- Second quarter EPS of $0.75, up 7% from the year-ago quarter
CLEVELAND, July 18 /PRNewswire-FirstCall/ -- KeyCorp today
announced second quarter net income of $308 million, or $0.75 per
diluted common share, compared to $291 million, or $0.70 per share,
for the second quarter of 2005. For the first quarter of 2006, net
income was $289 million, or $0.70 per diluted common share. Return
on average equity was 16.11% for the second quarter of 2006,
compared to 16.15% for the same period last year and 15.48% for the
first quarter of 2006. For the first six months of 2006, net income
was $597 million, or $1.45 per diluted common share, compared to
$555 million, or $1.34 per share, for the first six months of 2005.
Return on average equity was 15.80%, compared to 15.63% for the
first half of 2005. "Key's improved performance in the second
quarter was driven by revenue growth and solid asset quality," said
Chairman and Chief Executive Officer Henry L. Meyer III. "Relative
to last year's second quarter, Key's taxable- equivalent revenue
rose by $90 million. This increase was due largely to solid
commercial loan growth, higher income from our fee-based businesses
and growth in core deposits, which increased 10% from the second
quarter of 2005. The growth in fee income was broad-based and
included increases in trust and investment services income,
investment banking fees, income from operating leases, and net
gains from both principal investing and the initial public offering
by MasterCard. "With regard to asset quality, both nonperforming
loans and net loan charge-offs were down from both the prior and
year-ago quarters. For the second quarter of 2006, net loan
charge-offs represented 0.21% of Key's average total loans." The
company expects earnings to be in the range of $0.70 to $0.74 per
share for the third quarter of 2006 and $2.85 to $2.95 per share
for the full year. SUMMARY OF CONSOLIDATED RESULTS
Taxable-equivalent net interest income increased to $752 million
for the second quarter of 2006 from $723 million for the same
period last year. The positive effect of a 4% increase in average
earning assets, due primarily to commercial loan growth, more than
offset the effect of a 2 basis point decline in the net interest
margin to 3.69%. During the second quarter of 2005, the net
interest margin benefited from a principal investing distribution
of $15 million received in the form of dividends and interest. This
distribution added approximately 8 basis points to the net interest
margin for the year-ago quarter. Compared to the first quarter of
2006, taxable-equivalent net interest income decreased by $4
million. This reduction was attributable to an 8 basis point
decline in the net interest margin, offset in part by a slight
increase in average earning assets. Key's noninterest income was
$547 million for the second quarter of 2006, compared to $486
million for the year-ago quarter. The increase reflected net gains
of $23 million from principal investing in the current year,
compared to net losses of $1 million one year ago, and a $9 million
gain recorded in miscellaneous income that resulted from the share
redemption by MasterCard Incorporated as part of its initial public
offering in May 2006. Also contributing to the improved performance
were increases in income from trust and investment services,
investment banking activities, insurance products and operating
leases. Compared to the first quarter of 2006, noninterest income
grew by $66 million, due to a $26 million increase in principal
investing results and broad-based improvement in fee income
resulting from increased business activities. Key's noninterest
income for the second quarter of 2006 included the $9 million gain
associated with the MasterCard initial public offering, and results
for the prior quarter included a $25 million gain recorded in
investment banking and capital markets revenue that resulted from
the initial public offering completed by the New York Stock
Exchange in March. Key's noninterest expense was $816 million for
the second quarter of 2006, compared to $753 million for the same
period last year. Personnel expense rose by $45 million, due to
additional costs incurred in connection with business expansion, an
increase in employee benefits expense and higher incentive
compensation accruals. Nonpersonnel expense increased by $18
million. This increase included a $10 million rise in professional
fees, due largely to additional expenses associated with Key's
efforts to strengthen its compliance controls. Compared to the
first quarter of 2006, noninterest expense increased by $46
million. Personnel expense rose by $26 million, due primarily to
higher incentive compensation accruals. Nonpersonnel expense grew
by $20 million, reflecting increases in marketing expense and
professional fees. ASSET QUALITY Key's provision for loan losses
was $24 million for the second quarter of 2006, compared to $20
million for the year-ago quarter and $39 million for the first
quarter of 2006. Net loan charge-offs for the quarter totaled $34
million, or 0.21% of average loans, compared to $48 million, or
0.30%, for the same period last year and $39 million, or 0.23%, for
the previous quarter. At June 30, 2006, Key's nonperforming loans
totaled $279 million and represented 0.41% of period-end loans,
compared to 0.45% at June 30, 2005, and 0.44% at March 31, 2006.
Key's allowance for loan losses stood at $956 million, or 1.42% of
loans outstanding at June 30, 2006, compared to $1.100 billion, or
1.70%, at June 30, 2005, and $966 million, or 1.44%, at March 31,
2006. At June 30, 2006, the allowance for loan losses represented
343% of nonperforming loans, compared to 377% a year ago and 327%
at March 31, 2006. CAPITAL Key's capital ratios continued to exceed
all "well-capitalized" regulatory benchmarks at June 30, 2006.
Key's tangible equity to tangible assets ratio was 6.68% at quarter
end, compared to 6.60% at June 30, 2005, and 6.71% at March 31,
2006. The ratio is currently within management's targeted range of
6.25% to 6.75%. Key's capital position provides it with the
flexibility to take advantage of future investment opportunities,
to repurchase shares when appropriate and to pay dividends. During
the second quarter of 2006, Key repurchased 4,000,000 of its common
shares. At June 30, 2006, there were 12,461,248 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 2Q06 1Q06 4Q05 3Q05 2Q05 Shares outstanding at beginning
of period 405,273 406,624 408,542 408,231 407,297 Issuance of
shares under employee benefit and dividend reinvestment plans 1,399
4,649 1,332 1,561 934 Repurchase of common shares (4,000) (6,000)
(3,250) (1,250) -- Shares outstanding at end of period 402,672
405,273 406,624 408,542 408,231 LINE OF BUSINESS RESULTS The
following table shows the contribution made by each major business
group to Key's taxable-equivalent revenue and net income for the
periods presented. The specific lines of business that comprise
each of the major business groups are described under the heading
"Line of Business Descriptions." For more detailed financial
information pertaining to each business group and its respective
lines of business, see the last two pages of this release. Major
Business Groups Percent change 2Q06 vs. dollars in millions 2Q06
1Q06 2Q05 1Q06 2Q05 Revenue (taxable equivalent) Community Banking
$662 $642 $645 3.1 % 2.6 % National Banking 631 624 585 1.1 7.9
Other Segments 23 (6) 9 N/M 155.6 Total segments 1,316 1,260 1,239
4.4 6.2 Reconciling Items (17) (23) (30) 26.1 43.3 Total $1,299
$1,237 $1,209 5.0 % 7.4 % Net income Community Banking $105 $109
$118 (3.7) %(11.0)% National Banking 175 175 160 -- 9.4 Other
Segments 20 1 10 N/M 100.0 Total segments 300 285 288 5.3 4.2
Reconciling Items 8 4 3 100.0 166.7 Total $308 $289 $291 6.6 % 5.8
% N/M = Not Meaningful Community Banking Percent change 2Q06 vs.
dollars in millions 2Q06 1Q06 2Q05 1Q06 2Q05 Summary of operations
Net interest income(TE) $436 $430 $420 1.4 % 3.8 % Noninterest
income 226 212 225 6.6 .4 Total revenue (TE) 662 642 645 3.1 2.6
Provision for loan losses 19 29 18 (34.5) 5.6 Noninterest expense
475 438 438 8.4 8.4 Income before income taxes (TE) 168 175 189
(4.0) (11.1) Allocated income taxes and TE adjustments 63 66 71
(4.5) (11.3) Net income $105 $109 $118 (3.7) %(11.0)% Percent of
consolidated net income 34 % 38 % 41 % N/A N/A Average balances
Loans and leases $26,804 $26,739 $27,038 .2 % (.9)% Total assets
29,758 29,656 29,902 .3 (.5) Deposits 46,683 45,835 43,719 1.9 6.8
TE = Taxable Equivalent, N/A = Not Applicable Percent change
Additional Community Banking Data 2Q06 vs. dollars in millions 2Q06
1Q06 2Q05 1Q06 2Q05 Average deposits outstanding
Noninterest-bearing $8,086 $8,105 $8,092 (.2)% (.1)% Money market
deposit accounts and other savings 22,523 21,978 20,932 2.5 7.6
Time 16,074 15,752 14,695 2.0 9.4 Total deposits $46,683 $45,835
$43,719 1.9% 6.8% Home equity loans Average balance $10,107 $10,151
$10,398 Average loan-to-value ratio 70% 70% 71% Percent first lien
positions 60 61 61 Other data On-line households / household
penetration 639,444/52% 631,523/51% 595,411/47% KeyCenters 946 945
945 Automated teller machines 2,120 2,169 2,205 Net income for
Community Banking was $105 million for the second quarter of 2006,
down from $118 million for the year-ago quarter. An increase in
noninterest expense drove the decline and more than offset growth
in net interest income. Noninterest income and the provision for
loan losses were essentially unchanged. Noninterest expense grew by
$37 million, or 8%, from the second quarter of 2005, due primarily
to a rise in personnel expense and increases in various indirect
charges. Taxable-equivalent net interest income increased by $16
million, or 4%, due to growth in average core deposits, which also
experienced a more favorable interest rate spread. The positive
effect of these factors was offset in part by a tighter interest
rate spread on average earning assets. National Banking Percent
change 2Q06 vs. dollars in millions 2Q06 1Q06 2Q05 1Q06 2Q05
Summary of operations Net interest income (TE) $372 $378 $346
(1.6)% 7.5 % Noninterest income 259 246 239 5.3 8.4 Total
revenue(TE) 631 624 585 1.1 7.9 Provision for loan losses 5 10 2
(50.0) 150.0 Noninterest expense 346 334 327 3.6 5.8 Income before
income taxes(TE) 280 280 256 -- 9.4 Allocated income taxes and TE
adjustments 105 105 96 -- 9.4 Net income $175 $175 $160 -- % 9.4 %
Percent of consolidated net income 57 % 61 % 55 % N/A N/A Average
balances Loans and leases $40,201 $39,534 $36,842 1.7 % 9.1 % Total
assets 50,470 49,618 46,101 1.7 9.5 Deposits 10,638 9,962 7,535 6.8
41.2 TE = Taxable Equivalent, N/A = Not Applicable Additional
National Banking Data dollars in millions 2Q06 1Q06 2Q05 Home
equity loans Average balance $3,333 $3,277 $3,498 Average
loan-to-value ratio 70 % 70 % 71 % Percent first lien positions 61
62 67 Net income for National Banking was $175 million for the
second quarter of 2006, up from $160 million for the same period
last year. Growth in both net interest income and noninterest
income more than offset increases in noninterest expense and the
provision for loan losses. Taxable-equivalent net interest income
grew by $26 million, or 8%, from the second quarter of 2005,
reflecting strong growth in average loans and leases, as well as
deposits. Average loans and leases rose by $3.4 billion, or 9%,
with most of the growth coming from the Real Estate Capital line of
business. The positive effect of these factors was moderated by a
tighter interest rate spread on average earning assets in the
Consumer Finance line of business. Noninterest income rose by $20
million, or 8%. Contributing to the improved performance were
increases in income from trust and investment services, investment
banking activities and operating leases. Noninterest expense
increased by $19 million, or 6%, reflecting higher costs associated
with personnel and various indirect charges. Since the second
quarter of 2005, we have completed two acquisitions that have
helped us to build upon our success in commercial mortgage
origination and servicing. In the fourth quarter of 2005, we
continued the expansion of our commercial mortgage servicing
business by acquiring the commercial mortgage-backed servicing
business of ORIX Capital Markets, LLC, headquartered in Dallas,
Texas. In the third quarter, we expanded our FHA financing and
servicing capabilities by acquiring Malone Mortgage Company, also
based in Dallas. In addition, during the second quarter of 2006 we
expanded our asset management product line by acquiring Austin
Capital Management, Ltd., an investment firm headquartered in
Austin, Texas. Other Segments Other segments consist of Corporate
Treasury and Key's Principal Investing unit. These segments
generated net income of $20 million for the second quarter of 2006,
compared to $10 million for the same period last year. Line of
Business Descriptions Community Banking Regional Banking provides
individuals with branch-based deposit and investment products,
personal finance services and loans, including residential
mortgages, home equity and various types of installment loans. This
line of business also provides small businesses that typically have
annual sales revenues of $5 million or less with deposit,
investment and credit products, and business advisory services.
Through McDonald Financial Group, Regional Banking also 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. Commercial Banking provides midsize
businesses with products and services that include commercial
lending, cash management, equipment leasing, investments and
employee benefit programs, succession planning, capital markets,
derivatives and foreign exchange. National Banking 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 in which the owner occupies less than 60% of
the premises). Equipment Finance meets the equipment leasing needs
of companies worldwide and provides equipment manufacturers,
distributors and resellers with financing options for their
clients. Lease financing receivables and related revenues are
assigned to other lines of business (primarily Institutional and
Capital Markets, and Commercial Banking) if those businesses are
principally responsible for maintaining the relationship with the
client. Institutional and Capital Markets provides products and
services to large corporations, middle-market companies, financial
institutions, government entities and not-for-profit organizations.
These products and services include commercial lending, treasury
management, investment banking, derivatives and foreign exchange,
equity and debt underwriting and trading, and syndicated finance.
Through its Victory Capital Management unit, Institutional and
Capital Markets also manages or gives advice regarding investment
portfolios for a national client base, including corporations,
labor unions, not-for-profit organizations, governments and
individuals. These portfolios may be managed in separate accounts,
common funds or the Victory family of mutual funds. Consumer
Finance includes Indirect Lending, Commercial Floor Plan Lending
and National Home Equity. Indirect Lending offers loans to
consumers through dealers. This business unit also provides federal
and private education loans to students and their parents and
processes payments on loans that private schools make to parents.
Commercial Floor Plan Lending finances inventory for automobile and
marine dealers. National Home Equity provides both prime and
nonprime mortgage and home equity loan products to individuals.
These products originate outside of Key's retail branch system.
This business unit also works with home improvement contractors to
provide home equity and home improvement solutions. Cleveland-based
KeyCorp is one of the nation's largest bank-based financial
services companies, with assets of approximately $95 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 946
KeyCenters and offices; a network of 2,120 ATMs; telephone banking
centers (1.800.KEY2YOU); and a Web site, Key.com(R), that provides
account access and financial products 24 hours a day. Notes to
Editors: A live Internet broadcast of KeyCorp's conference call to
discuss quarterly earnings and currently anticipated earnings
trends and to answer analysts' questions can be accessed through
the Investor Relations section at http://www.key.com/ir at 9:00
a.m. ET, on Tuesday, July 18, 2006. A tape of the call will be
available through July 25. For up-to-date company information,
media contacts and facts and figures about Key's lines of business
visit our Media Newsroom at http://www.key.com/newsroom. This news
release contains forward-looking statements, including statements
about our financial condition, results of operations, earnings
outlook, asset quality trends and profitability. Forward-looking
statements express management's current expectations or forecasts
of future events and, by their nature, are subject to assumptions,
risks and uncertainties. Although management believes that the
expectations and forecasts reflected in these forward-looking
statements are reasonable, actual results could differ materially
due to a variety of factors including: (1) changes in interest
rates; (2) changes in trade, monetary or fiscal policy; (3) changes
in general economic conditions, or in the condition of the local
economies or industries in which we have significant operations or
assets, which could, among other things, materially impact credit
quality trends and our ability to generate loans; (4) increased
competitive pressure among financial services companies; (5) the
inability to successfully execute strategic initiatives designed to
grow revenues and/or manage expenses; (6) consummation of
significant business combinations or divestitures; (7) operational
or risk management failures due to technological or other factors;
(8) heightened regulatory practices, requirements or expectations;
(9) new legal obligations or liabilities or unfavorable resolution
of litigation; (10) adverse capital markets conditions; (11)
disruption in the economy and general business climate as a result
of terrorist activities or military actions; and (12) changes in
accounting or tax practices or requirements. Forward-looking
statements are not guarantees of future performance and should not
be relied upon as representing management's views as of any
subsequent date. We do not assume any obligation to update these
forward-looking statements. For further information regarding
KeyCorp, please read KeyCorp's reports that are filed with the
Securities and Exchange Commission and are available at
http://www.sec.gov/. Financial Highlights (dollars in millions,
except per share amounts) Three months ended 6-30-06 3-31-06
6-30-05 Summary of operations Net interest income (TE) $752 $756
$723 Noninterest income 547 481 486 Total revenue (TE) 1,299 1,237
1,209 Provision for loan losses 24 39 20 Noninterest expense 816
770 753 Net income 308 289 291 Per common share Net income $.76
$.71 $.71 Net income -- assuming dilution .75 .70 .70 Cash
dividends paid .345 .345 .325 Book value at period end 19.21 18.85
18.01 Market price at period end 35.68 36.80 33.15 Performance
ratios Return on average total assets 1.32 % 1.26 % 1.30 % Return
on average equity 16.11 15.48 16.15 Net interest margin (TE) 3.69
3.77 3.71 Capital ratios at period end Equity to assets 8.16 % 8.18
% 8.08 % Tangible equity to tangible assets 6.68 6.71 6.60 Tier 1
risk-based capital (a) 7.90 7.64 7.68 Total risk-based capital (a)
12.08 11.91 11.72 Leverage (a) 8.83 8.52 8.49 Asset quality Net
loan charge-offs $34 $39 $48 Net loan charge-offs to average loans
.21 % .23 % .30 % Allowance for loan losses $956 $966 $1,100
Allowance for loan losses to period- end loans 1.42 % 1.44 % 1.70 %
Allowance for loan losses to nonperforming loans 342.65 327.46
376.71 Nonperforming loans at period end $279 $295 $292
Nonperforming assets at period end 308 320 338 Nonperforming loans
to period-end loans .41 % .44 % .45 % Nonperforming assets to
period-end loans plus OREO and other nonperforming assets .46 .48
.52 Trust and brokerage assets Assets under management $80,349
$79,558 $76,807 Nonmanaged and brokerage assets 57,682 56,944
57,006 Other data Average full-time equivalent employees 19,931
19,694 19,429 KeyCenters 946 945 945 Taxable-equivalent adjustment
$22 $28 $30 Six months ended 6-30-06 6-30-05 Summary of operations
Net interest income (TE) $1,508 $1,437 Noninterest income 1,028 986
Total revenue (TE) 2,536 2,423 Provision for loan losses 63 64
Noninterest expense 1,586 1,522 Net income 597 555 Per common share
Net income $1.47 $1.36 Net income -- assuming dilution 1.45 1.34
Cash dividends paid .69 .65 Performance ratios Return on average
total assets 1.29 % 1.24 % Return on average equity 15.80 15.63 Net
interest margin (TE) 3.73 3.69 Asset quality Net loan charge-offs
$73 $102 Net loan charge-offs to average loans .22 % .32 % Other
data Average full-time equivalent employees 19,813 19,534
Taxable-equivalent adjustment $50 $58 (a) 6-30-06 ratio is
estimated. TE = Taxable Equivalent Consolidated Balance Sheets
(dollars in millions) 6-30-06 3-31-06 6-30-05 Assets Loans $67,408
$66,980 $64,690 Loans held for sale 4,189 3,631 3,274 Investment
securities 44 46 59 Securities available for sale 7,140 7,086 7,271
Short-term investments 1,577 1,974 1,845 Other investments 1,379
1,370 1,409 Total earning assets 81,737 81,087 78,548 Allowance for
loan losses (956) (966) (1,100) Cash and due from banks 2,814 2,486
2,968 Premises and equipment 557 564 576 Goodwill 1,372 1,355 1,342
Other intangible assets 132 120 101 Corporate-owned life insurance
2,732 2,711 2,639 Derivative assets 1,016 947 1,448 Accrued income
and other assets 5,390 5,087 4,493 Total assets $94,794 $93,391
$91,015 Liabilities Deposits in domestic offices: NOW and money
market deposit accounts $25,291 $25,271 $22,071 Savings deposits
1,751 1,850 2,022 Certificates of deposit ($100,000 or more) 5,224
5,411 5,094 Other time deposits 11,542 11,364 10,794 Total
interest-bearing 43,808 43,896 39,981 Noninterest-bearing 13,268
12,748 12,158 Deposits in foreign office -- interest-bearing 3,762
2,758 5,924 Total deposits 60,838 59,402 58,063 Federal funds
purchased and securities sold under repurchase agreements 3,654
3,511 2,824 Bank notes and other short-term borrowings 2,360 2,508
3,315 Derivative liabilities 1,156 1,048 1,241 Accrued expense and
other liabilities 4,999 5,252 4,632 Long-term debt 14,050 14,032
13,588 Total liabilities 87,057 85,753 83,663 Shareholders' equity
Preferred stock -- -- -- Common shares 492 492 492 Capital surplus
1,577 1,535 1,504 Retained earnings 8,199 8,031 7,574 Treasury
stock, at cost (2,411) (2,299) (2,132) Accumulated other
comprehensive loss (120) (121) (86) Total shareholders' equity
7,737 7,638 7,352 Total liabilities and shareholders' equity
$94,794 $93,391 $91,015 Common shares outstanding (000) 402,672
405,273 408,231 Consolidated Statements of Income (dollars in
millions, except per share amounts) Three months ended Six months
ended 6-30-06 3-31-06 6-30-05 6-30-06 6-30-05 Interest income Loans
$1,190 $1,114 $946 $2,304 $1,831 Loans held for sale 73 68 53 141
134 Investment securities 1 -- 1 1 2 Securities available for sale
84 83 80 167 160 Short-term investments 16 22 12 38 22 Other
investments 17 25 24 42 32 Total interest income 1,381 1,312 1,116
2,693 2,181 Interest expense Deposits 392 343 238 735 444 Federal
funds purchased and securities sold under repurchase agreements 34
34 25 68 50 Bank notes and other short- term borrowings 27 24 19 51
36 Long-term debt 198 183 141 381 272 Total interest expense 651
584 423 1,235 802 Net interest income 730 728 693 1,458 1,379
Provision for loan losses 24 39 20 63 64 706 689 673 1,395 1,315
Noninterest income Trust and investment services income 139 135 135
274 273 Service charges on deposit accounts 77 72 76 149 146
Investment banking and capital markets income 59 60 51 119 106
Operating lease income 56 52 48 108 94 Letter of credit and loan
fees 45 40 47 85 87 Corporate-owned life insurance income 26 25 24
51 52 Electronic banking fees 27 24 24 51 46 Net gains from loan
securitizations and sales 10 10 10 20 29 Net securities gains
(losses) 4 1 1 5 (5) Other income 104 62 70 166 158 Total
noninterest income 547 481 486 1,028 986 Noninterest expense
Personnel 431 405 386 836 776 Net occupancy 61 63 55 124 146
Computer processing 49 56 50 105 101 Operating lease expense 45 41
40 86 78 Professional fees 40 33 30 73 58 Marketing 28 18 34 46 59
Equipment 26 26 28 52 56 Other expense 136 128 130 264 248 Total
noninterest expense 816 770 753 1,586 1,522 Income before income
taxes and cumulative effect of accounting change 437 400 406 837
779 Income taxes 129 116 115 245 224 Income before cumulative
effect of accounting change 308 284 291 592 555 Cumulative effect
of accounting change, net of tax -- 5 -- 5 -- Net income $308 $289
$291 $597 $555 Per common share: Income before cumulative effect of
accounting change $.76 $.70 $.71 $1.46 $1.36 Net income .76 .71 .71
1.47 1.36 Per common share -- assuming dilution: Income before
cumulative effect of accounting change $.75 $.69 $.70 $1.44 $1.34
Net income .75 .70 .70 1.45 1.34 Cash dividends declared per common
share $.345 $.345 $.325 $.69 $.65 Weighted-average common shares
outstanding (000) 404,528 407,386 408,754 405,949 408,510
Weighted-average common shares and potential common shares
outstanding (000) 410,455 413,140 414,309 411,790 414,037
Consolidated Average Balance Sheets, Net Interest Income and
Yields/Rates (dollars in millions) Second Quarter 2006 Average
Balance Interest Yield/Rate Assets Loans: (a,b) Commercial,
financial and agricultural (c) $21,970 $390 7.12 % Real estate --
commercial mortgage 8,071 153 7.59 Real estate -- construction
7,570 152 8.07 Commercial lease financing (c) 9,764 148 6.05 Total
commercial loans 47,375 843 7.13 Real estate -- residential 1,430
24 6.54 Home equity 13,449 247 7.36 Consumer -- direct 1,685 41
9.64 Consumer -- indirect 3,503 57 6.66 Total consumer loans 20,067
369 7.37 Total loans 67,442 1,212 7.20 Loans held for sale 3,844 73
7.64 Investment securities (a) 46 1 8.01 Securities available for
sale (d) 7,075 84 4.71 Short-term investments 1,678 16 3.89 Other
investments (d) 1,398 17 4.60 Total earning assets 81,483 1,403
6.89 Allowance for loan losses (963) Accrued income and other
assets 13,341 Total assets $93,861 Liabilities NOW and money market
deposit accounts $25,347 173 2.75 Savings deposits 1,752 1 .20
Certificates of deposit ($100,000 or more) (e) 5,382 61 4.54 Other
time deposits 11,456 115 4.02 Deposits in foreign office 3,429 42
4.88 Total interest-bearing deposits 47,366 392 3.32 Federal funds
purchased and securities sold under repurchase agreements 3,005 34
4.60 Bank notes and other short-term borrowings 2,497 27 4.17
Long-term debt (e) 14,088 198 5.59 Total interest-bearing
liabilities 66,956 651 3.89 Noninterest-bearing deposits 13,027
Accrued expense and other liabilities 6,211 Total liabilities
86,194 Shareholders' equity 7,667 Total liabilities and
shareholders' equity $93,861 Interest rate spread (TE) 3.00 % Net
interest income (TE) and net interest margin (TE) 752 3.69 % TE
adjustment (a) 22 Net interest income, GAAP basis $730 Consolidated
Average Balance Sheets, Net Interest Income and Yields/Rates
(dollars in millions) First Quarter 2006 Average Balance Interest
Yield/Rate Assets Loans: (a,b) Commercial, financial and
agricultural (c) $21,720 $357 6.66 % Real estate -- commercial
mortgage 8,089 144 7.23 Real estate -- construction 7,312 138 7.66
Commercial lease financing (c) 9,581 143 5.98 Total commercial
loans 46,702 782 6.78 Real estate -- residential 1,450 23 6.33 Home
equity 13,433 238 7.19 Consumer -- direct 1,730 41 9.66 Consumer --
indirect 3,367 57 6.66 Total consumer loans 19,980 359 7.26 Total
loans 66,682 1,141 6.92 Loans held for sale 3,692 68 7.44
Investment securities (a) 61 1 6.34 Securities available for sale
(d) 7,148 83 4.61 Short-term investments 1,753 22 5.10 Other
investments (d) 1,336 25 7.13 Total earning assets 80,672 1,340
6.70 Allowance for loan losses (963) Accrued income and other
assets 13,206 Total assets $92,915 Liabilities NOW and money market
deposit accounts $24,452 145 2.40 Savings deposits 1,812 1 .32
Certificates of deposit ($100,000 or more) (e) 5,407 58 4.34 Other
time deposits 11,282 104 3.73 Deposits in foreign office 3,354 35
4.29 Total interest-bearing deposits 46,307 343 3.00 Federal funds
purchased and securities sold under repurchase agreements 3,349 34
4.06 Bank notes and other short-term borrowings 2,550 24 3.89
Long-term debt (e) 13,991 183 5.27 Total interest-bearing
liabilities 66,197 584 3.57 Noninterest-bearing deposits 12,707
Accrued expense and other liabilities 6,438 Total liabilities
85,342 Shareholders' equity 7,573 Total liabilities and
shareholders' equity $92,915 Interest rate spread (TE) 3.13 % Net
interest income (TE) and net interest margin (TE) 756 3.77 % TE
adjustment (a) 28 Net interest income, GAAP basis $728 Consolidated
Average Balance Sheets, Net Interest Income and Yields/Rates
(dollars in millions) Second Quarter 2005 Average Balance Interest
Yield/Rate Assets Loans: (a,b) Commercial, financial and
agricultural (c) $19,477 $258 5.31 % Real estate -- commercial
mortgage 8,373 129 6.13 Real estate -- construction 6,117 98 6.45
Commercial lease financing (c) 9,984 158 6.33 Total commercial
loans 43,951 643 5.86 Real estate -- residential 1,477 21 6.04 Home
equity 13,904 225 6.49 Consumer -- direct 1,831 36 7.93 Consumer --
indirect 3,328 51 6.15 Total consumer loans 20,540 333 6.53 Total
loans 64,491 976 6.07 Loans held for sale 3,169 53 6.61 Investment
securities (a) 65 1 8.42 Securities available for sale (d) 7,081 80
4.54 Short-term investments 1,799 12 2.58 Other investments (d)
1,455 24 6.42 Total earning assets 78,060 1,146 5.88 Allowance for
loan losses (1,124) Accrued income and other assets 12,979 Total
assets $89,915 Liabilities NOW and money market deposit accounts
$22,301 77 1.39 Savings deposits 1,999 1 .26 Certificates of
deposit ($100,000 or more) (e) 4,999 46 3.70 Other time deposits
10,806 82 3.05 Deposits in foreign office 4,314 32 2.96 Total
interest-bearing deposits 44,419 238 2.16 Federal funds purchased
and securities sold under repurchase agreements 3,830 25 2.67 Bank
notes and other short-term borrowings 2,792 19 2.72 Long-term debt
(e) 13,929 141 4.11 Total interest-bearing liabilities 64,970 423
2.62 Noninterest-bearing deposits 11,717 Accrued expense and other
liabilities 6,000 Total liabilities 82,687 Shareholders' equity
7,228 Total liabilities and shareholders' equity $89,915 Interest
rate spread (TE) 3.26 % Net interest income (TE) and net interest
margin (TE) 723 3.71 % TE adjustment (a) 30 Net interest income,
GAAP basis $693 (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) During the first quarter of 2006, Key reclassified
$760 million of average loans and related interest income from the
commercial lease financing component of the commercial loan
portfolio to the commercial, financial and agricultural component
to more accurately reflect the nature of these receivables.
Balances presented for prior periods were not reclassified as the
historical data was not available. (d) Yield is calculated on the
basis of amortized cost. (e) Rate calculation excludes basis
adjustments related to fair value hedges. TE = Taxable Equivalent
GAAP = U.S. generally accepted accounting principles Consolidated
Average Balance Sheets, Net Interest Income and Yields/Rates
(dollars in millions) Six months ended June 30, Six months ended
June 30, 2006 2005 Average Yield/ Average Yield/ Balance Interest
Rate Balance Interest Rate Assets Loans: (a,b) Commercial,
financial and agricultural (c) $21,846 $747 6.89 % $19,337 $488
5.09 % Real estate -- commercial mortgage 8,080 297 7.41 8,281 244
5.92 Real estate -- construction 7,442 290 7.87 5,878 179 6.15
Commercial lease financing (c) 9,672 291 6.02 10,019 316 6.32 Total
commercial loans 47,040 1,625 6.96 43,515 1,227 5.67 Real estate --
residential 1,440 47 6.43 1,471 44 6.02 Home equity 13,441 485 7.28
13,945 438 6.34 Consumer -- direct 1,707 82 9.65 1,879 74 7.91
Consumer -- indirect 3,436 114 6.66 3,326 105 6.33 Total consumer
loans 20,024 728 7.31 20,621 661 6.46 Total loans 67,064 2,353 7.06
64,136 1,888 5.93 Loans held for sale 3,769 141 7.54 3,722 134 7.21
Investment securities (a) 54 2 7.11 67 3 8.61 Securities available
for sale (d) 7,111 167 4.66 7,153 160 4.49 Short-term investments
1,715 38 4.50 1,740 22 2.51 Other investments (d) 1,367 42 5.84
1,439 32 4.36 Total earning assets 81,080 2,743 6.80 78,257 2,239
5.75 Allowance for loan losses (963) (1,129) Accrued income and
other assets 13,273 13,306 Total assets $93,390 $90,434 Liabilities
NOW and money market deposit accounts $24,902 318 2.58 $21,962 132
1.21 Savings deposits 1,782 2 .26 1,978 2 .25 Certificates of
deposit ($100,000 or more) (e) 5,395 119 4.44 4,947 90 3.68 Other
time deposits 11,369 219 3.88 10,698 158 2.98 Deposits in foreign
office 3,392 77 4.59 4,636 62 2.69 Total interest- bearing deposits
46,840 735 3.17 44,221 444 2.03 Federal funds purchased and
securities sold under repurchase agreements 3,176 68 4.32 4,151 50
2.44 Bank notes and other short-term borrowings 2,524 51 4.03 2,869
36 2.55 Long-term debt (e) 14,039 381 5.44 14,355 272 3.94 Total
interest- bearing liabilities 66,579 1,235 3.73 65,596 802 2.48
Noninterest-bearing deposits 12,867 11,626 Accrued expense and
other liabilities 6,324 6,051 Total liabilities 85,770 83,273
Shareholders' equity 7,620 7,161 Total liabilities and
shareholders' equity $93,390 $90,434 Interest rate spread (TE) 3.07
% 3.27 % Net interest income (TE) and net interest margin (TE)
1,508 3.73 % 1,437 3.69 % TE adjustment (a) 50 58 Net interest
income, GAAP basis $1,458 $1,379 (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) During the first quarter of 2006, Key
reclassified $760 million of average loans and related interest
income from the commercial lease financing component of the
commercial loan portfolio to the commercial, financial and
agricultural component to more accurately reflect the nature of
these receivables. Balances presented for prior periods were not
reclassified as the historical data was not available. (d) Yield is
calculated on the basis of amortized cost. (e) Rate calculation
excludes basis adjustments related to fair value hedges. TE =
Taxable Equivalent GAAP = U.S. generally accepted accounting
principles Noninterest Income (in millions) Three months ended Six
months ended 6-30-06 3-31-06 6-30-05 6-30-06 6-30-05 Trust and
investment services income (a) $139 $135 $135 $274 $273 Service
charges on deposit accounts 77 72 76 149 146 Investment banking and
capital markets income (a) 59 60 51 119 106 Operating lease income
56 52 48 108 94 Letter of credit and loan fees 45 40 47 85 87
Corporate-owned life insurance income 26 25 24 51 52 Electronic
banking fees 27 24 24 51 46 Net gains from loan securitizations and
sales 10 10 10 20 29 Net securities gains (losses) 4 1 1 5 (5)
Other income: Insurance income 17 14 11 31 22 Loan securitization
servicing fees 5 5 5 10 10 Credit card fees 3 3 5 6 8 Net gains
(losses) from principal investing 23 (3) (1) 20 11 Miscellaneous
income 56 43 50 99 107 Total other income 104 62 70 166 158 Total
noninterest income $547 $481 $486 $1,028 $986 (a) Additional detail
provided in tables below. Trust and Investment Services Income (in
millions) Three months ended Six months ended 6-30-06 3-31-06
6-30-05 6-30-06 6-30-05 Brokerage commissions and fee income $59
$62 $62 $121 $125 Personal asset management and custody fees 38 39
38 77 76 Institutional asset management and custody fees 42 34 35
76 72 Total trust and investment services income $139 $135 $135
$274 $273 Investment Banking and Capital Markets Income (in
millions) Three months ended Six months ended 6-30-06 3-31-06
6-30-05 6-30-06 6-30-05 Investment banking income $26 $22 $19 $48
$36 Dealer trading and derivatives income 11 7 10 18 29 Income from
other investments 11 21 13 32 23 Foreign exchange income 11 10 9 21
18 Total investment banking and capital markets income $59 $60 $51
$119 $106 Noninterest Expense (dollars in millions) Three months
ended Six months ended 6-30-06 3-31-06 6-30-05 6-30-06 6-30-05
Personnel (a) $431 $405 $386 $836 $776 Net occupancy 61 63 55 124
146 (b) Computer processing 49 56 50 105 101 Operating lease
expense 45 41 40 86 78 Professional fees 40 33 30 73 58 Marketing
28 18 34 46 59 Equipment 26 26 28 52 56 Other expense: Postage and
delivery 12 13 12 25 25 Franchise and business taxes 10 10 9 20 17
Telecommunications 7 7 8 14 15 OREO expense, net 1 1 2 2 4
Provision (credit) for losses on lending- related commitments -- --
2 -- (9) Miscellaneous expense 106 97 97 203 196 Total other
expense 136 128 130 264 248 Total noninterest expense $816 $770
$753 $1,586 $1,522 Average full-time equivalent employees 19,931
19,694 19,429 19,813 19,534 (a) Additional detail provided in table
below. (b) Includes a charge of $30 million recorded during the
first quarter of 2005 to adjust the accounting for rental expense
associated with operating leases from an escalating to a
straight-line basis. Personnel Expense (in millions) Three months
ended Six months ended 6-30-06 3-31-06 6-30-05 6-30-06 6-30-05
Salaries $235 $231 $218 $466 $435 Incentive compensation 100 79 88
179 163 Employee benefits 76 81 64 157 138 Stock-based compensation
18 14 14 32 32 Severance 2 -- 2 2 8 Total personnel expense $431
$405 $386 $836 $776 Loan Composition (dollars in millions) Percent
change 6-30-06 vs. 6-30-06 3-31-06 6-30-05 3-31-06 6-30-05
Commercial, financial and agricultural (a) $21,598 $21,681 $19,331
(.4)% 11.7 % Commercial real estate: Commercial mortgage 7,994
8,145 8,507 (1.9) (6.0) Construction 7,767 7,507 6,236 3.5 24.6
Total commercial real estate loans 15,761 15,652 14,743 .7 6.9
Commercial lease financing (a) 9,909 9,668 10,113 2.5 (2.0) Total
commercial loans 47,268 47,001 44,187 .6 7.0 Real estate --
residential mortgage 1,418 1,435 1,466 (1.2) (3.3) Home equity
13,509 13,429 13,921 .6 (3.0) Consumer -- direct 1,670 1,691 1,793
(1.2) (6.9) Consumer -- indirect: Marine 2,920 2,804 2,665 4.1 9.6
Other 623 620 658 .5 (5.3) Total consumer -- indirect loans 3,543
3,424 3,323 3.5 6.6 Total consumer loans 20,140 19,979 20,503 .8
(1.8) Total loans $67,408 $66,980 $64,690 .6 % 4.2 % (a) At March
31, 2006, Key reclassified $792 million of loans from the
commercial lease financing component of the commercial loan
portfolio to the commercial, financial and agricultural component
to more accurately reflect the nature of these receivables.
Balances presented for prior periods were not reclassified. Loans
Held for Sale Composition (dollars in millions) Percent change
6-30-06 vs. 6-30-06 3-31-06 6-30-05 3-31-06 6-30-05 Commercial,
financial and agricultural $394 $189 -- 108.5 % N/M Real estate --
commercial mortgage 784 411 $519 90.8 51.1 % Real estate --
residential mortgage 27 14 23 92.9 17.4 Real estate -- construction
36 62 -- (41.9) N/M Commercial lease financing -- 4 -- (100.0) --
Home equity 1 1 1 -- -- Education 2,929 2,930 2,586 -- 13.3
Automobile 18 20 145 (10.0) (87.6) Total loans held for sale $4,189
$3,631 $3,274 15.4 % 27.9 % N/M = Not Meaningful Summary of Loan
Loss Experience (dollars in millions) Three months ended Six months
ended 6-30-06 3-31-06 6-30-05 6-30-06 6-30-05 Average loans
outstanding during the period $67,442 $66,682 $64,491 $67,064
$64,136 Allowance for loan losses at beginning of period $966 $966
$1,128 $966 $1,138 Loans charged off: Commercial, financial and
agricultural 20 24 19 44 44 Real estate -- commercial mortgage 3 3
9 6 12 Real estate -- construction -- 2 -- 2 5 Total commercial
real estate loans 3 5 9 8 17 Commercial lease financing 8 6 13 14
25 Total commercial loans 31 35 41 66 86 Real estate -- residential
mortgage 2 1 2 3 4 Home equity 8 8 7 16 13 Consumer -- direct 9 10
10 19 18 Consumer -- indirect 9 11 15 20 32 Total consumer loans 28
30 34 58 67 59 65 75 124 153 Recoveries: Commercial, financial and
agricultural 7 12 5 19 10 Real estate -- commercial mortgage -- 1
-- 1 1 Real estate -- construction -- -- 2 -- 2 Total commercial
real estate loans -- 1 2 1 3 Commercial lease financing 9 5 10 14
20 Total commercial loans 16 18 17 34 33 Real estate -- residential
mortgage 1 -- 1 1 1 Home equity 1 2 2 3 3 Consumer -- direct 2 2 2
4 4 Consumer -- indirect 5 4 5 9 10 Total consumer loans 9 8 10 17
18 25 26 27 51 51 Net loans charged off (34) (39) (48) (73) (102)
Provision for loan losses 24 39 20 63 64 Allowance for loan losses
at end of period $956 $966 $1,100 $956 $1,100 Net loan charge-offs
to average loans .21 % .23 % .30 % .22 % .32 % Allowance for loan
losses to period- end loans 1.42 1.44 1.70 1.42 1.70 Allowance for
loan losses to nonperforming loans 342.65 327.46 376.71 342.65
376.71 Changes in Allowance for Credit Losses on Lending-Related
Commitments (in millions) Three months ended Six months ended
6-30-06 3-31-06 6-30-05 6-30-06 6-30-05 Balance at beginning of
period $59 $59 $55 $59 $66 Provision (credit) for losses on
lending-related commitments -- -- 2 -- (9) Balance at end of period
(a) $59 $59 $57 $59 $57 (a) Included in accrued expenses and other
liabilities on the consolidated balance sheet. Summary of
Nonperforming Assets and Past Due Loans (dollars in millions)
6-30-06 3-31-06 12-31-05 9-30-05 6-30-05 Commercial, financial and
agricultural $76 $68 $63 $50 $58 Real estate -- commercial mortgage
40 42 43 33 36 Real estate -- construction 4 4 2 3 3 Total
commercial real estate loans 44 46 45 36 39 Commercial lease
financing 29 29 39 151 73 Total commercial loans 149 143 147 237
170 Real estate -- residential mortgage 31 43 41 40 38 Home equity
90 97 79 75 74 Consumer -- direct 3 6 2 3 4 Consumer -- indirect 6
6 8 5 6 Total consumer loans 130 152 130 123 122 Total
nonperforming loans 279 295 277 360 292 Nonperforming loans held
for sale 1 2 3 2 1 OREO 26 21 25 29 33 Allowance for OREO losses
(1) (1) (2) (3) (2) OREO, net of allowance 25 20 23 26 31 Other
nonperforming assets 3 3 4 5 14 Total nonperforming assets $308
$320 $307 $393 $338 Accruing loans past due 90 days or more $119
$107 $90 $94 $74 Accruing loans past due 30 through 89 days 600 498
491 550 475 Nonperforming loans to period-end loans .41 % .44 % .42
% .55 % .45 % Nonperforming assets to period-end loans plus OREO
and other nonperforming assets .46 .48 .46 .60 .52 Summary of
Changes in Nonperforming Loans (in millions) 2Q06 1Q06 4Q05 Balance
at beginning of period $295 $277 $360 Loans placed on nonaccrual
status 98 100 142 Charge-offs (59) (65) (187) Loans sold (6) (2)
(2) Payments (45) (15) (27) Transfers to OREO (4) -- -- Loans
returned to accrual status -- -- (9) Balance at end of period $279
$295 $277 Line of Business Results (dollars in millions) Community
Banking 2Q06 1Q06 4Q05 3Q05 2Q05 Summary of operations Total
revenue (TE) $662 $642 $665 $659 $645 Provision for loan losses 19
29 30 26 18 Noninterest expense 475 438 483 454 438 Net income 105
109 95 112 118 Average loans and leases 26,804 26,739 27,267 27,131
27,038 Average deposits 46,683 45,835 45,730 44,705 43,719 Net loan
charge-offs 24 29 32 25 25 Return on average allocated equity 19.23
% 20.19 % 17.09 % 20.36 % 21.83 % Average full-time equivalent
employees 9,015 8,873 8,747 8,785 8,698 Supplementary information
(lines of business) Regional Banking Total revenue (TE) $563 $547
$559 $557 $546 Provision for loan losses 14 26 22 20 19 Noninterest
expense 423 391 428 404 388 Net income 79 81 68 83 87 Average loans
and leases 18,771 18,776 19,010 19,093 19,114 Average deposits
43,091 42,222 41,929 41,126 40,421 Net loan charge-offs 21 22 26 23
21 Return on average allocated equity 21.37 % 22.09 % 18.00 % 22.26
% 23.64 % Average full-time equivalent employees 8,642 8,519 8,386
8,419 8,316 Commercial Banking Total revenue (TE) $99 $95 $106 $102
$99 Provision for loan losses 5 3 8 6 (1) Noninterest expense 52 47
55 50 50 Net income 26 28 27 29 31 Average loans and leases 8,033
7,963 8,257 8,038 7,924 Average deposits 3,592 3,613 3,801 3,579
3,298 Net loan charge-offs 3 7 6 2 4 Return on average allocated
equity 14.75 % 16.18 % 15.15 % 16.37 % 17.97 % Average full-time
equivalent employees 373 354 361 366 382 Line of Business Results
(dollars in millions) Community Banking Percent change 2Q06 vs.
1Q06 2Q05 Summary of operations Total revenue (TE) 3.1 % 2.6 %
Provision for loan losses (34.5) 5.6 Noninterest expense 8.4 8.4
Net income (3.7) (11.0) Average loans and leases .2 (.9) Average
deposits 1.9 6.8 Net loan charge-offs (17.2) (4.0) Return on
average allocated equity N/A N/A Average full-time equivalent
employees 1.6 3.6 Supplementary information (lines of business)
Regional Banking Total revenue (TE) 2.9 % 3.1 % Provision for loan
losses (46.2) (26.3) Noninterest expense 8.2 9.0 Net income (2.5)
(9.2) Average loans and leases -- (1.8) Average deposits 2.1 6.6
Net loan charge-offs (4.5) -- Return on average allocated equity
N/A N/A Average full-time equivalent employees 1.4 3.9 Commercial
Banking Total revenue (TE) 4.2 % -- Provision for loan losses 66.7
N/M Noninterest expense 10.6 4.0 % Net income (7.1) (16.1) Average
loans and leases .9 1.4 Average deposits (.6) 8.9 Net loan
charge-offs (57.1) (25.0) Return on average allocated equity N/A
N/A Average full-time equivalent employees 5.4 (2.4) Line of
Business Results (continued) (dollars in millions) National Banking
2Q06 1Q06 4Q05 3Q05 2Q05 Summary of operations Total revenue (TE)
$631 $624 $644 $601 $585 Provision for loan losses 5 10 6 17 2
Noninterest expense 346 334 358 327 327 Net income 175 175 175 161
160 Average loans and leases 40,201 39,534 38,398 37,072 36,842
Average deposits 10,638 9,962 8,580 7,785 7,535 Net loan
charge-offs 10 10 132 24 23 Return on average allocated equity
18.31 % 18.53 % 18.43 % 17.47 % 17.61 % Average full-time
equivalent employees 4,466 4,455 4,403 4,419 4,502 Supplementary
information (lines of business) Real Estate Capital Total revenue
(TE) $174 $154 $163 $148 $138 Provision for loan losses 3 1 2 1 (5)
Noninterest expense 71 60 68 64 55 Net income 62 58 58 52 55
Average loans and leases 12,719 12,467 12,038 11,265 10,596 Average
deposits 3,467 3,214 2,467 2,100 1,728 Net loan charge-offs 2 2 --
-- 3 Return on average allocated equity 22.84 % 21.90 % 22.41 %
20.73 % 23.32 % Average full-time equivalent employees 955 981 873
812 774 Equipment Finance Total revenue (TE) $136 $124 $128 $123
$127 Provision for loan losses 8 8 (5) 3 7 Noninterest expense 80
71 79 72 75 Net income 30 28 33 30 28 Average loans and leases
9,871 9,569 9,458 9,133 8,892 Average deposits 14 15 15 14 11 Net
loan charge-offs 3 3 132 11 2 Return on average allocated equity
14.73 % 14.07 % 16.59 % 15.66 % 14.82 % Average full-time
equivalent employees 915 935 971 966 963 Institutional and Capital
Markets Total revenue (TE) $187 $204 $189 $179 $168 Provision for
loan losses (13) -- 6 -- 1 Noninterest expense 110 125 112 108 97
Net income 57 50 45 45 44 Average loans and leases 7,589 7,823
7,358 7,316 7,824 Average deposits 6,441 6,030 5,434 4,986 5,152
Net loan charge-offs (recoveries) (1) (5) (4) -- 7 Return on
average allocated equity 21.82 % 18.95 % 16.95 % 17.30 % 16.79 %
Average full-time equivalent employees 1,253 1,234 1,224 1,256
1,213 Consumer Finance Total revenue (TE) $134 $142 $164 $151 $152
Provision for loan losses 7 1 3 13 (1) Noninterest expense 85 78 99
83 100 Net income 26 39 39 34 33 Average loans and leases 10,022
9,675 9,544 9,358 9,530 Average deposits 716 703 664 685 644 Net
loan charge-offs 6 10 4 13 11 Return on average allocated equity
11.86 % 17.97 % 17.23 % 15.52 % 14.87 % Average full-time
equivalent employees 1,343 1,305 1,335 1,385 1,552 Line of Business
Results (continued) (dollars in millions) National Banking Percent
change 2Q06 vs. 1Q06 2Q05 Summary of operations Total revenue (TE)
1.1 % 7.9 % Provision for loan losses (50.0) 150.0 Noninterest
expense 3.6 5.8 Net income -- 9.4 Average loans and leases 1.7 9.1
Average deposits 6.8 41.2 Net loan charge-offs -- (56.5) Return on
average allocated equity N/A N/A Average full-time equivalent
employees .2 (.8) Supplementary information (lines of business)
Real Estate Capital Total revenue (TE) 13.0 % 26.1 % Provision for
loan losses 200.0 N/M Noninterest expense 18.3 29.1 Net income 6.9
12.7 Average loans and leases 2.0 20.0 Average deposits 7.9 100.6
Net loan charge-offs -- (33.3) Return on average allocated equity
N/A N/A Average full-time equivalent employees (2.7) 23.4 Equipment
Finance Total revenue (TE) 9.7 % 7.1 % Provision for loan losses --
14.3 Noninterest expense 12.7 6.7 Net income 7.1 7.1 Average loans
and leases 3.2 11.0 Average deposits (6.7) 27.3 Net loan
charge-offs -- 50.0 Return on average allocated equity N/A N/A
Average full-time equivalent employees (2.1) (5.0) Institutional
and Capital Markets Total revenue (TE) (8.3)% 11.3 % Provision for
loan losses N/M N/M Noninterest expense (12.0) 13.4 Net income 14.0
29.5 Average loans and leases (3.0) (3.0) Average deposits 6.8 25.0
Net loan charge-offs (recoveries) (80.0) N/M Return on average
allocated equity N/A N/A Average full-time equivalent employees 1.5
3.3 Consumer Finance Total revenue (TE) (5.6) % (11.8)% Provision
for loan losses 600.0 N/M Noninterest expense 9.0 (15.0) Net income
(33.3) (21.2) Average loans and leases 3.6 5.2 Average deposits 1.8
11.2 Net loan charge-offs (40.0) (45.5) Return on average allocated
equity N/A N/A Average full-time equivalent employees 2.9 (13.5) TE
= Taxable Equivalent N/A = Not Applicable N/M = Not Meaningful
DATASOURCE: KeyCorp CONTACT: Analysts, Vernon L. Patterson,
+1-216-689-0520, or Media, William C. Murschel, +1-216-689-0457,
both of KeyCorp Web site: http://www.key.com/ http://www.key.com/ir
http://www.key.com/newsroom
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