KeyCorp Reports Third Quarter 2010 and Year-To-Date Profit
Friday, October 22, 2021 6:31 AM

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CLEVELAND --

  • Net income from continuing operations of $163 million, or $.19 per common share, for the third quarter of 2010
  • Year-to-date net income from continuing operations of $121 million, or $.14 per common share
  • Net interest margin expanded 18 basis points from second quarter of 2010 to 3.35% for the third quarter of 2010
  • Pre-provision net revenue from continuing operations (net interest income plus taxable-equivalent adjustment and noninterest income less noninterest expense) increased $51 million from second quarter of 2010 to $397 million for the third quarter of 2010
  • Nonperforming loans decreased by $331 million from second quarter of 2010 to 2.67% of total period-end loans at September 30, 2021
  • Loan loss reserve at 3.81% of total period-end loans and represented 143% coverage of nonperforming loans at September 30, 2021
  • Net charge-offs declined to $357 million, or 2.69% of average loan balances, for the third quarter of 2010
  • Tier 1 common equity and Tier 1 risk-based capital ratios estimated at 8.59% and 14.26%, respectively

KeyCorp (NYSE: KEY) today announced third quarter net income from continuing operations attributable to Key common shareholders of $163 million, or $.19 per common share.  These results compare to a net loss from continuing operations attributable to Key common shareholders of $422 million, or $.50 per common share, for the third quarter of 2009.  The third quarter 2009 results were negatively impacted by a $733 million loan loss provision.  Third quarter 2010 net income attributable to Key common shareholders was $178 million compared to a net loss attributable to Key common shareholders of $438 million for the same quarter one year ago. Net income attributable to Key common shareholders for the nine-month period ended September 30, 2021 was $111 million compared to a net loss attributable to Key common shareholders of $1.364 billion for the same period one year ago.  

Key's third quarter earnings improvement resulted from improved pre-provision net revenue and a lower provision for loan losses when compared to the second quarter of 2010.  Credit quality continued to improve across the majority of the loan portfolios in both Community Banking and National Banking.  Net charge-offs declined by $78 million, and nonperforming loans decreased by $331 million from June 30, 2010.  

"With the third quarter's results, Key has returned to profitability on a year-to-date basis," said Chief Executive Officer Henry L. Meyer III.  "We are pleased with our progress and recognize the important contributions of employees across Key who have remained focused on serving our clients through what has been the most challenging economic period in decades.  Our third quarter results reflect a higher net interest margin, continued credit quality improvement, well-controlled expenses, and improvements in several fee-based businesses."

Meyer continued: "Our work to lower our risk profile and proactively address credit issues is resulting in asset quality improvements across a majority of our loan portfolios and the fourth consecutive quarterly decline in nonperforming assets."

"Key's core financial measures – strong capital, enhanced liquidity, adequate loan loss reserves – along with our selective exits from riskier lending categories, together provide a firm foundation for growth as the economy strengthens," added Meyer.  

At September 30, 2010, Key's estimated Tier 1 common equity ratio was 8.59% compared to 8.07% at June 30, 2010, and estimated Tier 1 risk-based capital ratio was 14.26% up from 13.62% one quarter ago.  

Key's strong capital and liquidity positions provide the Company with the ability to serve the borrowing needs of our clients when the economy expands. The Company originated approximately $8.1 billion in new or renewed lending commitments to consumers and businesses during the quarter and approximately $21 billion for the nine-month period ended September 30, 2010.  

Meyer also noted that Key opened 34 new branches during the first nine months of 2010 and expects to open an additional five new branches during the fourth quarter of 2010, increasing its market presence in selected markets of its 14-state branch network.  In addition, Key's online account application features were ranked second among the 16 largest U.S. banks in Corporate Insight's September 2010 edition of Bank Monitor, a leading rating service for the online space.  Key had previously been recognized by Bank Monitor for its capabilities in the areas of online application, account information, and alerts.  The investment in new and modernized branches, coupled with the enhancements to online banking, reflect Key's relationship strategy and efforts to provide clients with a breadth of options that meet their specific banking needs.  The Company is positioning its branch and online capabilities to enhance growth as the economy turns.

The following table shows Key's continuing and discontinued operating results for the comparative quarters and for the nine-month periods ended September 30, 2021 and 2009.

Results of Operations





Three months ended



Nine months ended

in millions, except per share amounts


9-30-10



6-30-10



9-30-09



9-30-10



9-30-09

Summary of operations















Income (loss) from continuing operations attributable to Key

$

204


$

97


$

(381)


$

244


$

(1,070)

Income (loss) from discontinued operations, net of taxes (a)


15



(27)



(16)



(10)



(41)

Net income (loss) attributable to Key

$

219


$

70


$

(397)


$

234


$

(1,111)

















Income (loss) from continuing operations attributable to Key    

$

204


$

97


$

(381)


$

244


$

(1,070)

Less:

Dividends on Series A Preferred Stock    


6



6



7



17



34


Noncash deemed dividend — common shares exchanged for Series A Preferred Stock    










114


Cash dividends on Series B Preferred Stock  


31



31



31



94



94


Amortization of discount on Series B Preferred Stock  


4



4



3



12



11

Income (loss) from continuing operations attributable to Key common shareholders    


163



56



(422)



121



(1,323)

Income (loss) from discontinued operations, net of taxes (a)


15



(27)



(16)



(10)



(41)

Net income (loss) attributable to Key common shareholders    

$

178


$

29


$

(438)


$

111


$

(1,364)

















Per common share — assuming dilution















Income (loss) from continuing operations attributable to Key common shareholders

$

.19


$

.06


$

(.50)


$

.14


$

(2.07)

Income (loss) from discontinued operations, net of taxes (a)


.02



(.03)



(.02)



(.01)



(.06)

Net income (loss) attributable to Key common shareholders (b)

$

.20


$

.03


$

(.52)


$

.13


$

(2.14)


















(a) In September 2009, management made the decision to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank National Association.  In April 2009, management made the decision to curtail the operations of Austin Capital Management, Ltd., an investment subsidiary that specializes in managing hedge fund investments for its institutional customer base.  As a result of these decisions, Key has accounted for these businesses as discontinued operations.  The loss from discontinued operations for the nine-month period ended September 30, 2021 was primarily attributable to fair value adjustments related to the education lending securitization trusts.  Included in the loss from discontinued operations for the nine-month period ended September 30, 2009, is a $23 million after-tax, or $.05 per common share, charge for intangible assets impairment related to Austin Capital Management.


(b) Earnings per share may not foot due to rounding.



SUMMARY OF CONTINUING OPERATIONS

Taxable-equivalent net interest income was $647 million for the third quarter of 2010, and the net interest margin was 3.35%.  These results compare to taxable-equivalent net interest income of $599 million and a net interest margin of 2.80% for the third quarter of 2009.  The increase in the net interest margin is primarily attributable to lower funding costs.  The Company continues to experience an improvement in the mix of deposits by reducing the level of higher costing certificates of deposit and increasing lower costing transaction accounts.  Key expects this change in funding mix to continue although at a slower pace going forward. This reduced pace will result from a lower volume of higher costing maturing certificates of deposit.  Additionally, Key experienced improved yields on loans due to lower levels of nonperforming loans.

Compared to the second quarter of 2010, taxable-equivalent net interest income increased by $24 million, and the net interest margin expanded by 18 basis points.  Most of this improvement is attributable to the repricing of certificates of deposit and an overall improved mix of deposits.  The Company's third quarter net interest margin also benefitted from reducing amounts invested in overnight short-term investments and investing these funds in collateralized mortgage-backed securities with an average duration of 2.5-3.5 years issued by government-sponsored entities.

Key's noninterest income was $486 million for the third quarter of 2010, compared to $382 million for the year-ago quarter.  Fee-based income improved by $95 million from the third quarter of 2009, which included increases of $68 million in investment banking and capital markets income and $15 million in letter of credit and loan fees. Also included in the third quarter of 2010 was a $12 million dividend from corporate-owned life insurance.

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


3Q10



2Q10



1Q10



4Q09



3Q09

Trust and investment services income

$

110


$

112


$

114


$

117


$

113

Service charges on deposit accounts


75



80



76



82



83

Operating lease income


41



43



47



52



55

Letter of credit and loan fees


61



42



40



52



46

Corporate-owned life insurance income


39



28



28



36



26

Electronic banking fees


30



29



27



27



27

Insurance income


15



19



18



16



18

Net gains (losses) from principal investing


18



17



37



80



(6)

Investment banking and capital markets income (loss)


42



31



9



(47)



(26)



















Compared to the second quarter of 2010, noninterest income decreased by $6 million.  This decrease in noninterest income resulted from declines in net gains from loan sales of $7 million, the anticipated decrease in service charges on deposit accounts of $5 million from the implementation of Regulation E, and various miscellaneous income components of $34 million. These decreases were partially offset by increases of $19 million in letter of credit and loan fees and $11 million in investment banking and capital market income. In addition, Key recognized a $12 million corporate-owned life insurance dividend in the third quarter of 2010.

Key's noninterest expense was $736 million for the third quarter of 2010, compared to $901 million for the same period last year.  Key recorded a credit of $10 million to the provision for losses on lending-related commitments during the third quarter of 2010, compared to a charge to the provision of $29 million in the year-ago quarter. Also contributing to the decrease was a decline in employee benefits expense of $31 million, which included a $12 million credit to pension expense.  Additionally, in the third quarter of 2009, Key recognized a $45 million write-off of intangible assets and $51 million of other real estate owned ("OREO") expense, compared to OREO expense of $4 million for the third quarter of 2010.  

Compared to the second quarter of 2010, noninterest expense decreased by $33 million.  This decline was primarily a result of a $26 million decrease in employee benefits expense, which included the pension expense item discussed above, and a decrease in OREO expense of $18 million. These declines were partially offset by increases in net occupancy costs of $6 million primarily related to reserves on vacant corporate facilities and operating lease expense of $5 million for impaired leases.

ASSET QUALITY

Key's provision for loan losses was $94 million for the third quarter of 2010, compared to $733 million for the year-ago quarter and $228 million for the second quarter of 2010.  Key's allowance for loan losses was $2 billion, or 3.81% of total period-end loans, at September 30, 2010, compared to 4.16% at June 30, 2010, and 4.00% at September 30, 2009.

Selected asset quality statistics for Key for each of the past five quarters are presented in the following table.

Selected Asset Quality Statistics from Continuing Operations


dollars in millions


3Q10




2Q10




1Q10




4Q09




3Q09


Net loan charge-offs

$

357



$

435



$

522



$

708



$

587


Net loan charge-offs to average loans


2.69

%



3.18

%



3.67

%



4.64

%



3.59

%

Allowance for loan losses

$

1,957



$

2,219



$

2,425



$

2,534



$

2,485


Allowance for credit losses (a)


2,056




2,328




2,544




2,655




2,579


Allowance for loan losses to period-end loans


3.81

%



4.16

%



4.34

%



4.31

%



4.00

%

Allowance for credit losses to period-end loans


4.00




4.36




4.55




4.52




4.15


Allowance for loan losses to nonperforming loans


142.64




130.30




117.43




115.87




108.52


Allowance for credit losses to nonperforming loans  


149.85




136.70




123.20




121.40




112.62


Nonperforming loans at period end

$

1,372



$

1,703



$

2,065



$

2,187



$

2,290


Nonperforming assets at period end


1,801




2,086




2,428




2,510




2,799


Nonperforming loans to period-end portfolio loans


2.67

%



3.19

%



3.69

%



3.72

%



3.68

%

Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets


3.48




3.88




4.31




4.25




4.46























(a) Includes the allowance for loan losses plus the liability for credit losses on lending-related commitments.




Net loan charge-offs for the quarter totaled $357 million, or 2.69%, of average loans.  These results compare to $587 million, or 3.59%, for the same period last year and $435 million, or 3.18%, for the previous quarter.  

Key's net loan charge-offs by loan type for each of the past five quarters are shown in the following table.

Net Loan Charge-offs from Continuing Operations


dollars in millions


3Q10



2Q10



1Q10



4Q09



3Q09


Commercial, financial and agricultural

$

136


$

136


$

126


$

218


$

168


Real estate — commercial mortgage


46



126



106



165



81


Real estate — construction


76



75



157



181



216


Commercial lease financing  


16



14



21



39



27


    Total commercial loans  


274



351



410



603



492


Home equity — Community Banking


35



25



30



27



25


Home equity — Other  


13



16



17



19



20


Marine


12



19



38



33



25


Other


23



24



27



26



25


    Total consumer loans


83



84



112



105



95


    Total net loan charge-offs

$

357


$

435


$

522


$

708


$

587


















Net loan charge-offs to average loans from continuing operations


2.69

%


3.18

%


3.67

%


4.64

%


3.59

%

















Net loan charge-offs from discontinued operations — education lending business

$

22


$

31


$

36


$

36


$

38





















Compared to the second quarter of 2010, net loan charge-offs in the commercial loan portfolio decreased by $77 million.  The decrease was attributable to a decline in the real estate commercial mortgage loan portfolio.  As shown in the table on page 6, Key's exit loan portfolio accounted for $105 million, or 29.41%, of Key's total net loan charge-offs for the third quarter of 2010.  Net charge-offs in the exit loan portfolio decreased by $9 million from the second quarter of 2010, primarily driven by an improvement in the marine portfolio.

At September 30, 2010, Key's nonperforming loans totaled $1.4 billion and represented 2.67% of period-end portfolio loans, compared to 3.19% at June 30, 2010, and 3.68% at September 30, 2009.  Nonperforming assets at September 30, 2021 totaled $1.8 billion and represented 3.48% of portfolio loans, OREO and other nonperforming assets, compared to 3.88% at June 30, 2010, and 4.46% at September 30, 2009.  The following table illustrates the trend in Key's nonperforming assets by loan type over the past five quarters.

Nonperforming Assets from Continuing Operations


dollars in millions


3Q10



2Q10



1Q10



4Q09



3Q09


Commercial, financial and agricultural

$

335


$

489


$

558


$

586


$

679


Real estate — commercial mortgage


362



404



579



614



566


Real estate — construction


333



473



607



641



702


Commercial lease financing


84



83



99



113



131


Total consumer loans


258



254



222



233



212


     Total nonperforming loans


1,372



1,703



2,065



2,187



2,290


Nonperforming loans held for sale


230



221



195



116



304


OREO and other nonperforming assets


199



162



168



207



205


     Total nonperforming assets

$

1,801


$

2,086


$

2,428


$

2,510


$

2,799


















Restructured loans included in nonperforming loans (a)

$

228


$

213


$

226


$

364


$

65


Nonperforming assets from discontinued operations —   education lending business


38



40



43



14



12


Nonperforming loans to period-end portfolio loans


2.67

%


3.19

%


3.69

%


3.72

%


3.68

%

Nonperforming assets to period-end portfolio loans,   plus OREO and other nonperforming assets


3.48



3.88



4.31



4.25



4.46



















(a) Restructured loans (i.e. troubled debt restructurings) are those for which Key, for reasons related to a borrower's financial difficulties, grants a concession to the borrower that it would not otherwise consider.  These concessions are made to improve the collectability of the loan and generally take the form of a reduction of the interest rate, extension of the maturity date or reduction in the principal balance.  




Nonperforming assets continued to decrease during the third quarter of 2010, representing the fourth consecutive quarterly decline.  Most of the reduction came from nonperforming loans in the commercial, financial and agricultural and the real estate – construction portfolios.  As shown in the following table, Key's exit loan portfolio accounted for $290 million, or 16.10%, of Key's total nonperforming assets at September 30, 2010, compared to $385 million, or 18.46%, at June 30, 2010.

Shown in the following table are the composition of Key's exit loan portfolio at September 30, 2010, and June 30, 2010, the net charge-offs recorded on this portfolio for the second and third quarters of 2010, and the nonperforming status of these loans at September 30, 2010, and June 30, 2010.

Exit Loan Portfolio from Continuing Operations














Balance

Outstanding


Change

9-30-10 vs.


Net Loan

Charge-offs


Balance on

Nonperforming Status



in millions

9-30-10


6-30-10


6-30-10


3Q10


2Q10


9-30-10


6-30-10



Residential properties — homebuilder

$

148


$

195


$

(47)


$

23


$

20


$

94


$

109



Residential properties — held for sale


8



25



(17)







8



25



    Total residential properties


156



220



(64)



23



20



102



134



Marine and RV floor plan


225



268



(43)



7



14



42



59



Commercial lease financing (a)


2,231



2,437



(206)



47



44



88



133



    Total commercial loans


2,612



2,925



(313)



77



78



232



326



Home equity — Other


707



753



(46)



13



16



16



17



Marine


2,355



2,491



(136)



12



19



41



41



RV and other consumer


172



188



(16)



3



1



1



1



    Total consumer loans


3,234



3,432



(198)



28



36



58



59



    Total exit loans in loan portfolio

$

5,846


$

6,357


$

(511)


$

105


$

114


$

290


$

385


























Discontinued operations — education  lending business (not included in exit loans above) (b)

$

6,651


$

6,686


$

(35)


$

22


$

31


$

38


$

40


























(a) Includes the business aviation, commercial vehicle, office products, construction and industrial leases, and Canadian lease financing portfolios; and all remaining balances related to lease in, lease out; sale in, sale out; service contract leases; and qualified technological equipment leases.


(b) Includes loans in Key's education loan securitization trusts consolidated upon the adoption of new consolidation accounting guidance on January 1, 2010.




CAPITAL

Key's risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at September 30, 2010.

Capital Ratios




9-30-10



6-30-10



3-31-10



12-31-09



9-30-09



Tier 1 common equity (a), (b)

8.59

%


8.07

%


7.51

%


7.50

%


7.64

%


Tier 1 risk-based capital (a)

14.26



13.62



12.92



12.75



12.61



Total risk-based capital (a)

18.18



17.80



17.07



16.95



16.65



Tangible common equity to tangible assets (b)

8.00



7.65



7.37



7.56



7.58



















(a) September 30, 2021 ratio is estimated.

(b) The table entitled "GAAP to Non-GAAP Reconciliations" presents the computations of certain financial measures related to "tangible common equity" and "Tier 1 common equity."  The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.



As shown in the preceding table, at September 30, 2010, Key had an estimated Tier 1 common equity ratio of 8.59%, an estimated Tier 1 risk-based capital ratio of 14.26%, and a tangible common equity ratio of 8.00%.

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

3Q10


2Q10


1Q10


4Q09


3Q09

Shares outstanding at beginning of period

880,515


879,052


878,535


878,559


797,246

Common shares exchanged for capital securities





81,278

Shares reissued (returned) under employee benefit plans

(187)


1,463


517


(24)


35

Shares outstanding at end of period

880,328


880,515


879,052


878,535


878,559














During each of the first three quarters of 2010, Key made a $31 million cash dividend payment to the U.S. Treasury Department as a participant in the U.S. Treasury's Capital Purchase Program.  During 2009, Key made four quarterly dividend payments aggregating $125 million to the U.S. Treasury Department.

LINE OF BUSINESS RESULTS

The following table shows the contribution made by each major business group to Key's taxable-equivalent revenue from continuing operations and income (loss) from continuing operations attributable to Key for the periods presented.  The specific lines of business that comprise each of the major business groups are described under the heading "Line of Business Descriptions."  During the first quarter of 2010, Key realigned its reporting structure for its business groups.  Prior to 2010, Consumer Finance consisted mainly of portfolios which were identified as exit or run-off portfolios and were included in Key's National Banking segment.  Effective for all periods presented, Key is reflecting the results of these exit portfolios in Other Segments.  The automobile dealer floor plan business, previously included in Consumer Finance, has been realigned with the Commercial Banking line of business within the Community Banking segment.  In addition, other previously identified exit portfolios included in the National Banking segment have been moved to Other Segments. For more detailed financial information pertaining to each business group and its respective lines of business, see the tables at the end of this release.  

Major Business Groups












Percent change 3Q10 vs.


dollars in millions


3Q10



2Q10



3Q09



2Q10



3Q09


Revenue from continuing operations (TE)
















Community Banking  

$

601


$

608


$

630



(1.2)

%


(4.6)

%

National Banking  (a)


430



409



381



5.1



12.9


Other Segments (b)


103



86



(23)



19.8



N/M


    Total Segments


1,134



1,103



988



2.8



14.8


Reconciling Items


(1)



12



(7)



N/M



85.7


    Total  

$

1,133


$

1,115


$

981



1.6

%


15.5

%

















Income (loss) from continuing operations
















attributable to Key  
















Community Banking  

$

57


$

35





62.9

%


N/M


National Banking  (a)


130



34


$

(236)



282.4



N/M


Other Segments (b)


19



28



(150)



(32.1)



N/M


    Total Segments


206



97



(386)



112.4



N/M


Reconciling Items


(2)





5



N/M



N/M


    Total  

$

204


$

97


$

(381)



110.3

%


N/M



















(a) National Banking's results for the third quarter of 2009 include a $45 million ($28 million after-tax) write-off of intangible assets, other than goodwill, resulting from Key's decision to cease lending in certain equipment leasing markets.  

(b) Other Segments' results for the third quarter of 2009 include a $17 million ($11 million after-tax) loss related to the exchange of Key common shares for capital securities.

TE = Taxable Equivalent, N/M = Not Meaningful




Community Banking












Percent change 3Q10 vs.


dollars in millions


3Q10



2Q10



3Q09



2Q10



3Q09


Summary of operations
















    Net interest income (TE)

$

404


$

408


$

435



(1.0)

%


(7.1)

%

    Noninterest income


197



200



195



(1.5)



1.0


    Total revenue (TE)


601



608



630



(1.2)



(4.6)


    Provision for loan losses


75



121



160



(38.0)



(53.1)


    Noninterest expense


458



451



488



1.6



(6.1)

%

    Income (loss) before income taxes (TE)


68



36



(18)



88.9



N/M


    Allocated income taxes and TE adjustments


11



1



(18)



N/M



N/M


    Net income (loss) attributable to Key

$

57


$

35


$



62.9

%


N/M


















Average balances
















    Loans and leases

$

26,779


$

27,218


$

29,126



(1.6)

%


(8.1)

%

    Total assets


30,004



30,292



31,956



(1.0)



(6.1)


    Deposits


48,703



50,421



53,068



(3.4)



(8.2)


















Assets under management at period end

$

17,816


$

16,980


$

17,090



4.9

%


4.2

%

































TE = Taxable Equivalent, N/M = Not Meaningful





Additional Community Banking Data










Percent change 3Q10 vs.


dollars in millions


3Q10



2Q10



3Q09



2Q10



3Q09


Average deposits outstanding
















NOW and money market deposit accounts

$

20,124


$

19,418


$

17,382



3.6

%


15.8

%

Savings deposits


1,872



1,870



1,776



.1



5.4


Certificates of deposit ($100,000 or more)


5,449



6,597



8,884



(17.4)



(38.7)


Other time deposits


9,596



11,248



14,705



(14.7)



(34.7)


Deposits in foreign office


368



421



478



(12.6)



(23.0)


Noninterest-bearing deposits


11,294



10,867



9,843



3.9



14.7


   Total deposits

$

48,703


$

50,421


$

53,068



(3.4)

%


(8.2)

%

















Home equity loans
















Average balance

$

9,709


$

9,837


$

10,191








Weighted-average loan-to-value ratio (at date of origination)


70

%


70

%


70

%







Percent first lien positions


52



52



53








Other data
















Branches


1,029



1,019



1,003








Automated teller machines


1,522



1,511



1,492











Community Banking Summary of Operations

Community Banking recorded net income attributable to Key of $57 million for the third quarter of 2010, compared to net income attributable to Key of less than $1 million for the year-ago quarter.  Decreases in the provision for loan losses and noninterest expense contributed to the improvement in the third quarter of 2010.

Taxable-equivalent net interest income declined by $31 million, or 7%, from the third quarter of 2009, due to declines in average earning assets and average deposits.  Average earning assets decreased $2 billion, or 8%, from the year-ago quarter, reflecting reductions in the commercial loan and home equity loan portfolios.  Average deposits declined by $4 billion, or 8%.  The mix of deposits continues to change from the year-ago quarter as higher-costing certificates of deposit originated in prior years mature, partially offset by growth in noninterest-bearing deposits and NOW accounts.

Noninterest income increased by $2 million, or 1%, from the year-ago quarter, due to higher income from trust and investment services, electronic banking fees, and a reduction in the provision for credit losses from client derivatives.  The increase in trust and investment services income reflects increased performance in the Key Private Bank, as well as growth in Key's branch-based investment services.  These factors were partially offset by the anticipated lower service charges on deposits from the implementation of Regulation E.

The provision for loan losses declined by $85 million, or 53%, compared to the third quarter of 2009 due to improving economic conditions from one year ago.

Noninterest expense declined by $30 million, or 6%, from the year-ago quarter.   The decrease was driven by reductions in FDIC deposit insurance premiums of $9 million from the third quarter of 2009, a credit of $5 million recorded to the provision for losses on lending-related commitments compared to a charge of $7 million recorded in the third quarter of 2009, and a reduction in corporate allocated costs. These improvements were partially offset by increases in personnel expense and professional fees.  

National Banking












Percent change 3Q10 vs.


dollars in millions


3Q10



2Q10



3Q09



2Q10



3Q09


Summary of operations
















    Net interest income (TE)

$

201


$

199


$

217



1.0

%


(7.4)

%

    Noninterest income


229



210



164



9.0



39.6


    Total revenue (TE)


430



409



381



5.1



12.9


    Provision for loan losses


(25)



99



439



N/M



N/M


    Noninterest expense (a)


249



259



325



(3.9)



(23.4)


    Income (loss) before income taxes (TE)


206



51



(383)



303.9



N/M


    Allocated income taxes and TE adjustments


76



17



(146)



347.1



N/M


    Net income (loss)  


130



34



(237)



282.4



N/M


       Less: Net income (loss) attributable to noncontrolling interests






(1)





100.0

%

    Net income (loss) attributable to Key

$

130


$

34


$

(236)



282.4

%


N/M


















Average balances
















    Loans and leases  

$

19,534


$

20,948


$

26,716



(6.8)

%


(26.9)

%

    Loans held for sale  


380



381



368



(.3)



3.3


    Total assets


23,765



24,781



31,856



(4.1)



(25.4)


    Deposits


11,779



12,474



13,305



(5.6)

%


(11.5)


















Assets under management at period end

$

41,902


$

41,882


$

49,055





(14.6)

%

















TE = Taxable Equivalent, N/M = Not Meaningful

(a) National Banking's results for the third quarter of 2009 include a $45 million ($28 million after-tax) write-off of intangible assets, other than goodwill, resulting from Key's decision to cease lending in certain equipment leasing markets.




National Banking Summary of Operations

National Banking recorded net income attributable to Key of $130 million for the third quarter of 2010, compared to a net loss attributable to Key of $236 million for the same period one year ago.  This improvement in the third quarter of 2010 was a result of a substantial decrease in the provision for loan losses.  

Taxable-equivalent net interest income decreased by $16 million, or 7%, compared to the third quarter of 2009, primarily due to lower earning assets, partially offset by improved earning asset yields.  Average earning assets decreased by $7 billion, or 27%, from the year-ago quarter.  

Noninterest income increased $65 million, or 40%, from the third quarter of 2009.  Investment banking and capital markets income increased $56 million, letter of credit and loan fees increased $18 million, and net gains from loan sales were $8 million, compared to net losses from loan sales of $9 million for the same period one year ago.  These gains were offset by decreases in trust and investment services income of $8 million, operating lease revenue of $7 million, and various other miscellaneous income items from the third quarter of 2009.

The provision for loan losses in the third quarter of 2010 was a $25 million credit compared to a $439 million charge for the same period one year ago.  National Banking continued to experience improved asset quality for the fourth quarter in a row.

Noninterest expense decreased by $76 million, or 23%, from the third quarter of 2009 as a result of a decrease in the write-off of intangible assets of $45 million and a credit of $4 million to the provision for losses on lending-related commitments compared to a charge of $20 million in the year-ago quarter. OREO expense, operating lease expense, and the provision for losses on LIHTC guaranteed funds also declined from the third quarter of 2009.  These improvements were partially offset by an increase in personnel costs.

Other Segments

Other Segments consist of Corporate Treasury, Key's Principal Investing unit and various exit portfolios which were previously included within the National Banking segment.  These exit portfolios were moved to Other Segments during the first quarter of 2010.  Prior periods have been adjusted to conform with the current reporting of the financial information for each segment.  Other Segments generated net income attributable to Key of $19 million for the third quarter of 2010, compared to a net loss attributable to Key of $150 million for the same period last year.  These results reflect an increase in net interest income of $86 million from the third quarter of 2009 and a decrease in the provision for loan losses of $92 million.  

Line of Business Descriptions

Community Banking

Regional Banking provides individuals with branch-based deposit and investment products, personal finance services and loans, including residential mortgages, home equity and various types of installment loans.  This line of business also provides small businesses with deposit, investment and credit products, and business advisory services.

Regional Banking also offers financial, estate and retirement planning, and asset management services to assist high-net-worth clients with their banking, trust, portfolio management, insurance, charitable giving and related needs.

Commercial Banking provides midsize businesses with products and services that include commercial lending, cash management, equipment leasing, investment and employee benefit programs, succession planning, access to capital markets, derivatives and foreign exchange.  

National Banking

Real Estate Capital and Corporate Banking Services consists of two business units, Real Estate Capital and Corporate Banking Services.

Real Estate Capital is a national business that provides construction and interim lending, permanent debt placements and servicing, equity and investment banking, and other commercial banking products and services to developers, brokers and owner-investors.  This unit deals primarily with nonowner-occupied properties (i.e., generally properties in which at least 50% of the debt service is provided by rental income from nonaffiliated third parties).  Real Estate Capital emphasizes providing clients with finance solutions through access to the capital markets.  

Corporate Banking Services provides cash management, interest rate derivatives, and foreign exchange products and services to clients served by both the Community Banking and National Banking groups.  Through its Public Sector and Financial Institutions businesses, Corporate Banking Services also provides a full array of commercial banking products and services to government and not-for-profit entities, and to community banks.  A variety of cash management services are provided through the Global Treasury Management unit.

Equipment Finance meets the equipment leasing needs of companies worldwide and provides equipment manufacturers, distributors and resellers with financing options for their clients.  Lease financing receivables and related revenues are assigned to other lines of business (primarily Institutional and Capital Markets and Commercial Banking) if those businesses are principally responsible for maintaining the relationship with the client.

Institutional and Capital Markets, through its KeyBanc Capital Markets unit, provides commercial lending, treasury management, investment banking, derivatives, foreign exchange, equity and debt underwriting and trading, and syndicated finance products and services to large corporations and middle-market companies.

Institutional and Capital Markets, through its Victory Capital Management unit, also manages or offers advice regarding investment portfolios for a national client base, including corporations, labor unions, not-for-profit organizations, governments and individuals.  These portfolios may be managed in separate accounts, common funds or the Victory family of mutual funds.

Cleveland-based KeyCorp (NYSE: KEY) is one of the nation's largest bank-based financial services companies, with assets of approximately $94 billion at September 30, 2010. Key companies provide investment management, retail and commercial banking, and investment banking products and services to individuals and companies throughout the United States and, for certain businesses, internationally. In 2009, KeyBank was awarded its seventh consecutive "Outstanding" rating for economic development achievements under the Community Reinvestment Act, the only national bank among the 50 largest in the United States to achieve this distinction from the Office of the Comptroller of the Currency.  Key has also been recognized for excellence in numerous areas of the multi-channel customer banking experience, including Corporate Insight's 2009 and 2010 editions of Bank Monitor for online service.  For more information about Key, visit https://www.key.com/.

Notes to Editors:

A live Internet broadcast of KeyCorp's conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on Friday, October 22, 2010.  An audio replay of the call will be available through October 29, 2010.

For up-to-date company information, media contacts and facts and figures about Key's lines of business, visit our Media Newsroom at https://www.key.com/newsroom.

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Key's financial condition, results of operations, earnings outlook, asset quality trends and profitability.  Forward-looking statements are not historical facts but instead represent only management's current expectations and forecasts regarding future events, many of which, by their nature, are inherently uncertain and outside of Key's control.  Key's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements.  Factors that could cause Key's actual results to differ materially from those described in the forward-looking statements can be found in Key's Annual Report on Form 10-K for the year ended December 31, 2021 and Quarterly Reports on Form 10-Q for the periods ended March 31, 2010, and June 30, 2010, which have been filed with the Securities and Exchange Commission and are available on Key's website (www.key.com) and on the Securities and Exchange Commission's website (www.sec.gov). Forward-looking statements are not guarantees of future performance and should not be relied upon as representing management's views as of any subsequent date.  Key does not undertake any obligation to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

Financial Highlights

(dollars in millions, except per share amounts)





Three months ended





9-30-10



6-30-10



9-30-09


Summary of operations













Net interest income (TE)

$

647



$

623



$

599



Noninterest income


486




492




382




Total revenue (TE)


1,133




1,115




981



Provision for loan losses


94




228




733



Noninterest expense


736




769




901



Income (loss) from continuing operations attributable to Key


204




97




(381)



Income (loss) from discontinued operations, net of taxes (b)


15




(27)




(16)



Net income (loss) attributable to Key  


219




70




(397)

















Income (loss) from continuing operations attributable to Key common shareholders

$

163



$

56



$

(422)



Income (loss) from discontinued operations, net of taxes (b)


15




(27)




(16)



Net income (loss) attributable to Key common shareholders


178




29




(438)
















Per common share













Income (loss) from continuing operations attributable to Key common shareholders

$

.19



$

.06



$

(.50)



Income (loss) from discontinued operations, net of taxes (b)


.02




(.03)




(.02)



Net income (loss) attributable to Key common shareholders


.20




.03




(.52)

















Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution  


.19




.06




(.50)



Income (loss) from discontinued operations, net of taxes — assuming dilution (b)


.02




(.03)




(.02)



Net income (loss) attributable to Key common shareholders — assuming dilution  


.20




.03




(.52)

















Cash dividends paid


.01




.01




.01



Book value at period end


9.54




9.19




9.39



Tangible book value at period end


8.46




8.10




8.29



Market price at period end


7.96




7.69




6.50
















Performance ratios













From continuing operations:













Return on average total assets


.93

%



.44

%



(1.62)

%


Return on average common equity


7.82




2.84




(20.30)



Net interest margin (TE)


3.35




3.17




2.80

















From consolidated operations:













Return on average total assets


.93

%



.30

%



(1.62)

%


Return on average common equity


8.54




1.47




(21.07)



Net interest margin (TE)


3.26




3.12




2.79



Loan to deposit


91.80




93.43




100.90
















Capital ratios at period end













Key shareholders' equity to assets  


11.84

%



11.49

%



11.31

%


Tangible Key shareholders' equity to tangible assets


10.93




10.58




10.41



Tangible common equity to tangible assets (a)


8.00




7.65




7.58



Tier 1 common equity (a), (c)


8.59




8.07




7.64



Tier 1 risk-based capital (c)


14.26




13.62




12.61



Total risk-based capital (c)


18.18




17.80




16.65



Leverage (c)


12.44




12.09




12.07
















Asset quality — from continuing operations













Net loan charge-offs

$

357



$

435



$

587



Net loan charge-offs to average loans  


2.69

%



3.18

%



3.59

%


Allowance for loan losses

$

1,957



$

2,219



$

2,485



Allowance for credit losses


2,056




2,328




2,579



Allowance for loan losses to period-end loans


3.81

%



4.16

%



4.00

%


Allowance for credit losses to period-end loans


4.00




4.36




4.15



Allowance for loan losses to nonperforming loans


142.64




130.30




108.52



Allowance for credit losses to nonperforming loans  


149.85




136.70




112.62



Nonperforming loans at period end

$

1,372



$

1,703



$

2,290



Nonperforming assets at period end


1,801




2,086




2,799



Nonperforming loans to period-end portfolio loans


2.67

%



3.19

%



3.68

%


Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets


3.48




3.88




4.46
















Trust and brokerage assets













Assets under management

$

59,718



$

58,862



$

66,145



Nonmanaged and brokerage assets  


26,913




27,189




25,883
















Other data













Average full-time equivalent employees


15,584




15,665




16,436



Branches


1,029




1,019




1,003
















Taxable-equivalent adjustment

$

7



$

6



$

7





Financial Highlights

(dollars in millions, except per share amounts)





Nine months ended





9-30-10



9-30-09


Summary of operations









Net interest income (TE)

$

1,902



$

1,769



Noninterest income


1,428




1,566




Total revenue (TE)


3,330




3,335



Provision for loan losses


735




2,403



Noninterest expense


2,290




2,683



Income (loss) from continuing operations attributable to Key


244




(1,070)



Income (loss) from discontinued operations, net of taxes (b)


(10)




(41)



Net income (loss) attributable to Key  


234




(1,111)













Income (loss) from continuing operations attributable to Key common shareholders

$

121



$

(1,323)



Income (loss) from discontinued operations, net of taxes (b)


(10)




(41)



Net income (loss) attributable to Key common shareholders


111




(1,364)












Per common share









Income (loss) from continuing operations attributable to Key common shareholders

$

.14



$

(2.07)



Income (loss) from discontinued operations, net of taxes (b)


(.01)




(.06)



Net income (loss) attributable to Key common shareholders


.13




(2.14)













Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution  


.14




(2.07)



Income (loss) from discontinued operations, net of taxes — assuming dilution (b)


(.01)




(.06)



Net income (loss) attributable to Key common shareholders — assuming dilution  


.13




(2.14)













Cash dividends paid


.03




.0825












Performance ratios









From continuing operations:









Return on average total assets  


.37

%



(1.49)

%


Return on average common equity  


2.00




(21.31)



Net interest margin (TE)  


3.24




2.77













From consolidated operations:









Return on average total assets


.33

%



(1.48)

%


Return on average common equity


1.84




(22.03)



Net interest margin (TE)


3.15




2.74












Asset quality — from continuing operations









Net loan charge-offs

$

1,314



$

1,549



Net loan charge-offs to average loans  


3.19

%



3.03

%











Other data









Average full-time equivalent employees


15,673




16,943












Taxable-equivalent adjustment

$

20



$

19


(a) The following table entitled "GAAP to Non-GAAP Reconciliations" presents the computations of certain financial measures related to "tangible common equity" and "Tier 1 common equity."  The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.


(b) In September 2009, management made the decision to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank National Association.  In April 2009, management made the decision to curtail the operations of Austin Capital Management, Ltd., an investment subsidiary that specializes in managing hedge fund investments for its institutional customer base.  As a result of these decisions, Key has accounted for these businesses as discontinued operations.


(c) 9-30-10 ratio is estimated.


TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles



GAAP to Non-GAAP Reconciliations

(dollars in millions, except per share amounts)

The table below presents the computations of certain financial measures related to "tangible common equity" and "Tier 1 common equity."  The tangible common equity ratio has become a focus of some investors, and management believes that this ratio may assist investors in analyzing Key's capital position absent the effects of intangible assets and preferred stock.  Traditionally, the banking regulators have assessed bank and bank holding company capital adequacy based on both the amount and composition of capital, the calculation of which is prescribed in federal banking regulations.  As a result of the Supervisory Capital Assessment Program, the Federal Reserve has focused its assessment of capital adequacy on a component of Tier 1 capital, known as Tier 1 common equity.  Because the Federal Reserve has long indicated that voting common shareholders' equity (essentially Tier 1 capital less preferred stock, qualifying capital securities and noncontrolling interests in subsidiaries) generally should be the dominant element in Tier 1 capital, such a focus is consistent with existing capital adequacy guidelines and does not imply a new or ongoing capital standard.

Because the Tier 1 common equity is neither formally defined by GAAP nor prescribed in amount by federal banking regulations, this measure is considered to be a non-GAAP financial measure.  Since analysts and banking regulators may assess Key's capital adequacy using tangible common equity and Tier 1 common equity, management believes it is useful to provide investors the ability to assess Key's capital adequacy on these same bases.  The table also reconciles the GAAP performance measures to the corresponding non-GAAP measures.

The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP.  Management believes that eliminating the effects of provision for loan losses facilitates the analysis of results by presenting them on a more comparable basis.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited.  To mitigate these limitations, Key has procedures in place to ensure that these measures are calculated using the appropriate GAAP or regulatory components and to ensure that Key's performance is properly reflected to facilitate period-to-period comparisons.  Although these non-GAAP financial measures are frequently used by investors in the evaluation of a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.





Three months ended





9-30-10



6-30-10



9-30-09


Tangible common equity to tangible assets at period end













Key shareholders' equity (GAAP)

$

11,134



$

10,820



$

10,970



Less:

Intangible assets  


956




959




971




Preferred Stock, Series B  


2,442




2,438




2,426




Preferred Stock, Series A  


291




291




291




Tangible common equity (non-GAAP)  

$

7,445



$

7,132



$

7,282

















Total assets (GAAP)

$

94,043



$

94,167



$

96,989



Less:

Intangible assets  


956




959




971




Tangible assets (non-GAAP)

$

93,087



$

93,208



$

96,018

















Tangible common equity to tangible assets ratio (non-GAAP)


8.00

%



7.65

%



7.58

%















Tier 1 common equity at period end













Key shareholders' equity (GAAP)  

$

11,134



$

10,820



$

10,970



Qualifying capital securities  


1,791




1,791




1,790



Less:

Goodwill  


917




917




917




Accumulated other comprehensive income (loss) (a)


247




126




11




Other assets (b)


382




469




406




Total Tier 1 capital (regulatory)


11,379




11,099




11,426



Less:

Qualifying capital securities  


1,791




1,791




1,790




Preferred Stock, Series B  


2,442




2,438




2,426




Preferred Stock, Series A  


291




291




291




Total Tier 1 common equity (non-GAAP)  

$

6,855



$

6,579



$

6,919

















Net risk-weighted assets (regulatory) (b), (c)

$

79,797



$

81,498



$

90,587

















Tier 1 common equity ratio (non-GAAP) (c)


8.59

%



8.07

%



7.64

%















Pre-provision net revenue













Net interest income (GAAP)

$

640



$

617



$

592



Plus:     Taxable-equivalent adjustment


7




6




7



            Noninterest income


486




492




382



Less:    Noninterest expense


736




769




901



Pre-provision net revenue from continuing operations (non-GAAP)

$

397



$

346



$

80



(a) Includes net unrealized gains or losses on securities available for sale (except for net unrealized losses on marketable equity securities), net gains or losses on cash flow hedges, and amounts resulting from the December 31, 2006, adoption and subsequent application of the applicable accounting guidance for defined benefit and other postretirement plans.  


(b) Other assets deducted from Tier 1 capital and net risk-weighted assets consist of disallowed deferred tax assets of $272 million at September 30, 2010, $354 million at June 30, 2021 and $285 million at September 30, 2009, disallowed intangible assets (excluding goodwill) and deductible portions of nonfinancial equity investments.  


(c) 9-30-10 amount is estimated.


GAAP = U.S. generally accepted accounting principles  



Consolidated Balance Sheets

(dollars in millions)



















9-30-10



6-30-10



9-30-09

Assets













Loans


$

51,354



$

53,334



$

62,193


Loans held for sale



637




699




703


Securities available for sale



21,241




19,773




15,413


Held-to-maturity securities



18




19




24


Trading account assets



1,155




1,014




1,406


Short-term investments



1,871




1,984




2,986


Other investments



1,405




1,415




1,448



Total earning assets



77,681




78,238




84,173


Allowance for loan losses



(1,957)




(2,219)




(2,485)


Cash and due from banks



823




591




725


Premises and equipment



888




872




863


Operating lease assets



563




589




775


Goodwill



917




917




917


Other intangible assets



39




42




54


Corporate-owned life insurance



3,145




3,109




3,041


Derivative assets



1,258




1,153




1,285


Accrued income and other assets



3,936




4,061




3,463


Discontinued assets



6,750




6,814




4,178



Total assets


$

94,043



$

94,167



$

96,989















Liabilities













Deposits in domestic offices:














NOW and money market deposit accounts


$

26,350



$

25,526



$

24,635



Savings deposits



1,856




1,883




1,783



Certificates of deposit ($100,000 or more)



6,850




8,476




12,216



Other time deposits



9,014




10,430




14,211



    Total interest-bearing deposits



44,070




46,315




52,845



Noninterest-bearing deposits



16,275




15,226




13,631


Deposits in foreign office — interest-bearing



1,073




834




783



    Total deposits



61,418




62,375




67,259


Federal funds purchased and securities sold under repurchase agreements



2,793




2,836




1,664


Bank notes and other short-term borrowings



685




819




471


Derivative liabilities



1,330




1,321




1,185


Accrued expense and other liabilities



1,862




2,154




2,236


Long-term debt



11,443




10,451




12,865


Discontinued liabilities



3,124




3,139




121



Total liabilities



82,655




83,095




85,801















Equity













Preferred stock, Series A



291




291




291


Preferred stock, Series B



2,442




2,438




2,426


Common shares



946




946




946


Common stock warrant



87




87




87


Capital surplus



3,710




3,701




3,726


Retained earnings



5,287




5,118




5,431


Treasury stock, at cost



(1,914)




(1,914)




(1,983)


Accumulated other comprehensive income (loss)



285




153




46



Key shareholders' equity



11,134




10,820




10,970


Noncontrolling interests



254




252




218



Total equity



11,388




11,072




11,188

Total liabilities and equity


$

94,043



$

94,167



$

96,989















Common shares outstanding (000)



880,328




880,515




878,559




Consolidated Statements of Income  

(dollars in millions, except per share amounts)























Three months ended



Nine months ended




9-30-10


6-30-10


9-30-09



9-30-10



9-30-09

Interest income


















Loans

$

649


$

677


$

786



$

2,036



$

2,445


Loans held for sale


4



5



7




13




23


Securities available for sale


170



154



121




474




310


Held-to-maturity securities  


1





1




2




2


Trading account assets


8



10



9




29




35


Short-term investments


1



2



3




5




9


Other investments


11



13



13




38




38



Total interest income


844



861



940




2,597




2,862




















Interest expense


















Deposits


147



188



277




547




873


Federal funds purchased and securities sold under repurchase agreements


1



2



2




4




4


Bank notes and other short-term borrowings


4



4



3




11




13


Long-term debt


52



50



66




153




222



Total interest expense


204



244



348




715




1,112




















Net interest income


640



617



592




1,882




1,750

Provision for loan losses


94



228



733




735




2,403

Net interest income (expense) after provision for loan losses


546



389



(141)




1,147




(653)




















Noninterest income


















Trust and investment services income


110



112



113




336




342


Service charges on deposit accounts


75



80



83




231




248


Operating lease income


41



43



55




131




175


Letter of credit and loan fees


61



42



46




143




128


Corporate-owned life insurance income


39



28



26




95




78


Net securities gains (losses) (a)


1



(2)



1




2




112


Electronic banking fees


30



29



27




86




78


Gains on leased equipment  


4



2



22




14




84


Insurance income


15



19



18




52




52


Net gains (losses) from loan sales


18



25






47




4


Net gains (losses) from principal investing


18



17



(6)




72




(84)


Investment banking and capital markets income (loss)  


42



31



(26)




82




5


Gain from sale/redemption of Visa Inc. shares












105


Gain (loss) related to exchange of common shares for capital securities






(17)







78


Other income


32



66



40




137




161



Total noninterest income


486



492



382




1,428




1,566




















Noninterest expense


















Personnel


359



385



380




1,106




1,114


Net occupancy


70



64



63




200




192


Operating lease expense


40



35



46




114




145


Computer processing


46



47



48




140




143


Professional fees


41



41



41




120




121


FDIC assessment


27



33



40




97




140


OREO expense, net


4



22



51




58




72


Equipment


24



26



24




74




71


Marketing


21



16



19




50




50


Provision (credit) for losses on lending-related commitments


(10)



(10)



29




(22)




40


Intangible assets impairment  






45







241


Other expense


114



110



115




353




354



Total noninterest expense


736



769



901




2,290




2,683

Income (loss) from continuing operations before income taxes


296



112



(660)




285




(1,770)


Income taxes


85



11



(274)




14




(688)

Income (loss) from continuing operations


211



101



(386)




271




(1,082)


Income (loss) from discontinued operations, net of taxes


15



(27)



(16)




(10)




(41)

Net income (loss)


226



74



(402)




261




(1,123)


Less:  Net income (loss) attributable to noncontrolling interests  


7



4



(5)




27




(12)

Net income (loss) attributable to Key

$

219


$

70


$

(397)



$

234



$

(1,111)




















Income (loss) from continuing operations attributable to Key common shareholders  

$

163


$

56


$

(422)



$

121



$

(1,323)

Net income (loss) attributable to Key common shareholders  


178



29



(438)




111




(1,364)




















Per common share

















Income (loss) from continuing operations attributable to Key common shareholders

$

.19


$

.06


$

(.50)



$

.14



$

(2.07)

Income (loss) from discontinued operations, net of taxes


.02



(.03)



(.02)




(.01)




(.06)

Net income (loss) attributable to Key common shareholders


.20



.03



(.52)




.13




(2.14)




















Per common share — assuming dilution

















Income (loss) from continuing operations attributable to Key common shareholders

$

.19


$

.06


$

(.50)



$

.14



$

(2.07)

Income (loss) from discontinued operations, net of taxes


.02



(.03)



(.02)




(.01)




(.06)

Net income (loss) attributable to Key common shareholders


.20



.03



(.52)




.13




(2.14)




















Cash dividends declared per common share

$

.01


$

.01


$

.01



$

.03



$

.0825




















Weighted-average common shares outstanding (000)


874,433



874,664



839,906




874,495




637,805

Weighted-average common shares and potential common shares outstanding (000)  


874,433



874,664



839,906




874,495




637,805







































(a) For the three months ended September 30, 2010, Key did not have any impairment losses related to securities.  For the three months ended June 30, 2010, Key had $4 million in impairment losses related to securities.  Impairment losses totaled $4 million for the three months ended September 30, 2009, of which $2 million was recognized in equity as a component of accumulated other comprehensive income.




Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations

(dollars in millions)







Third Quarter 2010



Second Quarter 2010



Third Quarter 2009




































Average

Balance


Interest

(a)

Yield/Rate

(a)


Average Balance


Interest

(a)

Yield/Rate

(a)


Average

Balance


Interest

(a)

Yield/Rate

(a)


































Assets
































Loans: (b), (c)
































Commercial, financial and agricultural  


$

16,948


$

193



4.52

%


$

17,725


$

209



4.74

%



22,098


$

255



4.59

%


Real estate — commercial mortgage



9,822



122



4.94




10,354



124



4.78




11,529



141



4.84



Real estate — construction



3,165



37



4.58




3,773



41



4.31




5,834



72



4.86



Commercial lease financing



6,587



87



5.25




6,759



90



5.33




8,073



88



4.35




   Total commercial loans



36,522



439



4.77




38,611



464



4.81




47,534



556



4.64



Real estate — residential mortgage



1,843



26



5.59




1,829



25



5.60




1,748



25



5.88



Home equity:

































Community Banking



9,709



102



4.19




9,837



103



4.21




10,192



111



4.32




Other



732



14



7.61




773



15



7.62




912



17



7.54




   Total home equity loans



10,441



116



4.43




10,610



118



4.45




11,104



128



4.58



Consumer other — Community Banking



1,156



33



11.20




1,145



33



11.57




1,189



32



10.48




Marine



2,423



38



6.25




2,563



39



6.21




3,017



48



6.26




Other



181



4



7.95




195



4



7.80




238



4



7.95




   Total consumer other  



2,604



42



6.37




2,758



43



6.32




3,255



52



6.38




   Total consumer loans



16,044



217



5.37




16,342



219



5.40




17,296



237



5.46




   Total loans



52,566



656



4.95




54,953



683



4.99




64,830



793



4.86



Loans held for sale  



501



4



3.48




516



5



3.50




665



7



4.26



Securities available for sale (b), (e)



20,276



170



3.43




17,285



154



3.63




12,154



121



4.00



Held-to-maturity securities (b)



19



1



11.05




22





11.46




25



1



9.64



Trading account assets



1,074



8



3.03




1,048



10



3.71




1,074



9



3.49



Short-term investments



1,594



1



.23




3,830



2



.23




5,243



3



.25



Other investments (e)



1,426



11



3.00




1,445



13



3.11




1,459



13



3.26




   Total earning assets



77,456



851



4.39




79,099



867



4.40




85,450



947



4.40



Allowance for loan losses



(2,092)










(2,356)










(2,462)









Accrued income and other assets



11,363










11,133










10,142









Discontinued assets — education lending business  



6,762










6,389










4,091










   Total assets


$

93,489









$

94,265









$

97,221









































Liabilities
































NOW and money market deposit accounts


$

25,783



23



.35



$

25,270



24



.39



$

24,444



29



.49



Savings deposits



1,885





.06




1,883



1



.06




1,799





.07



Certificates of deposit ($100,000 or more) (f)



7,635



61



3.12




9,485



77



3.28




12,771



114



3.55



Other time deposits



9,648



63



2.59




11,309



85



3.01




14,749



133



3.57



Deposits in foreign office  



958





.37




818



1



.36




665



1



.31




   Total interest-bearing deposits



45,909



147



1.27




48,765



188



1.55




54,428



277



2.03



Federal funds purchased and securities sold under repurchase agreements  



2,300



1



.31




1,841



2



.33




1,642



2



.30



Bank notes and other short-term borrowings  



669



4



2.36




539



4



3.06




1,034



3



1.14



Long-term debt (f)



7,308



52



3.08




7,031



50



3.09




9,183



66



3.07




   Total interest-bearing liabilities  



56,186



204



1.46




58,176



244



1.70




66,287



348



2.10



Noninterest-bearing deposits



15,949










15,644










13,604









Accrued expense and other liabilities



3,344










3,151










2,055









Discontinued liabilities — education lending business (d)



6,762










6,389










4,091










   Total liabilities



82,241










83,360










86,037









































Equity
































Key shareholders' equity



10,999










10,646










10,961









Noncontrolling interests



249










259










223










   Total equity



11,248










10,905










11,184











































   Total liabilities and equity


$

93,489









$

94,265









$

97,221









































Interest rate spread (TE)









2.93

%









2.70

%









2.30

%


































Net interest income (TE) and net interest margin (TE)  






647



3.35

%






623



3.17

%






599



2.80

%

TE adjustment (b)






7










6










7






Net interest income, GAAP basis





$

640









$

617









$

592







(a) Results are from continuing operations.  Interest excludes the interest associated with the liabilities referred to in (d) below, calculated using a matched funds transfer pricing methodology.


(b) Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%.  


(c) For purposes of these computations, nonaccrual loans are included in average loan balances.


(d) Discontinued liabilities include the liabilities of the education lending business and the dollar amount of any additional liabilities assumed necessary to support the assets associated with this business.


(e) Yield is calculated on the basis of amortized cost.


(f) Rate calculation excludes basis adjustments related to fair value hedges.  


TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles    




Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations

(dollars in millions)





Nine months ended September 30, 2021



Nine months ended September 30, 2021





















Average

Balance


Interest

(a)

Yield/Rate

(a)


Average

Balance


Interest

(a)

Yield/ Rate

(a)

Assets





















Loans: (b), (c)





















Commercial, financial and agricultural  

$

17,816


$

624



4.68

%


$

24,315


$

806



4.43

%


Real estate — commercial mortgage


10,200



374



4.90




11,464

(d)


425



4.95



Real estate — construction


3,820



123



4.29




6,530

(d)


232



4.75



Commercial lease financing