) $(661) 20.5% 54.9%
======= ======= =======
Loss from continuing
operations attributable
to Key $(291) $(359) $(631) 18.9% 53.9%
Average balances
Loans and leases $33,692 $37,231 $43,793 (9.5)% (23.1)%
Loans held for sale 511 469 1,088 9.0 (53.0)
Total assets 37,759 42,485 52,660 (11.1) (28.3)
Deposits 13,373 13,435 12,176 (.5) 9.8
Assets under management
at period end $49,230 $49,055 $49,231 .4% -
------------------------------------------------------------------------
(a) National Banking's results for the third quarter of 2009 include a $45
million ($28 million after tax) write-off of intangible assets, other
than goodwill, resulting from Key's decision to cease lending in
certain equipment leasing markets. For the fourth quarter of 2008,
National Banking's results include a noncash charge of $465 million
($420 million after tax) for intangible assets impairment. National
Banking's taxable-equivalent revenue was reduced by $18 million during
the fourth quarter of 2008 as a result of its involvement with certain
leveraged lease financing transactions which were challenged by the
IRS.
TE = Taxable Equivalent, N/M = Not Meaningful
National Banking Summary of Continuing Operations
National Banking recorded a loss from continuing operations attributable to Key of $291 million for the fourth quarter of 2009, compared to a $631 million loss from continuing operations attributable to Key for the same period one year ago. A substantial decrease in noninterest expense was partially offset by a higher provision for loan losses, lower net interest income and a decrease in noninterest income. During the fourth quarter of 2008, results were adversely affected by a goodwill impairment charge of $465 million ($420 million, after tax), which resulted from a reduction in the fair value of net assets caused by weakness in the financial markets.
Taxable-equivalent net interest income decreased by $9 million, or 3%, from the fourth quarter of 2008, due primarily to a $10.9 billion, or 23%, reduction in average earning assets. The impact of this reduction was offset in part by more favorable earning asset spreads and an $18 million charge recorded during the fourth quarter of 2008 as a result of an agreement reached with the IRS on all material aspects related to the IRS global tax settlement pertaining to certain leveraged lease financing transactions.
Noninterest income declined by $76 million, or 33%, from the fourth quarter of 2008, due in part to losses related to certain commercial real estate related investments, primarily caused by changes in their fair value. Net losses from investments made by the Real Estate Capital and Corporate Banking Services line of business rose by $34 million from the fourth quarter of 2008. The decline in noninterest income also reflected lower income from dealer trading and derivatives activities, trust and investment services, and operating leases. These adverse factors were partially offset by an increase in investment banking income.
The provision for loan losses rose by $86 million from the year-ago quarter, due primarily to higher levels of net loan charge-offs from the commercial loan portfolios.
Excluding the goodwill impairment charge, noninterest expense increased by $30 million, or 9%, from the fourth quarter of 2008, caused primarily by higher costs associated with OREO, and a provision for losses on lending-related commitments of $14 million during the current quarter, compared to a credit of $7 million in the year-ago quarter. These adverse factors were partially offset by lower personnel expense, reflecting a decrease of 619 average full-time equivalent employees.
In October 2009, management announced its decision to discontinue the education lending business, and to focus on the growing demand from schools for integrated, simplified billing, payment and cash management solutions. The Consumer Finance line of business will continue to service existing loans in this portfolio. In April 2009, Key made the strategic decision to curtail the operations of Austin Capital Management, Ltd., an investment subsidiary that specializes in managing hedge fund investments for its institutional customer base. As a result of these decisions, Key has applied discontinued operations accounting to these businesses.
Other Segments
Other Segments consist of Corporate Treasury and Key’s Principal Investing unit. These segments generated net income attributable to Key of $21 million for the fourth quarter of 2009, compared to a net loss attributable to Key of $40 million for the same period last year. These results reflect net gains from principal investing attributable to Key of $44 million ($28 million after tax) during the current quarter, compared to net losses of $33 million ($21 million after tax) in the year-ago quarter. During the fourth quarter of 2008, Key recorded net losses of $39 million related to the volatility associated with the hedge accounting applied to debt instruments. The majority of these losses were attributable to the restructuring of certain cash collateral arrangements for hedges that reduced exposure to counterparty risk and lowered the cost of borrowings.
Line of Business Descriptions
Community Banking
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.
National Banking
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 Community Banking and National Banking 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 to community banks.
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.
Through its Victory Capital Management unit, Institutional and Capital Markets 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.
Consumer Finance processes tuition payments for private schools. Through its Commercial Floor Plan Lending unit, this line of business also finances inventory for automobile dealers. In October 2008, Key exited retail and floor-plan lending for marine and recreational vehicle products, and began to limit new education loans to those backed by government guarantee. In September 2009, management made the decision to discontinue the education lending business and to focus on the growing demand from schools for integrated, simplified billing, payment and cash management solutions. The Consumer Finance line of business continues to service existing loans in these portfolios. These actions are consistent with Key’s strategy of de-emphasizing nonrelationship or out-of-footprint businesses.
Cleveland-based KeyCorp is one of the nation’s largest bank-based financial services companies, with assets of $93.3 billion at December 31, 2009. Key companies provide investment management, retail and commercial banking, consumer finance, and investment banking products and services to individuals and companies throughout the United States and, for certain businesses, internationally. The company’s businesses deliver their products and services through 1,007 branches and additional offices; a network of 1,495 ATMs; telephone banking centers (1.800.KEY2YOU); and a Web site, https://www.key.com/, that provides account access and financial products 24 hours a day.
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 Thursday, January 21, 2010. An audio replay of the call will be available through January 28.
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 Key’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2009, June 30, 2009, and September 30, 2009, and in its Annual Report on Form 10-K for the year ended December 31, 2008, each of which has been filed with the Securities and Exchange Commission and is available on Key’s website (www.key.com) 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.
Financial Highlights
(dollars in millions, except per share amounts)
Three months ended
------------------
12-31-09 9-30-09 12-31-08
-------- ------- --------
Summary of operations
Net interest income (TE) $637 $599 $624 (a)
Noninterest income 469 382 383
--- --- ---
Total revenue (TE) 1,106 981 1,007
Provision for loan
losses 756 733 551
Noninterest expense 871 901 1,264
Loss from continuing
operations
attributable to Key (217) (381) (494)
Loss from discontinued
operations, net of
taxes (b) (7) (16) (30)
Net loss attributable
to Key (224) (397) (a) (524) (a)
Loss from continuing
operations attributable
to Key common shareholders $(258) $(422) $(524)
Loss from discontinued
operations, net of
taxes (b) (7) (16) (30)
Net loss attributable
to Key common shareholders (265) (438) (a) (554) (a)
Per common share
Loss from continuing
operations attributable
to Key common shareholders $(.30) $(.50) $(1.07)
Loss from discontinued
operations, net of
taxes (b) (.01) (.02) (.06)
Net loss attributable
to Key common shareholders (.30) (.52) (1.13)
Loss from continuing
operations attributable
to Key common shareholders -
assuming dilution (.30) (.50) (1.07)
Loss from discontinued
operations, net of taxes -
assuming dilution (b) (.01) (.02) (.06)
Net loss attributable
to Key common shareholders -
assuming dilution (.30) (.52) (a) (1.13) (a)
Cash dividends paid .01 .01 .0625
Book value at period end 9.04 9.39 14.97
Tangible book value at
period end 7.94 8.29 12.41
Market price at period end 5.55 6.50 8.52
Performance ratios
From continuing operations:
Return on average
total assets (.94)% (1.62)% (1.90)%
Return on average
common equity (12.60) (20.30) (26.15)
Net interest margin (TE) 3.04 2.80 2.79 (a)
From consolidated operations:
Return on average
total assets (.93)% (1.62)% (a) (1.93)% (a)
Return on average
common equity (12.94) (21.07) (a) (27.65) (a)
Net interest margin (TE) 3.00 2.79 2.76
Capital ratios at period end
Key shareholders'
equity to assets 11.43 % 11.31 % 10.03 %
Tangible Key shareholders'
equity to tangible assets 10.50 10.41 8.92
Tangible common equity
to tangible assets 7.56 7.58 5.95
Tier 1 common equity (c) 7.46 7.64 5.62
Tier 1 risk-based
capital (c) 12.68 12.61 10.92
Total risk-based
capital (c) 16.85 16.65 14.82
Leverage (c) 11.74 12.07 11.05
Asset quality - from continuing
operations
Net loan charge-offs $708 $587 $309
Net loan charge-offs
to average loans 4.64 % 3.59 % 1.67 %
Allowance for loan losses $2,534 $2,485 $1,629
Allowance for credit losses 2,655 2,579 1,683
Allowance for loan losses
to period-end loans 4.31 % 4.00 % 2.24 %
Allowance for credit losses
to period-end loans 4.52 4.15 2.31
Allowance for loan losses
to nonperforming loans 115.87 108.52 133.42
Allowance for credit losses
to nonperforming loans 121.40 112.62 137.84
Nonperforming loans at
period end $2,187 $2,290 $1,221
Nonperforming assets
at period end 2,510 2,799 1,460
Nonperforming loans to
period-end portfolio loans 3.72 % 3.68 % 1.68 %
Nonperforming assets to
period-end portfolio loans
plus OREO and other
nonperforming assets 4.25 4.46 2.00
Trust and brokerage assets
Assets under management $66,939 $66,145 $64,717
Nonmanaged and brokerage
assets 27,190 25,883 22,728
Other data
Average full-time
equivalent employees 15,973 16,436 17,697
Branches 1,007 1,003 986
Taxable-equivalent adjustment $7 $7 $7
Financial Highlights (continued)
(dollars in millions, except per share amounts)
Twelve months ended
-------------------
12-31-09 12-31-08
-------- --------
Summary of operations
Net interest income (TE) $2,406 $1,862 (a)
Noninterest income 2,035 1,847
----- -----
Total revenue (TE) 4,441 3,709
Provision for loan losses 3,159 1,537
Noninterest expense 3,554 3,476
Loss from continuing operations
attributable to Key (1,287) (1,295)
Loss from discontinued operations,
net of taxes (b) (48) (173)
Net loss attributable to Key (1,335) (a) (1,468) (a)
Loss from continuing operations
attributable to Key common
shareholders $(1,581) $(1,337)
Loss from discontinued operations,
net of taxes (b) (48) (173)
Net loss attributable to Key common
shareholders (1,629) (a) (1,510) (a)
Per common share
Loss from continuing operations
attributable to Key common
shareholders $(2.27) $(2.97)
Loss from discontinued operations,
net of taxes (b) (.07) (.38)
Net loss attributable to Key common
shareholders (2.34) (3.36)
Loss from continuing operations
attributable to Key common
shareholders - assuming dilution (2.27) (2.97)
Loss from discontinued operations,
net of taxes - assuming dilution (b) (.07) (.38)
Net loss attributable to Key common
shareholders - assuming dilution (2.34) (a) (3.36) (a)
Cash dividends paid .0925 1.00
Performance ratios
From continuing operations:
Return on average total assets (1.35)% (1.29)%
Return on average common equity (19.00) (16.22)
Net interest margin (TE) 2.83 2.15 (a)
From consolidated operations:
Return on average total assets (1.34)% (a) (1.41)% (a)
Return on average common equity (19.62) (a) (18.32) (a)
Net interest margin (TE) 2.81 2.16
Asset quality - from continuing operations
Net loan charge-offs $2,257 $1,131
Net loan charge-offs to average loans 3.40 % 1.55 %
Other data
Average full-time equivalent employees 16,698 18,095
Taxable-equivalent adjustment $26 $(454)
(a) The following table entitled "GAAP to Non-GAAP Reconciliations"
presents certain earnings data and performance ratios, excluding charges
related to goodwill and other intangible assets impairment, and the tax
treatment of certain leveraged lease financing transactions disallowed by
the IRS. The table also shows 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 made the decision 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 made the decision to curtail the operations of
Austin Capital Management, Ltd., an investment subsidiary that specializes
in managing hedge fund investments for its institutional customer base. As
a result of these decisions, Key has accounted for these businesses as
discontinued operations.
(c) 12-31-09 ratio is estimated.
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting
principles
GAAP to Non-GAAP Reconciliations
(dollars in millions, except per share amounts)
The table below presents certain earnings data and performance
ratios, excluding (credits) charges related to intangible assets
impairment and the tax treatment of certain leveraged lease
financing transactions disallowed by the IRS. Management believes
that eliminating the effects of significant items that are generally
nonrecurring facilitates the analysis of results by presenting them
on a more comparable basis.
The table also shows the computations of certain financial measures
related to “tangible common equity” and “Tier 1 common equity.” 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 minority 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 the 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.
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
in the evaluation of 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
------------------
12-31-09 9-30-09 12-31-08
-------- ------- --------
Net loss
Net loss attributable to Key (GAAP) $(224) $(397) $(524)
Charges related to intangible
assets impairment, after tax --- 28 420
(Credits) charges related to
leveraged lease tax litigation,
after tax (80) --- (120)
--- --- ----
Net loss attributable to Key,
excluding (credits) charges
related to intangible assets
impairment and leveraged lease tax
litigation (non-GAAP) $(304) $(369) $(224)
===== ===== =====
Noncash deemed dividend - common
shares exchanged for Series A
Preferred Stock --- --- ---
Other preferred dividends and
amortization of discount on
preferred stock $41 $41 $30
Net loss attributable to Key
common shareholders (GAAP) $(265) $(438) $(554)
Net loss attributable to Key
common shareholders, excluding
(credits) charges related to
intangible assets impairment and
leveraged lease tax litigation
(non-GAAP) (345) (410) (254)
Per common share
Net loss attributable to Key
common shareholders - assuming
dilution (GAAP) $(.30) $(.52) $(1.13)
Net loss attributable to Key
common shareholders, excluding
(credits) charges related to
intangible assets impairment and
leveraged lease tax litigation -
assuming dilution (non-GAAP) (.39) (.49) (.52)
Performance ratios from consolidated
operations
Return on average total assets: (a)
Average total assets $95,975 $97,221 $107,735
Return on average total assets (GAAP) (.93)% (1.62)% (1.93)%
Return on average total assets,
excluding (credits) charges
related to intangible assets
impairment and leveraged lease tax
litigation (non-GAAP) (1.26) (1.51) (.83)
Return on average common equity: (a)
Average common equity $8,125 $8,249 $7,971
Return on average common equity (GAAP) (12.94)% (21.07)% (27.65)%
Return on average common equity,
excluding (credits) charges
related to intangible assets
impairment and leveraged lease
tax litigation (non-GAAP) (16.85) (19.72) (12.68)
Net interest income and margin from
continuing operations
Net interest income:
Net interest income (GAAP) $630 $592 $617
Charges related to leveraged
lease tax litigation, pre-tax - - 18
--- --- ---
Net interest income, excluding
(credits) charges related to
leveraged lease tax litigation
(non-GAAP) $630 $592 $635
==== ==== ====
Net interest income/margin (TE):
Net interest income (TE) (as reported) $637 $599 $624
Charges related to leveraged lease tax
litigation, pre-tax (TE) - - 18
--- --- ---
Net interest income, excluding
charges related to leveraged
lease tax litigation (TE) (adjusted
basis) $637 $599 $642
==== ==== ====
Net interest margin (TE) (as
reported) (a) 3.04 % 2.80 % 2.79 %
Impact of charges related to
leveraged lease tax litigation,
pre-tax (TE) (a) - - .08
--- --- ---
Net interest margin, excluding charges
related to leveraged lease tax
litigation (TE) (adjusted basis) (a) 3.04 % 2.80 % 2.87 %
==== ==== ====
Twelve months ended
-------------------
12-31-09 12-31-08
-------- --------
Net loss
Net loss attributable to Key (GAAP) $(1,335) $(1,468)
Charges related to intangible
assets impairment, after tax 192 424
(Credits) charges related to
leveraged lease tax litigation,
after tax (80) 959
--- ---
Net loss attributable to Key,
excluding (credits) charges
related to intangible assets
impairment and leveraged lease tax
litigation (non-GAAP) $(1,223) $(85)
======= ====
Noncash deemed dividend - common
shares exchanged for Series A
Preferred Stock $114 -
Other preferred dividends and
amortization of discount on
preferred stock 180 $42
Net loss attributable to Key common
shareholders (GAAP) $(1,629) $(1,510)
Net loss attributable to Key common
shareholders, excluding (credits)
charges related to intangible assets
impairment and leveraged lease tax
litigation (non-GAAP) (1,517) (127)
Per common share
Net loss attributable to Key common
shareholders - assuming dilution (GAAP) $(2.34) $(3.36)
Net loss attributable to Key common
shareholders, excluding (credits) charges
related to intangible assets impairment
and leveraged lease tax litigation -
assuming dilution (non-GAAP) (2.18) (.28)
Performance ratios from consolidated
operations
Return on average total assets: (a)
Average total assets $99,440 $104,390
Return on average total assets (GAAP) (1.34)% (1.41)%
Return on average total assets,
excluding (credits) charges related
to intangible assets impairment and
leveraged lease tax litigation (non-GAAP) (1.23) (.08)
Return on average common equity: (a)
Average common equity $7,723 $8,244
Return on average common equity (GAAP) $(19.62)% (18.32)%
Return on average common equity,
excluding (credits) charges related to
intangible assets impairment and
leveraged lease tax litigation
(non-GAAP) $(18.17) (1.54)
Net interest income and margin from
continuing operations
Net interest income:
Net interest income (GAAP) $2,380 $2,316
Charges related to leveraged lease
tax litigation, pre-tax - 380
--- ---
Net interest income, excluding (credits)
charges related to leveraged lease tax
litigation (non-GAAP) $2,380 $2,696
====== ======
Net interest income/margin (TE):
Net interest income (TE) (as reported) $2,406 $1,862
Charges related to leveraged lease tax
litigation, pre-tax (TE) - 890
--- ---
Net interest income, excluding charges
related to leveraged lease tax
litigation (TE) (adjusted basis) $2,406 $2,752
====== ======
Net interest margin (TE) (as reported) (a) 2.83 % 2.15 %
Impact of charges related to leveraged
lease tax litigation, pre-tax (TE) (a) - .98
--- ---
Net interest margin, excluding charges
related to leveraged lease tax
litigation (TE) (adjusted basis) (a) 2.83 % 3.13 %
==== ====
GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions, except per share amounts)
Three months ended
------------------
12-31-09 9-30-09 12-31-08
-------- ------- --------
Tangible common equity to
tangible assets at period end
Key shareholders’ equity (GAAP) $10,663 $10,970 $10,480
Less: Intangible assets 967 972 (d) 1,266 (e)
Preferred Stock, Series B 2,430 2,426 2,414
Preferred Stock, Series A 291 291 658
--- --- ---
Tangible common equity (non-
GAAP) $6,975 $7,281 $6,142
====== ====== ======
Total assets (GAAP) $93,287 $96,989 $104,531
Less: Intangible assets 967 972 (d) 1,266 (e)
--- --- -----
Tangible assets (non-GAAP) $92,320 $96,017 $103,265
======= ======= ========
Tangible common equity to
tangible assets ratio
(non-GAAP) 7.56 % 7.58 % 5.95 %
Tier 1 common equity at period end
Key shareholders' equity (GAAP) $10,663 $10,970 $10,480
Qualifying capital securities 1,791 1,790 2,582
Less: Goodwill 917 917 1,138 (f)
Accumulated other comprehensive
income (loss) (b) (49) 11 76
Other assets (c) 631 406 203
--- --- ---
Total Tier 1 capital
(regulatory) 10,955 11,426 11,645
Less: Qualifying capital securities 1,791 1,790 2,582
Preferred Stock, Series B 2,430 2,426 2,414
Preferred Stock, Series A 291 291 658
--- --- ---
Total Tier 1 common equity
(non-GAAP) $6,443 $6,919 $5,991
====== ====== ======
Net risk-weighted assets
(regulatory) (c), (g) $86,419 $90,587 $106,685
Tier 1 common equity ratio
(non-GAAP) (g) 7.46 % 7.64 % 5.62 %
(a) Income statement amount has been annualized in calculation of
percentage.
(b) 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.
(c) Other assets deducted from Tier 1 capital and net risk-weighted
assets consist of disallowed deferred tax assets of $514 million at
December 31, 2009, and $285 million at September 30, 2009,
disallowed intangible assets (excluding goodwill), and deductible
portions of nonfinancial equity investments.
(d) Includes $1 million of other intangible assets classified as
"discontinued assets" on the balance sheet.
(e) Includes $25 million of goodwill and $12 million of other intangible
assets classified as "discontinued assets" on the balance sheet.
(f) Includes $25 million of goodwill classified as "discontinued assets"
on the balance sheet.
(g) 12-31-09 amount or ratio is estimated.
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting
principles
Consolidated Balance Sheets
(dollars in millions)
12-31-09 9-30-09 12-31-08
-------- ------- --------
Assets
Loans $58,770 $62,193 $72,835
Loans held for sale 443 703 626
Securities available for sale 16,641 15,413 8,246
Held-to-maturity securities 24 24 25
Trading account assets 1,209 1,406 1,280
Short-term investments 1,743 2,986 5,221
Other investments 1,488 1,448 1,526
----- ----- -----
Total earning assets 80,318 84,173 89,759
Allowance for loan losses (2,534) (2,485) (1,629)
Cash and due from banks 471 725 1,245
Premises and equipment 880 863 840
Operating lease assets 716 775 990
Goodwill 917 917 1,113
Other intangible assets 50 54 116
Corporate-owned life insurance 3,071 3,041 2,970
Derivative assets 1,094 1,285 1,896
Accrued income and other assets 4,096 3,463 2,818
Discontinued assets 4,208 4,178 4,413
----- ----- -----
Total assets $93,287 $96,989 $104,531
======= ======= ========
Liabilities
Deposits in domestic offices:
NOW and money market deposit accounts $24,341 $24,635 $24,191
Savings deposits 1,807 1,783 1,712
Certificates of deposit ($100,000 or
more) 10,954 12,216 11,991
Other time deposits 13,286 14,211 14,763
------ ------ ------
Total interest-bearing deposits 50,388 52,845 52,657
Noninterest-bearing deposits 14,415 13,631 11,352
Deposits in foreign office -
interest-bearing 768 783 1,118
--- --- -----
Total deposits 65,571 67,259 65,127
Federal funds purchased and securities
sold under repurchase agreements 1,742 1,664 1,557
Bank notes and other short-term
borrowings 340 471 8,477
Derivative liabilities 1,012 1,185 1,032
Accrued expense and other liabilities 2,007 2,236 2,481
Long-term debt 11,558 12,865 14,995
Discontinued liabilities 124 121 181
--- --- ---
Total liabilities 82,354 85,801 93,850
Equity
Preferred stock, Series A 291 291 658
Preferred stock, Series B 2,430 2,426 2,414
Common shares 946 946 584
Common stock warrant 87 87 87
Capital surplus 3,734 3,726 2,553
Retained earnings 5,158 5,431 6,727
Treasury stock, at cost (1,980) (1,983) (2,608)
Accumulated other comprehensive
income (loss) (3) 46 65
--- --- ---
Key shareholders' equity 10,663 10,970 10,480
Noncontrolling interests 270 218 201
--- --- ---
Total equity 10,933 11,188 10,681
------ ------ ------
Total liabilities and equity $93,287 $96,989 $104,531
======= ======= ========
Common shares outstanding (000) 878,535 878,559 495,002
Consolidated Statements of Income
(dollars in millions, except per share amounts)
Twelve
Three months ended months ended
------------------ -----------------
12-31-09 9-30-09 12-31-08 12-31-09 12-31-08
-------- ------- -------- -------- --------
Interest income
Loans $749 $786 $940 $3,194 $3,732
Loans held for sale 6 7 14 29 76
Securities available for sale 150 121 101 460 404
Held-to-maturity securities --- 1 1 2 3
Trading account assets 12 9 17 47 56
Short-term investments 3 3 8 12 31
Other investments 13 13 13 51 51
--- --- --- --- ---
Total interest income 933 940 1,094 3,795 4,353
Interest expense
Deposits 246 277 346 1,119 1,468
Federal funds purchased and
securities sold under
repurchase agreements 1 2 4 5 57
Bank notes and other
short-term borrowings 3 3 30 16 130
Long-term debt 53 66 97 275 382
--- --- --- --- ---
Total interest expense 303 348 477 1,415 2,037
--- --- --- ----- -----
Net interest income 630 592 617 2,380 2,316
Provision for loan losses 756 733 551 3,159 1,537
--- --- --- ----- -----
Net interest income (expense)
after provision for loan
losses (126) (141) 66 (779) 779
Noninterest income
Trust and investment
services income 117 113 131 459 509
Service charges on
deposit accounts 82 83 90 330 365
Operating lease income 52 55 64 227 270
Letter of credit and
loan fees 52 46 42 180 183
Corporate-owned life
insurance income 36 26 33 114 117
Net securities gains
(losses) (a) 1 1 (5) 113 (2)
Electronic banking fees 27 27 25 105 103
Gains on leased equipment 15 22 19 99 40
Insurance income 16 18 15 68 65
Investment banking and
capital markets income
(loss) (47) (26) 5 (42) 68
Net gains (losses) from
principal investing 80 (6) (37) (4) (54)
Net gains (losses) from
loan securitizations
and sales (5) - 4 (1) (82)
Gain from sale/redemption
of Visa Inc. shares - - - 105 165
Gain (loss) related to
exchange of common shares
for capital securities - (17) - 78 -
Other income 43 40 (3) 204 100
--- --- --- --- ---
Total noninterest income 469 382 383 2,035 1,847
Noninterest expense
Personnel 400 380 405 1,514 1,581
Net occupancy 67 63 66 259 259
Operating lease expense 50 46 55 195 224
Computer processing 49 48 51 192 187
Professional fees 63 41 50 184 138
FDIC assessment 37 40 3 177 10
OREO expense, net 25 51 6 97 16
Equipment 25 24 22 96 92
Marketing 22 19 25 72 87
Provision (credit) for
losses on lending-
related commitments 27 29 (5) 67 (26)
Intangible assets impairment - 45 465 241 469
Other expense 106 115 121 460 439
--- --- --- --- ---
Total noninterest
expense 871 901 1,264 3,554 3,476
--- --- ----- ----- -----
Loss from continuing operations
before income taxes (528) (660) (815) (2,298) (850)
Income taxes (347) (274) (318) (1,035) 437
---- ---- ---- ------ ---
Loss from continuing
operations (181) (386) (497) (1,263) (1,287)
Loss from discontinued
operations, net of taxes (7) (16) (30) (48) (173)
--- --- --- --- ----
Net loss (188) (402) (527) (1,311) (1,460)
Less: Net income (loss)
attributable to
noncontrolling
interests 36 (5) (3) 24 8
--- --- --- --- ---
Net loss attributable to Key $(224) $(397) $(524) $(1,335) $(1,468)
===== ===== ===== ======= =======
Loss from continuing operations
attributable to Key common
shareholders $(258) $(422) $(524) $(1,581) $(1,337)
Net loss attributable
to Key common shareholders (265) (438) (554) (1,629) (1,510)
Per common share
----------------
Loss from continuing operations
attributable to Key common
shareholders $(.30) $(.50) $(1.07) $(2.27) $(2.97)
Loss from discontinued
operations, net of taxes (.01) (.02) (.06) (.07) (.38)
Net loss attributable to Key
common shareholders (.30) (.52) (1.13) (2.34) (3.36)
Per common share - assuming
dilution
---------------------------
Loss from continuing
operations attributable to
Key common shareholders $(.30) $(.50) $(1.07) $(2.27) $(2.97)
Loss from discontinued
operations, net of taxes (.01) (.02) (.06) (.07) (.38)
Net loss attributable
to Key common shareholders (.30) (.52) (1.13) (2.34) (3.36)
Cash dividends declared
per common share $.01 $.01 $.0625 $.0925 $.625
Weighted-average common
shares outstanding (000) 873,268 839,906 492,311 697,155 450,039
Weighted-average common
shares and potential
common shares
outstanding (000) 873,268 839,906 492,311 697,155 450,039
(a) For the three months ended December 31, 2009, Key did not have
impairment losses related to securities. Impairment losses and
the portion of those losses recorded in equity as a component of
accumulated other comprehensive income (loss) on the balance sheet
totaled $4 million and $2 million, respectively, for the three
months ended September 30, 2009, and $7 million and $1 million,
respectively, for the three months ended June 30, 2009.
Consolidated Average Balance Sheets, and Net Interest Income and
Yields/Rates From Continuing Operations
(dollars in millions)
Fourth Quarter 2009
-------------------
Average Yield/
Balance Interest(a) Rate (a)
------- ----------- ----------
Assets
Loans: (b), (c)
Commercial, financial
and agricultural $19,817 $232 4.63 %
Real estate - commercial
mortgage 10,853 132 4.84
Real estate - construction 5,246 62 4.70
Commercial lease financing 7,598 97 5.10
----- --- ----
Total commercial loans 43,514 523 4.77
Real estate - residential
mortgage 1,781 26 5.80
Home equity:
Community Banking 10,105 109 4.28
National Banking 858 16 7.44
--- --- ----
Total home equity
loans 10,963 125 4.53
Consumer other - Community
Banking 1,185 32 11.06
Consumer other - National
Banking:
Marine 2,866 44 6.16
Other 224 5 7.81
--- --- ----
Total consumer other -
National Banking 3,090 49 6.28
----- --- ----
Total consumer loans 17,019 232 5.44
------ --- ----
Total loans 60,533 755 4.96
Loans held for sale 618 6 3.35
Securities available for
sale (b), (f) 15,937 151 3.82
Held-to-maturity
securities (b) 24 --- 3.34
Trading account assets 1,315 12 3.72
Short-term investments 3,682 3 .23
Other investments (f) 1,465 13 3.21
----- --- ----
Total earning assets 83,574 940 4.47
Allowance for loan losses (2,525)
Accrued income and other
assets 10,785
Discontinued assets -
education lending business 4,141
-----
Total assets $95,975
=======
Liabilities
NOW and money market
deposit accounts $24,910 $25 .39
Savings deposits 1,801 1 .06
Certificates of deposit
($100,000 or more) (g) 11,675 103 3.49
Other time deposits 13,753 117 3.39
Deposits in foreign office 711 --- .31
--- --- ---
Total interest-
bearing deposits 52,850 246 1.84
Federal funds purchased and
securities sold under
repurchase agreements 1,657 1 .31
Bank notes and other
short-term borrowings 418 3 3.03
Long-term debt (g) 8,092 53 2.91
----- --- ----
Total interest-
bearing liabilities 63,017 303 1.94
------ --- ----
Noninterest-bearing deposits 14,655
Accrued expense and other
liabilities 3,097
Discontinued liabilities -
education lending
business (e) 4,141
-----
Total liabilities 84,910
Equity
Key shareholders' equity 10,843
Noncontrolling interests 222
---
Total equity 11,065
Total liabilities
and equity $95,975
=======
Interest rate spread (TE) 2.53 %
=====
Net interest income (TE) and
net interest margin (TE) 637 3.04 %
=====
TE adjustment (b) 7
---
Net interest income,
GAAP basis $630
====
Third Quarter 2009
------------------
Average Yield/
Balance Interest(a) Rate(a)
------- ----------- -------
Assets
Loans: (b), (c)
Commercial, financial and agricultural $22,098 $255 4.59 %
Real estate - commercial mortgage 11,529 (h) 141 4.84
Real estate - construction 5,834 (h) 72 4.86
Commercial lease financing 8,073 88 4.35
----- --- ----
Total commercial loans 47,534 556 4.64
Real estate - residential mortgage 1,748 25 5.88
Home equity:
Community Banking 10,186 110 4.32
National Banking 918 18 7.51
--- --- ----
Total home equity loans 11,104 128 4.58
Consumer other - Community Banking 1,189 32 10.48
Consumer other - National Banking:
Marine 3,017 48 6.26
Other 238 4 7.95
--- --- ----
Total consumer other - National Banking 3,255 52 6.38
----- --- ----
Total consumer loans 17,296 237 5.46
------ --- ----
Total loans 64,830 793 4.86
Loans held for sale 665 7 4.26
Securities available for sale (b), (f) 12,154 121 4.00
Held-to-maturity securities (b) 25 1 9.64
Trading account assets 1,074 9 3.49
Short-term investments 5,243 3 .25
Other investments (f) 1,459 13 3.26
----- --- ----
Total earning assets 85,450 947 4.40
Allowance for loan losses (2,462)
Accrued income and other assets 10,142
Discontinued assets - education lending
business 4,091
-----
Total assets $97,221
=======
Liabilities
NOW and money market deposit accounts $24,444 29 .49
Savings deposits 1,799 --- .07
Certificates of deposit ($100,000 or
more) (g) 12,771 114 3.55
Other time deposits 14,749 133 3.57
Deposits in foreign office 665 1 .31
--- --- ---
Total interest-bearing deposits 54,428 277 2.03
Federal funds purchased and securities
sold under repurchase agreements 1,642 2 .30
Bank notes and other short-term borrowings 1,034 3 1.14
Long-term debt (g) 9,183 66 3.07
----- --- ----
Total interest-bearing liabilities 66,287 348 2.10
------ --- ----
Noninterest-bearing deposits 13,604
Accrued expense and other liabilities 2,055
Discontinued liabilities - education
lending business (e) 4,091
-----
Total liabilities 86,037
Equity
Key shareholders' equity 10,961
Noncontrolling interests 223
---
Total equity 11,184
Total liabilities and equity $97,221
=======
Interest rate spread (TE) 2.30 %
=====
Net interest income (TE) and net interest
margin (TE) 599 2.80 %
=====
TE adjustment (b) 7
Net interest income, GAAP basis $592
====
Fourth Quarter 2008
-------------------
Average Yield/
Balance Interest(a) Rate(a)
------- ----------- -------
Assets
Loans: (b), (c)
Commercial, financial and
agricultural $27,662 $346 4.98 %
Real estate - commercial mortgage 10,707 151 5.63
Real estate - construction 7,686 100 5.16
Commercial lease financing 9,186 78 3.38 (d)
----- --- ----
Total commercial loans 55,241 675 4.87
Real estate - residential mortgage 1,903 29 6.00
Home equity:
Community Banking 10,037 129 5.13
National Banking 1,088 21 7.62
----- --- ----
Total home equity loans 11,125 150 5.37
Consumer other - Community Banking 1,260 30 9.57
Consumer other - National Banking:
Marine 3,467 55 6.32
Other 288 6 8.22
--- --- ----
Total consumer other -
National Banking 3,755 61 6.47
----- --- ----
Total consumer loans 18,043 270 5.96
------ --- ----
Total loans 73,284 945 5.14
Loans held for sale 1,180 14 5.13
Securities available for sale (b), (f) 8,075 102 5.07
Held-to-maturity securities (b) 27 2 10.74
Trading account assets 1,416 17 4.81
Short-term investments 3,715 8 .88
Other investments (f) 1,557 13 3.06
----- --- ----
Total earning assets 89,254 1,101 4.91
Allowance for loan losses (1,512)
Accrued income and other assets 15,706
Discontinued assets - education
lending business 4,287
-----
Total assets $107,735
========
Liabilities
NOW and money market deposit accounts $24,919 78 1.24
Savings deposits 1,722 1 .16
Certificates of deposit ($100,000
or more) (g) 11,270 118 4.20
Other time deposits 14,560 146 3.98
Deposits in foreign office 1,300 3 .90
----- --- ---
Total interest-bearing deposits 53,771 346 2.56
Federal funds purchased and securities
sold under repurchase agreements 1,727 4 .86
Bank notes and other short-term
borrowings 9,154 30 1.36
Long-term debt (g) 10,485 97 3.86
------ --- ----
Total interest-bearing
liabilities 75,137 477 2.54
------ --- ----
Noninterest-bearing deposits 10,726
Accrued expense and other liabilities 7,494
Discontinued liabilities -
education lending business (e) 4,287
-----
Total liabilities 97,644
Equity
Key shareholders' equity 9,888
Noncontrolling interests 203
---
Total equity 10,091
Total liabilities and equity $107,735
========
Interest rate spread (TE) 2.37 %
=====
Net interest income (TE) and
net interest margin (TE) 624 (d) 2.79 % (d)
====
TE adjustment (b) 7
Net interest income, GAAP
basis $617
====
Average balances have not been adjusted prior to the third quarter of
2009 to reflect Key’s January 1, 2008, adoption of the applicable
accounting guidance related to the offsetting of certain derivative
contracts on the consolidated balance sheet.
(a) Results are from continuing operations. Interest excludes the
interest associated with the liabilities referred to in (e) 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) During the fourth quarter of 2008, taxable-equivalent net interest
income was reduced by $18 million as a result of an agreement
reached with the IRS on all material aspects related to the IRS
global tax settlement pertaining to certain leveraged lease
financing transactions. Excluding this reduction, the taxable-
equivalent yield on Key's commercial lease financing portfolio would
have been 4.17% for the fourth quarter of 2008, and Key's taxable-
equivalent net interest margin would have been 2.87%.
(e) 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.
(f) Yield is calculated on the basis of amortized cost.
(g) Rate calculation excludes basis adjustments related to fair value
hedges.
(h) In late March 2009, Key transferred $1.5 billion of loans from the
construction portfolio to the commercial mortgage portfolio in
accordance with regulatory guidelines pertaining to the
classification of loans that have reached a completed status.
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting
principles
Consolidated Average Balance Sheets, and Net Interest Income and
Yields/Rates From Continuing Operations
(dollars in millions)
Twelve months ended
December 31, 2009
------------------------------
Average Yield/
Balance Interest(a) Rate(a)
------- ----------- -------
Assets
Loans: (b),(c)
Commercial, financial and agricultural $23,181 $1,038 4.48 %
Real estate - commercial mortgage 11,310 (d) 557 4.93
Real estate - construction 6,206 (d) 294 4.74
Commercial lease financing 8,220 369 4.48
----- --- ---
Total commercial loans 48,917 2,258 4.61
Real estate - residential mortgage 1,764 104 5.91
Home equity:
Community Banking 10,220 445 4.36
National Banking 939 71 7.55
----
Total home equity loans 11,159 516 4.63
Consumer other - Community Banking 1,202 127 10.62
Consumer other - National Banking:
Marine 3,097 193 6.22
Other 247 20 7.93
Total consumer other - National
Banking 3,344 213 6.35
----- --- ----
Total consumer loans 17,469 960 5.50
------ --- ----
Total loans 66,386 3,218 4.85
Loans held for sale 650 29 4.37
Securities available for sale
(b), (g) 11,169 462 4.19
Held-to-maturity securities (b) 25 2 8.17
Trading account assets 1,238 47 3.83
Short-term investments 4,149 12 .28
Other investments (g) 1,478 51 3.11
----- --- ----
Total earning assets 85,095 3,821 4.49
Allowance for loan losses (2,273)
Accrued income and other assets 12,349
Discontinued assets - education
lending business 4,269
-----
Total assets $99,440
=======
Liabilities
NOW and money market deposit accounts $24,345 124 .51
Savings deposits 1,787 2 .07
Certificates of deposit
($100,000 or more) (h) 12,612 462 3.66
Other time deposits 14,535 529 3.64
Deposits in foreign office 802 2 .27
--- --- ---
Total interest-bearing deposits 54,081 1,119 2.07
Federal funds purchased and securities
sold under repurchase agreements 1,618 5 .31
Bank notes and other short-term
borrowings 1,907 16 .84
Long-term debt (h) 9,455 275 3.16
----- --- ----
Total interest-bearing liabilities 67,061 1,415 2.13
------ ----- ----
Noninterest-bearing deposits 12,964
Accrued expense and other liabilities 4,340
Discontinued liabilities - education
lending business (f) 4,269
-----
Total liabilities 88,634
Equity
Key shareholders' equity 10,592
Noncontrolling interests 214
---
Total equity 10,806
=======
Total liabilities and equity $99,440
=======
Interest rate spread (TE) 2.36 %
====
Net interest income (TE) and net
interest margin (TE) 2,406 2.83 %
TE adjustment (b) 26
---
=====
Net interest income, GAAP basis $2,380
=====
Twelve months ended
December 31, 2008
---------------------------
Average Yield/
Balance Interest(a) Rate(a)
------- ----------- -------
Assets
Loans: (b),(c)
Commercial, financial and
agricultural $26,372 $1,446 5.48 %
Real estate - commercial
mortgage 10,576 640 6.05
Real estate - construction 8,109 461 5.68
Commercial lease financing 9,642 (425) (4.41) (e)
----- ---- -----
Total commercial
loans 54,699 2,122 3.88
Real estate - residential
mortgage 1,909 117 6.11
Home equity:
Community Banking 9,846 564 5.73
National Banking 1,171 90 7.67
----- --- ----
Total home equity
loans 11,017 654 5.93
Consumer other - Community
Banking 1,275 130 10.22
Consumer other - National
Banking:
Marine 3,586 226 6.30
Other 315 26 8.25
--- --- ----
Total consumer other
- National Banking 3,901 252 6.46
----- --- ----
Total consumer
loans 18,102 1,153 6.37
------ ----- ----
Total loans 72,801 3,275 4.50
Loans held for sale 1,404 76 5.43
Securities available for
sale (b), (g) 8,126 406 5.04
Held-to-maturity
securities (b) 27 4 11.73
Trading account assets 1,279 56 4.38
Short-term investments 1,615 31 1.96
Other investments (g) 1,563 51 3.02
----- --- ----
Total earning
assets 86,815 3,899 4.49
Allowance for loan losses (1,341)
Accrued income and
other assets 14,736
Discontinued assets -
education lending business 4,180
-----
Total assets $104,390
========
Liabilities
NOW and money market deposit
accounts $26,429 427 1.62
Savings deposits 1,796 6 .32
Certificates of deposit
($100,000 or more) (h) 9,385 398 4.25
Other time deposits 13,300 556 4.18
Deposits in foreign office 3,501 81 2.31
----- --- ----
Total interest-
bearing deposits 54,411 1,468 2.70
Federal funds purchased and
securities sold under
repurchase agreements 2,847 57 2.00
Bank notes and other
short-term borrowings 5,931 130 2.20
Long-term debt (h) 10,392 382 3.94
------ --- ----
Total interest-
bearing liabilities 73,581 2,037 2.80
------ ----- ----
Noninterest-bearing
deposits 10,596
Accrued expense and
other liabilities 6,920
Discontinued liabilities -
education lending
business (f) 4,180
-----
Total liabilities 95,277
Equity
Key shareholders' equity 8,923
Noncontrolling interests 190
---
Total equity 9,113
Total liabilities ========
and equity $104,390
========
Interest rate
spread (TE) 1.69 %
=====
Net interest income (TE)
and net interest margin (TE) 1,862 (e) 2.15 % (c) (e)
====
TE adjustment (b) (454)
----
Net interest income, ======
GAAP basis $2,316
======
Average balances have not been adjusted prior to the third quarter of
2009 to reflect Key’s January 1, 2008, adoption of the applicable
accounting guidance related to the offsetting of certain derivative
contracts on the consolidated balance sheet.
(a) Results are from continuing operations. Interest excludes the
interest associated with the liabilities referred to in (f) 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) In late March 2009, Key transferred $1.5 billion of loans from the
construction portfolio to the commercial mortgage portfolio in
accordance with regulatory guidelines pertaining to the
classification of loans that have reached a completed status.
(e) During the fourth quarter of 2008, taxable-equivalent net interest
income was reduced by $18 million as a result of an agreement
reached with the IRS on all material aspects related to the IRS
global tax settlement pertaining to certain leveraged lease
financing transactions. During the second quarter of 2008, Key's
taxable-equivalent net interest income was reduced by $838 million
following an adverse federal court decision on Key's tax treatment
of a leveraged sale-leaseback transaction. During the first
quarter of 2008, Key increased its tax reserves for certain LILO
transactions and recalculated its lease income in accordance with
prescribed accounting standards. These actions reduced Key's first
quarter 2008 taxable-equivalent net interest income by $34 million.
Excluding all of these reductions, the taxable-equivalent yield on
Key's commercial lease financing portfolio would have been 4.82% for
2008, and Key's taxable-equivalent net interest margin would have
been 3.13%.
(f) 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.
(g) Yield is calculated on the basis of amortized cost.
(h) Rate calculation excludes basis adjustments related to fair value
hedges.
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting
principles
Noninterest Income
(in millions)
Three months ended Twelve months ended
------------------ -------------------
12-31-09 9-30-09 12-31-08 12-31-09 12-31-08
-------- ------- -------- -------- --------
Trust and investment
Services income(a) $117 $113 $131 $459 $509
Service charges on
Deposit accounts 82 83 90 330 365
Operating lease income 52 55 64 227 270
Letter of credit and
loan fees 52 46 42 180 183
Corporate-owned life
insurance income 36 26 33 114 117
Net securities gains
(losses) 1 1 (5) 113 (2)
Electronic banking fees 27 27 25 105 103
Gains on leased equipment 15 22 19 99 40
Insurance income 16 18 15 68 65
Investment banking and
capital markets income
(loss) (a) (47) (26) 5 (42) 68
Net gains (losses) from
principal investing 80 (6) (37) (4) (54)
Net gains (losses) from
loan securitizations
and sales (5) - 4 (1) (82)
Gain from sale/redemption
of Visa Inc. shares - - - 105 165
Gain (loss) related to
exchange of common
shares for capital
securities - (17) - 78 -
Other income:
Gain from sale of
Key's claim associated
with the Lehman
Brothers' bankruptcy - - - 32 -
Credit card fees 2 6 3 14 16
Miscellaneous income 41 34 (6) 158 84
--- --- --- --- ---
Total other income 43 40 (3) 204 100
--- --- --- --- ---
Total noninterest
income $469 $382 $383 $2,035 $1,847
==== ==== ==== ====== ======
(a) Additional detail provided in tables below.
Trust and Investment Services Income
(in millions)
Three months ended Twelve months ended
------------------ -------------------
12-31-09 9-30-09 12-31-08 12-31-09 12-31-08
-------- ------- -------- -------- --------
Brokerage commissions
and fee income $31 $37 $48 $151 $159
Personal asset management
and custody fees 37 35 39 141 158
Institutional asset
management and custody
fees 49 41 44 167 192
--- --- --- --- ---
Total trust and
investment services
income $117 $113 $131 $459 $509
==== ==== ==== ==== ====
Investment Banking and Capital Markets Income (Loss)
(in millions)
Three months ended Twelve months ended
------------------ -------------------
12-31-09 9-30-09 12-31-08 12-31-09 12-31-08
-------- ------- -------- -------- --------
Investment banking
income $29 $22 $7 $83 $85
Loss from other
investments (66) (23) (32) (103) (44)
Dealer trading and
derivatives income
(loss) (21) (36) 10 (70) (34)
Foreign exchange
income 11 11 20 48 61
--- --- --- --- ---
Total investment
banking and capital
markets income (loss) $(47) $(26) $5 $(42) $68
==== ==== === ==== ===
Noninterest Expense
(dollars in millions)
Three months ended Twelve months ended
------------------ -------------------
12-31-09 9-30-09 12-31-08 12-31-09 12-31-08
-------- ------- -------- -------- --------
Personnel (a) $400 $380 $405 $1,514 $1,581
Net occupancy 67 63 66 259 259
Operating lease expense 50 46 55 195 224
Computer processing 49 48 51 192 187
Professional fees 63 41 50 184 138
FDIC assessment 37 40 3 177 10
OREO expense, net 25 51 6 97 16
Equipment 25 24 22 96 92
Marketing 22 19 25 72 87
Provision (credit) for
losses on lending-
related commitments 27 29 (5) 67 (26)
Intangible assets
impairment --- 45 465 241 469
Other expense:
Postage and delivery 8 9 12 33 46
Franchise and
business taxes 5 8 7 31 30
Telecommunications 6 7 8 26 30
Provision for losses
on LIHTC guaranteed
funds - 1 7 17 17
Miscellaneous expense 87 90 87 353 316
--- --- --- --- ---
Total other expense 106 115 121 460 439
--- --- --- --- ---
Total noninterest
expense $871 $901 $1,264 $3,554 $3,476
==== ==== ====== ====== ======
Average full-time
equivalent
employees(b) 15,973 16,436 17,697 16,698 18,095
(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
------------------ -------------------
12-31-09 9-30-09 12-31-08 12-31-09 12-31-08
-------- ------- -------- -------- --------
Salaries $229 $228 $238 $905 $949
Incentive compensation 76 58 76 222 279
Employee benefits 75 76 58 303 255
Stock-based compensation 15 12 11 51 50
Severance 5 6 22 33 48
--- --- --- --- ---
Total personnel
expense $400 $380 $405 $1,514 $1,581
==== ==== ==== ====== ======
Loan Composition
(dollars in millions)
Percent change
12-31-09 vs.
---------------
12-31-09 9-30-09 12-31-08 9-30-09 12-31-08
-------- ------- -------- ------- --------
Commercial, financial
and agricultural $19,248 $20,600 $27,260 (6.6)% (29.4)%
Commercial real estate:
Commercial mortgage 10,457 11,169 (a) 10,819 (6.4) (3.3)
Construction 4,739 5,473 (a) 7,717 (13.4) (38.6)
----- ----- ----- ----- -----
Total commercial
real estate loans 15,196 16,642 18,536 (8.7) (18.0)
Commercial lease
financing 7,460 7,787 9,039 (4.2) (17.5)
----- ----- ----- ---- -----
Total commercial
loans 41,904 45,029 54,835 (6.9) (23.6)
Real estate -
residential mortgage 1,796 1,763 1,908 1.9 (5.9)
Home equity:
Community Banking 10,052 10,158 10,124 (1.0) (.7)
National Banking 834 880 1,051 (5.2) (20.6)
--- --- ----- ---- -----
Total home equity
loans 10,886 11,038 11,175 (1.4) (2.6)
Consumer other -
Community Banking 1,181 1,189 1,233 (.7) (4.2)
Consumer other -
National Banking:
Marine 2,787 2,943 3,401 (5.3) (18.1)
Other 216 231 283 (6.5) (23.7)
--- --- --- ---- -----
Total consumer other
- National Banking 3,003 3,174 3,684 (5.4) (18.5)
----- ----- ----- ---- -----
Total consumer
loans 16,866 17,164 18,000 (1.7) (6.3)
------ ------ ------ ---- ----
Total loans (b) $58,770 $62,193 $72,835 (5.5)% (19.3)%
======= ======= =======
Loans Held for Sale Composition
(dollars in millions)
Percent change
12-31-09 vs.
--------------
12-31-09 9-30-09 12-31-08 9-30-09 12-31-08
-------- ------- -------- ------- --------
Commercial,
financial and
agricultural $14 $128 $102 (89.1)% (86.3)%
Real estate -
commercial
mortgage 171 302 273 (43.4) (37.4)
Real estate -
construction 92 133 164 (30.8) (43.9)
Commercial lease
financing 27 29 7 (6.9) 285.7
Real estate -
residential
mortgage 139 110 77 26.4 80.5
Automobile - 1 3 (100.0) (100.0)
--- --- --- ------ ------
Total loans held
for sale (c) $443 $703 $626 (37.0)% (29.2)%
==== ==== ====
(a) In late March 2009, Key transferred $1.5 billion of loans from
the construction portfolio to the commercial mortgage portfolio in
accordance with regulatory guidelines pertaining to the
classification of loans that have reached a completed status.
(b) Excluded at December 31, 2009, September 30, 2009, and December
31, 2008, are loans in the amount of $3.5 billion, $3.6 billion and
$3.7 billion, respectively, related to the discontinued operations
of the education lending business.
(c) Excluded at December 31, 2009, September 30, 2009, and December
31, 2008, are loans held for sale in the amount of $434 million,
$341 million, and $401 million, respectively, related to the
discontinued operations of the education lending business.
Summary of Loan Loss Experience from Continuing Operations
(dollars in millions)
Three months ended
------------------
12-31-09 9-30-09 12-31-08
-------- ------- --------
Average loans outstanding $60,533 $64,830 $73,284
======= ======= =======
Allowance for loan losses at beginning
of period $2,485 $2,339 $1,390
Loans charged off:
Commercial, financial and
agricultural 232 180 132
Real estate - commercial mortgage 166 81 43
Real estate - construction 187 217 49
--- --- ---
Total commercial real
estate loans 353 298 92
Commercial lease financing 45 32 26
--- --- ---
Total commercial loans 630 510 250
Real estate - residential mortgage 9 4 7
Home equity:
Community Banking 28 26 15
National Banking 20 20 17
--- --- ---
Total home equity loans 48 46 32
Consumer other - Community Banking 17 19 13
Consumer other - National Banking:
Marine 41 35 30
Other 5 5 4
--- --- ---
Total consumer other -
National Banking 46 40 34
--- --- ---
Total consumer loans 120 109 86
--- --- ---
Total loans charged off 750 619 336
Recoveries:
Commercial, financial and
agricultural 14 12 13
Real estate - commercial mortgage 1 - -
Real estate - construction 6 1 ---
--- --- ---
Total commercial real
estate loans 7 1 -
Commercial lease financing 6 5 5
--- --- ---
Total commercial loans 27 18 18
Real estate - residential mortgage 1 --- ---
Home equity:
Community Banking 1 1 1
National Banking 1 - -
--- --- ---
Total home equity loans 2 1 1
Consumer other - Community Banking 2 2 2
Consumer other - National Banking:
Marine 8 10 5
Other 2 1 1
--- --- ---
Total consumer other -
National Banking 10 11 6
--- --- ---
Total consumer loans 15 14 9
--- --- ---
Total recoveries 42 32 27
--- --- ---
Net loan charge-offs (708) (587) (309)
Provision for loan losses 756 733 551
Allowance related to loans acquired, net - - -
Foreign currency translation adjustment 1 --- (3)
--- --- ---
Allowance for loan losses at end of
period $2,534 $2,485 $1,629
====== ====== ======
Liability for credit losses on lending-
related commitments at beginning of
period $94 $65 $59
Provision (credit) for losses on lending-
related commitments 27 29 (5)
--- --- ---
Liability for credit losses on lending-
related commitments at end of
period (a) $121 $94 $54
==== === ===
Total allowance for credit losses at
end of period $2,655 $2,579 $1,683
====== ====== ======
Net loan charge-offs to average loans 4.64% 3.59% 1.67
Allowance for loan losses to period-end
loans 4.31 4.00 2.24
Allowance for credit losses to
period-end loans 4.52 4.15 2.31
Allowance for loan losses to
nonperforming loans 115.87 108.52 133.42
Allowance for credit losses to
nonperforming loans 121.40 112.62 137.84
Discontinued operations - education
lending business:
Loans charged off $37 $39 $33
Recoveries 1 1 ---
--- --- ---
Net loan charge-offs $(36) $(38) $(33)
==== ==== ====
Twelve months ended
-------------------
12-31-09 12-31-08
-------- --------
Average loans outstanding $66,386 $72,801
======= =======
Allowance for loan losses at beginning of period $1,629 $1,195
Loans charged off:
Commercial, financial and agricultural 838 332
Real estate - commercial mortgage 356 83
Real estate - construction 643 494
--- ---
Total commercial real estate loans 999 577
Commercial lease financing 128 83
--- ---
Total commercial loans 1,965 992
Real estate - residential
mortgage 20 15
Home equity:
Community Banking 97 43
National Banking 74 47
--- ---
Total home equity loans 171 90
Consumer other - Community Banking 67 44
Consumer other - National Banking:
Marine 154 85
Other 19 14
--- ---
Total consumer other - National Banking 173 99
--- ---
Total consumer loans 431 248
--- ---
Total loans charged off 2,396 1,240
Recoveries:
Commercial, financial and agricultural 52 54
Real estate - commercial mortgage 2 1
Real estate - construction 9 2
--- ---
Total commercial real estate loans 11 3
Commercial lease financing 22 20
--- ---
Total commercial loans 85 77
Real estate - residential mortgage 1 1
Home equity:
Community Banking 4 3
National Banking 2 1
--- ---
Total home equity loans 6 4
Consumer other - Community Banking 7 6
Consumer other - National Banking:
Marine 35 18
Other 5 3
--- ---
Total consumer other - National Banking 40 21
--- ---
Total consumer loans 54 32
--- ---
Total recoveries 139 109
--- ---
Net loan charge-offs (2,257) (1,131)
Provision for loan losses 3,159 1,537
Allowance related to loans acquired, net --- 32
Foreign currency translation adjustment 3 (4)
--- ---
Allowance for loan losses at end of period $2,534 $1,629
====== ======
Liability for credit losses on lending-related
commitments at beginning of period $54 $80
Provision (credit) for losses on lending-related
commitments 67 (26)
--- ---
Liability for credit losses on lending-related
commitments at end of period (a) $121 $54
==== ===
Total allowance for credit losses at end of period $2,655 $1,683
====== ======
Net loan charge-offs to average loans 3.40% 1.55%
Allowance for loan losses to period-end loans 4.31 2.24
Allowance for credit losses to period-end loans 4.52 2.31
Allowance for loan losses to nonperforming loans 115.87 133.42
Allowance for credit losses to nonperforming loans 121.40 137.84
Discontinued operations - education lending business:
Loans charged off $147 $131
Recoveries 4 2
--- ---
Net loan charge-offs $(143) $(129)
===== =====
(a) Included in "accrued expense and other liabilities" on the balance
sheet.
Summary of Nonperforming Assets and Past Due Loans From Continuing
Operations
(dollars in millions)
12-31-09 9-30-09 6-30-09
-------- ------- -------
Commercial, financial and agricultural $580 $679 $700
Real estate - commercial mortgage 473 566 454
Real estate - construction 566 702 716
--- --- ---
Total commercial real estate loans 1,039 1,268 1,170
Commercial lease financing 113 131 122
--- --- ---
Total commercial loans 1,732 2,078 1,992
Real estate - residential mortgage 73 68 46
Home equity:
Community Banking 107 103 101
National Banking 21 21 20
--- --- ---
Total home equity loans 128 124 121
Consumer other - Community Banking 4 4 5
Consumer other - National Banking:
Marine 23 15 19
Other 2 1 2
--- --- ---
Total consumer other - National
Banking 25 16 21
--- --- ---
Total consumer loans 230 212 193
--- --- ---
Total nonaccrual loans 1,962 2,290 2,185
Restructured loans accruing
interest (a), (b) 225 - -
--- --- ---
Total nonperforming loans 2,187 2,290 2,185
Nonperforming loans held for sale 116 304 145
OREO 191 187 182
Allowance for OREO losses (23) (40) (11)
--- --- ---
OREO, net of allowance 168 147 171
Other nonperforming assets 39 58 47
--- --- ---
Total nonperforming assets $2,510 $2,799 $2,548
====== ====== ======
Accruing loans past due 90 days
or more $331 $375 $552
Accruing loans past due 30
through 89 days 933 1,071 1,081
Restructured loans included in
nonaccrual loans (a) 139 65 7
Nonperforming loans to period-
end portfolio loans 3.72% 3.68% 3.25%
Nonperforming assets to period-
end portfolio loans plus OREO
and other nonperforming assets 4.25 4.46 3.77
3-31-09 12-31-08
------- --------
Commercial, financial and
agricultural $595 $415
Real estate - commercial mortgage 310 128
Real estate - construction 546 436
--- ---
Total commercial real estate loans 856 564
Commercial lease financing 109 81
--- ---
Total commercial loans 1,560 1,060
Real estate - residential mortgage 39 39
Home equity:
Community Banking 91 76
National Banking 19 15
--- ---
Total home equity loans 110 91
Consumer other - Community Banking 3 3
Consumer other - National Banking:
Marine 21 26
Other 2 2
--- ---
Total consumer other - National
Banking 23 28
--- ---
Total consumer loans 175 161
--- ---
Total nonaccrual loans 1,735 1,221
Restructured loans accruing
interest (a), (b) - -
--- ---
Total nonperforming loans 1,735 1,221
Nonperforming loans held for sale 72 90
OREO 147 110
Allowance for OREO losses (4) (3)
--- ---
OREO, net of allowance 143 107
Other nonperforming assets 44 42
--- ---
Total nonperforming assets $1,994 $1,460
====== ======
Accruing loans past due 90 days
or more $435 $413
Accruing loans past due 30
through 89 days 1,313 1,230
Restructured loans included in
nonaccrual loans (a) - -
Nonperforming loans to period-
end portfolio loans 2.48% 1.68%
Nonperforming assets to period-
end portfolio loans plus OREO
and other nonperforming assets 2.84 2.00
(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. Restructured loans in compliance with their modified terms
continue to accrue interest.
(b) Amounts in prior periods are nominal, thus not disclosed.
Summary of Changes in Nonperforming Loans From Continuing Operations
(in millions)
4Q09 3Q09 2Q09 1Q09 4Q08
---- ---- ---- ---- ----
Balance at beginning of
period $2,290 $2,185 $1,735 $1,221 $964
Loans placed on nonaccrual
status 1,082 1,140 1,218 1,175 734
Charge-offs (750) (619) (540) (487) (336)
Loans sold (70) (4) (12) (15) (5)
Payments (242) (300) (148) (112) (111)
Transfers to OREO or other
nonperforming assets (38) (94) (30) (34) (22)
Transfer to nonperforming
loans held for sale (23) (5) (30) - -
Loans returned to accrual
status (62) (13) (8) (13) (3)
--- --- --- --- ---
Balance at end of period $2,187 $2,290 $2,185 $1,735 $1,221
====== ====== ====== ====== ======
Summary of Changes in Other Real Estate Owned, Net of Allowance
(in millions)
4Q09 3Q09 2Q09 1Q09 4Q08
---- ---- ---- ---- ----
Balance at beginning of
period $147 $171 $143 $107 $60
Properties acquired (a) 98 91 46 44 64
Valuation adjustments (12) (36) (9) (3) (1)
Properties sold (65) (79) (9) (5) (16)
--- --- --- --- ---
Balance at end of period $168 $147 $171 $143 $107
==== ==== ==== ==== ====
(a) Properties acquired consist of those related to performing and
nonperforming loans.
Line of Business Results
(dollars in millions)
Community Banking
4Q09 3Q09 2Q09 1Q09
---- ---- ---- ----
Summary of operations
Total revenue (TE) $651 $629 $601 $601
Provision for loan losses 228 143 187 81
Noninterest expense 503 486 492 461
Net income (loss) attributable to
Key (50) - (49) 37
Average loans and leases 26,667 27,408 28,237 28,940
Average deposits 52,529 52,954 52,689 51,560
Net loan charge-offs 135 94 87 54
Net loan charge-offs to average
loans 2.01 % 1.36 % 1.24 % .76 %
Nonperforming assets at period end $469 $459 $369 $315
Return on average allocated equity (5.87)% - (5.87)% 4.61 %
Average full-time equivalent
employees 8,177 8,419 8,656 8,887
Supplementary information (lines of business)
Regional Banking
Total revenue (TE) $544 $531 $509 $508
Provision for loan losses 144 93 165 69
Noninterest expense 438 436 441 409
Net income (loss) attributable to
Key (24) 1 (61) 19
Average loans and leases 19,076 19,347 19,746 20,004
Average deposits 47,570 48,551 48,717 47,784
Net loan charge-offs 83 78 73 53
Net loan charge-offs to average
loans 1.73 % 1.60 % 1.48 % 1.07 %
Nonperforming assets at period end $312 $280 $236 $200
Return on average allocated equity (4.06)% .17 % (10.53)% 3.40 %
Average full-time equivalent
employees 7,877 8,120 8,339 8,565
Commercial Banking
Total revenue (TE) $107 $98 $92 $93
Provision for loan losses 84 50 22 12
Noninterest expense 65 50 51 52
Net income (loss) attributable to
Key (26) (1) 12 18
Average loans and leases 7,591 8,061 8,491 8,936
Average deposits 4,959 4,403 3,972 3,776
Net loan charge-offs 52 16 14 1
Net loan charge-offs to average
loans 2.72 % .79 % .66 % .05 %
Nonperforming assets at period end $157 $179 $133 $115
Return on average allocated
equity (10.00)% (.38)% 4.71 % 7.40 %
Average full-time equivalent
employees 300 299 317 322
Percent change 4Q09 vs.
-----------------------
4Q08 3Q09 4Q08
---- ---- ----
Summary of operations
Total revenue (TE) $641 3.5 % 1.6 %
Provision for loan losses 102 59.4 123.5
Noninterest expense 473 3.5 6.3
Net income (loss) attributable to
Key 41 N/M N/M
Average loans and leases 29,164 (2.7) (8.6)
Average deposits 51,051 (.8) 2.9
Net loan charge-offs 66 43.6 104.5
Net loan charge-offs to average
loans .90 % N/A N/A
Nonperforming assets at period end $245 2.2 91.4
Return on average allocated equity 5.08 % N/A N/A
Average full-time equivalent
employees 8,797 (2.9) (7.0)
Supplementary information (lines of business)
Regional Banking
Total revenue (TE) $551 2.4 % (1.3)%
Provision for loan losses 80 54.8 80.0
Noninterest expense 426 .5 2.8
Net income (loss) attributable to
Key 28 N/M N/M
Average loans and leases 20,022 (1.4) (4.7)
Average deposits 47,426 (2.0) .3
Net loan charge-offs 52 6.4 59.6
Net loan charge-offs to average
loans 1.03 % N/A N/A
Nonperforming assets at period end $169 11.4 84.6
Return on average allocated equity 5.02 % N/A N/A
Average full-time equivalent
employees 8,474 (3.0) (7.0)
Commercial Banking
Total revenue (TE) $90 9.2 % 18.9 %
Provision for loan losses 22 68.0 281.8
Noninterest expense 47 30.0 38.3
Net income (loss) attributable to
Key 13 N/M N/M
Average loans and leases 9,142 (5.8) (17.0)
Average deposits 3,625 12.6 36.8
Net loan charge-offs 14 225.0 271.4
Net loan charge-offs to average
loans .61 % N/A N/A
Nonperforming assets at period end $76 (12.3) 106.6
Return on average allocated equity 5.23 % N/A N/A
Average full-time equivalent
employees 323 .3 (7.1)
Line of Business Results (continued)
(dollars in millions)
National Banking
4Q09 3Q09 2Q09 1Q09
---- ---- ---- ----
Summary of operations
Total revenue (TE) $421 $450 $507 $500
Provision for loan losses 530 593 635 762
Noninterest expense 356 435 345 494
Loss from continuing
operations attributable
to Key (291) (359) (295) (544)
Net loss attributable
to Key (298) (375) (291) (573)
Average loans and
leases (a) 33,692 37,231 40,271 42,476
Average loans held
for sale (a) 511 469 466 567
Average deposits 13,373 13,435 13,141 12,081
Net loan charge-offs (a) 573 493 415 406
Net loan charge-offs
to average loans (a) 6.75 % 5.25 % 4.13 % 3.88 %
Nonperforming assets
at period end (a) $1,700 $1,811 $1,796 $1,401
Return on average
allocated equity (a) (22.54)% (26.59)% (21.46)% (40.09)%
Return on average
allocated equity (23.09) (27.79) (21.22) (42.34)
Average full-time
equivalent employees (b) 2,668 2,780 2,895 3,013
Supplementary information (lines of business)
Real Estate Capital and Corporate Banking Services
Total revenue (TE) $85 $125 $172 $172
Provision for loan losses 344 372 462 470
Noninterest expense 119 135 106 137
Net loss attributable
to Key (237) (237) (246) (292)
Average loans and
leases 13,751 14,904 15,873 16,567
Average loans held
for sale 273 248 231 269
Average deposits 10,389 10,624 10,582 9,987
Net loan charge-offs 434 309 274 218
Net loan charge-offs
to average loans 12.52 % 8.23 % 6.92 % 5.34 %
Nonperforming assets
at period end $1,076 $1,194 $1,119 $832
Return on average
allocated equity (38.32)% (36.35)% (36.68)% (47.37)%
Average full-time
equivalent employees 952 967 982 1,024
Equipment Finance
Total revenue (TE) $98 $87 $102 $101
Provision for loan losses 112 99 72 77
Noninterest expense 90 126 88 88
Net loss attributable
to Key (65) (86) (36) (40)
Average loans and
leases 7,724 8,462 8,769 9,091
Average loans held
for sale 34 73 40 28
Average deposits 15 15 17 17
Net loan charge-offs 46 51 46 44
Net loan charge-offs
to average loans 2.36 % 2.39 % 2.10 % 1.96 %
Nonperforming assets
at period end $313 $278 $270 $215
Return on average
allocated equity (40.17)% (53.90)% (23.18)% (22.85)%
Average full-time
equivalent employees 672 731 766 781
Institutional and Capital Markets
Total revenue (TE) $184 $187 $187 $172
Provision for loan losses 15 29 38 32
Noninterest expense 127 138 122 182
Income (loss) from
continuing operations
attributable to Key 26 12 17 (56)
Net income (loss)
attributable to Key 30 14 27 (78)
Average loans and leases 6,146 7,383 8,391 8,949
Average loans held
for sale 203 147 194 268
Average deposits 2,647 2,450 2,331 1,773
Net loan charge-offs 10 49 11 45
Net loan charge-offs
to average loans .65 % 2.63 % .53 % 2.04 %
Nonperforming assets at
period end $102 $75 $84 $58
Return on average
allocated equity (a) 9.71 % 4.32 % 6.02 % (18.63)%
Return on average
allocated equity 11.23 5.06 9.67 (26.25)
Average full-time
equivalent employees (b) 789 813 869 913
Consumer Finance
Total revenue (TE) $54 $51 $46 $55
Provision for loan losses 59 93 63 183
Noninterest expense 20 36 29 87
Loss from continuing
operations
attributable to Key (15) (48) (30) (156)
Net loss attributable
to Key (26) (66) (36) (163)
Average loans and
leases (a) 6,071 6,482 7,238 7,869
Average loans held
for sale (a) 1 1 1 2
Average deposits 322 346 211 304
Net loan charge-offs (a) 83 84 84 99
Net loan charge-offs
to average loans (a) 5.42 % 5.14 % 4.65 % 5.10 %
Nonperforming assets
at period end (a) $209 $264 $323 $296
Return on average
allocated equity (a) (6.17)% (18.40)% (11.27)% (58.91)%
Return on average
allocated equity (10.69) (25.30) (13.52) (61.55)
Average full-time
equivalent employees (b) 255 269 278 295
Percent change
4Q09 vs.
--------------
4Q08 3Q09 4Q08
---- ---- ----
Summary of operations
Total revenue (TE) $506 (6.4)% (16.8)%
Provision for loan losses 444 (10.6) 19.4
Noninterest expense 791 (18.2) (55.0)
Loss from continuing operations
attributable to Key (631) 18.9 53.9
Net loss attributable to Key (661) 20.5 54.9
Average loans and leases (a) 43,793 (9.5) (23.1)
Average loans held for sale (a) 1,088 9.0 (53.0)
Average deposits 12,176 (.5) 9.8
Net loan charge-offs (a) 243 16.2 135.8
Net loan charge-offs to average
loans (a) 2.21 % N/A N/A
Nonperforming assets at period
end (a) $963 (6.1) 76.5
Return on average allocated
equity (a) (47.23)% N/A N/A
Return on average allocated
equity (49.48) N/A N/A
Average full-time equivalent
employees (b) 3,287 (4.0) (18.8)
Supplementary information (lines of business)
Real Estate Capital and Corporate Banking Services
Total revenue (TE) $165 (32.0)% (48.5)%
Provision for loan losses 153 (7.5) 124.8
Noninterest expense 96 (11.9) 24.0
Net loss attributable to Key (53) - (347.2)
Average loans and leases 16,604 (7.7) (17.2)
Average loans held for sale 511 10.1 (46.6)
Average deposits 10,390 (2.2) -
Net loan charge-offs 81 40.5 435.8
Net loan charge-offs to average
loans 1.94 % N/A N/A
Nonperforming assets at period
end $543 (9.9) 98.2
Return on average allocated
equity (9.85)% N/A N/A
Average full-time equivalent
employees 1,107 (1.6) (14.0)
Equipment Finance
Total revenue (TE) $86 12.6 % 14.0 %
Provision for loan losses 33 13.1 239.4
Noninterest expense 346 (28.6) (74.0)
Net loss attributable to Key (278) 24.4 76.6
Average loans and leases 9,548 (8.7) (19.1)
Average loans held for sale 29 (53.4) 17.2
Average deposits 15 - -
Net loan charge-offs 51 (9.8) (9.8)
Net loan charge-offs to average
loans 2.12 % N/A N/A
Nonperforming assets at period
end $158 12.6 98.1
Return on average allocated
equity (125.25)% N/A N/A
Average full-time equivalent
employees 858 (8.1) (21.7)
Institutional and Capital Markets
Total revenue (TE) $196 (1.6)% (6.1)%
Provision for loan losses 53 (48.3) (71.7)
Noninterest expense 324 (8.0) (60.8)
Income (loss) from continuing
operations attributable to Key (192) 116.7 N/M
Net income (loss) attributable
to Key (191) 114.3 N/M
Average loans and leases 9,341 (16.8) (34.2)
Average loans held for sale 545 38.1 (62.8)
Average deposits 1,442 8.0 83.6
Net loan charge-offs 38 (79.6) (73.7)
Net loan charge-offs to average
loans 1.62 N/A N/A
Nonperforming assets at period
end $53 36.0 92.5
Return on average allocated
equity (a) (57.95)% N/A N/A
Return on average allocated
equity (57.65) N/A N/A
Average full-time equivalent
employees (b) 939 (3.0) (16.0)
Consumer Finance
Total revenue (TE) $59 5.9 % (8.5)%
Provision for loan losses 205 (36.6) (71.2)
Noninterest expense 25 (44.4) (20.0)
Loss from continuing operations
attributable to Key (108) 68.8 86.1
Net loss attributable to Key (139) 60.6 81.3
Average loans and leases (a) 8,300 (6.3) (26.9)
Average loans held for sale (a) 3 - (66.7)
Average deposits 329 (6.9) (2.1)
Net loan charge-offs (a) 73 (1.2) 13.7
Net loan charge-offs to average
loans (a) 3.50 % N/A N/A
Nonperforming assets at period
end (a) $209 (20.8) -
Return on average allocated
equity (a) (44.11)% N/A N/A
Return on average allocated
equity (56.77) N/A N/A
Average full-time equivalent
employees (b) 383 (5.2) (33.4)
(a) From continuing operations.
(b) The number of average full-time equivalent employees has not
been adjusted for discontinued operations.
TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful
SOURCE KeyCorp
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