KeyCorp Reports First Quarter 2013 Net Income of $196 Million, or $.21 per Common Share Net interest income was $583 million, up $30 million, or 5.4% from first quarter of 2012

Average total loans increased to $52.6 billion, up 6.5% from first quarter of 2012 led by 16.4% growth in commercial and industrial loans

Average total deposits increased to $63.6 billion, up 6.7% from first quarter of 2012

Net loan charge-offs declined 51% from one year ago to $49 million representing 38 basis points of average total loans

First quarter expenses were $681 million including $15 million of charges for efficiency initiative

Cash efficiency ratio improved to 66.0% from 67.7% one year ago

CLEVELAND, April 18, 2013 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced first quarter net income from continuing operations attributable to Key common shareholders of $196 million, or $.21 per common share, compared to $190 million, or $.20 per common share for the fourth quarter of 2012, and $195 million, or $.20 per common share for the first quarter of 2012.   During the first quarter Key incurred $15 million, or $.01 per common share of costs associated with its previously announced efficiency initiative.

SIGNIFICANT EVENTS

Agreement to sell Victory Capital Management and Victory Capital Advisors

  • Victory results moved to discontinued operations for all periods presented
  • Sale expected to close during the third quarter of 2013
  • Estimated after-tax gain to be in the range of $145-$155 million

Continued progress on efficiency initiative

  • Cash efficiency ratio improved to 66.0%
  • Noninterest expense of $15 million, or $.01 per share associated with efficiency initiative during the first quarter of 2013
  • Run rate savings of approximately $105 million annualized

Executing on capital management priorities

  • Key's capital plan received no objection from the Federal Reserve
  • Board authorized a common share repurchase program of up to $426 million
  • Board will consider an increase to the quarterly common share dividend to $.055 per share at May meeting
  • Key seeking no objection from the Federal Reserve to use the gain realized from the sale of Victory to repurchase common shares

"Our first quarter results highlight the strength of our business model and the progress we are making to ensure that Key is well-positioned for future growth," said Chairman and Chief Executive Officer Beth E. Mooney.  "We continued to experience growth in average loans; however, our customers remained cautious regarding the overall strength of the economy and were somewhat restrained in their borrowing during the quarter following a very strong fourth quarter.  Credit quality improved once again and we showed good progress controlling our expenses and improving our cash efficiency ratio to 66% during the quarter."

"Through the first quarter, we have realized $105 million in annualized expense savings, significant progress toward our $200 million goal by the end of 2013," continued Mooney.  "During the second quarter we expect to make further progress on our efficiency efforts as we consolidate branch locations and continue to work toward creating a variable cost base."

Mooney added:  "Capital management also remains a priority for Key.  In the first quarter, we repurchased 6.8 million shares and over the next four quarters, we expect to return a significant amount of our net income to shareholders through our planned capital actions we announced last month at the conclusion of the CCAR review.  Our plan included a share repurchase program of up to $426 million, which the Board approved last month, and an opportunity to increase the quarterly common share dividend by 10% to $.055 per share, which the Board will evaluate at their May meeting."

FIRST QUARTER 2013 FINANCIAL RESULTS

  • Net interest income of $583 million, up $30 million from one year ago
  • Net interest margin of 3.24%, up eight (8) basis points from the first quarter of 2012
  • Continued average loan growth driven by 16.4% increase in commercial, financial and agricultural loans from one year ago
  • Average deposits increased 6.7% from the first quarter of 2012
  • Noninterest expense included $15 million associated with the efficiency initiative
  • Cash efficiency ratio improved to 66.0%, down from 67.7% one year ago
  • Net loan charge-offs decreased 51% from the first quarter of 2012 to .38% of average total loans
  • Maintained solid balance sheet with Tier 1 common equity of 11.39%

 

Selected Financial Highlights




dollars in millions, except per share data

Change 1Q13 vs.





1Q13



4Q12



1Q12



4Q12



1Q12


Income (loss) from continuing operations attributable to Key common shareholders

$

196


$

190


$

195



3.2

%


.5

%

Income (loss) from continuing operations attributable to Key common shareholders per 

common share — assuming dilution


.21



.20



.20



5.0



5.0


Return on average total assets from continuing operations


.99

%


.96

%


1.01

%


N/A



N/A


Tier 1 common equity


11.39



11.36



11.55



N/A



N/A


Book value at period end

$

10.89


$

10.78


$

10.26



1.0

%


6.1

%

Net interest margin (TE) from continuing operations


3.24

%


3.37

%


3.16

%


N/A



N/A




















TE = Taxable Equivalent, N/A = Not Applicable

































INCOME STATEMENT HIGHLIGHTS

































Revenue

































dollars in millions











Change 1Q13 vs.





1Q13



4Q12



1Q12



4Q12



1Q12


Net interest income (TE)

$

589


$

607


$

559



(3.0)

%


5.4

%

Noninterest income


425



439



442



(3.2)



(3.8)



Total revenue

$

1,014


$

1,046


$

1,001



(3.1)

%


1.3

%



































TE = Taxable Equivalent
















Taxable-equivalent net interest income was $589 million for the first quarter of 2013, and the net interest margin was 3.24%.  These results compare to taxable-equivalent net interest income of $559 million and a net interest margin of 3.16% for the first quarter of 2012.  The increase in net interest income and the net interest margin was primarily a result of a change in funding mix from the redemption of certain trust preferred securities, maturity of long-term debt, and maturity of higher-costing certificates of deposit during 2012.

Compared to the fourth quarter of 2012, taxable-equivalent net interest income decreased by $18 million, and the net interest margin declined by 13 basis points.  The decrease in net interest income was primarily due to a lower day count and a decline in the net interest margin, which was partially offset by an increase in average earning asset balances.  The decline in the net interest margin was largely attributable to lower yields on loans and investment securities and an increase in short-term investments.

Noninterest Income (a)



dollars in millions












Change 1Q13 vs.






1Q13



4Q12



1Q12



4Q12



1Q12


Trust and investment services income


$

95


$

95


$

96



-



(1.0)

%

Investment banking and debt placement fees



79



110



61



(28.2)

%


29.5


Service charges on deposit accounts



69



75



68



(8.0)



1.5


Operating lease income and other leasing gains



23



19



52



21.1



(55.8)


Corporate services income



45



41



44



9.8



2.3


Cards and payments income



37



38



29



(2.6)



27.6


Corporate-owned life insurance income



30



36



30



(16.7)




Consumer mortgage income



7



11



9



(36.4)



(22.2)


Net gains (losses) from principal investing



8



2



35



300.0



(77.1)


Other income



32



12



18



166.7



77.8



Total noninterest income


$

425


$

439


$

442



(3.2)

%


(3.8)

%




(a) The noninterest income line items in the table above have been changed for the current quarter and all prior quarters to reflect Key's current business mix.


Key's noninterest income was $425 million for the first quarter of 2013, compared to $442 million for the year-ago quarter.  Operating lease income and other leasing gains decreased $29 million primarily due to a $20 million gain on the early termination of a leveraged lease one year ago, and net gains (losses) from principal investing decreased by $27 million.  These decreases were partially offset by an $18 million increase in investment banking and debt placement fees and a $14 million increase in other income.

Compared to the fourth quarter of 2012, noninterest income decreased by $14 million.  Investment banking and debt placement fees declined $31 million.  Service charges on deposit accounts and corporate-owned life insurance income each decreased $6 million.  These declines in noninterest income were partially offset by a $6 million increase in net gains (losses) from principal investing and a $20 million increase in other income.

 

Noninterest Expense



dollars in millions












Change 1Q13 vs.






1Q13



4Q12



1Q12



4Q12



1Q12


Personnel expense


$

391


$

422


$

372



(7.3)

%


5.1

%

Nonpersonnel expense



290



312



307



(7.1)



(5.5)



Total noninterest expense


$

681


$

734


$

679



(7.2)

%


.3

%





N/M = Not Meaningful

Key's noninterest expense was $681 million for the first quarter of 2013, compared to $679 million for the same period last year.  Personnel expense increased $19 million due to several factors – an increase in technology contract labor; higher incentive compensation expense accruals; and severance expense associated with Key's efficiency initiative.  Nonpersonnel expense decreased $17 million from one year ago.  Marketing expense, operating lease expense and various other miscellaneous expenses decreased from the year ago quarter.  These declines were partially offset by an increase of $11 million related to the amortization of the intangible assets associated with the third quarter 2012 acquisitions of the previously announced credit card portfolio as well as the branches in Western New York.

Compared to the fourth quarter of 2012, noninterest expense decreased by $53 million.  Personnel expense declined $31 million as salaries, technology contract labor, incentive compensation, employee benefits, stock-based compensation and severance expenses were all down from the fourth quarter of 2012.  Nonpersonnel expense decreased $22 million from the fourth quarter of 2012.  Business services and professional fees declined $19 million, and marketing expense decreased $14 million. These decreases were partially offset by an increase in the provision (credit) for losses on lending-related commitments, which was an expense of $3 million for the current quarter compared to a credit of $14 million for the prior quarter.

BALANCE SHEET HIGHLIGHTS

As of March 31, 2013 and December 31, 2012, Key had total assets of $89.2 billion compared to $87.4 billion at March 31, 2012.

Average Loans
























dollars in millions











Change 3-31-13 vs.





3-31-13


12-31-12


3-31-12


12-31-12


3-31-12


Commercial, financial and agricultural (a)


$

23,317


$

22,436


$

20,031



3.9

%


16.4

%

Other commercial loans



13,493 



13,494



14,730



N/M



(8.4)


Total home equity loans



10,200 



10,218



9,694



(.2)



5.2


Other consumer loans



5,616 



5,711



4,975



(1.7)



12.9



Total loans


$

52,626


$

51,859


$

49,430



1.5

%


6.5

%





















(a) Commercial, financial and agricultural average balance for the three months ended March 31, 2013 and December 31, 2012 includes $91 million and $90 million of assets from commercial credit cards, respectively.


Average loans were $52.6 billion for the first quarter of 2013, an increase of $3.2 billion compared to the first quarter of 2012.  Commercial, financial and agricultural loans grew by $3.3 billion over the year-ago quarter, with strong growth across Key's corporate and middle market segments.  In addition, the third quarter 2012 credit card portfolio and Western New York branch acquisitions added $1 billion of mostly consumer loans.  This growth was partially offset by managed declines in the commercial real estate portfolio, the equipment lease portfolio, which included the early termination of certain leveraged leases in the exit portfolio in 2012, and run-off of consumer loans in the designated exit portfolio. 

Compared to the fourth quarter of 2012, average loans increased by $767 million.  This average loan growth was attributable to an increase in commercial, financial and agricultural loans, partially offset by a decrease in home equity and other consumer loans.

Key originated approximately $8.5 billion in new or renewed lending commitments to consumers and businesses during the first quarter of 2013, compared to $10.2 billion during the fourth quarter of 2012 and $8.3 billion during the first quarter of 2012.

Average Deposits



































dollars in millions












Change 3-31-13 vs.





3-31-13


12-31-12


3-31-12


12-31-12


3-31-12


Non-time deposits


$

56,273


$

56,229


$

49,560



.1

%


13.5

%

Certificates of deposits ($100,000 or more)



2,911



2,992



4,036



(2.7)



(27.9)


Other time deposits



4,451



4,714



6,035



(5.6)



(26.2)



Total deposits


$

63,635


$

63,935


$

59,631



(.5)

%


6.7

%



















Cost of interest-bearing deposits



.43

%


.47

%


.76

%


N/A



N/A






































N/A = Not Applicable

















Average deposits totaled $63.6 billion for the first quarter of 2013, an increase of $4 billion compared to the year-ago quarter.  The growth reflects an increase in demand deposits of $2.9 billion and interest-bearing non-time deposits of $4.1 billion (including the impact of Key's third quarter 2012 Western New York branch acquisition, which added $2 billion of mostly interest-bearing non-time deposits).  This deposit growth was partially offset by $3 billion of run-off from one year ago in certificates of deposit and other time deposits.

Compared to the fourth quarter of 2012, average deposits decreased by $300 million.  This decline was primarily due to a decrease in deposits in foreign office.

ASSET QUALITY


































dollars in millions












Change 1Q13 vs.





1Q13



4Q12



1Q12



4Q12



1Q12


Net loan charge-offs


$

49


$

58


$

101



(15.5)

%


(51.5)

%

Net loan charge-offs to average total loans



.38 

%


.44

%


.82

%


N/A



N/A


Nonperforming loans at period end (a)


$

650


$

674


$

666



(3.6)



(2.4)


Nonperforming assets at period end



705 



735



767



(4.1)



(8.1)


Allowance for loan and lease losses



893 



888



944



.6



(5.4)


Allowance for loan and lease losses to nonperforming loans



137 

%


132

%


142

%


N/A



N/A


Provision (credit) for loan and lease losses


$

55


$

57


$

42



(3.5)

%


31.0

%



































(a)  March 31, 2013 and December 31, 2012 amounts exclude $22 million and $23 million, respectively, of purchased credit impaired loans acquired in July 2012.


















N/A = Not Applicable, N/M = Not Meaningful

















Key's provision for loan and lease losses was $55 million for the first quarter of 2013, compared to $57 million for the fourth quarter of 2012 and $42 million for the year-ago quarter.  Key's allowance for loan and lease losses was $893 million, or 1.70% of total period-end loans at March 31, 2013, compared to 1.68% at December 31, 2012, and 1.92% at March 31, 2012.

Net loan charge-offs for the first quarter of 2013 totaled $49 million, or .38% of average total loans.  These results compare to $58 million, or .44% for the fourth quarter of 2012, and $101 million, or .82% for the same period last year. 

At March 31, 2013, Key's nonperforming loans totaled $650 million and represented 1.24% of period-end portfolio loans, compared to 1.28% at December 31, 2012 and 1.35% at March 31, 2012.  Nonperforming loans at December 31, 2012 included $46 million of loans related to the regulatory guidance issued in the second and third quarters of 2012.  Nonperforming assets at March 31, 2013, totaled $705 million and represented 1.34% of period-end portfolio loans and OREO and other nonperforming assets, compared to 1.39% at December 31, 2012, and 1.55% at March 31, 2012.  OREO balances declined $40 million from one year ago to $21 million at March 31, 2013.

CAPITAL

Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at March 31, 2013.

Capital Ratios






















3-31-13



12-31-12



3-31-12


Tier 1 common equity (a), (b)


11.39 

%


11.36

%


11.55

%

Tier 1 risk-based capital (a)


12.18 



12.15



13.29


Total risk based capital (a)


15.01 



15.13



16.68


Tangible common equity to tangible assets (b)


10.24 



10.15



10.26













(a)      3-31-13 ratio is estimated.


(b)     The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "tangible common equity" and "Tier 1 common equity."  The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.

As shown in the preceding table, at March 31, 2013, Key's estimated Tier 1 common equity and Tier 1 risk-based capital ratios stood at 11.39% and 12.18%, respectively.  In addition, the tangible common equity ratio was 10.24% at March 31, 2013.

Summary of Changes in Common Shares Outstanding





























in thousands












Change 1Q13 vs.






1Q13



4Q12



1Q12



4Q12



1Q12


Shares outstanding at beginning of period



925,769



936,195



953,008



(1.1)

%


(2.9)

%

Common shares repurchased



(6,790)



(10,530)





N/M



N/M


Shares reissued (returned) under employee benefit plans



3,602



104



3,094



N/M



16.4



Shares outstanding at end of period



922,581



925,769



956,102



(.3)

%


(3.5)

%





































N/M = Not Meaningful

















During the first quarter of 2013, Key completed $65 million of Common Share repurchases on the open market under Key's share repurchase program.  Key's authority to repurchase Common Shares under the 2012 capital plan expired on March 31, 2013.

Key's Board of Directors has authorized management, pursuant to the 2013 capital plan submitted to the Federal Reserve and not objected to by the Federal Reserve, to repurchase up to $426 million of Key's Common Shares.  Common Share repurchases under the new 2013 capital plan authorization are expected to be executed from the second quarter of 2013 through the first quarter of 2014.  


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 1Q13 vs.






1Q13



4Q12



1Q12



4Q12



1Q12


Revenue from continuing operations (TE)

















Key Community Bank


$

549


$

580


$

532



(5.3)

%


3.2

%

Key Corporate Bank



379



403



378



(6.0)



.3


Other segments



83



69



94



20.3



(11.7)



Total segments



1,011



1,052



1,004



(3.9)



.7


Reconciling items



3



(6)



(3)



N/M



N/M



Total


$

1,014


$

1,046


$

1,001



(3.1)

%


1.3

%



















Income (loss) from continuing operations attributable to Key

















Key Community Bank


$

31


$

33


$

58



(6.1)

%


(46.6)

%

Key Corporate Bank



105



116



91



(9.5)



15.4


Other segments



68



52



50



30.8



36.0



Total segments



204



201



199



1.5



2.5

%

Reconciling items



(3)



(5)



2



N/M



N/M



Total


$

201


$

196


$

201



2.6

%







































TE = Taxable equivalent, N/M = Not Meaningful

















 

Key Community Bank





















































dollars in millions












Change 1Q13 vs.






1Q13



4Q12



1Q12



4Q12



1Q12


Summary of operations

















Net interest income (TE)


$

361


$

383


$

357



(5.7)

%


1.1

%

Noninterest income



188



197



175



(4.6)



7.4



Total revenue (TE)



549



580



532



(5.3)



3.2


Provision (credit) for loan and lease losses



59



26



4



126.9



N/M


Noninterest expense



440



502



436



(12.4)



.9



Income (loss) before income taxes (TE)



50



52



92



(3.8)



(45.7)


Allocated income taxes (benefit) and TE adjustments



19



19



34





(44.1)



Net income (loss) attributable to Key


$

31


$

33


$

58



(6.1)

%


(46.6)

%



















Average balances

















Loans and leases


$

28,982


$

28,633


$

25,981



1.2

%


11.6

%

Total assets



31,478



31,229



28,223



.8



11.5


Deposits



49,359



49,848



47,506



(1.0)



3.9




















Assets under management at period end


$

23,867


$

22,334


$

21,940



6.9

%


8.8

%





































TE = Taxable Equivalent, N/M = Not Meaningful







 

 

Additional Key Community Bank Data


dollars in millions












Change 1Q13 vs.






1Q13



4Q12



1Q12



4Q12



1Q12


Noninterest income

















Trust and investment services income


$

65


$

65


$

60





8.3

%

Service charges on deposit accounts



58



61



56



(4.9)

%


3.6


Cards and payments income



33



34



25



(2.9)



32.0


Other noninterest income



32



37



34



(13.5)



(5.9)



Total noninterest income


$

188


$

197


$

175



(4.6)

%


7.4

%



















Average deposit balances

















NOW and money market deposit accounts


$

26,110


$

25,698


$

23,067



1.6

%


13.2

%

Savings deposits



2,463



2,399



1,988



2.7



23.9


Certificates of deposit ($100,000 or more)



2,498



2,619



3,441



(4.6)



(27.4)


Other time deposits



4,445



4,702



6,022



(5.5)



(26.2)


Deposits in foreign office



270



287



313



(5.9)



(13.7)


Noninterest-bearing deposits



13,573



14,143



12,675



(4.0)



7.1



Total deposits


$

49,359


$

49,848


$

47,506



(1.0)

%


3.9

%



















Home equity loans

















Average balance


$

9,787


$

9,807


$

9,173








Weighted-average loan-to-value ratio (at date of origination)



70

%


70

%


70

%







Percent first lien positions



55



55



53


























Other data

















Branches



1,084



1,088



1,059








Automated teller machines



1,482



1,611



1,572


























 

Key Community Bank Summary of Operations

  • Seven consecutive quarters of average loan growth
  • Core deposits up $4.4 billion, or 11.7% from the prior year

Key Community Bank recorded net income attributable to Key of $31 million for the first quarter of 2013, compared to $58 million for the year-ago quarter.

Taxable-equivalent net interest income increased by $4 million, or 1.1% from the first quarter of 2012.  Average loans and leases grew 11.6% while average deposits increased 3.9% from one year ago.  The Western New York branch and credit card portfolio acquisitions contributed $31 million to net interest income, $1 billion to average loans and leases, and $2 billion to deposits.  The positive contribution to net interest income from the acquisitions was partially offset by a lower earnings credit applied to deposits in the current period compared to the same period one year ago as a result of the continued low-rate environment.

Noninterest income increased by $13 million, or 7.4% from the year-ago quarter.  Cards and payments income increased $8 million as a result of the third quarter 2012 credit card portfolio acquisition.  Trust and investment services income increased $5 million, primarily due to an increase in assets under management resulting from strong market performance and increased production.

The provision for loan and lease losses increased by $55 million compared to the first quarter of 2012.  Net loan charge-offs, including the 2012 credit card acquisition, of $47 million were flat compared to the same period one year ago.

Noninterest expense increased by $4 million, or .9% from the year-ago quarter.  Expense reductions resulting from Key's efficiency initiative substantially offset the increase in expenses associated with Key's third quarter 2012 Western New York branch and credit card portfolio acquisitions.

 

Key Corporate Bank









































dollars in millions












Change 1Q13 vs.






1Q13



4Q12



1Q12



4Q12



1Q12


Summary of operations

















Net interest income (TE)


$

187


$

195


$

196



(4.1)

%


(4.6)

%

Noninterest income



192



208



182



(7.7)



5.5



Total revenue (TE)



379



403



378



(6.0)



.3


Provision (credit) for loan and lease losses



4



11



13



(63.6)



(69.2)


Noninterest expense



209



207



222



1.0



(5.9)



Income (loss) before income taxes (TE)



166



185



143



(10.3)



16.1


Allocated income taxes and TE adjustments



61



69



52



(11.6)



17.3



Net income (loss) attributable to Key


$

105


$

116


$

91



(9.5)

%


15.4

%



















Average balances

















Loans and leases 


$

20,039


$

19,477


$

18,584



2.9

%


7.8

%

Loans held for sale 



409



538



509



(24.0)



(19.6)


Total assets



23,860



23,446



22,847



1.8



4.4


Deposits



13,957



13,672



11,556



2.1



20.8




















Assets under management at period end


$

11,847


$

12,410


$

13,922



(4.5)

%


(14.9)

%





































TE = Taxable Equivalent, N/M = Not Meaningful

















 

Additional Key Corporate Bank Data



































dollars in millions












Change 1Q13 vs.






1Q13



4Q12



1Q12



4Q12



1Q12


Noninterest income

















Trust and investment services income


$

31


$

30


$

36



3.3

%


(13.9)

%

Investment banking and debt placement fees



78



109



59



(28.4)



32.2


Operating lease income and other leasing gains



17



18



24



(5.6)



(29.2)


Corporate services income



30



31



33



(3.2)



(9.1)


Other noninterest income



36



20



30



80.0



20.0



Total noninterest income


$

192


$

208


$

182



(7.7)

%


5.5

%





































N/M = Not Meaningful

















Key Corporate Bank Summary of Operations

  • Investment banking and debt placement fees were up $19 million, or 32.2% from the prior year
  • Average loan balances up 7.8% from the prior year
  • Average deposits up 20.8% from the prior year

Key Corporate Bank recorded net income attributable to Key of $105 million for the first quarter of 2013, compared to $91 million for the same period one year ago. 

Taxable-equivalent net interest income decreased by $9 million, or 4.6% compared to the first quarter of 2012.  Average earning assets increased $1.2 billion, or 5.7% from the year-ago quarter.  The benefit from the increase in average earning assets was offset by a decrease in earning asset spread driven by a change in the mix of new business volume and the run-off of higher yielding loans.   Average deposit balances increased $2.4 billion, or 20.8% from the year-ago quarter; however, the deposit spread decreased as a result of the continued low-rate environment.    

Noninterest income increased by $10 million, or 5.5 % from the first quarter of 2012.  Investment banking and debt placement fees increased $19 million, partially offset by a $7 million decrease in operating lease income and other leasing gains compared to the year-ago quarter. 

The provision for loan and lease losses decreased by $9 million compared to the first quarter of 2012.  There was a net loan recovery of $1 million for the first quarter of 2013 compared to net loan charge-offs of $25 million for the same period one year ago.

Noninterest expense decreased by $13 million, or 5.9% from the first quarter of 2012.  This decline was driven by a reduction in other operating expenses compared to the first quarter of 2012. 

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 $68 million for the first quarter of 2013, compared to net income attributable to Key of $50 million for the same period last year.  These results were primarily attributable to an increase in net interest income of $36 million and a decrease in the provision for loan and lease losses of $32 million.  These improvements were partially offset by a decline in noninterest income of $48 million primarily due to decreases in operating lease income and other leasing gains of $22 million and net gains (losses) from principal investing of $27 million.

*****

KeyCorp was organized more than 160 years ago and is headquartered in Cleveland, Ohio.  One of the nation's largest bank-based financial services companies, Key had assets of approximately $89.2 billion at March 31, 2013.

Key provides deposit, lending, cash management and investment services to individuals and small and mid-sized businesses in 14 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.


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 "expect," "believe," and "anticipate," and other similar references to future periods.  Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events, many of which, by their nature, are inherently uncertain and outside of Key's control.  Key's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements.  Factors that could cause Key's actual results to differ materially from those described in the forward-looking statements can be found in KeyCorp's Form 10-K for the year ended December 31, 2012, 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: continued strain on the global financial markets as a result of economic slowdowns and concerns; current regulatory initiatives in the U.S., including the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended, subjecting us to a variety of new and more stringent legal and regulatory requirements and increased scrutiny from our regulators; adverse behaviors in securities, public debt, and capital markets, including changes in market liquidity and volatility; and our ability to timely and effectively implement our strategic initiatives.  Forward-looking statements are not guarantees of future performance and should not be relied upon as representing management's views as of any subsequent date.  Key does not undertake any obligation to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

Notes to Editors:

A live Internet broadcast of KeyCorp's conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on Thursday, April 18, 2013.  An audio replay of the call will be available through April 25, 2013.

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





3-31-13



12-31-12



3-31-12


Summary of operations













Net interest income (TE)

$

589



$

607



$

559



Noninterest income


425 




439




442




Total revenue (TE)


1,014 




1,046




1,001



Provision (credit) for loan and lease losses


55 




57




42



Noninterest expense


681 




734




679



Income (loss) from continuing operations attributable to Key


201 




196




201



Income (loss) from discontinued operations, net of taxes (a)





7




(1)



Net income (loss) attributable to Key 


204 




203




200

















Income (loss) from continuing operations attributable to Key common shareholders

$

196



$

190



$

195



Income (loss) from discontinued operations, net of taxes (a)





7




(1)



Net income (loss) attributable to Key common shareholders


199 




197




194
















Per common share













Income (loss) from continuing operations attributable to Key common shareholders

$

.21



$

.21



$

.21



Income (loss) from discontinued operations, net of taxes (a)


— 




.01






Net income (loss) attributable to Key common shareholders (b)


.22 




.21




.20

















Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution


.21 




.20




.20



Income (loss) from discontinued operations, net of taxes — assuming dilution (a)


— 




.01






Net income (loss) attributable to Key common shareholders — assuming dilution  (b)


.21 




.21




.20

















Cash dividends paid


.05 




.05




.03



Book value at period end


 10.89 




10.78




10.26



Tangible book value at period end


 9.78 




9.67




9.28



Market price at period end


 9.96 




8.42




8.50
















Performance ratios













From continuing operations:













Return on average total assets


 .99 

%



.96

%



1.01

%


Return on average common equity


 7.96 




7.58




8.08



Return on average tangible common equity (c)


 8.87 




8.45




8.94



Net interest margin (TE)


 3.24 




3.37




3.16



Cash efficiency ratio (c)


 65.98 




69.02




67.73

















From consolidated operations:













Return on average total assets


 .94 

%



.93

%



.93

%


Return on average common equity


 8.08 




7.86




8.04



Return on average tangible common equity (c)


 9.01 




8.77




8.90



Net interest margin (TE)


 3.16 




3.29




3.08



Loan to deposit (d)


 86.95 




85.77




86.97
















Capital ratios at period end













Key shareholders' equity to assets


 11.59 

%



11.51

%



11.55

%


Tangible Key shareholders' equity to tangible assets


 10.57 




11.18




11.22



Tangible common equity to tangible assets (c)


 10.24 




10.15




10.26



Tier 1 common equity (c), (e)


 11.39 




11.36




11.55



Tier 1 risk-based capital (e)


 12.18 




12.15




13.29



Total risk-based capital (e)


 15.01 




15.13




16.68



Leverage (e)


 11.31 




11.41




12.12


 

Financial Highlights (continued)


(dollars in millions)



















Three months ended





3-31-13



12-31-12



3-31-12


Asset quality — from continuing operations













Net loan charge-offs

$

49



$

58



$

101



Net loan charge-offs to average total loans


.38 

%



.44

%



.82

%


Allowance for loan and lease losses to annualized net loan charge-offs


449.37 




384.85




232.39



Allowance for loan and lease losses

$

893



$

888



$

944



Allowance for credit losses


925 




917




989



Allowance for loan and lease losses to period-end loans


1.70 

%



1.68

%



1.92

%


Allowance for credit losses to period-end loans


1.76 




1.74




2.01



Allowance for loan and lease losses to nonperforming loans


137.38 




131.75




141.74



Allowance for credit losses to nonperforming loans


142.31 




136.05




148.50



Nonperforming loans at period end (f)

$

650



$

674



$

666



Nonperforming assets at period end


705 




735




767



Nonperforming loans to period-end portfolio loans


1.24 

%



1.28

%



1.35

%


Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets


1.34 




1.39




1.55
















Trust and brokerage assets — from continuing operations













Assets under management

$

35,714



$

34,744



$

35,862



Nonmanaged and brokerage assets


 26,272 




25,197