KEYCORP 
By
During the fourth quarter, Key participated in the U.S. Treasury's Capital
Purchase Program, bolstering capital by
For the full year, Key had a loss from continuing operations of
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
"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
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
During the fourth quarter of 2008, Key strengthened its capital position
with a
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
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
in millions, Fourth Quarter 2008 Third Quarter 2008
except per Pre-tax After-tax Impact Pre-tax After-tax Impact
share amounts 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)
Net (losses) gains from
principal investing (33) (21) (.04) (24) (15) (.03)
Severance and other exit
costs (31) (20) (.04) (19) (14) (.03)
Realized and unrealized
losses on loan and
securities portfolios
held for sale or
trading (18) (11) (.02) (94)(b) (59)(b) (.12)
(Charges) credits
related to leveraged
lease tax litigation (18) 120(a) .24 -- (30) (.06)
Reversal of Honsador
litigation reserve -- -- -- 23 14 .03
Liability to Visa -- -- -- -- -- --
Fourth Quarter 2007
in millions, except per share amounts Pre-tax After-tax Impact
Amount Amount on EPS
Noncash charge for goodwill impairment -- -- --
U.S. taxes on accumulated earnings of
Canadian leasing operation -- -- --
Provision for loan losses in excess
of net charge-offs $(244) $(153) $(.39)
Net (losses) gains from principal
investing 6 3 .01
Severance and other exit costs (24) (14) (.04)
Realized and unrealized losses on
loan and securities portfolios held
for sale or trading (30) (19) (.05)
(Charges) credits related to leveraged
lease tax litigation -- -- --
Reversal of Honsador litigation reserve -- -- --
Liability to Visa (64) (40) (.10)
(a) Represents $120 million of previously accrued interest recovered in
connection with Key's opt-in to the IRS global tax settlement.
(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.
EPS = Earnings per diluted common share
SUMMARY OF CONTINUING OPERATIONS
Key's taxable-equivalent net interest income was
Compared to the third quarter of 2008, taxable-equivalent net interest
income decreased by
Key's noninterest income was
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
Compared to the third quarter of 2008, noninterest income increased by
Key's noninterest expense was
Compared to the third quarter of 2008, noninterest expense increased by
ASSET QUALITY
Key's provision for loan losses from continuing operations was
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
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
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
Net loan charge-offs for the quarter totaled
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
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
Total consumer loans 110 93 95 47 33
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%
(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.
At
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
The composition of Key's exit loan portfolio at
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
Key's allowance for loan losses was
CAPITAL
Key's capital ratios, as presented in the following table, continued to
exceed all "well-capitalized" regulatory benchmarks at
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
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.
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
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
Percent change
Additional Community Banking Data 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
Taxable-equivalent net interest income rose by
Noninterest income decreased by
The provision for loan losses rose by
Noninterest expense increased by
On
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
National Banking Summary of Continuing Operations
National Banking recorded a loss of
Taxable-equivalent net interest income decreased by
Noninterest income rose by
The provision for loan losses rose by
Excluding the goodwill impairment charge recorded during the fourth
quarter of 2008, noninterest expense decreased by
Other Segments
Other segments consist of Corporate Treasury and Key's Principal Investing
unit. These segments generated a net loss of
Line of Business Descriptions
Community Banking
Regional Banking provides individuals with branch-based deposit and investment products, personal finance services and loans, including residential mortgages, home equity and various types of installment loans. This line of business also provides small businesses with deposit, investment and credit products, and business advisory services.
Regional Banking also offers financial, estate and retirement planning, and asset management services to assist high-net-worth clients with their banking, trust, portfolio management, insurance, charitable giving and related needs.
Commercial Banking provides midsize businesses with products and services that include commercial lending, cash management, equipment leasing, investment and employee benefit programs, succession planning, access to capital markets, derivatives and foreign exchange.
National Banking
Real Estate Capital and Corporate Banking Services consists of two business units. Real Estate Capital 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 Finance meets the equipment leasing needs of companies worldwide and provides equipment manufacturers, distributors and resellers with financing options for their clients. Lease financing receivables and related revenues are assigned to other lines of business (primarily Institutional and Capital Markets, and Commercial Banking) if those businesses are principally responsible for maintaining the relationship with the client.
Institutional and Capital Markets through its KeyBanc Capital Markets unit provides commercial lending, treasury management, investment banking, derivatives 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 Finance provides 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
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
ADD: /FIRST AND FINAL ADD -- CLTH007 -- KeyCorp Earnings/
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
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
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
months
Three months ended 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)
