Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2011

Goodwill and Other Intangible Assets [Abstract]

Goodwill and Other Intangible Assets

10. Goodwill and Other Intangible Assets

Goodwill represents the amount by which the cost of net assets acquired in a business combination exceeds their fair value. Other intangible assets are primarily the net present value of future economic benefits to be derived from the purchase of core deposits. Additional information pertaining to our accounting policy for goodwill and other intangible assets is summarized in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Goodwill and Other Intangible Assets.”

Our annual goodwill impairment testing is performed as of October 1 each year. On that date in 2011, we determined that the estimated fair value of the Key Community Bank unit was 11% greater than its carrying amount; in 2010, the excess was 18%. Therefore, no further testing was required. At both dates in 2011 and 2010, we also performed a sensitivity analysis of the estimated fair value of the Key Community Bank unit, which indicated that the fair value continued to exceed the carrying amount under deteriorating assumptions. If actual results and market and economic conditions were to differ from the assumptions and data used in this testing, the estimated fair value of the Key Community Bank unit could change in the future. There has been no goodwill associated with our Key Corporate Bank unit since the first quarter of 2009.

During the first quarter of 2009, our review of impairment indicators prompted additional impairment testing of the carrying amount of the goodwill and other intangible assets assigned to the Key Community Bank and Key Corporate Bank units because, although the estimated fair value of the Key Community Bank unit was greater than its carrying amount, the estimated fair value of the Key Corporate Bank unit was less than its carrying amount, reflecting continued weakness in the financial markets. Based on the results of additional impairment testing, we recorded a $223 million pre-tax impairment charge and wrote off all of the remaining goodwill that had been assigned to the Key Corporate Bank unit.

In April 2009, we decided to wind down the operations of Austin, a subsidiary that specialized in managing hedge fund investments for institutional customers. Accordingly, we have accounted for this business as a discontinued operation. Of the $223 million impairment charge recorded for the Key Corporate Bank unit, $27 million related to the Austin discontinued operations, and has been reclassified to “income (loss) from discontinued operations, net of taxes” on the income statement. See Note 13 (“Acquisition, Divestiture and Discontinued Operations”) for additional information regarding the Austin discontinued operations.

Based on our quarterly review of impairment indicators during the three quarters of 2010, it was necessary to perform further reviews of goodwill recorded in our Key Community Bank unit. These reviews indicated the estimated fair value of the Key Community Bank unit continued to exceed its carrying amount at September 30, 2010, June 30, 2010 and March 31, 2010. No further impairment testing was required. Our quarterly review of impairment indicators at December 31, 2010 and for the four quarterly periods in 2011 indicated that no further review was necessary since no indicators were triggered.

Changes in the carrying amount of goodwill by reporting unit are presented in the following table.

in millions	Key Community Bank		Key Corporate Bank		Total
BALANCE AT DECEMBER 31, 2009	$	917		—	$	917
Impairment losses based on results of interim impairment testing		—		—		—
BALANCE AT DECEMBER 31, 2010		917		—		917
Impairment losses based on results of interim impairment testing		—		—		—
BALANCE AT DECEMBER 31, 2011	$	917		—	$	917

Accumulated impairment losses related to the Key Corporate Bank reporting unit totaled $665 million at December 31, 2011, 2010, and 2009. There were no accumulated impairment losses related to the Key Community Bank unit at December 31, 2011, 2010, and 2009.

As of December 31, 2011, we expected goodwill in the amount of $122 million to be deductible for tax purposes in future periods.

The following table shows the gross carrying amount and the accumulated amortization of intangible assets subject to amortization.

	2011				2010
December 31, in millions	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Intangible assets subject to amortization:
Core deposit intangibles	$	65	$	48	$	65	$	44
Other intangible assets (a)		142		142		142		142
Total	$	207	$	190	$	207	$	186

(a) Carrying amount and accumulated amortization excludes $18 million each at December 31, 2011 and 2010, related to the discontinued operations of Austin.

We sold Tuition Management Systems in December 2010. During that year, customer relationship intangible assets of $15 million were written off against the purchase price to determine our net gain from the sale.

During 2009, we identified a $45 million intangible asset related to vendor relationships in the equipment leasing business that was impaired as a result of our actions to cease conducting business in the commercial vehicle and office equipment leasing markets. As a result, we recorded a $45 million charge to write off this intangible asset.

Intangible asset amortization expense was $4 million for 2011, $13 million for 2010 and $76 million for 2009. Estimated amortization expense for intangible assets for each of the next five years is as follows: 2012 — $4 million; 2013 — $4 million; 2014 — $3 million; 2015 — $2 million; and 2016 — $2 million.