KEYCORP CLEVELAND, Jan. 22, 2015 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced fourth quarter net income from continuing operations attributable to Key common shareholders of $246 million, or $.28 per common share, compared to $197 million, or $.23 per common share, for the third quarter of 2014, and $229 million, or $.26 per common share, for the fourth quarter of 2013.
For the twelve months ended December 31, 2014, net income from continuing operations attributable to Key common shareholders was $917 million, or $1.04 per common share, compared to $847 million, or $.93 per common share, for the same period one year ago.
"Fourth quarter was a strong finish to the year," said Chairman and Chief Executive Officer Beth Mooney. "Our results reflect positive operating leverage, with both revenue growth and well-controlled expenses. Revenue benefited from solid loan growth, driven by a 12% increase from the prior year in commercial, financial and agricultural loans. Core expense levels continued to decline, and our net charge-offs remained well below our historical average."
"Our full-year results reflect the successful execution of our strategy to grow and expand relationships, invest in our businesses, and return peer-leading capital to our shareholders," continued Mooney. "We had a record year for investment banking and debt placement fees and remain on track with our successful integration of Pacific Crest Securities. A 2% decrease in expenses drove positive operating leverage for the year, and we expect further improvement in efficiency and productivity."
"Capital remains a strength of our company. We ended the year with a Tier 1 common equity ratio above 11%, while we continued to execute on our commitment to return capital to our shareholders through dividends and share repurchases. During the year, we announced an 18% increase in the common share dividend and repurchased $496 million of common shares. In total, we paid out 82% of 2014 net income to our shareholders," added Mooney.
FOURTH QUARTER 2014 FINANCIAL RESULTS, from continuing operations
Compared to Fourth Quarter of 2013
-- Average loans up 5.5%, driven by a 12.3% growth in commercial, financial
and agricultural loans
-- Average deposits up 2% due to growth in commercial mortgage servicing
and commercial deposits offsetting a decline in certificates of deposit
-- Net interest income (taxable-equivalent) relatively stable, as growth in
earning assets offset lower earning asset yields
-- Noninterest income up $37 million, reflecting higher investment banking
and debt placement fees, trust and investment services income, and
corporate services income, offsetting declines in other income, mortgage
servicing fees, and operating lease income and other leasing gains
-- Noninterest expense down $8 million, reflecting lower efficiency- and
pension-related charges and other expense, slightly offset by higher
incentive compensation expense
-- Efficiency initiative and pension settlement charges of $11 million, or
$.01 per common share, incurred during the fourth quarter of 2014,
compared to $24 million, or $.02 per common share, during the fourth
quarter of 2013
-- Asset quality improved, with net loan charge-offs to average loans
declining from .27% to .22%
-- Disciplined capital management, repurchasing $128 million of common
shares during the fourth quarter of 2014 and maintaining top tier
capital position with Tier 1 common equity of 11.18%
Compared to Third Quarter of 2014
-- Average loans up 1.3%, primarily driven by an increase in commercial,
financial and agricultural loans
-- Average deposits up 2% due to the growth in commercial mortgage
servicing and commercial deposits offsetting a decline in certificates
of deposit
-- Net interest income (taxable-equivalent) up $7 million due to an
increase in earning asset levels and higher loan fees, offsetting lower
earning asset yields
-- Noninterest income up $73 million, primarily due to higher investment
banking and debt placement fees, trust and investment services income,
corporate services income, and corporate-owned life insurance income,
slightly offset by declines in other income
-- Noninterest expense stable, with lower efficiency- and pension-related
charges and other expense offsetting higher incentive compensation
expense
-- Efficiency initiative and pension settlement charges of $35 million, or
$.03 per common share, incurred during the third quarter of 2014
-- Asset quality remains strong, with net loan charge-offs to average loans
flat to prior quarter and remaining well below the targeted range
Selected Financial Highlights
dollars in millions, except per share data Change 4Q14 vs.
4Q14 3Q14 4Q13 3Q14 4Q13
---- ---- ---- ---- ----
Income (loss) from continuing operations attributable to Key common shareholders $246 $197 $229 24.9% 7.4%
Income (loss) from continuing operations attributable to Key common shareholders per .28 .23 .26 21.7 7.7
common share - assuming dilution
Return on average total assets from continuing operations 1.12% .92% 1.08% N/A N/A
Tier 1 common equity (a) 11.18 11.26 11.22 N/A N/A
Book value at period end $11.91 $11.74 $11.25 1.4% 5.9%
Net interest margin (TE) from continuing operations 2.94% 2.96% 3.01% 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 4Q14 vs.
4Q14 3Q14 4Q13 3Q14 4Q13
---- ---- ---- ---- ----
Net interest income (TE) $588 $581 $589 1.2% (.2)%
Noninterest income 490 417 453 17.5 8.2
--- --- --- ---- ---
Total revenue $1,078 $998 $1,042 8.0% 3.5%
===
TE = Taxable Equivalent
Taxable-equivalent net interest income was $588 million for the fourth quarter of 2014, and the net interest margin was 2.94%. These results compare to taxable-equivalent net interest income of $589 million and a net interest margin of 3.01% for the fourth quarter of 2013. The decrease in net interest margin was largely attributable to lower earning asset yields and higher levels of excess liquidity driven by commercial deposit growth.
Compared to the third quarter of 2014, taxable-equivalent net interest income increased by $7 million, and the net interest margin declined by two basis points. The increase in net interest income was primarily due to higher earning asset levels and loan fees and a lower cost of funds as higher-rate certificates of deposit matured. These increases were partially offset by the impact of lower earning asset yields. The net interest margin was negatively impacted by higher levels of excess liquidity and lower earning asset yields partially offset by an increase in commercial loans and held-for-sale volume.
Noninterest Income
dollars in millions Change 4Q14 vs.
4Q14 3Q14 4Q13 3Q14 4Q13
---- ---- ---- ---- ----
Trust and investment services income $112 $99 $98 13.1% 14.3%
Investment banking and debt placement fees 126 88 84 43.2 50.0
Service charges on deposit accounts 64 68 68 (5.9) (5.9)
Operating lease income and other leasing gains 15 17 26 (11.8) (42.3)
Corporate services income 53 42 40 26.2 32.5
Cards and payments income 43 42 40 2.4 7.5
Corporate-owned life insurance income 38 26 33 46.2 15.2
Consumer mortgage income 3 3 3 - -
Mortgage servicing fees 11 9 22 22.2 (50.0)
Net gains (losses) from principal investing 18 9 20 100.0 (10.0)
Other income 7 14 19 (50.0) (63.2)
--- --- --- ----- -----
Total noninterest income $490 $417 $453 17.5% 8.2%
Key's noninterest income was $490 million for the fourth quarter of 2014, compared to $453 million for the year-ago quarter. The fourth quarter reflects a record high quarter for investment banking and debt placement fees, which increased $42 million, benefiting from Key's business model. Trust and investment services income increased $14 million, mostly due to a full-quarter impact of the recently-acquired Pacific Crest Securities. Corporate services income also increased $13 million, driven by higher derivatives income and non-yield loan fees. These increases were partially offset by declines in other income of $12 million, mortgage servicing fees of $11 million, and operating lease income and other leasing gains of $11 million.
Compared to the third quarter of 2014, noninterest income increased by $73 million. Investment banking and debt placement fees and trust and investment services income increased $38 million and $13 million, respectively, benefitting from Key's business model. Corporate-owned life insurance income had a seasonal increase of $12 million, and corporate services income increased $11 million due to higher derivatives income and non-yield loan fees.
Noninterest Expense
dollars in millions Change 4Q14 vs.
4Q14 3Q14 4Q13 3Q14 4Q13
---- ---- ---- ---- ----
Personnel expense $409 $405 $398 1.0% 2.8%
Nonpersonnel expense 295 299 314 (1.3) (6.1)
--- --- --- ---- ----
Total noninterest expense $704 $704 $712 - (1.1)%
Key's noninterest expense was $704 million for the fourth quarter of 2014, compared to $712 million for the same period last year. This decline reflects lower efficiency- and pension-related charges and other expense. These decreases were slightly offset by higher incentive compensation expense related to the performance of our business and a full-quarter impact of the recently-acquired Pacific Crest Securities.
Compared to the third quarter of 2014, noninterest expense remained flat. Lower expenses related to Key's efficiency initiative and pension settlement charges were offset by higher incentive compensation expense related to the performance of our business and a full-quarter impact of the recently-acquired Pacific Crest Securities.
BALANCE SHEET HIGHLIGHTS
As of December 31, 2014, Key had total assets of $93.8 billion compared to $89.8 billion at September 30, 2014, and $92.9 billion at December 31, 2013.
Average Loans
dollars in millions Change 12-31-14 vs.
12-31-14 9-30-14 12-31-13 9-30-14 12-31-13
-------- ------- -------- ------- --------
Commercial, financial and agricultural (a) $27,188 $26,456 $24,218 2.8% 12.3%
Other commercial loans 13,357 13,317 13,266 .3 .7
Total home equity loans 10,639 10,658 10,653 (.2) (.1)
Other consumer loans 5,357 5,365 5,471 (.1) (2.1)
----- ----- ----- --- ----
Total loans $56,541 $55,796 $53,608 1.3% 5.5%
(a) Commercial, financial and
agricultural average loan balances
include $90 million, $92 million, and
$97 million of assets from commercial
credit cards at December 31, 2014,
September 30, 2014, and December 31,
2013, respectively.
Average loans were $56.5 billion for the fourth quarter of 2014, an increase of $2.9 billion compared to the fourth quarter of 2013. The loan growth occurred primarily in the commercial, financial and agricultural portfolio, which increased $3 billion and was broad-based across Key's commercial lines of business. Consumer loans declined slightly as modest increases across Key's core consumer loan portfolio were more than offset by run-off in Key's designated consumer exit portfolio.
Compared to the third quarter of 2014, average loans increased by $745 million. Commercial, financial and agricultural loans increased by $732 million, accounting for the majority of the loan growth. On a period-end basis, commercial, financial and agricultural loans increased $1.3 billion over the linked quarter as most of the balance growth occurred towards the latter part of the fourth quarter. Consumer loans were relatively unchanged from the linked quarter as modest growth in the core consumer loan portfolio during the fourth quarter was substantially offset by run-off in Key's consumer exit portfolio.
Average Deposits
dollars in millions Change 12-31-14 vs.
12-31-14 9-30-14 12-31-13 9-30-14 12-31-13
-------- ------- -------- ------- --------
Non-time deposits (a) $63,541 $61,699 $61,394 3.0% 3.5%
Certificates of deposit ($100,000 or
more) 2,277 2,629 2,649 (13.4) (14.0)
Other time deposits 3,306 3,413 3,736 (3.1) (11.5)
----- ----- ----- ---- -----
Total deposits $69,124 $67,741 $67,779 2.0% 2.0%
Cost of total deposits (a) .15% .16% .20% N/A N/A
(a) Excludes deposits in
foreign office.
N/A = Not Applicable
Average deposits, excluding deposits in foreign office, totaled $69.1 billion for the fourth quarter of 2014, an increase of $1.3 billion compared to the year-ago quarter. Demand deposits increased by $1.3 billion, and NOW and money market deposit accounts increased $977 million, mostly due to growth related to commercial client inflows as well as increases related to the commercial mortgage servicing business. These increases were partially offset by run-off in certificates of deposit.
Compared to the third quarter of 2014, average deposits, excluding deposits in foreign office, increased by $1.4 billion. Demand deposits were up $1 billion, driven by large commercial client inflows. Interest-bearing deposits increased $343 million as increases in NOW and money market deposits accounts more than offset the run-off in certificates of deposits.
ASSET QUALITY
dollars in millions Change 4Q14 vs.
4Q14 3Q14 4Q13 3Q14 4Q13
---- ---- ---- ---- ----
Net loan charge-offs $32 $31 $37 3.2% (13.5)%
Net loan charge-offs to average total loans .22% .22% .27% N/A N/A
Nonperforming loans at period end (a) $418 $401 $508 4.2 (17.7)
Nonperforming assets at period end 436 418 531 4.3 (17.9)
Allowance for loan and lease losses 794 804 848 (1.2) (6.4)
Allowance for loan and lease losses to nonperforming loans 190.0% 200.5% 166.9% N/A N/A
Provision (credit) for loan and lease losses $22 $21 $19 4.8% 15.8%
(a) Loan balances exclude $13
million, $14 million, and $16
million of purchased credit
impaired loans at December 31,
2014, September 30, 2014, and
December 31, 2013,
respectively.
N/A = Not Applicable
Key's provision for loan and lease losses was $22 million for the fourth quarter of 2014, compared to $21 million for the third quarter of 2014 and $19 million for the year-ago quarter. Key's allowance for loan and lease losses was $794 million, or 1.38% of total period-end loans, at December 31, 2014, compared to 1.43% at September 30, 2014, and 1.56% at December 31, 2013.
Net loan charge-offs for the fourth quarter of 2014 totaled $32 million, or .22% of average total loans. These results compare to $31 million, or .22%, for the third quarter of 2014, and $37 million, or .27%, for the same period last year.
At December 31, 2014, Key's nonperforming loans totaled $418 million and represented .73% of period-end portfolio loans, compared to .71% at September 30, 2014, and .93% at December 31, 2013. Nonperforming assets at December 31, 2014, totaled $436 million and represented .76% of period-end portfolio loans and OREO and other nonperforming assets, compared to .74% at September 30, 2014, and .97% at December 31, 2013.
CAPITAL
Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at December 31, 2014.
Capital Ratios
12-31-14 9-30-14 12-31-13
-------- ------- --------
Tier 1 common
equity (a), (b) 11.18% 11.26% 11.22%
Tier 1 risk-based
capital (a) 11.91 12.01 11.96
Total risk based
capital (a) 13.91 14.10 14.33
Tangible common
equity to tangible
assets (b) 9.88 10.26 9.80
Leverage (a) 11.27 11.15 11.11
(a) 12-31-14 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 December 31, 2014, Key's estimated Tier 1 common equity and Tier 1 risk-based capital ratios stood at 11.18% and 11.91%, respectively. In addition, the tangible common equity ratio was 9.88% at December 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 10.69% at December 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 4Q14 vs.
4Q14 3Q14 4Q13 3Q14 4Q13
---- ---- ---- ---- ----
Shares outstanding at beginning of period 868,477 876,823 897,821 (1.0)% (3.3)%
Common shares repurchased (9,786) (8,830) (7,659) 10.8 27.8
Shares reissued (returned) under employee benefit plans 712 484 562 47.1 26.7
--- --- --- ---- ----
Shares outstanding at end of period 859,403 868,477 890,724 (1.0)% (3.5)%
As previously reported, Key's 2014 CCAR capital plan includes common share repurchases of up to $542 million, which include open market repurchases plus repurchases to offset issuances of common shares under our employee compensation plans, and are expected to be executed through the first quarter of 2015. During the fourth quarter of 2014, Key completed $128 million of common share repurchases.
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 4Q14 vs.
4Q14 3Q14 4Q13 3Q14 4Q13
---- ---- ---- ---- ----
Revenue from continuing operations (TE)
--------------------------------------
Key Community Bank $558 $559 $567 (.2)% (1.6)%
Key Corporate Bank 458 395 405 15.9 13.1
Other Segments 63 47 73 34.0 (13.7)
--- --- --- ---- -----
Total segments 1,079 1,001 1,045 7.8 3.3
Reconciling Items (1) (3) (3) N/M N/M
--- --- --- --- ---
Total $1,078 $998 $1,042 8.0% 3.5%
Income (loss) from continuing operations attributable to Key
------------------------------------------------------------
Key Community Bank $62 $57 $42 8.8% 47.6%
Key Corporate Bank 137 119 133 15.1 3.0
Other Segments 51 48 62 6.3 (17.7)
--- --- --- --- -----
Total segments 250 224 237 11.6 5.5
Reconciling Items 1 (21) (2) N/M N/M
--- --- --- --- ---
Total $251 $203 $235 23.6% 6.8%
TE = Taxable equivalent, N/M = Not Meaningful
Key Community Bank
dollars in millions Change 4Q14 vs.
4Q14 3Q14 4Q13 3Q14 4Q13
---- ---- ---- ---- ----
Summary of operations
Net interest income (TE) $363 $360 $377 .8% (3.7)%
Noninterest income 195 199 190 (2.0) 2.6
--- --- --- ---- ---
Total revenue (TE) 558 559 567 (.2) (1.6)
Provision (credit) for loan and lease losses 11 31 32 (64.5) (65.6)
Noninterest expense 449 437 468 2.7 (4.1)
--- --- --- --- ----
Income (loss) before income taxes (TE) 98 91 67 7.7 46.3
Allocated income taxes (benefit) and TE adjustments 36 34 25 5.9 44.0
--- --- --- --- ----
Net income (loss) attributable to Key $62 $57 $42 8.8% 47.6%
Average balances
Loans and leases $30,478 $30,103 $29,597 1.2% 3.0%
Total assets 32,598 32,209 31,790 1.2 2.5
Deposits 50,850 50,302 50,493 1.1 .7
Assets under management at period end $39,157 $39,249 $36,815 (.2)% 6.4%
TE = Taxable Equivalent
Additional Key Community Bank Data
dollars in millions Change 4Q14 vs.
4Q14 3Q14 4Q13 3Q14 4Q13
---- ---- ---- ---- ----
Noninterest income
Trust and investment services income $75 $73 $70 2.7% 7.1%
Service charges on deposit accounts 54 57 58 (5.3) (6.9)
Cards and payments income 40 39 37 2.6 8.1
Other noninterest income 26 30 25 (13.3) 4.0
--- --- --- ----- ---
Total noninterest income $195 $199 $190 (2.0)% 2.6%
Average deposit balances
NOW and money market deposit accounts $27,690 $27,403 $27,442 1.0% .9%
Savings deposits 2,378 2,418 2,472 (1.7) (3.8)
Certificates of deposit ($100,000 or more) 1,793 2,072 2,124 (13.5) (15.6)
Other time deposits 3,301 3,406 3,731 (3.1) (11.5)
Deposits in foreign office 332 320 285 3.8 16.5
Noninterest-bearing deposits 15,356 14,683 14,439 4.6 6.4
------ ------ ------ --- ---
Total deposits $50,850 $50,302 $50,493 1.1% .7%
Home equity loans
Average balance $10,365 $10,368 $10,310
Weighted-average loan-to-value ratio (at date of
origination) 71% 71% 71%
Percent first lien positions 60 59 58
Other data
Branches 994 997 1,028
Automated teller machines 1,287 1,290 1,335
Key Community Bank Summary of Operations
-- Average loan and lease balances up 3% from prior year
-- Average core deposits up 1.3% from prior year
-- Net income attributable to Key Community Bank up 47.6% from the prior
year
Key Community Bank recorded net income attributable to Key of $62 million for the fourth quarter of 2014, compared to net income attributable to Key of $42 million for the year-ago quarter.
Taxable-equivalent net interest income decreased by $14 million, or 3.7%, from the fourth quarter of 2013. Average loans and leases grew 3% while average core deposits increased 1.3% 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 increased $5 million, or 2.6%, from the year-ago quarter. This increase was due to growth in trust and investment services income of $5 million, cards and payments of $3 million, and other noninterest income of $1 million. Slightly offsetting these increases was a decline in service charges on deposit accounts of $4 million due to lower maintenance fees and overdraft charges.
The provision for loan and lease losses decreased by $21 million, or 65.6%, from the fourth quarter of 2013. Net loan charge-offs declined $3 million from the same period one year ago.
Noninterest expense declined by $19 million, or 4.1%, from the year-ago quarter as a result of Key's efficiency initiative. Personnel expense declined $2 million compared to the fourth quarter of 2013. Nonpersonnel expense decreased $17 million primarily due to internally-allocated costs.
Key Corporate Bank
dollars in millions Change 4Q14 vs.
4Q14 3Q14 4Q13 3Q14 4Q13
---- ---- ---- ---- ----
Summary of operations
Net interest income (TE) $217 $212 $198 2.4% 9.6%
Noninterest income 241 183 207 31.7 16.4
--- --- --- ---- ----
Total revenue (TE) 458 395 405 15.9 13.1
Provision (credit) for loan and lease losses 4 (5) (10) N/M N/M
Noninterest expense 239 212 210 12.7 13.8
--- --- --- ---- ----
Income (loss) before income taxes (TE) 215 188 205 14.4 4.9
Allocated income taxes and TE adjustments 78 69 72 13.0 8.3
--- --- --- ---- ---
Net income (loss) attributable to Key $137 $119 $133 15.1 3.0%
Average balances
Loans and leases $23,293 $22,700 $20,334 2.6% 14.6%
Loans held for sale 855 481 668 77.8 28.0
Total assets 27,227 26,460 24,339 2.9 11.9
Deposits 18,074 17,310 17,286 4.4 4.6
Assets under management at period end - $34 $90 N/M N/M
TE = Taxable Equivalent, N/M = Not Meaningful
Additional Key Corporate Bank Data
dollars in millions Change 4Q14 vs.
4Q14 3Q14 4Q13 3Q14 4Q13
---- ---- ---- ---- ----
Noninterest income
Trust and investment services income $37 $26 $28 42.3% 32.1%
Investment banking and debt placement fees 125 86 84 45.3 48.8
Operating lease income and other leasing gains 17 14 20 21.4 (15.0)
Corporate services income 43 30 29 43.3 48.3
Service charges on deposit accounts 10 11 10 (9.1) -
Cards and payments income 3 3 3 - -
--- --- --- --- ---
Payments and services income 56 44 42 27.3 33.3
Mortgage servicing fees 11 9 22 22.2% (50.0)%
Other noninterest income (5) 4 11 N/M N/M
--- --- --- --- ---
Total noninterest income $241 $183 $207 31.7 16.4
N/M = Not Meaningful
Key Corporate Bank Summary of Operations
-- Record high quarter and year for investment banking and debt placement
fees
-- Average loan and lease balances up 14.6% from the prior year
-- Average deposits up 4.6% from the prior year
Key Corporate Bank recorded net income attributable to Key of $137 million for the fourth quarter of 2014, compared to $133 million for the same period one year ago.
Taxable-equivalent net interest income increased by $19 million, or 9.6%, compared to the fourth quarter of 2013. Average earning assets increased $2.7 billion, or 12.2%, from the year-ago quarter, primarily driven by loan growth in commercial, financial and agricultural and real estate commercial mortgage. This growth in earning assets drove an increase of $9 million in earning asset spread. Average deposit balances increased $788 million, or 4.6%, from the year-ago quarter, driven by commercial mortgage servicing deposits and other commercial client inflows. This growth in deposit balances drove an increase of $8 million in deposit and borrowing spread.
Noninterest income was up $34 million, or 16.4% from the prior year. This growth was primarily due to a record high quarter for investment banking and debt placement fees, which increased $41 million or 48.8%, driven by Key's business model. Corporate services income increased $14 million due to higher derivatives income and non-yield loan fees. Trust and investment services income increased $9 million, mostly due to a full-quarter impact of the recently-acquired Pacific Crest Securities. Partially offsetting these increases were declines in mortgage servicing fees due to lower special servicing fees, and other income.
The provision for loan and lease losses increased $14 million compared to the fourth quarter of 2013 related to loan growth.
Noninterest expense increased by $29 million, or 13.8%, from the fourth quarter of 2013. This increase was due to higher incentive compensation expense related to the performance of the business and a full-quarter impact of the recently-acquired Pacific Crest Securities.
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 $51 million for the fourth quarter of 2014, compared to net income attributable to Key of $62 million for the same period last year. These results were primarily attributable to decreases of $7 million in operating lease income and other leasing gains and $5 million in net interest income from the prior year.
*****
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 $93.8 billion at December 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, January 22, 2015. An audio replay of the call will be available through January 29, 2015.
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 .
Financial Highlights
(dollars in millions, except per share amounts)
Three months ended
------------------
12-31-14 9-30-14 12-31-13
Summary of operations
Net interest income (TE) $588 $581 $589
Noninterest income 490 417 453
Total revenue (TE) 1,078 998 1,042
Provision (credit) for loan
and lease losses 22 21 19
Noninterest expense 704 704 712
Income (loss) from continuing
operations attributable to
Key 251 203 235
Income (loss) from
discontinued operations, net
of taxes (a) 2 (17) (5)
Net income (loss) attributable
to Key 253 186 230
Income (loss) from continuing
operations attributable to
Key common shareholders $246 $197 $229
Income (loss) from
discontinued operations, net
of taxes (a) 2 (17) (5)
Net income (loss) attributable
to Key common shareholders 248 180 224
Per common share
Income (loss) from continuing
operations attributable to
Key common shareholders $.29 $.23 $.26
Income (loss) from
discontinued operations, net
of taxes (a) - (.02) (.01)
Net income (loss) attributable
to Key common shareholders
(b) .29 .21 .25
Income (loss) from continuing
operations attributable to
Key common shareholders -
assuming dilution .28 .23 .26
Income (loss) from
discontinued operations, net
of taxes -assuming dilution
(a) - (.02) (.01)
Net income (loss) attributable
to Key common shareholders -
assuming dilution (b) .28 .21 .25
Cash dividends paid .065 .065 .055
Book value at period end 11.91 11.74 11.25
Tangible book value at period
end 10.65 10.47 10.11
Market price at period end 13.90 13.33 13.42
Performance ratios
From continuing operations:
Return on average total assets 1.12% .92% 1.08%
Return on average common
equity 9.50 7.68 9.10
Return on average tangible
common equity (c) 10.64 8.55 10.13
Net interest margin (TE) 2.94 2.96 3.01
Cash efficiency ratio (c) 64.4 69.5 67.4
From consolidated operations:
Return on average total assets 1.10% .81% 1.00%
Return on average common
equity 9.58 7.01 8.90
Return on average tangible
common equity (c) 10.72 7.81 9.91
Net interest margin (TE) 2.93 2.94 2.91
Loan to deposit (d) 84.6 87.4 83.8
Capital ratios at period end
Key shareholders' equity to
assets 11.22% 11.68% 11.09%
Key common shareholders'
equity to assets 10.91 11.36 10.78
Tangible common equity to
tangible assets (c) 9.88 10.26 9.80
Tier 1 common equity (c), (e) 11.18 11.26 11.22
Tier 1 risk-based capital (e) 11.91 12.01 11.96
Total risk-based capital (e) 13.91 14.10 14.33
Leverage (e) 11.27 11.15 11.11
Asset quality - from continuing operations
Net loan charge-offs $32 $31 $37
Net loan charge-offs to
average loans .22% .22% .27%
Allowance for loan and lease
losses $794 $804 $848
Allowance for credit losses 830 839 885
Allowance for loan and lease
losses to period-end loans 1.38% 1.43% 1.56%
Allowance for credit losses to
period-end loans 1.45 1.49 1.63
Allowance for loan and lease
losses to nonperforming loans 190.0 200.5 166.9
Allowance for credit losses to
nonperforming loans 198.6 209.2 174.2
Nonperforming loans at period
end (f) $418 $401 $508
Nonperforming assets at period
end 436 418 531
Nonperforming loans to period-
end portfolio loans .73% .71% .93%
Nonperforming assets to
period-end portfolio loans
plus OREO and other
nonperforming assets .76 .74 .97
Trust and brokerage assets
Assets under management $39,157 $39,283 $36,905
Nonmanaged and brokerage
assets 49,147 48,273 47,418
Other data
Average full-time equivalent
employees 13,590 13,905 14,197
Branches 994 997 1,028
Taxable-equivalent adjustment $6 $6 $6
Financial Highlights (continued)
(dollars in millions, except per share amounts)
Twelve months ended
12-31-14 12-31-13
-------- --------
Summary of operations
Net interest income
(TE) $2,317 $2,348
Noninterest income 1,797 1,766
Total revenue (TE) 4,114 4,114
Provision (credit)
for loan and lease
losses 59 130
Noninterest expense 2,759 2,820
Income (loss) from
continuing
operations
attributable to Key 939 870
Income (loss) from
discontinued
operations, net of
taxes (a) (39) 40
Net income (loss)
attributable to Key 900 910
Income (loss) from
continuing
operations
attributable to Key
common shareholders $917 $847
Income (loss) from
discontinued
operations, net of
taxes (a) (39) 40
Net income (loss)
attributable to Key
common shareholders 878 887
Per common share
Income (loss) from
continuing
operations
attributable to Key
common shareholders $1.05 $.93
Income (loss) from
discontinued
operations, net of
taxes (a) (.04) .04
Net income (loss)
attributable to Key
common shareholders
(b) 1.01 .98
Income (loss) from
continuing
operations
attributable to Key
common shareholders
-assuming dilution 1.04 .93
Income (loss) from
discontinued
operations, net of
taxes -assuming
dilution (a) (.04) .04
Net income (loss)
attributable to Key
common shareholders
-assuming dilution
(b) .99 .97
Cash dividends paid .25 .215
Performance ratios
From continuing
operations:
Return on average
total assets 1.08% 1.03%
Return on average
common equity 9.01 8.48
Return on average
tangible common
equity (c) 10.04 9.45
Net interest margin
(TE) 2.97 3.12
Cash efficiency ratio
(c) 66.1 67.5
From consolidated
operations:
Return on average
total assets .99% 1.02%
Return on average
common equity 8.63 8.88
Return on average
tangible common
equity (c) 9.61 9.90
Net interest margin
(TE) 2.94 3.02
Asset quality - from continuing operations
Net loan charge-offs $113 $168
Net loan charge-offs
to average total
loans .20% .32%
Other data
Average full-time
equivalent employees 13,853 14,783
Taxable-equivalent adjustment $24 $23
(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
for periods prior to September 30,
2014) divided by period-end
consolidated total deposits
(excluding deposits in foreign
office).
(e) 12-31-14 ratio is estimated.
(f) Loan balances exclude $13
million, $14 million, and $16 million
of purchased credit impaired loans at
December 31, 2014, September 30,
2014, and December 31, 2013,
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
12-31-14 9-30-14 12-31-13
-------- ------- --------
Tangible common equity to tangible assets at period end
Key shareholders' equity (GAAP) $10,530 $10,486 $10,303
Less: Intangible assets (a) 1,090 1,105 1,014
Preferred Stock, Series A (b) 282 282 282
--- --- ---
Tangible common equity (non-GAAP) $9,158 $9,099 $9,007
====== ====== ======
Total assets (GAAP) $93,821 $89,784 $92,934
Less: Intangible assets (a) 1,090 1,105 1,014
Tangible assets (non-GAAP) $92,731 $88,679 $91,920
======= ======= =======
Tangible common equity to tangible assets
ratio (non-GAAP) 9.88% 10.26% 9.80%
Tier 1 common equity at period end
Key shareholders' equity (GAAP) $10,530 $10,486 $10,303
Qualifying capital securities 340 340 339
Less: Goodwill 1,057 1,051 979
Accumulated other comprehensive income (loss) (c) (395) (366) (394)
Other assets (d) 89 110 89
--- --- ---
Total Tier 1 capital (regulatory) 10,119 10,031 9,968
Less: Qualifying capital securities 340 340 339
Preferred Stock, Series A (b) 282 282 282
--- --- ---
Total Tier 1 common equity (non-GAAP) $9,497 $9,409 $9,347
====== ====== ======
Net risk-weighted assets (regulatory)
(e) $84,976 $83,547 $83,328
Tier 1 common equity ratio (non-GAAP)
(e) 11.18% 11.26% 11.22%
Pre-provision net revenue
Net interest income (GAAP) $582 $575 $583
Plus: Taxable-equivalent adjustment 6 6 6
Noninterest income (GAAP) 490 417 453
Less: Noninterest expense (GAAP) 704 704 712
Pre-provision net revenue from
continuing operations (non-GAAP) $374 $294 $330
===
GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
Three months ended
------------------
12-31-14 9-30-14 12-31-13
-------- ------- --------
Average tangible common equity
Average Key shareholders' equity (GAAP) $10,562 $10,473 $10,272
Less: Intangible assets (average) (f) 1,096 1,037 1,016
Preferred Stock, Series A (average) 291 291 291
--- --- ---
Average tangible common equity (non-GAAP) $9,175 $9,145 $8,965
====== ====== ======
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations
attributable to Key common shareholders
(GAAP) $246 $197 $229
Average tangible common equity (non-GAAP) 9,175 9,145 8,965
Return on average tangible common equity from
continuing operations (non-GAAP) 10.64% 8.55% 10.13%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common
shareholders (GAAP) $248 $180 $224
Average tangible common equity (non-GAAP) 9,175 9,145 8,965
Return on average tangible common equity
consolidated (non-GAAP) 10.72% 7.81% 9.91%
Cash efficiency ratio
Noninterest expense (GAAP) $704 $704 $712
Less: Intangible asset amortization (GAAP) 10 10 10
Adjusted noninterest expense (non-GAAP) $694 $694 $702
==== ==== ====
Net interest income (GAAP) $582 $575 $583
Plus: Taxable-equivalent adjustment 6 6 6
Noninterest income (GAAP) 490 417 453
--- --- ---
Total taxable-equivalent revenue (non-GAAP) $1,078 $998 $1,042
====== ==== ======
Cash efficiency ratio (non-GAAP) 64.4% 69.5% 67.4%
Three months ended
------------------
12-31-14 9-30-14
-------- -------
Common Equity Tier 1 under the Regulatory Capital Rules (estimates)
Tier 1 common equity under current regulatory
rules $9,497 $9,409
Adjustments from current regulatory rules to
the Regulatory Capital Rules:
Deferred tax assets and other (g) (86) (93)
--- ---
Common Equity Tier 1 anticipated under the Regulatory Capital Rules (h) $9,411 $9,316
====== ======
Net risk-weighted assets under current
regulatory rules $84,976 $83,547
Adjustments from current regulatory rules to
the Regulatory Capital Rules:
Loan commitments less than one year 1,077 1,039
Past due loans 103 114
Mortgage servicing assets (i) 472 462
Deferred tax assets (i) 226 201
Other 1,211 1,172
----- -----
Total risk-weighted assets anticipated under the Regulatory Capital Rules (h) $88,065 $86,535
======= =======
Common Equity Tier 1 ratio under the
Regulatory Capital Rules 10.69% 10.77%
GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
Twelve months ended
-------------------
12-31-14 12-31-13
-------- --------
Pre-provision net revenue
Net interest income (GAAP) $2,293 $2,325
Plus: Taxable-equivalent adjustment 24 23
Noninterest income (GAAP) 1,797 1,766
Less: Noninterest expense (GAAP) 2,759 2,820
Pre-provision net revenue from continuing
operations (non-GAAP) $1,355 $1,294
Average tangible common equity
Average Key shareholders' equity (GAAP) $10,467 $10,276
Less: Intangible assets (average) (j) 1,039 1,021
Preferred Stock, Series A (average) 291 291
--- ---
Average tangible common equity (non-GAAP) $9,137 $8,964
====== ======
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations
attributable to Key common shareholders
(GAAP) $917 $847
Average tangible common equity (non-GAAP) 9,137 8,964
Return on average tangible common equity
from continuing operations (non-GAAP) 10.04% 9.45%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common
shareholders (GAAP) $878 $887
Average tangible common equity (non-GAAP) 9,137 8,964
Return on average tangible common equity
consolidated (non-GAAP) 9.61% 9.90%
Cash efficiency ratio
Noninterest expense (GAAP) $2,759 $2,820
Less: Intangible asset amortization (GAAP) 39 44
Adjusted noninterest expense (non-GAAP) $2,720 $2,776
====== ======
Net interest income (GAAP) $2,293 $2,325
Plus: Taxable-equivalent adjustment 24 23
Noninterest income (GAAP) 1,797 1,766
----- -----
Total taxable-equivalent revenue (non-GAAP) $4,114 $4,114
====== ======
Cash efficiency ratio (non-GAAP) 66.1% 67.5%
(a) For the three months ended
December 31, 2014, September 30,
2014, and December 31, 2013,
intangible assets exclude $68
million, $72 million, and $92
million, respectively, of period-
end purchased credit card
receivables.
(b) Net of capital surplus.
(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 December 31, 2014,
September 30, 2014, and December 31,
2013.
(e) 12-31-14 amount is estimated.
(f) For the three months ended
December 31, 2014, September 30,
2014, and December 31, 2013, average
intangible assets exclude $69
million, $76 million, and $96
million, respectively, of average
purchased credit card receivables.
(g) Includes the deferred tax asset
subject to future taxable income for
realization, primarily tax credit
carryforwards, as well as the
deductible portion 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%.
(j) For the twelve months ended
December 31, 2014, and December 31,
2013, average intangible assets
exclude $79 million and $107
million, respectively, of average
purchased credit card receivables.
GAAP = U.S. generally accepted
accounting principles
Consolidated Balance Sheets
(dollars in millions)
12-31-14 9-30-14 12-31-13
-------- ------- --------
Assets
Loans $57,381 $56,155 $54,457
Loans held for sale 734 784 611
Securities available for sale 13,360 12,245 12,346
Held-to-maturity securities 5,015 4,997 4,756
Trading account assets 750 965 738
Short-term investments 4,269 2,342 5,590
Other investments 760 822 969
Total earning assets 82,269 78,310 79,467
Allowance for loan and lease losses (794) (804) (848)
Cash and due from banks 653 651 617
Premises and equipment 841 832 885
Operating lease assets 330 304 305
Goodwill 1,057 1,051 979
Other intangible assets 101 126 127
Corporate-owned life insurance 3,479 3,456 3,408
Derivative assets 609 413 407
Accrued income and other assets 2,952 3,024 3,015
Discontinued assets 2,324 2,421 4,572
Total assets $93,821 $89,784 $92,934
======= ======= =======
Liabilities
Deposits in domestic offices:
NOW and money market deposit accounts $34,536 $33,941 $33,952
Savings deposits 2,371 2,390 2,472
Certificates of deposit ($100,000 or more) 2,040 2,533 2,631
Other time deposits 3,259 3,338 3,648
----- ----- -----
Total interest-bearing deposits 42,206 42,202 42,703
Noninterest-bearing deposits 29,228 25,697 26,001
Deposits in foreign office - interest-
bearing 564 557 558
Total deposits 71,998 68,456 69,262
Federal funds purchased and securities 575 657 1,534
sold under repurchase agreements
Bank notes and other short-term
borrowings 423 996 343
Derivative liabilities 784 384 414
Accrued expense and other liabilities 1,621 1,613 1,557
Long-term debt 7,875 7,172 7,650
Discontinued liabilities 3 3 1,854
Total liabilities 83,279 79,281 82,614
Equity
Preferred stock, Series A 291 291 291
Common shares 1,017 1,017 1,017
Capital surplus 3,986 3,984 4,022
Retained earnings 8,273 8,082 7,606
Treasury stock, at cost (2,681) (2,563) (2,281)
Accumulated other comprehensive income
(loss) (356) (325) (352)
Key shareholders' equity 10,530 10,486 10,303
Noncontrolling interests 12 17 17
Total equity 10,542 10,503 10,320
------ ------ ------
Total liabilities and equity $93,821 $89,784 $92,934
======= ======= =======
Common shares outstanding (000) 859,403 868,477 890,724
Consolidated Statements of Income
(dollars in millions, except per share amounts)
Three months ended Twelve months ended
------------------ -------------------
12-31-14 9-30-14 12-31-13 12-31-14 12-31-13
-------- ------- -------- -------- --------
Interest income
Loans $534 $531 $532 $2,110 $2,151
Loans held for sale 8 4 6 21 20
Securities available for sale 67 67 75 277 311
Held-to-maturity securities 23 25 22 93 82
Trading account assets 6 6 6 25 21
Short-term investments 2 2 2 6 6
Other investments 6 4 6 22 29
Total interest income 646 639 649 2,554 2,620
Interest expense
Deposits 26 28 34 117 158
Federal funds purchased and securities
sold under repurchase agreements - 1 - 2 2
Bank notes and other short-term borrowings 3 2 3 9 8
Long-term debt 35 33 29 133 127
Total interest expense 64 64 66 261 295
Net interest income 582 575 583 2,293 2,325
Provision (credit) for loan and lease losses 22 21 19 59 130
--- --- --- --- ---
Net interest income (expense) after provision for loan and lease losses 560 554 564 2,234 2,195
Noninterest income
Trust and investment services income 112 99 98 403 393
Investment banking and debt placement fees 126 88 84 397 333
Service charges on deposit accounts 64 68 68 261 281
Operating lease income and other leasing
gains 15 17 26 96 117
Corporate services income 53 42 40 178 172
Cards and payments income 43 42 40 166 162
Corporate-owned life insurance income 38 26 33 118 120
Consumer mortgage income 3 3 3 10 19
Mortgage servicing fees 11 9 22 46 58
Net gains (losses) from principal
investing 18 9 20 78 52
Other income (a), (b) 7 14 19 44 59
Total noninterest income 490 417 453 1,797 1,766
Noninterest expense
Personnel 409 405 398 1,591 1,609
Net occupancy 63 66 73 261 275
Computer processing 40 39 40 158 156
Business services and professional fees 38 36 42 156 151
Equipment 23 25 26 96 104
Operating lease expense 11 11 10 42 47
Marketing 16 15 18 49 51
FDIC assessment 9 9 7 30 30
Intangible asset amortization 10 10 10 39 44
Provision (credit) for losses on lending-
related commitments - (2) (3) (2) 8
OREO expense, net 2 1 2 5 7
Other expense 83 89 89 334 338
Total noninterest expense 704 704 712 2,759 2,820
--- --- --- ----- -----
Income (loss) from continuing operations before income taxes 346 267 305 1,272 1,141
Income taxes 94 64 70 326 271
Income (loss) from continuing operations 252 203 235 946 870
Income (loss) from discontinued
operations, net of taxes 2 (17) (5) (39) 40
Net income (loss) 254 186 230 907 910
Less: Net income (loss) attributable to
noncontrolling interests 1 - - 7 -
Net income (loss) attributable to Key $253 $186 $230 $900 $910
==== ==== ==== ==== ====
Income (loss) from continuing operations attributable to Key common shareholders $246 $197 $229 $917 $847
Net income (loss) attributable to Key common shareholders 248 180 224 878 887
Per common share
----------------
Income (loss) from continuing operations attributable to Key common shareholders $.29 $.23 $.26 $1.05 $.93
Income (loss) from discontinued operations, net of taxes - (.02) (.01) (.04) .04
Net income (loss) attributable to Key common shareholders (c) .29 .21 .25 1.01 .98
Per common share - assuming dilution
------------------------------------
Income (loss) from continuing operations attributable to Key common shareholders $.28 $.23 $.26 $1.04 $.93
Income (loss) from discontinued operations, net of taxes - (.02) (.01) (.04) .04
Net income (loss) attributable to Key common shareholders (c) .28 .21 .25 .99 .97
Cash dividends declared per common share $.065 $.065 $.055 $.25 $.215
Weighted-average common shares outstanding (000) 858,811 867,350 890,516 871,464 906,524
Effect of convertible preferred stock 20,602 - - - -
Effect of common share options and other
stock awards 6,773 6,772 7,196 6,735 6,047
Weighted-average common shares and potential common shares outstanding (000) (d) 886,186 874,122 897,712 878,199 912,571
======= ======= ======= ======= =======
(a) For the three months ended
December 31, 2014, September 30,
2014, and December 31, 2013, net
securities gains (losses) totaled
less than $1 million, less than
$1 million, and $1 million,
respectively. For the three
months ended December 31, 2014,
September 30, 2014, and December
31, 2013, Key did not have any
impairment losses related to
securities.
(b) For the twelve months ended
December 31, 2014, and December
31, 2013, net securities gains
(losses) totaled less than $1
million and $1 million,
respectively. For the twelve
months ended December 31, 2014,
and December 31, 2013, Key did
not have any impairment losses
related to securities.
(c) Earnings per share may not
foot due to rounding.
(d) Assumes conversion of common
share options and other stock
awards and/or convertible
preferred stock, as applicable.
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)
Fourth Quarter 2014 Third Quarter 2014 Fourth 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) $27,188 $223 3.24% $26,456 $218 3.28% $24,218 $212 3.47%
Real estate - commercial mortgage 8,161 77 3.73 8,142 78 3.79 7,678 78 4.01
Real estate - construction 1,077 10 3.90 1,030 10 3.78 1,075 11 4.21
Commercial lease financing 4,119 38 3.67 4,145 38 3.66 4,513 41 3.62
Total commercial loans 40,545 348 3.40 39,773 344 3.44 37,484 342 3.62
Real estate - residential mortgage 2,223 24 4.28 2,204 24 4.35 2,199 24 4.43
Home equity:
Key Community Bank 10,365 103 3.91 10,368 102 3.91 10,310 102 3.92
Other 274 5 7.84 290 6 7.80 343 7 7.72
--- --- ---- --- --- ---- --- --- ----
Total home equity loans 10,639 108 4.01 10,658 108 4.01 10,653 109 4.04
Consumer other -Key Community
Bank 1,552 27 6.78 1,534 26 6.87 1,446 26 7.18
Credit cards 728 20 11.02 716 20 11.12 701 20 11.17
Consumer other:
Marine 802 13 6.29 856 13 6.23 1,056 17 6.24
Other 52 - 7.52 55 2 7.63 69 1 8.03
--- --- ---- --- --- ---- --- --- ----
Total consumer other 854 13 6.36 911 15 6.32 1,125 18 6.35
--- --- ---- --- --- ---- ----- --- ----
Total consumer loans 15,996 192 4.76 16,023 193 4.78 16,124 197 4.88
------ --- ---- ------ --- ---- ------ --- ----
Total loans 56,541 540 3.79 55,796 537 3.82 53,608 539 3.98
Loans held for sale 871 8 3.72 502 4 3.87 688 6 3.65
Securities available for sale (b),
(e) 12,153 67 2.20 11,939 67 2.25 12,464 74 2.40
Held-to-maturity securities (b) 4,947 23 1.91 5,108 25 1.90 4,775 22 1.85
Trading account assets 868 6 2.84 893 6 2.68 819 6 2.90
Short-term investments 3,520 2 .27 3,048 2 .19 4,455 2 .18
Other investments (e) 792 6 2.77 847 4 2.12 983 6 2.47
Total earning assets 79,692 652 3.27 78,133 645 3.30 77,792 655 3.37
Allowance for loan and lease
losses (798) (809) (859)
Accrued income and other assets 9,868 9,799 9,467
Discontinued assets 2,359 4,138 4,777
Total assets $91,121 $91,261 $91,177
======= ======= =======
Liabilities
NOW and money market deposit
accounts $34,811 13 .14 $33,969 12 .14 $33,834 12 .15
Savings deposits 2,388 - .02 2,428 1 .02 2,483 - .03
Certificates of deposit ($100,000
or more) (f) 2,277 7 1.25 2,629 8 1.23 2,649 11 1.57
Other time deposits 3,306 6 .76 3,413 7 .83 3,736 11 1.16
Deposits in foreign office 543 - .24 595 - .23 615 - .21
Total interest-bearing deposits 43,325 26 .24 43,034 28 .26 43,317 34 .32
Federal funds purchased and
securities 621 - .02 1,176 1 .19 1,618 - .15
sold under repurchase agreements
Bank notes and other short-term
borrowings 772 3 1.17 484 2 1.79 438 3 1.96
Long-term debt (f), (g) 5,135 35 2.80 4,868 33 2.88 4,174 29 2.94
Total interest-bearing liabilities 49,853 64 .51 49,562 64 .52 49,547 66 .53
------ --- --- ------ --- --- ------ --- ---
Noninterest-bearing deposits 26,342 25,302 25,077
Accrued expense and other
liabilities 1,989 1,768 1,548
Discontinued liabilities (g) 2,359 4,138 4,717
Total liabilities 80,543 80,770 80,889
Equity
Key shareholders' equity 10,562 10,473 10,272
Noncontrolling interests 16 18 16
Total equity 10,578 10,491 10,288
Total liabilities and equity $91,121 $91,261 $91,177
======= ======= =======
Interest rate spread (TE) 2.76% 2.78% 2.84%
==== ==== ====
Net interest income (TE) and net interest margin (TE) 588 2.94% 581 2.96% 589 3.01%
==== ==== ====
TE adjustment (b) 6 6 6
--- --- ---
Net interest income, GAAP basis $582 $575 $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
$90 million, $92 million, and $97
million of assets from commercial
credit cards for the three months
ended December 31, 2014, September 30,
2014, and December 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
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)
Twelve months ended December 31, 2014 Twelve months ended December 31, 2013
------------------------------------- -------------------------------------
Average Average
Balance Interest (a) Yield/Rate (a) Balance Interest (a) Yield/ Rate (a)
------- -------- ---------- ------- -------- -----------
Assets
Loans: (b), (c)
Commercial, financial and
agricultural (d) $26,375 $866 3.28% $23,723 $855 3.60%
Real estate - commercial mortgage 7,999 303 3.79 7,591 312 4.11
Real estate - construction 1,061 43 4.07 1,058 45 4.25
Commercial lease financing 4,239 156 3.67 4,683 172 3.67
Total commercial loans 39,674 1,368 3.45 37,055 1,384 3.73
Real estate - residential mortgage 2,201 96 4.37 2,185 98 4.49
Home equity:
Key Community Bank 10,340 405 3.91 10,086 397 3.93
Other 299 23 7.80 377 29 7.70
--- --- ---- --- --- ----
Total home equity loans 10,639 428 4.02 10,463 426 4.07
Consumer other - Key Community Bank 1,501 104 6.92 1,404 103 7.33
Credit cards 712 78 10.95 701 83 11.86
Consumer other:
Marine 894 56 6.22 1,172 74 6.26
Other 58 4 7.70 74 6 8.32
--- --- ---- --- --- ----
Total consumer other 952 60 6.31 1,246 80 6.38
--- --- ---- ----- --- ----
Total consumer loans 16,005 766 4.79 15,999 790 4.94
Total loans 55,679 2,134 3.83 53,054 2,174 4.10
Loans held for sale 570 21 3.76 532 20 3.72
Securities available for sale (b),
(e) 12,210 277 2.27 12,689 311 2.49
Held-to-maturity securities (b) 4,949 93 1.88 4,387 82 1.87
Trading account assets 932 25 2.70 756 21 2.78
Short-term investments 2,886 6 .21 2,948 6 .20
Other investments (e) 865 22 2.53 1,028 29 2.84
Total earning assets 78,091 2,578 3.30 75,394 2,643 3.51
Allowance for loan and lease losses (818) (879)
Accrued income and other assets 9,806 9,662
Discontinued assets 3,828 5,036
Total assets $90,907 $89,213
==========
Liabilities
NOW and money market deposit
accounts $34,283 48 .14 $32,846 53 .16
Savings deposits 2,446 1 .02 2,505 1 .04
Certificates of deposit ($100,000
or more) (f) 2,616 35 1.35 2,829 50 1.76
Other time deposits 3,495 32 .91 4,084 53 1.30
Deposits in foreign office 615 1 .23 567 1 .23
Total interest-bearing deposits 43,455 117 .27 42,831 158 .37
Federal funds purchased and
securities 1,182 2 .16 1,802 2 .13
sold under repurchase agreements
Bank notes and other short-term
borrowings 597 9 1.49 394 8 1.89
Long-term debt (f), (g) 5,161 133 2.68 4,184 127 3.28
Total interest-bearing liabilities 50,395 261 .52 49,211 295 .60
------ --- --- ------ --- ---
Noninterest-bearing deposits 24,410 23,046
Accrued expense and other
liabilities 1,791 1,656
Discontinued liabilities (g) 3,828 4,995
Total liabilities 80,424 78,908
Equity
Key shareholders' equity 10,467 10,276
Noncontrolling interests 16 29
Total equity 10,483 10,305
Total liabilities and equity $90,907 $89,213
==========
Interest rate spread (TE) 2.78% 2.91%
==== ====
Net interest income (TE) and net interest margin (TE) 2,317 2.97% 2,348 3.12%
==== ====
TE adjustment (b) 24 23
--- ---
Net interest income, GAAP basis $2,293 $2,325
(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
$93 million and $95 million of assets
from commercial credit cards for the
twelve months ended December 31, 2014,
and December 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 Twelve months ended
12-31-14 9-30-14 12-31-13 12-31-14 12-31-13
Personnel (a) $409 $405 $398 $1,591 $1,609
Net occupancy 63 66 73 261 275
Computer processing 40 39 40 158 156
Business services and professional fees 38 36 42 156 151
Equipment 23 25 26 96 104
Operating lease expense 11 11 10 42 47
Marketing 16 15 18 49 51
FDIC assessment 9 9 7 30 30
Intangible asset amortization 10 10 10 39 44
Provision (credit) for losses on lending-related commitments - (2) (3) (2) 8
OREO expense, net 2 1 2 5 7
Other expense 83 89 89 334 338
--- --- --- --- ---
Total noninterest expense $704 $704 $712 $2,759 $2,820
==== ==== ==== ====== ======
Average full-time equivalent employees (b) 13,590 13,905 14,197 13,853 14,783
(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 Twelve months ended
12-31-14 9-30-14 12-31-13 12-31-14 12-31-13
Salaries $224 $226 $226 $894 $897
Technology contract labor, net 12 12 16 55 72
Incentive compensation 105 79 87 337 318
Employee benefits 53 71 56 237 249
Stock-based compensation 13 10 8 44 35
Severance 2 7 5 24 38
--- --- --- --- ---
Total personnel expense $409 $405 $398 $1,591 $1,609
==== ==== ==== ====== ======
Loan Composition
(dollars in millions)
Percent change 12-31-14 vs.
12-31-14 9-30-14 12-31-13 9-30-14 12-31-13
-------- ------- -------- ------- --------
Commercial, financial and agricultural (a) $27,982 $26,683 $24,963 4.9% 12.1%
Commercial real estate:
Commercial mortgage 8,047 8,276 7,720 (2.8) 4.2
Construction 1,100 1,036 1,093 6.2 .6
Total commercial real estate loans 9,147 9,312 8,813 (1.8) 3.8
Commercial lease financing (b) 4,252 4,135 4,551 2.8 (6.6)
----- ----- ----- --- ----
Total commercial loans 41,381 40,130 38,327 3.1 8.0
Residential - prime loans:
Real estate - residential mortgage 2,225 2,213 2,187 .5 1.7
Home equity:
Key Community Bank 10,366 10,380 10,340 (.1) .3
Other 267 283 334 (5.7) (20.1)
--- --- --- ---- -----
Total home equity loans 10,633 10,663 10,674 (.3) (.4)
Total residential - prime loans 12,858 12,876 12,861 (.1) -
Consumer other - Key Community Bank 1,560 1,546 1,449 .9 7.7
Credit cards 754 724 722 4.1 4.4
Consumer other:
Marine 779 828 1,028 (5.9) (24.2)
Other 49 51 70 (3.9) (30.0)
Total consumer other 828 879 1,098 (5.8) (24.6)
Total consumer loans 16,000 16,025 16,130 (.2) (.8)
Total loans (c), (d) $57,381 $56,155 $54,457 2.2% 5.4%
==========
Loans Held for Sale Composition
(dollars in millions)
Percent change 12-31-14 vs.
12-31-14 9-30-14 12-31-13 9-30-14 12-31-13
-------- ------- -------- ------- --------
Commercial, financial and agricultural $63 $30 $278 110.0% (77.3)%
Real estate - commercial mortgage 638 725 307 (12.0) 107.8
Commercial lease financing 15 10 9 50.0 66.7
Real estate - residential mortgage 18 19 17 (5.3) 5.9
--- --- --- ---- ---
Total loans held for sale $734 $784 $611 (6.4)% 20.1%
==========
Summary of Changes in Loans Held for Sale
(in millions)
4Q14 3Q14 2Q14 1Q14 4Q13
---- ---- ---- ---- ----
Balance at beginning of period $784 $435 $401 $611 $699
New originations 2,465 1,593 978 645 1,669
Transfers from (to) held to
maturity, net 2 - (8) 3 1
Loan sales (2,516) (1,243) (934) (596) (1,750)
Loan draws (payments), net (1) (1) (2) (262) (8)
Balance at end of period $734 $784 $435 $401 $611
==== ==== ==== ==== ====
(a) Loan balances include $88
million, $90 million, and $94
million of commercial credit card
balances at December 31, 2014,
September 30, 2014, and December 31,
2013, respectively.
(b) Commercial lease financing
includes receivables of $302
million, $367 million, and $58
million held as collateral for a
secured borrowing at December 31,
2014, September 30, 2014, and
December 31, 2013, respectively.
Principal reductions are based on
the cash payments received from
these related receivables.
(c) At December 31, 2014, total
loans include purchased loans of
$138 million, of which $13 million
were purchased credit impaired. At
September 30, 2014, total loans
include purchased loans of $143
million, of which $14 million were
purchased credit impaired. At
December 31, 2013, total loans
include purchased loans of $166
million, of which $16 million were
purchased credit impaired.
(d) Total loans exclude loans of
$2.3 billion at December 31, 2014,
$2.4 billion at September 30, 2014,
and $4.5 billion at December 31,
2013, related to the discontinued
operations of the education lending
business.
N/M = Not Meaningful
Exit Loan Portfolio From Continuing Operations
(in millions)
Balance Change Net Loan Balance on
Outstanding 12-31-14 vs. Charge-offs Nonperforming Status
----------- ----------- --------------------
12-31-14 9-30-14 9-30-14 4Q14 (b) 3Q14 (b) 12-31-14 9-30-14
-------- ------- ------- ---- --- ---- --- -------- -------
Residential properties - homebuilder $10 $11 $(1) - $1 $9 $10
Marine and RV floor plan 7 7 - - - 5 5
Commercial lease financing (a) 967 1,046 (79) $3 (1) 1 1
--- ----- --- --- --- --- ---
Total commercial loans 984 1,064 (80) 3 - 15 16
Home equity - Other 267 283 (16) - 1 10 10
Marine 779 828 (49) 3 2 15 16
RV and other consumer 54 57 (3) (1) 1 1 1
--- --- --- --- --- --- ---
Total consumer loans 1,100 1,168 (68) 2 4 26 27
----- ----- --- --- --- --- ---
Total exit loans in loan portfolio $2,084 $2,232 $(148) $5 $4 $41 $43
====== ====== ===== === === === ===
Discontinued operations - education $2,295 $2,375 $(80) $8 $7 $11 $9
lending business (not included in exit loans above)
(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) Credit amounts indicate
recoveries exceeded charge-
offs.
Asset Quality Statistics From Continuing Operations
(dollars in millions)
4Q14 3Q14 2Q14 1Q14 4Q13
---- ---- ---- ---- ----
Net loan charge-offs $32 $31 $30 $20 $37
Net loan charge-offs to average total loans .22% .22% .22% .15% .27%
Allowance for loan and lease losses $794 $804 $814 $834 $848
Allowance for credit losses (a) 830 839 851 869 885
Allowance for loan and lease losses to period-end loans 1.38% 1.43% 1.46% 1.50% 1.56%
Allowance for credit losses to period-end loans 1.45 1.49 1.53 1.57 1.63
Allowance for loan and lease losses to nonperforming loans 190.0 200.5 205.6 185.7 166.9
Allowance for credit losses to nonperforming loans 198.6 209.2 214.9 193.5 174.2
Nonperforming loans at period end (b) $418 $401 $396 $449 $508
Nonperforming assets at period end 436 418 410 469 531
Nonperforming loans to period-end portfolio loans .73% .71% .71% .81% .93%
Nonperforming assets to period-end portfolio loans plus .76 .74 .74 .85 .97
OREO and other nonperforming assets
(a) Includes the allowance for
loan and lease losses plus the
liability for credit losses on
lending-related unfunded
commitments.
(b) Loan balances exclude $13
million, $14 million, $15
million, $16 million, and $16
million of purchased credit
impaired loans at December 31,
2014, September 30, 2014, June
30, 2014, March 31, 2014, and
December 31, 2013, respectively.
Summary of Loan and Lease Loss Experience From Continuing Operations
(dollars in millions)
Three months ended Twelve months ended
-------------------
12-31-14 9-30-14 12-31-13 12-31-14 12-31-13
-------- ------- -------- -------- --------
Average loans outstanding $56,541 $55,796 $53,608 $55,679 $53,054
======= ======= ======= ======= =======
Allowance for loan and lease losses at beginning of period $804 $814 $868 $848 $888
Loans charged off:
Commercial, financial and agricultural 10 12 18 45 62
Real estate - commercial mortgage 3 - 2 6 20
Real estate - construction 1 2 1 5 3
--- --- --- --- ---
Total commercial real estate loans 4 2 3 11 23
Commercial lease financing 4 1 2 10 27
--- --- --- --- ---
Total commercial loans 18 15 23 66 112
Real estate - residential mortgage 3 2 7 10 20
Home equity:
Key Community Bank 8 9 12 37 62
Other 1 2 4 9 20
--- --- --- --- ---
Total home equity loans 9 11 16 46 82
Consumer other - Key Community Bank 7 7 7 30 31
Credit cards 7 9 5 34 30
Consumer other:
Marine 5 4 7 23 29
Other - 1 1 2 4
--- --- --- --- ---
Total consumer other 5 5 8 25 33
--- --- --- --- ---
Total consumer loans 31 34 43 145 196
--- --- --- --- ---
Total loans charged off 49 49 66 211 308
Recoveries:
Commercial, financial and agricultural 6 6 9 33 39
Real estate - commercial mortgage - 2 7 4 27
Real estate - construction 1 1 - 17 14
--- --- --- --- ---
Total commercial real estate loans 1 3 7 21 41
Commercial lease financing 2 2 5 10 15
--- --- --- --- ---
Total commercial loans 9 11 21 64 95
Real estate - residential mortgage - - 1 2 2
Home equity:
Key Community Bank 2 3 2 9 10
Other 1 1 1 5 6
--- --- --- --- ---
Total home equity loans 3 4 3 14 16
Consumer other - Key Community Bank 2 1 2 6 7
Credit cards - - - 1 3
Consumer other:
Marine 2 2 2 9 15
Other 1 - - 2 2
--- --- --- --- ---
Total consumer other 3 2 2 11 17
--- --- --- --- ---
Total consumer loans 8 7 8 34 45
--- --- --- --- ---
Total recoveries 17 18 29 98 140
--- --- --- --- ---
Net loan charge-offs (32) (31) (37) (113) (168)
Provision (credit) for loan and lease losses 22 21 19 59 130
Foreign currency translation adjustment - - (2) - (2)
--- --- --- --- ---
Allowance for loan and lease losses at end of period $794 $804 $848 $794 $848
==== ==== ==== ==== ====
Liability for credit losses on lending-related commitments at beginning of period $35 $37 $40 $37 $29
Provision (credit) for losses on lending-related commitments 1 (2) (3) (1) 8
--- --- --- --- ---
Liability for credit losses on lending-related commitments at end of period (a) $36 $35 $37 $36 $37
=== === === === ===
Total allowance for credit losses at end of period $830 $839 $885 $830 $885
==== ==== ==== ==== ====
Net loan charge-offs to average total loans .22% .22% .27% .20% .32%
Allowance for loan and lease losses to period-end loans 1.38 1.43 1.56 1.38 1.56
Allowance for credit losses to period-end loans 1.45 1.49 1.63 1.45 1.63
Allowance for loan and lease losses to nonperforming loans 190.0 200.5 166.9 190.0 166.9
Allowance for credit losses to nonperforming loans 198.6 209.2 174.2 198.6 174.2
Discontinued operations - education lending business:
Loans charged off $11 $10 $13 $45 $55
Recoveries 3 3 4 14 18
--- --- --- --- ---
Net loan charge-offs $(8) $(7) $(9) $(31) $(37)
=== === === ==== ====
(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)
12-31-14 9-30-14 6-30-14 3-31-14 12-31-13
Commercial, financial and agricultural $59 $47 $37 $60 $77
Real estate - commercial mortgage 34 41 38 37 37
Real estate - construction 13 14 9 11 14
--- --- --- --- ---
Total commercial real estate loans 47 55 47 48 51
Commercial lease financing 18 14 15 18 19
--- --- --- --- ---
Total commercial loans 124 116 99 126 147
Real estate - residential mortgage 79 81 89 105 107
Home equity:
Key Community Bank 185 174 178 188 205
Other 10 10 11 11 15
--- --- --- --- ---
Total home equity loans 195 184 189 199 220
Consumer other - Key Community Bank 2 2 2 2 3
Credit cards 2 1 1 1 4
Consumer other:
Marine 15 16 15 15 26
Other 1 1 1 1 1
--- --- --- --- ---
Total consumer other 16 17 16 16 27
--- --- --- --- ---
Total consumer loans 294 285 297 323 361
--- --- --- --- ---
Total nonperforming loans (a) 418 401 396 449 508
Nonperforming loans held for sale - - 1 1 1
OREO 18 16 12 12 15
Other nonperforming assets - 1 1 7 7
--- --- --- --- ---
Total nonperforming assets $436 $418 $410 $469 $531
==== ==== ==== ==== ====
Accruing loans past due 90 days or more $96 $71 $83 $89 $71
Accruing loans past due 30 through 89 days 235 340 274 267 318
Restructured loans - accruing and nonaccruing (b) 270 264 266 294 338
Restructured loans included in nonperforming loans (b) 157 137 142 178 214
Nonperforming assets from discontinued operations - 11 9 19 20 25
education lending business
Nonperforming loans to period-end portfolio loans .73% .71% .71% .81% .93%
Nonperforming assets to period-end portfolio loans .76 .74 .74 .85 .97
plus OREO and other nonperforming assets
(a) Loan balances exclude $13 million, $14 million,
$15 million, $16 million, and $16 million of
purchased credit impaired loans at December 31,
2014, September 30, 2014, June 30, 2014, March 31,
2014, and December 31, 2013, 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)
4Q14 3Q14 2Q14 1Q14 4Q13
---- ---- ---- ---- ----
Balance at beginning of period $401 $396 $449 $508 $541
Loans placed on nonaccrual status 103 109 79 98 129
Charge-offs (49) (49) (56) (57) (66)
Loans sold (2) - (21) (3) (19)
Payments (17) (13) (17) (21) (46)
Transfers to OREO (6) (7) (4) (3) (5)
Loans returned to accrual status (12) (35) (34) (73) (26)
--- --- --- --- ---
Balance at end of period (a) $418 $401 $396 $449 $508
==== ==== ==== ==== ====
(a) Loan balances exclude $13
million, $14 million, $15
million, $16 million, and $16
million of purchased credit
impaired loans at December 31,
2014, September 30, 2014, June
30, 2014, March 31, 2014, and
December 31, 2013,
respectively.
Summary of Changes in Nonperforming Loans Held For Sale From Continuing Operations
(in millions)
4Q14 3Q14 2Q14 1Q14 4Q13
---- ---- ---- ---- ----
Balance at beginning of period - $1 $1 $1 $13
Net advances / (payments) - - - - (1)
Loans sold - (2) - - (11)
Valuation adjustments - 1 - - -
Balance at end of period - - $1 $1 $1
=== === === === ===
Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations
(in millions)
4Q14 3Q14 2Q14 1Q14 4Q13
---- ---- ---- ---- ----
Balance at beginning of period $16 $12 $12 $15 $15
Properties acquired - nonperforming loans 6 7 4 3 5
Valuation adjustments (2) (1) (1) (1) -
Properties sold (2) (2) (3) (5) (5)
--- --- --- --- ---
Balance at end of period $18 $16 $12 $12 $15
=== === === === ===
Line of Business Results
(dollars in millions)
Percent change 4Q14 vs.
4Q14 3Q14 2Q14 1Q14 4Q13 3Q14 4Q13
---- ---- ---- ---- ---- ---- ----
Key Community Bank
Summary of operations
Total revenue (TE) $558 $559 $554 $546 $567 (.2)% (1.6)%
Provision (credit) for loan and lease losses 11 31 23 9 32 (64.5) (65.6)
Noninterest expense 449 437 445 440 468 2.7 (4.1)
Net income (loss) attributable to Key 62 57 54 61 42 8.8 47.6
Average loans and leases 30,478 30,103 30,034 29,797 29,597 1.2 3.0
Average deposits 50,850 50,302 50,230 49,910 50,493 1.1 .7
Net loan charge-offs 28 28 33 28 31 - (9.7)
Net loan charge-offs to average total loans .36% .37% .44% .38% .42% N/A N/A
Nonperforming assets at period end $340 $338 $331 $357 $396 .6 (14.1)
Return on average allocated equity 9.14% 8.45% 7.97% 8.83% 5.78% N/A N/A
Average full-time equivalent employees 7,414 7,573 7,569 7,698 7,845 (2.1) (5.5)
Key Corporate Bank
Summary of operations
Total revenue (TE) $458 $395 $390 $386 $405 15.9% 13.1%
Provision (credit) for loan and lease losses 4 (5) - (1) (10) N/M N/M
Noninterest expense 239 212 203 194 210 12.7 13.8
Net income (loss) attributable to Key 137 119 119 122 133 15.1 3.0
Average loans and leases 23,293 22,700 22,353 21,440 20,334 2.6 14.6
Average loans held for sale 855 481 429 429 668 77.8 28.0
Average deposits 18,074 17,310 16,042 15,714 17,286 4.4 4.6
Net loan charge-offs (2) - (2) (14) 2 N/M N/M
Net loan charge-offs to average total loans (.03)% - (.04)% (.26)% .04% N/A N/A
Nonperforming assets at period end $41 $20 $22 $53 $55 105.0 (25.5)
Return on average allocated equity 32.66% 29.71% 33.45% 34.12% 34.15% N/A N/A
Average full-time equivalent employees 1,991 1,945 1,888 1,866 1,842 2.4 8.1
TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/keycorp-reports-fourth-quarter-2014-net-income-of-246-million-or-28-per-common-share-300024180.html
SOURCE KeyCorp
