Line of Business Results

3 Months Ended

Mar. 31, 2013

Segment Reporting [Abstract]

Line of Business Results

18.  Line of Business Results

The specific lines of business that constitute each of the major business segments (operating segments) are described below.

Key Community Bank

Key Community Bank serves individuals and small to mid-sized businesses through its 14-state branch network.

Individuals are provided branch-based deposit and investment products, personal finance services and loans, including residential mortgages, home equity, credit card and various types of installment loans. In addition, financial, estate and retirement planning, asset management services, and Delaware Trust capabilities are offered to assist high-net-worth clients with their banking, trust, portfolio management, insurance, charitable giving, and related needs.

Small businesses are provided deposit, investment and credit products, and business advisory services. Mid-sized businesses are provided products and services that include commercial lending, cash management, equipment leasing, investment and employee benefit programs, succession planning, access to capital markets, derivatives, and foreign exchange.

Key Corporate Bank

Key Corporate Bank is a full-service corporate and investment bank focused principally on serving the needs of middle market clients in six industry sectors: consumer, energy, healthcare, industrial, public sector and real estate. Key Corporate Bank delivers a broad product suite of banking and capital markets products to its clients, including syndicated finance, debt and equity capital markets, commercial payments, equipment finance, commercial mortgage banking, derivatives, foreign exchange, financial advisory and public finance. Key Corporate Bank also delivers many of its product capabilities to clients of Key Community Bank.

Other Segments

Other Segments consist of Corporate Treasury, Community Development, Principal Investing and various exit portfolios.

Reconciling Items

Total assets included under “Reconciling Items” primarily represent the unallocated portion of nonearning assets of corporate support functions. Charges related to the funding of these assets are part of net interest income and are allocated to the business segments through noninterest expense. Reconciling Items also includes intercompany eliminations and certain items that are not allocated to the business segments because they do not reflect their normal operations.

The table on the following pages shows selected financial data for our two major business segments for the three-month periods ended March 31, 2013, and 2012.

The information was derived from the internal financial reporting system we use to monitor and manage our financial performance. GAAP guides financial accounting, but there is no authoritative guidance for “management accounting” — the way we use our judgment and experience to make reporting decisions. Consequently, the line of business results we report may not be comparable to line of business results presented by other companies.

The selected financial data are based on internal accounting policies designed to compile results on a consistent basis and in a manner that reflects the underlying economics of the businesses. In accordance with our policies:

¿ Net interest income is determined by assigning a standard cost for funds used or a standard credit for funds provided based on their assumed maturity, prepayment and/or repricing characteristics.

¿ Indirect expenses, such as computer servicing costs and corporate overhead, are allocated based on assumptions regarding the extent to which each line of business actually uses the services.

¿ The consolidated provision for loan and lease losses is allocated among the lines of business primarily based on their actual net charge-offs, adjusted periodically for loan growth and changes in risk profile. The amount of the consolidated provision is based on the methodology that we use to estimate our consolidated allowance for loan and lease losses. This methodology is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses” on page 120 of our 2012 Form 10-K.

¿ Income taxes are allocated based on the statutory federal income tax rate of 35% (adjusted for tax-exempt interest income, income from corporate-owned life insurance and tax credits associated with investments in low-income housing projects) and a blended state income tax rate (net of the federal income tax benefit) of 2.2%.

¿ Capital is assigned to each line of business based on regulatory requirements.

Developing and applying the methodologies that we use to allocate items among our lines of business is a dynamic process. Accordingly, financial results may be revised periodically to reflect enhanced alignment of expense base allocation drivers, changes in the risk profile of a particular business, or changes in our organizational structure.

Three months ended March 31,	Key Community Bank						Key Corporate Bank
dollars in millions	2013			2012			2013			2012
SUMMARY OF OPERATIONS
Net interest income (TE)	$	361		$	357		$	187		$	196
Noninterest income		188			175			192			182
Total revenue (TE) (a)		549			532			379			378
Provision (credit) for loan and lease losses		59			4			4			13
Depreciation and amortization expense		20			9			12			16
Other noninterest expense		420			427			197			206
Income (loss) from continuing operations before income taxes (TE)		50			92			166			143
Allocated income taxes and TE adjustments		19			34			61			52
Income (loss) from continuing operations		31			58			105			91
Income (loss) from discontinued operations, net of taxes		—			—			—			—
Net income (loss)		31			58			105			91
Less: Net income (loss) attributable to noncontrolling interests		—			—			—			—
Net income (loss) attributable to Key	$	31		$	58		$	105		$	91
AVERAGE BALANCES (b)
Loans and leases	$	28,982		$	25,981		$	20,039		$	18,584
Total assets (a)		31,478			28,223			23,860			22,847
Deposits		49,359			47,506			13,957			11,556
OTHER FINANCIAL DATA
Net loan charge-offs (b)	$	47		$	47		$	(1)		$	25
Return on average allocated equity (b)		4.38	%		8.18	%		26.35	%		19.89	%
Return on average allocated equity		4.38			8.18			26.35			19.89
Average full-time equivalent employees (c)		8,830			8,707			1,924			2,020

(a) Substantially all revenue generated by our major business segments is derived from clients that reside in the United States. Substantially all long-lived assets, including premises and equipment, capitalized software, and goodwill held by our major business segments, are located in the United States.

(b) From continuing operations.

(c) The number of average full-time equivalent employees has not been adjusted for discontinued operations.

Other Segments						Total Segments						Reconciling Items						Key
2013			2012			2013			2012			2013			2012			2013			2012
$	39		$	3		$	587		$	556		$	2		$	3		$	589		$	559
	44			91			424			448			1			(6)			425			442
	83			94			1,011			1,004			3			(3)			1,014			1,001
	(7)			25			56			42			(1)			—			55			42
	2			3			34			28			32			32			66			60
	17			25			634			658			(19)			(39)			615			619
	71			41			287			276			(9)			4			278			280
	2			(9)			82			77			(6)			2			76			79
	69			50			205			199			(3)			2			202			201
	—			—			—			—		$	3			(1)			3			(1)
	69			50			205			199			—			1			205			200
	1			—			1			—			—			—			1			—
$	68		$	50		$	204		$	199			—		$	1		$	204		$	200
$	3,562		$	4,825		$	52,583		$	49,390		$	43		$	40		$	52,626		$	49,430
	26,795			28,556			82,133			79,626			582			798			82,715			80,424
	625			749			63,941			59,811			(306)			(180)			63,635			59,631
$	3		$	29		$	49		$	101			—			—		$	49		$	101
	39.45	%		24.29	%		15.95	%		14.50	%		(.24)	%		.18	%		7.93	%		8.09	%
	39.45			24.29			15.95			14.50			—			0.09			8.05			8.05
	49			53			10,803			10,780			4,593			4,624			15,396			15,404