Exhibit 99.1
| | | | | |
| CONTACTS: | | ANALYSTS | | MEDIA |
| | | Vernon L. Patterson | | William C. Murschel |
| | | 216.689.0520 | | 216.828.7416 |
| | | 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: ww.key.com/newsroom |
FOR IMMEDIATE RELEASE
KEYCORP REPORTS FOURTH QUARTER AND 2008 RESULTS
| ¨ | | Net loss of $1.13 per common share for the fourth quarter |
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| ¨ | | Noncash after-tax charge of $420 million ($.85 per common share) taken for goodwill impairment |
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| ¨ | | Loan loss reserve increased by $249 million to $1.803 billion, or 2.36% of total loans |
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| ¨ | | Capital position bolstered by $2.500 billion through participation in U.S. Treasury’s Capital Purchase Program |
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| ¨ | | Participating in IRS global tax settlement on leasing transactions |
CLEVELAND, January 22, 2009 — KeyCorp (NYSE: KEY) today announced a fourth quarter loss from continuing operations of $524 million, or $1.13 per common share, compared to income from continuing operations of $22 million, or $.06 per diluted common share, for the fourth quarter of 2007. The quarterly loss was primarily attributable to a noncash accounting charge for goodwill impairment and continued building of loan loss reserves in light of the challenging economic environment.
During the fourth quarter, Key participated in the U.S. Treasury’s Capital Purchase Program, bolstering capital by $2.500 billion. For all of 2008, Key raised capital of $4.240 billion.
For the full year, Key had a loss from continuing operations of $1.468 billion, or $3.36 per common share. This compares to income from continuing operations of $941 million, or $2.38 per diluted common share, for 2007. Full-year results were adversely affected by a $1.011 billion after-tax charge taken in the second quarter as a result of an adverse federal tax court ruling that impacted Key’s accounting for certain lease financing transactions, and elevated provisions for loan losses. During the fourth quarter, Key and the IRS reached an agreement on all material aspects related to the IRS global tax settlement, which resulted in the reversal of $120 million of the after-tax, lease financing charge.
During the fourth quarter, the Company’s annual testing for goodwill impairment indicated that the estimated fair value of the National Banking unit was less than the carrying amount, reflecting unprecedented weakness in the financial markets. As a result, Key recorded an after-tax noncash accounting charge of $420 million. However, Key’s regulatory and tangible capital ratios were not affected by this adjustment. In light of the current economic environment, Key continued to build its loan loss reserves by taking a $594 million provision for loan losses, which exceeded net charge-offs by $252 million. As of the end of the year, Key’s reserve represented 2.36% of period-end loans and 147% of nonperforming loans.
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 2
“Key’s results for the quarter and the year reflect actions taken to manage risks and to fortify the balance sheet for an extremely challenging operating environment,” said Chief Executive Officer Henry L. Meyer III. “The $4.2 billion of capital we raised in 2008 positions us to continue to meet our relationship clients’ needs. Like the rest of the banking industry, we face significant head winds, but our core results continue to benefit from solid performance across our Community Banking network, decisions made to exit higher-risk or low-return nonrelationship businesses such as subprime lending, and actions we initiated at the end of 2007 to reduce exposure in the residential properties segment of our commercial real estate business, which has been reduced by $1.3 billion, or 36 percent, over the past year.”
Meyer continued: “Key’s business mix has allowed us to avoid many of the consumer credit issues affecting the financial services industry. We will continue to proactively take actions to position the Company to weather these challenging times and benefit when conditions improve.
“I’m also pleased to have had Peter Hancock join the Company in December as Vice Chair of National Banking. Peter brings with him a very strong business and risk management background, which are vital skills for these times.”
During the fourth quarter of 2008, Key strengthened its capital position with a $2.500 billion capital increase as a participant in the U.S. Treasury’s Capital Purchase Program and reduced its quarterly dividend. The Company also issued $1.500 billion of new term debt under the FDIC’s Temporary Liquidity Guarantee Program. Key’s Tier 1 capital ratio increased to a strong 10.81% at December 31, 2008. The added capital also positioned Key to take advantage of new lending opportunities. During the fourth quarter of 2008, the Company’s National Banking and Community Banking businesses originated approximately $5.7 billion in new or renewed loans.
Key also reported it had reached an agreement with the IRS on all material aspects related to the IRS global tax settlement pertaining to certain leveraged lease financing transactions. As a result, the Company recorded an after-tax recovery of $120 million for previously accrued interest on disputed tax balances. A final closing agreement with the IRS is expected during the first quarter of 2009. The positive impact of this recovery was partially offset by $68 million of additional U.S. taxes recorded on accumulated earnings of the Canadian leasing operation.
As shown in the following table, the comparability of Key’s earnings for the current, prior and year-ago quarters is affected by several significant items.
Significant Items Affecting the Comparability of Earnings
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Fourth Quarter 2008 | | | Third Quarter 2008 | | | Fourth Quarter 2007 | |
| | | Pre-tax | | | After-tax | | | Impact | | | Pre-tax | | | After-tax | | | Impact | | | Pre-tax | | | After-tax | | | Impact | |
| in millions, except per share amounts | | Amount | | | Amount | | | on EPS | | | Amount | | | Amount | | | on EPS | | | Amount | | | Amount | | | on EPS | |
| |
| Noncash charge for goodwill impairment | | $ | (465 | ) | | $ | (420 | ) | | $ | (.85 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| U.S. taxes on accumulated earnings of Canadian leasing operation | | | — | | | | (68 | ) | | | (.14 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Provision for loan losses in excess of net charge-offs | | | (252 | ) | | | (158 | ) | | | (.32 | ) | | $ | (134 | ) | | $ | (83 | ) | | $ | (.17 | ) | | $ | (244 | ) | | $ | (153 | ) | | $ | (.39 | ) |
| Net (losses) gains from principal investing | | | (33 | ) | | | (21 | ) | | | (.04 | ) | | | (24 | ) | | | (15 | ) | | | (.03 | ) | | | 6 | | | | 3 | | | | .01 | |
| Severance and other exit costs | | | (31 | ) | | | (20 | ) | | | (.04 | ) | | | (19 | ) | | | (14 | ) | | | (.03 | ) | | | (24 | ) | | | (14 | ) | | | (.04 | ) |
| Realized and unrealized losses on loan and securities portfolios held for sale or trading | | | (18 | ) | | | (11 | ) | | | (.02 | ) | | | (94 | )(b) | | | (59 | )(b) | | | (.12 | ) | | | (30 | ) | | | (19 | ) | | | (.05 | ) |
| (Charges) credits related to leveraged lease tax litigation | | | (18 | ) | | | 120 | (a) | | | .24 | | | | — | | | | (30 | ) | | | (.06 | ) | | | — | | | | — | | | | — | |
| Reversal of Honsador litigation reserve | | | — | | | | — | | | | — | | | | 23 | | | | 14 | | | | .03 | | | | — | | | | — | | | | — | |
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| Liability to Visa | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (64 | ) | | | (40 | ) | | | (.10 | ) |
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| (a) | | Represents $120 million of previously accrued interest recovered in connection with Key’s opt-in to the IRS global tax settlement. |
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| (b) | | Includes $54 million ($33 million after tax) of derivative-related charges recorded as a result of market disruption caused by the failure of Lehman Brothers. |
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| EPS = Earnings per diluted common share |
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 3
SUMMARY OF CONTINUING OPERATIONS
Key’s taxable-equivalent net interest income was $646 million for the fourth quarter of 2008, compared to $750 million for the year-ago quarter. Average earning assets rose by $7.214 billion, or 8%, due primarily to growth in commercial loans and the January 1 acquisition of U.S.B. Holding Co., Inc., which added approximately $1.5 billion to Key’s loan portfolio. Additionally, Key experienced an increase in short-term investments, reflecting actions taken by the Federal Reserve to begin paying interest on depository institutions’ reserve balances effective October 1, 2008. The net interest margin for the current quarter declined to 2.76% from 3.48% for the fourth quarter of 2007. Approximately 21 basis points of the reduction was attributable to the decrease in net interest income caused by recalculations of income recognized on leveraged leases contested by the IRS. Additionally, net interest income for the fourth quarter of 2007 benefited from an $18 million lease accounting adjustment that contributed approximately 9 basis points to the net interest margin. Also contributing to the lower net interest margin were tighter loan spreads caused by elevated funding costs, the increase in lower-yielding short-term investments and a higher level of nonperforming assets.
Compared to the third quarter of 2008, taxable-equivalent net interest income decreased by $59 million and the net interest margin declined by 37 basis points. Average earning assets were up $3.301 billion, or 4%, reflecting an increase in short-term investments. The reductions in net interest income and the net interest margin were due largely to tighter loan spreads resulting from elevated funding costs, an increase in lower-yielding short-term investments and a higher level of nonperforming assets. In addition, these performance measures for the fourth quarter of 2008 were adversely affected by an agreement reached with the IRS on all material aspects related to the IRS global tax settlement pertaining to certain leveraged lease financing transactions. As a result of this agreement and in accordance with applicable accounting standards, Key was required to recalculate the lease income recognized from inception for all of the contested leases. This recalculation reduced Key’s net interest income and net interest margin for the current quarter by $18 million and 8 basis points, respectively. Additionally, Key recorded an after-tax recovery of $120 million for previously accrued interest on the disputed tax balances. The Company expects to execute a final closing agreement with the IRS during the first quarter of 2009.
Key’s noninterest income was $399 million for the fourth quarter of 2008, compared to $488 million for the year-ago quarter. The decrease reflects net losses of $33 million from principal investing in the fourth quarter of 2008, compared to net gains of $6 million for the same period last year. Also, during the fourth quarter of 2008, Key recorded net losses (included in miscellaneous income) of $39 million related to the volatility associated with the hedge accounting applied to debt instruments, compared to net gains of $3 million in the year-ago quarter. The majority of the net losses are attributable to the restructuring of certain cash collateral arrangements for hedges that reduced exposure to counterparty risk and lowered the cost of borrowings. Additionally, Key’s income from investment banking and capital markets activities includes $32 million in losses from investments made by the Private Equity unit within Key’s Real Estate Capital and Corporate Banking Services line of business, compared to losses of $23 million in the fourth quarter of 2007. Key also experienced a $16 million decrease in letter of credit and loan fees caused by weakness in the economy. These factors were partially offset by a $7 million increase in income from trust and investment services. In addition, Key had net gains of $3 million from loan sales and write-downs in the current quarter, compared to net losses of $6 million for the same period last year.
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 4
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 | | 4Q08 | | | 3Q08 | | | 2Q08 | | | 1Q08 | | | 4Q07 | |
| |
| Trust and investment services income | | $ | 138 | | | $ | 133 | | | $ | 138 | | | $ | 129 | | | $ | 131 | |
| Service charges on deposit accounts | | | 90 | | | | 94 | | | | 93 | | | | 88 | | | | 90 | |
| Operating lease income | | | 64 | | | | 69 | | | | 68 | | | | 69 | | | | 72 | |
| Letter of credit and loan fees | | | 42 | | | | 53 | | | | 51 | | | | 37 | | | | 58 | |
| Corporate-owned life insurance income | | | 33 | | | | 28 | | | | 28 | | | | 28 | | | | 37 | |
| Electronic banking fees | | | 25 | | | | 27 | | | | 27 | | | | 24 | | | | 25 | |
| Insurance income | | | 15 | | | | 15 | | | | 20 | | | | 15 | | | | 10 | |
| Investment banking and capital markets income (loss) | | | 6 | | | | (31 | ) | | | 80 | | | | 8 | | | | 12 | |
| Net (losses) gains from principal investing | | | (33 | ) | | | (24 | ) | | | (14 | ) | | | 9 | | | | 6 | |
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Compared to the third quarter of 2008, noninterest income increased by $11 million. Included in third quarter results are $54 million of derivative-related charges recorded as a result of market disruption caused by the failure of Lehman Brothers, and $31 million of realized and unrealized losses from the residential properties segment of the construction loan portfolio. Excluding these items, noninterest income was down $74 million, due primarily to the $39 million of negative ineffective income recorded during the fourth quarter in connection with the previously mentioned restructuring of the cash collateral arrangements for hedges. Adjusting for the derivative-related charges discussed above, income from investment banking and capital markets activities was down $17 million, reflecting a $25 million increase in losses from investments made by the Private Equity unit. Also contributing to the decrease in noninterest income were an $11 million reduction in letter of credit and loan fees, and a $9 million increase in net losses from principal investing. These factors were partially offset by increases of $5 million in income from both trust and investment services, and corporate-owned life insurance.
Key’s noninterest expense was $1.303 billion for the fourth quarter of 2008, compared to $896 million for the same period last year. Noninterest expense for the current quarter was adversely affected by a goodwill impairment charge of $465 million, while results for the fourth quarter of 2007 include a $64 million charge for the estimated fair value of Key’s liability to Visa Inc. at that time. Excluding these items, noninterest expense was up $6 million, or less than 1%. Personnel expense rose by $12 million as higher incentive compensation accruals and an increase in stock-based compensation more than offset decreases in both salaries and costs associated with employee benefits. Included in noninterest expense for the fourth quarter of 2008 is $31 million of severance and other exit costs, including $8 million of expense recorded in connection with Key’s previously reported decision to limit new student loans to those backed by government guarantee. On an adjusted basis, nonpersonnel expense decreased by $6 million, due primarily to a $5 million credit for losses on lending-related commitments in the current quarter, compared to a $25 million provision in the fourth quarter of 2007. This favorable change was offset in part by increases in professional fees and marketing expense of $13 million and $9 million, respectively. Professional fees rose as a result of higher costs associated with collection efforts.
Compared to the third quarter of 2008, noninterest expense increased by $541 million. Excluding the goodwill impairment charge in the fourth quarter and the $23 million third quarter reversal of the remaining litigation reserve associated with the Honsador litigation, noninterest expense was up $53 million. Personnel expense grew by $30 million, due largely to higher incentive compensation accruals and an increase in severance expense. As previously noted, noninterest expense for the current quarter includes severance and other exit costs of $31 million, while results for the third quarter include $19 million of such costs, including $10 million of expense recorded in connection with Key’s decision to exit direct and indirect retail and floor-plan lending for marine and recreational vehicle products. On an adjusted basis, nonpersonnel expense was up $23 million, reflecting a $16 million
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 5
increase in professional fees and a $5 million credit for losses on lending-related commitments in the current quarter, compared to an $8 million provision in the prior quarter.
ASSET QUALITY
Key’s provision for loan losses from continuing operations was $594 million for the fourth quarter of 2008, compared to $363 million for the year-ago quarter and $407 million for the third quarter of 2008. Key’s provision for loan losses for the fourth quarter of 2008 exceeded its net loan charge-offs by $252 million as the Company continued to build reserves in a weak economy.
As previously reported, Key has undertaken a process to aggressively reduce its exposure in the residential properties segment of its construction loan portfolio through the planned sale of certain loans. In conjunction with these efforts, Key transferred $384 million of commercial real estate loans ($719 million, net of $335 million in net charge-offs) from the held-to-maturity loan portfolio to held-for-sale status in June. Key’s ability to sell these loans has been hindered by continued disruption in the financial markets which has precluded the ability of certain potential buyers to obtain the necessary funding. As shown in the following table, the balance of this portfolio has been reduced to $88 million at December 31, 2008, primarily as a result of cash proceeds from loan sales, transfers to other real estate owned (“OREO”), and both realized and unrealized losses. Key will continue to pursue the sale or foreclosure of the remaining loans, all of which are on nonperforming status.
Loans Held for Sale — Residential Properties Segment of Construction Loan Portfolio
| | | | | |
| in millions | | | | |
| |
Balance at September 30, 2008 | | $ | 133 | |
| Cash proceeds from loan sales | | | (10 | ) |
| Loans transferred to OREO | | | (14 | ) |
| Realized and unrealized losses | | | (14 | ) |
| Payments | | | (7 | ) |
| | | | |
Balance at December 31, 2008 | | $ | 88 | |
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Selected asset quality statistics for Key for each of the past five quarters are presented in the following table.
Selected Asset Quality Statistics
| | | | | | | | | | | | | | | | | | | | | |
| dollars in millions | | 4Q08 | | | 3Q08 | | | 2Q08 | | | 1Q08 | | | 4Q07 | |
| |
| Net loan charge-offs | | $ | 342 | | | $ | 273 | | | $ | 524 | | | $ | 121 | | | $ | 119 | |
| Net loan charge-offs to average loans from continuing operations | | | 1.77 | % | | | 1.43 | % | | | 2.75 | % | | | .67 | % | | | .67 | % |
| Nonperforming loans at period end | | $ | 1,225 | | | $ | 967 | | | $ | 814 | | | $ | 1,054 | | | $ | 687 | |
| Nonperforming loans to period-end portfolio loans | | | 1.60 | % | | | 1.26 | % | | | 1.07 | % | | | 1.38 | % | | | .97 | % |
| Nonperforming assets at period end | | $ | 1,464 | | | $ | 1,239 | | | $ | 1,210 | | | $ | 1,115 | | | $ | 764 | |
| Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets | | | 1.91 | % | | | 1.61 | % | | | 1.59 | % | | | 1.46 | % | | | 1.08 | % |
| Allowance for loan losses | | $ | 1,803 | | | $ | 1,554 | | | $ | 1,421 | | | $ | 1,298 | | | $ | 1,200 | |
| Allowance for loan losses to period-end loans | | | 2.36 | % | | | 2.03 | % | | | 1.87 | % | | | 1.70 | % | | | 1.69 | % |
| Allowance for loan losses to nonperforming loans | | | 147.18 | | | | 160.70 | | | | 174.57 | | | | 123.15 | | | | 174.67 | |
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Net loan charge-offs for the quarter totaled $342 million, or 1.77% of average loans from continuing operations, compared to $119 million, or .67%, for the same period last year and $273 million, or 1.43%, for the previous quarter. In the current quarter, the Company experienced an increase in commercial loan net charge-offs related to automobile and marine floor plan lending, and the media segment within Institutional Banking. Key’s consumer segments, with the exception of education lending, also experienced increases. The net charge-offs in the commercial real estate portfolio reflect continued weakness in the housing market, while those in the other portfolios are attributable to weakness
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 6
in the economic environment. As shown in the table on page 7, Key’s exit loan portfolio accounted for $139 million, or 41%, of Key’s total net loan charge-offs for the fourth quarter of 2008.
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
| | | | | | | | | | | | | | | | | | | | | |
| dollars in millions | | 4Q08 | | | 3Q08 | | | 2Q08 | | | 1Q08 | | | 4Q07 | |
| |
| Commercial, financial and agricultural | | $ | 119 | | | $ | 62 | | | $ | 61 | | | $ | 36 | | | $ | 35 | |
| Real estate — commercial mortgage | | | 43 | | | | 20 | | | | 15 | | | | 4 | | | | 1 | |
| Real estate — construction | | | 49 | | | | 79 | | | | 339 | (a) | | | 25 | | | | 44 | |
| Commercial lease financing | | | 21 | | | | 19 | | | | 14 | | | | 9 | | | | 6 | |
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| Total commercial loans | | | 232 | | | | 180 | | | | 429 | | | | 74 | | | | 86 | |
| Home equity — Community Banking | | | 14 | | | | 9 | | | | 9 | | | | 8 | | | | 6 | |
| Home equity — National Banking | | | 17 | | | | 12 | | | | 10 | | | | 7 | | | | 6 | |
| Marine | | | 25 | | | | 16 | | | | 10 | | | | 16 | | | | 8 | |
| Education | | | 33 | | | | 40 | | | | 54 | (b) | | | 2 | | | | 2 | |
| Other | | | 21 | | | | 16 | | | | 12 | | | | 14 | | | | 11 | |
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| Total consumer loans | | | 110 | | | | 93 | | | | 95 | | | | 47 | | | | 33 | |
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| Total net loan charge-offs | | $ | 342 | | | $ | 273 | | | $ | 524 | | | $ | 121 | | | $ | 119 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net loan charge-offs to average loans from continuing operations | | | 1.77 | % | | | 1.43 | % | | | 2.75 | % | | | .67 | % | | | .67 | % |
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| | |
| (a) | | During the second quarter of 2008, Key transferred $384 million of commercial real estate loans ($719 million of primarily construction loans, net of $335 million in net charge-offs) from the loan portfolio to held-for-sale status. |
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| (b) | | On March 31, 2008, Key transferred $3.284 billion of education loans from loans held for sale to the loan portfolio. |
At December 31, 2008, Key’s nonperforming loans totaled $1.225 billion and represented 1.60% of period-end portfolio loans, compared to 1.26% at September 30, 2008, and .97% at December 31, 2007. Nonperforming assets at December 31, 2008, totaled $1.464 billion and represented 1.91% of portfolio loans, other real estate owned and other nonperforming assets, compared to 1.61% at September 30, 2008, and 1.08% at December 31, 2007. Almost 70% of the increase in commercial loans on nonperforming status during the fourth quarter of 2008 was attributable to automobile and marine floor plan lending. Approximately 35% of the increase in the construction portfolio relates to residential properties in the exit loan portfolio. As shown in the table on page 7, Key’s exit loan portfolio accounted for $481 million, or 33%, of Key’s total nonperforming assets for the fourth quarter of 2008. The decrease in nonperforming loans held for sale and the increase in OREO and other nonperforming assets during the fourth quarter were due in part to the previously discussed activity in the residential properties segment of Key’s construction loan portfolio.
The following table illustrates the trend in Key’s nonperforming assets by loan type over the past five quarters.
Nonperforming Assets
| | | | | | | | | | | | | | | | | | | | | |
| dollars in millions | | 4Q08 | | | 3Q08 | | | 2Q08 | | | 1Q08 | | | 4Q07 | |
| |
| Commercial, financial and agricultural | | $ | 415 | | | $ | 309 | | | $ | 259 | | | $ | 147 | | | $ | 84 | |
| Real estate — commercial mortgage | | | 128 | | | | 119 | | | | 107 | | | | 113 | | | | 41 | |
| Real estate — construction | | | 436 | | | | 334 | | | | 256 | | | | 610 | | | | 415 | |
| Commercial lease financing | | | 81 | | | | 55 | | | | 57 | | | | 38 | | | | 28 | |
| Total consumer loans | | | 165 | | | | 150 | | | | 135 | | | | 146 | | | | 119 | |
| |
| Total nonperforming loans | | | 1,225 | | | | 967 | | | | 814 | | | | 1,054 | | | | 687 | |
| Nonperforming loans held for sale | | | 90 | | | | 169 | | | | 342 | | | | 9 | | | | 25 | |
| OREO and other nonperforming assets | | | 149 | | | | 103 | | | | 54 | | | | 52 | | | | 52 | |
| |
| Total nonperforming assets | | $ | 1,464 | | | $ | 1,239 | | | $ | 1,210 | | | $ | 1,115 | | | $ | 764 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Nonperforming loans to period-end portfolio loans | | | 1.60 | % | | | 1.26 | % | | | 1.07 | % | | | 1.38 | % | | | .97 | % |
| Nonperforming assets to period-end portfolio loans, plus OREO and other nonperforming assets | | | 1.91 | | | | 1.61 | | | | 1.59 | | | | 1.46 | | | | 1.08 | |
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KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 7
The composition of Key’s exit loan portfolio at December 31, 2008, the net charge-offs recorded on this portfolio for the fourth quarter and the nonperforming status of these loans at December 31 are shown in the following table. This portfolio, which decreased by $300 million from September 30, 2008, accounted for 41% of Key’s net loan charge-offs for the fourth quarter of 2008 and 33% of nonperforming assets outstanding at the end of the year.
Exit Loan Portfolio
| | | | | | | | | | | | | |
| | | | | | | | | | | Balance on | |
| | | Balance | | | Net Loan | | | Nonperforming | |
| | | Outstanding at | | | Charge-offs | | | Status at | |
| in millions | | 12-31-08 | | | 4Q08 | | | 12-31-08 | |
| |
| Residential properties — homebuilder | | $ | 883 | | | $ | 47 | | | $ | 254 | |
| Residential properties — held for sale | | | 88 | | | | — | | | | 88 | |
| |
| Total residential properties | | | 971 | | | | 47 | | | | 342 | |
| Marine and RV floor plan | | | 945 | | | | 14 | | | | 91 | |
| |
| Total commercial loans | | | 1,916 | | | | 61 | | | | 433 | |
| Private education | | | 2,871 | | | | 33 | | | | — | |
| Home equity — National Banking | | | 1,051 | | | | 17 | | | | 15 | |
| Marine | | | 3,401 | | | | 25 | | | | 26 | |
| RV and other consumer | | | 283 | | | | 3 | | | | 7 | |
| |
| Total consumer loans | | | 7,606 | | | | 78 | | | | 48 | |
| |
| Total loans in exit portfolios | | $ | 9,522 | | | $ | 139 | | | $ | 481 | |
| | | | | | | | | | |
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Key’s allowance for loan losses was $1.803 billion, or 2.36% of loans outstanding, at December 31, 2008, compared to $1.554 billion, or 2.03%, at September 30, 2008, and $1.200 billion, or 1.69%, at December 31, 2007.
CAPITAL
Key’s capital ratios, as presented in the following table, continued to exceed all “well-capitalized” regulatory benchmarks at December 31, 2008.
Capital Ratios
| | | | | | | | | | | | | | | | | | | | | |
| | | 12-31-08 | | | 9-30-08 | | | 6-30-08 | | | 3-31-08 | | | 12-31-07 | |
| |
Tier 1 risk-based capital(a) | | | 10.81 | % | | | 8.55 | % | | | 8.53 | % | | | 8.33 | % | | | 7.44 | % |
Total risk-based capital(a) | | | 14.67 | | | | 12.40 | | | | 12.41 | | | | 12.34 | | | | 11.38 | |
| Tangible equity to tangible assets | | | 8.92 | | | | 6.95 | | | | 6.98 | | | | 6.85 | | | | 6.58 | |
| |
| | |
| (a) | | 12-31-08 ratio is estimated. |
During the fourth quarter, Key bolstered its capital position by $2.500 billion through participation in the U.S. Treasury’s Capital Purchase Program. In accordance with standardized terms, Key issued $2.414 billion, or 25,000 shares, of cumulative preferred stock, Series B, with a liquidation preference of $100,000 per share, and 35.2 million common stock warrants with a carrying amount of $87 million to the U.S. Treasury. Additionally, Key reduced its quarterly dividend per common share from $.1875 to $.0625, effective with the December 15, 2008, dividend payment.
During the fourth quarter, Key also reissued .2 million of its common shares under employee benefit plans. There was no repurchase activity by Key during the fourth quarter, and the Company currently does not anticipate any share repurchase activity in the foreseeable future.
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 8
Transactions that caused the change in Key’s outstanding common shares over the past five quarters are summarized in the following table.
Summary of Changes in Common Shares Outstanding
| | | | | | | | | | | | | | | | | | | | | |
| in thousands | | 4Q08 | | | 3Q08 | | | 2Q08 | | | 1Q08 | | | 4Q07 | |
| |
Shares outstanding at beginning of period | | | 494,765 | | | | 485,662 | | | | 400,071 | | | | 388,793 | | | | 388,708 | |
| Common shares issued | | | — | | | | 7,066 | | | | 85,106 | | | | — | | | | — | |
| Shares reissued to acquire U.S.B. Holding Co., Inc. | | | — | | | | — | | | | — | | | | 9,895 | | | | — | |
| Shares reissued under employee benefit plans | | | 237 | | | | 2,037 | | | | 485 | | | | 1,383 | | | | 85 | |
| |
Shares outstanding at end of period | | | 495,002 | | | | 494,765 | | | | 485,662 | | | | 400,071 | | | | 388,793 | |
| | | | | | | | | | | | | | | | |
| |
LINE OF BUSINESS RESULTS
The following table shows the contribution made by each major business group to Key’s taxable-equivalent revenue and (loss) income from continuing operations for the periods presented. The specific lines of business that comprise each of the major business groups are described under the heading “Line of Business Descriptions.” For more detailed financial information pertaining to each business group and its respective lines of business, see the tables at the end of this release. Key’s line of business results for all periods presented reflect a new organizational structure that took effect January 1, 2008.
Major Business Groups
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Percent change 4Q08 vs. | |
| dollars in millions | | 4Q08 | | | 3Q08 | | | 4Q07 | | | 3Q08 | | | 4Q07 | |
| |
Revenue from continuing operations (TE) | | | | | | | | | | | | | | | | | | | | |
| Community Banking | | $ | 644 | | | $ | 653 | | | $ | 653 | | | | (1.4 | )% | | | (1.4 | )% |
National Banking(a) | | | 539 | | | | 487 | | | | 610 | | | | 10.7 | | | | (11.6 | ) |
| Other Segments | | | (78 | ) | | | (17 | ) | | | 17 | | | | (358.8 | ) | | | N/M | |
| |
| Total Segments | | | 1,105 | | | | 1,123 | | | | 1,280 | | | | (1.6 | ) | | | (13.7 | ) |
| Reconciling Items | | | (60 | ) | | | (30 | ) | | | (42 | ) | | | (100.0 | ) | | | (42.9 | ) |
| |
| Total | | $ | 1,045 | | | $ | 1,093 | | | $ | 1,238 | | | | (4.4 | )% | | | (15.6 | )% |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
(Loss) income from continuing operations | | | | | | | | | | | | | | | | | | | | |
| Community Banking | | $ | 33 | | | $ | 95 | | | $ | 112 | | | | (65.3 | )% | | | (70.5 | )% |
National Banking(a) | | | (662 | ) | | | (130 | ) | | | (67 | ) | | | (409.2 | ) | | | (888.1 | ) |
Other Segments(b) | | | (41 | ) | | | 9 | | | | 21 | | | | N/M | | | | N/M | |
| |
| Total Segments | | | (670 | ) | | | (26 | ) | | | 66 | | | | N/M | | | | N/M | |
Reconciling Items(c) | | | 146 | | | | (10 | ) | | | (44 | ) | | | N/M | | | | N/M | |
| |
| Total | | $ | (524 | ) | | $ | (36 | ) | | $ | 22 | | | | N/M | | | | N/M | |
| | | | | | | | | | | | | | | | | | |
| |
| | |
| (a) | | National Banking’s results for the fourth quarter of 2008 include a $465 million ($420 million after tax) noncash charge for goodwill impairment. For the third quarter of 2008, National Banking’s results include $54 million ($33 million after tax) of derivative-related charges recorded as a result of market disruption caused by the failure of Lehman Brothers. |
| |
| (b) | | Other Segments’ results for the third quarter of 2008 include a $23 million ($14 million after tax) credit, representing the reversal of the remaining litigation reserve associated with the Honsador litigation, which was settled in September 2008. |
| |
| (c) | | Reconciling Items for the fourth quarter of 2008 include $120 million of previously accrued interest recovered in connection with Key’s opt-in to the IRS global tax settlement. For the third quarter of 2008, Reconciling Items include a $30 million charge to income taxes for the interest cost associated with the leveraged lease tax litigation. Reconciling Items for the fourth quarter of 2007 include a $64 million ($40 million after tax) charge, representing the fair value of Key’s potential liability to Visa Inc. at that time. |
TE = Taxable Equivalent, N/M = Not Meaningful
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 9
Community Banking
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Percent change 4Q08 vs. | |
| dollars in millions | | 4Q08 | | | 3Q08 | | | 4Q07 | | | 3Q08 | | | 4Q07 | |
| |
Summary of operations | | | | | | | | | | | | | | | | | | | | |
| Net interest income (TE) | | $ | 452 | | | $ | 440 | | | $ | 434 | | | | 2.7 | % | | | 4.1 | % |
| Noninterest income | | | 192 | | | | 213 | | | | 219 | | | | (9.9 | ) | | | (12.3 | ) |
| |
| Total revenue (TE) | | | 644 | | | | 653 | | | | 653 | | | | (1.4 | ) | | | (1.4 | ) |
| Provision for loan losses | | | 102 | | | | 56 | | | | 36 | | | | 82.1 | | | | 183.3 | |
| Noninterest expense | | | 489 | | | | 445 | | | | 438 | | | | 9.9 | | | | 11.6 | |
| |
| Income before income taxes (TE) | | | 53 | | | | 152 | | | | 179 | | | | (65.1 | ) | | | (70.4 | ) |
| Allocated income taxes and TE adjustments | | | 20 | | | | 57 | | | | 67 | | | | (64.9 | ) | | | (70.1 | ) |
| |
| Net income | | $ | 33 | | | $ | 95 | | | $ | 112 | | | | (65.3 | )% | | | (70.5 | )% |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Average balances | | | | | | | | | | | | | | | | | | | | |
| Loans and leases | | $ | 29,157 | | | $ | 28,872 | | | $ | 27,234 | | | | 1.0 | % | | | 7.1 | % |
| Total assets | | | 32,353 | | | | 31,955 | | | | 29,978 | | | | 1.2 | | | | 7.9 | |
| Deposits | | | 51,055 | | | | 50,384 | | | | 47,261 | | | | 1.3 | | | | 8.0 | |
| | | | | | | | | | | | | | | | | | | | | |
Assets under management at period end | | $ | 15,486 | | | $ | 18,278 | | | $ | 21,592 | | | | (15.3 | )% | | | (28.3 | )% |
| |
TE = Taxable Equivalent, N/M = Not Meaningful, N/A = Not Applicable
Additional Community Banking Data
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Percent change 4Q08 vs. | |
| dollars in millions | | 4Q08 | | | 3Q08 | | | 4Q07 | | | 3Q08 | | | 4Q07 | |
| |
Average deposits outstanding | | | | | | | | | | | | | | | | | | | | |
| NOW and money market deposit accounts | | $ | 17,700 | | | $ | 19,507 | | | $ | 20,471 | | | | (9.3 | )% | | | (13.5 | )% |
| Savings deposits | | | 1,695 | | | | 1,752 | | | | 1,514 | | | | (3.3 | ) | | | 12.0 | |
| Certificates of deposit ($100,000 or more) | | | 8,012 | | | | 6,875 | | | | 4,918 | | | | 16.5 | | | | 62.9 | |
| Other time deposits | | | 14,558 | | | | 13,103 | | | | 11,454 | | | | 11.1 | | | | 27.1 | |
| Deposits in foreign office | | | 980 | | | | 1,193 | | | | 1,254 | | | | (17.9 | ) | | | (21.9 | ) |
| Noninterest-bearing deposits | | | 8,110 | | | | 7,954 | | | | 7,650 | | | | 2.0 | | | | 6.0 | |
| |
| Total deposits | | $ | 51,055 | | | $ | 50,384 | | | $ | 47,261 | | | | 1.3 | % | | | 8.0 | % |
| | | | | | | | | | | | | | | | | | |
| |
Home equity loans | | | | | | | | | | | | | |
| Average balance | | $ | 10,036 | | | $ | 9,887 | | | $ | 9,658 | |
| Weighted-average loan-to-value ratio | | | 70 | % | | | 70 | % | | | 70 | % |
| Percent first lien positions | | | 54 | | | | 54 | | | | 57 | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Other data | | | | | | | | | | | | |
| Branches | | | 986 | | | | 986 | | | | 955 | | | | | | | | | |
| Automated teller machines | | | 1,478 | | | | 1,479 | | | | 1,443 | |
| | | | | | | | | |
Community Banking Summary of Operations
Community Banking recorded net income of $33 million for the fourth quarter of 2008, compared to $112 million for the year-ago quarter. Increases in the provision for loan losses and noninterest expense, coupled with a decrease in noninterest income caused the decline, and more than offset an increase in net interest income.
Taxable-equivalent net interest income rose by $18 million, or 4%, from the fourth quarter of 2007. The increase was attributable to a $1.905 billion, or 7%, rise in average earning assets, due largely to growth in the commercial loan portfolio, and a $3.794 billion, or 8%, increase in average deposits. Both loans and deposits experienced organic growth and benefited from the January 1 acquisition of U.S.B. Holding Co.
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 10
Noninterest income decreased by $27 million, or 12%, from the year-ago quarter as a result of lower income from both trust and investment services caused by declines in the financial markets, a reduction in service charges on deposit accounts, an increase in the reserve for default losses on client derivatives stemming primarily from the declining interest rate environment, and gains from the sales of securities recorded during the fourth quarter of 2007.
The provision for loan losses rose by $66 million compared to the fourth quarter of 2007, reflecting a $35 million increase in net loan charge-offs. Community Banking’s provision for loan losses for the fourth quarter of 2008 exceeded its net loan charge-offs by $36 million, as the Company continued to build reserves in a weak economy.
Noninterest expense increased by $51 million, or 12%, from the year-ago quarter as a result of increases in marketing and personnel expense, higher occupancy costs, a rise in internally allocated overhead and smaller increases in a variety of other expense components.
On January 1, 2008, Key acquired U.S.B. Holding Co., Inc., the holding company for Union State Bank, a 31-branch state-chartered commercial bank headquartered in Orangeburg, New York. The acquisition doubles Key’s branch penetration in the attractive Lower Hudson Valley area. Assets and deposits acquired in this transaction were assigned to both the Community Banking and National Banking groups.
National Banking
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Percent change 4Q08 vs. | |
| dollars in millions | | 4Q08 | | | 3Q08 | | | 4Q07 | | | 3Q08 | | | 4Q07 | |
| |
Summary of operations | | | | | | | | | | | | | | | | | | | | |
| Net interest income (TE) | | $ | 299 | | | $ | 327 | | | $ | 387 | | | | (8.6 | )% | | | (22.7 | )% |
| Noninterest income | | | 240 | | | | 160 | (a) | | | 223 | | | | 50.0 | | | | 7.6 | |
| |
| Total revenue (TE) | | | 539 | | | | 487 | | | | 610 | | | | 10.7 | | | | (11.6 | ) |
| Provision for loan losses | | | 489 | | | | 350 | | | | 327 | | | | 39.7 | | | | 49.5 | |
| Noninterest expense | | | 830 | (a) | | | 342 | | | | 388 | | | | 142.7 | | | | 113.9 | |
| |
Loss from continuing operations before income
taxes (TE) | | | (780 | ) | | | (205 | ) | | | (105 | ) | | | (280.5 | ) | | | (642.9 | ) |
| Allocated income taxes and TE adjustments | | | (118 | ) | | | (75 | ) | | | (38 | ) | | | (57.3 | ) | | | (210.5 | ) |
| |
| Loss from continuing operations | | | (662 | ) | | | (130 | ) | | | (67 | ) | | | (409.2 | ) | | | (888.1 | ) |
| Income from discontinued operations, net of taxes | | | — | | | | — | | | | 3 | | | | — | | | | (100.0 | ) |
| |
| Net loss | | $ | (662 | ) | | $ | (130 | ) | | $ | (64 | ) | | | (409.2 | )% | | | 934.4 | % |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Average balances from continuing operations | | | | | | | | | | | | | | | | | | | | |
| Loans and leases | | $ | 47,474 | | | $ | 47,075 | | | $ | 42,040 | | | | .8 | % | | | 12.9 | % |
| Loans held for sale | | | 1,404 | | | | 1,651 | | | | 4,709 | | | | (15.0 | ) | | | (70.2 | ) |
| Total assets | | | 56,996 | | | | 56,183 | | | | 53,335 | | | | 1.4 | | | | 6.9 | |
| Deposits | | | 12,305 | | | | 12,439 | | | | 12,622 | | | | (1.1 | ) | | | (2.5 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Assets under management at period end | | $ | 49,231 | | | $ | 58,398 | | | $ | 63,850 | | | | (15.7 | )% | | | (22.9 | )% |
| |
| | |
| (a) | National Banking’s results for the fourth quarter of 2008 include a $465 million ($420 million after tax) noncash charge for goodwill impairment. For the third quarter of 2008, National Banking’s results include $54 million ($33 million after tax) of derivative-related charges recorded as a result of market disruption caused by the failure of Lehman Brothers. |
TE = Taxable Equivalent, N/M = Not Meaningful, N/A = Not Applicable
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 11
National Banking Summary of Continuing Operations
National Banking recorded a loss of $662 million from continuing operations for the fourth quarter of 2008, compared to a loss of $67 million for the same period one year ago. During the fourth quarter of 2008, results were adversely affected by a goodwill impairment charge of $465 million ($420 million, after tax), which resulted from a reduction in the fair value of net assets caused by weakness in the financial markets. Also contributing to the less favorable results was a substantially higher provision for loan losses and lower net interest income, offset in part by growth in noninterest income.
Taxable-equivalent net interest income decreased by $88 million, or 23%, from the fourth quarter of 2007, due primarily to the reduction caused by recalculations of income recognized on leveraged leases contested by the IRS. Also contributing to the decrease were tighter loan and deposit spreads, and a higher level of nonperforming assets. Average loans and leases grew by $5.434 billion, or 13%, while the level of average deposits was down $317 million, or 3%, from the year-ago quarter. Contributing to the loan growth was the March 31, 2008, transfer of $3.284 billion of education loans from loans held for sale to the loan portfolio.
Noninterest income rose by $17 million, or 8%, from the fourth quarter of 2007. The improvement reflects a $9 million increase in income from trust and investment services, a $13 million increase in gains on leased equipment, and net loan sale gains of $1 million in the current year, compared to net losses of $9 million in the year-ago quarter. These improvements were partially offset by a $16 million decrease in loan fees.
The provision for loan losses rose by $162 million, due primarily to higher levels of net loan charge-offs from the commercial, commercial real estate, education and marine loan portfolios. National Banking’s provision for loan losses for the fourth quarter of 2008 exceeded its net loan charge-offs by $213 million, as the Company continued to build reserves in a weak economy.
Excluding the goodwill impairment charge recorded during the fourth quarter of 2008, noninterest expense decreased by $23 million, or 6%, from the fourth quarter of 2007, reflecting a $7 million credit for losses on lending-related commitments in the current quarter, compared to a $22 million provision in the fourth quarter of 2007.
Other Segments
Other segments consist of Corporate Treasury and Key’s Principal Investing unit. These segments generated a net loss of $41 million for the fourth quarter of 2008, compared to net income of $21 million for the same period last year. These results reflect net losses of $33 million from principal investing in the fourth quarter of 2008, compared to net gains of $6 million for the same period last year. Additionally, during the fourth quarter of 2008, Key recorded net losses of $39 million related to the volatility associated with the hedge accounting applied to debt instruments, compared to net gains of $3 million in the year-ago quarter. The majority of the net losses are attributable to the restructuring of certain cash collateral arrangements for hedges that reduced exposure to counterparty risk and lowered the cost of borrowings.
Line of Business Descriptions
Community Banking
Regional Bankingprovides 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.
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 12
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 Bankingprovides midsize businesses with products and services that include commercial lending, cash management, equipment leasing, investment and employee benefit programs, succession planning, access to capital markets, derivatives and foreign exchange.
National Banking
Real Estate Capital and Corporate Banking Servicesconsists of two business units. 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). Particular emphasis has been placed on 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 throughout the Community Banking and National Banking groups. Through its Public Sector and Financial Institutions businesses, Corporate Banking Services provides a full array of commercial banking products and services to government and not-for-profit entities, and to community banks.
Equipment Financemeets 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 Marketsthrough its KeyBanc Capital Markets unit provides commercial lending, treasury management, investment banking, derivatives and foreign exchange, equity and debt underwriting and trading, and syndicated finance products and services to large corporations and middle-market companies.
Through its Victory Capital Management unit, Institutional and Capital Markets also manages or offers advice regarding investment portfolios for a national client base, including corporations, labor unions, not-for-profit organizations, governments and individuals. These portfolios may be managed in separate accounts, common funds or the Victory family of mutual funds.
Consumer Financeprovides government guaranteed education loans to students and their parents, and processes tuition payments for private schools. Through its Commercial Floor Plan Lending unit, this line of business also finances inventory for automobile dealers. In October 2008, Consumer Finance exited direct and indirect retail and floor-plan lending for marine and recreational vehicle products and began to limit new education loans to those backed by government guarantee. It continues to service existing loans in these portfolios and to honor existing education loan commitments. These actions are consistent with Key’s strategy of de-emphasizing nonrelationship or out-of-footprint businesses.
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 13
Cleveland-based KeyCorp is one of the nation’s largest bank-based financial services companies, with assets of $105 billion. Key companies provide investment management, retail and commercial banking, consumer finance, and investment banking products and services to individuals and companies throughout the United States and, for certain businesses, internationally. The company’s businesses deliver their products and services through 986 branches and additional offices; a network of 1,478 ATMs; telephone banking centers (1.800.KEY2YOU); and a Web site,https://www.key.com/,® that provides account access and financial products 24 hours a day.
Notes to Editors:
A live Internet broadcast of KeyCorp’s conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts’ questions can be accessed through the Investor Relations section athttps://www.key.com/irat 9:00 a.m. ET, on Thursday, January 22, 2009. An audio replay of the call will be available through January 29.
For up-to-date company information, media contacts and facts and figures about Key’s lines of business visit our Media Newsroom athttps://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 our 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 may cause actual results to differ materially include, among other things: (1) changes in interest rates; (2) changes in trade, monetary or fiscal policy; (3) continued disruption in the fixed income markets; (4) adverse capital markets conditions; (5) continuation of the recent deterioration in general economic conditions, or in the condition of the local economies or industries in which we have significant operations or assets, which could, among other things, materially impact credit quality trends and our ability to generate loans; (6) continued disruption in the housing markets and related conditions in the financial markets; (7) increased competitive pressure among financial services companies due to the recent consolidation of competing financial institutions and the conversion of certain investment banks to bank holding companies; (8) heightened legal standards and regulatory practices, requirements or expectations; (9) the inability to successfully execute strategic initiatives designed to grow revenues and/or manage expenses; (10) increased FDIC deposit insurance premiums; (11) consummation of significant business combinations or divestitures; (12) operational or risk management failures due to technological or other factors; (13) changes in accounting or tax practices or requirements; (14) new legal obligations or liabilities or unfavorable resolution of litigation; and (15) disruption in the economy and general business climate as a result of terrorist activities or military actions.
For additional information on KeyCorp and the factors that could cause Key’s actual results or financial condition to differ materially from those described in the forward-looking statements consult Key’s Annual Report on Form 10-K for the year ended December 31, 2007, and subsequent filings with the Securities and Exchange Commission available 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. We do not assume any obligation to update these forward-looking statements.
###
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 14
Financial Highlights
(dollars in millions, except per share amounts)
| | | | | | | | | | | | | |
| | | Three months ended |
| | | 12-31-08 | | | 9-30-08 | | | 12-31-07 | |
| |
Summary of operations | | | | | | | | | | | | |
| Net interest income (TE) | | $ | 646 | (a) | | $ | 705 | (a) | | $ | 750 | |
| Noninterest income | | | 399 | | | | 388 | | | | 488 | |
| |
| Total revenue (TE) | | | 1,045 | | | | 1,093 | | | | 1,238 | |
| Provision for loan losses | | | 594 | | | | 407 | | | | 363 | |
| Noninterest expense | | | 1,303 | | | | 762 | | | | 896 | |
| (Loss) income from continuing operations | | | (524 | ) | | | (36 | ) | | | 22 | |
Income from discontinued operations, net of taxes (b) | | | — | | | | — | | | | 3 | |
| Net (loss) income | | | (524 | )(a) | | | (36 | )(a) | | | 25 | |
| Net (loss) income applicable to common shares | | | (554 | ) | | | (48 | ) | | | 25 | |
| | | | | | | | | | | | | |
Per common share | | | | | | | | | | | | |
| (Loss) income from continuing operations | | $ | (1.13 | ) | | $ | (.10 | ) | | $ | .06 | |
| (Loss) income from continuing operations — assuming dilution | | | (1.13 | ) | | | (.10 | ) | | | .06 | |
Income from discontinued operations(b) | | | — | | | | — | | | | .01 | |
Income from discontinued operations — assuming dilution (b) | | | — | | | | — | | | | .01 | |
| Net (loss) income | | | (1.13 | ) | | | (.10 | ) | | | .06 | |
| Net (loss) income — assuming dilution | | | (1.13 | )(a) | | | (.10 | )(a) | | | .06 | |
| Cash dividends paid | | | .0625 | | | | .1875 | | | | .365 | |
| Book value at period end | | | 14.97 | | | | 16.16 | | | | 19.92 | |
| Tangible book value at period end | | | 12.41 | | | | 12.66 | | | | 16.39 | |
| Market price at period end | | | 8.52 | | | | 11.94 | | | | 23.45 | |
| | | | | | | | | | | | | |
Performance ratios — from continuing operations | | | | | | | | | | | | |
| Return on average total assets | | | (1.93 | )% | | | (.14 | )% | | | .09 | % |
| Return on average common equity | | | (27.65 | ) | | | (2.36 | ) | | | 1.11 | |
| Return on average total equity | | | (21.08 | ) | | | (1.64 | ) | | | 1.11 | |
| Net interest margin (TE) | | | 2.76 | | | | 3.13 | | | | 3.48 | |
| | | | | | | | | | | | | |
Performance ratios — from consolidated operations | | | | | | | | | | | | |
| Return on average total assets | | | (1.93 | )%(a) | | | (.14 | )%(a) | | | .10 | % |
| Return on average common equity | | | (27.65 | )(a) | | | (2.36 | )(a) | | | 1.26 | |
| Return on average total equity | | | (21.08 | )(a) | | | (1.64 | )(a) | | | 1.26 | |
| Net interest margin (TE) | | | 2.76 | (a) | | | 3.13 | (a) | | | 3.48 | |
| | | | | | | | | | | | | |
Capital ratios at period end | | | | | | | | | | | | |
| Equity to assets | | | 10.03 | % | | | 8.54 | % | | | 7.89 | % |
| Tangible equity to tangible assets | | | 8.92 | | | | 6.95 | | | | 6.58 | |
| Tangible common equity to tangible assets | | | 5.95 | | | | 6.29 | | | | 6.58 | |
Tier 1 risk-based capital (c) | | | 10.81 | | | | 8.55 | | | | 7.44 | |
Total risk-based capital(c) | | | 14.67 | | | | 12.40 | | | | 11.38 | |
Leverage (c) | | | 11.03 | | | | 9.28 | | | | 8.39 | |
| | | | | | | | | | | | | |
Asset quality | | | | | | | | | | | | |
| Net loan charge-offs | | $ | 342 | | | $ | 273 | | | $ | 119 | |
| Net loan charge-offs to average loans from continuing operations | | | 1.77 | % | | | 1.43 | % | | | .67 | % |
| Allowance for loan losses | | $ | 1,803 | | | $ | 1,554 | | | $ | 1,200 | |
| Allowance for loan losses to period-end loans | | | 2.36 | % | | | 2.03 | % | | | 1.69 | % |
| Allowance for loan losses to nonperforming loans | | | 147.18 | | | | 160.70 | | | | 174.67 | |
| Nonperforming loans at period end | | $ | 1,225 | | | $ | 967 | | | $ | 687 | |
| Nonperforming assets at period end | | | 1,464 | | | | 1,239 | | | | 764 | |
| Nonperforming loans to period-end portfolio loans | | | 1.60 | % | | | 1.26 | % | | | .97 | % |
| Nonperforming assets to period-end portfolio loans plus | | | | | | | | | | | | |
| OREO and other nonperforming assets | | | 1.91 | | | | 1.61 | | | | 1.08 | |
| | | | | | | | | | | | | |
Trust and brokerage assets | | | | | | | | | | | | |
| Assets under management | | $ | 64,717 | | | $ | 76,676 | | | $ | 85,442 | |
| Nonmanaged and brokerage assets | | | 22,728 | | | | 27,187 | | | | 33,918 | |
| | | | | | | | | | | | | |
Other data | | | | | | | | | | | | |
| Average full-time equivalent employees | | | 17,697 | | | | 18,098 | | | | 18,500 | |
| Branches | | | 986 | | | | 986 | | | | 955 | |
| | | | | | | | | | | | | |
| Taxable-equivalent adjustment | | $ | 7 | | | $ | 6 | | | $ | 40 | |
| |
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 15
Financial Highlights (continued)
(dollars in millions, except per share amounts)
| | | | | | | | | |
| | | Twelve months ended |
| | | 12-31-08 | | | 12-31-07 | |
| |
Summary of operations | | | | | | | | |
| Net interest income (TE) | | $ | 1,955 | (a) | | $ | 2,868 | |
| Noninterest income | | | 1,870 | | | | 2,229 | |
| |
| Total revenue (TE) | | | 3,825 | | | | 5,097 | |
| Provision for loan losses | | | 1,835 | | | | 529 | |
| Noninterest expense | | | 3,578 | | | | 3,248 | |
| (Loss) income from continuing operations | | | (1,468 | ) | | | 941 | |
Loss from discontinued operations, net of taxes (b) | | | — | | | | (22 | ) |
| Net (loss) income | | | (1,468 | )(a) | | | 919 | |
| Net (loss) income applicable to common shares | | | (1,510 | ) | | | 919 | |
| | | | | | | | | |
Per common share | | | | | | | | |
| (Loss) income from continuing operations | | $ | (3.36 | ) | | $ | 2.40 | |
| (Loss) income from continuing operations — assuming dilution | | | (3.36 | ) | | | 2.38 | |
Loss from discontinued operations (b) | | | — | | | | (.06 | ) |
Loss from discontinued operations — assuming dilution (b) | | | — | | | | (.05 | ) |
| Net (loss) income | | | (3.36 | ) | | | 2.35 | |
| Net (loss) income — assuming dilution | | | (3.36 | )(a) | | | 2.32 | |
| Cash dividends paid | | | 1.00 | | | | 1.46 | |
| | | | | | | | | |
Performance ratios — from continuing operations | | | | | | | | |
| Return on average total assets | | | (1.41) | % | | | .99 | % |
| Return on average common equity | | | (18.32 | ) | | | 12.19 | |
| Return on average total equity | | | (16.45 | ) | | | 12.19 | |
| Net interest margin (TE) | | | 2.16 | | | | 3.46 | |
| | | | | | | | | |
Performance ratios — from consolidated operations | | | | | | | | |
| Return on average total assets | | | (1.41) | %(a) | | | .97 | % |
| Return on average common equity | | | (18.32 | )(a) | | | 11.90 | |
| Return on average total equity | | | (16.45 | )(a) | | | 11.90 | |
| Net interest margin (TE) | | | 2.16 | (a) | | | 3.46 | |
| | | | | | | | | |
Asset quality | | | | | | | | |
| Net loan charge-offs | | $ | 1,260 | | | $ | 275 | |
| Net loan charge-offs to average loans from continuing operations | | | 1.67 | % | | | .41 | % |
| | | | | | | | | |
Other data | | | | | | | | |
| Average full-time equivalent employees | | | 18,095 | | | | 18,934 | |
| | | | | | | | | |
| Taxable-equivalent adjustment | | $ | (454 | ) | | $ | 99 | |
| |
| | |
| (a) | | The following table entitled “GAAP to Non-GAAP Reconciliations” presents certain earnings data and performance ratios, excluding (credits) charges related to the tax treatment of certain leveraged lease financing transactions disallowed by the Internal Revenue Service, and the charge resulting from Key’s annual goodwill impairment testing completed during the fourth quarter of 2008. The table reconciles certain GAAP performance measures to the corresponding non-GAAP measures and provides a basis for period-to-period comparisons. |
| |
| (b) | | Key sold the subprime mortgage loan portfolio held by the Champion Mortgage finance business in November 2006, and completed the sale of Champion’s origination platform in February 2007. As a result of these actions, Key has accounted for this business as a discontinued operation. |
| |
| (c) | | 12-31-08 ratio is estimated. |
| |
| TE = Taxable Equivalent |
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 16
GAAP to Non-GAAP Reconciliations
(dollars in millions, except per share amounts)
During the fourth quarter of 2008, Key recorded an after-tax credit of $120 million, or $.24 per common share, in connection with its opt-in to the IRS global tax settlement. As a result of an adverse federal court decision on Key’s tax treatment of a Service Contract Lease transaction entered into by AWG Leasing Trust, in which Key is a partner, Key recorded after-tax charges of $30 million, or $.06 per common share, during the third quarter of 2008 and $1.011 billion, or $2.43 per common share, during the second quarter of 2008. During the first quarter of 2008, Key increased its tax reserves for certain lease in, lease out transactions and recalculated its lease income in accordance with prescribed accounting standards, resulting in after-tax charges of $38 million, or $.10 per common share.
Additionally, during the fourth quarter of 2008, Key recorded an after-tax charge of $420 million, or $.85 per common share, as a result of its annual goodwill impairment testing. During the third quarter of 2008, Key recorded an after-tax charge of $4 million, or $.01 per common share, as a result of goodwill impairment related to management’s decision to limit new education loans.
The table below presents certain earnings data and performance ratios, excluding these (credits) charges (non-GAAP), reconciles the GAAP performance measures to the corresponding non-GAAP measures and provides a basis for period-to-period comparisons. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. Non-GAAP financial measures should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Twelve | |
| | | Three months ended | | | months ended | |
| | | 12-31-08 | | | 9-30-08 | | | 6-30-08 | | | 3-31-08 | | | 12-31-08 | |
| | |
Net income | | | | | | | | | | | | | | | | | | | | |
| Net (loss) income (GAAP) | | $ | (524 | ) | | $ | (36 | ) | | $ | (1,126 | ) | | $ | 218 | | | $ | (1,468 | ) |
| (Credits) charges related to leveraged lease tax litigation, after tax | | | (120 | ) | | | 30 | | | | 1,011 | | | | 38 | | | | 959 | |
| Charges related to goodwill impairment, after tax | | | 420 | | | | 4 | | | | — | | | | — | | | | 424 | |
| |
| Net (loss) income, excluding (credits) charges related to leveraged lease tax litigation and goodwill impairment (non-GAAP) | | $ | (224 | ) | | $ | (2 | ) | | $ | (115 | ) | | $ | 256 | | | $ | (85 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Preferred dividends | | $ | 30 | | | $ | 12 | | | | — | | | | — | | | $ | 42 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net (loss) income applicable to common shares (GAAP) | | $ | (554 | ) | | $ | (48 | ) | | $ | (1,126 | ) | | $ | 218 | | | $ | (1,510 | ) |
| Net (loss) income applicable to common shares, excluding (credits) charges related to leveraged lease tax litigation and goodwill impairment (non-GAAP) | | | (254 | ) | | | (14 | ) | | | (115 | ) | | | 256 | | | | (127 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Per common share | | | | | | | | | | | | | | | | | | | | |
| Net (loss) income — assuming dilution (GAAP) | | $ | (1.13 | ) | | $ | (.10 | ) | | $ | (2.70 | ) | | $ | .54 | | | $ | (3.36 | ) |
| Net (loss) income, excluding (credits) charges related to leveraged lease tax litigation and goodwill impairment — assuming dilution (non-GAAP) | | | (.52 | ) | | | (.03 | ) | | | (.28 | ) | | | .64 | | | | (.28 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Performance ratios | | | | | | | | | | | | | | | | | | | | |
Return on average total assets (a) | | | | | | | | | | | | | | | | | | | | |
| Average total assets | | $ | 107,735 | | | $ | 103,156 | | | $ | 103,290 | | | $ | 103,356 | | | $ | 104,390 | |
| | | | | | | | | | | | | | | | | | | | | |
| Return on average total assets (GAAP) | | | (1.93 | )% | | | (.14 | )% | | | (4.38 | )% | | | .85 | % | | | (1.41 | )% |
| Return on average total assets, excluding (credits) charges related to leveraged lease tax litigation and goodwill impairment (non-GAAP) | | | (.83 | ) | | | (.01 | ) | | | (.45 | ) | | | 1.00 | | | | (.08 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Return on average common equity (a) | | | | | | | | | | | | | | | | | | | | |
| Average common equity | | $ | 7,971 | | | $ | 8,077 | | | $ | 8,489 | | | $ | 8,445 | | | $ | 8,244 | |
| | | | | | | | | | | | | | | | | | | | | |
| Return on average common equity (GAAP) | | | (27.65 | )% | | | (2.36 | )% | | | (53.35 | )% | | | 10.38 | % | | | (18.32 | )% |
| Return on average common equity, excluding (credits) charges related to leveraged lease tax litigation and goodwill impairment (non-GAAP) | | | (12.68 | ) | | | (.69 | ) | | | (5.45 | ) | | | 12.19 | | | | (1.54 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Return on average total equity (a) | | | | | | | | | | | | | | | | | | | | |
| Average total equity | | $ | 9,888 | | | $ | 8,734 | | | $ | 8,617 | | | $ | 8,445 | | | $ | 8,923 | |
| | | | | | | | | | | | | | | | | | | | | |
| Return on average total equity (GAAP) | | | (21.08 | )% | | | (1.64 | )% | | | (52.56 | )% | | | 10.38 | % | | | (16.45 | )% |
| Return on average total equity, excluding (credits) charges related to leveraged lease tax litigation and goodwill impairment (non-GAAP) | | | (9.01 | ) | | | (.09 | ) | | | (5.37 | ) | | | 12.19 | | | | (.95 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Net interest income and margin | | | | | | | | | | | | | | | | | | | | |
Net interest income | | | | | | | | | | | | | | | | | | | | |
| Net interest income (GAAP) | | $ | 639 | | | $ | 699 | | | $ | 358 | | | $ | 713 | | | $ | 2,409 | |
| Charges related to leveraged lease tax litigation, pre-tax | | | 18 | | | | — | | | | 359 | | | | 3 | | | | 380 | |
| |
| Net interest income, excluding charges related to leveraged lease tax litigation (non-GAAP) | | $ | 657 | | | $ | 699 | | | $ | 717 | | | $ | 716 | | | $ | 2,789 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Net interest income/margin (TE) | | | | | | | | | | | | | | | | | | | | |
| Net interest income (loss) (TE) (as reported) | | $ | 646 | | | $ | 705 | | | $ | (100 | ) | | $ | 704 | | | $ | 1,955 | |
| Charges related to leveraged lease tax litigation, pre-tax (TE) | | | 18 | | | | — | | | | 838 | | | | 34 | | | | 890 | |
| |
| Net interest income, excluding charges related to leveraged lease tax litigation (TE) (adjusted basis) | | $ | 664 | | | $ | 705 | | | $ | 738 | | | $ | 738 | | | $ | 2,845 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Net interest margin (TE) (as reported)(a) | | | 2.76 | % | | | 3.13 | % | | | (.44 | )% | | | 3.14 | % | | | 2.16 | % |
Impact of charges related to leveraged lease tax litigation, pre-tax (TE)(a) | | | .08 | | | | — | | | | 3.76 | | | | .15 | | | | .98 | |
| |
Net interest margin, excluding charges related to leveraged lease tax litigation (TE) (adjusted basis) (a) | | | 2.84 | % | | | 3.13 | % | | | 3.32 | % | | | 3.29 | % | | | 3.14 | % |
| | | | | | | | | | | | | | | | |
| |
| | |
| (a) | | Income statement amount has been annualized in calculation of percentage. |
| |
| TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles |
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 17
Consolidated Balance Sheets
(dollars in millions)
| | | | | | | | | | | | | |
| | | 12-31-08 | | | 9-30-08 | | | 12-31-07 | |
| |
ASSETS | | | | | | | | | | | | |
| Loans | | $ | 76,504 | | | $ | 76,705 | | | $ | 70,823 | |
| Loans held for sale | | | 1,027 | | | | 1,475 | | | | 4,736 | |
| Securities available for sale | | | 8,437 | | | | 8,391 | | | | 7,860 | |
| Held-to-maturity securities | | | 25 | | | | 28 | | | | 28 | |
| Trading account assets | | | 1,280 | | | | 1,449 | | | | 1,056 | |
| Short-term investments | | | 5,221 | | | | 653 | | | | 516 | |
| Other investments | | | 1,526 | | | | 1,556 | | | | 1,538 | |
| |
| Total earning assets | | | 94,020 | | | | 90,257 | | | | 86,557 | |
| Allowance for loan losses | | | (1,803 | ) | | | (1,554 | ) | | | (1,200 | ) |
| Cash and due from banks | | | 1,257 | | | | 1,937 | | | | 1,814 | |
| Premises and equipment | | | 840 | | | | 801 | | | | 681 | |
| Operating lease assets | | | 990 | | | | 1,030 | | | | 1,128 | |
| Goodwill | | | 1,138 | | | | 1,595 | | | | 1,252 | |
| Other intangible assets | | | 128 | | | | 135 | | | | 123 | |
| Corporate-owned life insurance | | | 2,970 | | | | 2,940 | | | | 2,872 | |
| Derivative assets | | | 1,896 | | | | 951 | | | | 879 | |
| Accrued income and other assets | | | 3,095 | | | | 3,198 | | | | 4,122 | |
| |
| Total assets | | $ | 104,531 | | | $ | 101,290 | | | $ | 98,228 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
LIABILITIES | | | | | | | | | | | | |
| Deposits in domestic offices: | | | | | | | | | | | | |
| NOW and money market deposit accounts | | $ | 24,191 | | | $ | 25,789 | | | $ | 27,635 | |
| Savings deposits | | | 1,712 | | | | 1,731 | | | | 1,513 | |
| Certificates of deposit ($100,000 or more) | | | 11,991 | | | | 10,316 | | | | 6,982 | |
| Other time deposits | | | 14,763 | | | | 13,929 | | | | 11,615 | |
| |
| Total interest-bearing deposits | | | 52,657 | | | | 51,765 | | | | 47,745 | |
| Noninterest-bearing deposits | | | 11,485 | | | | 11,122 | | | | 11,028 | |
| Deposits in foreign office — interest-bearing | | | 1,118 | | | | 1,791 | | | | 4,326 | |
| |
| Total deposits | | | 65,260 | | | | 64,678 | | | | 63,099 | |
| Federal funds purchased and securities sold under repurchase agreements | | | 1,557 | | | | 1,799 | | | | 3,927 | |
| Bank notes and other short-term borrowings | | | 8,477 | | | | 5,352 | | | | 5,861 | |
| Derivative liabilities | | | 1,038 | | | | 589 | | | | 252 | |
| Accrued expense and other liabilities | | | 2,724 | | | | 4,624 | | | | 5,386 | |
| Long-term debt | | | 14,995 | | | | 15,597 | | | | 11,957 | |
| |
| Total liabilities | | | 94,051 | | | | 92,639 | | | | 90,482 | |
| | | | | | | | | | | | | |
SHAREHOLDERS’ EQUITY | | | | | | | | | | | | |
| Preferred stock, Series A | | | 658 | | | | 658 | | | | — | |
| Preferred stock, Series B | | | 2,414 | | | | — | | | | — | |
| Common shares | | | 584 | | | | 584 | | | | 492 | |
| Common stock warrants | | | 87 | | | | — | | | | — | |
| Capital surplus | | | 2,553 | | | | 2,552 | | | | 1,623 | |
| Retained earnings | | | 6,727 | | | | 7,320 | | | | 8,522 | |
| Treasury stock, at cost | | | (2,608 | ) | | | (2,616 | ) | | | (3,021 | ) |
| Accumulated other comprehensive income | | | 65 | | | | 153 | | | | 130 | |
| |
| Total shareholders’ equity | | | 10,480 | | | | 8,651 | | | | 7,746 | |
| |
| Total liabilities and shareholders’ equity | | $ | 104,531 | | | $ | 101,290 | | | $ | 98,228 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Common shares outstanding (000) | | | 495,002 | | | | 494,765 | | | | 388,793 | |
| |
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 18
Consolidated Statements of Income
(dollars in millions, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended | | | Twelve months ended | |
| | | 12-31-08 | | | 9-30-08 | | | 12-31-07 | | | 12-31-08 | | | 12-31-07 | |
Interest income | | | | | | | | | | | | | | | | | | | | |
| Loans | | $ | 996 | | | $ | 1,066 | | | $ | 1,205 | | | $ | 3,902 | | | $ | 4,751 | |
| Loans held for sale | | | 18 | | | | 21 | | | | 89 | | | | 146 | | | | 337 | |
| Securities available for sale | | | 110 | | | | 110 | | | | 115 | | | | 440 | | | | 427 | |
| Held-to-maturity securities | | | 1 | | | | 1 | | | | 1 | | | | 3 | | | | 2 | |
| Trading account assets | | | 17 | | | | 16 | | | | 12 | | | | 56 | | | | 38 | |
| Short-term investments | | | 8 | | | | 6 | | | | 13 | | | | 31 | | | | 37 | |
| Other investments | | | 13 | | | | 12 | | | | 12 | | | | 51 | | | | 52 | |
| |
| Total interest income | | | 1,163 | | | | 1,232 | | | | 1,447 | | | | 4,629 | | | | 5,644 | |
| | | | | | | | | | | | | | | | | | | | | |
Interest expense | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | 346 | | | | 347 | | | | 483 | | | | 1,468 | | | | 1,845 | |
| Federal funds purchased and securities sold under repurchase agreements | | | 4 | | | | 10 | | | | 45 | | | | 57 | | | | 208 | |
| Bank notes and other short-term borrowings | | | 31 | | | | 34 | | | | 45 | | | | 131 | | | | 104 | |
| Long-term debt | | | 143 | | | | 142 | | | | 164 | | | | 564 | | | | 718 | |
| |
| Total interest expense | | | 524 | | | | 533 | | | | 737 | | | | 2,220 | | | | 2,875 | |
| |
| | | | | | | | | | | | | | | | | | | | | |
Net interest income | | | 639 | | | | 699 | | | | 710 | | | | 2,409 | | | | 2,769 | |
| Provision for loan losses | | | 594 | | | | 407 | | | | 363 | | | | 1,835 | | | | 529 | |
| |
| Net interest income after provision for loan losses | | | 45 | | | | 292 | | | | 347 | | | | 574 | | | | 2,240 | |
| | | | | | | | | | | | | | | | | | | | | |
Noninterest income | | | | | | | | | | | | | | | | | | | | |
| Trust and investment services income | | | 138 | | | | 133 | | | | 131 | | | | 538 | | | | 490 | |
| Service charges on deposit accounts | | | 90 | | | | 94 | | | | 90 | | | | 365 | | | | 337 | |
| Operating lease income | | | 64 | | | | 69 | | | | 72 | | | | 270 | | | | 272 | |
| Letter of credit and loan fees | | | 42 | | | | 53 | | | | 58 | | | | 183 | | | | 192 | |
| Corporate-owned life insurance income | | | 33 | | | | 28 | | | | 37 | | | | 117 | | | | 121 | |
| Electronic banking fees | | | 25 | | | | 27 | | | | 25 | | | | 103 | | | | 99 | |
| Insurance income | | | 15 | | | | 15 | | | | 10 | | | | 65 | | | | 55 | |
| Investment banking and capital markets income (loss) | | | 6 | | | | (31 | ) | | | 12 | | | | 63 | | | | 117 | |
| Net securities (losses) gains | | | (5 | ) | | | 1 | | | | 6 | | | | (2 | ) | | | (35 | ) |
| Net (losses) gains from principal investing | | | (33 | ) | | | (24 | ) | | | 6 | | | | (62 | ) | | | 134 | |
| Net gains (losses) from loan securitizations and sales | | | 3 | | | | (30 | ) | | | (6 | ) | | | (95 | ) | | | (17 | ) |
| Gain from redemption of Visa Inc. shares | | | — | | | | — | | | | — | | | | 165 | | | | — | |
| Gain from sale of McDonald Investments branch network | | | — | | | | — | | | | — | | | | — | | | | 171 | |
| Other income | | | 21 | | | | 53 | | | | 47 | | | | 160 | | | | 293 | |
| |
| Total noninterest income | | | 399 | | | | 388 | | | | 488 | | | | 1,870 | | | | 2,229 | |
| | | | | | | | | | | | | | | | | | | | | |
Noninterest expense | | | | | | | | | | | | | | | | | | | | |
| Personnel | | | 411 | | | | 381 | | | | 399 | | | | 1,605 | | | | 1,621 | |
| Net occupancy | | | 68 | | | | 65 | | | | 64 | | | | 261 | | | | 246 | |
| Operating lease expense | | | 55 | | | | 56 | | | | 59 | | | | 224 | | | | 224 | |
| Computer processing | | | 51 | | | | 46 | | | | 52 | | | | 187 | | | | 201 | |
| Professional fees | | | 51 | | | | 35 | | | | 38 | | | | 142 | | | | 117 | |
| Equipment | | | 22 | | | | 23 | | | | 25 | | | | 92 | | | | 96 | |
| Marketing | | | 25 | | | | 27 | | | | 16 | | | | 87 | | | | 76 | |
| Goodwill impairment | | | 465 | | | | 4 | | | | 5 | | | | 469 | | | | 5 | |
| Other expense | | | 155 | | | | 125 | | | | 238 | | | | 511 | | | | 662 | |
| |
| Total noninterest expense | | | 1,303 | | | | 762 | | | | 896 | | | | 3,578 | | | | 3,248 | |
| |
(Loss) income from continuing operations before income taxes | | | (859 | ) | | | (82 | ) | | | (61 | ) | | | (1,134 | ) | | | 1,221 | |
| Income taxes | | | (335 | ) | | | (46 | ) | | | (83 | ) | | | 334 | | | | 280 | |
| |
(Loss) income from continuing operations | | | (524 | ) | | | (36 | ) | | | 22 | | | | (1,468 | ) | | | 941 | |
| Income (loss) from discontinued operations, net of taxes | | | — | | | | — | | | | 3 | | | | — | | | | (22 | ) |
| |
Net (loss) income | | $ | (524 | ) | | $ | (36 | ) | | $ | 25 | | | $ | (1,468 | ) | | $ | 919 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net (loss) income applicable to common shares | | $ | (554 | ) | | $ | (48 | ) | | $ | 25 | | | $ | (1,510 | ) | | $ | 919 | |
| | | | | | | | | | | | | | | | | | | | | |
Per common share: | | | | | | | | | | | | | | | | | | | | |
| (Loss) income from continuing operations | | $ | (1.13 | ) | | $ | (.10 | ) | | $ | .06 | | | $ | (3.36 | ) | | $ | 2.40 | |
| Net (loss) income | | | (1.13 | ) | | | (.10 | ) | | | .06 | | | | (3.36 | ) | | | 2.35 | |
| | | | | | | | | | | | | | | | | | | | | |
Per common share — assuming dilution: | | | | | | | | | | | | | | | | | | | | |
| (Loss) income from continuing operations | | $ | (1.13 | ) | | $ | (.10 | ) | | $ | .06 | | | $ | (3.36 | ) | | $ | 2.38 | |
| Net (loss) income | | | (1.13 | ) | | | (.10 | ) | | | .06 | | | | (3.36 | ) | | | 2.32 | |
| Cash dividends declared per common share | | $ | .0625 | | | $ | .1875 | | | $ | .74 | | | $ | .625 | | | $ | 1.835 | |
| Weighted-average common shares outstanding (000) | | | 492,311 | | | | 491,179 | | | | 388,940 | | | | 450,039 | | | | 392,013 | |
| Weighted-average common shares and potential common shares outstanding (000) | | | 492,311 | | | | 491,179 | | | | 389,911 | | | | 450,039 | | | | 395,823 | |
| |
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 19
Consolidated Average Balance Sheets, Net Interest Income and Yields/Rates
From Continuing Operations
(dollars in millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Fourth Quarter 2008 | | | Third Quarter 2008 | | | Fourth Quarter 2007 | |
| | | Average | | | | | | | | | | | Average | | | | | | | | | | | Average | | | | | | | |
| | | Balance | | | Interest | | | Yield/Rate | | | Balance | | | Interest | | | Yield/Rate | | | Balance | | | Interest | | | Yield/Rate | |
| |
Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans:(a), (b) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial, financial and agricultural | | $ | 27,662 | | | $ | 346 | | | | 4.98 | % | | $ | 26,345 | | | $ | 356 | | | | 5.38 | % | | $ | 23,825 | | | $ | 419 | | | | 6.98 | % |
| Real estate — commercial mortgage | | | 10,707 | | | | 151 | | | | 5.63 | | | | 10,718 | | | | 158 | | | | 5.87 | | | | 9,351 | | | | 175 | | | | 7.42 | |
| Real estate — construction | | | 7,686 | | | | 100 | | | | 5.16 | | | | 7,806 | | | | 109 | | | | 5.53 | | | | 8,192 | | | | 153 | | | | 7.42 | |
| Commercial lease financing | | | 9,186 | | | | 78 | | | | 3.38 | (c) | | | 9,585 | | | | 108 | | | | 4.52 | | | | 10,252 | | | | 171 | | | | 6.65 | |
| |
| Total commercial loans | | | 55,241 | | | | 675 | | | | 4.87 | | | | 54,454 | | | | 731 | | | | 5.35 | | | | 51,620 | | | | 918 | | | | 7.06 | |
| Real estate — residential | | | 1,903 | | | | 29 | | | | 6.00 | | | | 1,899 | | | | 28 | | | | 6.04 | | | | 1,596 | | | | 27 | | | | 6.72 | |
| Home equity: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Community Banking | | | 10,037 | | | | 129 | | | | 5.13 | | | | 9,887 | | | | 141 | | | | 5.64 | | | | 9,658 | | | | 168 | | | | 6.92 | |
| National Banking | | | 1,088 | | | | 21 | | | | 7.62 | | | | 1,138 | | | | 22 | | | | 7.65 | | | | 1,259 | | | | 24 | | | | 7.77 | |
| |
| Total home equity loans | | | 11,125 | | | | 150 | | | | 5.37 | | | | 11,025 | | | | 163 | | | | 5.85 | | | | 10,917 | | | | 192 | | | | 7.02 | |
| Consumer other — Community Banking | | | 1,260 | | | | 30 | | | | 9.57 | | | | 1,264 | | | | 33 | | | | 10.37 | | | | 1,308 | | | | 35 | | | | 10.73 | |
| Consumer other — National Banking: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Marine | | | 3,467 | | | | 55 | | | | 6.32 | | | | 3,586 | | | | 57 | | | | 6.33 | | | | 3,608 | | | | 58 | | | | 6.34 | |
| Education | | | 3,661 | | | | 56 | | | | 6.19 | | | | 3,635 | | | | 54 | | | | 5.90 | | | | 329 | | | | 8 | | | | 9.47 | |
| Other | | | 288 | | | | 6 | | | | 8.22 | | | | 308 | | | | 6 | | | | 8.22 | | | | 339 | | | | 7 | | | | 8.66 | |
| |
| Total consumer other — National Banking | | | 7,416 | | | | 117 | | | | 6.33 | | | | 7,529 | | | | 117 | | | | 6.20 | | | | 4,276 | | | | 73 | | | | 6.76 | |
| |
| Total consumer loans | | | 21,704 | | | | 326 | | | | 6.00 | | | | 21,717 | | | | 341 | | | | 6.25 | | | | 18,097 | | | | 327 | | | | 7.20 | |
| |
| Total loans | | | 76,945 | | | | 1,001 | | | | 5.19 | | | | 76,171 | | | | 1,072 | | | | 5.60 | | | | 69,717 | | | | 1,245 | | | | 7.10 | |
| Loans held for sale | | | 1,495 | | | | 18 | | | | 4.84 | | | | 1,723 | | | | 21 | | | | 4.76 | | | | 4,748 | | | | 89 | | | | 7.53 | |
Securities available for sale (a), (d) | | | 8,269 | | | | 111 | | | | 5.39 | | | | 8,266 | | | | 110 | | | | 5.38 | | | | 7,858 | | | | 115 | | | | 5.89 | |
Held-to-maturity securities(a) | | | 27 | | | | 2 | | | | 10.74 | | | | 27 | | | | 1 | | | | 13.81 | | | | 30 | | | | 1 | | | | 6.24 | |
| Trading account assets | | | 1,416 | | | | 17 | | | | 4.81 | | | | 1,579 | | | | 16 | | | | 4.02 | | | | 1,042 | | | | 12 | | | | 4.40 | |
| Short-term investments | | | 3,715 | | | | 8 | | | | .88 | | | | 794 | | | | 6 | | | | 3.44 | | | | 1,226 | | | | 13 | | | | 3.94 | |
Other investments (d) | | | 1,557 | | | | 13 | | | | 3.06 | | | | 1,563 | | | | 12 | | | | 2.87 | | | | 1,589 | | | | 12 | | | | 3.02 | |
| |
| Total earning assets | | | 93,424 | | | | 1,170 | | | | 4.98 | | | | 90,123 | | | | 1,238 | | | | 5.47 | | | | 86,210 | | | | 1,487 | | | | 6.86 | |
| Allowance for loan losses | | | (1,676 | ) | | | | | | | | | | | (1,498 | ) | | | | | | | | | | | (966 | ) | | | | | | | | |
| Accrued income and other assets | | | 15,987 | | | | | | | | | | | | 14,531 | | | | | | | | | | | | 13,547 | | | | | | | | | |
| |
Total assets | | $ | 107,735 | | | | | | | | | | | $ | 103,156 | | | | | | | | | | | $ | 98,791 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| NOW and money market deposit accounts | | $ | 24,919 | | | | 78 | | | | 1.24 | | | $ | 26,657 | | | | 108 | | | | 1.61 | | | $ | 25,687 | | | | 197 | | | | 3.05 | |
| Savings deposits | | | 1,722 | | | | 1 | | | | .16 | | | | 1,783 | | | | 1 | | | | .21 | | | | 1,523 | | | | 1 | | | | .19 | |
Certificates of deposit ($100,000 or more) (e) | | | 11,270 | | | | 118 | | | | 4.20 | | | | 9,506 | | | | 97 | | | | 4.05 | | | | 6,887 | | | | 86 | | | | 4.98 | |
| Other time deposits | | | 14,560 | | | | 146 | | | | 3.98 | | | | 13,118 | | | | 129 | | | | 3.92 | | | | 11,455 | | | | 135 | | | | 4.68 | |
Deposits in foreign office | | | 1,300 | | | | 3 | | | | .90 | | | | 2,762 | | | | 12 | | | | 1.77 | | | | 5,720 | | | | 64 | | | | 4.42 | |
| |
| Total interest-bearing deposits | | | 53,771 | | | | 346 | | | | 2.56 | | | | 53,826 | | | | 347 | | | | 2.57 | | | | 51,272 | | | | 483 | | | | 3.74 | |
Federal funds purchased and securities sold under repurchase agreements | | | 1,727 | | | | 4 | | | | .86 | | | | 2,546 | | | | 10 | | | | 1.58 | | | | 4,194 | | | | 45 | | | | 4.23 | |
| Bank notes and other short-term borrowings | | | 9,205 | | | | 31 | | | | 1.36 | | | | 4,843 | | | | 34 | | | | 2.72 | | | | 4,233 | | | | 45 | | | | 4.15 | |
Long-term debt (e), (f) | | | 14,557 | | | | 143 | | | | 4.08 | | | | 15,123 | | | | 142 | | | | 3.91 | | | | 11,851 | | | | 164 | | | | 5.72 | |
| |
| Total interest-bearing liabilities | | | 79,260 | | | | 524 | | | | 2.65 | | | | 76,338 | | | | 533 | | | | 2.80 | | | | 71,550 | | | | 737 | | | | 4.11 | |
| |
| Noninterest-bearing deposits | | | 10,860 | | | | | | | | | | | | 10,756 | | | | | | | | | | | | 12,948 | | | | | | | | | |
| Accrued expense and other liabilities | | | 7,727 | | | | | | | | | | | | 7,328 | | | | | | | | | | | | 6,405 | | | | | | | | | |
| |
| Total liabilities | | | 97,847 | | | | | | | | | | | | 94,422 | | | | | | | | | | | | 90,903 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Shareholders’ equity | | | 9,888 | | | | | | | | | | | | 8,734 | | | | | | | | | | | | 7,888 | | | | | | | | | |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 107,735 | | | | | | | | | | | $ | 103,156 | | | | | | | | | | | $ | 98,791 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate spread (TE) | | | | | | | | | | | 2.33 | % | | | | | | | | | | | 2.67 | % | | | | | | | | | | | 2.75 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net interest income (TE) and net interest margin (TE) | | | | | | | 646 | (c) | | | 2.76 | % (c) | | | | | | | 705 | | | | 3.13 | % | | | | | | | 750 | | | | 3.48 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
TE adjustment(a) | | | | | | | 7 | | | | | | | | | | | | 6 | | | | | | | | | | | | 40 | | | | | |
| |
| Net interest income, GAAP basis | | | | | | $ | 639 | | | | | | | | | | | $ | 699 | | | | | | | | | | | $ | 710 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
Average balances have not been restated to reflect Key’s January 1, 2008, adoption of Financial Accounting Standards Board (“FASB”) Interpretation No. 39, “Offsetting of Amounts Related to Certain Contracts,” and FASB Staff Position FIN 39-1, “Amendment of FASB Interpretation 39.”
| | | |
| (a) | | 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%. |
| |
| (b) | | For purposes of these computations, nonaccrual loans are included in average loan balances. |
| |
| (c) | | During the fourth quarter of 2008, Key’s taxable-equivalent net interest income was reduced by $18 million as a result of an agreement reached with the IRS on all material aspects related to the IRS global tax settlement pertaining to certain leveraged lease financing transactions. Excluding this reduction, the taxable-equivalent yield on Key’s commercial lease financing portfolio would have been 4.17% for the fourth quarter of 2008, and Key’s taxable-equivalent net interest margin would have been 2.84%. |
| |
| (d) | | Yield is calculated on the basis of amortized cost. |
| |
| (e) | | Rate calculation excludes basis adjustments related to fair value hedges. |
| |
| (f) | | Results from continuing operations exclude the dollar amount of liabilities assumed necessary to support interest-earning assets held by the discontinued Champion Mortgage finance business. The interest expense related to these liabilities, which also is excluded from continuing operations, was calculated using a matched funds transfer pricing methodology. |
| |
| TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles |
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 20
Consolidated Average Balance Sheets, Net Interest Income and Yields/Rates
From Continuing Operations
(dollars in millions)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Twelve months ended December 31, 2008 | | | Twelve months ended December 31, 2007 | |
| | | Average | | | | | | | | | | | Average | | | | | | | |
| | | Balance | | | Interest | | | Yield/Rate | | | Balance | | | Interest | | | Yield/Rate | |
| |
Assets | | | | | | | | | | | | | | | | | | | | | | | | |
Loans:(a), (b) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial, financial and agricultural | | $ | 26,372 | | | $ | 1,446 | | | | 5.48 | % | | $ | 22,415 | | | $ | 1,622 | | | | 7.23 | % |
| Real estate — commercial mortgage | | | 10,576 | | | | 640 | | | | 6.05 | | | | 8,802 | | | | 675 | | | | 7.67 | |
| Real estate — construction | | | 8,109 | | | | 461 | | | | 5.68 | | | | 8,237 | | | | 653 | | | | 7.93 | |
| Commercial lease financing | | | 9,642 | | | | (425 | ) | | | (4.41 | )(c) | | | 10,154 | | | | 606 | | | | 5.97 | |
| |
| Total commercial loans | | | 54,699 | | | | 2,122 | | | | 3.88 | | | | 49,608 | | | | 3,556 | | | | 7.17 | |
| Real estate — residential | | | 1,909 | | | | 117 | | | | 6.11 | | | | 1,525 | | | | 101 | | | | 6.64 | |
| Home equity: | | | | | | | | | | | | | | | | | | | | | | | | |
| Community Banking | | | 9,846 | | | | 564 | | | | 5.73 | | | | 9,671 | | | | 686 | | | | 7.09 | |
| National Banking | | | 1,171 | | | | 90 | | | | 7.67 | | | | 1,144 | | | | 89 | | | | 7.84 | |
| |
| Total home equity loans | | | 11,017 | | | | 654 | | | | 5.93 | | | | 10,815 | | | | 775 | | | | 7.17 | |
| Consumer other — Community Banking | | | 1,275 | | | | 130 | | | | 10.22 | | | | 1,367 | | | | 144 | | | | 10.53 | |
| Consumer other — National Banking: | | | | | | | | | | | | | | | | | | | | | | | | |
| Marine | | | 3,586 | | | | 226 | | | | 6.30 | | | | 3,390 | | | | 214 | | | | 6.30 | |
| Education | | | 2,818 | | | | 170 | | | | 6.05 | | | | 333 | | | | 32 | | | | 9.54 | |
| Other | | | 315 | | | | 26 | | | | 8.25 | | | | 319 | | | | 28 | | | | 8.93 | |
| |
| Total consumer other — National Banking | | | 6,719 | | | | 422 | | | | 6.29 | | | | 4,042 | | | | 274 | | | | 6.77 | |
| |
| Total consumer loans | | | 20,920 | | | | 1,323 | | | | 6.33 | | | | 17,749 | | | | 1,294 | | | | 7.29 | |
| |
| Total loans | | | 75,619 | | | | 3,445 | | | | 4.56 | | | | 67,357 | | | | 4,850 | | | | 7.20 | |
| Loans held for sale | | | 2,385 | | | | 146 | | | | 6.11 | | | | 4,461 | | | | 337 | | | | 7.57 | |
Securities available for sale (a), (d) | | | 8,317 | | | | 442 | | | | 5.36 | | | | 7,757 | | | | 427 | | | | 5.52 | |
Held-to-maturity securities(a) | | | 27 | | | | 4 | | | | 11.73 | | | | 36 | | | | 2 | | | | 6.68 | |
| Trading account assets | | | 1,279 | | | | 56 | | | | 4.38 | | | | 917 | | | | 38 | | | | 4.10 | |
| Short-term investments | | | 1,615 | | | | 31 | | | | 1.96 | | | | 846 | | | | 37 | | | | 4.34 | |
Other investments (d) | | | 1,563 | | | | 51 | | | | 3.02 | | | | 1,524 | | | | 52 | | | | 3.33 | |
| |
| Total earning assets | | | 90,805 | | | | 4,175 | | | | 4.59 | | | | 82,898 | | | | 5,743 | | | | 6.84 | |
| Allowance for loan losses | | | (1,438 | ) | | | | | | | | | | | (948 | ) | | | | | | | | |
| Accrued income and other assets | | | 15,023 | | | | | | | | | | | | 12,934 | | | | | | | | | |
| |
Total assets | | $ | 104,390 | | | | | | | | | | | $ | 94,884 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
| NOW and money market deposit accounts | | $ | 26,429 | | | | 427 | | | | 1.62 | | | $ | 24,070 | | | | 762 | | | | 3.17 | |
| Savings deposits | | | 1,796 | | | | 6 | | | | .32 | | | | 1,591 | | | | 3 | | | | .19 | |
Certificates of deposit ($100,000 or more) (e) | | | 9,385 | | | | 398 | | | | 4.25 | | | | 6,389 | | | | 321 | | | | 5.02 | |
| Other time deposits | | | 13,300 | | | | 556 | | | | 4.18 | | | | 11,767 | | | | 550 | | | | 4.68 | |
Deposits in foreign office | | | 3,501 | | | | 81 | | | | 2.31 | | | | 4,287 | | | | 209 | | | | 4.87 | |
| |
| Total interest-bearing deposits | | | 54,411 | | | | 1,468 | | | | 2.70 | | | | 48,104 | | | | 1,845 | | | | 3.84 | |
Federal funds purchased and securities sold under repurchase agreements | | | 2,847 | | | | 57 | | | | 2.00 | | | | 4,330 | | | | 208 | | | | 4.79 | |
| Bank notes and other short-term borrowings | | | 5,944 | | | | 131 | | | | 2.20 | | | | 2,423 | | | | 104 | | | | 4.28 | |
Long-term debt (e), (f) | | | 14,387 | | | | 564 | | | | 4.12 | | | | 12,537 | | | | 718 | | | | 5.84 | |
| |
| Total interest-bearing liabilities | | | 77,589 | | | | 2,220 | | | | 2.89 | | | | 67,394 | | | | 2,875 | | | | 4.28 | |
| |
| Noninterest-bearing deposits | | | 10,744 | | | | | | | | | | | | 13,635 | | | | | | | | | |
| Accrued expense and other liabilities | | | 7,134 | | | | | | | | | | | | 6,133 | | | | | | | | | |
| |
| Total liabilities | | | 95,467 | | | | | | | | | | | | 87,162 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Shareholders’ equity | | | 8,923 | | | | | | | | | | | | 7,722 | | | | | | | | | |
| |
Total liabilities and shareholders’ equity | | $ | 104,390 | | | | | | | | | | | $ | 94,884 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate spread (TE) | | | | | | | | | | | 1.70 | % | | | | | | | | | | | 2.56 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Net interest income (TE) and net interest margin (TE) | | | | | | | 1,955 | (c) | | | 2.16 | % (c) | | | | | | | 2,868 | | | | 3.46 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
TE adjustment(a) | | | | | | | (454 | ) | | | | | | | | | | | 99 | | | | | |
| |
| Net interest income, GAAP basis | | | | | | $ | 2,409 | | | | | | | | | | | $ | 2,769 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| |
Average balances have not been restated to reflect Key’s January 1, 2008, adoption of Financial Accounting Standards Board (“FASB”) Interpretation No. 39, “Offsetting of Amounts Related to Certain Contracts,” and FASB Staff Position FIN 39-1, “Amendment of FASB Interpretation 39.”
| (a) | | 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%. |
| |
| (b) | | For purposes of these computations, nonaccrual loans are included in average loan balances. |
| |
| (c) | | During the fourth quarter of 2008, Key’s taxable-equivalent net interest income was reduced by $18 million as a result of an agreement reached with the IRS on all material aspects related to the IRS global tax settlement pertaining to certain leveraged lease financing transactions. During the second quarter of 2008, Key’s taxable-equivalent net interest income was reduced by $838 million as a result of an adverse federal court decision on Key’s tax treatment of a Service Contract Lease transaction. During the first quarter of 2008, Key’s taxable-equivalent net interest income was reduced by $34 million as a result of an increase to Key’s tax reserves for certain lease in, lease out transactions and a recalculation of its lease income in accordance with prescribed accounting standards. Excluding these reductions, the taxable-equivalent yield on Key’s commercial lease financing portfolio would have been 4.82% for the twelve months ended December 31, 2008, and Key’s taxable-equivalent net interest margin would have been 3.14%. |
| |
| (d) | | Yield is calculated on the basis of amortized cost. |
| |
| (e) | | Rate calculation excludes basis adjustments related to fair value hedges. |
| |
| (f) | | Results from continuing operations exclude the dollar amount of liabilities assumed necessary to support interest-earning assets held by the discontinued Champion Mortgage finance business. The interest expense related to these liabilities, which also is excluded from continuing operations, was calculated using a matched funds transfer pricing methodology. |
| |
| TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles |
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 21
Noninterest Income
(in millions)
| | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended | | | Twelve months ended | |
| | | 12-31-08 | | | 9-30-08 | | | 12-31-07 | | | 12-31-08 | | | 12-31-07 | |
| |
Trust and investment services income(a) | | $ | 138 | | | $ | 133 | | | $ | 131 | | | $ | 538 | | | $ | 490 | |
| Service charges on deposit accounts | | | 90 | | | | 94 | | | | 90 | | | | 365 | | | | 337 | |
| Operating lease income | | | 64 | | | | 69 | | | | 72 | | | | 270 | | | | 272 | |
| Letter of credit and loan fees | | | 42 | | | | 53 | | | | 58 | | | | 183 | | | | 192 | |
| Corporate-owned life insurance income | | | 33 | | | | 28 | | | | 37 | | | | 117 | | | | 121 | |
| Electronic banking fees | | | 25 | | | | 27 | | | | 25 | | | | 103 | | | | 99 | |
| Insurance income | | | 15 | | | | 15 | | | | 10 | | | | 65 | | | | 55 | |
Investment banking and capital markets income (loss)(a) | | | 6 | | | | (31 | ) | | | 12 | | | | 63 | | | | 117 | |
| Net securities (losses) gains | | | (5 | ) | | | 1 | | | | 6 | | | | (2 | ) | | | (35 | ) |
| Net (losses) gains from principal investing | | | (33 | ) | | | (24 | ) | | | 6 | | | | (62 | ) | | | 134 | |
| Net gains (losses) from loan securitizations and sales | | | 3 | | | | (30 | ) | | | (6 | ) | | | (95 | ) | | | (17 | ) |
| Gain from redemption of Visa Inc. shares | | | — | | | | — | | | | — | | | | 165 | | | | — | |
| Gain from sale of McDonald Investments branch network | | | — | | | | — | | | | — | | | | — | | | | 171 | |
| Other income: | | | | | | | | | | | | | | | | | | | | |
| Loan securitization servicing fees | | | 5 | | | | 4 | | | | 5 | | | | 18 | | | | 21 | |
| Credit card fees | | | 3 | | | | 6 | | | | 3 | | | | 16 | | | | 13 | |
| Gains related to MasterCard Incorporated shares | | | — | | | | — | | | | — | | | | — | | | | 67 | |
| Litigation settlement — automobile residual value insurance | | | — | | | | — | | | | — | | | | — | | | | 26 | |
| Miscellaneous income | | | 13 | | | | 43 | | | | 39 | | | | 126 | | | | 166 | |
| |
| Total other income | | | 21 | | | | 53 | | | | 47 | | | | 160 | | | | 293 | |
| |
| Total noninterest income | | $ | 399 | | | $ | 388 | | | $ | 488 | | | $ | 1,870 | | | $ | 2,229 | |
| | | | | | | | | | | | | | | | |
| |
| |
| (a) Additional detail provided in tables below. |
| |
Trust and Investment Services Income
(in millions) |
| |
| | | Three months ended | | | Twelve months ended | |
| | | 12-31-08 | | | 9-30-08 | | | 12-31-07 | | | 12-31-08 | | | 12-31-07 | |
| |
| Brokerage commissions and fee income | | $ | 48 | | | $ | 37 | | | $ | 31 | | | $ | 159 | | | $ | 125 | |
| Personal asset management and custody fees | | | 39 | | | | 38 | | | | 43 | | | | 158 | | | | 165 | |
| Institutional asset management and custody fees | | | 51 | | | | 58 | | | | 57 | | | | 221 | | | | 200 | |
| |
| Total trust and investment services income | | $ | 138 | | | $ | 133 | | | $ | 131 | | | $ | 538 | | | $ | 490 | |
| | | | | | | | | | | | | | | | |
| |
| |
Investment Banking and Capital Markets Income
(in millions) |
| |
| | | Three months ended | | | Twelve months ended | |
| | | 12-31-08 | | | 9-30-08 | | | 12-31-07 | | | 12-31-08 | | | 12-31-07 | |
| |
| Investment banking income | | $ | 7 | | | $ | 20 | | | $ | 21 | | | $ | 85 | | | $ | 86 | |
| Losses from other investments | | | (32 | ) | | | (7 | ) | | | (23 | ) | | | (44 | ) | | | (34 | ) |
| Dealer trading and derivatives income (loss) | | | 11 | | | | (57 | ) | | | (1 | ) | | | (39 | ) | | | 17 | |
| Foreign exchange income | | | 20 | | | | 13 | | | | 15 | | | | 61 | | | | 48 | |
| |
| Total investment banking and capital markets income (loss) | | $ | 6 | | | $ | (31 | ) | | $ | 12 | | | $ | 63 | | | $ | 117 | |
| | | | | | | | | | | | | | | | |
| |
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 22
Noninterest Expense
(dollars in millions)
| | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended | | | Twelve months ended | |
| | | 12-31-08 | | | 9-30-08 | | | 12-31-07 | | | 12-31-08 | | | 12-31-07 | |
| |
Personnel (a) | | $ | 411 | | | $ | 381 | | | $ | 399 | | | $ | 1,605 | | | $ | 1,621 | |
| Net occupancy | | | 68 | | | | 65 | | | | 64 | | | | 261 | | | | 246 | |
| Operating lease expense | | | 55 | | | | 56 | | | | 59 | | | | 224 | | | | 224 | |
| Computer processing | | | 51 | | | | 46 | | | | 52 | | | | 187 | | | | 201 | |
| Professional fees | | | 51 | | | | 35 | | | | 38 | | | | 142 | | | | 117 | |
| Equipment | | | 22 | | | | 23 | | | | 25 | | | | 92 | | | | 96 | |
| Marketing | | | 25 | | | | 27 | | | | 16 | | | | 87 | | | | 76 | |
| Noncash charge for goodwill impairment | | | 465 | | | | 4 | | | | 5 | | | | 469 | | | | 5 | |
| Other expense: | | | | | | | | | | | | | | | | | | | | |
| Postage and delivery | | | 12 | | | | 11 | | | | 13 | | | | 46 | | | | 47 | |
| Franchise and business taxes | | | 7 | | | | 7 | | | | 7 | | | | 30 | | | | 32 | |
| Telecommunications | | | 8 | | | | 7 | | | | 7 | | | | 30 | | | | 28 | |
| (Credit) provision for losses on lending-related commitments | | | (5 | ) | | | 8 | | | | 25 | | | | (26 | ) | | | 28 | |
| Liability to Visa Inc. | | | — | | | | — | | | | 64 | | | | — | | | | 64 | |
| Miscellaneous expense | | | 133 | | | | 92 | | | | 122 | | | | 431 | | | | 463 | |
| |
| Total other expense | | | 155 | | | | 125 | | | | 238 | | | | 511 | | | | 662 | |
| |
| Total noninterest expense | | $ | 1,303 | | | $ | 762 | | | $ | 896 | | | $ | 3,578 | | | $ | 3,248 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Average full-time equivalent employees | | | 17,697 | | | | 18,098 | | | | 18,500 | (b) | | | 18,095 | | | | 18,934 | (b) |
| |
| (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 | |
| | | 12-31-08 | | | 9-30-08 | | | 12-31-07 | | | 12-31-08 | | | 12-31-07 | |
| |
| Salaries | | $ | 241 | | | $ | 245 | | | $ | 255 | | | $ | 960 | | | $ | 976 | |
| Incentive compensation | | | 78 | | | | 55 | | | | 52 | | | | 286 | | | | 264 | |
| Employee benefits | | | 58 | | | | 59 | | | | 65 | | | | 258 | | | | 287 | |
| Stock-based compensation | | | 11 | | | | 8 | | | | 3 | | | | 50 | | | | 60 | |
| Severance | | | 23 | | | | 14 | | | | 24 | | | | 51 | | | | 34 | |
| |
| Total personnel expense | | $ | 411 | | | $ | 381 | | | $ | 399 | | | $ | 1,605 | | | $ | 1,621 | |
| | | | | | | | | | | | | | | | |
| |
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 23
Loan Composition
(dollars in millions)
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Percent change 12-31-08 vs. | |
| | | 12-31-08 | | | 9-30-08 | | | 12-31-07 | | | 9-30-08 | | | 12-31-07 | |
| |
| Commercial, financial and agricultural | | $ | 27,260 | | | $ | 27,207 | | | $ | 24,797 | | | | .2 | % | | | 9.9 | % |
| Commercial real estate: | | | | | | | | | | | | | | | | | | | | |
| Commercial mortgage | | | 10,819 | | | | 10,569 | | | | 9,630 | | | | 2.4 | | | | 12.3 | |
| Construction | | | 7,717 | | | | 7,708 | | | | 8,102 | | | | .1 | | | | (4.8 | ) |
| |
Total commercial real estate loans (a) | | | 18,536 | | | | 18,277 | | | | 17,732 | | | | 1.4 | | | | 4.5 | |
| Commercial lease financing | | | 9,039 | | | | 9,437 | | | | 10,176 | | | | (4.2 | ) | | | (11.2 | ) |
| |
| Total commercial loans | | | 54,835 | | | | 54,921 | | | | 52,705 | | | | (.2 | ) | | | 4.0 | |
| Real estate — residential mortgage | | | 1,908 | | | | 1,898 | | | | 1,594 | | | | .5 | | | | 19.7 | |
| Home equity: | | | | | | | | | | | | | | | | | | | | |
| Community Banking | | | 10,124 | | | | 9,970 | | | | 9,655 | | | | 1.5 | | | | 4.9 | |
| National Banking | | | 1,051 | | | | 1,101 | | | | 1,262 | | | | (4.5 | ) | | | (16.7 | ) |
| |
| Total home equity loans | | | 11,175 | | | | 11,071 | | | | 10,917 | | | | .9 | | | | 2.4 | |
| Consumer other — Community Banking | | | 1,233 | | | | 1,274 | | | | 1,298 | | | | (3.2 | ) | | | (5.0 | ) |
| Consumer other — National Banking: | | | | | | | | | | | | | | | | | | | | |
| Marine | | | 3,401 | | | | 3,529 | | | | 3,637 | | | | (3.6 | ) | | | (6.5 | ) |
Education (b) | | | 3,669 | | | | 3,711 | | | | 331 | | | | (1.1 | ) | | | N/M | |
| Other | | | 283 | | | | 301 | | | | 341 | | | | (6.0 | ) | | | (17.0 | ) |
| |
| Total consumer other — National Banking | | | 7,353 | | | | 7,541 | | | | 4,309 | | | | (2.5 | ) | | | 70.6 | |
| |
| Total consumer loans | | | 21,669 | | | | 21,784 | | | | 18,118 | | | | (.5 | ) | | | 19.6 | |
| |
| Total loans | | $ | 76,504 | | | $ | 76,705 | | | $ | 70,823 | | | | (.3 | )% | | | 8.0 | % |
| | | | | | | | | | | | | | | | | | |
| |
Loans Held for Sale Composition
(dollars in millions)
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Percent change 12-31-08 vs. | |
| | | 12-31-08 | | | 9-30-08 | | | 12-31-07 | | | 9-30-08 | | | 12-31-07 | |
| |
| Commercial, financial and agricultural | | $ | 102 | | | $ | 159 | | | $ | 250 | | | | (35.8 | )% | | | (59.2 | )% |
| Real estate — commercial mortgage | | | 273 | | | | 718 | | | | 1,219 | | | | (62.0 | ) | | | (77.6 | ) |
Real estate — construction (a) | | | 164 | | | | 262 | | | | 35 | | | | (37.4 | ) | | | 368.6 | |
| Commercial lease financing | | | 7 | | | | 52 | | | | 1 | | | | (86.5 | ) | | | 600.0 | |
| Real estate — residential mortgage | | | 77 | | | | 57 | | | | 47 | | | | 35.1 | | | | 63.8 | |
| Home equity | | | — | | | | — | | | | 1 | | | | — | | | | (100.0 | ) |
Education (b) | | | 401 | | | | 223 | | | | 3,176 | | | | 79.8 | | | | (87.4 | ) |
| Automobile | | | 3 | | | | 4 | | | | 7 | | | | (25.0 | ) | | | (57.1 | ) |
| |
| Total loans held for sale | | $ | 1,027 | | | $ | 1,475 | | | $ | 4,736 | | | | (30.4 | )% | | | (78.3 | )% |
| | | | | | | | | | | | | | | | | | |
| |
| | |
| |
| (a) | | During the second quarter of 2008, Key transferred $384 million of commercial real estate loans ($719 million of primarily construction loans, net of $335 million in net charge-offs) from the loan portfolio to held-for-sale status. |
| |
| (b) | | On March 31, 2008, Key transferred $3.284 billion of education loans from loans held for sale to the loan portfolio. |
N/M = Not Meaningful
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 24
Summary of Loan Loss Experience
(dollars in millions)
| | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended | | | Twelve months ended | |
| | | 12-31-08 | | | 9-30-08 | | | 12-31-07 | | | 12-31-08 | | | 12-31-07 | |
| | |
| Average loans outstanding from continuing operations | | $ | 76,945 | | | $ | 76,171 | | | $ | 69,717 | | | $ | 75,619 | | | $ | 67,357 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses at beginning of period | | $ | 1,554 | | | $ | 1,421 | | | $ | 955 | | | $ | 1,200 | | | $ | 944 | |
| Loans charged off: | | | | | | | | | | | | | | | | | | | | |
| Commercial, financial and agricultural | | | 132 | | | | 75 | | | | 48 | | | | 332 | | | | 128 | |
| | | | | | | | | | | | | | | | | | | | | |
Real estate___ commercial mortgage | | | 43 | | | | 21 | | | | 3 | | | | 83 | | | | 16 | |
Real estate___ construction | | | 49 | | | | 80 | | | | 44 | | | | 494 | | | | 54 | |
| |
Total commercial real estate loans (a) | | | 92 | | | | 101 | | | | 47 | | | | 577 | | | | 70 | |
| Commercial lease financing | | | 26 | | | | 24 | | | | 18 | | | | 83 | | | | 51 | |
| |
| Total commercial loans | | | 250 | | | | 200 | | | | 113 | | | | 992 | | | | 249 | |
Real estate___ residential mortgage | | | 7 | | | | 2 | | | | 3 | | | | 15 | | | | 6 | |
| Home equity: | | | | | | | | | | | | | | | | | | | | |
| Community Banking | | | 15 | | | | 10 | | | | 6 | | | | 43 | | | | 21 | |
| National Banking | | | 17 | | | | 12 | | | | 6 | | | | 47 | | | | 16 | |
| |
| Total home equity loans | | | 32 | | | | 22 | | | | 12 | | | | 90 | | | | 37 | |
| Consumer other — Community Banking | | | 13 | | | | 11 | | | | 8 | | | | 44 | | | | 31 | |
| Consumer other — National Banking: | | | | | | | | | | | | | | | | | | | | |
| Marine | | | 30 | | | | 20 | | | | 11 | | | | 85 | | | | 33 | |
Education (b) | | | 33 | | | | 41 | | | | 2 | | | | 131 | | | | 5 | |
| Other | | | 4 | | | | 4 | | | | 3 | | | | 14 | | | | 9 | |
| |
| Total consumer other — National Banking | | | 67 | | | | 65 | | | | 16 | | | | 230 | | | | 47 | |
| |
| Total consumer loans | | | 119 | | | | 100 | | | | 39 | | | | 379 | | | | 121 | |
| |
| Total loans charged off | | | 369 | | | | 300 | | | | 152 | | | | 1,371 | | | | 370 | |
| Recoveries: | | | | | | | | | | | | | | | | | | | | |
| Commercial, financial and agricultural | | | 13 | | | | 13 | | | | 13 | | | | 54 | | | | 37 | |
| | | | | | | | | | | | | | | | | | | | | |
Real estate___ commercial mortgage | | | — | | | | 1 | | | | 2 | | | | 1 | | | | 6 | |
Real estate___ construction | | | — | | | | 1 | | | | — | | | | 2 | | | | 1 | |
| |
| Total commercial real estate loans | | | — | | | | 2 | | | | 2 | | | | 3 | | | | 7 | |
| Commercial lease financing | | | 5 | | | | 5 | | | | 12 | | | | 20 | | | | 22 | |
| |
| Total commercial loans | | | 18 | | | | 20 | | | | 27 | | | | 77 | | | | 66 | |
Real estate___ residential mortgage | | | — | | | | — | | | | — | | | | 1 | | | | 1 | |
| Home equity: | | | | | | | | | | | | | | | | | | | | |
| Community Banking | | | 1 | | | | 1 | | | | — | | | | 3 | | | | 3 | |
| National Banking | | | — | | | | — | | | | — | | | | 1 | | | | 1 | |
| |
| Total home equity loans | | | 1 | | | | 1 | | | | — | | | | 4 | | | | 4 | |
| Consumer other — Community Banking | | | 2 | | | | 1 | | | | 2 | | | | 6 | | | | 8 | |
| Consumer other — National Banking: | | | | | | | | | | | | | | | | | | | | |
| Marine | | | 5 | | | | 4 | | | | 3 | | | | 18 | | | | 12 | |
| Education | | | — | | | | 1 | | | | — | | | | 2 | | | | 1 | |
| Other | | | 1 | | | | — | | | | 1 | | | | 3 | | | | 3 | |
| |
| Total consumer other — National Banking | | | 6 | | | | 5 | | | | 4 | | | | 23 | | | | 16 | |
| |
| Total consumer loans | | | 9 | | | | 7 | | | | 6 | | | | 34 | | | | 29 | |
| |
| Total recoveries | | | 27 | | | | 27 | | | | 33 | | | | 111 | | | | 95 | |
| |
| Net loan charge-offs | | | (342 | ) | | | (273 | ) | | | (119 | ) | | | (1,260 | ) | | | (275 | ) |
| Provision for loan losses from continuing operations | | | 594 | | | | 407 | | | | 363 | | | | 1,835 | | | | 529 | |
| Allowance related to loans acquired, net | | | — | | | | — | | | | — | | | | 32 | | | | — | |
| Foreign currency translation adjustment | | | (3 | ) | | | (1 | ) | | | 1 | | | | (4 | ) | | | 2 | |
| |
| Allowance for loan losses at end of period | | $ | 1,803 | | | $ | 1,554 | | | $ | 1,200 | | | $ | 1,803 | | | $ | 1,200 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net loan charge-offs to average loans from continuing operations | | | 1.77 | % | | | 1.43 | % | | | .67 | % | | | 1.67 | % | | | .41 | % |
| Allowance for loan losses to period-end loans | | | 2.36 | | | | 2.03 | | | | 1.69 | | | | 2.36 | | | | 1.69 | |
| Allowance for loan losses to nonperforming loans | | | 147.18 | | | | 160.70 | | | | 174.67 | | | | 147.18 | | | | 174.67 | |
| |
| | | |
| (a) | | During the second quarter of 2008, Key transferred $384 million of commercial real estate loans ($719 million of primarily construction loans, net of $335 million in net charge-offs) from the loan portfolio to held-for-sale status. |
| |
| (b) | | On March 31, 2008, Key transferred $3.284 billion of education loans from loans held for sale to the loan portfolio. |
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 25
Changes in Liability for Credit Losses on Lending-Related Commitments
(in millions)
| | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended | | | Twelve months ended | |
| | | 12-31-08 | | | 9-30-08 | | | 12-31-07 | | | 12-31-08 | | | 12-31-07 | |
| | |
| Balance at beginning of period | | $ | 59 | | | $ | 51 | | | $ | 55 | | | $ | 80 | | | $ | 53 | |
| (Credit) provision for losses on lending- related commitments | | | (5 | ) | | | 8 | | | | 25 | | | | (26 | ) | | | 28 | |
| Charge-offs | | | — | | | | — | | | | — | | | | — | | | | (1 | ) |
| |
Balance at end of period(a) | | $ | 54 | | | $ | 59 | | | $ | 80 | | | $ | 54 | | | $ | 80 | |
| | | | | | | | | | | | | | | | |
| |
| | |
| (a) | | Included in “accrued expense and other liabilities” on the consolidated balance sheet. |
Summary of Nonperforming Assets and Past Due Loans
(dollars in millions)
| | | | | | | | | | | | | | | | | | | | | |
| | | 12-31-08 | | | 9-30-08 | | | 6-30-08 | | | 3-31-08 | | | 12-31-07 | |
| |
| Commercial, financial and agricultural | | $ | 415 | | | $ | 309 | | | $ | 259 | | | $ | 147 | | | $ | 84 | |
| |
| Real estate — commercial mortgage | | | 128 | | | | 119 | | | | 107 | | | | 113 | | | | 41 | |
| Real estate — construction | | | 436 | | | | 334 | | | | 256 | | | | 610 | | | | 415 | |
| |
| Total commercial real estate loans | | | 564 | | | | 453 | | | | 363 | (b) | | | 723 | | | | 456 | |
| Commercial lease financing | | | 81 | | | | 55 | | | | 57 | | | | 38 | | | | 28 | |
| |
| Total commercial loans | | | 1,060 | | | | 817 | | | | 679 | | | | 908 | | | | 568 | |
| Real estate — residential mortgage | | | 39 | | | | 35 | | | | 32 | | | | 34 | | | | 28 | |
| Home equity: | | | | | | | | | | | | | | | | | | | | |
| Community Banking | | | 76 | | | | 70 | | | | 61 | | | | 60 | | | | 54 | |
| National Banking | | | 15 | | | | 16 | | | | 14 | | | | 14 | | | | 12 | |
| |
| Total home equity loans | | | 91 | | | | 86 | | | | 75 | | | | 74 | | | | 66 | |
| Consumer other — Community Banking | | | 3 | | | | 3 | | | | 2 | | | | 2 | | | | 2 | |
| Consumer other — National Banking: | | | | | | | | | | | | | | | | | | | | |
| Marine | | | 26 | | | | 22 | | | | 20 | | | | 20 | | | | 20 | |
| Education | | | 4 | | | | 3 | | | | 4 | | | | 15 | | | | 2 | |
| Other | | | 2 | | | | 1 | | | | 2 | | | | 1 | | | | 1 | |
| |
| Total consumer other — National Banking | | | 32 | | | | 26 | | | | 26 | | | | 36 | | | | 23 | |
| |
| Total consumer loans | | | 165 | | | | 150 | | | | 135 | | | | 146 | | | | 119 | |
| |
| Total nonperforming loans | | | 1,225 | | | | 967 | | | | 814 | | | | 1,054 | | | | 687 | |
| | | | | | | | | | | | | | | | | | | | | |
| Nonperforming loans held for sale | | | 90 | | | | 169 | | | | 342 | (b) | | | 9 | | | | 25 | |
| | | | | | | | | | | | | | | | | | | | | |
| OREO | | | 110 | | | | 64 | | | | 26 | | | | 29 | | | | 21 | |
| Allowance for OREO losses | | | (3 | ) | | | (4 | ) | | | (2 | ) | | | (2 | ) | | | (2 | ) |
| |
| OREO, net of allowance | | | 107 | | | | 60 | | | | 24 | | | | 27 | | | | 19 | |
| | | | | | | | | | | | | | | | | | | | | |
Other nonperforming assets(a) | | | 42 | | | | 43 | | | | 30 | | | | 25 | | | | 33 | |
| |
| Total nonperforming assets | | $ | 1,464 | | | $ | 1,239 | | | $ | 1,210 | | | $ | 1,115 | | | $ | 764 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Accruing loans past due 90 days or more | | $ | 433 | | | $ | 328 | | | $ | 367 | | | $ | 283 | | | $ | 231 | |
| Accruing loans past due 30 through 89 days | | | 1,314 | | | | 937 | | | | 852 | | | | 1,169 | | | | 843 | |
| Nonperforming loans to period-end portfolio loans | | | 1.60 | % | | | 1.26 | % | | | 1.07 | % | | | 1.38 | % | | | .97 | % |
| Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets | | | 1.91 | | | | 1.61 | | | | 1.59 | | | | 1.46 | | | | 1.08 | |
| |
Summary of Changes in Nonperforming Loans
(in millions)
| | | | | | | | | | | | | | | | | | | | | |
| | | 4Q08 | | | 3Q08 | | | 2Q08 | | | 1Q08 | | | 4Q07 | |
| |
| Balance at beginning of period | | $ | 967 | | | $ | 814 | | | $ | 1,054 | | | $ | 687 | | | $ | 498 | |
| Loans placed on nonaccrual status | | | 734 | | | | 530 | | | | 789 | | | | 566 | | | | 378 | |
| Charge-offs | | | (369 | ) | | | (300 | ) | | | (547 | ) | | | (144 | ) | | | (147 | ) |
| Loans sold | | | (5 | ) | | | (1 | ) | | | (48 | ) | | | — | | | | (13 | ) |
| Payments | | | (77 | ) | | | (43 | ) | | | (86 | ) | | | (32 | ) | | | (17 | ) |
| Transfers to OREO | | | (22 | ) | | | — | | | | — | | | | (10 | ) | | | (5 | ) |
| Transfer to nonperforming loans held for sale | | | — | | | | (30 | ) | | | (342 | )(b) | | | (8 | ) | | | — | |
| Loans returned to accrual status | | | (3 | ) | | | (3 | ) | | | (6 | ) | | | (5 | ) | | | (7 | ) |
| |
| Balance at end of period | | $ | 1,225 | | | $ | 967 | | | $ | 814 | | | $ | 1,054 | | | $ | 687 | |
| | | | | | | | | | | | | | | | |
| |
| | |
| (a) | | Primarily investments held by the Private Equity unit within Key’s Real Estate Capital and Corporate Banking Services line of business. |
| |
| (b) | | During the second quarter of 2008, Key transferred $384 million of commercial real estate loans ($719 million of primarily construction loans, net of $335 million in net charge-offs) from the loan portfolio to held-for-sale status. |
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 26
Line of Business Results
(dollars in millions)
Community Banking
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Percent change 4Q08 vs. | |
| | | 4Q08 | | | 3Q08 | | | 2Q08 | | | 1Q08 | | | 4Q07 | | | 3Q08 | | | 4Q07 | |
| | |
Summary of operations | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total revenue (TE) | | $ | 644 | | | $ | 653 | | | $ | 656 | | | $ | 629 | | | $ | 653 | | | | (1.4 | )% | | | (1.4 | )% |
| Provision for loan losses | | | 102 | | | | 56 | | | | 44 | | | | 18 | | | | 36 | | | | 82.1 | | | | 183.3 | |
| Noninterest expense | | | 489 | | | | 445 | | | | 448 | | | | 428 | | | | 438 | | | | 9.9 | | | | 11.6 | |
| Net income | | | 33 | | | | 95 | | | | 103 | | | | 114 | | | | 112 | | | | (65.3 | ) | | | (70.5 | ) |
| Average loans and leases | | | 29,157 | | | | 28,872 | | | | 28,477 | | | | 28,093 | | | | 27,234 | | | | 1.0 | | | | 7.1 | |
| Average deposits | | | 51,055 | | | | 50,384 | | | | 49,950 | | | | 49,777 | | | | 47,261 | | | | 1.3 | | | | 8.0 | |
| Net loan charge-offs | | | 66 | | | | 70 | | | | 38 | | | | 30 | | | | 31 | | | | (5.7 | ) | | | 112.9 | |
| Net loan charge-offs to average loans | | | .90 | % | | | .96 | % | | | .54 | % | | | .43 | % | | | .45 | % | | | N/A | | | | N/A | |
| Nonperforming assets at period end | | $ | 261 | | | $ | 225 | | | $ | 218 | | | $ | 204 | | | $ | 153 | | | | 16.0 | | | | 70.6 | |
| Return on average allocated equity | | | 4.19 | % | | | 12.42 | % | | | 13.49 | % | | | 15.29 | % | | | 17.52 | % | | | N/A | | | | N/A | |
| Average full-time equivalent employees | | | 8,796 | | | | 8,854 | | | | 8,785 | | | | 8,714 | | | | 8,454 | | | | (.7 | ) | | | 4.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Supplementary information (lines of business) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Regional Banking | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total revenue (TE) | | $ | 556 | | | $ | 552 | | | $ | 554 | | | $ | 529 | | | $ | 555 | | | | .7 | % | | | .2 | % |
| Provision for loan losses | | | 80 | | | | 39 | | | | 25 | | | | 9 | | | | 26 | | | | 105.1 | | | | 207.7 | |
| Noninterest expense | | | 437 | | | | 398 | | | | 400 | | | | 385 | | | | 385 | | | | 9.8 | | | | 13.5 | |
| Net income | | | 24 | | | | 72 | | | | 81 | | | | 84 | | | | 90 | | | | (66.7 | ) | | | (73.3 | ) |
| Average loans and leases | | | 20,015 | | | | 19,795 | | | | 19,621 | | | | 19,562 | | | | 18,776 | | | | 1.1 | | | | 6.6 | |
| Average deposits | | | 47,427 | | | | 46,655 | | | | 46,253 | | | | 46,192 | | | | 43,718 | | | | 1.7 | | | | 8.5 | |
| Net loan charge-offs | | | 52 | | | | 41 | | | | 33 | | | | 29 | | | | 26 | | | | 26.8 | | | | 100.0 | |
| Net loan charge-offs to average loans | | | 1.03 | % | | | .82 | % | | | .68 | % | | | .60 | % | | | .55 | % | | | N/A | | | | N/A | |
| Nonperforming assets at period end | | $ | 184 | | | $ | 168 | | | $ | 157 | | | $ | 142 | | | $ | 119 | | | | 9.5 | | | | 54.6 | |
| Return on average allocated equity | | | 4.34 | % | | | 13.25 | % | | | 14.77 | % | | | 15.43 | % | | | 20.39 | % | | | N/A | | | | N/A | |
| Average full-time equivalent employees | | | 8,458 | | | | 8,512 | | | | 8,439 | | | | 8,365 | | | | 8,101 | | | | (.6 | ) | | | 4.4 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial Banking | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total revenue (TE) | | $ | 88 | | | $ | 101 | | | $ | 102 | | | $ | 100 | | | $ | 98 | | | | (12.9 | )% | | | (10.2 | )% |
| Provision for loan losses | | | 22 | | | | 17 | | | | 19 | | | | 9 | | | | 10 | | | | 29.4 | | | | 120.0 | |
| Noninterest expense | | | 52 | | | | 47 | | | | 48 | | | | 43 | | | | 53 | | | | 10.6 | | | | (1.9 | ) |
| Net income | | | 9 | | | | 23 | | | | 22 | | | | 30 | | | | 22 | | | | (60.9 | ) | | | (59.1 | ) |
| Average loans and leases | | | 9,142 | | | | 9,077 | | | | 8,856 | | | | 8,531 | | | | 8,458 | | | | .7 | | | | 8.1 | |
| Average deposits | | | 3,628 | | | | 3,729 | | | | 3,697 | | | | 3,585 | | | | 3,543 | | | | (2.7 | ) | | | 2.4 | |
| Net loan charge-offs | | | 14 | | | | 29 | | | | 5 | | | | 1 | | | | 5 | | | | (51.7 | ) | | | 180.0 | |
| Net loan charge-offs to average loans | | | .61 | % | | | 1.27 | % | | | .23 | % | | | .05 | % | | | .23 | % | | | N/A | | | | N/A | |
| Nonperforming assets at period end | | $ | 77 | | | $ | 57 | | | $ | 61 | | | $ | 62 | | | $ | 34 | | | | 35.1 | | | | 126.5 | |
| Return on average allocated equity | | | 3.83 | % | | | 10.39 | % | | | 10.21 | % | | | 14.90 | % | | | 11.12 | % | | | N/A | | | | N/A | |
| Average full-time equivalent employees | | | 338 | | | | 342 | | | | 346 | | | | 349 | | | | 353 | | | | (1.2 | ) | | | (4.2 | ) |
| |
KeyCorp Reports Fourth Quarter and 2008 Results
January 22, 2009
Page 27
Line of Business Results (continued)
(dollars in millions)
National Banking
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Percent change 4Q08 vs. | |
| | | 4Q08 | | | 3Q08 | | | 2Q08 | | | 1Q08 | | | 4Q07 | | | 3Q08 | | | 4Q07 | |
| | |
Summary of operations | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total revenue (TE) | | $ | 539 | | | $ | 487 | | | $ | (127 | ) | | $ | 438 | | | $ | 610 | | | | 10.7 | % | | | (11.6 | )% |
| Provision for loan losses | | | 489 | | | | 350 | | | | 609 | | | | 169 | | | | 327 | | | | 39.7 | | | | 49.5 | |
| Noninterest expense | | | 830 | | | | 342 | | | | 337 | | | | 308 | | | | 388 | | | | 142.7 | | | | 113.9 | |
| Loss from continuing operations | | | (662 | ) | | | (130 | ) | | | (671 | ) | | | (24 | ) | | | (67 | ) | | | (409.2 | ) | | | (888.1 | ) |
| Net loss | | | (662 | ) | | | (130 | ) | | | (671 | ) | | | (24 | ) | | | (64 | ) | | | (409.2 | ) | | | (934.4 | ) |
Average loans and leases (a) | | | 47,474 | | | | 47,075 | | | | 47,877 | | | | 44,163 | | | | 42,040 | | | | .8 | | | | 12.9 | |
Average loans held for sale (a) | | | 1,404 | | | | 1,651 | | | | 1,282 | | | | 4,932 | | | | 4,709 | | | | (15.0 | ) | | | (70.2 | ) |
Average deposits(a) | | | 12,305 | | | | 12,439 | | | | 12,287 | | | | 11,877 | | | | 12,622 | | | | (1.1 | ) | | | (2.5 | ) |
Net loan charge-offs (a) | | | 276 | | | | 203 | | | | 486 | | | | 91 | | | | 88 | | | | 36.0 | | | | 213.6 | |
Net loan charge-offs to average loans (a) | | | 2.31 | % | | | 1.72 | % | | | 4.08 | % | | | .83 | % | | | .83 | % | | | N/A | | | | N/A | |
| Nonperforming assets at period end | | $ | 1,190 | | | $ | 1,014 | | | $ | 992 | | | $ | 911 | | | $ | 611 | | | | 17.4 | | | | 94.8 | |
Return on average allocated equity (a) | | | (49.64 | )% | | | (10.07 | )% | | | (51.44 | )% | | | (1.96 | )% | | | (5.95 | )% | | | N/A | | | | N/A | |
| Return on average allocated equity | | | (49.64 | ) | | | (10.07 | ) | | | (51.44 | ) | | | (1.96 | ) | | | (5.68 | ) | | | N/A | | | | N/A | |
| Average full-time equivalent employees | | | 3,316 | | | | 3,552 | | | | 3,604 | | | | 3,759 | | | | 4,010 | | | | (6.6 | ) | | | (17.3 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Supplementary information (lines of business) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real Estate Capital and Corporate Banking Services | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total revenue (TE) | | $ | 161 | | | $ | 96 | | | $ | 235 | | | $ | 82 | | | $ | 160 | | | | 67.7 | % | | | .6 | % |
| Provision for loan losses | | | 153 | | | | 99 | | | | 366 | | | | 45 | | | | 270 | | | | 54.5 | | | | (43.3 | ) |
| Noninterest expense | | | 93 | | | | 89 | | | | 67 | | | | 60 | | | | 117 | | | | 4.5 | | | | (20.5 | ) |
| Net loss | | | (53 | ) | | | (58 | ) | | | (124 | ) | | | (14 | ) | | | (142 | ) | | | 8.6 | | | | 62.7 | |
| Average loans and leases | | | 16,604 | | | | 16,447 | | | | 17,086 | | | | 16,497 | | | | 15,003 | | | | 1.0 | | | | 10.7 | |
| Average loans held for sale | | | 511 | | | | 792 | | | | 616 | | | | 989 | | | | 1,257 | | | | (35.5 | ) | | | (59.3 | ) |
| Average deposits | | | 10,390 | | | | 10,446 | | | | 10,460 | | | | 9,784 | | | | 10,396 | | | | (.5 | ) | | | (.1 | ) |
| Net loan charge-offs | | | 81 | | | | 100 | | | | 376 | | | | 38 | | | | 45 | | | | (19.0 | ) | | | 80.0 | |
| Net loan charge-offs to average loans | | | 1.94 | % | | | 2.42 | % | | | 8.85 | % | | | .93 | % | | | 1.19 | % | | | N/A | | | | N/A | |
| Nonperforming assets at period end | | $ | 763 | | | $ | 714 | | | $ | 779 | | | $ | 732 | | | $ | 475 | | | | 6.9 | | | | 60.6 | |
| Return on average allocated equity | | | (9.96 | )% | | | (11.40 | )% | | | (23.15 | )% | | | (3.01 | )% | | | (36.68 | )% | | | N/A | | | | N/A | |
| Average full-time equivalent employees | | | 1,107 | | | | 1,209 | | | | 1,228 | | | | 1,233 | | | | 1,310 | | | | (8.4 | ) | | | (15.5 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Equipment Finance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total revenue (TE) | | $ | 92 | | | $ | 111 | | | $ | (696 | ) | | $ | 94 | | | $ | 183 | | | | (17.1 | )% | | | (49.7 | )% |
| Provision for loan losses | | | 33 | | | | 64 | | | | 36 | | | | 24 | | | | 23 | | | | (48.4 | ) | | | 43.5 | |
| Noninterest expense | | | 349 | | | | 90 | | | | 89 | | | | 96 | | | | 96 | | | | 287.8 | | | | 263.5 | |
| Net (loss) income | | | (276 | ) | | | (27 | ) | | | (513 | ) | | | (16 | ) | | | 40 | | | | (922.2 | ) | | | N/M | |
| Average loans and leases | | | 9,548 | | | | 10,013 | | | | 10,326 | | | | 10,596 | | | | 10,730 | | | | (4.6 | ) | | | (11.0 | ) |
| Average loans held for sale | | | 29 | | | | 49 | | | | 51 | | | | 32 | | | | 15 | | | | (40.8 | ) | | | 93.3 | |
| Average deposits | | | 15 | | | | 20 | | | | 21 | | | | 14 | | | | 17 | | | | (25.0 | ) | | | (11.8 | ) |
| Net loan charge-offs | | | 51 | | | | 32 | | | | 28 | | | | 24 | | | | 18 | | | | 59.4 | | | | 183.3 | |
| Net loan charge-offs to average loans | | | 2.12 | % | | | 1.27 | % | | | 1.09 | % | | | .91 | % | | | .67 | % | | | N/A | | | | N/A | |
| Nonperforming assets at period end | | $ | 158 | | | $ | 115 | | | $ | 105 | | | $ | 69 | | | $ | 58 | | | | 37.4 | | | | 172.4 | |
| Return on average allocated equity | | | (124.21 | )% | | | (12.00 | )% | | | (226.24 | )% | | | (6.97 | )% | | | (17.40 | )% | | | N/A | | | | N/A | |
| Average full-time equivalent employees | | | 781 | | | | 819 | | | | 838 | | | | 860 | | | | 923 | | | | (4.6 | ) | | | (15.4 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Institutional and Capital Markets | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total revenue (TE) | | $ | 200 | | | $ | 185 | | | $ | 230 | | | $ | 159 | | | $ | 169 | | | | 8.1 | % | | | 18.3 | % |
| Provision for loan losses | | | 52 | | | | 16 | | | | 36 | | | | 16 | | | | 15 | | | | 225.0 | | | | 246.7 | |
| Noninterest expense | | | 329 | | | | 107 | | | | 128 | | | | 103 | | | | 116 | | | | 207.5 | | | | 183.6 | |
| Net (loss) income | | | (193 | ) | | | 39 | | | | 41 | | | | 25 | | | | 25 | | | | N/M | | | | N/M | |
| Average loans and leases | | | 9,352 | | | | 8,363 | | | | 7,898 | | | | 7,633 | | | | 7,218 | | | | 11.8 | | | | 29.6 | |
| Average loans held for sale | | | 545 | | | | 649 | | | | 494 | | | | 555 | | | | 394 | | | | (16.0 | ) | | | 38.3 | |
| Average deposits | | | 1,442 | | | | 1,479 | | | | 1,384 | | | | 1,460 | | | | 1,560 | | | | (2.5 | ) | | | (7.6 | ) |
| Net loan charge-offs (recoveries) | | | 38 | | | | (1 | ) | | | 5 | | | | 2 | | | | 6 | | | | N/M | | | | 533.3 | |
| Net loan charge-offs (recoveries) to average loans | | | 1.62 | % | | | (.05 | )% | | | .25 | % | | | .11 | % | | | .33 | % | | | N/A | | | | N/A | |
| Nonperforming assets at period end | | $ | 55 | | | $ | 58 | | | $ | 26 | | | $ | 12 | | | $ | 15 | | | | (5.2 | ) | | | 266.7 | |
| Return on average allocated equity | | | (57.82 | )% | | | 12.11 | % | | | 13.11 | % | | | 8.28 | % | | | 8.51 | % | | | N/A | | | | N/A | |
| Average full-time equivalent employees | | | 939 | | | | 964 | | | | 931 | | | | 938 | | | | 979 | | | | (2.6 | ) | | | (4.1 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Finance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total revenue (TE) | | $ | 86 | | | $ | 95 | | | $ | 104 | | | $ | 103 | | | $ | 98 | | | | (9.5 | )% | | | (12.2 | )% |
| Provision for loan losses | | | 251 | | | | 171 | | | | 171 | | | | 84 | | | | 19 | | | | 46.8 | | | | N/M | |
| Noninterest expense | | | 59 | | | | 56 | | | | 53 | | | | 49 | | | | 59 | | | | 5.4 | | | | — | |
| (Loss) income from continuing operations | | | (140 | ) | | | (84 | ) | | | (75 | ) | | | (19 | ) | | | 10 | | | | (66.7 | ) | | | N/M | |
| Net (loss) income | | | (140 | ) | | | (84 | ) | | | (75 | ) | | | (19 | ) | | | 13 | | | | (66.7 | ) | | | N/M | |
Average loans and leases (a) | | | 11,970 | | | | 12,252 | | | | 12,567 | | | | 9,437 | | | | 9,089 | | | | (2.3 | ) | | | 31.7 | |
Average loans held for sale (a) | | | 319 | | | | 161 | | | | 121 | | | | 3,356 | | | | 3,043 | | | | 98.1 | | | | (89.5 | ) |
Average deposits (a) | | | 458 | | | | 494 | | | | 422 | | | | 619 | | | | 649 | | | | (7.3 | ) | | | (29.4 | ) |
Net loan charge-offs (a) | | | 106 | | | | 72 | | | | 77 | | | | 27 | | | | 19 | | | | 47.2 | | | | 457.9 | |
Net loan charge-offs to average loans (a) | | | 3.52 | % | | | 2.34 | % | | | 2.46 | % | | | 1.15 | % | | | .83 | % | | | N/A | | | | N/A | |
| Nonperforming assets at period end | | $ | 214 | | | $ | 127 | | | $ | 82 | | | $ | 98 | | | $ | 63 | | | | 68.5 | | | | 239.7 | |
Return on average allocated equity(a) | | | (57.12 | )% | | | (35.70 | )% | | | (32.72 | )% | | | (8.36 | )% | | | 4.65 | % | | | N/A | | | | N/A | |
| Return on average allocated equity | | | (57.12 | ) | | | (35.70 | ) | | | (32.72 | ) | | | (8.36 | ) | | | 6.04 | | | | N/A | | | | N/A | |
| Average full-time equivalent employees | | | 489 | | | | 560 | | | | 607 | | | | 728 | | | | 798 | | | | (12.7 | ) | | | (38.7 | ) |
| |
(a) From continuing operations.
TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful
