KeyBank 2006 Annual Report Download - page 32

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32
MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES
Figure 7 shows how the changes in yields or rates and average balances
from the prior year affected net interest income. The section entitled
“Financial Condition,” which begins on page 36, contains more
discussion about changes in earning assets and funding sources.
FIGURE 7. COMPONENTS OF NET INTEREST INCOME CHANGES
2006 vs 2005 2005 vs 2004
Average Yield/ Net Average Yield/ Net
in millions Volume Rate Change Volume Rate Change
INTEREST INCOME
Loans $191 $660 $851 $212 $463 $675
Loans held for sale 39 32 71 64 76 140
Investment securities (1) (1) (2) (1) (2) (3)
Securities available for sale 91120 (4) 4 —
Short-term investments (6) 17 11 (6) 23 17
Other investments (1) 29 28 41519
Total interest income (TE) 231 748 979 269 579 848
INTEREST EXPENSE
NOW and money market deposit accounts 41 309 350 20 193 213
Savings deposits (1) — (1) ———
Certificates of deposit ($100,000 or more) 26 46 72 5611
Other time deposits 27 113 140 7 30 37
Deposits in foreign office (12) 51 39 9 66 75
Total interest-bearing deposits 81 519 600 41 295 336
Federal funds purchased and securities sold
under repurchase agreements (11) 47 36 (5) 54 49
Bank notes and other short-term borrowings (17) 29 12 33740
Long-term debt (5) 195 190 (6) 202 196
Total interest expense 48 790 838 33 588 621
Net interest income (TE) $183 $ (42) $141 $236 $ (9) $227
The change in interest not due solely to volume or rate has been allocated in proportion to the absolute dollar amounts of the change in each.
TE = Taxable Equivalent
FIGURE 8. NONINTEREST INCOME
Year ended December 31, Change 2006 vs 2005
dollars in millions 2006 2005 2004 Amount Percent
Trust and investment services income $ 553 $ 542 $ 564 $ 11 2.0%
Service charges on deposit accounts 304 304 331 — —
Investment banking and capital markets income 230 229 217 1 .4
Operating lease income 229 191 183 38 19.9
Letter of credit and loan fees 188 181 158 7 3.9
Corporate-owned life insurance income 105 109 110 (4) (3.7)
Electronic banking fees 105 96 85 9 9.4
Net gains from loan securitizations and sales 76 69 9 7 10.1
Net securities gains 114 — —
Other income:
Insurance income 64 51 47 13 25.5
Loan securitization servicing fees 20 19 3 1 5.3
Credit card fees 17 14 13 3 21.4
Net gains from principal investing 53 56 44 (3) (5.4)
Miscellaneous income 182 205 157 (23) (11.2)
Total other income 336 345 264 (9) (2.6)
Total noninterest income $2,127 $2,067 $1,925 $ 60 2.9%
Noninterest income
Noninterest income for 2006 was $2.1 billion, representing a $60
million, or 3%, increase from 2005. In 2005, noninterest income rose
by $142 million, or 7%, from 2004.
As shown in Figure 8, the 2006 growth in noninterest income was
driven by increases of $38 million in operating lease income, $13
million in insurance income, $11 million in income from trust and
investment services, and $9 million in electronic banking fees. These
positive results were moderated by a $23 million decrease in
“miscellaneous income” caused by a $24 million charge recorded
during the fourth quarter of 2006 in connection with the redemption
of certain trust preferred securities.
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