KEYCORP CLEVELAND, Oct. 19, 2017 /PRNewswire/ --
Earnings Per Share Cash Efficiency(a) Return on Tangible
Common Equity(a)
Reported $.32 62.2% 12.2%
Adjusted (Non-GAAP)(b) $.35 59.7% 13.2%
(a) Non-GAAP measure; see pages 15-
17 for reconciliation
(b) Excludes notable items; see page
15 for detail
KeyCorp (NYSE: KEY) today announced third quarter net income from continuing operations attributable to Key common shareholders of $349 million, or $.32 per common share, compared to $393 million or $.36 per common share, for the second quarter of 2017 and $165 million, or $.16 per common share, for the third quarter of 2016. During the third quarter of 2017, Key's results included $36 million of merger-related charges and a $5 million merchant services gain adjustment, resulting in a pre-tax net impact of $41 million, or $.03 per common share.
"Third quarter results reflect strong returns and the seventh consecutive quarter of positive operating leverage compared to the prior year, as we continue to execute on our strategic priorities, grow our businesses, and deliver on the commitments we have made. Key's return on average tangible common equity, excluding notable items, was 13.2% for the quarter."
"We continue to have momentum in our fee-based businesses, including investment banking and debt placement fees, which were up 4% from the second quarter, and cards and payments income, which grew 7% on a linked-quarter basis. The cash efficiency ratio for the third quarter, excluding notable items, was 59.7%."
"We continue to invest for growth in support of our relationship strategy, including the recent HelloWallet and merchant services acquisitions, as well as Cain Brothers, which closed early in the fourth quarter. These investments enhance our focus on organic growth by investing in our people, products and capabilities to continue to drive positive operating leverage and future growth."
- Beth Mooney, Chairman and CEO
Selected Financial Highlights
dollars in millions, except per share data Change 3Q17 vs.
3Q17 2Q17 3Q16 2Q17 3Q16
---- ---- ---- ---- ----
Income (loss) from continuing operations attributable to Key common shareholders $349 $393 $165 (11.2)% 111.5%
Income (loss) from continuing operations attributable to Key common shareholders per .32 .36 .16 (11.1) 100.0
common share - assuming dilution
Return on average total assets from continuing operations 1.07% 1.23% .55% N/A N/A
Common Equity Tier 1 ratio (a) 10.26 9.91 9.56 N/A N/A
Book value at period end $13.18 $13.02 $12.78 1.2% 3.1%
Net interest margin (TE) from continuing operations 3.15% 3.30% 2.85% N/A N/A
(a) 9/30/2017
ratio is
estimated.
TE = Taxable Equivalent, N/A = Not
Applicable
INCOME STATEMENT HIGHLIGHTS
Revenue
dollars in millions Change 3Q17 vs.
3Q17 2Q17 3Q16 2Q17 3Q16
---- ---- ---- ---- ----
Net interest income (TE) $962 $987 $788 (2.5)% 22.1%
Noninterest income 592 653 549 (9.3) 7.8
--- --- --- ---- ---
Total revenue $1,554 $1,640 $1,337 (5.2)% 16.2%
====== ====== ======
TE = Taxable Equivalent; N/M
= Not Meaningful
Third quarter 2017 net interest income included $48 million of purchase accounting accretion related to the acquisition of First Niagara.
Taxable-equivalent net interest income was $962 million for the third quarter of 2017, and the net interest margin was 3.15%, compared to taxable-equivalent net interest income of $788 million and a net interest margin of 2.85% for the third quarter of 2016, reflecting the benefit from the First Niagara acquisition, including purchase accounting accretion, as well as higher earning asset yields and balances.
Compared to the second quarter of 2017, taxable-equivalent net interest income decreased by $25 million, and the net interest margin decreased by 15 basis points. The decrease in net interest income and the net interest margin reflects a decline in purchase accounting accretion of $52 million, including $42 million from the finalization of previous estimates recognized in the second quarter. Lower purchase accounting accretion was partially offset by higher earning asset yields and balances.
Excluding purchase accounting accretion, taxable-equivalent net interest income increased $145 million from the third quarter of 2016 and $27 million from the second quarter of 2017.
Noninterest Income
dollars in millions Change 3Q17 vs.
3Q17 2Q17 3Q16 2Q17 3Q16
---- ---- ---- ---- ----
Trust and investment services income $135 $134 $122 .7% 10.7%
Investment banking and debt placement fees 141 135 156 4.4 (9.6)
Service charges on deposit accounts 91 90 85 1.1 7.1
Operating lease income and other leasing gains 16 30 6 (46.7) 166.7
Corporate services income 54 55 51 (1.8) 5.9
Cards and payments income 75 70 66 7.1 13.6
Corporate-owned life insurance income 31 33 29 (6.1) 6.9
Consumer mortgage income 7 6 6 16.7 16.7
Mortgage servicing fees 21 15 15 40.0 40.0
Net gains (losses) from principal investing 3 - 5 N/M (40.0)
Other income 18 85 8 (78.8) 125.0
--- --- ---
Total noninterest income $592 $653 $549 (9.3)% 7.8%
==== ==== ====
N/M = Not Meaningful
Key's noninterest income was $592 million for the third quarter of 2017, compared to $549 million for the year-ago quarter. Growth was largely driven by a full-quarter impact of the First Niagara acquisition, as well as ongoing momentum in Key's core businesses. Broad-based growth across many fee income categories more than offset a decline in investment banking and debt placement fees, related to strong market conditions in the year-ago period.
Compared to the second quarter of 2017, noninterest income decreased by $61 million. The largest driver of this decrease was a $64 million one-time gain related to Key's merchant services business in the second quarter of 2017, recognized in other income. Excluding the one-time merchant services gain, noninterest income grew on a linked-quarter basis, driven by momentum in fee-based businesses, including growth in investment banking and debt placement fees, mortgage servicing fees, and cards and payments income, which also benefited from the recent merchant services acquisition. Operating lease income and other leasing gains decreased $14 million, related to lease residual losses in the third quarter of 2017.
Noninterest Expense
dollars in millions Change 3Q17 vs.
3Q17 2Q17 3Q16 2Q17 3Q16
---- ---- ---- ---- ----
Personnel expense $558 $551 $594 1.3% (6.1)%
Non-personnel expense 434 444 488 (2.3) (11.1)
--- --- --- ---- -----
Total noninterest expense $992 $995 $1,082 (.3) (8.3)
==== ==== ======
Merger-related charges 36 44 189 (18.2) (81.0)
Total noninterest expense excluding merger-related charges $956 $951 $893 .5% 7.1%
==== ==== ====
Key's noninterest expense was $992 million for the third quarter of 2017, and included $36 million of merger-related charges. Merger-related charges for the quarter were made up of $25 million of personnel expense and $11 million of non-personnel expense, mostly reflected in marketing and computer processing expense.
Excluding merger-related charges, noninterest expense was $63 million higher than the third quarter of last year. The increase from the prior year, reflected in both personnel and non-personnel expense, was primarily driven by a full-quarter impact of the First Niagara acquisition, as well as ongoing business investments and recent acquisitions, partially offset by merger cost savings.
Excluding merger-related charges, noninterest expense increased $5 million from the second quarter of 2017. Key incurred a number of notable items in the second quarter of 2017, including a $20 million charitable contribution and a $4 million credit related to purchase accounting finalization. Excluding these notable items as well as merger-related charges, noninterest expense increased $21 million from the second quarter of 2017. The increase represents recent business acquisitions, including HelloWallet and merchant services, as well as seasonal trends in marketing and personnel. Business services and professional fees were also higher in the third quarter, related to short-term initiatives.
BALANCE SHEET HIGHLIGHTS
Average Loans
dollars in millions Change 3Q17 vs.
3Q17 2Q17 3Q16 2Q17 3Q16
---- ---- ---- ---- ----
Commercial and industrial (a) $41,416 $40,666 $37,318 1.8% 11.0%
Other commercial loans 21,598 21,990 19,110 (1.8) 13.0
Home equity loans 12,314 12,473 11,968 (1.3) 2.9
Other consumer loans 11,486 11,373 9,301 1.0 23.5
------ ------ -----
Total loans $86,814 $86,502 $77,697 .4% 11.7%
======= ======= =======
(a) Commercial and industrial average
loan balances include $117 million,
$117 million, and $107 million of
assets from commercial credit cards
at September 30, 2017, June 30,
2017, and September 30, 2016,
respectively.
Average loans were $86.8 billion for the third quarter of 2017, an increase of $9.1 billion compared to the third quarter of 2016, primarily reflecting a full-quarter impact of the First Niagara acquisition, as well as growth in commercial and industrial loans, which was broad-based and spread across Key's commercial lines of business.
Compared to the second quarter of 2017, average loans increased by $312 million, driven primarily by growth in commercial and industrial loans. Commercial real estate loans declined as a result of paydowns and clients taking advantage of attractive capital markets alternatives. Consumer loans were relatively stable, as the home equity portfolio continued to decline, largely the result of paydowns.
At September 30, 2017, the remaining fair value discount on the First Niagara acquired loan portfolio was $302 million, compared to $345 million at June 30, 2017.
Average Deposits
dollars in millions Change 3Q17 vs.
3Q17 2Q17 3Q16 2Q17 3Q16
---- ---- ---- ---- ----
Non-time deposits $92,039 $92,018 $85,683 - 7.4%
Certificates of deposit ($100,000 or more) 6,402 6,111 4,204 4.8% 52.3
Other time deposits 4,664 4,650 5,031 .3 (7.3)
----- ----- ----- --- ----
Total deposits $103,105 $102,779 $94,918 .3% 8.6%
======== ======== =======
Cost of total deposits .28% .26% .21% N/A N/A
N/A = Not Applicable
Average deposits totaled $103.1 billion for the third quarter of 2017, an increase of $8.2 billion compared to the year-ago quarter, primarily reflecting a full-quarter impact of the First Niagara acquisition, and core retail and commercial deposit growth.
Compared to the second quarter of 2017, average deposits increased by $326 million, driven by growth in noninterest-bearing deposits from commercial deposit inflows and short-term escrows. Certificates of deposit balances also grew and helped offset the managed exit of certain public sector relationships.
ASSET QUALITY
dollars in millions Change 3Q17 vs.
3Q17 2Q17 3Q16 2Q17 3Q16
---- ---- ---- ---- ----
Net loan charge-offs $32 $66 $44 (51.5)% (27.3)%
Net loan charge-offs to average total loans .15% .31% .23% N/A N/A
Nonperforming loans at period end (a) $517 $507 $723 2.0 (28.5)
Nonperforming assets at period end (a) 556 556 760 - (26.8)
Allowance for loan and lease losses 880 870 865 1.1 1.7
Allowance for loan and lease losses to nonperforming loans (a) 170.2% 171.6% 119.6% N/A N/A
Provision for credit losses $51 $66 $59 (22.7)% (13.6)%
(a) Nonperforming loan balances exclude
$783 million, $835 million, and $959
million of purchased credit impaired
loans at September 30, 2017, June
30, 2017, and September 30, 2016,
respectively.
N/A = Not Applicable
Key's provision for credit losses was $51 million for the third quarter of 2017, compared to $59 million for the third quarter of 2016 and $66 million for the second quarter of 2017. The third quarter 2017 provision reflects a large recovery in the commercial and industrial portfolio. Key's allowance for loan and lease losses was $880 million, or 1.02% of total period-end loans, at September 30, 2017, compared to 1.01% at September 30, 2016, and 1.01% at June 30, 2017.
Net loan charge-offs for the third quarter of 2017 totaled $32 million, or .15% of average total loans, reflecting a large recovery in the commercial and industrial portfolio. These results compare to $44 million, or .23%, for the third quarter of 2016, and $66 million, or .31%, for the second quarter of 2017.
At September 30, 2017, Key's nonperforming loans totaled $517 million, which represented .60% of period-end portfolio loans. These results compare to .85% at September 30, 2016, and .59% at June 30, 2017. Nonperforming assets at September 30, 2017, totaled $556 million, and represented .64% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .89% at September 30, 2016, and .64% at June 30, 2017.
CAPITAL
Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at September 30, 2017.
Capital Ratios
9/30/2017 6/30/2017 9/30/2016
--------- --------- ---------
Common Equity Tier 1 (a) 10.26% 9.91% 9.56%
Tier 1 risk-based
capital (a) 11.11 10.73 10.53
Total risk based capital
(a) 13.09 12.64 12.63
Tangible common equity to
tangible assets (b) 8.49 8.56 8.27
Leverage (a) 9.83 9.95 10.22
(a) 9/30/2017 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." The table reconciles the GAAP
performance measures to the
corresponding non-GAAP measures,
which provides a basis for period-to-
period comparisons. See below for
further information on the Regulatory
Capital Rules.
Key's capital position remained strong throughout the third quarter. As shown in the preceding table, at September 30, 2017, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.26% and 11.11%, respectively. The increase in these ratios was primarily driven by a change in methodology for multipurpose facilities. Key's tangible common equity ratio was 8.49% at September 30, 2017.
As a "standardized approach" banking organization, Key's mandatory compliance with the final Basel III capital framework for U.S. banking organizations (the "Regulatory Capital Rules") began on January 1, 2015, subject to transitional provisions extending to January 1, 2019. Key's estimated Common Equity Tier 1 ratio as calculated under the fully phased-in Regulatory Capital Rules was 10.15% at September 30, 2017. 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 3Q17 vs.
3Q17 2Q17 3Q16 2Q17 3Q16
---- ---- ---- ---- ----
Shares outstanding at beginning of period 1,092,739 1,097,479 842,703 (.4)% 29.7%
Open market repurchases and return of shares under employee (15,298) (5,072) (5,240) 201.6 191.9
compensation plans
Shares issued under employee compensation plans (net of cancellations) 1,598 332 4,857 381.3 (67.1)
Common shares issued to acquire First Niagara - - 239,735 N/M NM
--- --- ------- --- ---
Shares outstanding at end of period 1,079,039 1,092,739 1,082,055 (1.3)% (.3)%
========= ========= =========
N/M = Not Meaningful
Consistent with Key's 2017 Capital Plan, during the third quarter of 2017, Key declared a dividend of $.095 per common share. Key also completed $277 million of common share repurchases during the quarter, including $271 million of common share repurchases in the open market and $6 million of share repurchases related to employee equity compensation programs.
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 3Q17 vs.
3Q17 2Q17 3Q16 2Q17 3Q16
---- ---- ---- ---- ----
Revenue from continuing operations (TE)
--------------------------------------
Key Community Bank $959 $1,010 $783 (5.0)% 22.5%
Key Corporate Bank 560 596 556 (6.0) .7
Other Segments 30 35 16 (14.3) 87.5
--- --- --- ----- ----
Total segments 1,549 1,641 1,355 (5.6) 14.3
Reconciling Items 5 (1) (18) N/M N/M
--- --- --- --- ---
Total $1,554 $1,640 $1,337 (5.2)% 16.2%
====== ====== ======
Income (loss) from continuing operations attributable to Key
------------------------------------------------------------
Key Community Bank $161 $196 $97 (17.9)% 66.0%
Key Corporate Bank 190 222 160 (14.4) 18.8
Other Segments 23 28 16 (17.9) 43.8
--- --- --- ----- ----
Total segments 374 446 273 (16.1) 37.0
Reconciling Items (a) (11) (39) (102) N/M N/M
--- --- ---- --- ---
Total $363 $407 $171 (10.8)% 112.3%
==== ==== ====
(a) Reconciling items consists
primarily of the unallocated
portion of merger-related
charges and items not
allocated to the business
segments because they do not
reflect their normal
operations.
TE = Taxable Equivalent, N/M = Not
Meaningful
Key Community Bank
dollars in millions Change 3Q17 vs.
3Q17 2Q17 3Q16 2Q17 3Q16
---- ---- ---- ---- ----
Summary of operations
Net interest income (TE) $670 $674 $533 (.6)% 25.7%
Noninterest income 289 336 250 (14.0) 15.6
--- --- --- ----- ----
Total revenue (TE) 959 1,010 783 (5.0) 22.5
Provision for credit losses 59 47 39 25.5 51.3
Noninterest expense 643 651 590 (1.2) 9.0
--- --- --- ---- ---
Income (loss) before income taxes (TE) 257 312 154 (17.6) 66.9
Allocated income taxes (benefit) and TE adjustments 96 116 57 (17.2) 68.4
--- --- --- ----- ----
Net income (loss) attributable to Key $161 $196 $97 (17.9)% 66.0%
===
Average balances
Loans and leases $47,595 $47,461 $41,548 .3% 14.6%
Total assets 51,708 51,502 44,218 .4 16.9
Deposits 79,563 79,601 69,397 - 14.6
Assets under management at period end $38,660 $37,613 $36,752 2.8% 5.2%
TE = Taxable Equivalent
Additional Key Community Bank Data
dollars in millions Change 3Q17 vs.
3Q17 2Q17 3Q16 2Q17 3Q16
---- ---- ---- ---- ----
Noninterest income
Trust and investment services income $101 $99 $86 2.0% 17.4%
Service charges on deposit accounts 78 77 70 1.3 11.4
Cards and payments income 65 60 54 8.3 20.4
Other noninterest income 45 100 40 (55.0) 12.5
--- --- --- ----- ----
Total noninterest income $289 $336 $250 (14.0)% 15.6%
==== ==== ====
Average deposit balances
NOW and money market deposit accounts $44,481 $45,127 $38,417 (1.4)% 15.8%
Savings deposits 5,165 5,293 4,369 (2.4) 18.2
Certificates of deposit ($100,000 or more) 4,195 4,016 2,606 4.5 61.0
Other time deposits 4,657 4,640 4,944 .4 (5.8)
Noninterest-bearing deposits 21,065 20,525 19,061 2.6% 10.5
------ ------ ------ --- ----
Total deposits $79,563 $79,601 $69,397 - 14.6%
======= ======= =======
Home equity loans
Average balance $12,182 $12,330 $11,703
Combined weighted-average loan-to-value ratio (at date of origination) 69% 71% 70%
Percent first lien positions 60 60 55
Other data
Branches 1,208 1,210 1,322
Automated teller machines 1,588 1,589 1,701
Key Community Bank Summary of Operations (3Q17 vs. 3Q16)
-- Positive operating leverage compared to prior year
-- Net income increased $64 million, or 66%, from prior year
-- Average commercial and industrial loans increased $2.7 billion, or
17.2%, from the prior year
-- Average deposits increased $10.2 billion, or 14.6%, from the prior year
Key Community Bank recorded net income attributable to Key of $161 million for the third quarter of 2017, compared to $97 million for the year-ago quarter, benefiting from momentum in Key's core businesses, as well as the full-quarter impact of the First Niagara acquisition.
Taxable-equivalent net interest income increased by $137 million, or 25.7%, from the third quarter of 2016. The increase was primarily attributable to the full-quarter impact of the First Niagara acquisition, as well as the benefit from higher interest rates. Average loans and leases increased $6 billion, or 14.6%, largely driven by a $2.7 billion, or 17.2%, increase in commercial and industrial loans. Additionally, average deposits increased $10.2 billion, or 14.6%, from one year ago.
Noninterest income was up $39 million, or 15.6%, from the year-ago quarter, driven by the full quarter impact of the First Niagara acquisition, including the addition of Key Insurance and Benefits Services. Strength in cards and payments, which includes the full-quarter impact of Key's merchant services acquisition in the second quarter of 2017, and higher assets under management from market growth also contributed to the increase.
The provision for credit losses increased by $20 million, or 51.3%, and net loan charge-offs increased $10 million from the third quarter of 2016, primarily related to the acquisition of First Niagara.
Noninterest expense increased by $53 million, or 9%, from the year-ago quarter, largely driven by the full-quarter impact of the First Niagara acquisition, as well as core business activity, ongoing investments, recent acquisitions and seasonal trends. Personnel expense increased $29 million, while non-personnel expense increased by $24 million, including higher marketing expense and higher intangible amortization expense.
Key Corporate Bank
dollars in millions Change 3Q17 vs.
3Q17 2Q17 3Q16 2Q17 3Q16
---- ---- ---- ---- ----
Summary of operations
Net interest income (TE) $291 $312 $278 (6.7)% 4.7%
Noninterest income 269 284 278 (5.3) (3.2)
--- --- --- ---- ----
Total revenue (TE) 560 596 556 (6.0) .7
Provision for credit losses (11) 19 23 (157.9) (147.8)
Noninterest expense 303 299 310 1.3 (2.3)
--- --- --- --- ----
Income (loss) before income taxes (TE) 268 278 223 (3.6) 20.2
Allocated income taxes and TE adjustments 78 56 63 39.3 23.8
--- --- --- ---- ----
Net income (loss) 190 222 160 (14.4) 18.8
Less: Net income (loss) attributable to noncontrolling interests - - - N/M N/M
--- --- --- --- ---
Net income (loss) attributable to Key $190 $222 $160 (14.4)% 18.8%
===
Average balances
Loans and leases $38,040 $37,721 $34,561 .8% 10.1%
Loans held for sale 1,521 1,000 1,103 52.1 37.9
Total assets 45,276 44,148 40,584 2.6 11.6
Deposits 21,559 21,145 22,708 2.0% (5.1)%
TE = Taxable Equivalent, N/M
= Not Meaningful
Additional Key Corporate Bank Data
dollars in millions Change 3Q17 vs.
3Q17 2Q17 3Q16 2Q17 3Q16
---- ---- ---- ---- ----
Noninterest income
Trust and investment services income $34 $35 $36 (2.9)% (5.6)%
Investment banking and debt placement fees 137 134 153 2.2 (10.5)
Operating lease income and other leasing gains 13 22 10 (40.9) 30.0
Corporate services income 41 38 36 7.9 13.9
Service charges on deposit accounts 13 13 15 - (13.3)
Cards and payments income 10 10 10 - -
--- --- --- ---
Payments and services income 64 61 61 4.9 4.9
Mortgage servicing fees 18 12 13 50.0 38.5
Other noninterest income 3 20 5 (85.0) (40.0)
--- --- --- -----
Total noninterest income $269 $284 $278 (5.3)% (3.2)%
===
Key Corporate Bank Summary of Operations (3Q17 vs. 3Q16)
-- Positive operating leverage compared to prior year
-- Net income up $30 million, or 18.8%, from prior year
-- Average loan and lease balances up $3.5 billion, or 10.1%, from the
prior year
Key Corporate Bank recorded net income attributable to Key of $190 million for the third quarter of 2017, compared to $160 million for the same period one year ago.
Taxable-equivalent net interest income increased by $13 million, or 4.7%, compared to the third quarter of 2016. Average loan and lease balances increased $3.5 billion, or 10.1%, from the year-ago quarter, driven by growth in commercial and industrial and commercial mortgage loans. Average deposit balances decreased $1.1 billion, or 5.1%, from the year-ago quarter, driven by the managed exit of higher cost corporate and public sector deposits.
Noninterest income was down $9 million, or 3.2%, from the prior year. This decline was mostly due to lower investment banking and debt placement fees, resulting from strong market conditions and activity in the third quarter of 2016. This decrease was partially offset by growth in mortgage servicing fees and corporate services income compared to the prior year.
During the third quarter of 2017, Key Corporate Bank benefited from a large recovery in the commercial and industrial portfolio, as well as improving credit quality in the overall portfolio. Accordingly, the provision for credit losses decreased $34 million, or 147.8%, compared to the third quarter of 2016, with $21 million less of net loan charge-offs.
Noninterest expense decreased by $7 million, or 2.3%, from the third quarter of 2016. The decrease from the prior year was largely driven by lower performance-based compensation. Slightly offsetting this decrease were higher levels of operating lease expense, business services and professional fees, and cards and payments expense.
Other Segments
Other Segments consist of Corporate Treasury, Key's Principal Investing unit, and various exit portfolios. Other Segments generated net income attributable to Key of $23 million for the third quarter of 2017, compared to $16 million for the same period last year, driven by increases in operating lease income and other leasing gains and corporate-owned life insurance income.
*****
KeyCorp's roots trace back 190 years to Albany, New York. Headquartered in Cleveland, Ohio, Key is one of the nation's largest bank-based financial services companies, with assets of approximately $136.7 billion at September 30, 2017.
Key provides deposit, lending, cash management, insurance, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of more than 1,200 branches and more than 1,500 ATMs. 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.
This earnings release contains forward-
looking statements within the meaning of
the Private Securities Litigation Reform
Act of 1995. These statements do not relate
strictly to historical or current facts.
Forward-looking statements usually can be
identified by the use of words such as
"goal," "objective," "plan," "expect,"
"assume," "anticipate," "intend,"
"project," "believe," "estimate," or other
words of similar meaning. Forward-looking
statements provide our current expectations
or forecasts of future events,
circumstances, results, or aspirations.
Forward-looking statements, by their
nature, are subject to assumptions, risks
and uncertainties, many of which are
outside of our control. Our actual results
may differ materially from those set forth
in our forward-looking statements. There
is no assurance that any list of risks and
uncertainties or risk factors is complete.
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, 2016, as well as in
KeyCorp's subsequent SEC filings, all of
which have been filed with the Securities
and Exchange Commission (the "SEC") and are
available on Key's website (www.key.com/
ir) and on the SEC'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, a reversal of the U.S. economic
recovery due to financial, political, or
other shocks, and the extensive and
increasing regulation of the U.S. financial
services industry. Any forward-looking
statements made by us or on our behalf
speak only as of the date they are made and
we do not undertake any obligation to
update any forward-looking statement to
reflect the impact of subsequent events or
circumstances.
--------------------------------------------
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, October 19, 2017. An audio replay of the call will be available through October 29, 2017.
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
9/30/2017 6/30/2017 9/30/2016
--------- --------- ---------
Summary of operations
Net interest income (TE) $962 $987 $788
Noninterest income 592 653 549
---
Total revenue (TE) 1,554 1,640 1,337
Provision for credit losses 51 66 59
Noninterest expense 992 995 1,082
Income (loss) from continuing operations attributable to Key 363 407 171
Income (loss) from discontinued operations, net of taxes (a) 1 5 1
Net income (loss) attributable to Key 364 412 172
Income (loss) from continuing operations attributable to Key common shareholders 349 393 165
Income (loss) from discontinued operations, net of taxes (a) 1 5 1
Net income (loss) attributable to Key common shareholders 350 398 166
Per common share
Income (loss) from continuing operations attributable to Key common shareholders $.32 $.36 $.17
Income (loss) from discontinued operations, net of taxes (a) - - -
Net income (loss) attributable to Key common shareholders (b) .32 .37 .17
Income (loss) from continuing operations attributable to Key common shareholders -
assuming dilution .32 .36 .16
Income (loss) from discontinued operations, net of taxes - assuming dilution (a) - - -
Net income (loss) attributable to Key common shareholders - assuming dilution (b) .32 .36 .17
Cash dividends declared .095 .095 .085
Book value at period end 13.18 13.02 12.78
Tangible book value at period end 10.52 10.40 10.14
Market price at period end 18.82 18.74 12.17
Performance ratios
From continuing operations:
Return on average total assets 1.07% 1.23% .55%
Return on average common equity 9.74 11.12 5.09
Return on average tangible common equity (c) 12.21 13.80 6.16
Net interest margin (TE) 3.15 3.30 2.85
Cash efficiency ratio (c) 62.2 59.3 80.0
From consolidated operations:
Return on average total assets 1.06% 1.23% .55%
Return on average common equity 9.77 11.26 5.12
Return on average tangible common equity (c) 12.25 13.98 6.20
Net interest margin (TE) 3.13 3.28 2.83
Loan to deposit (d) 86.2 87.2 84.7
Capital ratios at period end
Key shareholders' equity to assets 11.15% 11.23% 11.04%
Key common shareholders' equity to assets 10.40 10.48 10.18
Tangible common equity to tangible assets (c) 8.49 8.56 8.27
Common Equity Tier 1 (e) 10.26 9.91 9.56
Tier 1 risk-based capital (e) 11.11 10.73 10.53
Total risk-based capital (e) 13.09 12.64 12.63
Leverage (e) 9.83 9.95 10.22
Asset quality - from continuing operations
Net loan charge-offs $32 $66 $44
Net loan charge-offs to average loans .15% .31% .23%
Allowance for loan and lease losses $880 $870 $865
Allowance for credit losses 937 918 918
Allowance for loan and lease losses to period-end loans 1.02% 1.01% 1.01%
Allowance for credit losses to period-end loans 1.08 1.06 1.07
Allowance for loan and lease losses to nonperforming loans (f) 170.2 171.6 119.6
Allowance for credit losses to nonperforming loans (f) 181.2 181.1 127.0
Nonperforming loans at period-end (f) $517 $507 $723
Nonperforming assets at period-end (f) 556 556 760
Nonperforming loans to period-end portfolio loans (f) .60% .59% .85%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming
assets (f) .64 .64 .89
Trust assets
Assets under management $38,660 $37,613 $36,752
Other data
Average full-time equivalent employees 18,548 18,344 17,079
Branches 1,208 1,210 1,322
Taxable-equivalent adjustment $14 $14 $8
Financial Highlights (continued)
(dollars in millions, except per share amounts)
Nine months ended
9/30/2017 9/30/2016
--------- ---------
Summary of operations
Net interest income (TE) $2,878 $2,005
Noninterest income 1,822 1,453
-----
Total revenue (TE) 4,700 3,458
Provision for credit losses 180 200
Noninterest expense 3,000 2,536
Income (loss) from continuing operations attributable to Key 1,094 557
Income (loss) from discontinued operations, net of taxes (a) 6 5
Net income (loss) attributable to Key 1,100 562
Income (loss) from continuing operations attributable to Key common shareholders $1,038 $540
Income (loss) from discontinued operations, net of taxes (a) 6 5
Net income (loss) attributable to Key common shareholders 1,044 545
Per common share
Income (loss) from continuing operations attributable to Key common shareholders $.96 $.61
Income (loss) from discontinued operations, net of taxes (a) .01 .01
Net income (loss) attributable to Key common shareholders (b) .97 .62
Income (loss) from continuing operations attributable to Key common shareholders - assuming dilution .95 .60
Income (loss) from discontinued operations, net of taxes - assuming dilution (a) .01 .01
Net income (loss) attributable to Key common shareholders - assuming dilution (b) .96 .61
Cash dividends paid .275 .245
Performance ratios
From continuing operations:
Return on average total assets 1.10% .71%
Return on average common equity 9.89 6.28
Return on average tangible common equity (c) 12.36 7.21
Net interest margin (TE) 3.19 2.84
Cash efficiency ratio (c) 62.4 72.5
From consolidated operations:
Return on average total assets 1.09% .70%
Return on average common equity 9.95 6.34
Return on average tangible common equity (c) 12.43 7.27
Net interest margin (TE) 3.17 2.81
Asset quality - from continuing operations
Net loan charge-offs 156 133
Net loan charge-offs to average total loans .24% .27%
Other data
Average full-time equivalent employees 18,427 14,642
Taxable-equivalent adjustment 39 24
(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.
(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" 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.
For further information on the
Regulatory Capital Rules, see the
"Capital" section of this release.
(d) Represents period-end consolidated
total loans and loans held for sale
divided by period-end consolidated
total deposits.
(e) September 30, 2017, ratio is estimated.
(f) Nonperforming loan balances exclude
$783 million, $835 million, and $959
million of purchased credit impaired
loans at September 30, 2017, June 30,
2017, and September 30, 2016,
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 average tangible common equity," "Common Equity Tier 1," "pre-provision net revenue," certain financial measures excluding merger-related charges and/or other notable items, and "cash efficiency ratio."
Notable items include certain revenue or expense items that may occur in a reporting period which management does not consider indicative of ongoing financial performance. Management believes it is useful to consider certain financial metrics with and without merger-related charges and/or other notable items in order to enable a better understanding of Company results, increase comparability of period-to-period results, and to evaluate and forecast those results.
The tangible common equity ratio and the return on average 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. In October 2013, the federal banking regulators published the final Basel III capital framework for U.S. banking organizations (the "Regulatory Capital Rules"). The Regulatory Capital Rules require higher and better-quality capital and introduced a new capital measure, "Common Equity Tier 1," a non-GAAP financial measure. The mandatory compliance date for Key as a "standardized approach" banking organization began on January 1, 2015, subject to transitional provisions extending to January 1, 2019.
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 credit losses makes it easier to analyze the results by presenting them on a more comparable basis.
As previously disclosed, Key completed its purchase of First Niagara on August 1, 2016. The definitive agreement and plan of merger to acquire First Niagara was originally announced on October 30, 2015. As a result of this transaction, Key has recognized merger-related charges. For the second and third quarters of 2017, merger-related charges are included in the total for "notable items." The table below shows the computation of earnings per share excluding notable items, return on average tangible common equity excluding notable items, return on average assets from continuing operations excluding notable items, cash efficiency ratio excluding notable items, and pre-provision net revenue excluding notable items. Management believes that eliminating the effects of the merger-related charges and other notable items 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. The table below also shows the computation for the cash efficiency ratio excluding merger-related charges. Management believes these ratios provide greater consistency and comparability between Key's results and those of its peer banks. Additionally, these ratios are 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 Nine months ended
9/30/2017 6/30/2017 9/30/2016 9/30/2017 9/30/2016
--------- --------- --------- --------- ---------
Tangible common equity to tangible assets at period-end
Key shareholders' equity (GAAP) $15,249 $15,253 $14,996
Less: Intangible assets (a) 2,870 2,866 2,855
Preferred Stock (b) 1,009 1,009 1,150
----- ----- -----
Tangible common equity (non-GAAP) $11,370 $11,378 $10,991
======= ======= =======
Total assets (GAAP) $136,733 $135,824 $135,805
Less: Intangible assets (a) 2,870 2,866 2,855
----- ----- -----
Tangible assets (non-GAAP) $133,863 $132,958 $132,950
======== ======== ========
Tangible common equity to tangible assets ratio (non-GAAP) 8.49% 8.56% 8.27%
Earnings per common share (EPS) excluding notable items
EPS from continuing operations attributable to Key common shareholders - assuming $.32 $.36 $.16
dilution
Plus: EPS impact of notable items .03 (.02) .14
--- ---- ---
EPS from continuing operations attributable to Key common shareholders excluding $.35 $.34 $.30
notable items (non-GAAP)
Notable items
Merger-related charges $(36) $(44) $(207) $(161) $(276)
Merchant services gain (5) 64 - 59 -
Purchase accounting finalization, net - 43 - 43 -
Charitable contribution - (20) - (20) -
--- ---
Total notable items $(41) $43 $(207) $(79) $(276)
==== === ===== ==== =====
Income taxes (13) 16 (75) (27) (101)
Total notable items after tax $(28) $27 $(132) $(52) $(175)
==== === ===== ==== =====
GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
Three months ended Nine months ended
9/30/2017 6/30/2017 9/30/2016 9/30/2017 9/30/2016
--------- --------- --------- --------- ---------
Pre-provision net revenue
Net interest income (GAAP) $948 $973 $780 $2,839 $1,981
Plus: Taxable-equivalent adjustment 14 14 8 39 24
Noninterest income 592 653 549 1,822 1,453
Less: Noninterest expense 992 995 1,082 3,000 2,536
Pre-provision net revenue from continuing operations (non-GAAP) $562 $645 $255 $1,700 $922
==== ==== ==== ====== ====
Plus: Notable items 41 (43) 207 79 276
-------------
Pre-provision net revenue from continuing operations excluding notable items (non-GAAP) $603 $602 $462 $1,779 $1,198
==== ==== ==== ====== ======
Average tangible common equity
Average Key shareholders' equity (GAAP) $15,241 $15,200 $13,552 $15,208 $11,890
Less: Intangible assets (average) (c) 2,878 2,756 2,255 2,802 1,473
Preferred Stock (average) 1,025 1,025 648 1,175 410
----- ----- --- ----- ---
Average tangible common equity (non-GAAP) $11,338 $11,419 $10,649 $11,231 $10,007
======= ======= ======= ======= =======
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to Key common
shareholders $349 $393 $165 $1,038 $540
(GAAP)
Plus: Notable items, after tax 28 (27) 132 52 175
--------------
Net income (loss) from continuing operations attributable to Key common
shareholders
excluding notable items (non-GAAP) $377 $366 $297 $1,090 $715
==== ==== ==== ====== ====
Average tangible common equity (non-GAAP) 11,338 11,419 10,649 11,231 10,007
Return on average tangible common equity from continuing operations (non-GAAP) 12.21% 13.80% 6.16% 12.36% 7.21%
Return on average tangible common equity from continuing operations excluding
notable 13.19 12.86 11.10 12.98 9.54
items (non-GAAP)
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP) $350 $398 $166 $1,044 $545
Average tangible common equity (non-GAAP) 11,338 11,419 10,649 11,231 10,007
Return on average tangible common equity consolidated (non-GAAP) 12.25% 13.98% 6.20% 12.43% 7.27%
Cash efficiency ratio
Noninterest expense (GAAP) $992 $995 $1,082 $3,000 $2,536
Less: Intangible asset amortization 25 22 13 69 28
--------------
Adjusted noninterest expense (non-GAAP) 967 973 1,069 2,931 2,508
Less: Notable items (d) 36 60 189 177 258
--------------
Adjusted noninterest expense excluding notable items (non-GAAP) $931 $913 $880 $2,754 $2,250
==== ==== ==== ====== ======
Net interest income (GAAP) $948 $973 $780 $2,839 $1,981
Plus: Taxable-equivalent adjustment 14 14 8 39 24
Noninterest income 592 653 549 1,822 1,453
--- --- --- ----- -----
Total taxable-equivalent revenue (non-GAAP) 1,554 1,640 1,337 4,700 3,458
Plus: Notable items (e) 5 (103) 18 (98) 18
Adjusted total taxable-equivalent revenue excluding notable items (non-GAAP) $1,559 $1,537 $1,355 $4,602 $3,476
====== ====== ====== ====== ======
Cash efficiency ratio (non-GAAP) 62.2% 59.3% 80.0% 62.4% 72.5%
Cash efficiency ratio excluding notable items (non-GAAP) 59.7 59.4 64.9 59.8 64.7
Return on average total assets from continuing operations excluding notable items
Income from continuing operations attributable to Key (GAAP) $363 $407 $171 $1,094 $557
Plus: Notable items, after tax 28 (27) 132 52 175
--------------
Income from continuing operations attributable to Key excluding notable items, $391 $380 $303 $1,146 $732
after tax (non-GAAP)
Average total assets from continuing operations (GAAP) $134,356 $132,491 $123,469 $133,202 $105,187
===
Return on average total assets from continuing operations excluding notable items
(non- 1.15% 1.15% .98% 1.15% .93%
GAAP)
GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
Three
months
ended
-----
9/30/2017
---------
Common Equity Tier 1 under the Regulatory Capital Rules ("RCR") (estimates)
Common Equity Tier 1 under current RCR $12,105
Adjustments from current RCR to the fully phased-in RCR:
Deferred tax assets and other intangible assets (f) (60)
---
Common Equity Tier 1 anticipated under the fully phased-in RCR (g) $12,045
=======
Net risk-weighted assets under current RCR $118,013
Adjustments from current RCR to the fully phased-in RCR:
Mortgage servicing assets (h) 622
All other assets (12)
Total risk-weighted assets anticipated under the fully phased-in RCR (g) $118,623
========
Common Equity Tier 1 ratio under the fully phased-in RCR (g) 10.15%
(a) For the three months ended September
30, 2017, June 30, 2017, and
September 30, 2016, intangible
assets exclude $30 million, $33
million, and $51 million,
respectively, of period-end
purchased credit card receivables.
(b) Net of capital surplus.
(c) For the three months ended September
30, 2017, June 30, 2017, and
September 30, 2016, average
intangible assets exclude $32
million, $36 million, and $47
million, respectively, of average
purchased credit card receivables.
For the nine months ended September
30, 2017, and September 30, 2016,
average intangible assets exclude
$36 million and $42 million,
respectively, of average purchased
credit card receivables.
(d) Notable items for the three months
ended September 30, 2017, includes
$36 million of merger-related
expense.
(e) Notable items for the three months
ended September 30, 2017, includes
a $5 million adjustment related to
the merchant services acquisition
gain.
(f) Includes the deferred tax assets
subject to future taxable income
for realization, primarily tax
credit carryforwards, as well as
intangible assets (other than
goodwill and mortgage servicing
assets) subject to the transition
provisions of the final rule.
(g) 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."
(h) 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)
9/30/2017 6/30/2017 9/30/2016
--------- --------- ---------
Assets
Loans $86,492 $86,503 $85,528
Loans held for sale 1,341 1,743 1,137
Securities available for sale 19,012 18,024 20,540
Held-to-maturity securities 10,276 10,638 8,995
Trading account assets 783 1,081 926
Short-term investments 3,993 2,522 3,216
Other investments 728 732 747
---
Total earning assets 122,625 121,243 121,089
Allowance for loan and lease losses (880) (870) (865)
Cash and due from banks 562 601 749
Premises and equipment 916 919 1,023
Operating lease assets 736 691 430
Goodwill 2,487 2,464 2,480
Other intangible assets 412 435 426
Corporate-owned life insurance 4,113 4,100 4,035
Derivative assets 622 636 1,304
Accrued income and other assets 3,744 4,147 3,480
Discontinued assets 1,396 1,458 1,654
-----
Total assets $136,733 $135,824 $135,805
======== ======== ========
Liabilities
Deposits in domestic offices:
NOW and money market deposit accounts $53,734 $53,342 $56,432
Savings deposits 6,366 7,056 5,335
Certificates of deposit ($100,000 or more) 6,519 6,286 4,601
Other time deposits 4,720 4,605 5,793
----- ----- -----
Total interest-bearing deposits 71,339 71,289 72,161
Noninterest-bearing deposits 32,107 31,532 32,024
Total deposits 103,446 102,821 104,185
Federal funds purchased and securities sold under repurchase
agreements 372 1,780 602
Bank notes and other short-term borrowings 616 924 809
Derivative liabilities 232 308 850
Accrued expense and other liabilities 1,717 1,475 1,739
Long-term debt 15,100 13,261 12,622
Total liabilities 121,483 120,569 120,807
Equity
Preferred stock 1,025 1,025 1,165
Common shares 1,257 1,257 1,257
Capital surplus 6,310 6,310 6,359
Retained earnings 10,125 9,878 9,260
Treasury stock, at cost (2,962) (2,711) (2,863)
Accumulated other comprehensive income (loss) (506) (506) (182)
Key shareholders' equity 15,249 15,253 14,996
Noncontrolling interests 1 2 2
---
Total equity 15,250 15,255 14,998
------ ------ ------
Total liabilities and equity $136,733 $135,824 $135,805
======== ======== ========
Common shares outstanding (000) 1,079,039 1,092,739 1,082,055
Consolidated Statements of Income
(dollars in millions, except per share amounts)
Three months ended Nine months ended
9/30/2017 6/30/2017 9/30/2016 9/30/2017 9/30/2016
--------- --------- --------- --------- ---------
Interest income
Loans $928 $948 $746 $2,753 $1,875
Loans held for sale 17 9 10 39 23
Securities available for sale 91 90 88 276 237
Held-to-maturity securities 55 55 30 161 78
Trading account assets 7 7 4 21 17
Short-term investments 6 5 7 14 17
Other investments 5 3 5 12 10
---
Total interest income 1,109 1,117 890 3,276 2,257
Interest expense
Deposits 72 66 49 196 114
Federal funds purchased and securities sold under repurchase
agreements - - - 1 -
Bank notes and other short-term borrowings 3 4 2 12 7
Long-term debt 86 74 59 228 155
---
Total interest expense 161 144 110 437 276
Net interest income 948 973 780 2,839 1,981
Provision for credit losses 51 66 59 180 200
--- --- --- --- ---
Net interest income after provision for credit losses 897 907 721 2,659 1,781
Noninterest income
Trust and investment services income 135 134 122 404 341
Investment banking and debt placement fees 141 135 156 403 325
Service charges on deposit accounts 91 90 85 268 218
Operating lease income and other leasing gains 16 30 6 69 41
Corporate services income 54 55 51 163 154
Cards and payments income 75 70 66 210 164
Corporate-owned life insurance income 31 33 29 94 85
Consumer mortgage income 7 6 6 19 11
Mortgage servicing fees 21 15 15 54 37
Net gains (losses) from principal investing 3 - 5 4 16
Other income (a) 18 85 8 134 61
---
Total noninterest income 592 653 549 1,822 1,453
Noninterest expense
Personnel 558 551 594 1,665 1,425
Net occupancy 74 78 73 239 193
Computer processing 56 55 70 171 158
Business services and professional fees 49 45 76 140 157
Equipment 29 27 26 83 68
Operating lease expense 24 21 15 64 42
Marketing 34 30 32 85 66
FDIC assessment 21 21 21 62 38
Intangible asset amortization 25 22 13 69 28
OREO expense, net 3 3 3 8 6
Other expense 119 142 159 414 355
---
Total noninterest expense 992 995 1,082 3,000 2,536
--- --- ----- ----- -----
Income (loss) from continuing operations before income taxes 497 565 188 1,481 698
Income taxes 134 158 16 386 141
---
Income (loss) from continuing operations 363 407 172 1,095 557
Income (loss) from discontinued operations, net of taxes 1 5 1 6 5
---
Net income (loss) 364 412 173 1,101 562
Less: Net income (loss) attributable to noncontrolling interests - - 1 1 -
---
Net income (loss) attributable to Key $364 $412 $172 $1,100 $562
==== ==== ==== ====== ====
Income (loss) from continuing operations attributable to Key common shareholders $349 $393 $165 $1,038 $540
Net income (loss) attributable to Key common shareholders 350 398 166 1,044 545
Per common share
Income (loss) from continuing operations attributable to Key common shareholders $.32 $.36 $.17 $.96 $.61
Income (loss) from discontinued operations, net of taxes - - - .01 .01
Net income (loss) attributable to Key common shareholders (b) .32 .37 .17 .97 .62
Per common share - assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders $.32 $.36 $.16 $.95 $.6
Income (loss) from discontinued operations, net of taxes - - - .01 .01
Net income (loss) attributable to Key common shareholders (b) .32 .36 .17 .96 .61
Cash dividends declared per common share $.095 $.095 $.085 $.275 $.245
Weighted-average common shares outstanding (000) 1,073,390 1,076,203 982,080 1,075,296 880,824
Effect of common share options and other stock awards 15,451 16,836 12,580 16,359 8,965
------
Weighted-average common shares and potential common shares outstanding (000) (c) 1,088,841 1,093,039 994,660 1,091,655 889,789
========= ========= ======= ========= =======
(a) For the three months ended September
30, 2017, net securities gains
(losses) totaled less than $1
million. For the three months ended
June 30, 2017, net securities gains
(losses) totaled $1 million. For
the three months ended September
30, 2016, net securities gains
(losses) totaled less than $1
million. For the three months ended
September 30, 2017, June 30, 2017,
and September 30, 2016, Key did not
have any impairment losses related
to securities.
(b) Earnings per share may not foot due
to rounding.
(c) 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)
Third Quarter 2017 Second Quarter 2017 Third Quarter 2016
Average Yield/ Average Yield/ Average Yield/
Balance Interest (a) Rate (a) Balance Interest (a) Rate (a) Balance Interest (a) Rate (a)
----------- ------- ------- ----------- ------- ------- ----------- -------
Assets
Loans: (b), (c)
Commercial and industrial (d) $41,416 $414 3.97% $40,666 $409 4.04% $37,318 $317 3.38%
Real estate - commercial mortgage 14,850 169 4.51 15,096 187 4.97 12,879 126 3.91
Real estate - construction 2,054 23 4.51 2,204 31 5.51 1,723 21 4.67
Commercial lease financing 4,694 46 3.89 4,690 50 4.33 4,508 38 3.33
-----
Total commercial loans 63,014 652 4.11 62,656 677 4.34 56,428 502 3.54
Real estate - residential mortgage 5,493 54 3.92 5,509 52 3.77 4,453 45 3.96
Home equity loans 12,314 136 4.41 12,473 135 4.31 11,968 122 4.07
Consumer direct loans 1,774 33 7.26 1,743 31 7.07 1,666 30 7.20
Credit cards 1,049 30 11.34 1,044 29 11.04 996 27 10.80
Consumer indirect loans 3,170 37 4.64 3,077 38 5.02 2,186 28 5.23
-----
Total consumer loans 23,800 290 4.85 23,846 285 4.77 21,269 252 4.73
------
Total loans 86,814 942 4.31 86,502 962 4.46 77,697 754 3.86
Loans held for sale 1,607 17 4.13 1,082 9 3.58 1,152 10 3.48
Securities available for sale (b), (e) 18,574 91 1.96 17,997 90 1.97 17,972 88 1.99
Held-to-maturity securities (b) 10,469 55 2.12 10,469 55 2.09 6,250 30 1.86
Trading account assets 889 7 2.74 1,042 7 3.00 860 4 2.12
Short-term investments 2,166 6 1.21 1,970 5 .96 5,911 7 .48
Other investments (e) 728 5 2.46 687 3 1.87 717 5 2.74
---
Total earning assets 121,247 1,123 3.68 119,749 1,131 3.78 110,559 898 3.24
Allowance for loan and lease losses (868) (864) (847)
Accrued income and other assets 13,977 13,606 13,757
Discontinued assets 1,417 1,477 1,676
-----
Total assets $135,773 $133,968 $125,145
===
Liabilities
NOW and money market deposit accounts $53,826 37 .27 $54,416 34 .25 $51,318 25 .20
Savings deposits 6,697 5 .25 6,854 4 .21 4,521 1 .07
Certificates of deposit ($100,000 or more) 6,402 21 1.31 6,111 19 1.23 4,204 12 1.15
Other time deposits 4,664 9 .81 4,650 9 .77 5,031 11 .85
Total interest-bearing deposits 71,589 72 .40 72,031 66 .36 65,074 49 .30
Federal funds purchased and securities 456 - .23 466 - .23 578 - .16
sold under repurchase agreements
Bank notes and other short-term borrowings 865 3 1.49 1,216 4 1.43 1,186 2 .91
Long-term debt (f), (g) 12,631 86 2.75 11,046 74 2.68 10,415 59 2.31
------
Total interest-bearing liabilities 85,541 161 .75 84,759 144 .68 77,253 110 .57
------
Noninterest-bearing deposits 31,516 30,748 29,844
Accrued expense and other liabilities 2,057 1,782 2,818
Discontinued liabilities (g) 1,417 1,477 1,676
-----
Total liabilities 120,531 118,766 111,591
Equity
Key shareholders' equity 15,241 15,200 13,552
Noncontrolling interests 1 2 2
---
Total equity 15,242 15,202 13,554
Total liabilities and equity $135,773 $133,968 $125,145
===
Interest rate spread (TE) 2.93% 3.10% 2.67%
==== ==== ====
Net interest income (TE) and net interest margin (TE) 962 3.15% 987 3.30% 788 2.85%
==== ==== ====
TE adjustment (b) 14 14 8
--- --- ---
Net interest income, GAAP basis $948 $973 $780
(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 and industrial average
balances include $117 million, $117
million, and $107 million of assets
from commercial credit cards for the
three months ended September 30,
2017, June 30, 2017, and September
30, 2016, 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
Key's 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)
Nine months ended September 30, 2017 Nine months ended September 30, 2016
Average Average
Balance Interest (a) Yield/Rate (a) Balance Interest (a) Yield/ Rate
(a)
------- ----------- -------------- ------- ----------- -----------
Assets
Loans: (b), (c)
Commercial and industrial (d) $40,700 $1,196 3.93% $33,859 $850 3.35%
Real estate - commercial mortgage 15,043 520 4.62 9,818 283 3.85
Real estate - construction 2,203 80 4.86 1,205 39 4.30
Commercial lease financing 4,673 140 3.99 4,139 111 3.57
-----
Total commercial loans 62,619 1,936 4.13 49,021 1,283 3.50
Real estate - residential mortgage 5,507 160 3.88 2,986 91 4.05
Home equity loans 12,465 402 4.32 10,773 327 4.06
Consumer direct loans 1,760 94 7.10 1,619 82 6.77
Credit cards 1,053 88 11.15 858 69 10.71
Consumer indirect loans 3,081 112 4.85 1,118 47 5.67
-----
Total consumer loans 23,866 856 4.79 17,354 616 4.74
------
Total loans 86,485 2,792 4.31 66,375 1,899 3.82
Loans held for sale 1,293 39 4.01 864 23 3.58
Securities available for sale (b), (e) 18,582 276 1.96 15,492 237 2.06
Held-to-maturity securities (b) 10,311 161 2.08 5,320 78 1.94
Trading account assets 966 21 2.84 881 17 2.60
Short-term investments 1,918 14 1.00 4,971 17 .46
Other investments (e) 708 12 2.20 658 10 2.05
---
Total earning assets 120,263 3,315 3.68 94,561 2,281 3.23
Allowance for loan and lease losses (862) (828)
Accrued income and other assets 13,801 11,454
Discontinued assets 1,477 1,739
-----
Total assets $134,679 $106,926
===
Liabilities
NOW and money market deposit accounts $54,178 103 .25 $42,935 56 .18
Savings deposits 6,635 10 .19 3,087 1 .04
Certificates of deposit ($100,000 or more) 6,050 56 1.24 3,402 33 1.28
Other time deposits 4,673 27 .78 3,832 24 .83
Total interest-bearing deposits 71,536 196 .37 53,256 114 .29
Federal funds purchased and securities sold under repurchase agreements 570 1 .27 451 - .09
Bank notes and other short-term borrowings 1,291 12 1.27 825 7 1.21
Long-term debt (f), (g) 11,510 228 2.66 9,429 155 2.25
------
Total interest-bearing liabilities 84,907 437 .69 63,961 276 .58
------
Noninterest-bearing deposits 31,123 26,938
Accrued expense and other liabilities 1,962 2,392
Discontinued liabilities (g) 1,478 1,739
-----
Total liabilities 119,470 95,030
Equity
Key shareholders' equity 15,208 11,890
Noncontrolling interests 1 6
---
Total equity 15,209 11,896
Total liabilities and equity $134,679 $106,926
===
Interest rate spread (TE) 2.99% 2.65%
==== ====
Net interest income (TE) and net interest margin (TE) 2,878 3.19% 2,005 2.84%
==== ====
TE adjustment (b) 39 24
--- ---
Net interest income, GAAP basis $2,839 $1,981
(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 and industrial average
balances include $116 million and
$93 million of assets from
commercial credit cards for the nine
months ended September 30, 2017, and
September 30, 2016, 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
Key's 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 Nine months ended
9/30/2017 6/30/2017 9/30/2016 9/30/2017 9/30/2016
--------- --------- --------- --------- ---------
Personnel (a) $558 $551 $594 $1,665 $1,425
Net occupancy 74 78 73 239 193
Computer processing 56 55 70 171 158
Business services and professional fees 49 45 76 140 157
Equipment 29 27 26 83 68
Operating lease expense 24 21 15 64 42
Marketing 34 30 32 85 66
FDIC assessment 21 21 21 62 38
Intangible asset amortization 25 22 13 69 28
OREO expense, net 3 3 3 8 6
Other expense 119 142 159 414 355
--- --- --- --- ---
Total noninterest expense $992 $995 $1,082 $3,000 $2,536
==== ==== ====== ====== ======
Merger-related charges (b) 36 44 189 161 258
Total noninterest expense excluding merger-related charges $956 $951 $893 $2,839 $2,278
==== ==== ==== ====== ======
Average full-time equivalent employees (c) 18,548 18,344 17,079 18,427 14,642
(a) Additional detail provided in
Personnel Expense table below.
(b) Additional detail provide in
Merger-Related Charges table
below.
(c) The number of average full-time
equivalent employees has not
been adjusted for discontinued
operations.
Personnel Expense
(in millions)
Three months ended Nine months ended
9/30/2017 6/30/2017 9/30/2016 9/30/2017 9/30/2016
--------- --------- --------- --------- ---------
Salaries and contract labor $339 $332 $329 $995 $839
Incentive and stock-based compensation 134 137 162 398 352
Employee benefits 80 76 73 252 199
Severance 5 6 30 20 35
--- --- --- --- ---
Total personnel expense $558 $551 $594 $1,665 $1,425
==== ==== ==== ====== ======
Merger-related charges 25 31 97 86 148
Total personnel expense excluding merger-related charges $533 $520 $497 $1,579 $1,277
==== ==== ==== ====== ======
Merger-Related Charges
(in millions)
Three months ended Nine months ended
9/30/2017 6/30/2017 9/30/2016 9/30/2017 9/30/2016
--------- --------- --------- --------- ---------
Net interest income - - (6) - (6)
Operating lease income and other leasing gains - - (2) - (2)
Other income - - (10) - (10)
--- --- --- --- ---
Noninterest income - - (12) - (12)
Personnel $25 $31 $97 86 $148
Net occupancy (2) (1) - 2 -
Business services and professional fees 2 6 32 13 44
Computer processing 4 2 15 11 15
Marketing 5 6 9 17 13
Other non-personnel expense 2 - 36 32 38
--- --- --- --- ---
Noninterest expense 36 44 189 161 258
--- --- --- --- ---
Total merger-related charges $36 $44 $207 $161 $276
=== === ==== ==== ====
Loan Composition
(dollars in millions)
Percent change 9/30/2017
vs.
9/30/2017 6/30/2017 9/30/2016 6/30/2017 9/30/2016
--------- --------- --------- --------- ---------
Commercial and industrial (a) $41,147 $40,914 $39,433 .6% 4.3%
Commercial real estate:
Commercial mortgage 14,929 14,813 14,979 .8 (.3)
Construction 1,954 2,168 2,189 (9.9) (10.7)
----- ----- ----- ---- -----
Total commercial real estate loans 16,883 16,981 17,168 (.6) (1.7)
Commercial lease financing (b) 4,716 4,737 4,783 (.4) (1.4)
----- ----- ----- --- ----
Total commercial loans 62,746 62,632 61,384 .2 2.2
Residential - prime loans:
Real estate - residential mortgage 5,476 5,517 5,509 (.7) (.6)
Home equity loans 12,238 12,405 12,757 (1.3) (4.1)
------ ------ ------ ---- ----
Total residential - prime loans 17,714 17,922 18,266 (1.2) (3.0)
Consumer direct loans 1,789 1,755 1,764 1.9 1.4
Credit cards 1,045 1,049 1,084 (.4) (3.6)
Consumer indirect loans 3,198 3,145 3,030 1.7 5.5
----- ----- ----- --- ---
Total consumer loans 23,746 23,871 24,144 (.5) (1.6)
------ ------ ------ --- ----
Total loans (c), (d) $86,492 $86,503 $85,528 .0% 1.1%
======= ======= ======= === ===
(a) Loan balances include $118 million,
$118 million, and $117 million of
commercial credit card balances at
September 30, 2017, June 30, 2017,
and September 30, 2016,
respectively.
(b) Commercial lease financing includes
receivables held as collateral for a
secured borrowing of $31 million,
$47 million, and $76 million at
September 30, 2017, June 30, 2017,
and September 30, 2016,
respectively. Principal reductions
are based on the cash payments
received from these related
receivables.
(c) At September 30, 2017, total loans
include purchased loans of $16.7
billion, of which $783 million were
purchased credit impaired. At June
30, 2017, total loans include
purchased loans of $17.8 billion, of
which $835 million were purchased
credit impaired. At September 30,
2016, total loans include purchased
loans of $22.4 billion, of which
$959 million were purchased credit
impaired.
(d) Total loans exclude loans of $1.4
billion at September 30, 2017, $1.4
billion at June 30, 2017, and $1.6
billion at September 30, 2016,
related to the discontinued
operations of the education lending
business.
Loans Held for Sale Composition
(dollars in millions)
Percent change 9/30/2017
vs.
9/30/2017 6/30/2017 9/30/2016 6/30/2017 9/30/2016
--------- --------- --------- --------- ---------
Commercial and industrial $34 $338 $56 (89.9)% (39.3)%
Real estate - commercial mortgage 1,246 1,332 1,016 (6.5) 22.6
Commercial lease financing 1 10 3 (90.0) (66.7)
Real estate - residential mortgage 60 63 62 (4.8) (3.2)
Total loans held for sale (a) $1,341 $1,743 $1,137 (23.1)% 17.9%
====== ====== ======
(a) Total loans held for sale include Real estate - residential mortgage loans held for sale at fair value of $60 million at
September 30, 2017, $63 million at June 30, 2017, and $62 million at September 30, 2016.
Summary of Changes in Loans Held for Sale
(in millions)
3Q17 2Q17 1Q17 4Q16 3Q16
---- ---- ---- ---- ----
Balance at beginning of period $1,743 $1,384 $1,104 $1,137 $442
Purchases - - - - 48
New originations 2,855 2,876 2,563 2,846 2,857
Transfers from (to) held to maturity, net (63) (7) 17 11 2
Loan sales (3,191) (2,507) (2,299) (2,889) (2,180)
Loan draws (payments), net (3) (3) (1) (1) (32)
--- --- --- ---
Balance at end of period (a) $1,341 $1,743 $1,384 $1,104 $1,137
====== ====== ====== ====== ======
(a) Total loans held for sale include Real estate - residential mortgage loans held for sale at fair value of $60 million at
September 30, 2017, $63 million at June 30, 2017, and $62 million at March 31, 2017, December 31, 2016, and
September 30, 2016.
Summary of Loan and Lease Loss Experience From Continuing Operations
(dollars in millions)
Three months ended Nine months ended
9/30/2017 6/30/2017 9/30/2016 9/30/2017 9/30/2016
--------- --------- --------- --------- ---------
Average loans outstanding $86,814 $86,502 $77,697 $86,485 $66,375
======= ======= ======= ======= =======
Allowance for loan and lease losses at beginning of period $870 $870 $854 $858 $796
Loans charged off:
Commercial and industrial 29 40 17 101 78
Real estate - commercial mortgage 6 3 - 9 3
Real estate - construction 2 - 9 2 9
--- --- --- --- ---
Total commercial real estate loans 8 3 9 11 12
Commercial lease financing 1 1 5 9 11
--- --- --- --- ---
Total commercial loans 38 44 31 121 101
Real estate - residential mortgage - 4 1 2 4
Home equity loans 6 9 5 23 22
Consumer direct loans 8 8 6 26 18
Credit cards 11 12 9 34 25
Consumer indirect loans 8 5 3 24 9
--- --- --- --- ---
Total consumer loans 33 38 24 109 78
--- --- --- --- ---
Total loans charged off 71 82 55 230 179
Recoveries:
Commercial and industrial 25 2 2 32 8
Real estate - commercial mortgage 1 - 1 1 9
Real estate - construction - - 1 1 2
--- --- --- --- ---
Total commercial real estate loans 1 - 2 2 11
Commercial lease financing 3 - - 5 2
--- --- --- --- ---
Total commercial loans 29 2 4 39 21
Real estate - residential mortgage 1 1 1 4 3
Home equity loans 4 5 3 12 10
Consumer direct loans 1 2 1 4 4
Credit cards 1 2 1 4 3
Consumer indirect loans 3 4 1 11 5
--- --- --- --- ---
Total consumer loans 10 14 7 35 25
--- --- --- --- ---
Total recoveries 39 16 11 74 46
--- --- --- --- ---
Net loan charge-offs (32) (66) (44) (156) (133)
Provision (credit) for loan and lease losses 42 66 56 178 203
Foreign currency translation adjustment - - (1) - (1)
--- --- --- --- ---
Allowance for loan and lease losses at end of period $880 $870 $865 $880 $865
==== ==== ==== ==== ====
Liability for credit losses on lending-related commitments at beginning of period $48 $48 $50 $55 $56
Provision (credit) for losses on lending-related commitments 9 - 3 2 (3)
--- --- ---
Liability for credit losses on lending-related commitments at end of period (a) $57 $48 $53 $57 $53
=== === === === ===
Total allowance for credit losses at end of period $937 $918 $918 $937 $918
==== ==== ==== ==== ====
Net loan charge-offs to average total loans .15% .31% .23% .24% .27%
Allowance for loan and lease losses to period-end loans 1.02 1.01 1.01 1.02 1.01
Allowance for credit losses to period-end loans 1.08 1.06 1.07 1.08 1.07
Allowance for loan and lease losses to nonperforming loans 170.2 171.6 119.6 170.2 119.6
Allowance for credit losses to nonperforming loans 181.2 181.1 127.0 181.2 127.0
Discontinued operations - education lending business:
Loans charged off $10 $4 $6 $20 $21
Recoveries 2 2 3 6 8
--- --- --- --- ---
Net loan charge-offs $(8) $(2) $(3) $(14) $(13)
=== === === ==== ====
(a) Included in "Accrued
expense and other
liabilities" on the
balance sheet.
Asset Quality Statistics From Continuing Operations
(dollars in millions)
3Q17 2Q17 1Q17 4Q16 3Q16
---- ---- ---- ---- ----
Net loan charge-offs $32 $66 $58 $72 $44
Net loan charge-offs to average total loans .15% .31% .27% .34% .23%
Allowance for loan and lease losses $880 $870 $870 $858 $865
Allowance for credit losses (a) 937 918 918 913 918
Allowance for loan and lease losses to period-end loans 1.02% 1.01% 1.01% 1.00% 1.01%
Allowance for credit losses to period-end loans 1.08 1.06 1.07 1.06 1.07
Allowance for loan and lease losses to nonperforming loans (b) 170.2 171.6 151.8 137.3 119.6
Allowance for credit losses to nonperforming loans (b) 181.2 181.1 160.2 146.1 127.0
Nonperforming loans at period end (b) $517 $507 $573 $625 $723
Nonperforming assets at period end (b) 556 556 623 676 760
Nonperforming loans to period-end portfolio loans (b) .60% .59% .67% .73% .85%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (b) .64 .64 .72 .79 .89
(a) Includes the allowance for loan and
lease losses plus the liability for
credit losses on lending-related
unfunded commitments.
(b) Nonperforming loan balances exclude
$783 million, $835 million, $812
million, $865 million, and $959
million of purchased credit impaired
loans at September 30, 2017, June
30, 2017, March 31, 2017, December
31, 2016, and September 30, 2016,
respectively.
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
(dollars in millions)
9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
--------- --------- --------- ---------- ---------
Commercial and industrial $169 $178 $258 $297 $335
Real estate - commercial mortgage 30 34 32 26 32
Real estate - construction 2 4 2 3 17
--- --- --- --- ---
Total commercial real estate loans 32 38 34 29 49
Commercial lease financing 11 11 5 8 13
--- --- --- --- ---
Total commercial loans 212 227 297 334 397
Real estate - residential mortgage 57 58 54 56 72
Home equity loans 227 208 207 223 225
Consumer direct loans 3 2 3 6 2
Credit cards 2 2 3 2 3
Consumer indirect loans 16 10 9 4 24
--- --- --- --- ---
Total consumer loans 305 280 276 291 326
--- --- --- --- ---
Total nonperforming loans (a) 517 507 573 625 723
OREO 39 48 49 51 35
Other nonperforming assets - 1 1 - 2
--- --- --- --- ---
Total nonperforming assets (a) $556 $556 $623 $676 $760
==== ==== ==== ==== ====
Accruing loans past due 90 days or more $86 $85 $79 $87 $49
Accruing loans past due 30 through 89 days 329 340 312 404 317
Restructured loans - accruing and nonaccruing (b) 315 333 302 280 304
Restructured loans included in nonperforming loans (b) 187 193 161 141 149
Nonperforming assets from discontinued operations - education lending business 8 5 4 5 5
Nonperforming loans to period-end portfolio loans (a) .60% .59% .67% .73% .85%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming .64 .64 .72 .79 .89
assets (a)
(a) Nonperforming loan balances exclude $783 million,
$835 million, $812 million, $865 million, and
$959 million, of purchased credit impaired loans
at September 30, 2017, June 30, 2017, March 31,
2017, December 31, 2016, and September 30, 2016,
respectively.
(b) Restructured loans (i.e., troubled debt
restructuring) 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)
3Q17 2Q17 1Q17 4Q16 3Q16
---- ---- ---- ---- ----
Balance at beginning of period $507 $573 $625 $723 $619
Loans placed on nonaccrual status 181 143 218 170 78
Nonperforming loans acquired from First Niagara (a) - - - (31) 150
Charge-offs (71) (82) (77) (81) (53)
Loans sold (1) - (8) (9) -
Payments (32) (84) (59) (30) (32)
Transfers to OREO (10) (8) (11) (21) (5)
Transfers to other nonperforming assets - - - - -
Loans returned to accrual status (57) (35) (115) (96) (34)
--- --- ---- --- ---
Balance at end of period (b) $517 $507 $573 $625 $723
==== ==== ==== ==== ====
(a) During the fourth quarter of 2016,
Key adjusted the estimated fair
value of the First Niagara acquired
loan portfolio recorded during the
third quarter of 2016, resulting in
a $31 million decrease in the
balance of acquired nonperforming
loans.
(b) Nonperforming loan balances exclude
$783 million, $835 million, $812
million, $865 million, and $959
million of purchased credit impaired
loans at September 30, 2017, June
30, 2017, March 31, 2017, December
31, 2016, and September 30, 2016,
respectively.
Line of Business Results
(dollars in millions)
Percent change 3Q17 vs.
3Q17 2Q17 1Q17 4Q16 3Q16 2Q17 3Q16
---- ---- ---- ---- ---- ---- ----
Key Community Bank
Summary of operations
Total revenue (TE) $959 $1,010 $905 $902 $783 (5.0)% 22.5%
Provision for credit losses 59 47 46 51 39 25.5 51.3
Noninterest expense 643 651 627 682 590 (1.2) 9.0
Net income (loss) attributable to Key 161 196 146 106 97 (17.9) 66.0
Average loans and leases 47,595 47,461 47,068 47,059 41,548 .3 14.6
Average deposits 79,563 79,601 79,148 79,266 69,397 - 14.6
Net loan charge-offs 41 47 43 42 31 (12.8) 32.3
Net loan charge-offs to average total loans .34% .40% .37% .36% .30% N/A N/A
Nonperforming assets at period end $427 $406 $395 $412 $429 5.2 (.5)
Return on average allocated equity 13.27% 16.51% 12.58% 8.87% 10.84% N/A N/A
Average full-time equivalent employees 11,032 10,899 10,804 11,198 9,805 1.2 12.5
Key Corporate Bank
Summary of operations
Total revenue (TE) $560 $596 $578 $630 $556 (6.0)% .7%
Provision for credit losses (11) 19 18 17 23 (157.9) (147.8)
Noninterest expense 303 299 302 326 310 1.3 (2.3)
Net income (loss) attributable to Key 190 222 181 224 160 (14.4) 18.8
Average loans and leases 38,040 37,721 37,705 36,746 34,561 .8 10.1
Average loans held for sale 1,521 1,000 1,097 1,223 1,103 52.1 37.9
Average deposits 21,559 21,145 21,002 23,171 22,708 2.0 (5.1)
Net loan charge-offs (9) 19 14 26 12 (147.4) (175.0)
Net loan charge-offs to average total loans (.09)% .2% .15% .28% .14% N/A N/A
Nonperforming assets at period end $106 $119 $197 $244 $318 (10.9) (66.7)
Return on average allocated equity 26.92% 31.25% 24.97% 31.17% 26.89% N/A N/A
Average full-time equivalent employees 2,460 2,364 2,384 2,380 2,330 4.1 5.6
TE = Taxable Equivalent, N/A
= Not Applicable, N/M = Not
Meaningful
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SOURCE KeyCorp
