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EX-99.2 - EX-99.2 - KEYCORP /NEW/l41644exv99w2.htm
Exhibit 99.1
     
News
   
(GRAPGIC)
   
 
  KeyCorp
 
  127 Public Square
 
  Cleveland, OH 44114
         
CONTACTS:
  ANALYSTS   MEDIA
 
  Vernon L. Patterson   William C. Murschel
 
  216.689.0520   216.471.2885
 
  Vernon_Patterson@KeyBank.com   William_C_Murschel@KeyBank.com
 
       
 
  Christopher F. Sikora    
 
  216.689.3133    
 
  Chris_F_Sikora@KeyBank.com    
     
INVESTOR
  KEY MEDIA
RELATIONS: www.key.com/ir
  NEWSROOM: www.key.com/newsroom
 
   
FOR IMMEDIATE RELEASE
   
KEYCORP REPORTS
FOURTH QUARTER NET INCOME OF $292 MILLION
2010 NET INCOME OF $413 MILLION
  Net income from continuing operations of $292 million, or $.33 per common share, for the fourth quarter of 2010
 
  Full year net income from continuing operations of $413 million, or $.47 per common share
 
  Net interest margin at 3.31% for the fourth quarter of 2010
 
  Nonperforming loans down $304 million to 2.13% of period-end loans
 
  Nonperforming assets down $463 million
 
  Loan loss reserve at 3.20% of total period-end loans
 
  Reserve coverage ratio of nonperforming loans increased to 150% at December 31, 2010
 
  Net charge-offs declined to $256 million, or 2.00% of average loan balances, for the fourth quarter of 2010
 
  Tier 1 common equity and Tier 1 risk-based capital ratios estimated at 9.31% and 15.10%, respectively, at December 31, 2010
     CLEVELAND, January 25, 2011 — KeyCorp (NYSE: KEY) today announced fourth quarter net income from continuing operations attributable to Key common shareholders of $292 million, or $.33 per common share. These results compare to a net loss from continuing operations attributable to Key common shareholders of $258 million, or $.30 per common share, for the fourth quarter of 2009. The fourth quarter 2010 results reflect an improvement in pre-provision net revenue and lower credit costs from the same period one-year ago. The fourth quarter 2009 results were negatively impacted by a $756 million loan loss provision. Fourth quarter 2010 net income attributable to Key common shareholders was $279 million compared to a net loss attributable to Key common shareholders of $265 million for the same quarter one year ago.

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 2
     For 2010, Key’s net income from continuing operations attributable to common shareholders was $413 million, or $.47 per common share. Results for the current year compare to a net loss from continuing operations attributable to Key common shareholders of $1.581 billion, or $2.27 per common share, for 2009. The 2009 results were adversely impacted by an elevated loan loss provision and write-offs of certain intangible assets. Net income attributable to Key common shareholders for the year ended December 31, 2010, was $390 million compared to a net loss attributable to Key common shareholders of $1.629 billion for the same period one year ago.
     “Key’s fourth quarter performance represents a strong finish to the year. We continue to make meaningful progress in both profitability and credit quality,” said Chairman and Chief Executive Officer Henry L. Meyer III. “Furthermore, we are increasingly confident that the strategic actions we have undertaken will continue to yield favorable results into 2011.”
     “With three consecutive profitable quarters, and continued signs of increased economic activity on the part of our clients, Key has clearly turned the corner and is positioned well to compete in 2011,” added Meyer. “Our core financial measures — strong capital, enhanced liquidity, adequate loan loss reserves, as well as our exit from riskier lending categories — represent a firm foundation for profitability in the year ahead.”
     Meyer said he was particularly pleased with Key’s improvement in credit quality metrics and the Company’s capital position. Credit quality continued to improve across the majority of loan portfolios in both Key Community Bank and Key Corporate Bank, as nonperforming assets were down $463 million and nonperforming loans decreased by $304 million from the previous quarter, and net charge-offs declined to $256 million for the fourth quarter of 2010.
     With respect to TARP repayment, Meyer stated: “We are aware that certain of our peer banks have recently repaid TARP. The Comprehensive Capital Assessment Plan we submitted on January 7, 2011, included our proposal for repaying the TARP preferred stock in a manner that we believe makes sense for Key and our shareholders. Repaying TARP is a top priority for Key, but our patience has been appropriate because it has allowed us to demonstrate improved financial performance and an increased stock price. Moreover, given the strength of our capital and our improved risk profile and profitability, it is our goal to repay TARP in a less dilutive manner than would have been achievable if we repaid prior to undergoing the Federal Reserve’s Comprehensive Capital Assessment. All of this is subject to obtaining requisite regulatory approvals.”
     At December 31, 2010, Key’s estimated Tier 1 common equity and Tier 1 risk-based capital ratios were 9.31% and 15.10%, compared to 8.61% and 14.30%, respectively, at September 30, 2010.
     Key’s strong capital and liquidity positions provide the Company with the ability to serve the borrowing needs of our clients as the economy expands. The Company originated approximately $8.5 billion in new or renewed lending commitments to consumers and businesses during the quarter and approximately $29.5 billion for the year ended December 31, 2010.
     Meyer also noted that over the last two years, Key has opened 77 new branches and renovated approximately 145 others, expanding Key’s 14-state branch network to 1,033 branches. The Company plans to build an additional 40 new branches in 2011. Key also recently announced that it scored significantly higher than its four largest competitor banks in a third quarter 2010 customer satisfaction survey conducted by the American Customer

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 3
Satisfaction Index. Key’s scores were significantly better than bank industry scores across multiple dimensions, most notably Customer Loyalty.
     During the quarter, Key announced that Meyer will retire on May 1, 2011, and that Beth E. Mooney has been elected President and Chief Operating Officer of KeyCorp and a member of KeyCorp’s Board of Directors. Mooney will assume the additional role of Chairman and Chief Executive Officer on May 1, 2011, and become the first woman CEO of a top 20 U.S. bank. Mooney, who has over 30 years of experience in retail banking, commercial lending, and real estate financing, was previously Vice Chair of KeyCorp and head of Key’s Community Bank business.
     Key also announced the elections of William R. Koehler to President, Key Community Bank and Christopher M. Gorman to President, Key Corporate Bank (previously known as Key National Banking). Koehler has 20 years of experience in the financial services industry, most recently as President of KeyBank’s Great Lakes Region. In his new role, Koehler is responsible for Key’s businesses associated with its 14-state branch network, including retail banking, small- and middle-market business banking, private banking, investment services and mortgage. Gorman was previously the senior executive vice president and head of the now renamed Key Corporate Bank.
     The following table shows Key’s continuing and discontinued operating results for the comparative quarters and for the years ended December 31, 2010, and 2009.
Results of Operations
                                         
    Three months ended     Twelve months ended  
in millions, except per share amounts   12-31-10     9-30-10     12-31-09     12-31-10     12-31-09  
 
Summary of operations
                                       
Income (loss) from continuing operations attributable to Key
  $ 333     $ 204     $ (217 )   $ 577     $ (1,287 )
Income (loss) from discontinued operations, net of taxes (a)
    (13 )     15       (7 )     (23 )     (48 )
 
                             
Net income (loss) attributable to Key
  $ 320     $ 219     $ (224 )   $ 554     $ (1,335 )
 
                             
 
                                       
Income (loss) from continuing operations attributable to Key
  $ 333     $ 204     $ (217 )   $ 577     $ (1,287 )
Less: Dividends on Series A Preferred Stock
    6       6       5       23       39  
Noncash deemed dividend — common shares exchanged for Series A Preferred Stock
                            114  
Cash dividends on Series B Preferred Stock
    31       31       31       125       125  
Amortization of discount on Series B Preferred Stock
    4       4       5       16       16  
 
                             
Income (loss) from continuing operations attributable to Key common shareholders
    292       163       (258 )     413       (1,581 )
Income (loss) from discontinued operations, net of taxes (a)
    (13 )     15       (7 )     (23 )     (48 )
 
                             
Net income (loss) attributable to Key common shareholders
  $ 279     $ 178     $ (265 )   $ 390     $ (1,629 )
 
                             
 
                                       
Per common share — assuming dilution
                                       
Income (loss) from continuing operations attributable to Key common shareholders
  $ .33     $ .19     $ (.30 )   $ .47     $ (2.27 )
Income (loss) from discontinued operations, net of taxes (a)
    (.02 )     .02       (.01 )     (.03 )     (.07 )
 
                             
Net income (loss) attributable to Key common shareholders (b)
  $ .32     $ .20     $ (.30 )   $ .44     $ (2.34 )
 
                             
 
(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. The loss from discontinued operations for the year ended December 31, 2010, was primarily attributable to fair value adjustments related to the education lending securitization trusts. Included in the loss from discontinued operations for the 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.
 
(b)   Earnings per share may not foot due to rounding.
SUMMARY OF CONTINUING OPERATIONS
     Taxable-equivalent net interest income was $635 million for the fourth quarter of 2010, and the net interest margin was 3.31%. These results compare to taxable-equivalent net interest income of $637 million and a net interest margin of 3.04% for the fourth quarter of 2009. The increase in the net interest margin is primarily attributable to lower funding costs. The

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 4
Company continues to experience an improvement in the mix of deposits by reducing the level of higher costing certificates of deposit and growing lower costing transaction accounts. This benefit to the net interest margin was partially offset by a lower level of average earning assets compared to the same period one year ago resulting from pay downs on loans.
     Compared to the third quarter of 2010, taxable-equivalent net interest income decreased by $12 million, and the net interest margin declined four basis points. The modest decline in the net interest margin reflects the combined effect of hedge maturities and change in the mix of earning assets, with average loan balances declining and average balances of lower yielding investment securities increasing. These impacts were moderated by a continued decrease in the total cost of funds during this period due to the repricing of certificates of deposit and a continued overall improved mix of deposits.
     Key’s noninterest income was $526 million for the fourth quarter of 2010, compared to $469 million for the year-ago quarter. Investment banking and capital markets income increased $110 million compared to the same period one-year ago. In the fourth quarter of 2009, the Company incurred losses on certain real estate investments, recorded additional reserves on customer derivative positions, and recorded a loss on certain commercial mortgage-backed securities. In total, these amounted to a reduction of fee income of $87 million in the fourth quarter of 2009. This compares to income of $18 million recorded in the fourth quarter of 2010 as a result of improved credit quality. In addition, net gains from loan sales increased $34 million from the fourth quarter of 2009, and the Company realized a gain of $28 million from the sale of Tuition Management Systems in the fourth quarter of 2010. These gains were partially offset by decreases of $86 million in net gains (losses) from principal investing (including results attributable to noncontrolling interests), $12 million in service charges on deposit accounts, and $10 million in operating lease income from the fourth quarter of 2009.
     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   4Q10     3Q10     2Q10     1Q10     4Q09  
 
Trust and investment services income
  $ 108     $ 110     $ 112     $ 114     $ 117  
Service charges on deposit accounts
    70       75       80       76       82  
Operating lease income
    42       41       43       47       52  
Letter of credit and loan fees
    51       61       42       40       52  
Corporate-owned life insurance income
    42       39       28       28       36  
Electronic banking fees
    31       30       29       27       27  
Insurance income
    12       15       19       18       16  
Net gains (losses) from principal investing
    (6 )     18       17       37       80  
Investment banking and capital markets income (loss)
    63       42       31       9       (47 )
     Compared to the third quarter of 2010, noninterest income increased by $40 million. The increase resulted from a $28 million gain from the sale of Tuition Management Systems and a $21 million increase in investment banking and capital markets income, primarily attributable to a positive adjustment to our customer derivative reserve. In addition, the Company sold several investment securities during the quarter resulting in an increase of $11 million in net securities gains. These increases were partially offset by a decrease of $24 million in net gains (losses) from principal investing (including results attributable to noncontrolling interests).
     Key’s noninterest expense was $744 million for the fourth quarter of 2010, compared to $871 million for the same period last year. Key recorded a credit of $26 million to the provision for losses on lending-related commitments during the fourth quarter of 2010,

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 5
compared to a charge to the provision of $27 million in the year-ago quarter. Also contributing to the decrease in noninterest expense was a decline in employee benefits expense of $41 million as a result of lower pension expense and medical claims expense. Additionally, in the fourth quarter of 2010, operating lease expense was $22 million less and other real estate owned (“OREO”) expense was $15 million less than the year-ago quarter.
     Compared to the third quarter of 2010, noninterest expense increased by $8 million. Increases in noninterest expense included $15 million in business services and professional fees, $6 million in personnel expense, $6 million in OREO expense, and $7 million in various other miscellaneous expenses. These increases were partially offset by decreases in the provision for losses on lending-related commitments of $16 million and operating lease expense of $12 million.
ASSET QUALITY
     Key’s provision for loan losses was a credit of $97 million for the fourth quarter of 2010, compared to a charge of $756 million for the year-ago quarter and $94 million for the third quarter of 2010. Key’s allowance for loan losses was $1.6 billion, or 3.20% of total period-end loans, at December 31, 2010, compared to 3.81% at September 30, 2010, and 4.31% at December 31, 2009.
     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   4Q10     3Q10     2Q10     1Q10     4Q09  
 
Net loan charge-offs
  $ 256     $ 357     $ 435     $ 522     $ 708  
Net loan charge-offs to average loans
    2.00 %     2.69 %     3.18 %     3.67 %     4.64 %
Allowance for loan losses
  $ 1,604     $ 1,957     $ 2,219     $ 2,425     $ 2,534  
Allowance for credit losses (a)
    1,677       2,056       2,328       2,544       2,655  
Allowance for loan losses to period-end loans
    3.20 %     3.81 %     4.16 %     4.34 %     4.31 %
Allowance for credit losses to period-end loans
    3.35       4.00       4.36       4.55       4.52  
Allowance for loan losses to nonperforming loans
    150.19       142.64       130.30       117.43       115.87  
Allowance for credit losses to nonperforming loans
    157.02       149.85       136.70       123.20       121.40  
Nonperforming loans at period end
  $ 1,068     $ 1,372     $ 1,703     $ 2,065     $ 2,187  
Nonperforming assets at period end
    1,338       1,801       2,086       2,428       2,510  
Nonperforming loans to period-end portfolio loans
    2.13 %     2.67 %     3.19 %     3.69 %     3.72 %
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets
    2.66       3.48       3.88       4.31       4.25  
 
(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 $256 million, or 2.00%, of average loans. These results compare to $708 million, or 4.64%, for the same period last year and $357 million, or 2.69%, for the previous quarter. Net loan charge-offs declined each quarter during 2010 and are at their lowest level since the first quarter of 2008.

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 6
     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   4Q10     3Q10     2Q10     1Q10     4Q09  
 
Commercial, financial and agricultural
  $ 80     $ 136     $ 136     $ 126     $ 218  
Real estate — commercial mortgage
    52       46       126       106       165  
Real estate — construction
    28       76       75       157       181  
Commercial lease financing
    12       16       14       21       39  
 
                             
Total commercial loans
    172       274       351       410       603  
Home equity — Key Community Bank
    26       35       25       30       27  
Home equity — Other
    13       13       16       17       19  
Marine
    17       12       19       38       33  
Other
    28       23       24       27       26  
 
                             
Total consumer loans
    84       83       84       112       105  
 
                             
Total net loan charge-offs
  $ 256     $ 357     $ 435     $ 522     $ 708  
 
                             
 
                                       
Net loan charge-offs to average loans from continuing operations
    2.00 %     2.69 %     3.18 %     3.67 %     4.64 %
 
                                       
Net loan charge-offs from discontinued operations — education lending business
  $ 32     $ 22     $ 31     $ 36     $ 36  
     Compared to the third quarter of 2010, net loan charge-offs in the commercial loan portfolio decreased by $102 million. The decrease was primarily attributable to a decline in the commercial, financial and agricultural and the real estate — construction loan portfolios. As shown in the table on page 7, Key’s exit loan portfolio accounted for $81 million, or 31.64%, of Key’s total net loan charge-offs for the fourth quarter of 2010. Net charge-offs in the exit loan portfolio decreased by $24 million from the third quarter of 2010, primarily driven by an improvement in the commercial lease financing portfolio.
     At December 31, 2010, Key’s nonperforming loans totaled $1.1 billion and represented 2.13% of period-end portfolio loans, compared to 2.67% at September 30, 2010, and 3.72% at December 31, 2009. Nonperforming assets at December 31, 2010, totaled $1.3 billion and represented 2.66% of portfolio loans and OREO and other nonperforming assets, compared to 3.48% at September 30, 2010, and 4.25% at December 31, 2009. 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   4Q10     3Q10     2Q10     1Q10     4Q09  
 
Commercial, financial and agricultural
  $ 242     $ 335     $ 489     $ 558     $ 586  
Real estate — commercial mortgage
    255       362       404       579       614  
Real estate — construction
    241       333       473       607       641  
Commercial lease financing
    64       84       83       99       113  
Total consumer loans
    266       258       254       222       233  
 
                             
Total nonperforming loans
    1,068       1,372       1,703       2,065       2,187  
Nonperforming loans held for sale
    106       230       221       195       116  
OREO and other nonperforming assets
    164       199       162       168       207  
 
                             
Total nonperforming assets
  $ 1,338     $ 1,801     $ 2,086     $ 2,428     $ 2,510  
 
                             
 
                                       
Restructured loans — accruing and nonaccruing (a)
  $ 297     $ 360     $ 343     $ 323     $ 364  
Restructured loans included in nonperforming loans (a)
    202       228       213       226       364  
Nonperforming assets from discontinued operations — education lending business
    40       38       40       43       14  
Nonperforming loans to period-end portfolio loans
    2.13 %     2.67 %     3.19 %     3.69 %     3.72 %
Nonperforming assets to period-end portfolio loans, plus OREO and other nonperforming assets
    2.66       3.48       3.88       4.31       4.25  
 
(a)   Restructured loans (i.e. troubled debt restructurings) are those for which Key, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. These concessions are made to improve the collectability of the loan and generally take the form of a reduction of the interest rate, extension of the maturity date or reduction in the principal balance.

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 7
     Nonperforming assets continued to decrease during the fourth quarter of 2010, representing the fifth consecutive quarterly decline and now stand at their lowest level since the third quarter of 2008. Most of the reduction during the fourth quarter came from nonperforming loans in the commercial, financial and agricultural, the real estate — commercial mortgage, and the real estate — construction portfolios. As shown in the following table, Key’s exit loan portfolio accounted for $210 million, or 15.70%, of Key’s total nonperforming assets at December 31, 2010, compared to $290 million, or 16.10%, at September 30, 2010.
     The following table shows the composition of Key’s exit loan portfolio at December 31, 2010, and September 30, 2010, the net charge-offs recorded on this portfolio for the third and fourth quarters of 2010, and the nonperforming status of these loans at December 31, 2010, and September 30, 2010.
Exit Loan Portfolio from Continuing Operations
                                                         
                       
  Balance     Change     Net Loan     Balance on  
  Outstanding     12-31-10 vs.     Charge-offs     Nonperforming Status  
in millions   12-31-10     9-30-10     9-30-10     4Q10     3Q10     12-31-10     9-30-10  
 
Residential properties — homebuilder
  $ 113     $ 148     $ (35 )   $ 16     $ 23     $ 66     $ 94  
Residential properties — held for sale
          8       (8 )                       8  
 
                                         
Total residential properties
    113       156       (43 )     16       23       66       102  
Marine and RV floor plan
    166       225       (59 )     12       7       37       42  
Commercial lease financing (a)
    2,047       2,231       (184 )     20       47       46       88  
 
                                         
Total commercial loans
    2,326       2,612       (286 )     48       77       149       232  
Home equity — Other
    666       707       (41 )     13       13       18       16  
Marine
    2,234       2,355       (121 )     17       12       42       41  
RV and other consumer
    162       172       (10 )     3       3       1       1  
 
                                         
Total consumer loans
    3,062       3,234       (172 )     33       28       61       58  
 
                                         
Total exit loans in loan portfolio
  $ 5,388     $ 5,846     $ (458 )   $ 81     $ 105     $ 210     $ 290  
 
                                         
                                                       
Discontinued operations — education lending business (not included in exit loans above) (b)
  $ 6,466     $ 6,651     $ (185 )   $ 32     $ 22     $ 39     $ 38  
 
(a)   Includes the business aviation, commercial vehicle, office products, construction and industrial leases, and Canadian lease financing portfolios; and all remaining balances related to lease in, lease out; sale in, sale out; service contract leases; and qualified technological equipment leases.
 
(b)   Includes loans in Key’s education loan securitization trusts consolidated upon the adoption of new consolidation accounting guidance on January 1, 2010.
CAPITAL
     Key’s risk-based capital ratios included in the following table continued to exceed all “well-capitalized” regulatory benchmarks at December 31, 2010.
Capital Ratios
                                         
    12-31-10     9-30-10     6-30-10     3-31-10     12-31-09  
 
Tier 1 common equity (a), (b)
    9.31 %     8.61 %     8.07 %     7.51 %     7.50 %
Tier 1 risk-based capital (a)
    15.10       14.30       13.62       12.92       12.75  
Total risk-based capital (a)
    19.05       18.22       17.80       17.07       16.95  
Tangible common equity to tangible assets (b)
    8.19       8.00       7.65       7.37       7.56  
 
(a)   12-31-10 ratio is estimated.
 
(b)   The table entitled “GAAP to Non-GAAP Reconciliations” presents the computations of certain financial measures related to “tangible common equity” and “Tier 1 common equity.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.
     As shown in the preceding table, at December 31, 2010, Key had an estimated Tier 1 common equity ratio of 9.31%, an estimated Tier 1 risk-based capital ratio of 15.10%, and a tangible common equity ratio of 8.19%. Since December 31, 2009, Key’s Tier 1 common

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 8
equity ratio has increased 181 basis points as a result of returning to profitability and a lower level of risk-weighted assets.
     The changes in Key’s outstanding common shares over the past five quarters are summarized in the following table.
Summary of Changes in Common Shares Outstanding
                                         
in thousands   4Q10     3Q10     2Q10     1Q10     4Q09  
 
Shares outstanding at beginning of period
    880,328       880,515       879,052       878,535       878,559  
Shares reissued (returned) under employee benefit plans
    280       (187 )     1,463       517       (24 )
 
                             
Shares outstanding at end of period
    880,608       880,328       880,515       879,052       878,535  
 
                             
     During the fourth quarter of 2010, Key made a $31 million cash dividend payment to the U.S. Treasury Department as a participant in the U.S. Treasury’s Capital Purchase Program. During 2010 and 2009, Key made four quarterly dividend payments aggregating $125 million each year to the U.S. Treasury Department.
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.” During the first quarter of 2010, Key realigned its reporting structure for its business groups. Prior to 2010, Consumer Finance consisted mainly of portfolios that were identified as exit or run-off portfolios and were included in the Key Corporate Bank segment (previously known as Key National Banking). Effective for all periods presented, Key is reflecting the results of these exit portfolios in Other Segments. The automobile dealer floor plan business, previously included in Consumer Finance, has been realigned with the Commercial Banking line of business within the Key Community Bank segment. In addition, other previously identified exit portfolios included in the Key Corporate Bank segment have been moved to Other Segments. 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 4Q10 vs.  
dollars in millions   4Q10     3Q10     4Q09     3Q10     4Q09  
 
Revenue from continuing operations (TE)
                                       
Key Community Bank
  $ 601     $ 601     $ 627             (4.1 )%
Key Corporate Bank
    464       430       340       7.9 %     36.5  
Other Segments
    78       103       130       (24.3 )     (40.0 )
 
                             
Total Segments
    1,143       1,134       1,097       .8       4.2  
Reconciling Items
    18       (1 )     9       N/M       100.0  
 
                             
Total
  $ 1,161     $ 1,133     $ 1,106       2.5 %     5.0 %
 
                                 
                                       
Income (loss) from continuing operations
                                       
attributable to Key
                                       
Key Community Bank
  $ 61     $ 57     $ (40 )     7.0 %     N/M  
Key Corporate Bank
    302       130       (213 )     132.3       N/M  
Other Segments
    (13 )     19       (57 )     (168.4 )     N/M  
 
                             
Total Segments
    350       206       (310 )     69.9       N/M  
Reconciling Items
    (17 )     (2 )     93       N/M       (118.3 )%
 
                             
Total
  $ 333     $ 204     $ (217 )     63.2 %     N/M  
 
                                 
 
TE = Taxable Equivalent, N/M = Not Meaningful

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 9
Key Community Bank
                                         
                            Percent change 4Q10 vs.  
dollars in millions   4Q10     3Q10     4Q09     3Q10     4Q09  
 
Summary of operations
                                       
Net interest income (TE)
  $ 395     $ 404     $ 429       (2.2) %     (7.9 )%
Noninterest income
    206       197       198       4.6       4.0  
 
                             
Total revenue (TE)
    601       601       627             (4.1 )
Provision for loan losses
    74       75       230       (1.3 )     (67.8 )
Noninterest expense
    456       458       489       (.4 )     (6.7 )%
 
                             
Income (loss) before income taxes (TE)
    71       68       (92 )     4.4       N/M  
Allocated income taxes and TE adjustments
    10       11       (52 )     (9.1 )     N/M  
 
                             
Net income (loss) attributable to Key
  $ 61     $ 57     $ (40 )     7.0 %     N/M  
 
                                 
 
                                       
Average balances
                                       
Loans and leases
  $ 26,437     $ 26,779     $ 28,321       (1.3) %     (6.7 )%
Total assets
    29,822       30,004       31,048       (.6 )     (3.9 )
Deposits
    48,143       48,703       52,640       (1.1 )     (8.5 )
 
                                       
Assets under management at period end
  $ 18,788     $ 17,816     $ 17,709       5.5 %     6.1 %
 
                                       
 
TE = Taxable Equivalent, N/M = Not Meaningful
                                         
Additional Key Community Bank Data                           Percent change 4Q10 vs.  
dollars in millions   4Q10     3Q10     4Q09     3Q10     4Q09  
 
Average deposits outstanding
                                       
NOW and money market deposit accounts
  $ 20,513     $ 20,124     $ 17,931       1.9 %     14.4 %
Savings deposits
    1,863       1,872       1,784       (.5 )     4.4  
Certificates of deposit ($100,000 or more)
    4,885       5,449       8,165       (10.4 )     (40.2 )
Other time deposits
    8,638       9,596       13,708       (10.0 )     (37.0 )
Deposits in foreign office
    421       368       529       14.4       (20.4 )
Noninterest-bearing deposits
    11,823       11,294       10,523       4.7       12.4  
 
                             
Total deposits
  $ 48,143     $ 48,703     $ 52,640       (1.1) %     (8.5 )%
 
                                 
 
                                       
   
Home equity loans
                                       
Average balance
  $ 9,582     $ 9,709     $ 10,101                  
Weighted-average loan-to-value ratio (at date of origination)
    70 %     70 %     70 %                
Percent first lien positions
    53       52       53                  
   
Other data
                                       
Branches
    1,033       1,029       1,007                  
Automated teller machines
    1,531       1,522       1,495                  
   
Key Community Bank Summary of Operations
     Key Community Bank recorded net income attributable to Key of $61 million for the fourth quarter of 2010, compared to a net loss attributable to Key of $40 million for the year-ago quarter. A substantial decrease in the provision for loan losses was the main contributor to the improvement in the fourth quarter of 2010.
     Taxable-equivalent net interest income declined by $34 million, or 8%, from the fourth quarter of 2009, due primarily to a decline in average deposits of $4 billion, or 9%. The mix of deposits continues to change from the year-ago quarter as higher-costing certificates of deposit originated in prior years mature, partially offset by growth in noninterest-bearing deposits and NOW and money market savings accounts. Average earning assets also decreased by $2 billion, or 7%, from the year-ago quarter.
     Noninterest income increased by $8 million, or 4%, from the year-ago quarter, due to higher income from mortgage loan sale gains, electronic banking fees, trust and investment services, and a reduction in the provision for credit losses from client derivatives. These factors were partially offset by the anticipated lower service charges on deposits from the implementation of Regulation E which was consistent with Key’s expectations.
     The provision for loan losses declined by $156 million, or 68%, compared to the fourth quarter of 2009 due to improving economic conditions resulting in lower net charge-offs and nonperforming loans from the same period one year ago.

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 10
     Noninterest expense declined by $33 million, or 7%, from the year-ago quarter. The decrease was driven by reductions in personnel expense, the provision for losses on lending-related commitments, FDIC deposit insurance premiums, and corporate allocated costs. These improvements were partially offset by increased business services and professional fees, reflecting the cost of our third-party mortgage operations.
Key Corporate Bank
                                         
                            Percent change 4Q10 vs.  
dollars in millions   4Q10     3Q10     4Q09     3Q10     4Q09  
 
Summary of operations
                                       
Net interest income (TE)
  $ 206     $ 201     $ 208       2.5 %     (1.0 )%
Noninterest income
    258       229       132       12.7       95.5  
 
                             
Total revenue (TE)
    464       430       340       7.9       36.5  
Provision for loan losses
    (263 )     (25 )     382       N/M       (168.8 )
Noninterest expense
    249       248       300       .4       (17.0 )
 
                             
Income (loss) before income taxes (TE)
    478       207       (342 )     130.9       N/M  
Allocated income taxes and TE adjustments
    177       77       (130 )     129.9       N/M  
 
                             
Net income (loss)
    301       130       (212 )     131.5       N/M  
Less: Net income (loss) attributable to noncontrolling interests
    (1 )           1       N/M       (200.0 )%
 
                             
Net income (loss) attributable to Key
  $ 302     $ 130     $ (213 )     132.3 %     N/M  
 
                                 
                                       
Average balances
                                       
Loans and leases
  $ 18,601     $ 19,534     $ 24,011       (4.8) %     (22.5 )%
Loans held for sale
    253       380       431       (33.4 )     (41.3 )
Total assets
    22,602       23,765       28,253       (4.9 )     (20.0 )
Deposits
    12,961       11,779       13,257       10.0       (2.2 )
                                       
Assets under management at period end
  $ 41,027     $ 41,902     $ 49,230       (2.1) %     (16.7 )%
 
TE = Taxable Equivalent, N/M = Not Meaningful
Key Corporate Bank Summary of Operations
     Key Corporate Bank recorded net income attributable to Key of $302 million for the fourth quarter of 2010, compared to a net loss attributable to Key of $213 million for the same period one year ago. This improvement in the fourth quarter of 2010 was a result of a substantial decrease in the provision for loan losses.
     Taxable-equivalent net interest income decreased by $2 million, or 1%, compared to the fourth quarter of 2009, primarily due to lower earning assets, partially offset by improved earning asset yields and an increase in loan-related interest fees. Average earning assets decreased by $5 billion, or 23%, from the year-ago quarter.
     Noninterest income increased by $126 million, or 95%, from the fourth quarter of 2009. Investment banking and capital markets income increased $104 million. The fourth quarter of 2009 included a $78 million charge related to changes in the fair values of certain real estate investments compared to a charge of $1 million in the fourth quarter of 2010. Also contributing to the improvement in noninterest income was the $28 million gain from the sale of Tuition Management Systems and an increase of $17 million in net gains from loan sales. These gains were partially offset by decreases in trust and investment services income of $13 million and operating lease revenue of $6 million.
     The provision for loan losses in the fourth quarter of 2010 was a credit of $263 million compared to a charge of $382 million for the same period one year ago. Key Corporate Bank continued to experience improved asset quality for the fifth quarter in a row.
     Noninterest expense decreased by $51 million, or 17%, from the fourth quarter of 2009 as a result of a credit of $18 million to the provision for losses on lending- related commitments compared to a charge of $14 million in the year-ago quarter. OREO expense and operating

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 11
lease expense also declined from the fourth quarter of 2009. These improvements were partially offset by an increase in various other miscellaneous expenses.
Other Segments
     Other Segments consist of Corporate Treasury, Key’s Principal Investing unit and various exit portfolios that previously were included within the Key Corporate Bank segment. These exit portfolios were moved to Other Segments during the first quarter of 2010. Prior periods have been adjusted to conform to the current reporting of the financial information for each segment. Other Segments generated a net loss attributable to Key of $13 million for the fourth quarter of 2010, compared to a net loss attributable to Key of $57 million for the same period last year. These results reflect net losses from principal investing (including results attributable to noncontrolling interests) of $5 million compared to net gains from principal investing (including results attributable to noncontrolling interests) of $80 million in the fourth quarter of 2009. This decline was partially offset by a decrease in the provision for loan losses of $43 million.
Line of Business Descriptions
Key Community Bank
Regional Banking provides individuals with branch-based deposit and investment products, personal finance services and loans, including residential mortgages, home equity and various types of installment loans. This line of business also provides small businesses with deposit, investment and credit products, and business advisory services.
Regional Banking also offers financial, estate and retirement planning, and asset management services to assist high-net-worth clients with their banking, trust, portfolio management, insurance, charitable giving and related needs.
Commercial Banking provides midsize businesses with products and services that include commercial lending, cash management, equipment leasing, investment and employee benefit programs, succession planning, access to capital markets, derivatives and foreign exchange.
Key Corporate Bank
Real Estate Capital and Corporate Banking Services consists of two business units, Real Estate Capital and Corporate Banking Services.
Real Estate Capital is a national business that provides construction and interim lending, permanent debt placements and servicing, equity and investment banking, and other commercial banking products and services to developers, brokers and owner-investors. This unit deals primarily with nonowner-occupied properties (i.e., generally properties in which at least 50% of the debt service is provided by rental income from nonaffiliated third parties). Real Estate Capital emphasizes providing clients with finance solutions through access to the capital markets.
Corporate Banking Services provides cash management, interest rate derivatives, and foreign exchange products and services to clients served by both the Key Community Bank and Key Corporate Bank groups. Through its Public Sector and Financial Institutions businesses, Corporate Banking Services also provides a full array of commercial banking products and services to government and not-for-profit entities and community banks. A variety of cash management services are provided through the Global Treasury Management unit.

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 12
Equipment Finance meets the equipment leasing needs of companies worldwide and provides equipment manufacturers, distributors and resellers with financing options for their clients. Lease financing receivables and related revenues are assigned to other lines of business (primarily Institutional and Capital Markets and Commercial Banking) if those businesses are principally responsible for maintaining the relationship with the client.
Institutional and Capital Markets, through its KeyBanc Capital Markets unit, provides commercial lending, treasury management, investment banking, derivatives, foreign exchange, equity and debt underwriting and trading, and syndicated finance products and services to large corporations and middle-market companies.
Institutional and Capital Markets, through its Victory Capital Management unit, also manages or offers advice regarding investment portfolios for a national client base, including corporations, labor unions, not-for-profit organizations, governments and individuals. These portfolios may be managed in separate accounts, common funds or the Victory family of mutual funds.
     Cleveland-based KeyCorp (NYSE: KEY) is one of the nation’s largest bank-based financial services companies, with assets of approximately $92 billion at December 31, 2010. Key companies provide investment management, retail and commercial banking, and investment banking products and services to individuals and companies throughout the United States and, for certain businesses, internationally. In 2010, KeyBank scored significantly higher than its four largest competitor banks in a customer satisfaction survey conducted by the American Customer Satisfaction Index, scoring significantly better than bank industry scores across multiple dimensions, most notably Customer Loyalty. In 2009, KeyBank was awarded its seventh consecutive “Outstanding” rating for economic development achievements under the Community Reinvestment Act, the only national bank among the 50 largest in the United States to achieve this distinction from the Office of the Comptroller of the Currency. Key also has been recognized for excellence in numerous areas of the multi-channel customer banking experience, including Corporate Insight’s 2009 and 2010 editions of Bank Monitor for online service. For more information about Key, visit https://www.key.com/.

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 13
Notes to Editors:
A live Internet broadcast of KeyCorp’s conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts’ questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on Tuesday, January 25, 2011. An audio replay of the call will be available through February 1, 2011.
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 Annual Report on Form 10-K for the year ended December 31, 2009 and Quarterly Reports on Form 10-Q for the periods ended March 31, 2010, June 30, 2010, and September 30, 2010, which have been filed with the Securities and Exchange Commission and are 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.
*****

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 14
Financial Highlights
(dollars in millions, except per share amounts)
                         
    Three months ended  
    12-31-10     9-30-10     12-31-09  
Summary of operations
                       
Net interest income (TE)
  $ 635     $ 647     $ 637  
Noninterest income
    526       486       469  
 
                 
Total revenue (TE)
    1,161       1,133       1,106  
Provision for loan losses
    (97 )     94       756  
Noninterest expense
    744       736       871  
Income (loss) from continuing operations attributable to Key
    333       204       (217 )
Income (loss) from discontinued operations, net of taxes (b)
    (13 )     15       (7 )
Net income (loss) attributable to Key
    320       219       (224 )
 
                       
Income (loss) from continuing operations attributable to Key common shareholders
  $ 292     $ 163     $ (258 )
Income (loss) from discontinued operations, net of taxes (b)
    (13 )     15       (7 )
Net income (loss) attributable to Key common shareholders
    279       178       (265 )
 
                       
Per common share
                       
Income (loss) from continuing operations attributable to Key common shareholders
  $ .33     $ .19     $ (.30 )
Income (loss) from discontinued operations, net of taxes (b)
    (.02 )     .02       (.01 )
Net income (loss) attributable to Key common shareholders
    .32       .20       (.30 )
 
                       
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution
    .33       .19       (.30 )
Income (loss) from discontinued operations, net of taxes — assuming dilution (b)
    (.02 )     .02       (.01 )
Net income (loss) attributable to Key common shareholders — assuming dilution
    .32       .20       (.30 )
 
                       
Cash dividends paid
    .01       .01       .01  
Book value at period end
    9.52       9.54       9.04  
Tangible book value at period end
    8.45       8.46       7.94  
Market price at period end
    8.85       7.96       5.55  
 
                       
Performance ratios
                       
From continuing operations:
                       
Return on average total assets
    1.53 %     .93 %     (.94 )%
Return on average common equity
    13.71       7.82       (12.60 )
Net interest margin (TE)
    3.31       3.35       3.04  
 
                       
From consolidated operations:
                       
Return on average total assets
    1.36 %     .93 %     (.93 )%
Return on average common equity
    13.10       8.54       (12.94 )
Net interest margin (TE)
    3.22       3.26       3.00  
Loan to deposit (d)
    90.30       91.80       97.30  
 
                       
Capital ratios at period end
                       
Key shareholders’ equity to assets
    12.10 %     11.84 %     11.43 %
Tangible Key shareholders’ equity to tangible assets
    11.20       10.93       10.50  
Tangible common equity to tangible assets (a)
    8.19       8.00       7.56  
Tier 1 common equity (a), (c)
    9.31       8.61       7.50  
Tier 1 risk-based capital (c)
    15.10       14.30       12.75  
Total risk-based capital (c)
    19.05       18.22       16.95  
Leverage (c)
    12.92       12.53       11.72  
 
                       
Asset quality — from continuing operations
                       
Net loan charge-offs
  $ 256     $ 357     $ 708  
Net loan charge-offs to average loans
    2.00 %     2.69 %     4.64 %
Allowance for loan losses
  $ 1,604     $ 1,957     $ 2,534  
Allowance for credit losses
    1,677       2,056       2,655  
Allowance for loan losses to period-end loans
    3.20 %     3.81 %     4.31 %
Allowance for credit losses to period-end loans
    3.35       4.00       4.52  
Allowance for loan losses to nonperforming loans
    150.19       142.64       115.87  
Allowance for credit losses to nonperforming loans
    157.02       149.85       121.40  
Nonperforming loans at period end
  $ 1,068     $ 1,372     $ 2,187  
Nonperforming assets at period end
    1,338       1,801       2,510  
Nonperforming loans to period-end portfolio loans
    2.13 %     2.67 %     3.72 %
Nonperforming assets to period-end portfolio loans plus
                       
OREO and other nonperforming assets
    2.66       3.48       4.25  
 
                       
Trust and brokerage assets
                       
Assets under management
  $ 59,815     $ 59,718     $ 66,939  
Nonmanaged and brokerage assets
    28,069       26,913       27,190  
 
                       
Other data
                       
Average full-time equivalent employees
    15,424       15,584       15,973  
Branches
    1,033       1,029       1,007  
 
                       
Taxable-equivalent adjustment
  $ 6     $ 7     $ 7  

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 15
Financial Highlights (continued)
(dollars in millions, except per share amounts)
                 
    Twelve months ended  
    12-31-10     12-31-09  
Summary of operations
               
Net interest income (TE)
  $ 2,537     $ 2,406  
Noninterest income
    1,954       2,035  
 
           
Total revenue (TE)
    4,491       4,441  
Provision for loan losses
    638       3,159  
Noninterest expense
    3,034       3,554  
Income (loss) from continuing operations attributable to Key
    577       (1,287 )
Income (loss) from discontinued operations, net of taxes (b)
    (23 )     (48 )
Net income (loss) attributable to Key
    554       (1,335 )
 
               
Income (loss) from continuing operations attributable to Key common shareholders
  $ 413     $ (1,581 )
Income (loss) from discontinued operations, net of taxes (b)
    (23 )     (48 )
Net income (loss) attributable to Key common shareholders
    390       (1,629 )
 
               
Per common share
               
Income (loss) from continuing operations attributable to Key common shareholders
  $ .47     $ (2.27 )
Income (loss) from discontinued operations, net of taxes (b)
    (.03 )     (.07 )
Net income (loss) attributable to Key common shareholders
    .45       (2.34 )
 
               
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution
    .47       (2.27 )
Income (loss) from discontinued operations, net of taxes — assuming dilution (b)
    (.03 )     (.07 )
Net income (loss) attributable to Key common shareholders — assuming dilution
    .44       (2.34 )
 
               
Cash dividends paid
    .04       .0925  
 
               
Performance ratios
               
From continuing operations:
               
Return on average total assets
    .66 %     (1.35) %
Return on average common equity
    5.06       (19.00 )
Net interest margin (TE)
    3.26       2.83  
 
               
From consolidated operations:
               
Return on average total assets
    .59 %     (1.34) %
Return on average common equity
    4.78       (19.62 )
Net interest margin (TE)
    3.16       2.81  
 
               
Asset quality — from continuing operations
               
Net loan charge-offs
  $ 1,570     $ 2,257  
Net loan charge-offs to average loans
    2.91 %     3.40 %
 
               
Other data
               
Average full-time equivalent employees
    15,610       16,698  
 
               
Taxable-equivalent adjustment
  $ 26     $ 26  
 
(a)   The following table entitled “GAAP to Non-GAAP Reconciliations” presents the computations of certain financial measures related to “tangible common equity” and “Tier 1 common equity.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.
 
(b)   In September 2009, management 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)   12-31-10 ratio is estimated.
 
(d)   Ending balances; loans & loans held for sale (excluding securitized loans) to deposits (excluding foreign branch).
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 16
GAAP to Non-GAAP Reconciliations
(dollars in millions, except per share amounts)
The table below presents the computations of certain financial measures related to “tangible common equity” 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 noncontrolling interests in subsidiaries) generally should be the dominant element in Tier 1 capital, such a focus is consistent with existing capital adequacy guidelines and does not imply a new or ongoing capital standard.
Because 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.
The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of provision for loan losses facilitates the analysis of results by presenting them on a more comparable basis.
Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. To mitigate these limitations, Key has procedures in place to ensure that these measures are calculated using the appropriate GAAP or regulatory components and to ensure that Key’s performance is properly reflected to facilitate period-to-period comparisons. Although these non-GAAP financial measures are frequently used by investors 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  
  12-31-10     9-30-10     12-31-09  
Tangible common equity to tangible assets at period end
                       
Key shareholders’ equity (GAAP)
  $ 11,117     $ 11,134     $ 10,663  
Less: Intangible assets
    938       956       967  
Preferred Stock, Series B
    2,446       2,442       2,430  
Preferred Stock, Series A
    291       291       291  
 
                 
Tangible common equity (non-GAAP)
  $ 7,442     $ 7,445     $ 6,975  
 
                 
Total assets (GAAP)
  $ 91,843     $ 94,043     $ 93,287  
Less: Intangible assets
    938       956       967  
 
                 
Tangible assets (non-GAAP)
  $ 90,905     $ 93,087     $ 92,320  
 
                 
Tangible common equity to tangible assets ratio (non-GAAP)
    8.19 %     8.00 %     7.56 %
 
                       
Tier 1 common equity at period end
                       
Key shareholders’ equity (GAAP)
  $ 11,117     $ 11,134     $ 10,663  
Qualifying capital securities
    1,791       1,791       1,791  
Less: Goodwill
    917       917       917  
Accumulated other comprehensive income (loss) (a)
    (67 )     247       (48 )
Other assets (b)
    247       383       632  
 
                 
Total Tier 1 capital (regulatory)
    11,811       11,378       10,953  
Less: Qualifying capital securities
    1,791       1,791       1,791  
Preferred Stock, Series B
    2,446       2,442       2,430  
Preferred Stock, Series A
    291       291       291  
 
                 
Total Tier 1 common equity (non-GAAP)
  $ 7,283     $ 6,854     $ 6,441  
 
                 
Net risk-weighted assets (regulatory) (b), (c)
  $ 78,224     $ 79,572     $ 85,881  
 
                       
Tier 1 common equity ratio (non-GAAP) (c)
    9.31 %     8.61 %     7.50 %
 
                       
Pre-provision net revenue
                       
Net interest income (GAAP)
  $ 629     $ 640     $ 630  
Plus: Taxable-equivalent adjustment
    6       7       7  
Noninterest income
    526       486       469  
Less: Noninterest expense
    744       736       871  
 
                 
Pre-provision net revenue from continuing operations (non-GAAP)
  $ 417     $ 397     $ 235  
 
                 
 
(a)   Includes net unrealized gains or losses on securities available for sale (except for net unrealized losses on marketable equity securities), net gains or losses on cash flow hedges, and amounts resulting from the December 31, 2006, adoption and subsequent application of the applicable accounting guidance for defined benefit and other postretirement plans.
 
(b)   Other assets deducted from Tier 1 capital and net risk-weighted assets consist of disallowed deferred tax assets of $158 million at December 31, 2010, $277 million at September 30, 2010 and $514 million at December 31, 2009, disallowed intangible assets (excluding goodwill) and deductible portions of nonfinancial equity investments.
 
(c)   12-31-10 amount is estimated.
GAAP = U.S. generally accepted accounting principles

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 17
Consolidated Balance Sheets
(dollars in millions)
                         
    12-31-10     9-30-10     12-31-09  
Assets
                       
Loans
  $ 50,107     $ 51,354     $ 58,770  
Loans held for sale
    467       637       443  
Securities available for sale
    21,933       21,241       16,641  
Held-to-maturity securities
    17       18       24  
Trading account assets
    985       1,155       1,209  
Short-term investments
    1,344       1,871       1,743  
Other investments
    1,358       1,405       1,488  
 
                 
Total earning assets
    76,211       77,681       80,318  
Allowance for loan losses
    (1,604 )     (1,957 )     (2,534 )
Cash and due from banks
    278       823       471  
Premises and equipment
    908       888       880  
Operating lease assets
    509       563       716  
Goodwill
    917       917       917  
Other intangible assets
    21       39       50  
Corporate-owned life insurance
    3,167       3,145       3,071  
Derivative assets
    1,006       1,258       1,094  
Accrued income and other assets
    3,876       3,936       4,096  
Discontinued assets
    6,554       6,750       4,208  
 
                 
Total assets
  $ 91,843     $ 94,043     $ 93,287  
 
                 
 
                       
Liabilities
                       
Deposits in domestic offices:
                       
NOW and money market deposit accounts
  $ 27,066     $ 26,350     $ 24,341  
Savings deposits
    1,879       1,856       1,807  
Certificates of deposit ($100,000 or more)
    5,862       6,850       10,954  
Other time deposits
    8,245       9,014       13,286  
 
                 
Total interest-bearing deposits
    43,052       44,070       50,388  
Noninterest-bearing deposits
    16,653       16,275       14,415  
Deposits in foreign office — interest-bearing
    905       1,073       768  
 
                 
Total deposits
    60,610       61,418       65,571  
Federal funds purchased and securities sold under repurchase agreements
    2,045       2,793       1,742  
Bank notes and other short-term borrowings
    1,151       685       340  
Derivative liabilities
    1,142       1,330       1,012  
Accrued expense and other liabilities
    1,931       1,862       2,007  
Long-term debt
    10,592       11,443       11,558  
Discontinued liabilities
    2,998       3,124       124  
 
                 
Total liabilities
    80,469       82,655       82,354  
 
                       
Equity
                       
Preferred stock, Series A
    291       291       291  
Preferred stock, Series B
    2,446       2,442       2,430  
Common shares
    946       946       946  
Common stock warrant
    87       87       87  
Capital surplus
    3,711       3,710       3,734  
Retained earnings
    5,557       5,287       5,158  
Treasury stock, at cost
    (1,904 )     (1,914 )     (1,980 )
Accumulated other comprehensive income (loss)
    (17 )     285       (3 )
 
                 
Key shareholders’ equity
    11,117       11,134       10,663  
Noncontrolling interests
    257       254       270  
 
                 
Total equity
    11,374       11,388       10,933  
 
                 
Total liabilities and equity
  $ 91,843     $ 94,043     $ 93,287  
 
                 
 
                       
Common shares outstanding (000)
    880,608       880,328       878,535  

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 18
Consolidated Statements of Income
(dollars in millions, except per share amounts)
                                         
           
    Three months ended     Twelve months ended  
  12-31-10     9-30-10     12-31-09     12-31-10   12-31-09  
Interest income
                                       
Loans
  $ 617     $ 649     $ 749     $ 2,653     $ 3,194  
Loans held for sale
    4       4       6       17       29  
Securities available for sale
    170       170       150       644       460  
Held-to-maturity securities
          1             2       2  
Trading account assets
    8       8       12       37       47  
Short-term investments
    1       1       3       6       12  
Other investments
    11       11       13       49       51  
 
                             
Total interest income
    811       844       933       3,408       3,795  
 
                                       
                                       
Interest expense
                                       
Deposits
    124       147       246       671       1,119  
Federal funds purchased and securities sold under repurchase agreements
    2       1       1       6       5  
Bank notes and other short-term borrowings
    3       4       3       14       16  
Long-term debt
    53       52       53       206       275  
 
                             
Total interest expense
    182       204       303       897       1,415  
 
                                       
 
                             
Net interest income
    629       640       630       2,511       2,380  
Provision for loan losses
    (97 )     94       756       638       3,159  
 
                             
Net interest income (expense) after provision for loan losses
    726       546       (126 )     1,873       (779 )
                                       
 
                                       
Noninterest income
                                       
Trust and investment services income
    108       110       117       444       459  
Service charges on deposit accounts
    70       75       82       301       330  
Operating lease income
    42       41       52       173       227  
Letter of credit and loan fees
    51       61       52       194       180  
Corporate-owned life insurance income
    42       39       36       137       114  
Net securities gains (losses) (a)
    12       1       1       14       113  
Electronic banking fees
    31       30       27       117       105  
Gains on leased equipment
    6       4       15       20       99  
Insurance income
    12       15       16       64       68  
Net gains (losses) from loan sales
    29       18       (5 )     76       (1 )
Net gains (losses) from principal investing
    (6 )     18       80       66       (4 )
Investment banking and capital markets income (loss)
    63       42       (47 )     145       (42 )
Gain from sale/redemption of Visa Inc. shares
                            105  
Gain (loss) related to exchange of common shares for capital securities
                            78  
Other income
    66       32       43       203       204  
 
                             
Total noninterest income
    526       486       469       1,954       2,035  
                                       
 
                                       
Noninterest expense
                                       
Personnel
    365       359       400       1,471       1,514  
Net occupancy
    70       70       67       270       259  
Operating lease expense
    28       40       50       142       195  
Computer processing
    45       46       49       185       192  
Business services and professional fees
    56       41       63       176       184  
FDIC assessment
    27       27       37       124       177  
OREO expense, net
    10       4       25       68       97  
Equipment
    26       24       25       100       96  
Marketing
    22       21       22       72       72  
Provision (credit) for losses on lending-related commitments
    (26 )     (10 )     27       (48 )     67  
Intangible assets impairment
                            241  
Other expense
    121       114       106       474       460  
 
                             
Total noninterest expense
    744       736       871       3,034       3,554  
 
                             
Income (loss) from continuing operations before income taxes
    508       296       (528 )     793       (2,298 )
Income taxes
    172       85       (347 )     186       (1,035 )
 
                             
Income (loss) from continuing operations
    336       211       (181 )     607       (1,263 )
Income (loss) from discontinued operations, net of taxes
    (13 )     15       (7 )     (23 )     (48 )
 
                             
Net income (loss)
    323       226       (188 )     584       (1,311 )
Less: Net income (loss) attributable to noncontrolling interests
    3       7       36       30       24  
 
                             
Net income (loss) attributable to Key
  $ 320     $ 219     $ (224 )   $ 554     $ (1,335 )
 
                             
Income (loss) from continuing operations attributable to Key common shareholders
  $ 292     $ 163     $ (258 )   $ 413     $ (1,581 )
Net income (loss) attributable to Key common shareholders
    279       178       (265 )     390       (1,629 )
 
                                       
Per common share
                                       
Income (loss) from continuing operations attributable to Key common shareholders
  $ .33     $ .19     $ (.30 )   $ .47     $ (2.27 )
Income (loss) from discontinued operations, net of taxes
    (.02 )     .02       (.01 )     (.03 )     (.07 )
Net income (loss) attributable to Key common shareholders
    .32       .20       (.30 )     .45       (2.34 )
 
                                       
Per common share — assuming dilution
                                       
Income (loss) from continuing operations attributable to Key common shareholders
  $ .33     $ .19     $ (.30 )   $ .47     $ (2.27 )
Income (loss) from discontinued operations, net of taxes
    (.02 )     .02       (.01 )     (.03 )     (.07 )
Net income (loss) attributable to Key common shareholders
    .32       .20       (.30 )     .44       (2.34 )
                                       
 
                                       
Cash dividends declared per common share
  $ .01     $ .01     $ .01     $ .04     $ .0925  
                                       
 
                                       
Weighted-average common shares outstanding (000)
    875,501       874,433       873,268       874,748       697,155  
Weighted-average common shares and potential common shares outstanding (000) (b)
    900,263       874,433       873,268       878,153       697,155  
 
(a)   For the three months ended December 31, 2010, September 30, 2010 and December 31, 2009, Key did not have any impairment losses related to securities.
 
(b)   Assumes conversion of stock options and/or Preferred Series A shares, as applicable.

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 19
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)
                                                                         
  Fourth Quarter 2010     Third Quarter 2010     Fourth Quarter 2009  
  Average                     Average                     Average              
  Balance     Interest(a)     Yield/Rate(a)     Balance     Interest(a)     Yield/Rate(a)     Balance     Interest(a)     Yield/Rate(a)  
Assets
                                                                       
Loans: (b), (c)
                                                                       
Commercial, financial and agricultural
  $ 16,562     $ 189       4.51 %   $ 16,948     $ 193       4.52 %   $ 19,817     $ 232       4.63 %
Real estate — commercial mortgage
    9,514       117       4.89       9,822       122       4.94       10,853       132       4.84  
Real estate — construction
    2,531       26       4.15       3,165       37       4.58       5,246       62       4.70  
Commercial lease financing
    6,484       82       5.08       6,587       87       5.25       7,598       97       5.10  
 
                                                     
Total commercial loans
    35,091       414       4.69       36,522       439       4.77       43,514       523       4.77  
Real estate — residential mortgage
    1,837       25       5.43       1,843       26       5.59       1,781       26       5.80  
Home equity:
                                                                       
Key Community Bank
    9,583       101       4.16       9,709       102       4.19       10,101       109       4.28  
Other
    686       13       7.58       732       14       7.61       862       16       7.54  
 
                                                     
Total home equity loans
    10,269       114       4.39       10,441       116       4.43       10,963       125       4.53  
Consumer other — Key Community Bank
    1,170       30       10.38       1,156       33       11.20       1,185       32       11.06  
Consumer other:
                                                                       
Marine
    2,295       36       6.30       2,423       38       6.25       2,866       44       6.16  
Other
    167       3       7.98       181       4       7.95       224       5       7.81  
 
                                                     
Total consumer other
    2,462       39       6.41       2,604       42       6.37       3,090       49       6.28  
 
                                                     
Total consumer loans
    15,738       208       5.27       16,044       217       5.37       17,019       232       5.44  
 
                                                     
Total loans
    50,829       622       4.87       52,566       656       4.95       60,533       755       4.96  
Loans held for sale
    403       4       3.16       501       4       3.48       618       6       3.35  
Securities available for sale (b), (e)
    21,257       171       3.27       20,276       170       3.43       15,937       151       3.82  
Held-to-maturity securities (b)
    17             11.92       19       1       11.05       24             3.34  
Trading account assets
    967       8       3.22       1,074       8       3.03       1,315       12       3.72  
Short-term investments
    2,521       1       .22       1,594       1       .23       3,682       3       .23  
Other investments (e)
    1,400       11       2.86       1,426       11       3.00       1,465       13       3.21  
 
                                                     
Total earning assets
    77,394       817       4.22       77,456       851       4.39       83,574       940       4.47  
Allowance for loan losses
    (1,789 )                     (2,092 )                     (2,525 )                
Accrued income and other assets
    11,025                       11,363                       10,785                  
Discontinued assets — education lending business
    6,674                       6,762                       4,141                  
 
                                                                 
Total assets
  $ 93,304                     $ 93,489                     $ 95,975                  
 
                                                                 
 
                                                                       
                                                                       
Liabilities
                                                                       
NOW and money market deposit accounts
  $ 27,047       21       .30     $ 25,783       23       .35     $ 24,910       25       .39  
Savings deposits
    1,873             .06       1,885             .06       1,801       1       .06  
Certificates of deposit ($100,000 or more) (f)
    6,341       49       3.05       7,635       61       3.12       11,675       103       3.49  
Other time deposits
    8,664       53       2.43       9,648       63       2.59       13,753       117       3.39  
Deposits in foreign office
    1,228       1       .32       958             .37       711             .31  
 
                                                     
Total interest-bearing deposits
    45,153       124       1.09       45,909       147       1.27       52,850       246       1.84  
Federal funds purchased and securities sold under repurchase agreements
    2,236       2       .31       2,300       1       .31       1,657       1       .31  
Bank notes and other short-term borrowings
    480       3       2.77       669       4       2.36       418       3       3.03  
Long-term debt (f)
    7,525       53       3.02       7,308       52       3.08       8,092       53       2.91  
 
                                                     
Total interest-bearing liabilities
    55,394       182       1.31       56,186       204       1.46       63,017       303       1.94  
 
                                                     
Noninterest-bearing deposits
    16,841                       15,949                       14,655                  
Accrued expense and other liabilities
    2,965                       3,344                       3,097                  
Discontinued liabilities — education lending business (d)
    6,674                       6,762                       4,141                  
 
                                                                 
Total liabilities
    81,874                       82,241                       84,910                  
                                                                       
 
                                                                       
Equity
                                                                       
Key shareholders’ equity
    11,183                       10,999                       10,843                  
Noncontrolling interests
    247                       249                       222                  
 
                                                                 
Total equity
    11,430                       11,248                       11,065                  
Total liabilities and equity
  $ 93,304                     $ 93,489                     $ 95,975                  
 
                                                                 
 
                                                                       
Interest rate spread (TE)
                    2.91 %                     2.93 %                     2.53 %
 
                                                                 
 
                                                                       
                                                                       
Net interest income (TE) and net interest margin (TE)
            635       3.31 %             647       3.35 %             637       3.04 %
 
                                                                 
 
                                                                       
TE adjustment (b)
            6                       7                       7          
 
                                                                 
Net interest income, GAAP basis
          $ 629                     $ 640                     $ 630          
 
                                                                 
 
(a)   Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (d) below, calculated using a matched funds transfer pricing methodology.
 
(b)   Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%.
 
(c)   For purposes of these computations, nonaccrual loans are included in average loan balances.
 
(d)   Discontinued liabilities include the liabilities of the education lending business and the dollar amount of any additional liabilities assumed necessary to support the assets associated with this business.
 
(e)   Yield is calculated on the basis of amortized cost.
 
(f)   Rate calculation excludes basis adjustments related to fair value hedges.
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 20
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)
                                                 
    Twelve months ended December 31, 2010     Twelve months ended December 31, 2009  
    Average                     Average              
    Balance     Interest(a)     Yield/Rate(a)     Balance     Interest(a)     Yield/ Rate(a)  
Assets
                                               
Loans: (b), (c)
                                               
Commercial, financial and agricultural
  $ 17,500     $ 813       4.64 %   $ 23,181     $ 1,038       4.48 %
Real estate — commercial mortgage
    10,027       491       4.90       11,310 (d)     557       4.93  
Real estate — construction
    3,495       149       4.26       6,206 (d)     294       4.74  
Commercial lease financing
    6,754       352       5.21       8,220       369       4.48  
 
                                   
Total commercial loans
    37,776       1,805       4.78       48,917       2,258       4.61  
Real estate — residential mortgage
    1,828       102       5.57       1,764       104       5.91  
Home equity:
                                               
Key Community Bank
    9,773       411       4.20       10,214       445       4.36  
Other
    751       57       7.59       945       71       7.50  
 
                                   
Total home equity loans
    10,524       468       4.45       11,159       516       4.63  
Consumer other — Key Community Bank
    1,158       132       11.44       1,202       127       10.62  
Consumer other:
                                               
Marine
    2,497       155       6.23       3,097       193       6.22  
Other
    188       15       7.87       247       20       7.93  
 
                                   
Total consumer other
    2,685       170       6.34       3,344       213       6.35  
 
                                   
Total consumer loans
    16,195       872       5.39       17,469       960       5.50  
 
                                   
Total loans
    53,971       2,677       4.96       66,386       3,218       4.85  
Loans held for sale
    453       17       3.62       650       29       4.37  
Securities available for sale (b), (f)
    18,800       646       3.50       11,169       462       4.19  
Held-to-maturity securities (b)
    20       2       10.56       25       2       8.17  
Trading account assets
    1,068       37       3.47       1,238       47       3.83  
Short-term investments
    2,684       6       .24       4,149       12       .28  
Other investments (f)
    1,442       49       3.08       1,478       51       3.11  
 
                                   
Total earning assets
    78,438       3,434       4.39       85,095       3,821       4.49  
Allowance for loan losses
    (2,207 )                     (2,273 )                
Accrued income and other assets
    11,243                       12,349                  
Discontinued assets — education lending business
    6,677                       4,269                  
 
                                           
 
  $ 94,151                     $ 99,440                  
 
                                           
 
                                               
Liabilities
                                               
NOW and money market deposit accounts
  $ 25,712       91       .35     $ 24,345       124       .51  
Savings deposits
    1,867       1       .06       1,787       2       .07  
Certificates of deposit ($100,000 or more) (g)
    8,486       275       3.24       12,612       462       3.66  
Other time deposits
    10,545       301       2.86       14,535       529       3.64  
Deposits in foreign office
    926       3       .34       802       2       .27  
 
                                   
Total interest-bearing deposits
    47,536       671       1.41       54,081       1,119       2.07  
Federal funds purchased and securities sold under repurchase agreements
    2,044       6       .31       1,618       5       .31  
Bank notes and other short-term borrowings
    545       14       2.63       1,907       16       .84  
Long-term debt (g)
    7,211       206       3.09       9,455       275       3.16  
 
                                   
Total interest-bearing liabilities
    57,336       897       1.58       67,061       1,415       2.13  
 
                                   
Noninterest-bearing deposits
    15,856                       12,964                  
Accrued expense and other liabilities
    3,131                       4,340                  
Discontinued liabilities — education lending business (e)
    6,677                       4,269                  
 
                                           
 
    83,000                       88,634                  
 
                                               
Equity
                                               
Key shareholders’ equity
    10,895                       10,592                  
Noncontrolling interests
    256                       214                  
 
                                           
Total equity
    11,151                       10,806                  
 
                                           
 
                                               
Total liabilities and equity
  $ 94,151                     $ 99,440                  
 
                                           
 
                                               
Interest rate spread (TE)
                    2.81 %                     2.36 %
 
                                           
Net interest income (TE) and net interest margin (TE)
            2,537       3.26 %             2,406       2.83 %
 
                                           
TE adjustment (b)
            26                       26          
 
                                           
Net interest income, GAAP basis
          $ 2,511                     $ 2,380          
 
                                           
 
(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)   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)   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.
 
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 21
Noninterest Income
(in millions)
                                         
    Three months ended     Twelve months ended  
    12-31-10     9-30-10     12-31-09     12-31-10     12-31-09  
Trust and investment services income (a)
  $ 108     $ 110     $ 117     $ 444     $ 459  
Service charges on deposit accounts
    70       75       82       301       330  
Operating lease income
    42       41       52       173       227  
Letter of credit and loan fees
    51       61       52       194       180  
Corporate-owned life insurance income
    42       39       36       137       114  
Net securities gains (losses)
    12       1       1       14       113  
Electronic banking fees
    31       30       27       117       105  
Gains on leased equipment
    6       4       15       20       99  
Insurance income
    12       15       16       64       68  
Net gains (losses) from loan sales
    29       18       (5 )     76       (1 )
Net gains (losses) from principal investing
    (6 )     18       80       66       (4 )
Investment banking and capital markets income (loss) (a)
    63       42       (47 )     145       (42 )
Gain from sale/redemption of Visa Inc. shares
                            105  
Gain (loss) related to exchange of common shares for capital securities
                            78  
Other income:
                                       
Gain from sale of Key’s claim associated with the Lehman Brothers’ Bankruptcy
                            32  
Credit card fees
    2       3       2       11       14  
Miscellaneous income
    64       29       41       192       158  
 
                             
Total other income
    66       32       43       203       204  
 
                             
Total noninterest income
  $ 526     $ 486     $ 469     $ 1,954     $ 2,035  
 
                             
 
(a)   Additional detail provided in tables below.
Trust and Investment Services Income
(in millions)
                                         
    Three months ended     Twelve months ended  
    12-31-10     9-30-10     12-31-09     12-31-10     12-31-09  
Brokerage commissions and fee income
  $ 32     $ 33     $ 31     $ 134     $ 151  
Personal asset management and custody fees
    38       37       37       149       141  
Institutional asset management and custody fees
    38       40       49       161       167  
 
                             
Total trust and investment services income
  $ 108     $ 110     $ 117     $ 444     $ 459  
 
                             
Investment Banking and Capital Markets Income (Loss)
(in millions)
                                         
    Three months ended     Twelve months ended  
    12-31-10     9-30-10     12-31-09     12-31-10     12-31-09  
Investment banking income
  $ 33     $ 38     $ 29     $ 112     $ 83  
Income (loss) from other investments
          2       (66 )     6       (103 )
Dealer trading and derivatives income (loss)
    18       (10 )     (21 )     (16 )     (70 )
Foreign exchange income
    12       12       11       43       48  
 
                             
Total investment banking and capital markets income (loss)
  $ 63     $ 42     $ (47 )   $ 145     $ (42 )
 
                             

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 22
Noninterest Expense
(dollars in millions)
                                         
    Three months ended     Twelve months ended  
    12-31-10     9-30-10     12-31-09     12-31-10     12-31-09  
Personnel (a)
  $ 365     $ 359     $ 400     $ 1,471     $ 1,514  
Net occupancy
    70       70       67       270       259  
Operating lease expense
    28       40       50       142       195  
Computer processing
    45       46       49       185       192  
Business services and professional fees
    56       41       63       176       184  
FDIC assessment
    27       27       37       124       177  
OREO expense, net
    10       4       25       68       97  
Equipment
    26       24       25       100       96  
Marketing
    22       21       22       72       72  
Provision (credit) for losses on lending-related commitments
    (26 )     (10 )     27       (48 )     67  
Intangible assets impairment
                            241  
Other expense:
                                       
Postage and delivery
    6       9       8       30       33  
Franchise and business taxes
    9       5       5       27       31  
Telecommunications
    6       5       6       22       26  
Provision for losses on LIHTC guaranteed funds
    8                   8       17  
Miscellaneous expense
    92       95       87       387       353  
 
                             
Total other expense
    121       114       106       474       460  
 
                             
Total noninterest expense
  $ 744     $ 736     $ 871     $ 3,034     $ 3,554  
 
                             
 
                                       
Average full-time equivalent employees (b)
    15,424       15,584       15,973       15,610       16,698  
 
(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  
    12-31-10     9-30-10     12-31-09     12-31-10     12-31-09  
Salaries
  $ 232     $ 230     $ 229     $ 913     $ 905  
Incentive compensation
    85       69       76       266       222  
Employee benefits
    34       45       75       224       303  
Stock-based compensation
    11       12       15       52       51  
Severance
    3       3       5       16       33  
 
                             
Total personnel expense
  $ 365     $ 359     $ 400     $ 1,471     $ 1,514  
 
                             

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 23
Loan Composition
(dollars in millions)
                                         
                            Percent change 12-31-10 vs.  
    12-31-10     9-30-10     12-31-09     9-30-10     12-31-09  
Commercial, financial and agricultural
  $ 16,441     $ 16,451     $ 19,248       (.1) %     (14.6) %
Commercial real estate:
                                       
Commercial mortgage
    9,502       9,673       10,457       (1.8 )     (9.1 )
Construction
    2,106       2,731       4,739       (22.9 )     (55.6 )
 
                             
Total commercial real estate loans
    11,608       12,404       15,196       (6.4 )     (23.6 )
Commercial lease financing
    6,471       6,583       7,460       (1.7 )     (13.3 )
 
                             
Total commercial loans
    34,520       35,438       41,904       (2.6 )     (17.6 )
Real estate — residential mortgage
    1,844       1,853       1,796       (.5 )     2.7  
Home equity:
                                       
Key Community Bank
    9,514       9,655       10,048       (1.5 )     (5.3 )
Other
    666       707       838       (5.8 )     (20.5 )
 
                             
Total home equity loans
    10,180       10,362       10,886       (1.8 )     (6.5 )
Consumer other — Key Community Bank
    1,167       1,174       1,181       (.6 )     (1.2 )
Consumer other:
                                       
Marine
    2,234       2,355       2,787       (5.1 )     (19.8 )
Other
    162       172       216       (5.8 )     (25.0 )
 
                             
Total consumer — indirect loans
    2,396       2,527       3,003       (5.2 )     (20.2 )
 
                             
Total consumer loans
    15,587       15,916       16,866       (2.1 )     (7.6 )
 
                             
Total loans (a)
  $ 50,107     $ 51,354     $ 58,770       (2.4) %     (14.7) %
 
                                 
Loans Held for Sale Composition
(dollars in millions)
                                         
                            Percent change 12-31-10 vs.  
    12-31-10     9-30-10     12-31-09     9-30-10     12-31-09  
Commercial, financial and agricultural
  $ 196     $ 128     $ 14       53.1 %     N/M  
Real estate — commercial mortgage
    118       327       171       (63.9 )     (31.0) %
Real estate — construction
    35       77       92       (54.5 )     (62.0 )
Commercial lease financing
    8       13       27       (38.5 )     (70.4 )
Real estate — residential mortgage
    110       92       139       19.6       (20.9 )
 
                             
Total loans held for sale (b), (c)
  $ 467     $ 637     $ 443       (26.7) %     5.4 %
 
                                 
 
(a)   Excluded at December 31, 2010, September 30, 2010, and December 31, 2009, are loans in the amount of $6.5 billion, $6.6 billion, and $3.5 billion, respectively, related to the discontinued operations of the education lending business.
 
(b)   Excluded at December 31, 2010, September 30, 2010, and December 31, 2009, are loans held for sale in the amount of $15 million, $15 million, and $434 million, respectively, related to the discontinued operations of the education lending business.
 
(c)   The beginning balance at September 30, 2010 of $637 million increased by new originations in the amount of $1.053 billion and decreased by loan sales of $1.174 billion, and loan payments of $49 million, for an ending balance of $467 million at December 31, 2010.
N/M = Not Meaningful

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 24
Summary of Loan Loss Experience from Continuing Operations
(dollars in millions)
                                         
    Three months ended     Twelve months ended  
    12-31-10     9-30-10     12-31-09     12-31-10     12-31-09  
Average loans outstanding
  $ 50,829     $ 52,566     $ 60,533     $ 53,971     $ 66,386  
 
                             
 
                                       
Allowance for loan losses at beginning of period
  $ 1,957     $ 2,219     $ 2,485     $ 2,534     $ 1,629  
Loans charged off:
                                       
Commercial, financial and agricultural
    104       170       232       565       838  
 
                                       
Real estate — commercial mortgage
    73       50       166       360       356  
Real estate — construction
    49       88       187       380       643  
 
                             
Total commercial real estate loans
    122       138       353       740       999  
Commercial lease financing
    20       22       45       88       128  
 
                             
Total commercial loans
    246       330       630       1,393       1,965  
Real estate — residential mortgage
    11       7       9       36       20  
Home equity:
                                       
Key Community Bank
    28       36       28       123       97  
Other
    13       14       20       62       74  
 
                             
Total home equity loans
    41       50       48       185       171  
Consumer other — Key Community Bank
    16       15       17       64       67  
Consumer other:
                                       
Marine
    25       25       41       129       154  
Other
    4       3       5       15       19  
 
                             
Total consumer other
    29       28       46       144       173  
 
                             
Total consumer loans
    97       100       120       429       431  
 
                             
Total loans charged off
    343       430       750       1,822       2,396  
Recoveries:
                                       
Commercial, financial and agricultural
    24       34       14       87       52  
 
                                       
Real estate — commercial mortgage
    21       4       1       30       2  
Real estate — construction
    21       12       6       44       9  
 
                             
Total commercial real estate loans
    42       16       7       74       11  
Commercial lease financing
    8       6       6       25       22  
 
                             
Total commercial loans
    74       56       27       186       85  
Real estate — residential mortgage
          1       1       2       1  
Home equity:
                                       
Key Community Bank
    2       1       1       7       4  
Other
          1       1       3       2  
 
                             
Total home equity loans
    2       2       2       10       6  
Consumer other — Key Community Bank
    2       1       2       7       7  
Consumer other:
                                       
Marine
    8       13       8       43       35  
Other
    1             2       4       5  
 
                             
Total consumer other
    9       13       10       47       40  
 
                             
Total consumer loans
    13       17       15       66       54  
 
                             
Total recoveries
    87       73       42       252       139  
 
                             
Net loan charge-offs
    (256 )     (357 )     (708 )     (1,570 )     (2,257 )
Provision for loan losses
    (97 )     94       756       638       3,159  
Foreign currency translation adjustment
          1       1       2       3  
 
                             
Allowance for loan losses at end of period
  $ 1,604     $ 1,957     $ 2,534     $ 1,604     $ 2,534  
 
                             
 
                                       
Liability for credit losses on lending-related commitments at beginning of period
  $ 99     $ 109     $ 94     $ 121     $ 54  
Provision (credit) for losses on lending-related commitments
    (26 )     (10 )     27       (48 )     67  
 
                             
Liability for credit losses on lending-related commitments at end of period (a)
  $ 73     $ 99     $ 121     $ 73     $ 121  
 
                             
 
                                       
Total allowance for credit losses at end of period
  $ 1,677     $ 2,056     $ 2,655     $ 1,677     $ 2,655  
 
                             
 
                                       
Net loan charge-offs to average loans
    2.00 %     2.69 %     4.64 %     2.91 %     3.40 %
Allowance for loan losses to period-end loans
    3.20       3.81       4.31       3.20       4.31  
Allowance for credit losses to period-end loans
    3.35       4.00       4.52       3.35       4.52  
Allowance for loan losses to nonperforming loans
    150.19       142.64       115.87       150.19       115.87  
Allowance for credit losses to nonperforming loans
    157.02       149.85       121.40       157.02       121.40  
 
                                       
Discontinued operations — education lending business:
                                       
Loans charged off
  $ 34     $ 26     $ 37     $ 129     $ 147  
Recoveries
    2       4       1       8       4  
 
                             
Net loan charge-offs
  $ (32 )   $ (22 )   $ (36 )   $ (121 )   $ (143 )
 
                             
 
(a)   Included in “accrued expense and other liabilities” on the balance sheet.

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 25
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
(dollars in millions)
                                         
    12-31-10     9-30-10     6-30-10     3-31-10     12-31-09  
Commercial, financial and agricultural
  $ 242     $ 335     $ 489     $ 558     $ 586  
 
                                       
Real estate — commercial mortgage
    255       362       404       579       614  
Real estate — construction
    241       333       473       607       641  
 
                             
Total commercial real estate loans
    496       695       877       1,186       1,255  
Commercial lease financing
    64       84       83       99       113  
 
                             
Total commercial loans
    802       1,114       1,449       1,843       1,954  
Real estate — residential mortgage
    98       90       77       72       73  
Home equity:
                                       
Key Community Bank
    102       106       112       111       107  
Other
    18       16       17       18       21  
 
                             
Total home equity loans
    120       122       129       129       128  
Consumer other — Key Community Bank
    4       3       5       4       4  
Consumer other:
                                       
Marine
    42       41       41       16       26  
Other
    2       2       2       1       2  
 
                             
Total consumer other
    44       43       43       17       28  
 
                             
Total consumer loans
    266       258       254       222       233  
 
                             
Total nonperforming loans
    1,068       1,372       1,703       2,065       2,187  
 
                                       
Nonperforming loans held for sale
    106       230       221       195       116  
OREO
    166       221       200       175       191  
Allowance for OREO losses
    (37 )     (58 )     (64 )     (45 )     (23 )
 
                             
OREO, net of allowance
    129       163       136       130       168  
 
                                       
Other nonperforming assets
    35       36       26       38       39  
 
                             
Total nonperforming assets
  $ 1,338     $ 1,801     $ 2,086     $ 2,428     $ 2,510  
 
                             
 
                                       
Accruing loans past due 90 days or more
  $ 239     $ 152     $ 240     $ 434     $ 331  
Accruing loans past due 30 through 89 days
    476       662       610       639       933  
Restructured loans — accruing and nonaccruing (a)
    297       360       343       323       364  
Restructured loans included in nonperforming loans (a)
    202       228       213       226       364  
Nonperforming assets from discontinued operations — education lending business
    40       38       40       43       14  
Nonperforming loans to period-end portfolio loans
    2.13 %     2.67 %     3.19 %     3.69 %     3.72 %
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets
    2.66       3.48       3.88       4.31       4.25  
 
(a)   Restructured loans (i.e. troubled debt restructurings) are those for which Key, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. These concessions are made to improve the collectability of the loan and generally take the form of a reduction of the interest rate, extension of the maturity date or reduction in the principal balance.

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 26
Summary of Changes in Nonperforming Loans From Continuing Operations
(in millions)
                                         
    4Q10     3Q10     2Q10     1Q10     4Q09  
Balance at beginning of period
  $ 1,372     $ 1,703     $ 2,065     $ 2,187     $ 2,290  
Loans placed on nonaccrual status
    544       691       682       746       1,141  
Charge-offs
    (343 )     (430 )     (492 )     (557 )     (750 )
Loans sold
    (162 )     (92 )     (136 )     (15 )     (70 )
Payments
    (250 )     (200 )     (185 )     (102 )     (237 )
Transfers to OREO
    (14 )     (39 )     (66 )     (20 )     (98 )
Transfers to nonperforming loans held for sale
    (41 )     (163 )     (82 )     (59 )     (23 )
Transfers to other nonperforming assets
    (3 )     (7 )     (36 )     (3 )     (4 )
Loans returned to accrual status
    (35 )     (91 )     (47 )     (112 )     (62 )
 
                             
Balance at end of period
  $ 1,068     $ 1,372     $ 1,703     $ 2,065     $ 2,187  
 
                             
Summary of Changes in Nonperforming Loans Held For Sale From Continuing Operations
(in millions)
                                         
    4Q10     3Q10     2Q10     1Q10     4Q09  
Balance at beginning of period
  $ 230     $ 221     $ 195     $ 116     $ 304  
Transfers in
    41       162       86       129       71  
Net advances / (payments)
    (26 )     (35 )     1             3  
Loans sold
    (139 )     (50 )     (53 )     (38 )     (228 )
Transfers to OREO
          (58 )     (6 )     (6 )      
Valuation adjustments
          (6 )     (2 )     (6 )     (18 )
Loans returned to accrual status / other
        (4 )                 (16 )
 
                             
Balance at end of period
  $ 106     $ 230     $ 221     $ 195     $ 116  
 
                             
Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations
(in millions)
                                         
    4Q10     3Q10     2Q10     1Q10     4Q09  
Balance at beginning of period
  $ 163     $ 136     $ 130     $ 168     $ 147  
Properties acquired — nonperforming loans
    14       97       72       26       98  
Valuation adjustments
    (9 )     (7 )     (24 )     (28 )     (12 )
Properties sold
    (39 )     (63 )     (42 )     (36 )     (65 )
 
                             
Balance at end of period
  $ 129     $ 163     $ 136     $ 130     $ 168  
 
                             

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 27
Line of Business Results
(dollars in millions)
Key Community Bank
                                                         
                                            Percent change 4Q10 vs.  
    4Q10     3Q10     2Q10     1Q10     4Q09     3Q10     4Q09  
Summary of operations
                                                       
Total revenue (TE)
  $ 601     $ 601     $ 608     $ 599     $ 627             (4.1 )%
Provision for loan losses
    74       75       121       142       230       (1.3 )%     (67.8 )
Noninterest expense
    456       458       451       465       489       (.4 )     (6.7 )
Net income (loss) attributable to Key
    61       57       35       7       (40 )     7.0       N/M  
Average loans and leases
    26,437       26,779       27,218       27,769       28,321       (1.3 )     (6.7 )
Average deposits
    48,143       48,703       50,421       51,459       52,640       (1.1 )     (8.5 )
Net loan charge-offs
    115       129       148       116       148       (10.9 )     (22.3 )
Net loan charge-offs to average loans
    1.73 %     1.91 %     2.18 %     1.69 %     2.07 %     N/A       N/A  
Nonperforming assets at period end
  $ 497     $ 567     $ 561     $ 597     $ 544       (12.3 )     (8.6 )
Return on average allocated equity
    6.87 %     6.26 %     3.80 %     .76 %     (4.42) %     N/A       N/A  
Average full-time equivalent employees
    8,291       8,306       8,246       8,187       8,227       (.2 )     .8  
 
                                                       
Supplementary information (lines of business)
                                                       
Regional Banking
                                                       
Total revenue (TE)
  $ 474     $ 483     $ 495     $ 490     $ 510       (1.9) %     (7.1 )%
Provision for loan losses
    77       105       57       115       139       (26.7 )     (44.6 )
Noninterest expense
    411       415       408       420       429       (1.0 )     (4.2 )
Net income (loss) attributable to Key
    8       (9 )     31       (16 )     (19 )     N/M       N/M  
Average loans and leases
    17,811       18,079       18,405       18,753       19,076       (1.5 )     (6.6 )
Average deposits
    42,390       43,348       45,234       46,197       47,569       (2.2 )     (10.9 )
Net loan charge-offs
    77       89       82       96       82       (13.5 )     (6.1 )
Net loan charge-offs to average loans
    1.72 %     1.95 %     1.79 %     2.08 %     1.71 %     N/A       N/A  
Nonperforming assets at period end
  $ 326     $ 350     $ 339     $ 327     $ 319       (6.9 )     2.2  
Return on average allocated equity
    1.32 %     (1.47) %     5.09 %     (2.66) %     (3.24) %     N/A       N/A  
Average full-time equivalent employees
    7,930       7,953       7,891       7,836       7,877       (.3 )     .7  
 
                                                       
Commercial Banking
                                                       
Total revenue (TE)
  $ 127     $ 118     $ 113     $ 109     $ 117       7.6 %     8.5 %
Provision for loan losses
    (3 )     (30 )     64       27       91       N/M       (103.3 )
Noninterest expense
    45       43       43       45       60       4.7       (25.0 )
Net income (loss) attributable to Key
    53       66       4       23       (21 )     (19.7 )     N/M  
Average loans and leases
    8,626       8,700       8,813       9,016       9,245       (.9 )     (6.7 )
Average deposits
    5,753       5,355       5,187       5,262       5,071       7.4       13.4  
Net loan charge-offs
    38       40       66       20       66       (5.0 )     (42.4 )
Net loan charge-offs to average loans
    1.75 %     1.82 %     3.00 %     .90 %     2.83 %     N/A       N/A  
Nonperforming assets at period end
  $ 171     $ 217     $ 222     $ 270     $ 225       (21.2 )     (24.0 )
Return on average allocated equity
    18.82 %     22.04 %     1.28 %     7.30 %     (6.57) %     N/A       N/A  
Average full-time equivalent employees
    361       353       355       351       350       2.3       3.1  

 


 

KeyCorp Reports Fourth Quarter and Full Year 2010 Profit
January 25, 2011
Page 28
Line of Business Results (continued)
(dollars in millions)
Key Corporate Bank
                                                         
                                            Percent change 4Q10 vs.  
    4Q10     3Q10     2Q10     1Q10     4Q09     3Q10     4Q09  
Summary of operations
                                                       
Total revenue (TE)
  $ 464     $ 430     $ 409     $ 376     $ 340       7.9 %     36.5 %
Provision for loan losses
    (263 )     (25 )     99       161       382       N/M       (168.8 )
Noninterest expense
    249       248       259       268       300       .4       (17.0 )
Net income (loss) attributable to Key
    302       130       34       (31 )     (213 )     132.3       N/M  
Average loans and leases
    18,601       19,534       20,948       22,440       24,011       (4.8 )     (22.5 )
Average loans held for sale
    253       380       381       240       431       (33.4 )     (41.3 )
Average deposits
    12,961       11,779       12,474       12,416       13,257       10.0       (2.2 )
Net loan charge-offs
    61       122       173       251       411       (50.0 )     (85.2 )
Net loan charge-offs to average loans
    1.30 %     2.48 %     3.31 %     4.54 %     6.79 %     N/A       N/A  
Nonperforming assets at period end
  $ 575     $ 886     $ 1,089     $ 1,285     $ 1,326       (35.1 )     (56.6 )
Return on average allocated equity
    41.53 %     16.65 %     4.02 %     (3.64 )%     (22.83 )%     N/A       N/A  
Average full-time equivalent employees
    2,308       2,353       2,327       2,370       2,400       (1.9 )     (3.8 )
 
                                                       
Supplementary information (lines of business)
                                                       
Real Estate Capital and Corporate Banking Services
                                                       
Total revenue (TE)
  $ 179     $ 175     $ 176     $ 144     $ 92       2.3 %     94.6 %
Provision for loan losses
    (211 )     22       77       145       304       N/M       (169.4 )
Noninterest expense
    93       99       108       116       117       (6.1 )     (20.5 )
Net income (loss) attributable to Key
    187       34       (5 )     (72 )     (206 )     450.0       N/M  
Average loans and leases
    9,380       10,300       11,465       12,340       13,256       (8.9 )     (29.2 )
Average loans held for sale
    199       202       194       115       228       (1.5 )     (12.7 )
Average deposits
    10,604       9,360       9,811       9,835       10,602       13.3        
Net loan charge-offs
    57       103       142       207       381       (44.7 )     (85.0 )
Net loan charge-offs to average loans
    2.41 %     3.97 %     4.97 %     6.80 %     11.40 %     N/A       N/A  
Nonperforming assets at period end
  $ 442     $ 719     $ 867     $ 1,067     $ 1,094       (38.5 )     (59.6 )
Return on average allocated equity
    43.16 %     7.14 %     (.97 )%     (14.06 )%     (36.12 )%     N/A       N/A  
Average full-time equivalent employees
    1,028       1,039       1,052       1,078       1,093       (1.1 )     (5.9 )
 
                                                       
Equipment Finance
                                                       
Total revenue (TE)
  $ 66     $ 63     $ 61     $ 61     $ 66       4.8 %      
Provision for loan losses
    (16 )     (12 )     10       4       65       N/M       (124.6 )%
Noninterest expense
    50       53       48       45       57       (5.7 )     (12.3 )
Net income (loss) attributable to Key
    20       14       2       8       (35 )     42.9       N/M  
Average loans and leases
    4,656       4,515       4,478       4,574       4,610       3.1       1.0  
Average loans held for sale
          2       16       1             (100.0 )     N/M  
Average deposits
    2       5       5       6       7       (60.0 )     (71.4 )
Net loan charge-offs
    7       25       18       18       21       (72.0 )     (66.7 )
Net loan charge-offs to average loans
    .60 %     2.20 %     1.61 %     1.60 %     1.81 %     N/A       N/A  
Nonperforming assets at period end
  $ 68     $ 86     $ 106     $ 111     $ 122       (20.9 )     (44.3 )
Return on average allocated equity
    23.55 %     16.73 %     2.25 %     8.67 %     (37.43 )%     N/A       N/A  
Average full-time equivalent employees
    529       536       549       563       586       (1.3 )     (9.7 )
 
                                                       
Institutional and Capital Markets
                                                       
Total revenue (TE)
  $ 219     $ 192     $ 172     $ 171     $ 182       14.1 %     20.3 %
Provision for loan losses
    (36 )     (35 )     12       12       13       N/M       (376.9 )
Noninterest expense
    106       96       103       107       126       10.4       (15.9 )
Net income (loss) attributable to Key
    95       82       37       33       28       15.9       239.3  
Average loans and leases
    4,565       4,719       5,005       5,526       6,145       (3.3 )     (25.7 )
Average loans held for sale
    54       176       171       124       203       (69.3 )     (73.4 )
Average deposits
    2,355       2,414       2,658       2,575       2,648       (2.4 )     (11.1 )
Net loan charge-offs
    (3 )     (6 )     13       26       9       N/M       (133.3 )
Net loan charge-offs to average loans
    (.26 )%     (.50 )%     1.04 %     1.91 %     .58 %     N/A       N/A  
Nonperforming assets at period end
  $ 65     $ 81     $ 116     $ 107     $ 110       (19.8 )     (40.9 )
Return on average allocated equity
    45.46 %     37.18 %     15.22 %     13.36 %     10.41 %     N/A       N/A  
Average full-time equivalent employees
    751       778       726       729       721       (3.5 )     4.2  
 
TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful