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KeyCorp Annual Report, Year Ended Dec 31, 2006

Filing Date
Filed February 28, 2007
Period End
December 31, 2006
In the record · 2016–202610-K1110-Q348-K141

KEY filed 11 annual reports (10-K), 34 quarterly reports (10-Q) and 141 current reports (8-K) between 2016 and 2026.

  1. Deal closed8-K · Aug ’16Aug ’16
  2. FY2018 annual report10-K · Feb ’19Feb ’19
  3. Leadership change8-K · Dec ’21Dec ’21
  4. Leadership change8-K · Jan ’26Jan ’26

01—Abstract

Summary

Summary of the 10-K filed February 28, 2007. Cited figures are marked; the original filing is the authoritative source.

KeyCorp, headquartered in Cleveland, Ohio, reported total assets of $92.3 billiona at December 31, 2006, and describes itself as one of the nation's largest bank-based financial services companies.

It operates through two business groups, Community Banking and National Banking, with 950 KeyCenters across sixteen states and an average of 20,006 full-time equivalent employees in 2006. Income from continuing operations before the cumulative effect of an accounting change was $1.193 billionb, or $2.91 per diluted share, which the filing describes as the highest level of earnings in the company's history. Net income was $1.055 billion, or $2.57 per diluted share, after a $143 million loss from discontinued operations tied to the Champion Mortgage divestiture, which included a $170 million goodwill write-off.

The balance sheet and capital position were stable. Total deposits were $59.1 billionc, and the Tier 1 risk-based capital ratio was 8.24%, the total risk-based capital ratio 12.43%, and the leverage ratio 8.98%. The filing reports net loan charge-offs of .26% of average loans from continuing operations, the lowest since 1995, and nonperforming assets of $273 million.

Management repurchased 17.5 million common shares during 2006, and in January 2007 the Board authorized repurchase of 25.0 million additional shares and raised the quarterly dividend 5.8%d to $.365. The company also disclosed a regulatory consent order from the OCC and a memorandum of understanding with the Federal Reserve Bank of Cleveland related to Bank Secrecy Act compliance, with no fine or civil money penalty imposed. Recent portfolio actions shaped 2006 results.

Key sold the $2.5 billion nonprime Champion Mortgage loan portfolio in November 2006 and agreed to sell its origination platform, and on February 9, 2007 it sold the McDonald Investments branch network to UBS Financial Services for cash proceeds of approximately $219 million. The filing also notes a pending settlement with Swiss Reinsurance America Corporation, under which Swiss Re will pay Key $279 million in 2007, producing a one-time gain of approximately $26 million.

02—Key points

Key Highlights

  1. Record 2006 earnings: income from continuing operations of $1.193 billion, or $2.91 per diluted share, versus $1.090 billion, or $2.63, in 2005.
  2. Net income of $1.055 billion, or $2.57 per diluted share, including a $143 million loss from discontinued operations tied to the Champion Mortgage divestiture.
  3. Total assets of $92.3 billion and total deposits of $59.1 billion at December 31, 2006.
  4. Capital ratios remained above well-capitalized thresholds: Tier 1 risk-based 8.24%, total risk-based 12.43%, leverage 8.98%.
  5. Asset quality improved: net loan charge-offs were .26% of average continuing loans, the lowest since 1995, and nonperforming assets fell to $273 million.
  6. Shareholder returns: 17.5 million shares repurchased in 2006, a January 2007 authorization for 25.0 million more, and a quarterly dividend increase to $.365.
  7. Pending items include the February 2007 sale of the McDonald Investments branch network for about $219 million and a Swiss Re settlement of $279 million expected in 2007.

03—Questions

Frequently Asked Questions

  1. How did KeyCorp perform financially in 2006?

    Income from continuing operations was $1.193 billion, or $2.91 per diluted share, up from $1.090 billion, or $2.63, in 2005. Net income was $1.055 billion, or $2.57 per diluted share, after discontinued operations. The filing describes 2006 as the highest level of earnings in the company's history.

  2. What drove the 2006 net income figure below continuing operations?

    The Champion Mortgage finance business was accounted for as discontinued operations, producing a loss of $143 million net of taxes. That loss includes a $170 million goodwill write-off, a gain on disposal, and disposal transaction costs.

  3. Is KeyCorp well capitalized?

    KeyCorp and KBNA met all regulatory capital requirements at December 31, 2006. KBNA qualified as well capitalized, with a Tier 1 risk-based ratio of 8.24%, a total risk-based ratio of 12.43%, and a leverage ratio of 8.98% for the parent. The filing notes that FDIC-defined capital categories serve a limited function and should not be read as a full representation of financial condition.

  4. What regulatory matters did KeyCorp disclose?

    In October 2005, KBNA entered into a consent order with the OCC, and KeyCorp entered into a memorandum of understanding with the Federal Reserve Bank of Cleveland, both concerning Bank Secrecy Act compliance. Neither agency imposed a fine or civil money penalty, and management said it does not expect these actions to have a material effect on operating results.

  5. What are the notable post-year-end developments?

    On February 9, 2007, McDonald Investments sold its branch network to UBS Financial Services for cash proceeds of approximately $219 million, subject to adjustment. On February 16, 2007, conditions were satisfied for a settlement under which Swiss Re will pay Key $279 million in 2007, expected to produce a one-time gain of about $26 million. The Champion origination platform sale was expected to close in the first quarter of 2007.

04—Continue

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