- EPS of $0.72 for the fourth quarter and $2.73 for the full year
- ROE of 15.59% for the fourth quarter, compared with 11.99% one year ago
- Higher revenue
- Average core deposits up 8% from the fourth quarter of 2004
- Continued expansion of commercial mortgage servicing business
CLEVELAND, Jan. 20 - KeyCorp (NYSE: KEY) today announced fourth quarter net income of $296 million, or $0.72 per diluted common share, compared with $213 million, or $0.51 per share, for the fourth quarter of 2004. Adjusted net income for the year-ago quarter was $290 million, or $0.70 per share, excluding the effects of the sale of the broker- originated home equity loan portfolio and the reclassification of the indirect automobile loan portfolio to held-for-sale status. For the third quarter of 2005, net income was $278 million, or $0.67 per diluted common share. Return on average equity rose to 15.59% for the fourth quarter of 2005 from 11.99% for the same period last year and 14.84% for the third quarter of 2005.
Key's 2005 net income of $1.129 billion, or $2.73 per diluted common share, was the highest in the company's history. Net income increased 18 percent from a reported $954 million, or $2.30 per share, for the previous year. Return on average equity rose to 15.42% for 2005 from 13.75% for 2004.
"Key's solid fourth quarter results reflect our success in growing revenue, improving our business mix and strengthening our credit risk profile," said Chairman and Chief Executive Officer Henry L. Meyer III. "Compared with last year's comparable quarter, taxable-equivalent revenue rose by $132 million, reflecting an improved net interest margin, strong commercial loan growth, higher fee income and growth in core deposits - which increased 8% from the fourth quarter of 2004. During the quarter, we also increased our commercial mortgage servicing portfolio from $44 billion to more than $70 billion through the acquisition of the commercial mortgage-backed servicing business of ORIX Capital Markets, LLC.
"Over the past several years, we have restored our strong credit culture, and we remain committed to maintaining it. Included in our net charge-offs for the quarter were $127 million of commercial passenger airline leases. Our exposure to that industry now stands at $86 million, substantially all of which is categorized as performing. Total nonperforming loans were down $31 million and total nonperforming assets declined by $72 million from December 31, 2004; both are at their lowest level in 11 years.
"We are also committed to strengthening our anti-money laundering processes, and controls related to the Bank Secrecy Act. We believe we have made significant progress in this regard during the fourth quarter and will continue with our improvement efforts into 2006."
The company expects earnings to be in the range of $0.67 to $0.71 per share for the first quarter of 2006 and $2.80 to $2.90 per share for the full year.
SUMMARY OF CONSOLIDATED RESULTS
Taxable-equivalent net interest income increased to $748 million for the fourth quarter of 2005 from $698 million for the same period last year. Average earning assets rose by 4%, due primarily to commercial loan growth, while the net interest margin increased 8 basis points to 3.71%. The growth in commercial loans was attributable in part to the acquisition of American Express Business Finance Corporation during the fourth quarter of 2004. Compared with the third quarter of 2005, taxable-equivalent net interest income grew by $22 million. This growth was attributable to a $1.4 billion increase in average earning assets and a 4 basis point improvement in the net interest margin.
Key's noninterest income was $561 million for the fourth quarter of 2005, compared with $479 million for the year-ago quarter. The increase was attributable primarily to net gains from loan securitizations and sales recorded in the fourth quarter of 2005, compared with net losses recorded in the year-ago quarter. Current year results included a $16 million gain from the annual securitization and sale of education loans, while last year's results included $46 million of losses associated with management's decision to sell the broker-originated home equity and indirect automobile loan portfolios. Also contributing to the improved performance was a $15 million increase in income from principal investing.
Compared with the third quarter of 2005, noninterest income grew by $30 million. The improvement reflected a $22 million increase in net gains from loan securitizations and sales, due largely to the gain resulting from the securitization and sale of education loans in the current period. Noninterest income also benefited from increases of $9 million in income from investment banking activities, $6 million in net gains on the residual values of leased equipment and $5 million in income from corporate owned life insurance. These increases were offset, in part, by an $11 million reduction in income from principal investing.
Key's noninterest expense was $834 million for the fourth quarter of 2005, compared with $818 million for the same period last year. Excluding a $55 million write-off of goodwill recorded during the fourth quarter of 2004 in connection with the decision to sell Key's nonprime indirect automobile loan business, noninterest expense for the fourth quarter of 2005 was up $71 million from the year-ago quarter. Nonpersonnel expense accounted for most of the growth. During the fourth quarter, miscellaneous expense included a $15 million contribution to the Key Foundation, a $10 million accrual for the settlement of a legal dispute and an additional $5 million reserve to absorb potential noncredit-related losses from Key's education lending business. Also contributing to the increase in noninterest expense were professional fees associated with Key's efforts to strengthen its compliance controls, higher franchise and business taxes, and an increase in net occupancy expense. Personnel expense rose by $5 million from the fourth quarter of 2004.
Compared with the third quarter of 2005, noninterest expense increased by $53 million. Nonpersonnel expense grew by $51 million, reflecting the $15 million contribution to the Key Foundation, the legal settlement accrual, and increases in professional fees and a variety of other expense components. The level of personnel expense was essentially unchanged.
ASSET QUALITY
Key's provision for loan losses was an expense of $36 million for the fourth quarter of 2005, compared with a credit of $21 million for the year-ago quarter and an expense of $43 million for the third quarter of 2005.
Net loan charge-offs for the quarter totaled $164 million, or 0.98% of average loans, compared with $140 million, or 0.88%, for the same period last year and $49 million, or 0.30%, for the previous quarter. The increase from September 30, 2005, was attributable to the charge-off of several credits within the commercial passenger airline portfolio. Key had established reserves in prior periods in connection with these lease financing receivables.
At December 31, 2005, Key's nonperforming loans stood at $277 million and represented 0.42% of period-end loans, compared with 0.49% at December 31, 2004, and 0.55% at September 30, 2005. The decrease from the prior quarter reflects charge-offs related to certain commercial passenger airline leases.
Key's allowance for loan losses stood at $966 million, or 1.45% of loans outstanding at December 31, 2005, compared with $1.138 billion, or 1.80% at December 31, 2004, and $1.093 billion, or 1.67% at September 30, 2005. At December 31, 2005, the allowance for loan losses represented 349% of nonperforming loans, compared with 369% a year ago and 304% at September 30, 2005.
CAPITAL
Key's capital ratios continued to exceed all "well-capitalized" regulatory benchmarks at December 31, 2005. Key's tangible equity to tangible assets ratio was 6.68% at quarter end, compared with 6.35% at December 31, 2004, and 6.68% at September 30, 2005. The ratio is currently within management's targeted range of 6.25% to 6.75%.
Key's capital position provides it with the flexibility to take advantage of future investment opportunities, to repurchase shares when appropriate and to pay dividends. During the fourth quarter of 2005, Key repurchased 3,250,000 of its common shares. At December 31, 2005, there were 22,461,248 shares remaining for repurchase under the current authorization. Share repurchases and other activities that caused the change in Key's outstanding common shares over the past five quarters are summarized in the table below.
Summary of Changes in Common Shares Outstanding
in thousands 4Q05 3Q05 2Q05 1Q05 4Q04
Shares outstanding at
beginning of period 408,542 408,231 407,297 407,570 405,723
Issuance of shares under
employee benefit and
dividend reinvestment plans 1,332 1,561 934 2,227 1,847
Repurchase of common shares (3,250) (1,250) -- (2,500) --
Shares outstanding at end of
period 406,624 408,542 408,231 407,297 407,570
LINE OF BUSINESS RESULTS
The following table shows the contribution made by each major business group to Key's taxable-equivalent revenue and net income 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 last two pages of this release.
Major Business Groups Percent
change 4Q05
vs.
dollars in millions 4Q05 3Q05 4Q04 3Q05 4Q04
Revenue (taxable equivalent)
Consumer Banking $730 $716 $691 2.0 % 5.6 %
Corporate and Investment Banking 577 543 515 6.3 12.0
Other Segments 17 24 (2) (29.2) N/M
Total segments 1,324 1,283 1,204 3.2 10.0
Reconciling Items (15) (26) (27) 42.3 44.4
Total $1,309 $1,257 $1,177 4.1 % 11.2 %
Net income (loss) `
Consumer Banking $109 $125 $59 (12.8)% 84.7 %
Corporate and Investment Banking 161 148 174 8.8 (7.5)
Other Segments 20 21 9 (4.8) 122.2
Total segments 290 294 242 (1.4) 19.8
Reconciling Items 6 (16) (29) N/M N/M
Total $296 $278 $213 6.5 % 39.0 %
N/M = Not Meaningful
Consumer Banking
Percent change 4Q05
vs.
dollars in millions 4Q05 3Q05 4Q04 3Q05 4Q04
Summary of operations
Net interest
income (TE) $489 $483 $502 1.2 % (2.6)%
Noninterest income 241 233 189 3.4 27.5
Total revenue (TE) 730 716 691 2.0 5.6
Provision for
loan losses 28 29 9 (3.4) 211.1
Noninterest expense 527 488 555 8.0 (5.0)
Income before
income taxes (TE) 175 199 127 (12.1) 37.8
Allocated income
taxes and TE
adjustments 66 74 68 (10.8) (2.9)
Net income $109 $125 $59 (12.8)% 84.7 %
Percent of
consolidated
net income 37 % 45 % 28 % N/A N/A
Average balances
Loans $29,260 $29,139 $31,886 .4 % (8.2)%
Total assets 35,688 35,473 37,796 .6 (5.6)
Deposits 43,158 42,359 40,925 1.9 5.5
TE = Taxable Equivalent, N/A = Not Applicable
Additional Consumer Banking Data Percent
change 4Q05
vs.
dollars in millions 4Q05 3Q05 4Q04 3Q05 4Q04
Average deposits outstanding
Noninterest-bearing $7,131 $7,122 $6,741 .1 % 5.8 %
Money market deposit
accounts and other savings 21,313 20,785 20,315 2.5 4.9
Time 14,714 14,452 13,869 1.8 6.1
Total deposits $43,158 $42,359 $40,925 1.9 % 5.5 %
Home equity loans
Community Banking:
Average balance $10,288 $10,365 $10,534
Average loan-to-value
ratio 71 % 71 % 72 %
Percent first lien
positions 61 61 61
National Home Equity:
Average balance $3,471 $3,515 $4,153
Average loan-to-value
ratio 64 % 65 % 67 %
Percent first lien
positions 63 66 70
Other data
On-line households /
household penetration 622,957/50% 607,127/49% 571,051/45%
KeyCenters 947 946 935
Automated teller machines 2,180 2,185 2,194
Net income for Consumer Banking was $109 million for the fourth quarter of 2005, compared with $59 million for the year-ago quarter. Two principal causes of the increase were the fourth quarter 2004 sale of the broker- originated home equity loan portfolio, and the reclassification of the indirect automobile loan portfolio to held-for-sale status. These actions significantly reduced noninterest income and the provision for loan losses, and substantially increased noninterest expense in the year-ago quarter. Excluding the effects of the above actions, net income for Consumer Banking was $136 million for the fourth quarter of 2004.
Taxable-equivalent net interest income decreased by $13 million, or 3%, from the fourth quarter of 2004, due to a less favorable interest rate spread on average earning assets and a reduction in loans which resulted from the sale of the higher-yielding broker-originated home equity and indirect automobile loan portfolios. The adverse effects of these factors were moderated by growth in average deposits.
Noninterest income rose by $52 million, or 28%, due primarily to net gains from loan securitizations and sales recorded in the fourth quarter of 2005, compared with net losses recorded in the year-ago quarter. Current year results included a $16 million gain from the annual securitization and sale of education loans, while last year's results included $46 million of losses associated with management's decision to sell the previously-mentioned portfolios. Noninterest income also benefited from higher income from electronic banking and loan securitization servicing. The positive effects of these factors were offset, in part, by decreases in income from brokerage, and various investment banking and capital markets activities.
Noninterest expense decreased by $28 million, or 5%, due primarily to a $55 million write-down of goodwill recorded in the fourth quarter of 2004 in connection with management's decision to sell the nonprime indirect automobile loan business, and a decrease in personnel expense. The overall reduction in noninterest expense was moderated by higher costs associated with loan servicing and various indirect charges.
Corporate & Investment Banking
Percent change 4Q05
vs.
dollars in millions 4Q05 3Q05 4Q04 3Q05 4Q04
Summary of operations
Net interest
income (TE) $315 $297 $260 6.1 % 21.2 %
Noninterest income 262 246 255 6.5 2.7
Total revenue (TE) 577 543 515 6.3 12.0
Provision for
loan losses 8 14 (30) (42.9) N/M
Noninterest expense 312 292 266 6.8 17.3
Income before
income taxes (TE) 257 237 279 8.4 (7.9)
Allocated income
taxes and TE
adjustments 96 89 105 7.9 (8.6)
Net income $161 $148 $174 8.8 % (7.5)%
Percent of
consolidated net
income 54 % 53 % 82 % N/A N/A
Average balances
Loans $36,407 $35,064 $30,852 3.8 % 18.0 %
Total assets 42,998 41,398 37,012 3.9 16.2
Deposits 11,157 10,136 8,793 10.1 26.9
TE = Taxable Equivalent, N/M = Not Meaningful, N/A = Not Applicable
Additional Corporate and Investment Banking Data Percent
change 4Q05
vs.
dollars in millions 4Q05 3Q05 4Q04 3Q05 4Q04
Average lease financing
receivables managed by
Key Equipment Finance(a)
Receivables held in Key Equipment
Finance portfolio $8,311 $8,150 $6,937 2.0 % 19.8 %
Receivables assigned to other
lines of business 1,974 2,011 1,892 (1.8) 4.3
Total lease financing
receivables managed $10,285 $10,161 $8,829 1.2 % 16.5 %
(a) Includes lease financing receivables held in portfolio and those
assigned to other lines of business (primarily Corporate Banking) if
those businesses are principally responsible for maintaining the
relationship with the client.
Net income for Corporate and Investment Banking was $161 million for the fourth quarter of 2005, down from $174 million for the same period last year. A significant increase in the provision for loan losses and growth in noninterest expense more than offset increases in both net interest income and noninterest income.
The provision for loan losses was an expense of $8 million for the fourth quarter of 2005, compared with a credit of $30 million for the year-ago quarter. The credit recorded last year was due largely to improved asset quality in the Corporate Banking and KeyBank Real Estate Capital lines of business.
Noninterest expense rose by $46 million, or 17%, as business expansion, including the acquisition of American Express Business Finance Corporation ("AEBF"), contributed to increases in personnel and various other expense categories.
Taxable-equivalent net interest income increased by $55 million, or 21%, due primarily to strong growth in average loans and leases, as well as deposits. Average loans and leases rose by $5.6 billion, or 18%, reflecting improvements in each of the primary lines of business. The increase in lease financing receivables in the Key Equipment Finance line was bolstered by the acquisition of AEBF during the fourth quarter of 2004.
Noninterest income grew by $7 million, or 3%. The improvement was driven by net securities gains in the current year, compared with net losses recorded one year ago, higher income from operating leases and an increase in net gains on the residual values of leased equipment. The positive effects of these factors were partially offset by a reduction in income from investment banking activities.
On December 8, 2005, we continued the expansion of our commercial mortgage servicing business by acquiring the commercial mortgage-backed servicing business of ORIX Capital Markets, LLC. This is one in a series of acquisitions that we have made over the past several years to build upon our success in commercial mortgage origination and servicing.
Other Segments
Other segments consist of Corporate Treasury and Key's Principal Investing unit. These segments generated net income of $20 million for the fourth quarter of 2005, compared with $9 million for the same period last year. Increases in net gains from principal investing and net interest income drove the improvement.
Line of Business Descriptions
Consumer Banking
Community Banking includes Retail Banking, Small Business and McDonald Financial Group.
Retail Banking provides individuals with branch-based deposit and investment products, personal finance services and loans, including residential mortgages, home equity and various types of installment loans.
Small Business provides businesses that typically have annual sales revenues of $10 million or less with deposit, investment and credit products, and business advisory services.
McDonald Financial Group offers financial, estate and retirement planning, and asset management services to assist high-net-worth clients with their banking, brokerage, trust, portfolio management, insurance, charitable giving and related needs.
Consumer Finance includes Indirect Lending and National Home Equity.
Indirect Lending offers loans to consumers through dealers and finances inventory for automobile and marine dealers. This business unit also provides federal and private education loans to students and their parents and processes payments on loans that private schools make to parents.
National Home Equity provides both prime and nonprime mortgage and home equity loan products to individuals. These products originate outside of Key's retail branch system. This business unit also works with home improvement contractors to provide home equity and home improvement solutions.
Corporate and Investment Banking
Corporate Banking provides products and services to large corporations, middle-market companies, financial institutions and government organizations. These products and services include commercial lending, treasury management, investment banking, derivatives and foreign exchange, equity and debt underwriting and trading, and syndicated finance.
Through its Victory Capital Management unit, Corporate Banking also manages or gives 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.
KeyBank Real Estate Capital provides construction and interim lending, permanent debt placements and servicing, and equity and investment banking services to developers, brokers and owner-investors. This line of business deals exclusively with nonowner-occupied properties (i.e., generally properties for which the owner occupies less than 60% of the premises).
Key Equipment Finance meets the equipment leasing needs of companies worldwide and provides equipment manufacturers, distributors and resellers with financing options for their clients. Lease financing receivables and related revenues are assigned to other lines of business (primarily Corporate Banking) if those businesses are principally responsible for maintaining the relationship with the client.
Cleveland-based KeyCorp is one of the nation's largest bank-based financial services companies, with assets of approximately $93 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 947 KeyCenters and offices; a network of 2,180 ATMs; telephone banking centers (1.800.KEY2YOU); and a Web site, Key.com,(R) 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 earnings and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at http://www.Key.com/ir at 9:00 a.m. ET, on Friday, January 20, 2006. A tape of the call will be available through January 27.
For up-to-date company information, media contacts and facts and figures about Key's lines of business visit our Media Newsroom at http://www.Key.com/newsroom.
This news release contains forward-looking statements, including statements about our financial condition, results of operations, earnings outlook, asset quality trends and profitability. Forward-looking statements provide management's current expectations or forecasts of future events and, by their nature, are subject to assumptions, risks and uncertainties. Although management believes that the expectations and forecasts reflected in these forward-looking statements are reasonable, actual results could differ materially from those contained in or implied by such forward-looking statements due to a variety of factors including: (1) changes in interest rates; (2) changes in trade, monetary or fiscal policy; (3) changes 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; (4) increased competitive pressure among financial services companies; (5) the inability to successfully execute strategic initiatives designed to grow revenues and/or manage expenses; (6) consummation of significant business combinations or divestitures; (7) operational or risk management failures due to technological or other factors; (8) heightened regulatory practices, requirements or expectations; (9) new legal obligations or restrictions or unfavorable resolution of litigation; (10) adverse capital markets conditions; (11) disruption in the economy and general business climate as a result of terrorist activities or military actions; and (12) changes in accounting or tax practices or requirements. 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. For further information regarding KeyCorp, please read KeyCorp's reports that are filed with the Securities and Exchange Commission and are available at http://www.sec.gov.
Financial Highlights
(dollars in millions, except per share amounts)
Three months ended
12-31-05 9-30-05 12-31-04
Summary of operations
Net interest income (TE) $748 $726 $698
Noninterest income 561 531 479
Total revenue (TE) 1,309 1,257 1,177
Provision for loan losses 36 43 (21)
Noninterest expense 834 781 818
Net income 296 278 213
Per common share
Net income $.72 $.68 $.52
Net income - assuming dilution .72 .67 .51
Cash dividends paid .325 .325 .31
Book value at period end 18.69 18.41 17.46
Market price at period end 32.93 32.25 33.90
Performance ratios
Return on average total assets 1.27 % 1.22 % .95 %
Return on average equity 15.59 14.84 11.99
Net interest margin (TE) 3.71 3.67 3.63
Capital ratios at period end
Equity to assets 8.16 % 8.15 % 7.84 %
Tangible equity to tangible assets 6.68 6.68 6.35
Tier 1 risk-based capital(a) 7.67 7.72 7.22
Total risk-based capital(a) 11.59 11.83 11.47
Leverage(a) 8.54 8.60 7.96
Asset quality
Net loan charge-offs $164 $49 $140
Net loan charge-offs to average loans .98 % .30 % .88 %
Allowance for loan losses $966 $1,093 $1,138
Allowance for loan losses to period-
end loans 1.45 % 1.67 % 1.80 %
Allowance for loan losses to
nonperforming loans 348.74 303.61 369.48
Nonperforming loans at period end $277 $360 $308
Nonperforming assets at period end 307 393 379
Nonperforming loans to period-end loans .42 % .55 % .49 %
Nonperforming assets to period-end
loans plus OREO and other nonperforming
assets .46 .60 .60
Trust and brokerage assets
Assets under management $77,144 $76,341 $74,557
Nonmanaged and brokerage assets 56,509 57,313 72,703
Other data
Average full-time equivalent employees 19,417 19,456 19,575
KeyCenters 947 946 935
Taxable-equivalent adjustment $30 $33 $26
Financial Highlights (continued)
(dollars in millions, except per share amounts)
Twelve months ended
12-31-05 12-31-04
Summary of operations
Net interest income (TE) $2,911 $2,699
Noninterest income 2,078 1,929
Total revenue (TE) 4,989 4,628
Provision for loan losses 143 185
Noninterest expense 3,137 2,961
Net income 1,129 954
Per common share
Net income $2.76 $2.32
Net income - assuming dilution 2.73 2.30
Cash dividends paid 1.30 1.24
Performance ratios
Return on average total assets 1.24 % 1.10 %
Return on average equity 15.42 13.75
Net interest margin (TE) 3.69 3.63
Asset quality
Net loan charge-offs $315 $431
Net loan charge-offs to average loans .49 % .70 %
Other data
Average full-time equivalent employees 19,485 19,576
Taxable-equivalent adjustment $121 $94
(a) 12-31-05 ratio is estimated.
TE = Taxable Equivalent
Consolidated Balance Sheets
(dollars in millions)
12-31-05 9-30-05 12-31-04
Assets
Loans $66,478 $65,575 $63,372
Loans held for sale 3,381 3,595 4,353
Investment securities 91 98 71
Securities available for sale 7,269 7,124 7,451
Short-term investments 1,592 2,394 1,472
Other investments 1,332 1,310 1,421
Total earning assets 80,143 80,096 78,140
Allowance for loan losses (966) (1,093) (1,138)
Cash and due from banks 3,108 2,660 2,454
Premises and equipment 656 593 603
Goodwill 1,355 1,344 1,359
Other intangible assets 125 109 87
Corporate-owned life insurance 2,690 2,658 2,608
Derivative assets 1,039 1,132 1,949
Accrued income and other assets 4,976 4,824 4,685
Total assets $93,126 $92,323 $90,747
Liabilities
Deposits in domestic offices:
NOW and money market deposit accounts $24,241 $23,541 $21,748
Savings deposits 1,840 1,922 1,970
Certificates of deposit ($100,000
or more) 5,156 4,783 4,697
Other time deposits 11,170 10,804 10,435
Total interest-bearing 42,407 41,050 38,850
Noninterest-bearing 13,335 12,202 11,581
Deposits in foreign office -
interest-bearing 3,023 4,819 7,411
Total deposits 58,765 58,071 57,842
Federal funds purchased and securities
sold under repurchase agreements 4,835 3,444 2,145
Bank notes and other short-term
borrowings 1,780 3,001 2,515
Derivative liabilities 1,060 1,075 1,196
Accrued expense and other liabilities 5,149 5,173 5,086
Long-term debt 13,939 14,037 14,846
Total liabilities 85,528 84,801 83,630
Shareholders' equity
Preferred stock -- -- --
Common shares 492 492 492
Capital surplus 1,534 1,517 1,491
Retained earnings 7,882 7,719 7,284
Treasury stock (2,204) (2,133) (2,128)
Accumulated other comprehensive loss (106) (73) (22)
Total shareholders' equity 7,598 7,522 7,117
Total liabilities and shareholders'
equity $93,126 $92,323 $90,747
Common shares outstanding (000) 406,624 408,542 407,570
Consolidated Statements of Income
(dollars in millions, except per share amounts)
Twelve months
Three months ended ended
12-31-05 9-30-05 12-31-04 12-31-05 12-31-04
Interest income
Loans $1,085 $1,006 $870 $3,922 $3,263
Loans held for sale 64 56 33 254 114
Investment securities -- 1 1 3 5
Securities available for sale 84 84 81 328 331
Short-term investments 19 15 11 56 38
Other investments 10 12 9 54 35
Total interest income 1,262 1,174 1,005 4,617 3,786
Interest expense
Deposits 309 273 184 1,026 677
Federal funds purchased and
securities sold under
repurchase agreements 40 31 23 121 60
Bank notes and other short-term
borrowings 24 22 13 82 42
Long-term debt 171 155 113 598 402
Total interest expense 544 481 333 1,827 1,181
Net interest income 718 693 672 2,790 2,605
Provision for loan losses 36 43 (21) 143 185
682 650 693 2,647 2,420
Noninterest income
Trust and investment services
income 134 135 143 542 564
Service charges on deposit
accounts 76 82 77 304 331
Investment banking and capital
markets income 82 93 77 294 255
Letter of credit and loan fees 49 46 50 182 158
Corporate-owned life insurance
income 31 26 33 109 110
Electronic banking fees 26 24 23 96 85
Net gains (losses) from loan
securitizations and sales 34 12 (29) 75 16
Net securities gains (losses) 3 3 (3) 1 4
Other income 126 110 108 475 406
Total noninterest income 561 531 479 2,078 1,929
Noninterest expense
Personnel 416 414 411 1,606 1,549
Net occupancy 68 66 60 280 236
Computer processing 57 54 50 212 191
Equipment 27 28 30 111 119
Professional fees 42 29 32 129 113
Marketing 30 29 32 118 111
Other expense 194 161 203 681 642
Total noninterest expense 834 781 818 3,137 2,961
Income before income taxes 409 400 354 1,588 1,388
Income taxes 113 122 141 459 434
Net income $296 $278 $213 $1,129 $954
Net income per common share $.72 $.68 $.52 $2.76 $2.32
Net income per common share --
assuming dilution .72 .67 .51 2.73 2.30
Cash dividends declared per
common share .325 .325 .31 1.30 1.24
Weighted-average common
shares outstanding (000) 408,431 410,456 408,243 408,981 410,585
Weighted-average common shares
and potential common shares
outstanding (000) 412,542 415,441 413,727 414,014 415,430 Consolidated Average Balance Sheets, Net Interest Income and Yields/Rates
(dollars in millions)
Fourth Quarter 2005 Third Quarter 2005
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
Assets
Loans: (a,b)
Commercial, financial
and agricultural $19,992 $315 6.25 % $19,249 $280 5.78 %
Real estate -
commercial mortgage 8,580 151 6.98 8,467 136 6.42
Real estate -
construction 6,896 129 7.42 6,388 110 6.81
Commercial lease
financing 10,285 154 6.01 10,161 158 6.19
Total commercial
loans 45,753 749 6.51 44,265 684 6.15
Real estate -
residential 1,460 23 6.22 1,472 23 6.13
Home equity 13,767 242 7.00 13,888 236 6.72
Consumer - direct 1,785 44 9.68 1,794 40 8.96
Consumer - indirect
lease financing 23 1 11.28 36 1 11.05
Consumer - indirect
other 3,317 55 6.68 3,303 55 6.62
Total consumer loans 20,352 365 7.13 20,493 355 6.86
Total loans 66,105 1,114 6.70 64,758 1,039 6.37
Loans held for sale 3,592 64 7.05 3,521 56 6.43
Investment securities(a) 95 1 5.81 76 1 7.00
Securities available
for sale(c) 7,034 84 4.77 7,131 84 4.65
Short-term investments 2,091 19 3.53 1,972 15 3.15
Other investments(c) 1,297 10 3.09 1,342 12 3.25
Total earning assets 80,214 1,292 6.40 78,800 1,207 6.08
Allowance for loan
losses (1,085) (1,095)
Accrued income and
other assets 13,077 12,918
Total assets $92,206 $90,623
Liabilities
NOW and money market
deposit accounts $23,947 127 2.11 $22,886 101 1.75
Savings deposits 1,858 1 .27 1,952 2 .29
Certificates of
deposit ($100,000 or
more)(d) 5,006 51 4.06 4,928 48 3.85
Other time deposits 10,951 96 3.46 10,805 87 3.21
Deposits in foreign
office 3,316 34 4.03 4,048 35 3.46
Total interest-
bearing deposits 45,078 309 2.72 44,619 273 2.43
Federal funds purchased
and securities sold
under repurchase
agreements 4,309 40 3.72 3,674 31 3.28
Bank notes and other
short-term borrowings 2,607 24 3.67 2,841 22 3.04
Long-term debt(d) 13,860 171 4.89 13,814 155 4.50
Total interest-
bearing liabilities 65,854 544 3.28 64,948 481 2.94
Noninterest-bearing
deposits 12,594 12,215
Accrued expense and
other liabilities 6,224 6,027
Total liabilities 84,672 83,190
Shareholders' equity 7,534 7,433
Total liabilities
and shareholders'
equity $92,206 $90,623
Interest rate spread (TE) 3.12 % 3.14 %
Net interest income (TE)
and net interest margin (TE) 748 3.71 % 726 3.67 %
TE adjustment(a) 30 33
Net interest income, GAAP basis $718 $693 Consolidated Average Balance Sheets, Net Interest Income and Yields/Rates
(dollars in millions)
Fourth Quarter 2004
Average
Balance Interest Yield/Rate
Assets
Loans: (a,b)
Commercial, financial and
agricultural $17,899 $206 4.59 %
Real estate - commercial mortgage 7,967 107 5.35
Real estate - construction 5,295 74 5.52
Commercial lease financing 8,829 129 5.89
Total commercial loans 39,990 516 5.15
Real estate - residential 1,512 23 5.94
Home equity 14,696 219 5.94
Consumer - direct 2,003 38 7.63
Consumer - indirect lease financing 104 3 10.02
Consumer - indirect other 5,076 96 7.55
Total consumer loans 23,391 379 6.45
Total loans 63,381 895 5.63
Loans held for sale 2,635 33 5.07
Investment securities(a) 75 2 8.53
Securities available for sale(c) 7,233 81 4.48
Short-term investments 2,100 11 2.00
Other investments(c) 1,417 9 2.56
Total earning assets 76,841 1,031 5.35
Allowance for loan losses (1,251)
Accrued income and other assets 13,658
Total assets $89,248
Liabilities
NOW and money market deposit
accounts $21,591 46 .84
Savings deposits 1,951 1 .23
Certificates of deposit
($100,000 or more)(d) 4,871 44 3.66
Other time deposits 10,366 75 2.89
Deposits in foreign office 3,506 18 1.96
Total interest-bearing deposits 42,285 184 1.73
Federal funds purchased and
securities sold under repurchase
agreements 5,085 23 1.81
Bank notes and other short-term
borrowings 2,793 13 1.79
Long-term debt(d) 14,119 113 3.36
Total interest-bearing liabilities 64,282 333 2.08
Noninterest-bearing deposits 11,804
Accrued expense and other liabilities 6,095
Total liabilities 82,181
Shareholders' equity 7,067
Total liabilities and shareholders'
equity $89,248
Interest rate spread (TE) 3.27 %
Net interest income (TE) and net
interest margin (TE) 698 3.63 %
TE adjustment(a) 26
Net interest income, GAAP basis $672
(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) Yield is calculated on the basis of amortized cost.
(d) Rate calculation excludes basis adjustments related to fair value
hedges.
TE = Taxable Equivalent
GAAP = U.S. generally accepted accounting principles Consolidated Average Balance Sheets, Net Interest Income and Yields/Rates
(dollars in millions)
Twelve months ended Twelve months ended
December 31, 2005 December 31, 2004
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
Assets
Loans: (a,b)
Commercial, financial
and agricultural $19,480 $1,083 5.56 % $17,119 $762 4.45 %
Real estate -
commercial mortgage 8,403 531 6.32 7,032 354 5.03
Real estate -
construction 6,263 418 6.67 4,926 250 5.08
Commercial lease
financing 10,122 628 6.21 8,269 487 5.90
Total commercial
loans 44,268 2,660 6.01 37,346 1,853 4.96
Real estate -
residential 1,468 90 6.10 1,563 94 6.01
Home equity 13,886 916 6.60 14,784 842 5.70
Consumer - direct 1,834 158 8.60 2,048 154 7.52
Consumer - indirect
lease financing 47 5 10.72 178 18 9.86
Consumer - indirect
other 3,286 212 6.45 5,188 393 7.58
Total consumer loans 20,521 1,381 6.73 23,761 1,501 6.32
Total loans 64,789 4,041 6.24 61,107 3,354 5.49
Loans held for sale 3,638 254 6.99 2,510 114 4.55
Investment
securities(a) 76 5 7.30 85 8 8.69
Securities available
for sale(c) 7,118 328 4.60 7,215 331 4.60
Short-term investments 1,887 56 2.96 2,218 38 1.70
Other investments(c) 1,379 54 3.79 1,257 35 2.77
Total earning assets 78,887 4,738 6.00 74,392 3,880 5.22
Allowance for loan
losses (1,109) (1,284)
Accrued income and
other assets 13,150 13,309
Total assets $90,928 $86,417
Liabilities
NOW and money market
deposit accounts $22,696 360 1.59 $20,175 147 .73
Savings deposits 1,941 5 .26 2,007 5 .23
Certificates of
deposit ($100,000
or more)(d) 4,957 189 3.82 4,834 178 3.71
Other time deposits 10,789 341 3.16 10,564 304 2.88
Deposits in foreign
office 4,155 131 3.15 2,978 43 1.43
Total interest-
bearing deposits 44,538 1,026 2.30 40,558 677 1.67
Federal funds
purchased and
securities sold under
repurchase agreements 4,070 121 2.97 4,669 60 1.29
Bank notes and other
short-term
borrowings 2,796 82 2.94 2,631 42 1.59
Long-term debt(d) 14,094 598 4.32 14,304 402 2.93
Total interest-
bearing liabilities 65,498 1,827 2.80 62,162 1,181 1.92
Noninterest-bearing
deposits 12,019 11,192
Accrued expense and
other liabilities 6,088 6,126
Total
liabilities 83,605 79,480
Shareholders' equity 7,323 6,937
Total liabilities
and shareholders'
equity $90,928 $86,417
Interest rate spread (TE) 3.20 % 3.30 %
Net interest income
(TE) and net interest
margin (TE) 2,911 3.69 % 2,699 3.63 %
TE adjustment(a) 121 94
Net interest income,
GAAP basis $2,790 $2,605
(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) Yield is calculated on the basis of amortized cost.
(d) Rate calculation excludes basis adjustments related to fair value
hedges.
TE = Taxable Equivalent
GAAP = U.S. generally accepted accounting principles
Noninterest Income
(in millions)
Twelve months
Three months ended ended
12-31-05 9-30-05 12-31-04 12-31-05 12-31-04
Trust and investment services
income(a) $134 $135 $143 $542 $564
Service charges on deposit
accounts 76 82 77 304 331
Investment banking and capital
markets income(a) 82 93 77 294 255
Letter of credit and loan fees 49 46 50 182 158
Corporate-owned life insurance
income 31 26 33 109 110
Electronic banking fees 26 24 23 96 85
Net gains (losses) from loan
securitizations and sales 34 12 (29) 75 16
Net securities gains (losses) 3 3 (3) 1 4
Other income:
Operating lease income 50 47 46 191 183
Insurance income 15 16 12 52 48
Loan securitization servicing
fees 5 5 1 20 5
Credit card fees 2 4 4 14 13
Miscellaneous income 54 38 45 198 157
Total other income 126 110 108 475 406
Total noninterest
income $561 $531 $479 $2,078 $1,929
(a) Additional detail provided in tables below.
Trust and Investment Services Income
(in millions)
Twelve months
Three months ended ended
12-31-05 9-30-05 12-31-04 12-31-05 12-31-04
Brokerage commissions and
fee income $61 $61 $68 $247 $265
Personal asset management and
custody fees 38 39 39 153 156
Institutional asset management
and custody fees 35 35 36 142 143
Total trust and investment
services income $134 $135 $143 $542 $564
Investment Banking and Capital Markets Income
(in millions)
Twelve months
Three months ended ended
12-31-05 9-30-05 12-31-04 12-31-05 12-31-04
Investment banking income $30 $21 $39 $87 $122
Net gains from principal investing 20 31 5 64 44
Foreign exchange income 11 11 10 40 41
Dealer trading and derivatives
income 10 16 8 55 8
Income from other investments 11 14 15 48 40
Total investment banking and
capital markets income $82 $93 $77 $294 $255
Noninterest Expense
(dollars in millions)
Twelve months
Three months ended ended
12-31-05 9-30-05 12-31-04 12-31-05 12-31-04
Personnel(a) $416 $414 $411 $1,606 $1,549
Net occupancy 68 66 60 280 236
Computer processing 57 54 50 212 191
Equipment 27 28 30 111 119
Professional fees 42 29 32 129 113
Marketing 30 29 32 118 111
Other expense:
Operating lease expense 40 40 36 158 151
Postage and delivery 14 12 13 51 52
Telecommunications 7 8 7 30 29
Franchise and business taxes 9 8 (1) 34 16
OREO expense, net 2 2 3 8 17
Provision for losses on
lending-related commitments --- 2 1 (7) (4)
Miscellaneous expense 122 89 144(b) 407 381
Total other expense 194 161 203 681 642
Total noninterest
expense $834 $781 $818 $3,137 $2,961
Average full-time equivalent
employees 19,417 19,456 19,575 19,485 19,576
(a) Additional detail provided in table below.
(b) Includes goodwill write-off of $55 million as a result of management's
decision to sell Key's nonprime indirect automobile loan portfolio.
Personnel Expense
(in millions)
Twelve months
Three months ended ended
12-31-05 9-30-05 12-31-04 12-31-05 12-31-04
Salaries $220 $222 $216 $878 $848
Incentive compensation 120 104 113 396 393
Employee benefits 56 67 65 263 258
Stock-based compensation 17 17 13 54 40
Severance 3 4 4 15 10
Total personnel expense $416 $414 $411 $1,606 $1,549
Loan Composition
(dollars in millions)
Percent change
12-31-05 vs.
12-31-05 9-30-05 12-31-04 9-30-05 12-31-04
Commercial, financial and
agricultural $20,579 $19,451 $18,730 5.8 % 9.9 %
Commercial real estate:
Commercial mortgage 8,360 8,618 8,131 (3.0) 2.8
Construction 7,109 6,700 5,508 6.1 29.1
Total commercial
real estate loans 15,469 15,318 13,639 1.0 13.4
Commercial lease financing 10,352 10,339 10,155 .1 1.9
Total commercial
loans 46,400 45,108 42,524 2.9 9.1
Real estate - residential
mortgage 1,458 1,476 1,473 (1.2) (1.0)
Home equity 13,488 13,872 14,062 (2.8) (4.1)
Consumer - direct 1,794 1,792 1,983 .1 (9.5)
Consumer - indirect:
Automobile lease financing 19 28 89 (32.1) (78.7)
Marine 2,715 2,676 2,624 1.5 3.5
Other 604 623 617 (3.0) (2.1)
Total consumer -
indirect loans 3,338 3,327 3,330 .3 .2
Total consumer loans 20,078 20,467 20,848 (1.9) (3.7)
Total loans $66,478 $65,575 $63,372 1.4 % 4.9 %
Loans Held for Sale Composition
(dollars in millions)
Percent change
12-31-05 vs.
12-31-05 9-30-05 12-31-04 9-30-05 12-31-04
Commercial, financial and
agricultural $85 -- -- N/M N/M
Real estate - commercial
mortgage 525 $416 $283 26.2 % 85.5 %
Real estate - residential
mortgage 11 21 26 (47.6) (57.7)
Real estate - construction 51 5 -- 920.0 N/M
Home equity -- 1 29 (100.0) (100.0)
Education 2,687 3,123 2,278 (14.0) 18.0
Automobile 22 29 1,737 (24.1) (98.7)
Total loans held for
sale $3,381 $3,595 $4,353 (6.0)% (22.3)%
N/M = Not Meaningful
Summary of Loan Loss Experience
(dollars in millions)
Three months ended Twelve months ended
12-31-05 9-30-05 12-31-04 12-31-05 12-31-04
Average loans
outstanding during the
period $66,105 $64,758 $63,381 $64,789 $61,107
Allowance for loan
losses at beginning of
period $1,093 $1,100 $1,251 $1,138 $1,406
Loans charged off:
Commercial,
financial and
agricultural 22 14 20 80 145
Real estate --
commercial
mortgage 3 4 9 19 35
Real estate --
construction -- -- -- 5 5
Total
commercial
real estate
loans 3 4 9 24 40
Commercial lease
financing 140 18 18 183 52
Total
commercial
loans 165 36 47 287 237
Real estate --
residential
mortgage 2 1 2 7 17
Home equity 6 7 26 26 63
Consumer -- direct 10 10 10 38 42
Consumer --
indirect lease
financing -- 1 2 3 8
Consumer --
indirect other 4 14 86 48 216
Total consumer
loans 22 33 126 122 346
187 69 173 409 583
Recoveries:
Commercial,
financial and
agricultural 7 4 6 21 41
Real estate --
commercial
mortgage 1 1 4 3 8
Real estate --
construction 1 -- -- 3 4
Total
commercial
real estate
loans 2 1 4 6 12
Commercial lease
financing 8 7 4 35 14
Total
commercial
loans 17 12 14 62 67
Real estate --
residential
mortgage -- -- -- 1 1
Home equity 1 1 2 5 6
Consumer -- direct 2 2 2 8 9
Consumer --
indirect lease
financing -- 1 -- 2 3
Consumer --
indirect other 3 4 15 16 66
Total consumer
loans 6 8 19 32 85
23 20 33 94 152
Net loans charged off (164) (49) (140) (315) (431)
Provision for loan
losses 36 43 (21) 143 185
Foreign currency
translation adjustment 1 (1) -- -- --
Allowance related to
loans acquired -- -- 48 -- 48
Reclassification of
allowance for credit
losses on
lending-related
commitments(a) -- -- -- -- (70)
Allowance for loan
losses at end of period $966 $1,093 $1,138 $966 $1,138
Net loan charge-offs to
average loans .98 % .30 % .88 % .49 % .70 %
Allowance for loan
losses to period-end
loans 1.45 1.67 1.80 1.45 1.80
Allowance for loan
losses to nonperforming
loans 348.74 303.61 369.48 348.74 369.48
(a) Included in accrued expenses and other liabilities on the consolidated
balance sheet.
Changes in Allowance for Credit Losses on Lending-Related Commitments
(in millions)
Twelve months
Three months ended ended
12-31-05 9-30-05 12-31-04 12-31-05 12-31-04
Balance at beginning of
period $59 $57 $65 $66 --
Reclassification of
allowance for credit
losses -- -- -- -- $70
Provision for losses
on lending-related
commitments -- 2 1 (7) (4)
Balance at end of period(a) $59 $59 $66 $59 $66
(a) Included in accrued expenses and other liabilities on the
consolidated balance sheet.
Summary of Nonperforming Assets and Past Due Loans
(dollars in millions)
12-31-05 9-30-05 6-30-05 3-31-05 12-31-04
Commercial, financial and
agricultural $63 $50 $58 $46 $37
Real estate - commercial mortgage 43 33 36 41 37
Real estate - construction 2 3 3 5 20
Total commercial real estate
loans 45 36 39 46 57
Commercial lease financing 39 151 73 75 84
Total commercial loans 147 237 170 167 178
Real estate - residential mortgage 41 40 38 43 39
Home equity 79 75 74 76 80
Consumer - direct 2 3 4 3 3
Consumer - indirect lease financing 1 1 1 5 1
Consumer - indirect other 7 4 5 5 7
Total consumer loans 130 123 122 132 130
Total nonperforming loans 277 360 292 299 308
Nonperforming loans held for sale 3 2 1 6 8
OREO 25 29 33 58 53
Allowance for OREO losses (2) (3) (2) (4) (4)
OREO, net of allowance 23 26 31 54 49
Other nonperforming assets 4 5 14 12 14
Total nonperforming assets $307 $393 $338 $371 $379
Accruing loans past due 90 days or
more $90 $94 $74 $79 $122
Accruing loans past due 30 through
89 days 491 550 475 495 491
Nonperforming loans to period-end
loans .42 % .55 % .45 % .47 % .49 %
Nonperforming assets to period-end
loans plus OREO and other
nonperforming assets .46 .60 .52 .58 .60
Summary of Changes in Nonperforming Loans
(in millions)
4Q05 3Q05 2Q05 1Q05 4Q04
Balance at beginning of period $360 $292 $299 $308 $389
Loans placed on nonaccrual status 106 126 58 71 88
Charge-offs (164) (49) (48) (54) (91)
Loans sold (2) (3) -- (5) (66)
Payments (14) (5) (13) (9) (11)
Transfers to OREO -- -- (4) (12) --
Loans returned to accrual status (9) (1) -- -- (1)
Balance at end of period $277 $360 $292 $299 $308
Reconciliation of Fourth Quarter 2004 Summary of Operations As Reported
to Adjusted Summary of Operations
(dollars in millions, except per share amounts)
Change 4Q05 As
Reported
vs. 4Q04
Adjusted
Basis
4Q04 4Q04 4Q05
As Adjust- Adjusted As Amount Percent
Reported ments(a) Basis Reported
Net interest income (TE) $698 -- $698 $748 $50 7.2%
Noninterest income 479 $46 525 561 36 6.9
Total revenue (TE) 1,177 46 1,223 1,309 86 7.0
Provision for loan losses (21) 21 -- 36 36 N/M
Noninterest expense 818 (53) 765 834 69 9.0
Income before income
taxes (TE) 380 78 458 439 (19) (4.1)
Income taxes and TE
adjustments 167 1 168 143 (25) (14.9)
Net income $213 $77 $290 $296 $6 2.1
Diluted earnings per common
share $.51 $.19 $.70 $.72 $.02 2.9%
(a) Adjustments reflect the effects of Key's fourth quarter 2004 sale of
its broker-originated home equity loan portfolio held in the Key Home
Equity Services division, and the reclassification to held-for-sale
status of its indirect automobile loan portfolio. Key sold the
indirect automobile loan portfolio during the first half of 2005.
TE = Includes taxable-equivalent adjustment of $30 million in 4Q05 and
$26 million in 4Q04
N/M = Not Meaningful
Reconciliation of Fourth Quarter 2004 Earnings As Reported (GAAP Basis)
to Adjusted Earnings
(in millions, except per share amounts)
Pre-tax After-tax EPS
Amount Amount Impact(a)
Fourth quarter 2004 earnings as
reported (GAAP basis) $354 $213 $.51
Actions resulting in significant
nonrecurring charges:
Sale of broker-originated home
equity loan portfolio 9 6 .01
Write-off of goodwill (nonprime
indirect automobile loan
business) 55 55 .13
Reclassification of indirect
automobile loan portfolio to
held-for-sale status 14 16 .04
Adjusted fourth quarter 2004 earnings $432 $290 $.70
Fourth quarter 2005 earnings as
reported (GAAP basis) $409 $296 $.72
(a) Earnings per share ("EPS") components do not foot due to rounding.
GAAP = U.S. generally accepted accounting principles
Line of Business Results
(dollars in millions)
Consumer Banking
4Q05 3Q05 2Q05 1Q05
Summary of operations
Total revenue (TE) $730 $716 $706 $727
Provision for loan losses 28 29 22 48
Noninterest expense 527 488 490 476
Net income 109 125 122 127
Average loans 29,260 29,139 29,303 29,397
Average deposits 43,158 42,359 41,567 41,063
Net loan charge-offs 31 36 32 39
Return on average allocated
equity 17.61 % 20.63 % 20.23 % 20.62 %
Average full-time equivalent
employees 9,880 9,963 10,026 10,194
Supplementary information (lines
of business)
Community Banking
Total revenue (TE) $567 $567 $555 $544
Provision for loan losses 24 22 18 20
Noninterest expense 427 405 388 386
Net income 72 88 93 86
Average loans 19,716 19,781 19,773 19,919
Average deposits 42,489 41,670 40,920 40,475
Net loan charge-offs 26 24 21 25
Return on average allocated
equity 18.36 % 22.77 % 24.43 % 22.80 %
Average full-time equivalent
employees 8,513 8,546 8,448 8,548
Consumer Finance
Total revenue (TE) $163 $149 $151 $183
Provision for loan losses 4 7 4 28
Noninterest expense 100 83 102 90
Net income (loss) 37 37 29 41
Average loans 9,544 9,358 9,530 9,478
Average deposits 669 689 647 588
Net loan charge-offs 5 12 11 14
Return on average allocated
equity 16.31 % 16.85 % 13.04 % 17.18 %
Average full-time equivalent
employees 1,367 1,417 1,578 1,646
Line of Business Results
(dollars in millions)
Consumer Banking
Percent change
4Q05 vs.
4Q04 3Q05 4Q04
Summary of operations
Total revenue (TE) $691 2.0 % 5.6 %
Provision for loan losses 9 (3.4) 211.1
Noninterest expense 555 8.0 (5.0)
Net income 59 (12.8) 84.7
Average loans 31,886 .4 (8.2)
Average deposits 40,925 1.9 5.5
Net loan charge-offs 118 (13.9) (73.7)
Return on average allocated equity 9.13 % N/A N/A
Average full-time equivalent
employees 10,392 (.8) (4.9)
Supplementary information (lines of
business)
Community Banking
Total revenue (TE) $572 -- (.9)%
Provision for loan losses 21 9.1 % 14.3
Noninterest expense 404 5.4 5.7
Net income 92 (18.2) (21.7)
Average loans 20,094 (.3) (1.9)
Average deposits 40,365 2.0 5.3
Net loan charge-offs 23 8.3 13.0
Return on average allocated equity 23.87 % N/A N/A
Average full-time equivalent
employees 8,728 (.4) (2.5)
Consumer Finance
Total revenue (TE) $119 9.4 % 37.0 %
Provision for loan losses (12) (42.9) N/M
Noninterest expense 151 20.5 (33.8)
Net income (loss) (33) -- N/M
Average loans 11,792 2.0 (19.1)
Average deposits 560 (2.9) 19.5
Net loan charge-offs 95 (58.3) (94.7)
Return on average allocated equity (12.66)% N/A N/A
Average full-time equivalent
employees 1,664 (3.5) (17.8)
Line of Business Results (continued)
(dollars in millions)
Corporate and Investment Banking
4Q05 3Q05 2Q05 1Q05
Summary of operations
Total revenue (TE) $577 $543 $523 $488
Provision for loan losses 8 14 (2) (4)
Noninterest expense 312 292 274 254
Net income 161 148 157 149
Average loans 36,407 35,064 34,577 33,846
Average deposits 11,157 10,136 9,691 8,781
Net loan charge-offs 133 13 16 15
Return on average allocated
equity 18.21 % 17.13 % 18.56 % 17.76 %
Average full-time equivalent
employees 3,363 3,336 3,269 3,316
Supplementary information (lines
of business)
Corporate Banking
Total revenue (TE) $286 $271 $258 $259
Provision for loan losses 16 9 (6) (5)
Noninterest expense 164 157 144 135
Net income 66 66 75 80
Average loans 14,911 14,666 15,089 15,101
Average deposits 8,675 8,022 7,952 7,256
Net loan charge-offs 1 2 11 10
Return on average allocated
equity 15.49 % 15.66 % 17.80 % 19.04 %
Average full-time equivalent
employees 1,519 1,558 1,532 1,541
KeyBank Real Estate Capital
Total revenue (TE) $163 $149 $138 $103
Provision for loan losses 4 2 (7) 5
Noninterest expense 69 64 55 46
Net income 57 52 56 33
Average loans 12,038 11,265 10,596 9,794
Average deposits 2,467 2,100 1,728 1,514
Net loan charge-offs -- -- 3 4
Return on average allocated
equity 21.98 % 20.71 % 23.77 % 14.16 %
Average full-time equivalent
employees 873 812 774 758
Key Equipment Finance
Total revenue (TE) $128 $123 $127 $126
Provision for loan losses (12) 3 11 (4)
Noninterest expense 79 71 75 73
Net income 38 30 26 36
Average loans 9,458 9,133 8,892 8,951
Average deposits 15 14 11 11
Net loan charge-offs 132 11 2 1
Return on average allocated
equity 19.11 % 15.66 % 13.76 % 19.36 %
Average full-time equivalent
employees 971 966 963 1,017
TE = Taxable Equivalent
N/A = Not Applicable
N/M = Not Meaningful
Line of Business Results (continued)
(dollars in millions)
Corporate and Investment Banking
Percent change
4Q05 vs.
4Q04 3Q05 4Q04
Summary of operations
Total revenue (TE) $515 6.3 % 12.0 %
Provision for loan losses (30) (42.9) N/M
Noninterest expense 266 6.8 17.3
Net income 174 8.8 (7.5)
Average loans 30,852 3.8 18.0
Average deposits 8,793 10.1 26.9
Net loan charge-offs 22 923.1 504.5
Return on average allocated equity 22.13 % N/A N/A
Average full-time equivalent
employees 3,028 .8 11.1
Supplementary information (lines of
business)
Corporate Banking
Total revenue (TE) $273 5.5 % 4.8 %
Provision for loan losses (32) 77.8 N/M
Noninterest expense 158 4.5 3.8
Net income 92 --- (28.3)
Average loans 13,877 1.7 7.5
Average deposits 7,266 8.1 19.4
Net loan charge-offs 12 (50.0) (91.7)
Return on average allocated equity 21.37 % N/A N/A
Average full-time equivalent
employees 1,558 (2.5) (2.5)
KeyBank Real Estate Capital
Total revenue (TE) $132 9.4 % 23.5 %
Provision for loan losses (4) 100.0 N/M
Noninterest expense 49 7.8 40.8
Net income 54 9.6 5.6
Average loans 9,109 6.9 32.2
Average deposits 1,520 17.5 62.3
Net loan charge-offs 2 --- (100.0)
Return on average allocated equity 24.00 % N/A N/A
Average full-time equivalent
employees 702 7.5 24.4
Key Equipment Finance
Total revenue (TE) $110 4.1 % 16.4 %
Provision for loan losses 6 N/M N/M
Noninterest expense 59 11.3 33.9
Net income 28 26.7 35.7
Average loans 7,866 3.6 20.2
Average deposits 7 7.1 114.3
Net loan charge-offs 8 N/M N/M
Return on average allocated equity 21.42 % N/A N/A
Average full-time equivalent
employees 768 .5 26.4
TE = Taxable Equivalent
N/A = Not Applicable
N/M = Not Meaningful
