Slide 1: Third Quarter 2008 Review
Third Quarter 2008 Review October 21, 2008 Speakers: Henry Meyer Jeff Weeden
Slide 2: Forward-Looking Statement Disclosure
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 FORWARD-LOOKING STATEMENT DISCLOSURE This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about our financial condition, results of operations, earnings
Slide 3: Strategic Update
Strategic Update Strong reserves and capital Active risk management Continued focus on relationship businesses Strategic allocation of capital Exiting retail / floor plan lending for marine and RV Exiting private student lending
Slide 4: Improving Business Mix
Improving Business Mix Austin Capital Mgmt Champion Mortgage Acquisitions Divestitures / Exit 2005 ORIX Servicing Portfolio Indirect auto business Malone Mortgage American Express Bus. Fin. Broker originated home equity EverTrust Sterling Branches American Capital Resources Tuition Mgmt Systems Anno
Slide 5: Financial Summary-3Q08 vs. 3Q07
Financial Summary-3Q08 vs. 3Q07 Results from Continuing Operations (1) (1) Continuing Operations exclude the results of the Champion Mortgage finance business, which has been accounted for as a discontinued operation. (2) 9/30/08 ratio is estimated. GAAP = U.S. generally accepted accounting principl
Slide 6: Significant Items Impacting 3Q08 Results
Significant Items Impacting 3Q08 Results $ in millions, except EPS
Slide 7: 3Q08 Update on Prior Disclosed Items
Realized and unrealized losses reduced the carrying balance by 9% during the 3rd quarter. Total cumulative loss recognized to date approximately 51% of original loan balances of $719 million. Will continue to work additional sales and foreclosure activities in the 4th quarter. The remaining $133 mil
Slide 8: Net Interest Margin (TE)-Continuing Ops.
Net Interest Margin (TE)-Continuing Ops. 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 Net Interest Income 689 692 716 722 726 726 744 700 706 712 750 738.4 738 705 Net Interest Spread 0.0319 0.0309 0.0306 0.0305 0.0296 0.0285 0.0285 0.027 0.0262 0.0252 0.0275 0.0281 0.0288 0
Slide 9: Average Loans-Continuing Ops.
2003 2004 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 Average Loan Growth Adjusted for Union State Bank Acquisition 0.063 0.084 Average Loan Growth from Prior Year -0.0156 -0.0349 0.0815 0.0613 0.0483 0.054 0.0539 0.0516 0.034 0.0234 0.02157 0.03834 0.063 0.1065 0.1569 0.12
Slide 10: Average Deposits-Continuing Ops.
$ in billions 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 CD's < $100 (K) 11.3 11.5 11.7 11.9 12.063 12.047 11.5 11.455 12.8 12.7 13.1 CDs > $100 (K) 5.5 6 6.2 6.2 6.3 6.9 8.1 8.7 9.5 CD's < $100 (K) 11.3 11.5 11.7 11.9 12.063 12.047 11.5 11.455 12.8 12.7 13.1 Average Core Deposit Growth
Slide 11: Asset Quality
Asset Quality $ in millions Net C/O to Average Loans from Continuing Operations Nonperforming Loans to EOP Loans Nonperforming Assets to EOP Loans + OREO Allowance to Total Loans to Nonperforming Loans Change 3Q08 vs. 3008 2008 3007 2008 3007 $ 273 $524 59 S$ (251) $ 214 143 % 2.75 % 35% $ 967 $814
Slide 12: Nonperforming Asset Trends
Com'l Real Estate C&I and Lease Consumer Held for Sale OREO + Other $73 62 88 56 50 $58 60 97 3 55 $54 101 99 3 96 $64 117 95 4 98 $269 124 105 6 66 $456 112 119 25 52 $723 185 146 9 52 $363 316 135 342 54 Nonperforming Asset Trends 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 NPAs to Loans + O
Slide 13: Commercial NPL Summary by Asset Size
Commercial NPL Summary by Asset Size C&I CRE Lease 9 18 - - $68 165 - - 2 7 - - $38 133 - - 2 1 - - $67 40 - - <$5 million $5-$15 million $15-$25 million >$25 million 98.58% $ Amount $ Amount $ Amount # of Accounts # of Accounts # of Accounts $136 115 55 1,351 295 1,061 $ Amount # of Accounts Commer
Slide 14: Credit Quality by Portfolio - 3Q08
Credit Quality by Portfolio - 3Q08 (1) Net charge-off amounts annualized in calculation N/M = Not Meaningful * * $ in millions
Slide 15: Commercial Real Estate Loans
Commercial Real Estate Loans (1) Segment NPLs are taken as a percentage of total Key NPLs. Total Key NPLs were $967 million at 9/30/2008. (2) Nonresidential land and development loans (3) NPLs, 90+ Days Past Due, and 30-89 Days Past Due are taken as a percentage of the respective total Key NPLs of $
Slide 16: Commercial Real Estate Residential Properties: $2.36 Billion
Commercial Real Estate Residential Properties: $2.36 Billion
Slide 17: Capital Ratios
Peer Median 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 Tangible Equity to Tangible Assets 0.0671 0.0668 0.0681 0.0701 0.0704 0.0697 0.0687 0.0658 0.0685 0.0698 0.0695 Peer-Tangible Equity to Tangible Assets 0.0586 0.0571 0.0623 0.0652 0.0608 0.057 0.057 0.0559 0.0568 0.059 1Q06 2Q06 3Q06
Slide 18: Appendix
Appendix
Slide 19: Geographically Diverse Community Banking
Geographically Diverse Community Banking Great Lakes Core Deposits: 34% Commercial Loans: 31% Home Equity Loans: 29% Northwest Core Deposits: 23% Commercial Loans: 28% Home Equity Loans: 29% Rocky Mountains Core Deposits: 8% Commercial Loans: 13% Home Equity Loans: 14% Northeast Core Deposits: 31% C
Slide 20: Community Banking Financial Summary
Financial Summary TE = Taxable Equivalent N/M = Not Meaningful N/A = Not Applicable Community Banking $ in millions
Slide 21: Community Banking Line of Business Summary
Community Banking Line of Business Summary $ in millions TE = Taxable Equivalent N/M = Not Meaningful N/A = Not Applicable
Slide 22: National Banking Financial Summary
National Banking Financial Summary $ in millions (1) From continuing operations TE = Taxable Equivalent N/M = Not Meaningful N/A = Not Applicable
Slide 23: National Banking Line of Business Summary
National Banking Line of Business Summary TE = Taxable Equivalent N/M = Not Meaningful N/A = Not Applicable $ in millions
Slide 24: National Banking Line of Business Summary
National Banking Line of Business Summary $ in millions (1) From continuing operations TE = Taxable Equivalent N/M = Not Meaningful N/A = Not Applicable
Slide 25: Commercial Real Estate Servicing
2000 2001 2002 2003 2004 2005 1Q06 2Q06 3Q06 4Q06 2006 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 Servicing Portfolio 8.3 11 19.8 22.4 34.1 73.7 76.1 78.4 81.8 93.6 93.6 108.3 121.4 136.2 134.9 130.6 128.9 125 Average Escrow Deposits 0.125 0.303 0.411 0.558 0.832 1.23 2.135 2.386 2.494 3.053 2.52 3.279 3.92
Slide 26: Managing Through the Credit Cycle
Managing Through the Credit Cycle Commercial Portfolio C&I Portfolio Middle Market and Large Corporate portfolios are well-diversified, granular and performing as expected Modest deterioration in the Great Lakes Region Auto dealer floor plan showing increasing NPLs Commercial Real Estate Continuing
Slide 27: Average Loans Continuing Operations
Average Loans $ in millions Continuing Operations
Slide 28: Home Equity Loans
Home Equity Loans * Period End Balance, $ in millions September 30, 2008
Slide 29: Exit Portfolios
Exit Portfolios $ in millions, period end data
Slide 30: Net Charge-Offs to Average Loans
Net Charge-Offs to Average Loans
Slide 31: Nonperforming Assets
Nonperforming Assets $ in millions (1) Primarily investments held by the Private Equity unit within Key's Real Estate Capital and Corporate Banking Services line of business. (2) During the second quarter of 2008, Key transferred $384 million of commercial real estate loans ($719 million of primaril
Slide 32: NPLs to End of Period Loans
NPLs to End of Period Loans N/M = Not Meaningful