-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FWqyV4sT0kwzkx6cCEc4zypr2XDaPwoCkijm3Vdl62up3tnl7nAi2yurp9iVNZiN bFC1i/fTuxgA9AGsGk69EQ== 0000950152-04-007379.txt : 20041014 0000950152-04-007379.hdr.sgml : 20041014 20041014164448 ACCESSION NUMBER: 0000950152-04-007379 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 30 CONFORMED PERIOD OF REPORT: 20041014 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041014 DATE AS OF CHANGE: 20041014 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEYCORP /NEW/ CENTRAL INDEX KEY: 0000091576 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 346542451 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11302 FILM NUMBER: 041079290 BUSINESS ADDRESS: STREET 1: 127 PUBLIC SQ CITY: CLEVELAND STATE: OH ZIP: 44114-1306 BUSINESS PHONE: 2166896300 MAIL ADDRESS: STREET 1: 127 PUBLIC SQ CITY: CLEVELAND STATE: OH ZIP: 44114-1306 FORMER COMPANY: FORMER CONFORMED NAME: SOCIETY CORP DATE OF NAME CHANGE: 19920703 8-K 1 l09645ae8vk.htm KEYCORP 8-K KeyCorp 8-K
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 14, 2004

(KEYCORP LOGO)


(Exact name of registrant as specified in charter)
         
Ohio   0-850   34-6542451

 
 
 
 
 
(State or other jurisdiction
of incorporation)
  Commission File Number   (I.R.S. Employer Identification No.)
         
127 Public Square, Cleveland, Ohio       44114-1306

 
     
 
(Address of principal executive offices)       (Zip Code)

Registrant’s telephone number, including area code: (216) 689-6300

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



 


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Item 2.02 Results of Operations and Financial Condition
Item 9.01 Financial Statements and Exhibits
SIGNATURE
EX-99.1 Third Quarter 2004 Earnings


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Section 2 – Financial Information

Item 2.02 Results of Operations and Financial Condition

On October 14, 2004, the Registrant conducted a conference call/webcast to discuss its quarterly earnings and currently anticipated earnings trends. The slide presentation reviewed by the Registrant in the conference call/webcast follows as Annex A to this Item 2.02.

On October 14, 2004, the Registrant issued a press release announcing its earnings results for the three- and nine-month periods ended September 30, 2004. This press release, dated October 14, 2004, is attached as Exhibit 99.1 to this report.

Section 9 – Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits

(c) Exhibits

     
99.1
  The Registrant’s October 14, 2004, press release announcing its earnings results for the three- and nine-month periods ended September 30, 2004.

 


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ANNEX A

Third Quarter 2004 Review October 14, 2004 Speakers: Henry Meyer Jeff Weeden


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PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 FORWARD-LOOKING STATEMENT DISCLOSURE The conference call and discussion, including related questions and answers, and presentation materials, contain forward-looking statements about issues like anticipated fourth quarter and full-year 2004 earnings, anticipated level of net loan charge-offs and nonperforming assets and anticipated improvement in profitability and competitiveness. Forward-looking statements by their nature are subject to assumptions, risks and uncertainties. Actual results could differ materially from those contained in or implied by such forward-looking statements for a variety of factors including: changes in interest rates; failure of the economy to continue to improve, which could materially impact credit quality trends and the ability to generate loans; declines or disruptions in the stock or bond markets; delay in or inability to execute strategic initiatives designed to grow revenues and/or manage expenses; inaccurate or erroneous assumptions made in connection with various modeling techniques; consummation of significant business combinations or divestitures; new legal obligations or restrictions or unfavorable resolution of litigation; further disruption in the economy or the general business climate as a result of terrorist activities or military actions; and changes in accounting, tax or regulatory practices or requirements.


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Progress on Strategic Priorities STRATEGIC PRIORITIES Profitably grow revenue Improve asset quality Maintain expense discipline Improve shareholder returns RESULTS Revenue up 1.1% from 2Q04 Avg. commercial loans up 3.4% from 2Q04 NPLs down for 8th consecutive quarter Net charge-offs lowest since 2Q00 Expenses down from 3Q03 YTD Total Return: Key 11% vs. Peers 6%


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Financial Summary - 3Q04 vs. 2Q04 EPS of $0.61 Total revenue (TE) up $12 million Net interest margin up 4 bps to 3.61% NPLs down $64 million Repurchased 2.5 million shares


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Net Interest Margin (TE) 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 KEY 0.0368 0.0368 0.0368 0.0371 0.0363 0.0377 0.0385 0.0398 0.0393 0.0398 0.0399 0.0398 0.0386 0.0385 0.0373 0.0378 0.0374 0.0357 0.0361 Peer Median S&P Regional & Diversified Bank Indices 0.0407 0.0406 0.0415 0.042 0.0412 0.0394 0.0388 0.0381 0.0362 0.0364 0.0369 0.0357 KEY Peer Median S&P Regional & Diversified Bank Indices


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$36.5 $36.4 $36.5 $36.5 $36.4 $36.1 $36.3 $37.3 $38.6 24.6 24.3 24.7 25.2 25.7 25.7 26.0 25.5 25.5 1.7 1.4 1.1 0.9 0.8 0.6 0.4 0.3 0.3 0.7 0.6 0.5 0.4 0.2 0.2 0.1 - - 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 C&I Runoff 1.4 1.3 1.1 0.9 0.8 0.7 0.6 0.5 0.4 0.2 0.2 0.01 0 0 Auto Runoff 3.9 3.5 3 2.5 2 1.7 1.4 1.1 0.9 0.8 0.6 0.04 0.03 0.03 Consumer Loans 23.2 23.3 22 22.9 24 24.6 24.3 24.7 25.2 25.7 25.7 26 25.5 25.5 Commercial Loans 38.4 38.1 37.7 37.1 37.1 36.5 36.4 36.5 36.5 36.7 36.1 36.3 37.3 38.6 Total 67 66.2 63.8 63.5 63.9 63.5 62.7 62.8 63 63.1 62.6 62.8 63.1 64.4 Average Loans $ in billions Commercial Consumer Auto Commercial Exit Portfolios


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$ in billions Average Core Deposit Growth 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 dda 8.2 8.3 8.8 8.6 8.7 9.2 9.9 9.8 10.1 10.6 10.9 10.7 11 11.3 CD's 14.5 13.7 13.7 13.4 13.1 12.7 12.2 11.8 11.4 11.1 11 11 10.6 10.3 Savings 2 1.9 1.9 1.9 2 2 2 2 2.1 2.1 2.1 2 2 2 Now & Mmda 12.9 13.1 13 13.4 13.2 13.3 15.1 16.8 17.7 18.4 18.8 18.9 19.8 20.5 Total 37.6 37 37.4 37.3 37 37.2 39.2 40.4 41.3 42.2 42.8 42.6 43.4 44.1 Now/MMDA $13.3 $15.1 $16.8 $17.7 $18.4 $18.8 $18.9 $19.8 $20.5 Savings 2.0 2.0 2.0 2.1 2.1 2.1 2.0 2.0 2.0 CD's 12.7 12.2 11.8 11.4 11.1 11.0 11.0 10.6 10.3 DDA 9.2 9.9 9.8 10.1 10.6 10.9 10.7 11.0 11.3 TOTAL $37.2 $39.2 $40.4 $41.3 $42.2 $42.8 $42.6 $43.4 $44.1


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Asset Quality Net C/O to Average Loans Nonperforming Loans to EOP Loans Nonperforming Assets to EOP Loans + OREO Allowance to Total Loans to Nonperforming Loans $ in millions 3Q03 4Q03 1Q04 2Q04 3Q04 $ 76 .47% $ 390 .60% $ 460 .71% $1,251 1.93% 321% $ 123 .77% $ 795 1.27% $ 862 1.37% $1,405 2.24% 177% $ 123 .78% $ 694 1.11% $ 753 1.20% $1,406 2.24% 203% $ 111 .71% $ 587 .94% $ 670 1.07% $1,306 2.09% 222% $ 104 .67% $ 454 .71% $ 540 .84% $1,276 1.99% 281%


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Net Charge-Offs to Average Loans Corporate & Investment Banking Consumer Banking 1Q02 0.0149 0.0105 2Q02 0.0151 0.0093 3Q02 0.0143 0.0077 4Q02 0.0132 0.0097 1Q03 0.0108 0.0097 2Q03 0.01 0.0075 3Q03 0.0073 0.0084 4Q03 0.0074 0.0083 1Q04 0.0059 0.0088 2Q04 0.0055 0.0083 3Q04 0.0037 0.0062 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 Consumer Commercial 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 by Loan Type


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Capital 3Q03 4Q03 1Q04 2Q04 3Q04 Tang. Equity/Tang. Assets 6.94% 6.94% 6.98% 6.64% 6.57% Tier 1 Risk-Based Capital 8.23% 8.35% 8.10% 7.93% 7.74% * Cash dividends paid $ .305 $ .305 $ .31 $ .31 $ .31 (per share) Shares Repurchased 2.5 4.0 8.0 6.0 2.5 (millions) * Estimated


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Stable net interest margin Modest loan/earning assets growth Stable to improving asset quality Continued expense discipline 4Q04 EPS Range: $0.60 to $0.63 Outlook - Fourth Quarter 2004


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Appendix


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Financial Summary Consumer Banking Total Revenue (TE) $592 $551 $600 7.4% (1.3)% Provision for Loan Losses 51 46 70 10.9 (27.1) Non Interest Expense 352 345 355 2.0 (0.8) Net Income 118 100 110 18.0 7.3 Percent of Consolidated Net Income 47 % 42 % 49 % N/A N/A Average Loans 29,331 29,362 29,179 (0.1) 0.5 Average deposits 35,574 35,025 35,062 1.6 1.5 ROE 23.25 % 19.87 % 21.07 % N/A N/A $ in millions Percent Change 3Q04 2Q04 3Q03 3Q04 vs 2Q04 3Q04 vs 3Q03


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Line of Business Summary Consumer Banking Retail Banking Total Revenue (TE) $321 $312 $330 2.9% (2.7)% Net Income 59 58 66 1.7 (10.6) Average Loans 10,771 10,557 10,178 2.0 5.8 Average Deposits 30,116 29,796 30,051 1.1 0.2 ROE 38.35 % 39.07 % 43.86 % N/A N/A Small Business Total Revenue (TE) $97 $95 $97 2.1% - Net Income 19 19 18 - 5.6% Average Loans 4,420 4,479 4,502 (1.3) (1.8) Average Deposits 5,047 4,865 4,618 3.7 9.3 ROE 19.68 % 20.06 % 18.69 % N/A N/A Consumer Finance Total Revenue (TE) $174 $144 $173 20.8% 0.6% Net Income 40 23 26 73.9 53.8 Average Loans 14,140 14,326 14,499 (1.3) (2.5) Average Deposits 411 364 393 12.9 4.6 ROE 15.56 % 8.84 % 9.45 % N/A N/A Percent Change 3Q04 2Q04 3Q03 3Q04 vs 2Q04 3Q04 vs 3Q03 $ in millions


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Financial Summary Corporate and Investment Banking Total Revenue (TE) $365 $363 $358 0.6 % 2.0 % Provision for Loan Losses (1) 25 48 N/M N/M Non Interest Expense 187 169 174 10.7 7.5 Net Income 112 106 85 5.7 31.8 Percent of Consolidated Net Income 44 % 44 % 37 % N/A N/A Average Loans 29,078 27,854 27,901 4.4 4.2 Average deposits 5,146 4,958 4,566 3.8 12.7 ROE 14.87 % 14.24 % 11.08 % N/A N/A Percent Change 3Q04 2Q04 3Q03 3Q04 vs 2Q04 3Q04 vs 3Q03 $ in millions


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Line of Business Summary Corporate Banking Total Revenue (TE) $190 $198 $196 (4.0)% (3.1)% Net Income 54 45 28 20.0 92.9 Average Loans 13,106 12,558 12,813 4.4 2.3 Average Deposits 3,767 3,742 3,576 0.7 5.3 ROE 13.70 % 11.38 % 6.62 % N/A N/A KeyBank Real Estate Capital Total Revenue (TE) $104 $91 $102 14.3% 2.0 % Net Income 37 33 38 12.1 (2.6) Average Loans 8,286 7,752 8,260 6.9 0.3 Average Deposits 1,366 1,202 976 13.6 40.0 ROE 15.95 % 14.67 % 16.79 % N/A N/A Key Equipment Finance Total Revenue (TE) $71 $74 $60 (4.1)% 18.3 % Net Income 21 28 19 (25.0) 10.5 Average Loans 7,686 7,544 6,828 1.9 12.6 Average Deposits 13 14 14 (7.1) (7.1) ROE 16.51 % 22.66 % 16.07 % N/A N/A Percent Change 3Q04 2Q04 3Q03 3Q04 vs 2Q04 3Q04 vs 3Q03 $ in millions Corporate and Investment Banking


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Investment Management Services Financial Summary Total Revenue (TE) $193 $202 $200 (4.5)% (3.5)% Provision for Loan Losses 1 3 5 (66.7) (80.0) Non Interest Expense 149 162 162 (8.0) (8.0) Net Income 27 23 21 17.4 28.6 Percent of Consolidated Net Income 11 % 10 % 9 % N/A N/A Average Loans 5,275 5,226 5,100 0.9 3.4 Average deposits 7,114 7,188 6,382 (1.0) 11.5 ROE 17.58 % 15.37 % 13.93 % N/A N/A $ in millions Percent Change 3Q04 2Q04 3Q03 3Q04 vs 2Q04 3Q04 vs 3Q03


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Total Revenue (TE) $ in millions 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 Non 455 398 454 418 443 448 432 446 397 434 463 466 431 446 436 Net 695 719 730 726 702 721 722 724 703 710 690 693 685 658 680 1150 1117 1184 1144 1145 1169 1154 1170 1100 1144 1153 1159 1116 1104 1116 Net Interest Inc. Noninterest Inc. 695 719 730 726 702 721 722 724 703 710 690 693 685 658 680 455 398 454 418 443 448 432 446 397 434 463 466 431 446 436


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Noninterest Expense $ in millions 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 Non-Personnel Expense 334 512 350 367 298 304 301 313 295 316 319 319 286 308 296 Personnel Expense 364 346 333 335 363 361 357 355 363 372 380 379 373 371 394 698 858 683 702 661 665 658 668 658 688 699 698 659 679 690 Personnel Non-Personnel 364 345 334 335 363 361 358 354 363 371 380 379 373 371 394 334 513 349 367 298 304 301 314 294 317 319 319 286 308 296


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Money Market Fixed Income Equity 12/31/1998 12/1/1999 12/1/2000 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 Equity 37.9 39.2 37.7 34.7 35.9 32.1 35.8 34.5 31.1 25.4 27.2 25.4 26.9 28.8 31.8 31.9 32.3 32.4 Fixed Income 14.3 14.4 14.6 14.7 15.3 16.9 16.9 18.5 18.9 17.6 16.1 16.3 17.1 17.3 17.3 18.2 18.7 19.6 Money Market 18.3 19.7 21.7 22 23.2 21.2 20 19.4 20.7 19.4 18.4 19.1 19.3 18.9 19.6 19.3 19 19.2 Total 70.5 73.3 74 71.4 74.4 70.2 72.7 72.4 70.7 62.4 61.7 60.8 63.3 65 68.7 69.4 70 71.2 Assets Under Management $ in billions 22.0 23.2 21.2 20.0 19.4 20.7 19.4 18.4 19.1 19.3 18.9 19.5 19.3 19.0 19.2 14.7 15.3 16.9 16.9 18.5 18.9 17.6 16.1 16.3 17.1 17.3 17.4 18.2 18.7 19.6 34.7 35.9 32.1 35.8 34.5 31.1 25.4 27.2 25.4 26.9 28.8 31.8 31.9 32.3 32.4


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Net Charge-Offs to Average Loans 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 KEY 0.0084 0.0042 0.0063 0.0064 0.0066 0.0102 0.0104 0.0137 0.0132 0.0127 0.0116 0.0118 0.0104 0.009 0.0077 0.0078 0.0071 0.0067 0.0047 Peer Median S&P Regional & Diversified Bank Indices 0.0062 0.0067 0.0064 0.0077 0.0062 0.0057 0.0057 0.006 0.0051 0.0061 0.0037 0.0032 KEY Peer Median S&P Regional & Diversified Bank Indices


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Allowance to Total Loans 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 KEY 0.0153 0.0149 0.0151 0.015 0.0149 0.0185 0.0182 0.0265 0.0251 0.0241 0.0237 0.0232 0.0227 0.0222 0.0224 0.0224 0.0209 0.0199 0.0193 Peer Median S&P Regional & Diversified Bank Indices 0.0146 0.0148 0.0148 0.0146 0.0146 0.0146 0.0148 0.0147 0.0145 0.0146 0.01391 0.0137 KEY Peer Median S&P Regional & Diversified Bank Indices


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1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 KEY 2.0698 1.7963 1.6909 1.54 1.4039 1.5445 1.3266 1.8429 1.6516 1.6082 1.5086 1.5398 1.5719 1.68 1.77 2.03 2.22 2.81 3.21 Peer Median S&P Regional & Diversified Bank Indices 1.9011 1.9939 1.8636 2.0114 2.0021 2.0677 1.9863 2.02 2.2 2.45 2.62 2.85 Allowance to NPL KEY Peer Median S&P Regional & Diversified Bank Indices


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NPAs to Loans and OREO 4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 KEY 0.0074 0.0078 0.0088 0.0093 0.01 0.011 0.0123 0.0141 0.0149 0.0158 0.0156 0.0161 0.0159 0.0154 0.0142 0.0137 0.012 0.0107 0.0084 0.0071 Peer Median S&P Regional & Diversified Bank Indices 0.0096 0.0096 0.0099 0.01 0.0096 0.0085 0.0087 0.0081 0.0074 0.0073 0.0064 0.0057 KEY Peer Median S&P Regional & Diversified Bank Indices


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4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 KEY 0.44 0.451 0.461 0.444 0.434 0.424 0.415 0.396 0.388 0.39 0.375 0.361 Commercial Loans - Utilization * Estimated *


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Strong Dividend Record 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004T Outstanding 0.64 0.72 0.76 0.84 0.94 1.04 1.12 1.18 1.2 1.22 1.24 Dividend increased 39 consecutive years


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Tangible Equity to Tangible Assets 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 KEY 0.0616 0.0612 0.061 0.0612 0.0629 0.0625 0.0651 0.0629 0.0657 0.0669 0.0671 0.0673 0.0671 0.069 0.0694 0.0694 0.0698 0.0664 0.0657 Peer Median S&P Regional & Diversified Bank Indices 0.068 0.0629 0.0664 0.068 0.0659 0.0656 0.0673 0.0655 0.0678 0.0678 0.0678 0.0649 KEY Peer Median S&P Regional & Diversified Bank Indices


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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

         
    KEYCORP
   
 
    (Registrant)
 
       
Date: October 14, 2004   /s/ Lee Irving
   
 
  By:   Lee Irving
      Executive Vice President and Chief Accounting Officer

 

EX-99.1 2 l09645aexv99w1.htm EX-99.1 THIRD QUARTER 2004 EARNINGS Exhibit 99.1
 

Exhibit 99.1

                     
Analyst Contact:   Vernon L. Patterson   Media Contact:   Gary Cavano
 
  216.689.0520         216.689.0517  
 
                   
Investor Relations           Key Media    
Information:   www.Key.com/ir   Newsroom:   www.Key.com/newsroom

FOR IMMEDIATE RELEASE

KEYCORP REPORTS THIRD QUARTER 2004 EARNINGS

  EPS of $0.61 for the third quarter
 
  Commercial loan balances up an annualized 14% from the previous quarter
 
  Continued improvement in asset quality
 
  Core deposits up an annualized 6% from the previous quarter

CLEVELAND, October 14, 2004 – KeyCorp (NYSE: KEY) today announced third quarter net income of $252 million, or $0.61 per diluted common share, compared with $227 million, or $0.53 per share, for the third quarter of 2003. For the second quarter of 2004, net income was $239 million, or $0.58 per diluted common share.

     “Key reported solid third quarter results with a modest increase in revenue and continued improvement in asset quality,” said Chairman and Chief Executive Officer Henry L. Meyer III. “Contributing to positive momentum was an increase in the net interest margin and stronger loan growth. We continue to be encouraged by the increase in commercial loan balances, which were up an annualized 14% from the prior quarter. The growth in commercial loans was geographically broad-based and spread among a number of industry sectors.

     “Asset quality also continued to improve as nonperforming loans declined for the eighth consecutive quarter and net loan charge-offs as a percentage of average loans fell to their lowest level since the second quarter of 2000.”

     Key expects earnings to be in the range of $0.60 to $0.63 per share for the fourth quarter of 2004.

SUMMARY OF CONSOLIDATED RESULTS

     Taxable-equivalent net interest income rose to $680 million for the third quarter of 2004 from $658 million in the previous quarter. Key’s net interest margin improved 4 basis points to 3.61%, while average earning assets grew by $1.4 billion, due primarily to an increase in the commercial loan portfolio. Compared with the third quarter of 2003, taxable-equivalent net interest income decreased by $10 million, as the negative effect of a lower net interest margin more than offset the effect of a 2% increase in average earning assets.

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 2

     Key’s noninterest income was $436 million for the third quarter of 2004, compared with $446 million for the second quarter. The decrease reflected a $17 million decline in income from investment banking and capital markets activities, due primarily to a reduction in net gains from principal investing and lower income from trading activities. Income from trust and investment services was down $6 million, due to a slowdown in brokerage activities, and net gains from the sales of securities decreased by $7 million. These reductions were substantially offset by a $20 million increase in net gains from loan securitizations and sales, including a $13 million gain from the annual securitization and sale of education loans in the third quarter of 2004. Compared with the year-ago quarter, noninterest income decreased by $27 million, due largely to declines of $18 million in net gains from loan securitizations and sales, and $9 million in service charges on deposit accounts. These reductions were partially offset by net gains of $4 million on the residual values of leased vehicles and equipment in the third quarter of 2004, compared with net losses of $9 million for the same period last year.

     Noninterest expense of $690 million for the third quarter of 2004 was up from $679 million in the prior quarter. Personnel expense rose by $23 million, due to increases in incentive compensation accruals, the cost of employee benefits and costs stemming from stock-based compensation. Nonpersonnel expense decreased by $12 million, reflecting lower costs associated with marketing, real estate acquired through foreclosures, and occupancy. Compared with the third quarter of 2003, noninterest expense decreased by $9 million as reductions in a variety of expense components more than offset higher costs for personnel and computer processing.

ASSET QUALITY

     Key’s provision for loan losses was $51 million for the third quarter of 2004, down from $74 million for the second quarter of 2004 and $123 million for the year-ago quarter.

     Net loan charge-offs for the quarter totaled $76 million, or 0.47% of average loans, compared with $104 million, or 0.67%, for the previous quarter and $123 million, or 0.77%, for the same period last year. Net loan charge-offs as a percentage of average loans were at their lowest level since the second quarter of 2000.

     During the third quarter of 2004, Key’s nonperforming loans decreased by $64 million to $390 million, due primarily to reductions in the middle market, small business and media portfolios. Nonperforming loans represented 0.60% of loans outstanding at September 30, 2004, down from 0.71% at June 30, 2004, and 1.27% at September 30, 2003.

     Key’s allowance for loan losses stood at $1.251 billion, or 1.93% of loans outstanding at September 30, 2004, compared with $1.276 billion, or 1.99% at June 30, 2004, and $1.405 billion, or 2.24% at September 30, 2003. At September 30, 2004, the allowance for loan losses represented 321% of nonperforming loans, compared with 281% at June 30, 2004, and 177% a year ago.

CAPITAL

     Key’s capital ratios continued to exceed all “well-capitalized” regulatory benchmarks at September 30, 2004. Key’s tangible equity to tangible assets ratio was 6.57% at quarter end, compared with 6.64% at June 30, 2004, and 6.94% at September 30, 2003.

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 3

     Key’s strong capital position provides the Company with the flexibility to take advantage of future investment opportunities, to repurchase shares when appropriate and to pay dividends. During the third quarter of 2004, Key repurchased 2,500,000 of its common shares. At September 30, 2004, there were 29,461,248 shares remaining for repurchase under the current authorization. Share repurchases and other activities that caused the change in Key’s outstanding common shares over the past five quarters are summarized in the table below.

Summary of Changes in Common Shares Outstanding

                                         
in thousands
  3Q04
  2Q04
  1Q04
  4Q03
  3Q03
Shares outstanding at beginning of period
    407,243       412,153       416,494       419,266       421,074  
Issuance of shares under employee benefit and dividend reinvestment plans
    980       1,128       3,659       1,228       692  
Repurchase of common shares
    (2,500 )     (6,038 )     (8,000 )     (4,000 )     (2,500 )
 
   
 
     
 
     
 
     
 
     
 
 
Shares outstanding at end of period
    405,723       407,243       412,153       416,494       419,266  
 
   
 
     
 
     
 
     
 
     
 
 

LINE OF BUSINESS RESULTS

     The following table summarizes the contribution made by each major business group to Key’s taxable-equivalent revenue and net income for the periods presented. The specific lines of business that comprise each of the major business groups are described under the heading “Line of Business Descriptions.” For more detailed financial information pertaining to each business group and its respective lines of business, see the last three pages of this release.

Major Business Groups

                                         
                            Percent change 3Q04 vs.
dollars in millions
  3Q04
  2Q04
  3Q 03
  2Q04
  3Q03
Revenue (taxable equivalent)
                                       
Consumer Banking
  $ 592     $ 551     $ 600       7.4 %     (1.3 )%
Corporate and Investment Banking
    365       363       358       .6       2.0  
Investment Management Services
    193       202       200       (4.5 )     (3.5 )
Other Segments
    (2 )     15       16       N/M       N/M  
 
   
 
     
 
     
 
     
 
     
 
 
Total segments
    1,148       1,131       1,174       1.5       (2.2 )
Reconciling Items
    (32 )     (27 )     (21 )     (18.5 )     (52.4 )
 
   
 
     
 
     
 
     
 
     
 
 
Total
  $ 1,116     $ 1,104     $ 1,153       1.1       (3.2 )
 
   
 
     
 
     
 
                 
Net income (loss)
                                       
Consumer Banking
  $ 118     $ 100     $ 110       18.0 %     7.3 %
Corporate and Investment Banking
    112       106       85       5.7       31.8  
Investment Management Services
    27       23       21       17.4       28.6  
Other Segments
    3       15       14       (80.0 )     (78.6 )
 
   
 
     
 
     
 
     
 
     
 
 
Total segments
    260       244       230       6.6       13.0  
Reconciling Items
    (8 )     (5 )     (3 )     (60.0 )     (166.7 )
 
   
 
     
 
     
 
     
 
     
 
 
Total
  $ 252     $ 239     $ 227       5.4       11.0  
 
   
 
     
 
     
 
                 


N/M = Not Meaningful

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 4

Consumer Banking

                                         
                            Percent change 3Q04 vs.
dollars in millions
  3Q04
  2Q04
  3Q03
  2Q04
  3Q03
Summary of operations
                                       
Net interest income (TE)
  $ 453     $ 431     $ 454       5.1 %     (.2 )%
Noninterest income
    139       120       146       15.8       (4.8 )
 
   
 
     
 
     
 
     
 
     
 
 
Total revenue (TE)
    592       551       600       7.4       (1.3 )
Provision for loan losses
    51       46       70       10.9       (27.1 )
Noninterest expense
    352       345       355       2.0       (.8 )
 
   
 
     
 
     
 
     
 
     
 
 
Income before income taxes (TE)
    189       160       175       18.1       8.0  
Allocated income taxes and TE adjustments
    71       60       65       18.3       9.2  
 
   
 
     
 
     
 
     
 
     
 
 
Net income
  $ 118     $ 100     $ 110       18.0       7.3  
 
   
 
     
 
     
 
                 
Percent of consolidated net income
    47 %     42 %     49 %     N/A       N/A  
Average balances
                                       
Loans
  $ 29,331     $ 29,362     $ 29,179       (.1 )%     .5 %
Total assets
    31,855       31,975       31,687       (.4 )     .5  
Deposits
    35,574       35,025       35,062       1.6       1.5  


TE = Taxable Equivalent, N/A = Not Applicable

Additional Consumer Banking Data

                                         
                            Percent change 3Q 04 vs.
dollars in millions
  3Q 04
  2Q 04
  3Q 03
  2Q 04
  3Q 03
Average deposits outstanding
                                       
Noninterest-bearing
  $ 5,750     $ 5,640     $ 5,746       2.0 %     .1 %
Money market deposit accounts and other savings
    16,973       16,284       15,586       4.2       8.9  
Time
    12,851       13,101       13,730       (1.9 )     (6.4 )
 
   
 
     
 
     
 
     
 
     
 
 
Total deposits
  $ 35,574     $ 35,025     $ 35,062       1.6       1.5  
 
   
 
     
 
     
 
                 
Home equity loans
                                       
Retail Banking and Small Business:
                                       
Average balance
  $ 8,810     $ 8,608     $ 8,257                  
Average loan-to-value ratio
    72 %     72 %     72 %                
Percent first lien positions
    60       60       58                  
National Home Equity:
                                       
Average balance
  $ 4,502     $ 4,504     $ 5,164                  
Average loan-to-value ratio
    71 %     72 %     74 %                
Percent first lien positions
    76       78       82                  
 
   
 
     
 
     
 
                 
Other data
                                       
On-line clients / household penetration
    938,540/44 %     882,088/42 %     722,172/37 %                
KeyCenters
    921       902       900                  
Automated teller machines
    2,187       2,166       2,158                  

     Net income for Consumer Banking was $118 million for the third quarter of 2004, representing an $8 million increase from the year-ago quarter. The increase was attributable to a substantially lower provision for loan losses, offset in part by a decrease in noninterest income.

     The provision for loan losses decreased by $19 million as a result of improved asset quality in Consumer Finance and Small Business lines of business.

     Noninterest income decreased by $7 million, or 5%, from the third quarter of 2003, due largely to an $11 million decline in net gains from loan securitizations and sales in the Consumer Finance line of business and a $6 million decrease in service charges on deposit accounts, primarily in Retail Banking. These reductions were offset partially by a $7 million decrease in net losses incurred on the residual values of leased vehicles.

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 5

Corporate and Investment Banking

                                         
                            Percent change 3Q04 vs.
dollars in millions
  3Q04
  2Q04
  3Q03
  2Q04
  3Q03
Summary of operations
                                       
Net interest income (TE)
  $ 234     $ 228     $ 235       2.6 %     (.4 )%
Noninterest income
    131       135       123       (3.0 )     6.5  
 
   
 
     
 
     
 
     
 
     
 
 
Total revenue (TE)
    365       363       358       .6       2.0  
Provision for loan losses
    (1 )     25       48       N/M       N/M  
Noninterest expense
    187       169       174       10.7       7.5  
 
   
 
     
 
     
 
     
 
     
 
 
Income before income taxes (TE)
    179       169       136       5.9       31.6  
Allocated income taxes and TE adjustments
    67       63       51       6.3       31.4  
 
   
 
     
 
     
 
     
 
     
 
 
Net income
  $ 112     $ 106     $ 85       5.7       31.8  
 
   
 
     
 
     
 
                 
Percent of consolidated net income
    44 %     44 %     37 %     N/A       N/A  
Average balances
                                       
Loans
  $ 29,078     $ 27,854     $ 27,901       4.4 %     4.2 %
Total assets
    33,993       32,788       32,157       3.7       5.7  
Deposits
    5,146       4,958       4,566       3.8       12.7  


TE = Taxable Equivalent, N/M = Not Meaningful, N/A = Not Applicable

     Net income for Corporate and Investment Banking was $112 million for the third quarter of 2004, up from $85 million for the same period last year. A significant decrease in the provision for loan losses and growth in noninterest income drove the improvement and more than offset an increase in noninterest expense.

     The provision for loan losses decreased by $49 million, reflecting improved asset quality in the Corporate Banking line of business.

     Noninterest income rose by $8 million, or 7%, due largely to increases of $5 million in both non-yield-related loan fees and income from investment banking and capital markets activities. In addition, Key Equipment Finance recorded net gains of $5 million on the residual values of leased equipment in the third quarter of 2004, compared with a small net loss in the year-ago quarter. These favorable results were offset in part by a decrease in net gains from loan sales.

     Noninterest expense increased by $13 million, or 7%, due primarily to an $8 million increase in personnel expense.

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 6

Investment Management Services

                                         
                            Percent change 3Q04 vs.
dollars in millions
  3Q04
  2Q04
  3Q03
  2Q04
  3Q03
Summary of operations
                                       
Net interest income (TE)
  $ 60     $ 59     $ 60       1.7 %     %
Noninterest income
    133       143       140       (7.0 )     (5.0 )
 
   
 
     
 
     
 
     
 
     
 
 
Total revenue (TE)
    193       202       200       (4.5 )     (3.5 )
Provision for loan losses
    1       3       5       (66.7 )     (80.0 )
Noninterest expense
    149       162       162       (8.0 )     (8.0 )
 
   
 
     
 
     
 
     
 
     
 
 
Income before income taxes (TE)
    43       37       33       16.2       30.3  
Allocated income taxes and TE adjustments
    16       14       12       14.3       33.3  
 
   
 
     
 
     
 
     
 
     
 
 
Net income
  $ 27     $ 23     $ 21       17.4       28.6  
 
   
 
     
 
     
 
                 
Percent of consolidated net income
    11 %     10 %     9 %     N/A       N/A  
Average balances
                                       
Loans
  $ 5,275     $ 5,226     $ 5,100       .9 %     3.4 %
Total assets
    6,614       6,567       6,228       .7       6.2  
Deposits
    7,114       7,188       6,382       (1.0 )     11.5  


TE = Taxable Equivalent, N/A = Not Applicable

Additional Investment Management Services Data

                         
dollars in billions
  3Q04
  2Q04
  3Q03
Assets under management
  $ 70.9     $ 69.7     $ 65.0  
Nonmanaged and brokerage assets
    67.6       68.1       63.4  

     Net income for Investment Management Services was $27 million for the third quarter of 2004, up from $21 million for the third quarter of last year. The positive effects of a decrease in noninterest expense and a reduction in the provision for loan losses more than offset a decline in noninterest income.

     Noninterest expense declined by $13 million, or 8%, due to a variety of factors, including decreases in computer processing costs and indirect charges.

     The provision for loan losses decreased by $4 million, reflecting improved asset quality in the McDonald Financial Group.

     Noninterest income decreased by $7 million, or 5%, due largely to a $4 million decline in brokerage commissions and lower income from the sales of annuities.

Other Segments

     Other segments consist primarily of Treasury and principal investing. These segments generated net income of $3 million for the third quarter of 2004, compared with $14 million for the same period last year. Declines in net gains from principal investing and the sales of securities, lower income from corporate-owned life insurance and additional revenue recorded in the third quarter of 2003 in connection with the demutualization of an insurance company in which Key was a policy holder contributed to the decrease.

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 7

Line of Business Descriptions

Consumer Banking
Retail Banking provides individuals with branch-based deposit and investment products, personal finance services and loans, including residential mortgages, home equity and various types of installment loans.

Small Business provides businesses that have annual sales revenues of $10 million or less with deposit, investment and credit products, and business advisory services.

Consumer Finance includes Indirect Lending and National Home Equity.

Indirect Lending offers automobile and marine loans to consumers through dealers and finances inventory for automobile and marine dealers. This business unit also provides federal and private education loans to students and their parents and processes payments on loans from private schools to parents.

National Home Equity provides both prime and nonprime mortgage and home equity loan products to individuals. These products originate outside of Key’s retail branch system. This business unit also works with mortgage brokers and home improvement contractors to provide home equity and home improvement solutions.

Corporate and Investment Banking
Corporate Banking provides an array of products and services to large corporations, middle-market companies, financial institutions and government organizations. These products and services include financing, treasury management, investment banking, derivatives and foreign exchange, equity and debt trading, and syndicated finance.

KeyBank Real Estate Capital provides construction and interim lending, permanent debt placements and servicing, and equity and investment banking services to developers, brokers and owner-investors. This line of business deals exclusively with nonowner-occupied properties (i.e., generally properties for which the owner occupies less than 60% of the premises).

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

Investment Management Services
Investment Management Services includes Victory Capital Management and McDonald Financial Group.

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

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 8

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

     Cleveland-based KeyCorp is one of the nation’s largest bank-based financial services companies, with assets of approximately $88 billion. Key companies provide investment management, retail and commercial banking, consumer finance, and investment banking products and services to individuals and companies throughout the United States and, for certain businesses, internationally. The company’s businesses deliver their products and services through 921 KeyCenters and offices; a network of 2,187 ATMs; telephone banking centers (1.800.KEY2YOU); and a Web site, Key.com,® that provides account access and financial products 24 hours a day.

Notes to Editors:
A live Internet broadcast of KeyCorp’s conference call to discuss quarterly earnings and currently anticipated earnings trends and to answer analysts’ questions can be accessed through the Investor Relations section at www.Key.com/ir at 9:00 a.m. ET, on Thursday, October 14, 2004. A tape of the call will be available through October 21.

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

This news release contains forward-looking statements about issues like anticipated earnings outlook, asset quality trends and anticipated improvement in profitability and competitiveness. Forward-looking statements by their nature are subject to assumptions, risks and uncertainties. Actual results could differ materially from those contained in or implied by such forward-looking statements for a variety of factors including: changes in interest rates; failure of the economy to continue to improve, which could materially impact credit quality trends and the ability to generate loans; declines or disruptions in the stock or bond markets; delay in or inability to execute strategic initiatives designed to grow revenues and/or manage expenses; inaccurate or erroneous assumptions made in connection with various modeling techniques; consummation of significant business combinations or divestitures; new legal obligations or restrictions or unfavorable resolution of litigation; further disruption in the economy and the general business climate as a result of terrorist activities or military actions; and changes in accounting, tax or regulatory practices or requirements.

###

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 9

Financial Highlights
(dollars in millions, except per share amounts)

                         
    Three months ended
    9-30-04
  6-30-04
  9-30-03
Summary of operations
                       
Net interest income (TE)
  $ 680     $ 658     $ 690  
Noninterest income
    436       446       463  
 
   
 
     
 
     
 
 
Total revenue (TE)
    1,116       1,104       1,153  
Provision for loan losses
    51       74       123  
Noninterest expense
    690       679       699  
Net income
    252       239       227  
Per common share
                       
Net income
  $ .62     $ .58     $ .54  
Net income — assuming dilution
    .61       .58       .53  
Cash dividends paid
    .31       .31       .305  
Book value at period end
    17.12       16.77       16.64  
Market price at period end
    31.60       29.89       25.57  
Performance ratios
                       
Return on average total assets
    1.16 %     1.13 %     1.06 %
Return on average equity
    14.62       13.97       13.06  
Net interest margin (TE)
    3.61       3.57       3.73  
Capital ratios at period end
                       
Equity to assets
    7.85 %     7.92 %     8.26 %
Tangible equity to tangible assets
    6.57       6.64       6.94  
Tier 1 risk-based capital a
    7.74       7.93       8.23  
Total risk-based capital a
    11.66       12.07       12.48  
Leverage a
    8.27       8.34       8.37  
Asset quality
                       
Net loan charge-offs
  $ 76     $ 104     $ 123  
Net loan charge-offs to average loans
    .47 %     .67 %     .77 %
Allowance for loan losses
  $ 1,251     $ 1,276     $ 1,405  
Allowance for loan losses to period-end loans
    1.93 %     1.99 %     2.24 %
Allowance for loan losses to nonperforming loans
    320.77       281.06       176.73  
Nonperforming loans at period end
  $ 390     $ 454     $ 795  
Nonperforming assets at period end
    460       540       862  
Nonperforming loans to period-end loans
    .60 %     .71 %     1.27 %
Nonperforming assets to period-end loans plus OREO
and other nonperforming assets
    .71       .84       1.37  
Other data
                       
Average full-time equivalent employees
    19,635       19,514       20,059  
KeyCenters
    921       902       900  
Taxable-equivalent adjustment
  $ 22     $ 22     $ 13  

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 10

Financial Highlights (continued)
(dollars in millions, except per share amounts)

                 
    Nine months ended
    9-30-04
  9-30-03
Summary of operations
               
Net interest income (TE)
  $ 2,023     $ 2,103  
Noninterest income
    1,313       1,294  
 
   
 
     
 
 
Total revenue (TE)
    3,336       3,397  
Provision for loan losses
    206       378  
Noninterest expense
    2,028       2,044  
Net income
    741       669  
Per common share
               
Net income
  $ 1.80     $ 1.58  
Net income — assuming dilution
    1.78       1.57  
Cash dividends paid
    .93       .915  
Performance ratios
               
Return on average total assets
    1.16 %     1.06 %
Return on average equity
    14.36       12.98  
Net interest margin (TE)
    3.64       3.81  
Asset quality
               
Net loan charge-offs
  $ 291     $ 425  
Net loan charge-offs to average loans
    .61 %     .90 %
Other data
               
Average full-time equivalent employees
    19,577       20,174  
Taxable-equivalent adjustment
  $ 68     $ 49  


(a) 9-30-04 ratio is estimated.
 
TE = Taxable Equivalent

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 11

Consolidated Balance Sheets
(dollars in millions)

                         
    9-30-04
  6-30-04
  9-30-03
Assets
                       
Loans
  $ 64,981     $ 64,016     $ 62,723  
Investment securities
    78       81       106  
Securities available for sale
    7,182       7,023       7,550  
Short-term investments
    2,753       2,639       1,776  
Other investments
    1,341       1,231       1,103  
 
   
 
     
 
     
 
 
Total earning assets
    76,335       74,990       73,258  
Allowance for loan losses
    (1,251 )     (1,276 )     (1,405 )
Cash and due from banks
    2,984       2,313       2,398  
Premises and equipment
    599       600       614  
Goodwill
    1,179       1,150       1,154  
Other intangible assets
    32       31       41  
Corporate-owned life insurance
    2,574       2,550       2,483  
Accrued income and other assets
    6,003       5,863       5,917  
 
   
 
     
 
     
 
 
Total assets
  $ 88,455     $ 86,221     $ 84,460  
 
   
 
     
 
     
 
 
Liabilities
                       
Deposits in domestic offices:
                       
NOW and money market deposit accounts
  $ 21,165     $ 19,956     $ 18,389  
Savings deposits
    1,976       2,014       2,079  
Certificates of deposit ($100,000 or more)
    4,715       4,630       4,887  
Other time deposits
    10,212       10,342       11,034  
 
   
 
     
 
     
 
 
Total interest-bearing
    38,068       36,942       36,389  
Noninterest-bearing
    12,008       10,940       10,947  
Deposits in foreign office — interest-bearing
    5,767       4,541       1,403  
 
   
 
     
 
     
 
 
Total deposits
    55,843       52,423       48,739  
Federal funds purchased and securities sold under repurchase agreements
    3,322       3,794       4,804  
Bank notes and other short-term borrowings
    2,853       2,598       2,707  
Accrued expense and other liabilities
    6,047       5,969       5,891  
Long-term debt
    13,444       14,608       15,342  
 
   
 
     
 
     
 
 
Total liabilities
    81,509       79,392       77,483  
Shareholders’ equity
                       
Preferred stock
                 
Common shares
    492       492       492  
Capital surplus
    1,477       1,469       1,454  
Retained earnings
    7,197       7,072       6,732  
Treasury stock
    (2,172 )     (2,121 )     (1,718 )
Accumulated other comprehensive income (loss)
    (48 )     (83 )     17  
 
   
 
     
 
     
 
 
Total shareholders’ equity
    6,946       6,829       6,977  
 
   
 
     
 
     
 
 
Total liabilities and shareholders’ equity
  $ 88,455     $ 86,221     $ 84,460  
 
   
 
     
 
     
 
 
Common shares outstanding (000)
    405,723       407,243       419,266  

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 12

Consolidated Statements of Income
(dollars in millions, except per share amounts)

                                         
    Three months ended
  Nine months ended
    9-30-04
  6-30-04
  9-30-03
  9-30-04
  9-30-03
Interest income
                                       
Loans
  $ 847     $ 816     $ 880     $ 2,496     $ 2,694  
Taxable investment securities
    1                   1        
Tax-exempt investment securities
    1       1       2       3       5  
Securities available for sale
    84       78       77       250       274  
Short-term investments
    9       9       6       27       22  
Other investments
    10       8       6       26       19  
 
   
 
     
 
     
 
     
 
     
 
 
Total interest income
    952       912       971       2,803       3,014  
Interest expense
                                       
Deposits
    171       161       168       493       539  
Federal funds purchased and securities sold under repurchase agreements
    17       10       12       37       41  
Bank notes and other short-term borrowings
    8       9       13       29       46  
Long-term debt, including capital securities
    98       96       101       289       334  
 
   
 
     
 
     
 
     
 
     
 
 
Total interest expense
    294       276       294       848       960  
 
   
 
     
 
     
 
     
 
     
 
 
Net interest income
    658       636       677       1,955       2,054  
Provision for loan losses
    51       74       123       206       378  
 
   
 
     
 
     
 
     
 
     
 
 
 
    607       562       554       1,749       1,676  
Noninterest income
                                       
Trust and investment services income
    135       141       138       421       399  
Service charges on deposit accounts
    84       86       93       254       276  
Investment banking and capital markets income
    52       69       53       163       142  
Letter of credit and loan fees
    42       40       37       119       99  
Corporate-owned life insurance income
    25       25       27       77       81  
Net gains from loan securitizations and sales
    21       1       39       47       68  
Electronic banking fees
    22       22       20       62       61  
Net securities gains
          7       2       7       9  
Other income
    55       55       54       163       159  
 
   
 
     
 
     
 
     
 
     
 
 
Total noninterest income
    436       446       463       1,313       1,294  
Noninterest expense
                                       
Personnel
    394       371       380       1,138       1,114  
Net occupancy
    57       61       56       176       171  
Computer processing
    49       48       43       141       131  
Equipment
    28       30       35       89       101  
Marketing
    26       30       30       79       88  
Professional fees
    27       29       30       81       87  
Other expense
    109       110       125       324       352  
 
   
 
     
 
     
 
     
 
     
 
 
Total noninterest expense
    690       679       699       2,028       2,044  
 
   
 
     
 
     
 
     
 
     
 
 
Income before income taxes
    353       329       318       1,034       926  
Income taxes
    101       90       91       293       257  
 
   
 
     
 
     
 
     
 
     
 
 
Net income
  $ 252     $ 239     $ 227     $ 741     $ 669  
 
   
 
     
 
     
 
     
 
     
 
 
Net income per common share
  $ .62     $ .58     $ .54     $ 1.80     $ 1.58  
Net income per common share — assuming dilution
    .61       .58       .53       1.78       1.57  
Weighted-average common shares outstanding (000)
    407,187       410,292       421,971       411,371       423,697  
Weighted-average common shares and potential common shares outstanding (000)
    411,575       414,908       425,669       416,002       426,968  

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 13

Consolidated Average Balance Sheets, Net Interest Income and Yields/Rates
(dollars in millions)

                                                                         
    Third Quarter 2004
  Second Quarter 2004
  Third Quarter 2003
    Average                   Average                   Average        
    Balance
  Interest
  Yield/Rate
  Balance
  Interest
  Yield/Rate
  Balance
  Interest
  Yield/Rate
Assets
                                                                       
Loans:a,b
                                                                       
Commercial, financial and agricultural
  $ 18,088     $ 198       4.34 %   $ 17,392     $ 189       4.36 %   $ 17,188     $ 202       4.65 %
Real estate — commercial mortgage
    6,448       81       4.99       6,071       74       4.94       5,859       77       5.21  
Real estate — construction
    4,825       62       5.15       4,716       56       4.79       5,196       66       5.05  
Commercial lease financing
    8,808       126       5.72       8,729       127       5.83       7,995       118       5.91  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Total commercial loans
    38,169       467       4.87       36,908       446       4.86       36,238       463       5.07  
Real estate — residential
    1,511       21       5.79       1,568       24       6.09       1,707       28       6.43  
Home equity
    14,844       212       5.67       14,631       201       5.53       14,862       218       5.80  
Consumer — direct
    2,059       38       7.35       2,058       38       7.41       2,162       39       7.19  
Consumer — indirect lease financing
    144       4       10.07       199       5       9.74       460       11       9.60  
Consumer — indirect other
    5,153       97       7.56       5,137       95       7.39       5,123       105       8.23  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Total consumer loans
    23,711       372       6.26       23,593       363       6.17       24,314       401       6.55  
Loans held for sale
    2,476       30       4.74       2,602       28       4.28       2,526       29       4.53  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Total loans
    64,356       869       5.38       63,103       837       5.33       63,078       893       5.62  
Taxable investment securities
    14       1       4.22       16             4.20       14             4.46  
Tax-exempt investment securitiesa
    65       1       9.64       74       2       9.73       91       2       9.76  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Total investment securities
    79       2       8.65       90       2       8.72       105       2       9.07  
Securities available for salea,c
    6,982       84       4.88       7,130       78       4.37       7,877       77       3.91  
Short-term investments
    2,527       9       1.50       2,384       9       1.44       1,531       6       1.70  
Other investmentsc
    1,328       10       2.98       1,167       8       2.79       1,032       6       2.68  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Total earning assets
    75,272       974       5.16       73,874       934       5.07       73,623       984       5.32  
Allowance for loan losses
    (1,270 )                     (1,237 )                     (1,396 )                
Accrued income and other assets
    12,522                       12,678                       12,495                  
 
   
 
                     
 
                     
 
                 
Total assets
  $ 86,524                     $ 85,315                     $ 84,722                  
 
   
 
                     
 
                     
 
                 
Liabilities
                                                                       
NOW and money market deposit accounts
  $ 20,454       39       .77     $ 19,753       33       .67     $ 18,381       35       .75  
Savings deposits
    1,986       2       .22       2,040       1       .23       2,092       2       .48  
Certificates of deposit ($100,000 or more)d
    4,852       44       3.60       4,727       44       3.77       4,898       46       3.78  
Other time deposits
    10,348       73       2.81       10,591       76       2.87       11,073       81       2.89  
Deposits in foreign office
    3,593       13       1.47       2,635       7       1.05       1,627       4       1.04  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Total interest-bearing deposits
    41,233       171       1.65       39,746       161       1.63       38,071       168       1.76  
Federal funds purchased and securities sold under repurchase agreements
    5,032       17       1.35       4,483       10       .93       5,133       12       .93  
Bank notes and other short-term borrowings
    2,614       8       1.33       2,512       9       1.43       2,559       13       2.05  
Long-term debtd
    13,415       98       3.01       14,465       96       2.74       15,421       101       2.68  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Total interest-bearing liabilities
    62,294       294       1.90       61,206       276       1.82       61,184       294       1.93  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Noninterest-bearing deposits
    11,285                       11,010                       10,628                  
Accrued expense and other liabilities
    6,090                       6,220                       6,016                  
 
   
 
                     
 
                     
 
                 
Total liabilities
    79,669                       78,436                       77,828                  
Shareholders’ equity
    6,855                       6,879                       6,894                  
 
   
 
                     
 
                     
 
                 
Total liabilities and shareholders’ equity
  $ 86,524                     $ 85,315                     $ 84,722                  
 
   
 
                     
 
                     
 
                 
Interest rate spread (TE)
                    3.26 %                     3.25 %                     3.39 %
 
                   
 
                     
 
                     
 
 
Net interest income (TE) and net interest margin (TE)
            680       3.61 %             658       3.57 %             690       3.73 %
 
                   
 
                     
 
                     
 
 
TE adjustmenta
            22                       22                       13          
 
           
 
                     
 
                     
 
         
Net interest income, GAAP basis
          $ 658                     $ 636                     $ 677          
 
           
 
                     
 
                     
 
         


(a)   Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%.
 
(b)   For purposes of these computations, nonaccrual loans are included in average loan balances.
 
(c)   Yield is calculated on the basis of amortized cost.
 
(d)   Rate calculation excludes basis adjustments related to fair value hedges.
 
    TE = Taxable Equivalent
 
    GAAP = Accounting Principles Generally Accepted in the United States

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 14

Consolidated Average Balance Sheets, Net Interest Income and Yields/Rates
(dollars in millions)

                                                 
    Nine months ended September 30, 2004
  Nine months ended September 30, 2003
    Average                   Average        
    Balance
  Interest
  Yield/Rate
  Balance
  Interest
  Yield/Rate
Assets
                                               
Loans:a,b
                                               
Commercial, financial and agricultural
  $ 17,508     $ 577       4.40 %   $ 17,267     $ 626       4.84 %
Real estate — commercial mortgage
    6,091       227       4.97       5,941       239       5.36  
Real estate — construction
    4,799       176       4.91       5,401       206       5.12  
Commercial lease financing
    8,692       380       5.83       7,890       360       6.08  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total commercial loans
    37,090       1,360       4.90       36,499       1,431       5.23  
Real estate — residential
    1,556       70       6.04       1,804       90       6.55  
Home equity
    14,813       623       5.61       14,436       654       6.06  
Consumer — direct
    2,067       116       7.48       2,142       119       7.43  
Consumer — indirect lease financing
    202       15       9.82       610       43       9.47  
Consumer — indirect other
    5,226       297       7.58       5,015       317       8.46  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total consumer loans
    23,864       1,121       6.27       24,007       1,223       6.81  
Loans held for sale
    2,468       81       4.37       2,479       86       4.64  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total loans
    63,422       2,562       5.39       62,985       2,740       5.81  
Taxable investment securities
    16       1       4.26       7             5.08  
Tax-exempt investment securitiesa
    72       5       9.70       108       8       9.33  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total investment securities
    88       6       8.73       115       8       9.07  
Securities available for salea,c
    7,209       250       4.65       7,997       274       4.59  
Short-term investments
    2,258       27       1.60       1,581       22       1.88  
Other investmentsc
    1,203       26       2.86       991       19       2.60  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total earning assets
    74,180       2,871       5.17       73,669       3,063       5.55  
Allowance for loan losses
    (1,295 )                     (1,414 )                
Accrued income and other assets
    12,573                       12,210                  
 
   
 
                     
 
                 
Total assets
  $ 85,458                     $ 84,465                  
 
   
 
                     
 
                 
Liabilities
                                               
NOW and money market deposit accounts
  $ 19,699       101       .69     $ 17,628       118       .90  
Savings deposits
    2,026       4       .23       2,073       8       .54  
Certificates of deposit ($100,000 or more)d
    4,821       134       3.72       4,766       141       3.98  
Other time deposits
    10,631       229       2.88       11,433       255       2.98  
Deposits in foreign office
    2,801       25       1.21       1,930       17       1.18  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total interest-bearing deposits
    39,978       493       1.65       37,830       539       1.91  
Federal funds purchased and securities sold under repurchase agreements
    4,529       37       1.09       5,004       41       1.10  
Bank notes and other short-term borrowings
    2,577       29       1.52       2,583       46       2.41  
Long-term debt, including capital securitiesd
    14,366       289       2.79       16,330       334       2.84  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total interest-bearing liabilities
    61,450       848       1.86       61,747       960       2.10  
Noninterest-bearing deposits
    10,986                       10,159                  
Accrued expense and other liabilities
    6,129                       5,670                  
 
   
 
                     
 
                 
Total liabilities
    78,565                       77,576                  
Shareholders’ equity
    6,893                       6,889                  
 
   
 
                     
 
                 
Total liabilities and shareholders’ equity
  $ 85,458                     $ 84,465                  
 
   
 
                     
 
                 
Interest rate spread (TE)
                    3.31 %                     3.45 %
 
                   
 
                     
 
 
Net interest income (TE) and net interest margin (TE)
            2,023       3.64 %             2,103       3.81 %
 
                   
 
                     
 
 
TE adjustmenta
            68                       49          
 
           
 
                     
 
         
Net interest income, GAAP basis
          $ 1,955                     $ 2,054          
 
           
 
                     
 
         
Capital securities
                      $ 838     $ 36          


(a)   Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%.
 
(b)   For purposes of these computations, nonaccrual loans are included in average loan balances.
 
(c)   Yield is calculated on the basis of amortized cost.
 
(d)   Rate calculation excludes basis adjustments related to fair value hedges.
 
    TE = Taxable Equivalent
 
    GAAP = Accounting Principles Generally Accepted in the United States

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 15

Noninterest Income
(in millions)

                                         
    Three months ended
  Nine months ended
    9-30-04
  6-30-04
  9-30-03
  9-30-04
  9-30-03
Trust and investment services incomea
  $ 135     $ 141     $ 138     $ 421     $ 399  
Service charges on deposit accounts
    84       86       93       254       276  
Investment banking and capital markets incomea
    52       69       53       163       142  
Letter of credit and loan fees
    42       40       37       119       99  
Corporate-owned life insurance income
    25       25       27       77       81  
Net gains from loan securitizations and sales
    21       1       39       47       68  
Electronic banking fees
    22       22       20       62       61  
Net securities gains
          7       2       7       9  
Other income:
                                       
Insurance income
    10       13       12       34       38  
Loan securitization servicing fees
    2       1       2       4       6  
Credit card fees
    3       3       2       9       8  
Miscellaneous income
    40       38       38       116       107  
 
   
 
     
 
     
 
     
 
     
 
 
Total other income
    55       55       54       163       159  
 
   
 
     
 
     
 
     
 
     
 
 
Total noninterest income
  $ 436     $ 446     $ 463     $ 1,313     $ 1,294  
 
   
 
     
 
     
 
     
 
     
 
 


(a)   Additional detail provided in tables below.

Trust and Investment Services Income
(in millions)

                                         
    Three months ended
  Nine months ended
    9-30-04
  6-30-04
  9-30-03
  9-30-04
  9-30-03
Brokerage commissions and fee income
  $ 61     $ 66     $ 66     $ 197     $ 196  
Personal asset management and custody fees
    41       42       39       125       111  
Institutional asset management and custody fees
    9       10       10       28       29  
All other fees
    24       23       23       71       63  
 
   
 
     
 
     
 
     
 
     
 
 
Total trust and investment services income
  $ 135     $ 141     $ 138     $ 421     $ 399  
 
   
 
     
 
     
 
     
 
     
 
 

Investment Banking and Capital Markets Income
(in millions)

                                         
    Three months ended
  Nine months ended
    9-30-04
  6-30-04
  9-30-03
  9-30-04
  9-30-03
Investment banking income
  $ 36     $ 31     $ 24     $ 92     $ 70  
Net gains from principal investing
    10       19       16       39       32  
Foreign exchange income
    7       12       10       31       25  
Net gain from sale of other investments
    1                   1        
Dealer trading and derivatives income (loss)
    (2 )     7       3             15  
 
   
 
     
 
     
 
     
 
     
 
 
Total investment banking and capital markets income
  $ 52     $ 69     $ 53     $ 163     $ 142  
 
   
 
     
 
     
 
     
 
     
 
 

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 16

Noninterest Expense
(dollars in millions)

                                         
    Three months ended
  Nine months ended
    9-30-04
  6-30-04
  9-30-03
  9-30-04
  9-30-03
Personnela
  $ 394     $ 371     $ 380     $ 1,138     $ 1,114  
Net occupancy
    57       61       56       176       171  
Computer processing
    49       48       43       141       131  
Equipment
    28       30       35       89       101  
Marketing
    26       30       30       79       88  
Professional fees
    27       29       30       81       87  
Other expense:
                                       
Postage and delivery
    13       13       15       39       43  
Telecommunications
    8       7       8       22       24  
Franchise and business taxes
    9       9       10       17       35  
OREO expense, net
    3       7       5       14       10  
Miscellaneous expense
    76       74       87       232       240  
 
   
 
     
 
     
 
     
 
     
 
 
Total other expense
    109       110       125       324       352  
 
   
 
     
 
     
 
     
 
     
 
 
Total noninterest expense
  $ 690     $ 679     $ 699     $ 2,028     $ 2,044  
 
   
 
     
 
     
 
     
 
     
 
 
Average full-time equivalent employees
    19,635       19,514       20,059       19,577       20,174  


(a)   Additional detail provided in table below.

Personnel Expense
(in millions)

                                         
    Three months ended
  Nine months ended
    9-30-04
  6-30-04
  9-30-03
  9-30-04
  9-30-03
Salaries
  $ 213     $ 210     $ 215     $ 632     $ 647  
Incentive compensation
    103       92       94       280       244  
Employee benefits
    63       59       63       193       198  
Stock-based compensation
    12       8       8       27       15  
Severance
    3       2             6       10  
 
   
 
     
 
     
 
     
 
     
 
 
Total personnel expense
  $ 394     $ 371     $ 380     $ 1,138     $ 1,114  
 
   
 
     
 
     
 
     
 
     
 
 

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 17

Loan Composition
(dollars in millions)

                                         
                            Percent change 9-30-04 vs.
    9-30-04
  6-30-04
  9-30-03
  6-30-04
  9-30-03
Commercial, financial and agricultural
  $ 18,118     $ 17,721     $ 17,118       2.2 %     5.8 %
Commercial real estate:
                                       
Commercial mortgage
    6,710       6,312       5,822       6.3       15.3  
Construction
    5,120       4,863       5,236       5.3       (2.2 )
 
   
 
     
 
     
 
     
 
     
 
 
Total commercial real estate loans
    11,830       11,175       11,058       5.9       7.0  
Commercial lease financing
    8,969       8,792       8,123       2.0       10.4  
 
   
 
     
 
     
 
     
 
     
 
 
Total commercial loans
    38,917       37,688       36,299       3.3       7.2  
Real estate — residential mortgage
    1,509       1,542       1,665       (2.1 )     (9.4 )
Home equity
    14,950       14,753       14,879       1.3       .5  
Consumer — direct
    2,017       2,074       2,154       (2.7 )     (6.4 )
Consumer — indirect:
                                       
Automobile lease financing
    120       170       400       (29.4 )     (70.0 )
Automobile loans
    1,862       1,910       2,093       (2.5 )     (11.0 )
Marine
    2,648       2,640       2,489       .3       6.4  
Other
    620       598       561       3.7       10.5  
 
   
 
     
 
     
 
     
 
     
 
 
Total consumer — indirect loans
    5,250       5,318       5,543       (1.3 )     (5.3 )
 
   
 
     
 
     
 
     
 
     
 
 
Total consumer loans
    23,726       23,687       24,241       .2       (2.1 )
Loans held for sale:
                                       
Real estate — commercial mortgage
    314       369       210       (14.9 )     49.5  
Real estate — residential mortgage
    24       22       59       9.1       (59.3 )
Home equity
    21       13             61.5       N/M  
Education
    1,979       2,237       1,914       (11.5 )     3.4  
 
   
 
     
 
     
 
     
 
     
 
 
Total loans held for sale
    2,338       2,641       2,183       (11.5 )     7.1  
 
   
 
     
 
     
 
     
 
     
 
 
Total loans
  $ 64,981     $ 64,016     $ 62,723       1.5       3.6  
 
   
 
     
 
     
 
                 

N/M = Not Meaningful

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 18

Summary of Loan Loss Experience
(dollars in millions)

                                         
    Three months ended
  Nine months ended
    9-30-04
  6-30-04
  9-30-03
  9-30-04
  9-30-03
Average loans outstanding during the period
  $ 64,356     $ 63,103     $ 63,078     $ 63,422     $ 62,985  
 
   
 
     
 
     
 
     
 
     
 
 
Allowance for loan losses at beginning of period
  $ 1,276     $ 1,306     $ 1,405     $ 1,406     $ 1,452  
Loans charged off:
                                       
Commercial, financial and agricultural
    35       43       61       130       225  
Real estate — commercial mortgage
    6       10       11       24       36  
Real estate — construction
          5       1       5       5  
 
   
 
     
 
     
 
     
 
     
 
 
Total commercial real estate loans
    6       15       12       29       41  
Commercial lease financing
    9       15       14       34       45  
 
   
 
     
 
     
 
     
 
     
 
 
Total commercial loans
    50       73       87       193       311  
Real estate — residential mortgage
    6       4       2       12       5  
Home equity
    9       11       15       37       44  
Consumer — direct
    9       11       12       32       37  
Consumer — indirect lease financing
    1       2       3       6       12  
Consumer — indirect other
    38       47       40       130       119  
 
   
 
     
 
     
 
     
 
     
 
 
Total consumer loans
    63       75       72       217       217  
 
   
 
     
 
     
 
     
 
     
 
 
 
    113       148       159       410       528  
Recoveries:
                                       
Commercial, financial and agricultural
    10       13       11       36       27  
Real estate — commercial mortgage
    1       1       2       3       10  
Real estate — construction
          4             4       3  
 
   
 
     
 
     
 
     
 
     
 
 
Total commercial real estate loans
    1       5       2       7       13  
Commercial lease financing
    3       4       6       10       11  
 
   
 
     
 
     
 
     
 
     
 
 
Total commercial loans
    14       22       19       53       51  
Real estate — residential mortgage
          1             1       1  
Home equity
    2       1       1       4       4  
Consumer — direct
    3       2       3       7       7  
Consumer — indirect lease financing
    1       1       2       3       5  
Consumer — indirect other
    17       17       11       51       35  
 
   
 
     
 
     
 
     
 
     
 
 
Total consumer loans
    23       22       17       66       52  
 
   
 
     
 
     
 
     
 
     
 
 
 
    37       44       36       119       103  
 
   
 
     
 
     
 
     
 
     
 
 
Net loans charged off
    (76 )     (104 )     (123 )     (291 )     (425 )
Provision for loan losses
    51       74       123       206       378  
Reclassification of allowance for credit losses on lending-related commitmentsa
                      (70 )      
 
   
 
     
 
     
 
     
 
     
 
 
Allowance for loan losses at end of period
  $ 1,251     $ 1,276     $ 1,405     $ 1,251     $ 1,405  
 
   
 
     
 
     
 
     
 
     
 
 
Net loan charge-offs to average loans
    .47 %     .67 %     .77 %     .61 %     .90 %
Allowance for loan losses to period-end loans
    1.93       1.99       2.24       1.93       2.24  
Allowance for loan losses to nonperforming loans
    320.77       281.06       176.73       320.77       176.73  


(a)   Included in accrued expenses and other liabilities on the consolidated balance sheet.

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 19

Summary of Nonperforming Assets and Past Due Loans
(dollars in millions)

                                         
    9-30-04
  6-30-04
  3-31-04
  12-31-03
  9-30-03
Commercial, financial and agricultural
  $ 61     $ 114     $ 191     $ 252     $ 345  
 
Real estate — commercial mortgage
    49       61       72       85       89  
Real estate — construction
    1       1       12       25       38  
 
   
 
     
 
     
 
     
 
     
 
 
Total commercial real estate loans
    50       62       84       110       127  
Commercial lease financing
    74       59       84       103       108  
 
   
 
     
 
     
 
     
 
     
 
 
Total commercial loans
    185       235       359       465       580  
Real estate — residential mortgage
    36       38       39       39       36  
Home equity
    149       151       161       153       151  
Consumer — direct
    4       13       10       14       12  
Consumer — indirect lease financing
    1       2       2       3       3  
Consumer — indirect other
    15       15       16       20       13  
 
   
 
     
 
     
 
     
 
     
 
 
Total consumer loans
    205       219       228       229       215  
 
   
 
     
 
     
 
     
 
     
 
 
Total nonperforming loans
    390       454       587       694       795  
 
OREO
    60       71       76       61       69  
Allowance for OREO losses
    (5 )     (8 )     (5 )     (4 )     (4 )
 
   
 
     
 
     
 
     
 
     
 
 
OREO, net of allowance
    55       63       71       57       65  
Other nonperforming assets
    15       23       12       2       2  
 
   
 
     
 
     
 
     
 
     
 
 
Total nonperforming assets
  $ 460     $ 540     $ 670     $ 753     $ 862  
 
   
 
     
 
     
 
     
 
     
 
 
Accruing loans past due 90 days or more
  $ 139     $ 114     $ 127     $ 152     $ 165  
Accruing loans past due 30 through 89 days
    602       622       559       613       710  
Nonperforming loans to period-end loans
    .60 %     .71 %     .94 %     1.11 %     1.27 %
Nonperforming assets to period-end loans plus OREO and other nonperforming assets
    .71       .84       1.07       1.20       1.37  

Summary of Changes in Nonperforming Loans
(in millions)

                                         
    3Q04
  2Q04
  1Q04
  4Q03
  3Q03
Balance at beginning of period
  $ 454     $ 587     $ 694     $ 795     $ 837  
Loans placed on nonaccrual status
    94       68       145       111       240  
Charge-offs
    (76 )     (104 )     (111 )     (123 )     (123 )
Loans sold
    (35 )     (33 )     (58 )     (40 )     (73 )
Payments
    (32 )     (62 )     (56 )     (46 )     (73 )
Transfers to OREO
                (11 )           (6 )
Loans returned to accrual status
    (15 )     (2 )     (16 )     (3 )     (7 )
 
   
 
     
 
     
 
     
 
     
 
 
Balance at end of period
  $ 390     $ 454     $ 587     $ 694     $ 795  
 
   
 
     
 
     
 
     
 
     
 
 

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 20

Line of Business Results
(dollars in millions)

Consumer Banking

                                                         
                                            Percent change 3Q04 vs.
    3Q04
  2Q04
  1Q04
  4Q03
  3Q03
  2Q04
  3Q03
Summary of operations
                                                       
Total revenue (TE)
  $ 592     $ 551     $ 572     $ 575     $ 600       7.4 %     (1.3 )%
Provision for loan losses
    51       46       59       68       70       10.9       (27.1 )
Noninterest expense
    352       345       335       352       355       2.0       (.8 )
Net income
    118       100       111       97       110       18.0       7.3  
Average loans
    29,331       29,362       29,736       29,244       29,179       (.1 )     .5  
Average deposits
    35,574       35,025       34,742       35,008       35,062       1.6       1.5  
Net loan charge-offs
    52       61       71       68       70       (14.8 )     (25.7 )
Return on average allocated equity
    23.25 %     19.87 %     21.62 %     18.71 %     21.07 %     N/A       N/A  
Average full-time equivalent employees
    8,227       8,130       8,129       8,129       8,231       1.2        
Supplementary information (lines of business)
                                                       
Retail Banking
                                                       
Total revenue (TE)
  $ 321     $ 312     $ 312     $ 324     $ 330       2.9 %     (2.7 )%
Provision for loan losses
    15       10       15       14       14       50.0       7.1  
Noninterest expense
    212       208       199       207       211       1.9       .5  
Net income
    59       58       61       65       66       1.7       (10.6 )
Average loans
    10,771       10,557       10,369       10,264       10,178       2.0       5.8  
Average deposits
    30,116       29,796       29,791       29,894       30,051       1.1       .2  
Net loan charge-offs
    15       10       15       14       14       50.0       7.1  
Return on average allocated equity
    38.35 %     39.07 %     41.16 %     43.20 %     43.86 %     N/A       N/A  
Average full-time equivalent employees
    6,225       6,137       6,092       6,103       6,207       1.4       .3  
Small Business
                                                       
Total revenue (TE)
  $ 97     $ 95     $ 92     $ 98     $ 97       2.1 %     %
Provision for loan losses
    12       12       13       16       17             (29.4 )
Noninterest expense
    55       52       51       52       52       5.8       5.8  
Net income
    19       19       18       18       18             5.6  
Average loans
    4,420       4,479       4,445       4,452       4,502       (1.3 )     (1.8 )
Average deposits
    5,047       4,865       4,582       4,731       4,618       3.7       9.3  
Net loan charge-offs
    12       14       14       16       17       (14.3 )     (29.4 )
Return on average allocated equity
    19.68 %     20.06 %     19.00 %     18.69 %     18.69 %     N/A       N/A  
Average full-time equivalent employees
    419       416       415       380       382       .7       9.7  
Consumer Finance
                                                       
Total revenue (TE)
  $ 174     $ 144     $ 168     $ 153     $ 173       20.8 %     .6 %
Provision for loan losses
    24       24       31       38       39             (38.5 )
Noninterest expense
    85       85       85       93       92             (7.6 )
Net income
    40       23       32       14       26       73.9       53.8  
Average loans
    14,140       14,326       14,922       14,528       14,499       (1.3 )     (2.5 )
Average deposits
    411       364       369       383       393       12.9       4.6  
Net loan charge-offs
    25       37       42       38       39       (32.4 )     (35.9 )
Return on average allocated equity
    15.56 %     8.84 %     11.83 %     5.15 %     9.45 %     N/A       N/A  
Average full-time equivalent employees
    1,583       1,577       1,622       1,646       1,642       .4       (3.6 )

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 21

Line of Business Results (continued)
(dollars in millions)

Corporate and Investment Banking

                                                         
                                            Percent change 3Q04 vs.
    3Q04
  2Q04
  1Q04
  4Q03
  3Q03
  2Q04
  3Q03
Summary of operations
                                                       
Total revenue (TE)
  $ 365     $ 363     $ 354     $ 390     $ 358       .6 %     2.0 %
Provision for loan losses
    (1 )     25       21       49       48       N/M       N/M  
Noninterest expense
    187       169       164       182       174       10.7       7.5  
Net income
    112       106       106       100       85       5.7       31.8  
Average loans
    29,078       27,854       27,221       27,418       27,901       4.4       4.2  
Average deposits
    5,146       4,958       4,756       4,780       4,566       3.8       12.7  
Net loan charge-offs
    23       40       39       49       48       (42.5 )     (52.1 )
Return on average allocated equity
    14.87 %     14.24 %     14.16 %     13.09 %     11.08 %     N/A       N/A  
Average full-time equivalent employees
    2,487       2,435       2,412       2,429       2,433       2.1       2.2  
Supplementary information (lines of business)
                                                       
Corporate Banking
                                                       
Total revenue (TE)
  $ 190     $ 198     $ 189     $ 200     $ 196       (4.0 )%     (3.1 )%
Provision for loan losses
    (7 )     25       14       37       43       N/M       N/M  
Noninterest expense
    110       102       104       113       108       7.8       1.9  
Net income
    54       45       44       32       28       20.0       92.9  
Average loans
    13,106       12,558       12,216       12,369       12,813       4.4       2.3  
Average deposits
    3,767       3,742       3,615       3,655       3,576       .7       5.3  
Net loan charge-offs
    13       36       31       37       43       (63.9 )     (69.8 )
Return on average allocated equity
    13.70 %     11.38 %     11.04 %     7.78 %     6.62 %     N/A       N/A  
Average full-time equivalent employees
    1,167       1,130       1,131       1,140       1,125       3.3       3.7  
KeyBank Real Estate Capital
                                                       
Total revenue (TE)
  $ 104     $ 91     $ 88     $ 121     $ 102       14.3 %     2.0 %
Provision for loan losses
          (4 )     1       4             (100.0 )     N/M  
Noninterest expense
    45       42       37       43       41       7.1       9.8  
Net income
    37       33       31       46       38       12.1       (2.6 )
Average loans
    8,286       7,752       7,624       8,062       8,260       6.9       .3  
Average deposits
    1,366       1,202       1,127       1,111       976       13.6       40.0  
Net loan charge-offs (recoveries)
    3       (1 )     2       4             (400.0 )     N/M  
Return on average allocated equity
    15.95 %     14.67 %     13.60 %     19.64 %     16.79 %     N/A       N/A  
Average full-time equivalent employees
    678       673       668       674       688       .7       (1.5 )
Key Equipment Finance
                                                       
Total revenue (TE)
  $ 71     $ 74     $ 77     $ 69     $ 60       (4.1 )%     18.3 %
Provision for loan losses
    6       4       5       8       5       50.0       20.0  
Noninterest expense
    32       25       23       26       25       28.0       28.0  
Net income
    21       28       31       22       19       (25.0 )     10.5  
Average loans
    7,686       7,544       7,381       6,987       6,828       1.9       12.6  
Average deposits
    13       14       14       14       14       (7.1 )     (7.1 )
Net loan charge-offs
    7       5       6       8       5       40.0       40.0  
Return on average allocated equity
    16.51 %     22.66 %     25.45 %     18.53 %     16.07 %     N/A       N/A  
Average full-time equivalent employees
    642       632       613       615       620       1.6       3.5  

 


 

KeyCorp Reports Third Quarter 2004 Earnings
October 14, 2004
Page 22

Line of Business Results (continued)
(dollars in millions)

Investment Management Services

                                                         
                                            Percent change 3Q04 vs.
    3Q04
  2Q04
  1Q04
  4Q03
  3Q03
  2Q04
  3Q03
Summary of operations
                                                       
Total revenue (TE)
  $ 193     $ 202     $ 204     $ 210     $ 200       (4.5 )%     (3.5 )%
Provision for loan losses
    1       3       1       6       5       (66.7 )     (80.0 )
Noninterest expense
    149       162       152       160       162       (8.0 )     (8.0 )
Net income
    27       23       32       27       21       17.4       28.6  
Average loans
    5,275       5,226       5,140       5,151       5,100       .9       3.4  
Average deposits
    7,114       7,188       6,908       6,779       6,382       (1.0 )     11.5  
Net loan charge-offs
    1       3       1       6       5       (66.7 )     (80.0 )
Return on average allocated equity
    17.58 %     15.37 %     21.20 %     17.45 %     13.93 %     N/A       N/A  
Average full-time equivalent employees
    2,620       2,626       2,639       2,715       2,780       (.2 )     (5.8 )

TE = Taxable Equivalent
N/A = Not Applicable
N/M = Not Meaningful

 

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