Financial Highlights (dollars in millions, except per share
amounts) Three months ended 12-31-06 9-30-06 12-31-05 Summary of
operations Net interest income (TE) $744 $726 $716 Noninterest
income 558 543 552 Total revenue (TE) 1,302 1,269 1,268 Provision
for loan losses 53 35 35 Noninterest expense 809 790 812 Income
from continuing operations 311 305 284 Income (loss) from
discontinued operations, net of tax (165) 7 12 Net income 146 312
296 Per common share Income from continuing operations $.77 $.76
$.70 Income from continuing operations - assuming dilution .76 .74
.69 Income (loss) from discontinued operations (.41) .02 .03 Income
(loss) from discontinued operations - assuming dilution (.40) .02
.03 Net income .36 .77 .72 Net income - assuming dilution .36 .76
.72 Cash dividends declared .345 .345 .325 Book value at period end
19.30 19.73 18.69 Market price at period end 38.03 37.44 32.93
Performance ratios - from continuing operations Return on average
total assets 1.33 % 1.31 % 1.26 % Return on average equity 15.63
15.52 14.96 Net interest margin (TE) 3.66 3.61 3.68 Performance
ratios - from consolidated operations Return on average total
assets .61 % 1.30 % 1.27 % Return on average equity 7.34 15.88
15.59 Net interest margin (TE) 3.69 3.63 3.71 Capital ratios at
period end Equity to assets 8.34 % 8.26 % 8.16 % Tangible equity to
tangible assets 7.01 6.81 6.68 Tier 1 risk-based capital (a) 8.30
8.02 7.59 Total risk-based capital (a) 12.53 12.13 11.47 Leverage
(a) 8.94 8.89 8.53 Asset quality Net loan charge-offs $54 $43 $164
Net loan charge-offs to average loans from continuing operations
.33 % .26 % 1.02 % Allowance for loan losses $944 $944 $966
Allowance for loan losses to period- end loans 1.43 % 1.44 % 1.45 %
Allowance for loan losses to nonperforming loans 439.07 423.32
348.74 Nonperforming loans at period end $215 $223 $277
Nonperforming assets at period end 273 329 307 Nonperforming loans
to period-end portfolio loans .33 % .34 % .42 % Nonperforming
assets to period-end portfolio loans plus OREO and other
nonperforming assets .41 .50 .46 Trust and brokerage assets Assets
under management $84,699 $84,060 $77,144 Nonmanaged and brokerage
assets 56,292 55,221 56,509 Other data Average full-time equivalent
employees 20,100 20,264 19,417 KeyCenters 950 949 947
Taxable-equivalent adjustment $32 $21 $30 Financial Highlights
(continued) (dollars in millions, except per share amounts) Twelve
months ended 12-31-06 12-31-05 Summary of operations Net interest
income (TE) $2,918 $2,777 Noninterest income 2,127 2,067 Total
revenue (TE) 5,045 4,844 Provision for loan losses 150 143
Noninterest expense 3,149 3,054 Income from continuing operations
1,193 1,090 Income (loss) from discontinued operations, net of tax
(143) 39 Net income 1,055 1,129 Per common share Income from
continuing operations $2.95 $2.67 Income from continuing operations
- assuming dilution 2.91 2.63 Income (loss) from discontinued
operations (.35) .10 Income (loss) from discontinued operations -
assuming dilution (.35) .09 Net income 2.61 2.76 Net income -
assuming dilution 2.57 2.73 Cash dividends declared 1.38 1.30
Performance ratios - from continuing operations Return on average
total assets 1.30 % 1.24 % Return on average equity 15.43 14.88 Net
interest margin (TE) 3.67 3.65 Performance ratios - from
consolidated operations Return on average total assets 1.12 % 1.24
% Return on average equity 13.64 15.42 Net interest margin (TE)
3.69 3.69 Asset quality Net loan charge-offs $170 $315 Net loan
charge-offs to average loans from continuing operations .26 % .51 %
Other data Average full-time equivalent employees 20,006 19,485
Taxable-equivalent adjustment $103 $121 (a) 12-31-06 ratio is
estimated. TE = Taxable Equivalent Consolidated Balance Sheets
(dollars in millions) 12-31-06 9-30-06 12-31-05 Assets Loans
$65,826 $65,551 $66,478 Loans held for sale 3,637 7,150 3,381
Investment securities 41 41 91 Securities available for sale 7,827
7,441 7,269 Short-term investments 1,407 1,582 1,592 Other
investments 1,352 1,367 1,332 Total earning assets 80,090 83,132
80,143 Allowance for loan losses (944) (944) (966) Cash and due
from banks 2,264 2,957 3,108 Premises and equipment 595 567 575
Goodwill 1,202 1,372 1,355 Other intangible assets 120 127 125
Corporate-owned life insurance 2,782 2,754 2,690 Derivative assets
1,091 915 1,039 Accrued income and other assets 5,137 5,275 5,057
Total assets $92,337 $96,155 $93,126 Liabilities Deposits in
domestic offices: NOW and money market deposit accounts $24,340
$25,150 $24,241 Savings deposits 1,642 1,672 1,840 Certificates of
deposit ($100,000 or more) 5,941 5,734 5,156 Other time deposits
11,956 11,848 11,170 Total interest-bearing 43,879 44,404 42,407
Noninterest-bearing 13,553 13,396 13,335 Deposits in foreign office
- interest-bearing 1,684 3,629 3,023 Total deposits 59,116 61,429
58,765 Federal funds purchased and securities sold under repurchase
agreements 3,643 4,701 4,835 Bank notes and other short-term
borrowings 1,192 2,594 1,780 Derivative liabilities 922 844 1,060
Accrued expense and other liabilities 5,228 4,986 5,149 Long-term
debt 14,533 13,654 13,939 Total liabilities 84,634 88,208 85,528
Shareholders' equity Preferred stock -- -- -- Common shares 492 492
492 Capital surplus 1,602 1,588 1,534 Retained earnings 8,377 8,371
7,882 Treasury stock, at cost (2,584) (2,434) (2,204) Accumulated
other comprehensive loss (184) (70) (106) Total shareholders'
equity 7,703 7,947 7,598 Total liabilities and shareholders' equity
$92,337 $96,155 $93,126 Common shares outstanding (000) 399,153
402,748 406,624 Consolidated Statements of Income (dollars in
millions, except per share amounts) Three months ended Twelve
months ended 12-31-06 9-30-06 12-31-05 12-31-06 12-31-05 Interest
income Loans $1,187 $1,178 $1,026 $4,561 $3,693 Loans held for sale
90 94 64 325 254 Investment securities -- 1 -- 2 3 Securities
available for sale 96 84 84 347 327 Short-term investments 16 16 18
63 52 Other investments 24 16 10 82 54 Total interest income 1,413
1,389 1,202 5,380 4,383 Interest expense Deposits 440 428 295 1,576
976 Federal funds purchased and securities sold under repurchase
agreements 37 30 26 107 71 Bank notes and other short-term
borrowings 19 24 24 94 82 Long-term debt 205 202 171 788 598 Total
interest expense 701 684 516 2,565 1,727 Net interest income 712
705 686 2,815 2,656 Provision for loan losses 53 35 35 150 143 Net
interest income after provision for loan losses 659 670 651 2,665
2,513 Noninterest income Trust and investment services income 142
137 134 553 542 Service charges on deposit accounts 77 78 76 304
304 Investment banking and capital markets income 69 44 61 230 229
Operating lease income 63 58 50 229 191 Letter of credit and loan
fees 55 48 48 188 181 Corporate-owned life insurance income 31 23
31 105 109 Electronic banking fees 27 27 26 105 96 Net gains from
loan securitizations and sales 42 14 28 76 69 Net securities gains
(losses) 3 (7) 3 1 1 Other income 49 121 95 336 345 Total
noninterest income 558 543 552 2,127 2,067 Noninterest expense
Personnel 447 418 411 1,692 1,588 Net occupancy 68 62 67 250 276
Computer processing 55 52 57 212 209 Operating lease expense 50 48
40 184 158 Professional fees 33 28 42 134 126 Equipment 24 26 26
102 110 Marketing 27 32 23 97 88 Other expense 105 124 146 478 499
Total noninterest expense 809 790 812 3,149 3,054 Income from
continuing operations before income taxes and cumulative effect of
accounting change 408 423 391 1,643 1,526 Income taxes 97 118 107
450 436 Income from continuing operations before cumulative effect
of accounting change 311 305 284 1,193 1,090 Income (loss) from
discontinued operations, net of tax (165) 7 12 (143) 39 Income
before cumulative effect of accounting change 146 312 296 1,050
1,129 Cumulative effect of change in accounting for forfeited
stock-based awards, net of tax -- -- -- 5 -- Net income $146 $312
$296 $1,055 $1,129 Per common share: Income from continuing
operations before cumulative effect of accounting change $.77 $.76
$.70 $2.95 $2.67 Income before cumulative effect of accounting
change .36 .77 .72 2.60 2.76 Net income .36 .77 .72 2.61 2.76 Per
common share - assuming dilution: Income from continuing operations
before cumulative effect of accounting change $.76 $.74 $.69 $2.91
$2.63 Income before cumulative effect of accounting change .36 .76
.72 2.56 2.73 Net income .36 .76 .72 2.57 2.73 Cash dividends
declared per common share $.345 $.345 $.325 $1.38 $1.30
Weighted-average common shares outstanding (000) 402,329 403,780
408,431 404,490 408,981 Weighted-average common shares and
potential common shares outstanding (000) 407,828 409,428 412,542
410,222 414,014 Consolidated Average Balance Sheets, Net Interest
Income and Yields/Rates From Continuing Operations (dollars in
millions) Fourth Quarter 2006 Average Balance Interest Yield/Rate
Assets Loans: (a,b) Commercial, financial and agricultural (c)
$21,384 $400 7.42 % Real estate - commercial mortgage 8,399 167
7.86 Real estate - construction 8,347 174 8.25 Commercial lease
financing (c) 9,891 160 6.47 Total commercial loans 48,021 901 7.44
Real estate - residential 1,428 24 6.59 Home equity 10,896 197 7.22
Consumer - direct 1,557 34 8.63 Consumer - indirect 3,671 62 6.85
Total consumer loans 17,552 317 7.21 Total loans 65,573 1,218 7.38
Loans held for sale 4,547 90 7.86 Investment securities (a) 38 1
7.68 Securities available for sale (d) 7,765 96 4.88 Short-term
investments 1,584 16 4.04 Other investments (d) 1,351 24 6.76 Total
earning assets 80,858 1,445 7.09 Allowance for loan losses (941)
Accrued income and other assets 13,129 Total assets $93,046
Liabilities NOW and money market deposit accounts $25,136 198 3.13
Savings deposits 1,651 1 .19 Certificates of deposit ($100,000 or
more) (e) 6,013 75 4.93 Other time deposits 11,921 136 4.50
Deposits in foreign office (f) 2,245 30 5.55 Total interest-bearing
deposits 46,966 440 3.72 Federal funds purchased and securities
sold under repurchase agreements (f) 2,816 37 5.21 Bank notes and
other short-term borrowings 1,814 19 4.17 Long-term debt (e) 14,092
205 5.80 Total interest-bearing liabilities 65,688 701 4.24
Noninterest-bearing deposits 13,424 Accrued expense and other
liabilities 6,041 Total liabilities 85,153 Shareholders' equity
7,893 Total liabilities and shareholders' equity $93,046 Interest
rate spread (TE) 2.85 % Net interest income (TE) and net interest
margin (TE) 744 3.66 % TE adjustment (a) 32 Net interest income,
GAAP basis $712 Third Quarter 2006 Average Balance Interest
Yield/Rate Assets Loans: (a,b) Commercial, financial and
agricultural (c) $21,648 $400 7.34 % Real estate - commercial
mortgage 8,106 164 8.04 Real estate - construction 7,965 171 8.51
Commercial lease financing (c) 9,850 144 5.83 Total commercial
loans 47,569 879 7.34 Real estate - residential 1,415 23 6.49 Home
equity 11,017 200 7.19 Consumer - direct 1,585 36 9.07 Consumer -
indirect 3,594 61 6.83 Total consumer loans 17,611 320 7.23 Total
loans 65,180 1,199 7.31 Loans held for sale 4,578 94 8.17
Investment securities (a) 42 1 8.12 Securities available for sale
(d) 7,216 84 4.61 Short-term investments 1,588 16 3.78 Other
investments (d) 1,363 16 4.67 Total earning assets 79,967 1,410
7.00 Allowance for loan losses (951) Accrued income and other
assets 13,247 Total assets $92,263 Liabilities NOW and money market
deposit accounts $25,230 194 3.05 Savings deposits 1,700 1 .19
Certificates of deposit ($100,000 or more) (e) 5,517 67 4.82 Other
time deposits 11,700 127 4.29 Deposits in foreign office (f) 2,820
39 5.55 Total interest-bearing deposits 46,967 428 3.61 Federal
funds purchased and securities sold under repurchase agreements (f)
2,315 30 5.05 Bank notes and other short-term borrowings 2,285 24
4.29 Long-term debt (e) 13,763 202 5.83 Total interest-bearing
liabilities 65,330 684 4.15 Noninterest-bearing deposits 13,073
Accrued expense and other liabilities 6,063 Total liabilities
84,466 Shareholders' equity 7,797 Total liabilities and
shareholders' equity $92,263 Interest rate spread (TE) 2.85 % Net
interest income (TE) and net interest margin (TE) 726 3.61 % TE
adjustment (a) 21 Net interest income, GAAP basis $705 Fourth
Quarter 2005 Average Balance Interest Yield/Rate Assets Loans:
(a,b) Commercial, financial and agricultural (c) $19,992 $315 6.25
% Real estate - commercial mortgage 8,580 151 6.98 Real estate -
construction 6,896 129 7.42 Commercial lease financing (c) 10,285
154 6.01 Total commercial loans 45,753 749 6.51 Real estate -
residential 1,460 23 6.22 Home equity 11,074 183 6.61 Consumer -
direct 1,785 44 9.68 Consumer - indirect 3,340 56 6.71 Total
consumer loans 17,659 306 6.91 Total loans 63,412 1,055 6.62 Loans
held for sale 3,592 64 7.05 Investment securities (a) 95 1 5.81
Securities available for sale (d) 7,034 84 4.77 Short-term
investments 2,069 18 3.23 Other investments (d) 1,297 10 3.09 Total
earning assets 77,499 1,232 6.32 Allowance for loan losses (1,079)
Accrued income and other assets 12,862 Total assets $89,282
Liabilities NOW and money market deposit accounts $23,947 127 2.11
Savings deposits 1,858 1 .27 Certificates of deposit ($100,000 or
more)(e) 5,006 51 4.06 Other time deposits 10,951 96 3.46 Deposits
in foreign office (f) 1,869 20 4.21 Total interest-bearing deposits
43,631 295 2.69 Federal funds purchased and securities sold under
repurchase agreements (f) 2,862 26 3.64 Bank notes and other
short-term borrowings 2,607 24 3.67 Long-term debt (e) 13,860 171
4.89 Total interest-bearing liabilities 62,960 516 3.26
Noninterest-bearing deposits 12,576 Accrued expense and other
liabilities 6,212 Total liabilities 81,748 Shareholders' equity
7,534 Total liabilities and shareholders' equity $89,282 Interest
rate spread (TE) 3.06 % Net interest income (TE) and net interest
margin (TE) 716 3.68 % TE adjustment (a) 30 Net interest income,
GAAP basis $686 (a) Interest income on tax-exempt securities and
loans is 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. (f) Results from
continuing operations exclude the dollar amount of liabilities
assumed to support interest-earning assets held by the discontinued
Champion Mortgage finance business. The interest expense related to
these liabilities, which is also excluded from continuing
operations, is calculated using an internal funds transfer pricing
rate. TE = Taxable Equivalent GAAP = U.S. generally accepted
accounting principles Consolidated Average Balance Sheets, Net
Interest Income and Yields/Rates From Continuing Operations
(dollars in millions) Twelve months ended December 31, 2006 Average
Balance Interest Yield/Rate Assets Loans: (a,b) Commercial,
financial and agricultural (c) $21,679 $1,547 7.13 % Real estate -
commercial mortgage 8,167 628 7.68 Real estate - construction 7,802
635 8.14 Commercial lease financing (c) 9,773 595 6.08 Total
commercial loans 47,421 3,405 7.18 Real estate - residential 1,430
93 6.49 Home equity 10,971 775 7.07 Consumer - direct 1,639 152
9.26 Consumer - indirect 3,535 238 6.73 Total consumer loans 17,575
1,258 7.16 Total loans 64,996 4,663 7.17 Loans held for sale 4,168
325 7.80 Investment securities (a) 47 3 7.43 Securities available
for sale (d) 7,302 347 4.71 Short-term investments 1,648 63 3.82
Other investments (d) 1,362 82 5.78 Total earning assets 79,523
5,483 6.88 Allowance for loan losses (952) Accrued income and other
assets 13,131 Total assets $91,702 Liabilities NOW and money market
deposit accounts $25,044 710 2.84 Savings deposits 1,728 4 .23
Certificates of deposit ($100,000 or more) (e) 5,581 261 4.67 Other
time deposits 11,592 481 4.14 Deposits in foreign office (f) 2,305
120 5.22 Total interest-bearing deposits 46,250 1,576 3.41 Federal
funds purchased and securities sold under repurchase agreements (f)
2,215 107 4.80 Bank notes and other short-term borrowings 2,284 94
4.12 Long-term debt (e) 13,983 788 5.62 Total interest-bearing
liabilities 64,732 2,565 3.96 Noninterest-bearing deposits 13,053
Accrued expense and other liabilities 6,183 Total liabilities
83,968 Shareholders' equity 7,734 Total liabilities and
shareholders' equity $91,702 Interest rate spread (TE) 2.92 % Net
interest income (TE) and net interest margin (TE) 2,918 3.67 % TE
adjustment (a) 103 Net interest income, GAAP basis $2,815 Twelve
months ended December 31, 2005 Average Balance Interest Yield/Rate
Assets Loans: (a,b) Commercial, financial and agricultural (c)
$19,480 $1,083 5.56 % Real estate - commercial mortgage 8,403 531
6.32 Real estate - construction 6,263 418 6.67 Commercial lease
financing (c) 10,122 628 6.21 Total commercial loans 44,268 2,660
6.01 Real estate - residential 1,468 90 6.10 Home equity 11,094 687
6.20 Consumer - direct 1,834 158 8.60 Consumer - indirect 3,333 217
6.51 Total consumer loans 17,729 1,152 6.50 Total loans 61,997
3,812 6.15 Loans held for sale 3,637 254 6.99 Investment securities
(a) 76 5 7.30 Securities available for sale (d) 7,118 327 4.58
Short-term investments 1,860 52 2.79 Other investments (d) 1,379 54
3.79 Total earning assets 76,067 4,504 5.92 Allowance for loan
losses (1,103) Accrued income and other assets 12,945 Total assets
$87,909 Liabilities NOW and money market deposit accounts $22,696
360 1.59 Savings deposits 1,941 5 .26 Certificates of deposit
($100,000 or more) (e) 4,957 189 3.82 Other time deposits 10,789
341 3.16 Deposits in foreign office (f) 2,662 81 3.06 Total
interest-bearing deposits 43,045 976 2.27 Federal funds purchased
and securities sold under repurchase agreements (f) 2,577 71 2.74
Bank notes and other short-term borrowings 2,796 82 2.94 Long-term
debt (e) 14,094 598 4.32 Total interest-bearing liabilities 62,512
1,727 2.77 Noninterest-bearing deposits 12,001 Accrued expense and
other liabilities 6,073 Total liabilities 80,586 Shareholders'
equity 7,323 Total liabilities and shareholders' equity $87,909
Interest rate spread (TE) 3.15 % Net interest income (TE) and net
interest margin (TE) 2,777 3.65 % TE adjustment (a) 121 Net
interest income, GAAP basis $2,656 (a) Interest income on
tax-exempt securities and loans is 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. (f)
Results from continuing operations exclude the dollar amount of
liabilities assumed to support interest-earning assets held by the
discontinued Champion Mortgage finance business. The interest
expense related to these liabilities, which is also excluded from
continuing operations, is calculated using an internal funds
transfer pricing rate. TE = Taxable Equivalent GAAP = U.S.
generally accepted accounting principles Noninterest Income (in
millions) Three months ended Twelve months ended 12-31-06 9-30-06
12-31-05 12-31-06 12-31-05 Trust and investment services income (a)
$142 $137 $134 $553 $542 Service charges on deposit accounts 77 78
76 304 304 Investment banking and capital markets income (a) 69 44
61 230 229 Operating lease income 63 58 50 229 191 Letter of credit
and loan fees 55 48 48 188 181 Corporate-owned life insurance
income 31 23 31 105 109 Electronic banking fees 27 27 26 105 96 Net
gains from loan securitizations and sales 42 14 28 76 69 Net
securities gains (losses) 3 (7) 3 1 1 Other income: Insurance
income 15 18 16 64 51 Loan securitization servicing fees 5 5 4 20
19 Credit card fees 3 8 2 17 14 Net gains from principal investing
5 28 16 53 56 Miscellaneous income 21 62 57 182 205 Total other
income 49 121 95 336 345 Total noninterest income $558 $543 $552
$2,127 $2,067 (a) Additional detail provided in tables below. Trust
and Investment Services Income (in millions) Three months ended
Twelve months ended 12-31-06 9-30-06 12-31-05 12-31-06 12-31-05
Brokerage commissions and fee income $58 $56 $61 $235 $247 Personal
asset management and custody fees 40 39 38 156 153 Institutional
asset management and custody fees 44 42 35 162 142 Total trust and
investment services income $142 $137 $134 $553 $542 Investment
Banking and Capital Markets Income (in millions) Three months ended
Twelve months ended 12-31-06 9-30-06 12-31-05 12-31-06 12-31-05
Investment banking income $43 $21 $29 $112 $87 Dealer trading and
derivatives income 10 7 10 33 54 Income from other investments 6 5
11 43 48 Foreign exchange income 10 11 11 42 40 Total investment
banking and capital markets income $69 $44 $61 $230 $229
Noninterest Expense (dollars in millions) Three months ended Twelve
months ended 12-31-06 9-30-06 12-31-05 12-31-06 12-31-05 Personnel
(a) $447 $418 $411 $1,692 $1,588 Net occupancy 68 62 67 250 276 (b)
Computer processing 55 52 57 212 209 Operating lease expense 50 48
40 184 158 Professional fees 33 28 42 134 126 Equipment 24 26 26
102 110 Marketing 27 32 23 97 88 Other expense: Postage and
delivery 12 13 13 50 50 Franchise and business taxes (7) 9 9 22 34
Telecommunications 7 7 7 28 30 OREO expense, net 2 2 2 6 8 Credit
for losses on lending-related commitments (6) -- -- (6) (7)
Miscellaneous expense 97 93 115 378 384 Total other expense 105 124
146 478 499 Total noninterest expense $809 $790 $812 $3,149 $3,054
Average full-time equivalent employees 20,100 20,264 19,417 20,006
19,485 (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 Twelve months
ended 12-31-06 9-30-06 12-31-05 12-31-06 12-31-05 Salaries $238
$240 $217 $940 $873 Incentive compensation 120 93 113 388 367
Employee benefits 64 67 54 287 254 Stock-based compensation 17 15
24 64 79 Severance 8 3 3 13 15 Total personnel expense $447 $418
$411 $1,692 $1,588 Loan Composition (dollars in millions) Percent
change 12-31-06 vs. 12-31-06 9-30-06 12-31-05 9-30-06 12-31-05
Commercial, financial and agricultural (a) $21,412 $21,556 $20,579
(.7)% 4.0 % Commercial real estate: Commercial mortgage 8,426 8,266
8,360 1.9 .8 Construction 8,209 8,272 7,109 (.8) 15.5 Total
commercial real estate loans 16,635 16,538 15,469 .6 7.5 Commercial
lease financing (a) 10,259 9,860 10,352 4.0 (.9) Total commercial
loans 48,306 47,954 46,400 .7 4.1 Real estate - residential
mortgage 1,442 1,407 1,458 2.5 (1.1) Home equity (b) 10,826 10,988
13,488 (1.5) (19.7) Consumer - direct 1,536 1,576 1,794 (2.5)
(14.4) Consumer - indirect: Marine 3,077 2,982 2,715 3.2 13.3 Other
639 644 623 (.8) 2.6 Total consumer - indirect loans 3,716 3,626
3,338 2.5 11.3 Total consumer loans 17,520 17,597 20,078 (.4)
(12.7) Total loans $65,826 $65,551 $66,478 .4 % (1.0)% Loans Held
for Sale Composition (dollars in millions) Percent change 12-31-06
vs. 12-31-06 9-30-06 12-31-05 9-30-06 12-31-05 Commercial,
financial and agricultural $47 $219 $85 (78.5)% (44.7)% Real estate
- commercial mortgage 946 1,062 525 (10.9) 80.2 Real estate -
construction 36 198 51 (81.8) (29.4) Commercial lease financing 3 2
-- 50.0 N/M Real estate - residential mortgage 21 21 11 -- 90.9
Home equity (b) 180 2,485 -- (92.8) N/M Education 2,390 3,147 2,687
(24.1) (11.1) Automobile 14 16 22 (12.5) (36.4) Total loans held
for sale $3,637 $7,150 $3,381 (49.1)% 7.6 % (a) On 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 as the historical data was not
available. (b) On August 1, 2006, Key transferred $2.5 billion of
home equity loans from the loan portfolio to loans held for sale in
connection with the November sale of the Champion Mortgage loan
portfolio. N/M = Not Meaningful Summary of Loan Loss Experience
(dollars in millions) Three months ended 12-31-06 9-30-06 12-31-05
Average loans outstanding from continuing operations $65,573
$65,180 $63,412 Allowance for loan losses at beginning of period
$944 $956 $1,093 Loans charged off: Commercial, financial and
agricultural 18 30 22 Real estate - commercial mortgage 15 3 3 Real
estate - construction 1 1 -- Total commercial real estate loans 16
4 3 Commercial lease financing 13 13 140 Total commercial loans 47
47 165 Real estate - residential mortgage 2 2 2 Home equity 8 6 6
Consumer - direct 7 7 10 Consumer - indirect 10 8 4 Total consumer
loans 27 23 22 74 70 187 Recoveries: Commercial, financial and
agricultural 7 8 7 Real estate - commercial mortgage 2 2 1 Real
estate - construction -- 1 1 Total commercial real estate loans 2 3
2 Commercial lease financing 4 9 8 Total commercial loans 13 20 17
Real estate - residential mortgage -- -- -- Home equity 2 2 1
Consumer - direct 2 1 2 Consumer - indirect 3 4 3 Total consumer
loans 7 7 6 20 27 23 Net loans charged off (54) (43) (164)
Provision for loan losses from continuing operations 53 35 35
Provision for loan losses from discontinued operations -- (4) 1
Foreign currency translation adjustment 1 -- 1 Allowance for loan
losses at end of period $944 $944 $966 Net loan charge-offs to
average loans from continuing operations .33 % .26 % 1.02 %
Allowance for loan losses to period- end loans 1.43 1.44 1.45
Allowance for loan losses to nonperforming loans 439.07 423.32
348.74 Twelve months ended 12-31-06 12-31-05 Average loans
outstanding from continuing operations $64,996 $61,997 Allowance
for loan losses at beginning of period $966 $1,138 Loans charged
off: Commercial, financial and agricultural 92 80 Real estate -
commercial mortgage 24 19 Real estate - construction 4 5 Total
commercial real estate loans 28 24 Commercial lease financing 40
183 Total commercial loans 160 287 Real estate - residential
mortgage 7 7 Home equity 30 26 Consumer - direct 33 38 Consumer -
indirect 38 51 Total consumer loans 108 122 268 409 Recoveries:
Commercial, financial and agricultural 34 21 Real estate -
commercial mortgage 5 3 Real estate - construction 1 3 Total
commercial real estate loans 6 6 Commercial lease financing 27 35
Total commercial loans 67 62 Real estate - residential mortgage 1 1
Home equity 7 5 Consumer - direct 7 8 Consumer - indirect 16 18
Total consumer loans 31 32 98 94 Net loans charged off (170) (315)
Provision for loan losses from continuing operations 150 143
Provision for loan losses from discontinued operations (3) --
Foreign currency translation adjustment 1 -- Allowance for loan
losses at end of period $944 $966 Net loan charge-offs to average
loans from continuing operations .26 % .51 % Allowance for loan
losses to period- end loans 1.43 1.45 Allowance for loan losses to
nonperforming loans 439.07 348.74 Changes in Allowance for Credit
Losses on Lending-Related Commitments (in millions) Three months
ended Twelve months ended 12-31-06 9-30-06 12-31-05 12-31-06
12-31-05 Balance at beginning of period $59 $59 $59 $59 $66 Credit
for losses on lending-related commitments (6) -- -- (6) (7) Balance
at end of period (a) $53 $59 $59 $53 $59 Summary of Nonperforming
Assets and Past Due Loans (dollars in millions) 12-31-06 9-30-06
6-30-06 3-31-06 12-31-05 Commercial, financial and agricultural $38
$42 $76 $68 $63 Real estate - commercial mortgage 53 41 40 42 43
Real estate - construction 10 37 4 4 2 Total commercial real estate
loans 63 78 44 46 45 Commercial lease financing 22 20 29 29 39
Total commercial loans 123 140 149 143 147 Real estate -
residential mortgage 29 29 31 43 41 Home equity (b) 50 46 90 97 79
Consumer - direct 2 2 3 6 2 Consumer - indirect 11 6 6 6 8 Total
consumer loans 92 83 130 152 130 Total nonperforming loans 215 223
279 295 277 Nonperforming loans held for sale (b) 3 56 1 2 3 OREO
57 52 26 21 25 Allowance for OREO losses (3) (3) (1) (1) (2) OREO,
net of allowance 54 49 25 20 23 Other nonperforming assets 1 1 3 3
4 Total nonperforming assets $273 $329 $308 $320 $307 Accruing
loans past due 90 days or more $120 $125 $119 $107 $90 Accruing
loans past due 30 through 89 days 644 715 600 498 491 Nonperforming
loans to period-end portfolio loans .33 % .34 % .41 % .44 % .42 %
Nonperforming assets to period-end portfolio loans plus OREO and
other nonperforming assets .41 .50 .46 .48 .46 Summary of Changes
in Nonperforming Loans (in millions) 4Q06 3Q06 2Q06 1Q06 4Q05
Balance at beginning of period $223 $279 $295 $277 $360 Loans
placed on nonaccrual status 115 134 98 100 142 Charge-offs (74)
(70) (59) (65) (187) Loans sold (5) (22) (6) (2) (2) Payments (23)
(43) (45) (15) (27) Transfer to held-for-sale portfolio (b) -- (55)
-- -- -- Transfers to OREO (12) -- (4) -- -- Loans returned to
accrual status (9) -- -- -- (9) Balance at end of period $215 $223
$279 $295 $277 (a) Included in "accrued expenses and other
liabilities" on the consolidated balance sheet. (b) On August 1,
2006, Key transferred approximately $55 million of home equity
loans from nonperforming loans to nonperforming loans held for sale
in connection with an expected sale of the Champion Mortgage
finance business. Line of Business Results (dollars in millions)
Community Banking 4Q06 3Q06 2Q06 1Q06 4Q05 Summary of operations
Total revenue (TE) $664 $671 $663 $643 $666 Provision for loan
losses 23 22 21 29 30 Noninterest expense 480 470 475 439 484 Net
income 101 112 104 109 95 Average loans and leases 26,632 26,737
26,804 26,739 27,267 Average deposits 47,376 46,987 46,683 45,835
45,730 Net loan charge- offs 25 22 24 28 31 Return on average
allocated equity 17.38 % 19.20 % 18.11 % 19.14 % 16.18 % Average
full-time equivalent employees 8,966 9,080 8,970 8,829 8,701
Supplementary information (lines of business) Regional Banking
Total revenue (TE) $565 $570 $564 $547 $558 Provision for loan
losses 19 19 19 22 26 Noninterest expense 432 420 423 391 429 Net
income 72 82 76 83 65 Average loans and leases 18,581 18,722 18,771
18,776 19,010 Average deposits 43,683 43,405 43,091 42,222 41,929
Net loan charge- offs 19 19 21 22 26 Return on average allocated
equity 17.95 % 20.40 % 19.31 % 21.20 % 16.11 % Average full-time
equivalent employees 8,645 8,761 8,642 8,519 8,387 Commercial
Banking Total revenue (TE) $99 $101 $99 $96 $108 Provision for loan
losses 4 3 2 7 4 Noninterest expense 48 50 52 48 55 Net income 29
30 28 26 30 Average loans and leases 8,051 8,015 8,033 7,963 8,257
Average deposits 3,693 3,582 3,592 3,613 3,801 Net loan charge-
offs 6 3 3 6 5 Return on average allocated equity 16.11 % 16.55 %
15.49 % 14.62 % 16.35 % Average full-time equivalent employees 321
319 328 310 314 Percent change 4Q06 vs. 3Q06 4Q05 Summary of
operations Total revenue (TE) (1.0)% (.3)% Provision for loan
losses 4.5 (23.3) Noninterest expense 2.1 (.8) Net income (9.8) 6.3
Average loans and leases (.4) (2.3) Average deposits .8 3.6 Net
loan charge-offs 13.6 (19.4) Return on average allocated equity N/A
N/A Average full-time equivalent employees (1.3) 3.0 Supplementary
information (lines of business) Regional Banking Total revenue (TE)
(.9)% 1.3 % Provision for loan losses --- (26.9) Noninterest
expense 2.9 .7 Net income (12.2) 10.8 Average loans and leases (.8)
(2.3) Average deposits .6 4.2 Net loan charge-offs -- (26.9) Return
on average allocated equity N/A N/A Average full-time equivalent
employees (1.3) 3.1 Commercial Banking Total revenue (TE) (2.0)%
(8.3)% Provision for loan losses 33.3 -- Noninterest expense (4.0)
(12.7) Net income (3.3) (3.3) Average loans and leases .4 (2.5)
Average deposits 3.1 (2.8) Net loan charge-offs 100.0 20.0 Return
on average allocated equity N/A N/A Average full-time equivalent
employees .6 2.2 Line of Business Results (continued) (dollars in
millions) National Banking 4Q06 3Q06 2Q06 1Q06 4Q05 Summary of
operations Total revenue (TE) $684 $605 $604 $591 $604 Provision
for loan losses 30 13 2 10 5 Noninterest expense 343 321 328 316
336 Income from continuing operations 194 169 172 166 164 Net
income 29 176 177 176 176 Average loans and leases (a) 38,534
37,929 37,755 37,072 35,705 Average loans held for sale (a) 4,537
4,568 3,835 3,689 3,585 Average deposits (a) 11,847 11,055 10,624
9,947 8,562 Net loan charge- offs (a) 29 21 10 11 133 Return on
average allocated equity (a) 19.99 % 17.93 % 18.74 % 18.33 % 18.19
% Return on average allocated equity 2.81 17.52 18.09 18.18 18.13
Average full-time equivalent employees 4,558 4,573 4,466 4,455
4,402 Supplementary information (lines of business) Real Estate
Capital Total revenue (TE) $188 $169 $174 $155 $163 Provision for
loan losses 18 7 -- 2 -- Noninterest expense 69 69 70 64 69 Net
income 63 57 65 56 59 Average loans and leases 12,931 12,854 12,719
12,467 12,038 Average loans held for sale 1,125 1,022 692 577 605
Average deposits 4,096 3,598 3,467 3,214 2,467 Net loan charge-
offs 8 -- 2 2 -- Return on average allocated equity 21.45 % 20.05 %
23.32 % 20.63 % 22.27 % Average full-time equivalent employees 957
970 980 981 873 Equipment Finance Total revenue (TE) $146 $137 $136
$124 $128 Provision for loan losses 7 11 2 3 5 Noninterest expense
79 83 79 75 80 Net income 37 27 34 29 27 Average loans and leases
10,222 10,100 9,871 9,569 9,458 Average loans held for sale 33 6 34
8 -- Average deposits 15 19 14 15 15 Net loan charge- offs 14 11 3
3 132 Return on average allocated equity 16.97 % 12.43 % 16.29 %
14.19 % 13.31 % Average full-time equivalent employees 938 927 915
935 971 Institutional and Capital Markets Total revenue (TE) $219
$187 $187 $204 $188 Provision for loan losses (2) -- (4) (5) (4)
Noninterest expense 129 110 115 115 112 Net income 58 49 48 59 50
Average loans and leases 7,510 7,377 7,589 7,824 7,358 Average
loans held for sale 387 454 139 112 73 Average deposits 7,078 6,703
6,441 6,029 5,434 Net loan charge- offs (recoveries) 1 -- (2) (4)
(3) Return on average allocated equity 20.04 % 17.74 % 18.03 %
21.89 % 18.45 % Average full-time equivalent employees 1,297 1,305
1,228 1,234 1,223 Consumer Finance Total revenue (TE) $131 $112
$107 $108 $125 Provision for loan losses 7 (5) 4 10 4 Noninterest
expense 66 59 64 62 75 Income from continuing operations 36 36 25
22 28 Net income (loss) (129) 43 30 32 40 Average loans and leases
(a) 7,871 7,598 7,576 7,212 6,851 Average loans held for sale (a)
2,992 3,086 2,970 2,992 2,907 Average deposits (a) 658 735 702 689
646 Net loan charge- offs (a) 6 10 7 10 4 Return on average
allocated equity (a) 21.22 % 21.84 % 15.26 % 13.71 % 17.20 % Return
on average allocated equity (56.06) 18.98 13.36 14.37 17.25 Average
full-time equivalent employees 1,366 1,371 1,343 1,305 1,335
Percent change 4Q06 vs. 3Q06 4Q05 Summary of operations Total
revenue (TE) 13.1 % 13.2 % Provision for loan losses 130.8 500.0
Noninterest expense 6.9 2.1 Income from continuing operations 14.8
18.3 Net income (83.5) (83.5) Average loans and leases (a) 1.6 7.9
Average loans held for sale (a) (.7) 26.6 Average deposits (a) 7.2
38.4 Net loan charge-offs (a) 38.1 (78.2) Return on average
allocated equity (a) N/A N/A Return on average allocated equity N/A
N/A Average full-time equivalent employees (.3) 3.5 Supplementary
information (lines of business) Real Estate Capital Total revenue
(TE) 11.2 % 15.3 % Provision for loan losses 157.1 N/M Noninterest
expense -- -- Net income 10.5 6.8 Average loans and leases .6 7.4
Average loans held for sale 10.1 86.0 Average deposits 13.8 66.0
Net loan charge-offs N/M N/M Return on average allocated equity N/A
N/A Average full-time equivalent employees (1.3) 9.6 Equipment
Finance Total revenue (TE) 6.6 % 14.1 % Provision for loan losses
(36.4) 40.0 Noninterest expense (4.8) (1.3) Net income 37.0 37.0
Average loans and leases 1.2 8.1 Average loans held for sale 450.0
N/M Average deposits (21.1) -- Net loan charge-offs 27.3 (89.4)
Return on average allocated equity N/A N/A Average full-time
equivalent employees 1.2 (3.4) Institutional and Capital Markets
Total revenue (TE) 17.1 % 16.5 % Provision for loan losses N/M 50.0
Noninterest expense 17.3 15.2 Net income 18.4 16.0 Average loans
and leases 1.8 2.1 Average loans held for sale (14.8) 430.1 Average
deposits 5.6 30.3 Net loan charge-offs (recoveries) N/M N/M Return
on average allocated equity N/A N/A Average full-time equivalent
employees (.6) 6.1 Consumer Finance Total revenue (TE) 17.0 % 4.8 %
Provision for loan losses N/M 75.0 Noninterest expense 11.9 (12.0)
Income from continuing operations -- 28.6 Net income (loss) N/M N/M
Average loans and leases (a) 3.6 14.9 Average loans held for sale
(a) (3.0) 2.9 Average deposits (a) (10.5) 1.9 Net loan charge-offs
(a) (40.0) 50.0 Return on average allocated equity (a) N/A N/A
Return on average allocated equity N/A N/A Average full-time
equivalent employees (.4) 2.3 (a) From continuing operations. TE =
Taxable Equivalent N/A = Not Applicable N/M = Not Meaningful
DATASOURCE: KeyCorp Web site: http://www.key.com/
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