KEYCORP 
By CLEVELAND, April 17, 2014 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced first quarter net income from continuing operations attributable to Key common shareholders of $232 million, or $.26 per common share, compared to $229 million, or $.26 per common share, for the fourth quarter of 2013, and $196 million, or $.21 per common share, for the first quarter of 2013.
"This was a solid quarter for Key, delivering on our commitments to generate positive operating leverage, maintain our strong risk management practices, and remain disciplined in the way we manage capital," said Chairman and Chief Executive Officer Beth Mooney. "Revenue trends benefited from solid loan growth, driven by commercial, financial and agricultural loans, and the investments we made in our fee-based businesses. Our results also demonstrate our continued focus on improving productivity and efficiency, with expenses declining from the year-ago period and prior quarter. Our cash efficiency ratio was 65%, within our targeted range of 60% to 65%, and we remain committed to further improvement."
"Credit quality trends and our provision for loan losses continued to reflect our strong risk management practices, with both nonperforming loans and net charge-offs declining," added Mooney.
"Capital management also remains a priority for Key," continued Mooney. "We expect to return a significant amount of our net income to shareholders over the next four quarters through the planned capital actions we announced last month at the conclusion of the CCAR review. Our plan included a share repurchase program of up to $542 million, and, subject to approval by our Board of Directors, an increase of the quarterly common share dividend to $.065 per share. We expect these actions will lead to an estimated payout ratio that is among the highest in our peer group for the second consecutive year."
FIRST QUARTER 2014 FINANCIAL RESULTS, from continuing operations
Compared with First Quarter of 2013
-- Average loans up 4.0% (5.5% excluding impact of exit portfolios), driven
by an 8.9% growth in commercial, financial and agricultural loans;
period ending loans up 5.5%
-- Average deposits up 3.9% due to commercial mortgage servicing
acquisition and growth in commercial and public deposits offsetting
declines in certificates of deposits
-- Positive operating leverage as the decline in expense more than offset
the decline in revenue
-- Net interest income (taxable-equivalent) down $20 million, primarily due
to lower asset yields and loan fees
-- Noninterest income up $10 million, reflecting higher principal investing
gains, growth in investment banking and debt placement fees, and
benefits from investments in commercial mortgage servicing
-- Noninterest expense down $19 million, reflecting $5 million in lower
efficiency-related charges, and the successful execution of our
efficiency initiative
-- Asset quality improved, with net loan charge-offs to average loans
declining from .38% to .15%
-- Disciplined capital management, with the announcement of new planned
capital actions including a share repurchase program of up to $542
million, and, subject to approval by Key's Board of Directors, an
increase of the quarterly common share dividend to $.065 per share
Compared with Fourth Quarter of 2013
-- Average loans up 2.1%, driven by a 4.8% growth in commercial, financial
and agricultural loans; period ending loans up 1.8%
-- Average deposits down 3.2% due to the expected reduction of escrow
deposits in the commercial mortgage servicing business
-- Net interest income (taxable-equivalent) down $20 million due to lower
asset yields as well as fewer days in the quarter
-- Noninterest income down $18 million, reflecting a decline in
corporate-owned life insurance income and lower commercial mortgage
special servicing fees
-- Noninterest expense down $50 million due to a decline of $12 million
related to efficiency charges, and lower expenses for marketing,
incentive compensation, and salaries
-- Asset quality remains strong, with a 12 basis point improvement in net
loan charge-offs to average loans
-- Disciplined capital management, repurchasing $141 million of common
shares during the first quarter of 2014 and maintaining a top tier
capital position with Tier 1 common equity of 11.22%
Selected Financial Highlights
dollars in millions, except per share data Change 1Q14 vs.
1Q14 4Q13 1Q13 4Q13 1Q13
---- ---- ---- ---- ----
Income (loss) from continuing operations attributable to Key common
shareholders $232 $229 $196 1.3% 18.4%
Income (loss) from continuing operations attributable to Key common shareholders per
common share -assuming dilution .26 .26 .21 - 23.8
Return on average total assets from continuing operations 1.13% 1.08% .99% N/A N/A
Tier 1 common equity (a) 11.22 11.22 11.40 N/A N/A
Book value at period end $11.43 $11.25 $10.89 1.6% 5.0%
Net interest margin (TE) from continuing operations 3.00% 3.01% 3.24% N/A N/A
(a) The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the
computations of certain financial measures related to "Tier 1 common equity." The table reconciles the
GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for
period-to-period comparisons.
TE = Taxable Equivalent, N/A = Not Applicable
INCOME STATEMENT HIGHLIGHTS
Revenue
dollars in millions Change 1Q14 vs.
1Q14 4Q13 1Q13 4Q13 1Q13
---- ---- ---- ---- ----
Net interest income (TE) $569 $589 $589 (3.4)% (3.4)%
Noninterest income 435 453 425 (4.0) 2.4
--- --- --- ---- ---
Total revenue $1,004 $1,042 $1,014 (3.6)% (1.0)%
===
TE = Taxable Equivalent
Taxable-equivalent net interest income was $569 million for the first quarter of 2014, and the net interest margin was 3.00%. These results compare to taxable-equivalent net interest income of $589 million and a net interest margin of 3.24% for the first quarter of 2013. The decrease in net interest income and net interest margin is attributable to lower asset yields and loan fees, offsetting the impact of loan growth. The decreases were also partially offset by the maturity of higher-rate certificates of deposits and a more favorable mix of lower-cost deposits.
Compared to the fourth quarter of 2013, taxable-equivalent net interest income decreased by $20 million, and the net interest margin declined by one basis point. The decrease in net interest income was primarily due to lower asset yields as well as fewer days in the first quarter of 2014. The decrease was partially offset by increased loan growth and a lower cost of funds as higher-rate certificates of deposits matured.
Noninterest Income
dollars in millions Change 1Q14 vs.
1Q14 4Q13 1Q13 4Q13 1Q13
---- ---- ---- ---- ----
Trust and investment services income $98 $98 $95 - 3.2%
Investment banking and debt placement fees 84 84 79 - 6.3
Service charges on deposit accounts 63 68 69 (7.4)% (8.7)
Operating lease income and other leasing gains 29 26 25 11.5 16.0
Corporate services income 42 40 45 5.0 (6.7)
Cards and payments income 38 40 37 (5.0) 2.7
Corporate-owned life insurance income 26 33 30 (21.2) (13.3)
Consumer mortgage income 2 3 7 (33.3) (71.4)
Mortgage servicing fees 15 22 8 (31.8) 87.5
Net gains (losses) from principal investing 24 20 8 20.0 200.0
Other income 14 19 22 (26.3) (36.4)
--- --- --- ----- -----
Total noninterest income $435 $453 $425 (4.0)% 2.4%
===
Key's noninterest income was $435 million for the first quarter of 2014, compared to $425 million for the year-ago quarter. Key continued to see benefits from recent investments, with mortgage servicing fees increasing $7 million and card and payments income increasing $1 million. Reflecting the benefits of Key's focus on targeted industries, investment banking and debt placement fees increased $5 million from the prior year. In addition, net gains from principal investing increased $16 million. These increases were partially offset by decreases of $8 million in other income mostly related to lower fixed income sales and trading income, a decline in service charges on deposit accounts of $6 million due to lower non-sufficient funds and overdraft charges, and a $5 million decrease in consumer mortgage income.
Compared to the fourth quarter of 2013, noninterest income decreased by $18 million. Mortgage servicing fees decreased $7 million as the fourth quarter of 2013 had higher commercial mortgage special servicing fees, and service charges on deposit accounts decreased $5 million due to lower non-sufficient funds and overdraft charges. Corporate-owned life insurance income also declined $7 million due to seasonality of annual dividend payments in the fourth quarter.
Noninterest Expense
dollars in millions Change 1Q14 vs.
1Q14 4Q13 1Q13 4Q13 1Q13
---- ---- ---- ---- ----
Personnel expense $388 $398 $391 (2.5)% (.8)%
Nonpersonnel expense 274 314 290 (12.7) (5.5)
--- --- --- ----- ----
Total noninterest expense $662 $712 $681 (7.0)% (2.8)%
Key's noninterest expense was $662 million for the first quarter of 2014, compared to $681 million for the same period last year. Excluding efficiency charges of $10 million in the first quarter of 2014 and $15 million in the first quarter of 2013, noninterest expense was down $14 million from the prior year. The provision (credit) for losses on lending-related commitments decreased $5 million, which was a credit of $2 million in the current quarter compared to an expense of $3 million the prior year. Additionally, there were declines in various other miscellaneous expenses.
Compared to the fourth quarter of 2013, noninterest expense decreased by $50 million. The reduction in expenses reflected $12 million in lower efficiency-related charges. Marketing decreased $13 million from the prior quarter. Personnel expense decreased $10 million due to lower incentive compensation and salary expense. In addition, other expense decreased $12 million from the prior quarter.
BALANCE SHEET HIGHLIGHTS
As of March 31, 2014, Key had total assets of $90.8 billion compared to $92.9 billion at December 31, 2013, and $89.2 billion at March 31, 2013.
Average Loans
dollars in millions Change 3-31-14 vs.
3-31-14 12-31-13 3-31-13 12-31-13 3-31-13
------- -------- ------- -------- -------
Commercial, financial and
agricultural (a) $25,390 $24,218 $23,317 4.8% 8.9%
Other commercial loans 13,337 13,266 13,493 .5 (1.2)
Total home equity loans 10,630 10,653 10,200 (.2) 4.2
Other consumer loans 5,389 5,471 5,616 (1.5) (4.0)
----- ----- ----- ---- ----
Total loans $54,746 $53,608 $52,626 2.1% 4.0%
(a) Commercial, financial and
agricultural average balances
for the three months ended March
31, 2014, December 31, 2013, and
March 31, 2013, include $94
million, $97 million, and $91
million of assets from
commercial credit cards,
respectively.
Average loans were $54.7 billion for the first quarter of 2014, an increase of $2.1 billion compared to the first quarter of 2013. The loan growth occurred primarily in the commercial, financial and agricultural portfolio, and was broad-based across Key's commercial lines of business. Consumer loans increased $203 million, as the $430 million increase in home equity loans was partially offset by the $227 million decrease in other consumer loans. The growth in home equity loans was balanced across Key's geographic footprint.
Compared to the fourth quarter of 2013, average loans increased by $1.1 billion. Commercial, financial and agricultural loans increased $1.2 billion. Consumer loans declined $105 million, with $82 million of the decrease related to exit portfolios.
Average Deposits
dollars in millions Change 3-31-14 vs.
3-31-14 12-31-13 3-31-13 12-31-13 3-31-13
------- -------- ------- -------- -------
Non-time deposits (a) $59,197 $61,394 $55,819 (3.6)% 6.1%
Certificates of deposits ($100,000 or more) 2,758 2,649 2,911 4.1 (5.3)
Other time deposits 3,679 3,736 4,451 (1.5) (17.3)
----- ----- ----- ---- -----
Total deposits $65,634 $67,779 $63,181 (3.2)% 3.9%
===
Cost of total deposits (a) .20% .20% .29% N/A N/A
(a) Excludes deposits in foreign office.
N/A = Not Applicable
Average deposits, excluding deposits in foreign office, totaled $65.6 billion for the first quarter of 2014, an increase of $2.5 billion compared to the year-ago quarter. Demand deposits increased by $1.3 billion and NOW and money market deposit accounts increased $2.1 billion, mostly due to growth related to commercial and public sector client inflows as well as increases related to the commercial mortgage servicing acquisition. This growth was partially offset by run-off in certificates of deposit.
Compared to the fourth quarter of 2013, average deposits, excluding deposits in foreign office, decreased by $2.1 billion. Demand deposits were down $2.4 billion, driven by the expected reduction of escrow deposits in the commercial mortgage servicing business as well as seasonal outflows related to other commercial clients. This decrease was partially offset by increases in NOW and money market deposit accounts.
ASSET QUALITY
dollars in millions Change 1Q14 vs.
1Q14 4Q13 1Q13 4Q13 1Q13
---- ---- ---- ---- ----
Net loan charge-offs $20 $37 $49 (45.9)% (59.2)%
Net loan charge-offs to average total loans .15% .27% .38% N/A N/A
Nonperforming loans at period end
(a) $449 $508 $650 (11.6) (30.9)
Nonperforming assets at period end 469 531 705 (11.7) (33.5)
Allowance for loan and lease losses 834 848 893 (1.7) (6.6)
Allowance for loan and lease losses to
nonperforming loans 185.7% 166.9% 137.4% N/A N/A
Provision (credit) for loan and
lease losses $6 $19 $55 (68.4)% (89.1)%
(a) March 31, 2014, December 31, 2013, and March 31, 2013, loan balances exclude $16 million, $16 million, and $22 million of purchased credit impaired loans, respectively.
N/A = Not Applicable
Key's provision for loan and lease losses was $6 million for the first quarter of 2014, compared to $19 million for the fourth quarter of 2013 and $55 million for the year-ago quarter. Key's allowance for loan and lease losses was $834 million, or 1.50%, of total period-end loans at March 31, 2014, compared to 1.56% at December 31, 2013, and 1.70% at March 31, 2013.
Net loan charge-offs for the first quarter of 2014 totaled $20 million, or .15%, of average total loans. These results compare to $37 million, or .27%, for the fourth quarter of 2013, and $49 million, or .38%, for the same period last year.
At March 31, 2014, Key's nonperforming loans totaled $449 million and represented .81% of period-end portfolio loans, compared to .93% at December 31, 2013, and 1.24% at March 31, 2013. Nonperforming assets at March 31, 2014, totaled $469 million and represented .85% of period-end portfolio loans and OREO and other nonperforming assets, compared to .97% at December 31, 2013, and 1.34% at March 31, 2013.
CAPITAL
Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at March 31, 2014.
Capital Ratios
3-31-14 12-31-13 3-31-13
------- -------- -------
Tier 1 common equity (a),
(b) 11.22% 11.22% 11.40%
Tier 1 risk-based capital
(a) 11.96 11.96 12.19
Total risk based capital
(a) 14.17 14.33 15.02
Tangible common equity to
tangible assets (b) 10.14 9.80 10.24
Leverage (a) 11.32 11.11 11.36
(a) 3-31-14 ratio is estimated.
(b) The table entitled "GAAP to Non-GAAP
Reconciliations" in the attached
financial supplement presents the
computations of certain financial
measures related to "tangible common
equity" and "Tier 1 common equity."
The table reconciles the GAAP
performance measures to the
corresponding non-GAAP measures, which
provides a basis for period-to-period
comparisons.
As shown in the preceding table, at March 31, 2014, Key's estimated Tier 1 common equity and Tier 1 risk-based capital ratios stood at 11.22% and 11.96%, respectively. In addition, the tangible common equity ratio was 10.14% at March 31, 2014.
In October 2013, federal banking regulators published the final Basel III capital framework for U.S. banking organizations (the "Regulatory Capital Rules"). While the Regulatory Capital Rules became effective January 1, 2014, the mandatory compliance date for Key as a "standardized approach" banking organization begins on January 1, 2015, subject to transitional provisions extending to January 1, 2019. Key's estimated Common Equity Tier 1 as calculated under the Regulatory Capital Rules was 10.67% at March 31, 2014. This estimate exceeds the fully phased-in required minimum Common Equity Tier 1 and Capital Conservation Buffer of 7.00%.
Summary of Changes in Common Shares Outstanding
in thousands Change 1Q14 vs.
1Q14 4Q13 1Q13 4Q13 1Q13
---- ---- ---- ---- ----
Shares outstanding at beginning of period 890,724 897,821 925,769 (.8)% (3.8)%
Common shares repurchased (9,845) (7,659) (6,790) 28.5 45.0
Shares reissued (returned) under employee benefit plans 3,990 562 3,602 610.0 10.8
----- --- ----- ----- ----
Shares outstanding at end of period 884,869 890,724 922,581 (.7)% (4.1)%
=======
Key completed its 2013 CCAR capital plan, including common share repurchases of $141 million, in the first quarter of 2014. Key's 2014 CCAR capital plan includes common share repurchases of up to $542 million, which are expected to be executed through the first quarter of 2015.
LINE OF BUSINESS RESULTS
The following table shows the contribution made by each major business segment to Key's taxable-equivalent revenue from continuing operations and income (loss) from continuing operations attributable to Key for the periods presented. For more detailed financial information pertaining to each business segment, see the tables at the end of this release.
Major Business Segments
dollars in millions Change 1Q14 vs.
1Q14 4Q13 1Q13 4Q13 1Q13
---- ---- ---- ---- ----
Revenue from continuing operations (TE)
--------------------------------------
Key Community Bank $541 $561 $575 (3.6)% (5.9)%
Key Corporate Bank 391 411 383 (4.9) 2.1
Other Segments 70 73 54 (4.1) 29.6
--- --- --- ---- ----
Total segments 1,002 1,045 1,012 (4.1) (1.0)
Reconciling Items 2 (3) 2 N/M -
--- --- --- --- ---
Total $1,004 $1,042 $1,014 (3.6)% (1.0)%
===
Income (loss) from continuing operations attributable to Key
------------------------------------------------------------
Key Community Bank $63 $43 $47 46.5% 34.0%
Key Corporate Bank 122 133 113 (8.3) 8.0
Other Segments 53 61 43 (13.1) 23.3
--- --- --- ----- ----
Total segments 238 237 203 .4 17.2
Reconciling Items - (2) (2) N/M N/M
--- --- --- --- ---
Total $238 $235 $201 1.3% 18.4%
===
TE = Taxable equivalent, N/M = Not Meaningful
Key Community Bank
dollars in millions Change 1Q14 vs.
1Q14 4Q13 1Q13 4Q13 1Q13
---- ---- ---- ---- ----
Summary of operations
Net interest income (TE) $363 $377 $387 (3.7)% (6.2)%
Noninterest income 178 184 188 (3.3) (5.3)
--- --- --- ---- ----
Total revenue (TE) 541 561 575 (3.6) (5.9)
Provision (credit) for loan and lease losses 9 32 59 (71.9) (84.7)
Noninterest expense 432 460 441 (6.1) (2.0)
--- --- --- ---- ----
Income (loss) before income taxes (TE) 100 69 75 44.9 33.3
Allocated income taxes (benefit) and TE adjustments 37 26 28 42.3 32.1
--- --- --- ---- ----
Net income (loss) attributable to Key $63 $43 $47 46.5% 34.0%
===
Average balances
Loans and leases $29,793 $29,596 $28,977 .7% 2.8%
Total assets 31,943 31,785 31,474 .5 1.5
Deposits 49,824 50,409 49,349 (1.2) 1.0
Assets under management at period end $26,549 $26,664 $25,101 (.4)% 5.8%
TE = Taxable Equivalent
Additional Key Community Bank Data
dollars in millions Change 1Q14 vs.
1Q14 4Q13 1Q13 4Q13 1Q13
---- ---- ---- ---- ----
Noninterest income
Trust and investment services income $67 $66 $65 1.5% 3.1%
Service charges on deposit accounts 52 58 58 (10.3) (10.3)
Cards and payments income 35 37 33 (5.4) 6.1
Other noninterest income 24 23 32 4.3 (25.0)
--- --- --- --- -----
Total noninterest income $178 $184 $188 (3.3)% (5.3)%
===
Average deposit balances
NOW and money market deposit accounts $27,428 $27,438 $26,109 - 5.1%
Savings deposits 2,465 2,472 2,463 (.3)% .1
Certificates of deposit ($100,000 or more) 2,163 2,124 2,498 1.8 (13.4)
Other time deposits 3,673 3,731 4,445 (1.6) (17.4)
Deposits in foreign office 309 285 270 8.4 14.4
Noninterest-bearing deposits 13,786 14,359 13,564 (4.0) 1.6
------ ------ ------ ---- ---
Total deposits $49,824 $50,409 $49,349 (1.2)% 1.0%
===
Home equity loans
Average balance $10,305 $10,310 $9,787
Weighted-average loan-to-value ratio (at
date of origination) 71% 71% 70%
Percent first lien positions 58 58 55
Other data
Branches 1,027 1,028 1,084
Automated teller machines 1,330 1,335 1,482
Key Community Bank Summary of Operations
-- Average loan balances up 2.8% from prior year
-- Average core deposits up 3.7% from prior year
-- Net income attributable to Key Community Bank up 34% from the prior year
Key Community Bank recorded net income attributable to Key of $63 million for the first quarter of 2014, compared to net income attributable to Key of $47 million for the year-ago quarter.
Taxable-equivalent net interest income decreased by $24 million, or 6.2%, from the first quarter of 2013. Average loans and leases grew 2.8% while average deposits increased 1% from one year ago. However, these volume-related increases were offset by declines in the deposit spread as a result of the continued low-rate environment.
Noninterest income declined by $10 million, or 5.3%, from the year-ago quarter. Consumer mortgage income decreased $5 million, and service charges on deposit accounts declined $6 million due to lower non-sufficient funds and overdraft charges. These decreases were partially offset by increases in cards and payments income and trust and investment services income of $2 million each.
The provision for loan and lease losses decreased by $50 million, or 84.7%, from the first quarter of 2013. Net loan charge-offs decreased $19 million from the same period one year ago.
Noninterest expense declined by $9 million, or 2%, from the year-ago quarter as a result of Key's efficiency initiative. Personnel expense decreased $18 million primarily due to declines in salaries, incentive compensation, and employee benefits. This decrease was partially offset by a $9 million increase in nonpersonnel expense primarily due to increases in the provision for losses on lending-related commitments, miscellaneous expense, and other support costs.
Key Corporate Bank
dollars in millions Change 1Q14 vs.
1Q14 4Q13 1Q13 4Q13 1Q13
---- ---- ---- ---- ----
Summary of operations
Net interest income (TE) $194 $199 $195 (2.5)% (.5)%
Noninterest income 197 212 188 (7.1) 4.8
--- --- --- ---- ---
Total revenue (TE) 391 411 383 (4.9) 2.1
Provision (credit) for loan and lease losses (1) (10) 2 N/M N/M
Noninterest expense 199 216 203 (7.9) (2.0)
--- --- --- ---- ----
Income (loss) before income taxes (TE) 193 205 178 (5.9) 8.4
Allocated income taxes and TE adjustments 71 72 65 (1.4) 9.2
--- --- --- ---- ---
Net income (loss) attributable to Key $122 $133 $113 (8.3)% 8.0%
===
Average balances
Loans and leases $21,445 $20,336 $19,466 5.5% 10.2%
Loans held for sale 429 668 409 (35.8) 4.9
Total assets 25,363 24,344 23,181 4.2 9.4
Deposits 15,800 17,370 13,966 (9.0) 13.1
Assets under management at period end $12,344 $10,241 $10,613 20.5% 16.3%
TE = Taxable Equivalent, N/M = Not Meaningful
Additional Key Corporate Bank Data
dollars in millions Change 1Q14 vs.
1Q14 4Q13 1Q13 4Q13 1Q13
---- ---- ---- ---- ----
Noninterest income
Trust and investment services income $31 $32 $30 (3.1)% 3.3%
Investment banking and debt placement fees 84 84 79 - 6.3
Operating lease income and other leasing gains 21 20 15 5.0 40.0
Corporate services income 28 29 29 (3.4) (3.4)
Service charges on deposit accounts 11 10 11 10.0 -
Cards and payments income 3 3 4 - (25.0)
--- --- --- --- -----
Payments and services income 42 42 44 - (4.5)
Mortgage servicing fees 15 22 8 (31.8) 87.5
Other noninterest income 4 12 12 (66.7) (66.7)
--- --- --- ----- -----
Total noninterest income $197 $212 $188 (7.1)% 4.8%
===
N/M = Not Meaningful
Key Corporate Bank Summary of Operations
-- Average loan balances up 10.2% from the prior year
-- Average deposits up 13.1% from the prior year
-- Total revenue increased 2.1% from prior year
-- Investment banking and debt placement fees increased 6.3% from the prior
year
Key Corporate Bank recorded net income attributable to Key of $122 million for the first quarter of 2014, compared to $113 million for the same period one year ago.
Taxable-equivalent net interest income decreased by $1 million, or .5%, compared to the first quarter of 2013. Average earning assets increased $2.3 billion, or 11.1%, from the year-ago quarter, primarily driven by loan growth in commercial, financial and agricultural and real estate commercial mortgage. This growth was broad-based across the Corporate Bank lines of business. The increase in earning assets was offset by declines from loan spread compression. Average deposit balances increased $1.8 billion, or 13.1%, from the year-ago quarter, driven by increases in Public Sector as well as increases related to the commercial mortgage servicing acquisition. This increase in deposit balances was more than offset by declines in the deposit spread as a result of the continued low-rate environment.
Noninterest income increased by $9 million, or 4.8%, from the first quarter of 2013. This increase was driven by higher mortgage servicing fees of $7 million, operating lease income and other leasing gains of $6 million, and investment banking and debt placement fees of $5 million from the year-ago quarter. Offsetting these increases was an $8 million decrease in other income primarily due to declines in fixed income sales and trading.
The provision for loan and lease losses decreased $3 million compared to the first quarter of 2013. Net loan charge-offs decreased $13 million from the same period one year ago primarily due to a sizable recovery.
Noninterest expense decreased by $4 million, or 2%, from the first quarter of 2013. A lower provision for losses on lending-related commitments and reduced miscellaneous expenses offset increases in personnel expense.
Other Segments
Other Segments consist of Corporate Treasury, Community Development, Key's Principal Investing unit, and various exit portfolios. Other Segments generated net income attributable to Key of $53 million for the first quarter of 2014, compared to net income attributable to Key of $43 million for the same period last year. These results were primarily attributable to an increase in net gains (losses) from principal investing of $16 million.
*****
KeyCorp was organized more than 160 years ago and is headquartered in Cleveland, Ohio. One of the nation's largest bank-based financial services companies, Key had assets of approximately $90.8 billion at March 31, 2014.
Key provides deposit, lending, cash management and investment services to individuals and small and mid-sized businesses in 12 states under the name KeyBank National Association. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC.
INVESTOR RELATIONS: www.key.com/ir
KEY MEDIA NEWSROOM: www.key.com/newsroom
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Key's financial condition, results of operations, and profitability. Forward-looking statements can be identified by words such as "outlook," "goal," "objective," "plan," "expect," "anticipate," "intend," "project," "believe," or "estimate." Forward-looking statements represent management's current expectations and forecasts regarding future events. If underlying assumptions prove to be inaccurate or unknown risks or uncertainties arise, actual results could vary materially from these projections or expectations. Factors that could cause Key's actual results to differ from those described in the forward-looking statements can be found in KeyCorp's Form 10-K for the year ended December 31, 2013, which has been filed with the Securities and Exchange Commission and is available on Key's website (www.key.com/ir) and on the Securities and Exchange Commission's website (www.sec.gov). These factors may include, among others: deterioration of commercial real estate market fundamentals, adverse changes in credit quality trends, declining asset prices, changes in local, regional and international business, economic or political conditions, and the extensive and increasing regulation of the U.S. financial services industry. Forward looking statements speak only as of the date they are made and Key does not undertake any obligation to update the forward-looking statements to reflect new information or future events.
Notes to Editors:
A live Internet broadcast of KeyCorp's conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on Thursday, April 17, 2014. An audio replay of the call will be available through April 24, 2014.
For up-to-date company information, media contacts, and facts and figures about Key's lines of business, visit our Media Newsroom at https://www.key.com/newsroom.
KeyCorp
First Quarter 2014
Financial Supplement
Page
----
13 Financial Highlights
15 GAAP to Non-GAAP Reconciliation
17 Consolidated Balance Sheets
18 Consolidated Statements of Income
19 Consolidated Average Balance Sheets,
and Net Interest Income and Yields/
Rates From Continuing Operations
20 Noninterest Expense
20 Personnel Expense
21 Loan Composition
21 Loans Held for Sale Composition
21 Summary of Changes in Loans Held for
Sale
22 Exit Loan Portfolio From Continuing
Operations
22 Asset Quality Statistics From
Continuing Operations
23 Summary of Loan and Lease Loss
Experience From Continuing
Operations
24 Summary of Nonperforming Assets and
Past Due Loans From Continuing
Operations
25 Summary of Changes in Nonperforming
Loans From Continuing Operations
25 Summary of Changes in Nonperforming
Loans Held for Sale From Continuing
Operations
25 Summary of Changes in Other Real
Estate Owned, Net of Allowance, From
Continuing Operations
26 Line of Business Results
Financial Highlights
(dollars in millions, except per share amounts)
Three months ended
------------------
3-31-14 12-31-13 3-31-13
Summary of operations
Net interest
income (TE) $569 $589 $589
Noninterest
income 435 453 425
Total revenue (TE) 1,004 1,042 1,014
Provision
(credit) for
loan and
lease losses 6 19 55
Noninterest
expense 662 712 681
Income (loss)
from
continuing
operations
attributable
to Key 238 235 201
Income (loss)
from
discontinued
operations,
net of taxes
(a) 4 (5) 3
Net income
(loss)
attributable
to Key 242 230 204
Income (loss)
from
continuing
operations
attributable
to Key common
shareholders $232 $229 $196
Income (loss)
from
discontinued
operations,
net of taxes
(a) 4 (5) 3
Net income
(loss)
attributable
to Key common
shareholders 236 224 199
Per common share
Income (loss)
from
continuing
operations
attributable
to Key common
shareholders $.26 $.26 $.21
Income (loss)
from
discontinued
operations,
net of taxes
(a) - (.01) -
Net income
(loss)
attributable
to Key common
shareholders
(b) .27 .25 .22
Income (loss)
from
continuing
operations
attributable
to Key common
shareholders
-assuming
dilution .26 .26 .21
Income (loss)
from
discontinued
operations,
net of taxes
-assuming
dilution (a) - (.01) -
Net income
(loss)
attributable
to Key common
shareholders
-assuming
dilution
(b) .26 .25 .21
Cash dividends
paid .055 .055 .05
Book value at
period end 11.43 11.25 10.89
Tangible book
value at
period end 10.28 10.11 9.78
Market price
at period end 14.24 13.42 9.96
Performance ratios
From
continuing
operations:
Return on
average total
assets 1.13% 1.08% .99%
Return on
average
common equity 9.33 9.10 7.96
Return on
average
tangible
common equity
(c) 10.38 10.13 8.87
Net interest
margin (TE) 3.00 3.01 3.24
Cash
efficiency
ratio (c) 64.9 67.4 66.0
From
consolidated
operations:
Return on
average total
assets 1.09% 1.00% .94%
Return on
average
common equity 9.50 8.90 8.08
Return on
average
tangible
common equity
(c) 10.56 9.91 9.01
Net interest
margin (TE) 2.95 2.91 3.16
Loan to
deposit (d) 87.5 83.8 86.9
Capital ratios at period end
Key
shareholders'
equity to
assets 11.46% 11.09% 11.59%
Key common
shareholders'
equity to
assets 11.14 10.78 11.27
Tangible
common equity
to tangible
assets (c) 10.14 9.80 10.24
Tier 1 common
equity (c),
(e) 11.22 11.22 11.40
Tier 1 risk-
based capital
(e) 11.96 11.96 12.19
Total risk-
based capital
(e) 14.17 14.33 15.02
Leverage (e) 11.32 11.11 11.36
Financial Highlights (continued)
(dollars in millions)
Three months ended
------------------
3-31-14 12-31-13 3-31-13
------- -------- -------
Asset quality -from continuing
operations
Net loan
charge-offs $20 $37 $49
Net loan
charge-offs
to average
total loans .15% .27% .38%
Allowance for
loan and lease
losses $834 $848 $893
Allowance for
credit losses 869 885 925
Allowance for
loan and lease
losses to
period-end
loans 1.50% 1.56% 1.70%
Allowance for
credit losses
to period-end
loans 1.57 1.63 1.76
Allowance for
loan and lease
losses to
nonperforming
loans 185.7 166.9 137.4
Allowance for
credit losses
to
nonperforming
loans 193.5 174.2 142.3
Nonperforming
loans at
period end
(f) $449 $508 $650
Nonperforming
assets at
period end 469 531 705
Nonperforming
loans to
period-end
portfolio
loans .81% .93% 1.24%
Nonperforming
assets to
period-end
portfolio
loans plus
OREO and other
nonperforming
assets .85 .97 1.34
Trust and brokerage assets -from
continuing operations
Assets under
management $38,893 $36,905 $35,714
Nonmanaged and
brokerage
assets 47,396 47,418 37,115
Other data
Average full-
time
equivalent
employees 14,055 14,197 15,396
Branches 1,027 1,028 1,084
Taxable-equivalent adjustment $6 $6 $6
(a) In April 2009, management decided to
wind down the operations of Austin
Capital Management, Ltd., a subsidiary
that specialized in managing hedge fund
investments for institutional
customers. In September 2009,
management decided to discontinue the
education lending business conducted
through Key Education Resources, the
education payment and financing unit of
KeyBank National Association. In
February 2013, Key decided to sell its
investment subsidiary, Victory Capital
Management, and its broker-dealer
affiliate, Victory Capital Advisors, to
a private equity fund. As a result of
these decisions, Key has accounted for
these businesses as discontinued
operations.
(b) Earnings per share may not foot due to
rounding.
(c) The following table entitled "GAAP to
Non-GAAP Reconciliations" presents the
computations of certain financial
measures related to "tangible common
equity," "Tier 1 common equity," and
"cash efficiency." The table
reconciles the GAAP performance
measures to the corresponding non-GAAP
measures, which provides a basis for
period-to-period comparisons.
(d) Represents period-end consolidated
total loans and loans held for sale
(excluding education loans in the
securitization trusts) divided by
period-end consolidated total deposits
(excluding deposits in foreign office).
(e) 3-31-14 ratio is estimated.
(f) March 31, 2014, December 31, 2013, and
March 31, 2013, loan balances exclude
$16 million, $16 million, and $22
million of purchased credit impaired
loans, respectively.
TE = Taxable Equivalent, GAAP = U.S. generally accepted
accounting principles
GAAP to Non-GAAP Reconciliations
(dollars in millions)
The table below presents certain non-GAAP financial measures related to "tangible common equity," "return on tangible common equity," "Tier 1 common equity," "pre-provision net revenue," and "cash efficiency ratio."
The tangible common equity ratio and the return on tangible common equity ratio have been a focus for some investors, and management believes these ratios may assist investors in analyzing Key's capital position without regard to the effects of intangible assets and preferred stock. Traditionally, the banking regulators have assessed bank and bank holding company capital adequacy based on both the amount and the composition of capital, the calculation of which is prescribed in federal banking regulations. Since the commencement of the Comprehensive Capital Analysis and Review process in early 2009, the Federal Reserve has focused its assessment of capital adequacy on a component of Tier 1 risk-based capital known as Tier 1 common equity, a non-GAAP financial measure. Because the Federal Reserve has long indicated that voting common shareholders' equity (essentially Tier 1 risk-based capital less preferred stock, qualifying capital securities, and noncontrolling interests in subsidiaries) generally should be the dominant element in Tier 1 risk-based capital, this focus on Tier 1 common equity is consistent with existing capital adequacy categories.
Tier 1 common equity is neither formally defined by GAAP nor prescribed in amount by federal banking regulations; this measure is considered to be a non-GAAP financial measure. Since analysts and banking regulators may assess Key's capital adequacy using tangible common equity and Tier 1 common equity, management believes it is useful to enable investors to assess Key's capital adequacy on these same bases. The table also reconciles the GAAP performance measures to the corresponding non-GAAP measures.
The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of the provision for loan and lease losses makes it easier to analyze the results by presenting them on a more comparable basis.
The cash efficiency ratio is a ratio of two non-GAAP performance measures. As such, there is no directly comparable GAAP performance measure. The cash efficiency ratio performance measure removes the impact of Key's intangible asset amortization from the calculation. Management believes this ratio provides greater consistency and comparability between Key's results and those of its peer banks. Additionally, this ratio is used by analysts and investors as they develop earnings forecasts and peer bank analysis.
Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.
Three months ended
3-31-14 12-31-13 3-31-13
------- -------- -------
Tangible common equity to tangible assets at period end
Key shareholders' equity (GAAP) $10,403 $10,303 $10,340
Less: Intangible assets (a) 1,012 1,014 1,024
Preferred Stock, Series A (b) 282 282 291
--- --- ---
Tangible common equity (non-GAAP) $9,109 $9,007 $9,025
====== ====== ======
Total assets (GAAP) $90,802 $92,934 $89,198
Less: Intangible assets (a) 1,012 1,014 1,024
Tangible assets (non-GAAP) $89,790 $91,920 $88,174
======= ======= =======
Tangible common equity to tangible
assets ratio (non-GAAP) 10.14% 9.80% 10.24%
Tier 1 common equity at period end
Key shareholders' equity (GAAP) $10,403 $10,303 $10,340
Qualifying capital securities 339 339 339
Less: Goodwill 979 979 979
Accumulated other comprehensive income (loss) (c) (367) (394) (204)
Other assets (d) 86 89 106
--- --- ---
Total Tier 1 capital (regulatory) 10,044 9,968 9,798
Less: Qualifying capital securities 339 339 339
Preferred Stock, Series A (b) 282 282 291
--- --- ---
Total Tier 1 common equity (non-GAAP) $9,423 $9,347 $9,168
====== ====== ======
Net risk-weighted assets
(regulatory) (e) $83,951 $83,328 $80,400
Tier 1 common equity ratio (non-
GAAP) (e) 11.22% 11.22% 11.40%
Pre-provision net revenue
Net interest income (GAAP) $563 $583 $583
Plus: Taxable-equivalent adjustment 6 6 6
Noninterest income (GAAP) 435 453 425
Less: Noninterest expense (GAAP) 662 712 681
Pre-provision net revenue from
continuing operations (non-GAAP) $342 $330 $333
===
GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
Three months ended
------------------
3-31-14 12-31-13 3-31-13
------- -------- -------
Average tangible common equity
Average Key shareholders' equity
(GAAP) $10,371 $10,272 $10,279
Less: Intangible assets (average) (f) 1,013 1,016 1,027
Preferred Stock, Series A (average) 291 291 291
--- --- ---
Average tangible common equity (non-GAAP) $9,067 $8,965 $8,961
====== ====== ======
Return on average tangible common equity from continuing operations
Net income (loss) from continuing
operations attributable to Key
common shareholders (GAAP) $232 $229 $196
Average tangible common equity
(non-GAAP) 9,067 8,965 8,961
Return on average tangible common
equity from continuing operations
(non-GAAP) 10.38% 10.13% 8.87%
Return on average tangible common equity consolidated
Net income (loss) attributable to
Key common shareholders (GAAP) $236 $224 $199
Average tangible common equity
(non-GAAP) 9,067 8,965 8,961
Return on average tangible common
equity consolidated (non-GAAP) 10.56% 9.91% 9.01%
Cash efficiency ratio
Noninterest expense (GAAP) $662 $712 $681
Less: Intangible asset amortization (GAAP) 10 10 12
Adjusted noninterest expense (non-GAAP) $652 $702 $669
==== ==== ====
Net interest income (GAAP) $563 $583 $583
Plus: Taxable-equivalent adjustment 6 6 6
Noninterest income (GAAP) 435 453 425
--- --- ---
Total taxable-equivalent revenue (non-GAAP) $1,004 $1,042 $1,014
====== ====== ======
Cash efficiency ratio (non-GAAP) 64.9% 67.4% 66.0%
Three months ended
------------------
3-31-14 12-31-13
------- --------
Common Equity Tier 1 under the Regulatory Capital Rules (estimates)
Tier 1 common equity under current
regulatory rules $9,423 $9,347
Adjustments from current
regulatory rules to the
Regulatory Capital Rules:
Deferred tax assets and other (g) (113) (129)
---- ----
Common Equity Tier 1 anticipated under the Regulatory Capital Rules
(h) $9,310 $9,218
====== ======
Net risk-weighted assets under
current regulatory rules $83,951 $83,328
Adjustments from current
regulatory rules to the
Regulatory Capital Rules:
Loan commitments less than one year 1,029 784
Past due loans 164 164
Mortgage servicing assets (i) 497 497
Deferred tax assets (i) 163 182
Other 1,431 1,413
----- -----
Total risk-weighted assets anticipated under the Regulatory Capital
Rules $87,235 $86,368
======= =======
Common Equity Tier 1 ratio under
the Regulatory Capital Rules (h) 10.67% 10.67%
(a) Three months ended March 31, 2014,
December 31, 2013, and March 31,
2013, exclude $84 million, $92
million, and $114 million of period-
end purchased credit card receivable
intangible assets, respectively.
(b) Net of capital surplus for the three
months ended March 31, 2014, and
December 31, 2013.
(c) Includes net unrealized gains or
losses on securities available for
sale (except for net unrealized
losses on marketable equity
securities), net gains or losses on
cash flow hedges, and amounts
resulting from the application of
the applicable accounting guidance
for defined benefit and other
postretirement plans.
(d) Other assets deducted from Tier 1
capital and net risk-weighted
assets consist of disallowed
intangible assets (excluding
goodwill) and deductible portions of
nonfinancial equity investments.
There were no disallowed deferred
tax assets at March 31, 2014,
December 31, 2013, and March 31,
2013.
(e) 3-31-14 amount is estimated.
(f) Three months ended March 31, 2014,
December 31, 2013, and March 31,
2013, exclude $89 million, $96
million, and $118 million of average
purchased credit card receivable
intangible assets, respectively.
(g) Includes the deferred tax asset
subject to future taxable income for
realization, primarily tax credit
carryforwards, as well as the
deductible potion of purchased
credit card receivables.
(h) The anticipated amount of regulatory
capital and risk-weighted assets is
based upon the federal banking
agencies' Regulatory Capital Rules
(as fully phased-in on January 1,
2019); Key is subject to the
Regulatory Capital Rules under the
"standardized approach."
(i) Item is included in the 10%/15%
exceptions bucket calculation and is
risk-weighted at 250%.
GAAP = U.S. generally accepted accounting principles
Consolidated Balance Sheets
(dollars in millions)
3-31-14 12-31-13 3-31-13
------- -------- -------
Assets
Loans $55,445 $54,457 $52,574
Loans held for
sale 401 611 434
Securities
available for
sale 12,359 12,346 13,496
Held-to-maturity
securities 4,826 4,756 3,721
Trading account
assets 840 738 701
Short-term
investments 2,922 5,590 3,081
Other investments 899 969 1,059
Total earning assets 77,692 79,467 75,066
Allowance for loan
and lease losses (834) (848) (893)
Cash and due from
banks 409 617 621
Premises and
equipment 862 885 930
Operating lease
assets 294 305 309
Goodwill 979 979 979
Other intangible
assets 117 127 159
Corporate-owned
life insurance 3,425 3,408 3,352
Derivative assets 427 407 609
Accrued income and
other assets 3,004 3,015 2,884
Discontinued
assets 4,427 4,572 5,182
Total assets $90,802 $92,934 $89,198
======= ======= =======
Liabilities
Deposits in
domestic offices:
NOW and money market deposit
accounts $34,373 $33,952 $32,700
Savings deposits 2,513 2,472 2,546
Certificates of deposit ($100,000
or more) 2,849 2,631 2,998
Other time deposits 3,682 3,648 4,324
----- ----- -----
Total interest-bearing deposits 43,417 42,703 42,568
Noninterest-bearing deposits 23,244 26,001 21,564
Deposits in
foreign office -
interest-bearing 605 558 522
Total deposits 67,266 69,262 64,654
Federal funds
purchased and
securities 1,417 1,534 1,950
sold under
repurchase
agreements
Bank notes and
other short-term
borrowings 464 343 378
Derivative
liabilities 408 414 524
Accrued expense
and other
liabilities 1,297 1,557 1,352
Long-term debt 7,712 7,650 7,785
Discontinued
liabilities 1,819 1,854 2,176
Total liabilities 80,383 82,614 78,819
Equity
Preferred stock,
Series A 291 291 291
Common shares 1,017 1,017 1,017
Capital surplus 3,961 4,022 4,059
Retained earnings 7,793 7,606 7,065
Treasury stock, at
cost (2,335) (2,281) (1,930)
Accumulated other
comprehensive
income (loss) (324) (352) (162)
Key shareholders' equity 10,403 10,303 10,340
Noncontrolling
interests 16 17 39
Total equity 10,419 10,320 10,379
------ ------ ------
Total liabilities and equity $90,802 $92,934 $89,198
======= ======= =======
Common shares outstanding (000) 884,869 890,724 922,581
Consolidated Statements of Income
(dollars in millions, except per share amounts)
Three months ended
------------------
3-31-14 12-31-13 3-31-13
------- -------- -------
Interest income
Loans $519 $532 $548
Loans held for
sale 4 6 4
Securities
available for
sale 72 75 80
Held-to-
maturity
securities 22 22 18
Trading account
assets 6 6 6
Short-term
investments 1 2 2
Other
investments 6 6 9
Total interest income 630 649 667
Interest expense
Deposits 32 34 45
Federal funds
purchased and
securities
sold under
repurchase
agreements 1 - 1
Bank notes and
other short-
term
borrowings 2 3 1
Long-term debt 32 29 37
Total interest expense 67 66 84
Net interest income 563 583 583
Provision (credit) for loan and lease
losses 6 19 55
--- --- ---
Net interest income (expense) after
provision for loan and lease losses 557 564 528
Noninterest income
Trust and
investment
services
income 98 98 95
Investment
banking and
debt placement
fees 84 84 79
Service charges
on deposit
accounts 63 68 69
Operating lease
income and
other leasing
gains 29 26 25
Corporate
services
income 42 40 45
Cards and
payments
income 38 40 37
Corporate-
owned life
insurance
income 26 33 30
Consumer
mortgage
income 2 3 7
Mortgage
servicing fees 15 22 8
Net gains
(losses) from
principal
investing 24 20 8
Other income
(a) 14 19 22
Total noninterest income 435 453 425
Noninterest expense
Personnel 388 398 391
Net occupancy 64 73 64
Computer
processing 38 40 39
Business
services and
professional
fees 41 42 35
Equipment 24 26 26
Operating lease
expense 10 10 12
Marketing 5 18 6
FDIC assessment 6 7 8
Intangible
asset
amortization 10 10 12
Provision
(credit) for
losses on
lending-
related
commitments (2) (3) 3
OREO expense,
net 1 2 3
Other expense 77 89 82
Total noninterest expense 662 712 681
--- --- ---
Income (loss) from continuing
operations before income taxes 330 305 272
Income taxes 92 70 70
Income (loss) from continuing
operations 238 235 202
Income (loss)
from
discontinued
operations,
net of taxes 4 (5) 3
Net income (loss) 242 230 205
Less: Net
income (loss)
attributable
to
noncontrolling
interests - - 1
Net income (loss) attributable to Key $242 $230 $204
==== ==== ====
Income (loss) from continuing
operations attributable to Key common
shareholders $232 $229 $196
Net income (loss) attributable to Key
common shareholders 236 224 199
Per common share
----------------
Income (loss) from continuing
operations attributable to Key common
shareholders $.26 $.26 $.21
Income (loss) from discontinued
operations, net of taxes - (.01) -
Net income (loss) attributable to Key
common shareholders (b) .27 .25 .22
Per common share - assuming dilution
------------------------------------
Income (loss) from continuing
operations attributable to Key common
shareholders $.26 $.26 $.21
Income (loss) from discontinued
operations, net of taxes - (.01) -
Net income (loss) attributable to Key
common shareholders (b) .26 .25 .21
Cash dividends declared per common
share $.055 $.055 $.05
Weighted-average common shares
outstanding (000) 884,727 890,516 920,316
Weighted-average common shares and
potential common shares outstanding
(000) (c) 891,890 897,712 926,051
(a) For the three months ended March 31, 2014, December 31, 2013, and
March 31, 2013, net securities gains (losses) totaled less than
$1 million, $1 million, and less than $1 million, respectively.
For the three months ended March 31, 2014, December 31, 2013, and
March 31, 2013, Key did not have any impairment losses related to
securities.
(b) Earnings per share may not foot due to rounding.
(c) Assumes conversion of stock options and/or Preferred Series A
shares, as applicable.
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)
First Quarter 2014 Fourth Quarter 2013 First Quarter 2013
Average Average Average
Balance Interest (a) Yield/Rate (a) Balance Interest (a) Yield/Rate (a) Balance Interest (a) Yield/Rate (a)
Assets
Loans: (b), (c)
Commercial, financial and
agricultural (d) $25,390 $206 3.29% $24,218 $212 3.47% $23,317 $218 3.78%
Real estate - commercial mortgage 7,807 74 3.84 7,678 78 4.01 7,616 79 4.24
Real estate - construction 1,091 12 4.55 1,075 11 4.21 1,034 11 4.27
Commercial lease financing 4,439 42 3.78 4,513 41 3.62 4,843 47 3.92
Total commercial loans 38,727 334 3.49 37,484 342 3.62 36,810 355 3.92
Real estate - residential mortgage 2,187 24 4.44 2,199 24 4.43 2,173 25 4.58
Home equity:
Key Community Bank 10,305 100 3.92 10,310 102 3.92 9,787 96 3.97
Other 325 6 7.77 343 7 7.72 413 8 7.70
--- --- ---- --- --- ---- --- --- ----
Total home equity loans 10,630 106 4.04 10,653 109 4.04 10,200 104 4.12
Consumer other - Key Community Bank 1,438 25 7.06 1,446 26 7.18 1,343 25 7.58
Credit cards 701 20 11.28 701 20 11.17 704 22 12.61
Consumer other:
Marine 996 15 6.18 1,056 17 6.24 1,311 20 6.29
Other 67 1 7.55 69 1 8.03 85 2 7.98
--- --- ---- --- --- ---- --- --- ----
Total consumer other 1,063 16 6.26 1,125 18 6.35 1,396 22 6.39
----- --- ---- ----- --- ---- ----- --- ----
Total consumer loans 16,019 191 4.83 16,124 197 4.88 15,816 198 5.00
------ --- ---- ------ --- ---- ------ --- ----
Total loans 54,746 525 3.88 53,608 539 3.98 52,626 553 4.26
Loans held for sale 446 4 3.34 688 6 3.65 469 4 3.27
Securities available for sale (b),
(e) 12,346 72 2.33 12,464 74 2.40 12,065 81 2.74
Held-to-maturity securities (b) 4,767 22 1.84 4,775 22 1.85 3,816 18 1.94
Trading account assets 981 6 2.51 819 6 2.90 710 6 3.44
Short-term investments 2,486 1 .17 4,455 2 .18 2,999 2 .22
Other investments (e) 936 6 2.57 983 6 2.47 1,059 9 3.59
Total earning assets 76,708 636 3.32 77,792 655 3.37 73,744 673 3.67
Allowance for loan and lease losses (842) (859) (896)
Accrued income and other assets 9,791 9,467 9,867
Discontinued assets 4,493 4,777 5,216
Total assets $90,150 $91,177 $87,931
======= ======= =======
Liabilities
NOW and money market deposit
accounts $34,064 12 .14 $33,834 12 .15 $31,946 14 .18
Savings deposits 2,475 - .03 2,483 - .03 2,473 1 .05
Certificates of deposit ($100,000 or
more) (f) 2,758 10 1.50 2,649 11 1.57 2,911 14 1.99
Other time deposits 3,679 10 1.07 3,736 11 1.16 4,451 16 1.42
Deposits in foreign office 660 - .22 615 - .21 454 - .25
Total interest-bearing deposits 43,636 32 .30 43,317 34 .32 42,235 45 .43
Federal funds purchased and
securities 1,469 1 .17 1,618 - .15 1,913 1 .15
sold under repurchase agreements
Bank notes and other short-term
borrowings 587 2 1.63 438 3 1.96 387 1 1.75
Long-term debt (f), (g) 5,169 32 2.57 4,174 29 2.94 4,671 37 3.51
Total interest-bearing liabilities 50,861 67 .54 49,547 66 .53 49,206 84 .70
------ --- --- ------ --- --- ------ --- ---
Noninterest-bearing deposits 22,658 25,077 21,400
Accrued expense and other
liabilities 1,750 1,548 1,799
Discontinued liabilities (g) 4,493 4,717 5,213
Total liabilities 79,762 80,889 77,618
Equity
Key shareholders' equity 10,371 10,272 10,279
Noncontrolling interests 17 16 34
Total equity 10,388 10,288 10,313
Total liabilities and equity $90,150 $91,177 $87,931
======= ======= =======
Interest rate spread (TE) 2.78% 2.84% 2.97%
==== ==== ====
Net interest income (TE) and net interest margin (TE) 569 3.00% 589 3.01% 589 3.24%
==== ==== ====
TE adjustment (b) 6 6 6
--- --- ---
Net interest income, GAAP basis $563 $583 $583
(a) Results are from continuing
operations. Interest excludes the
interest associated with the
liabilities referred to in (g)
below, calculated using a matched
funds transfer pricing methodology.
(b) Interest income on tax-exempt
securities and loans has been
adjusted to a taxable-equivalent
basis using the statutory federal
income tax rate of 35%.
(c) For purposes of these computations,
nonaccrual loans are included in
average loan balances.
(d) Commercial, financial and
agricultural average balances
include $94 million, $97 million,
and $91 million of assets from
commercial credit cards for the
three months ended March 31, 2014,
December 31, 2013, and March 31,
2013, respectively.
(e) Yield is calculated on the basis of
amortized cost.
(f) Rate calculation excludes basis
adjustments related to fair value
hedges.
(g) A portion of long-term debt and the
related interest expense is
allocated to discontinued
liabilities as a result of applying
our matched funds transfer pricing
methodology to discontinued
operations.
TE = Taxable Equivalent, GAAP = U.S. generally
accepted accounting principles
Noninterest Expense
(dollars in millions)
Three months ended
3-31-14 12-31-13 3-31-13
Personnel (a) $388 $398 $391
Net occupancy 64 73 64
Computer processing 38 40 39
Business services and
professional fees 41 42 35
Equipment 24 26 26
Operating lease expense 10 10 12
Marketing 5 18 6
FDIC assessment 6 7 8
Intangible asset amortization 10 10 12
Provision (credit) for losses on
lending-related commitments (2) (3) 3
OREO expense, net 1 2 3
Other expense 77 89 82
--- --- ---
Total noninterest
expense $662 $712 $681
==== ==== ====
Average full-time equivalent
employees (b) 14,055 14,197 15,396
(a) Additional detail provided in table below.
(b) The number of average full-time equivalent employees has not been adjusted for discontinued operations.
Personnel Expense
(in millions)
Three months ended
3-31-14 12-31-13 3-31-13
Salaries $220 $226 $222
Technology contract labor, net 17 16 18
Incentive compensation 72 87 73
Employee benefits 63 56 59
Stock-based compensation 11 8 10
Severance 5 5 9
--- --- ---
Total personnel
expense $388 $398 $391
==== ==== ====
Loan Composition
(dollars in millions)
Percent change 3-31-14 vs.
3-31-14 12-31-13 3-31-13 12-31-13 3-31-13
------- -------- ------- -------- -------
Commercial, financial and agricultural (a) $26,224 $24,963 $23,412 5.1% 12.0%
Commercial real estate:
Commercial mortgage 7,877 7,720 7,544 2.0 4.4
Construction 1,007 1,093 1,057 (7.9) (4.7)
Total commercial real
estate loans 8,884 8,813 8,601 .8 3.3
Commercial lease financing (b) 4,396 4,551 4,796 (3.4) (8.3)
----- ----- ----- ---- ----
Total commercial loans 39,504 38,327 36,809 3.1 7.3
Residential - prime loans:
Real estate -residential
mortgage 2,183 2,187 2,176 (.2) .3
Home equity:
Key Community Bank 10,281 10,340 9,809 (.6) 4.8
Other 315 334 401 (5.7) (21.4)
--- --- --- ---- -----
Total home equity loans 10,596 10,674 10,210 (.7) 3.8
Total residential - prime loans 12,779 12,861 12,386 (.6) 3.2
Consumer other - Key Community Bank 1,436 1,449 1,353 (.9) 6.1
Credit cards 698 722 693 (3.3) .7
Consumer other:
Marine 965 1,028 1,254 (6.1) (23.0)
Other 63 70 79 (10.0) (20.3)
Total consumer other 1,028 1,098 1,333 (6.4) (22.9)
Total consumer loans 15,941 16,130 15,765 (1.2) 1.1
Total loans (c), (d) $55,445 $54,457 $52,574 1.8% 5.5%
==========
Loans Held for Sale Composition
(dollars in millions)
Percent change 3-31-14 vs.
3-31-14 12-31-13 3-31-13 12-31-13 3-31-13
------- -------- ------- -------- -------
Commercial, financial and agricultural $44 $278 $180 (84.2)% (75.6)%
Real estate - commercial mortgage 333 307 196 8.5 69.9
Commercial lease financing 8 9 9 (11.1) (11.1)
Real estate - residential mortgage 16 17 49 (5.9) (67.3)
--- --- --- ---- -----
Total loans held for sale $401 $611 $434 (34.4)% (7.6)%
==========
Summary of Changes in Loans Held for Sale
(dollars in millions)
1Q14 4Q13 3Q13 2Q13 1Q13
---- ---- ---- ---- ----
Balance at beginning of period $611 $699 $402 $434 $599
New originations 645 1,669 1,467 1,241 1,075
Transfers from held to
maturity, net 3 1 15 17 19
Loan sales (596) (1,750) (1,181) (1,292) (1,257)
Loan draws (payments), net (262) (8) (4) - -
Transfers to OREO /
valuation adjustments - - - 2 (2)
Balance at end of period $401 $611 $699 $402 $434
==== ==== ==== ==== ====
(a) March 31, 2014, December 31,
2013, and March 31, 2013, loan
balances include $95 million,
$94 million, and $93 million of
commercial credit card balances,
respectively.
(b) March 31, 2014, and December 31,
2013, commercial lease financing
includes receivables of $124
million and $58 million,
respectively, held as collateral
for a secured borrowing.
(c) Excludes loans in the amount of
$4.4 billion at March 31, 2014,
$4.5 billion at December 31,
2013, and $5.1 billion at March
31, 2013, related to the
discontinued operations of the
education lending business.
(d) March 31, 2014, total loans
include purchased loans of $159
million, of which $16 million
were purchased credit impaired.
December 31, 2013, total loans
include purchased loans of $166
million, of which $16 million
were purchased credit impaired.
March 31, 2013, total loans
include purchased loans of $204
million, of which $22 million
were purchased credit impaired.
N/M = Not Meaningful
Exit Loan Portfolio From Continuing Operations
(dollars in millions)
Balance Change Net Loan Balance on
Outstanding 3-31-14 vs. Charge-offs Nonperforming Status
----------- ----------- --------------------
3-31-14 12-31-13 12-31-13 1Q14 (c) 4Q13 (c) 3-31-14 12-31-13
------- -------- -------- --------- ------- ------- --------
Residential properties - homebuilder $20 $20 - $(1) - $7 $7
Marine and RV floor plan 23 24 $(1) - - 6 6
Commercial lease financing (a) 1,381 782 599 (2) $(2) 3 -
----- --- --- --- --- --- ---
Total commercial loans 1,424 826 598 (3) (2) 16 13
Home equity - Other 315 334 (19) 2 3 11 16
Marine 965 1,028 (63) 4 5 15 26
RV and other consumer 63 70 (7) 1 1 1 1
--- --- --- --- --- --- ---
Total consumer loans 1,343 1,432 (89) 7 9 27 43
----- ----- --- --- --- --- ---
Total exit loans in loan portfolio $2,767 $2,258 $509 $4 $7 $43 $56
====== ====== ==== === === === ===
Discontinued operations - education $4,354 $4,497 $(143) $9 $9 $20 $25
lending business (not included in exit loans above) (b)
(a) Includes (1) the business
aviation, commercial vehicle,
office products, construction and
industrial leases; (2) Canadian
lease financing portfolios; (3)
European lease financing
portfolios; and (4) all remaining
balances related to lease in,
lease out; sale in, lease out;
service contract leases; and
qualified technological equipment
leases.
(b) Includes loans in Key's
consolidated education loan
securitization trusts.
(c) Credit amounts indicate recoveries
exceeded charge-offs.
Asset Quality Statistics From Continuing Operations
(dollars in millions)
1Q14 4Q13 3Q13 2Q13 1Q13
---- ---- ---- ---- ----
Net loan charge-offs $20 $37 $37 $45 $49
Net loan charge-offs to average
total loans .15% .27% .28% .34% .38%
Allowance for loan and lease
losses $834 $848 $868 $876 $893
Allowance for credit losses (a) 869 885 908 913 925
Allowance for loan and lease
losses to period-end loans 1.50% 1.56% 1.62% 1.65% 1.70%
Allowance for credit losses to
period-end loans 1.57 1.63 1.69 1.72 1.76
Allowance for loan and lease
losses to nonperforming loans 185.7 166.9 160.4 134.4 137.4
Allowance for credit losses to
nonperforming loans 193.5 174.2 167.8 140.0 142.3
Nonperforming loans at period end
(b) $449 $508 $541 $652 $650
Nonperforming assets at period end 469 531 579 693 705
Nonperforming loans to period-end
portfolio loans .81% .93% 1.01% 1.23% 1.24%
Nonperforming assets to period-
end portfolio loans plus OREO and
other nonperforming assets .85 .97 1.08 1.30 1.34
(a) Includes the allowance for loan and lease losses
plus the liability for credit losses on lending-
related commitments.
(b) March 31, 2014, December 31, 2013, September 30,
2013, June 30, 2013, and March 31, 2013, loan
balances exclude $16 million, $16 million, $18
million, $19 million, and $22 million of purchased
credit impaired loans, respectively.
Summary of Loan and Lease Loss Experience From Continuing Operations
(dollars in millions)
Three months ended
3-31-14 12-31-13 3-31-13
------- -------- -------
Average loans
outstanding $54,746 $53,608 $52,626
======= ======= =======
Allowance for loan and
lease losses at
beginning of period $848 $868 $888
Loans charged off:
Commercial, financial and
agricultural 12 18 14
Real estate -commercial mortgage 2 2 13
Real estate - construction 2 1 1
--- --- ---
Total commercial real estate
loans 4 3 14
Commercial lease financing 3 2 6
--- --- ---
Total commercial loans 19 23 34
Real estate -residential
mortgage 3 7 6
Home equity:
Key Community Bank 10 12 18
Other 3 4 6
--- --- ---
Total home equity loans 13 16 24
Consumer other -Key Community
Bank 8 7 9
Credit cards 6 5 8
Consumer other:
Marine 7 7 8
Other 1 1 1
--- --- ---
Total consumer other 8 8 9
--- --- ---
Total consumer loans 38 43 56
--- --- ---
Total loans charged off 57 66 90
Recoveries:
Commercial, financial and
agricultural 10 9 12
Real estate -commercial mortgage 1 7 5
Real estate - construction 14 - 8
--- --- ---
Total commercial real estate
loans 15 7 13
Commercial lease financing 2 5 4
--- --- ---
Total commercial loans 27 21 29
Real estate -residential
mortgage 1 1 -
Home equity:
Key Community Bank 3 2 2
Other 1 1 2
--- --- ---
Total home equity loans 4 3 4
Consumer other -Key Community
Bank 2 2 2
Credit cards - - -
Consumer other:
Marine 3 2 5
Other - - 1
--- --- ---
Total consumer other 3 2 6
--- --- ---
Total consumer loans 10 8 12
--- --- ---
Total recoveries 37 29 41
--- --- ---
Net loan charge-offs (20) (37) (49)
Provision (credit) for loan and
lease losses 6 19 55
Foreign currency translation
adjustment - (2) (1)
--- --- ---
Allowance for loan and
lease losses at end
of period $834 $848 $893
==== ==== ====
Liability for credit
losses on lending-
related commitments
at beginning of
period $37 $40 $29
Provision (credit) for losses on
lending-related commitments (2) (3) 3
--- --- ---
Liability for credit
losses on lending-
related commitments
at end of period (a) $35 $37 $32
=== === ===
Total allowance for
credit losses at end
of period $869 $885 $925
==== ==== ====
Net loan charge-offs to average
total loans .15% .27% .38%
Allowance for loan and lease
losses to period-end loans 1.50 1.56 1.70
Allowance for credit losses to
period-end loans 1.57 1.63 1.76
Allowance for loan and lease
losses to nonperforming loans 185.7 166.9 137.4
Allowance for credit losses to
nonperforming loans 193.5 174.2 142.3
Discontinued operations -
education lending business:
Loans charged off $13 $13 $16
Recoveries 4 4 4
--- --- ---
Net loan charge-offs $(9) $(9) $(12)
=== === ====
(a) Included in "accrued expense and other liabilities" on the balance sheet.
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
(dollars in millions)
3-31-14 12-31-13 9-30-13 6-30-13 3-31-13
Commercial, financial and agricultural $60 $77 $102 $146 $142
Real estate - commercial mortgage 37 37 58 106 114
Real estate - construction 11 14 17 26 27
--- --- --- --- ---
Total commercial real estate loans 48 51 75 132 141
Commercial lease financing 18 19 22 14 12
--- --- --- --- ---
Total commercial loans 126 147 199 292 295
Real estate - residential mortgage 105 107 98 94 96
Home equity:
Key Community Bank 188 205 198 205 199
Other 11 15 13 16 18
--- --- --- --- ---
Total home equity loans 199 220 211 221 217
Consumer other - Key Community Bank 2 3 2 3 3
Credit cards 1 4 4 11 13
Consumer other:
Marine 15 26 25 30 25
Other 1 1 2 1 1
--- --- --- --- ---
Total consumer other 16 27 27 31 26
--- --- --- --- ---
Total consumer loans 323 361 342 360 355
--- --- --- --- ---
Total nonperforming loans (a) 449 508 541 652 650
Nonperforming loans held for sale 1 1 13 14 23
OREO 12 15 15 18 21
Other nonperforming assets 7 7 10 9 11
--- --- --- --- ---
Total nonperforming assets $469 $531 $579 $693 $705
==== ==== ==== ==== ====
Accruing loans past due 90 days or more $89 $71 $90 $80 $83
Accruing loans past due 30 through 89 days 267 318 288 251 368
Restructured loans - accruing and nonaccruing (b) 294 338 349 311 294
Restructured loans included in nonperforming loans (b) 178 214 228 195 178
Nonperforming assets from discontinued operations - 20 25 23 19 15
education lending business
Nonperforming loans to period-end portfolio loans .81% .93% 1.01% 1.23% 1.24%
Nonperforming assets to period-end portfolio loans .85 .97 1.08 1.30 1.34
plus OREO and other nonperforming assets
(a) March 31, 2014, December 31, 2013,
September 30, 2013, June 30, 2013,
and March 31, 2013, loan balances
exclude $16 million, $16 million,
$18 million, $19 million, and $22
million of purchased credit impaired
loans, respectively.
(b) Restructured loans (i.e., troubled
debt restructurings) are those for
which Key, for reasons related to a
borrower's financial difficulties,
grants a concession to the borrower
that it would not otherwise
consider. These concessions are
made to improve the collectability
of the loan and generally take the
form of a reduction of the interest
rate, extension of the maturity date
or reduction in the principal
balance.
Summary of Changes in Nonperforming Loans From Continuing Operations
(in millions)
1Q14 4Q13 3Q13 2Q13 1Q13
---- ---- ---- ---- ----
Balance at beginning of period $508 $541 $652 $650 $674
Loans placed on nonaccrual status 98 129 161 160 278
Charge-offs (57) (66) (78) (74) (91)
Loans sold (3) (19) (61) (5) (42)
Payments (21) (46) (43) (36) (83)
Transfers to OREO (3) (5) (2) (7) (7)
Loans returned to accrual status (73) (26) (88) (36) (79)
--- --- --- --- ---
Balance at end of period (a) $449 $508 $541 $652 $650
==== ==== ==== ==== ====
(a) March 31, 2014, December 31, 2013, September 30, 2013, June 30, 2013, and March 31, 2013, loan balances
exclude $16 million, $16 million, $18 million, $19 million, and $22 million of purchased credit impaired loans,
respectively.
Summary of Changes in Nonperforming Loans Held For Sale From Continuing Operations
(in millions)
1Q14 4Q13 3Q13 2Q13 1Q13
---- ---- ---- ---- ----
Balance at beginning of period $1 $13 $14 $23 $25
Net advances / (payments) - (1) (1) (1) -
Loans sold - (11) - (8) -
Valuation adjustments - - - - (2)
Balance at end of period $1 $1 $13 $14 $23
=== === === === ===
Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations
(in millions)
1Q14 4Q13 3Q13 2Q13 1Q13
---- ---- ---- ---- ----
Balance at beginning of period $15 $15 $18 $21 $22
Properties acquired - nonperforming loans 3 5 2 7 7
Valuation adjustments (1) - (1) (2) (3)
Properties sold (5) (5) (4) (8) (5)
--- --- --- --- ---
Balance at end of period $12 $15 $15 $18 $21
=== === === === ===
Line of Business Results
(dollars in millions)
Percent change 1Q14 vs.
1Q14 4Q13 3Q13 2Q13 1Q13 4Q13 1Q13
---- ---- ---- ---- ---- ---- ----
Key Community Bank
Summary of operations
Total revenue (TE) $541 $561 $579 $582 $575 (3.6)% (5.9)%
Provision (credit) for loan and lease losses 9 32 24 41 59 (71.9) (84.7)
Noninterest expense 432 460 446 458 441 (6.1) (2.0)
Net income (loss) attributable to Key 63 43 69 52 47 46.5 34.0
Average loans and leases 29,793 29,596 29,495 29,161 28,977 .7 2.8
Average deposits 49,824 50,409 49,652 49,473 49,349 (1.2) 1.0
Net loan charge-offs 28 31 27 42 47 (9.7) (40.4)
Net loan charge-offs to average total loans .38% .42% .36% .58% .66% N/A N/A
Nonperforming assets at period end $357 $396 $383 $476 $481 (9.8) (25.8)
Return on average allocated equity 9.20% 5.97% 9.38% 7.10% 6.51% N/A N/A
Average full-time equivalent employees 7,656 7,805 7,990 8,316 8,709 (1.9) (12.1)
Key Corporate Bank
Summary of operations
Total revenue (TE) $391 $411 $383 $379 $383 (4.9)% 2.1%
Provision (credit) for loan and lease losses (1) (10) 12 (7) 2 N/M N/M
Noninterest expense 199 216 208 194 203 (7.9) (2.0)
Net income (loss) attributable to Key 122 133 106 121 113 (8.3) 8.0
Average loans and leases 21,445 20,336 19,949 19,536 19,466 5.5 10.2
Average loans held for sale 429 668 422 466 409 (35.8) 4.9
Average deposits 15,800 17,370 16,123 15,606 13,966 (9.0) 13.1
Net loan charge-offs (14) 2 6 (4) (1) N/M N/M
Net loan charge-offs to average total loans (.26)% .04% .12% (.08)% (.02)% N/A N/A
Nonperforming assets at period end $53 $55 $111 $125 $126 (3.6) (57.9)
Return on average allocated equity 33.52% 33.61% 26.42% 30.58% 29.06% N/A N/A
Average full-time equivalent employees 1,926 1,901 1,951 1,886 1,861 1.3 3.5
TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful
SOURCE KeyCorp
