KeyCorp Reports Second Quarter 2013 Net Income of $193 Million, or $.21 Per Common Share

Efficiency initiative results in achieved annualized run rate savings of approximately $171 million through the second quarter of 2013

Jul 18, 2013, 06:13 ET from KeyCorp

CLEVELAND, July 18, 2013 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced second quarter net income from continuing operations attributable to Key common shareholders of $193 million, or $.21 per common share, compared to $196 million, or $.21 per common share for the first quarter of 2013, and $217 million, or $.23 per common share for the second quarter of 2012.   During the second quarter, Key incurred $37 million, or $.03 per common share of costs associated with its previously announced efficiency initiative.

For the six months ended June 30, 2013, net income from continuing operations attributable to Key common shareholders was $389 million, or $.42 per common share, compared to $412 million, or $.43 per common share for the same period one year ago. During the first half of 2013, Key incurred $52 million, or $.04 per common share of costs related to its efficiency initiative.

CURRENT QUARTER DEVELOPMENTS

Executing on growth initiatives

  • Acquiring a commercial mortgage servicing portfolio and special servicing business, building scale and becoming one of the top three largest named servicers of commercial/multifamily loans in the U.S. and the fifth largest special servicer of CMBS (Initial closing completed in June; final closing expected in July)
  • Expanded mobile offering with the launch of new remote deposit capabilities for both consumer and commercial clients

Continued progress on efficiency initiative

  • Achieved annualized run rate savings of approximately $171 million through the second quarter of 2013
  • Recognized expenses of $37 million, or $.03 per common share associated with efficiency initiative during the second quarter of 2013
  • Cash efficiency ratio of 69.06%, and adjusted cash efficiency ratio net of efficiency initiative charges of 65.42% for the second quarter of 2013
  • Consolidated 33 branches during the second quarter of 2013
  • Realigned Community Bank organization around core relationship strategy to drive profitability

Focused on capital management priorities

  • Repurchased $112 million of common shares during the second quarter of 2013
  • Increased common share dividend by 10% to $.055 per common share

"During the second quarter, the strength of our business model continued to drive results. Key made clear progress implementing growth initiatives, improving its cost structure and executing capital priorities," said Chairman and Chief Executive Officer Beth Mooney.

"Compared to the first quarter, cautious client behavior led to slower loan growth, higher levels of liquidity for Key and greater than anticipated pressure on our net interest margin. Despite the challenging economic backdrop, Key was able to produce slight increases in both loans and revenue and control expenses. Further, we stayed true to our commitment of disciplined capital management by repurchasing $112 million in common shares and increasing our dividend by 10%," continued Mooney.

Mooney added: "To maintain and enhance our growth, we also continued to invest in our businesses. We are in the process of acquiring a commercial mortgage servicing portfolio and special servicing business that will significantly enhance our scale and presence in the market. We also launched new mobile capabilities that add accessibility and functionality for both our consumer and commercial clients. Our efficiency initiative, which began in June 2012, remains on target to reach our goal of $200 million in annualized savings by the end of the year. Through the second quarter of 2013, we have achieved approximately $171 million of the targeted savings."

SECOND QUARTER 2013 FINANCIAL RESULTS

Compared with Second Quarter of 2012

  • Total revenue increased $14 million
    • Taxable-equivalent net interest income of $586 million, up $42 million, or 7.7%, which included $30 million associated with Key's third quarter 2012 branch and credit card portfolio acquisitions
    • Noninterest income declined $28 million, or 6.1% primarily due to a gain on the early terminations of leveraged leases one year ago and a reduction in net gains (losses) from principal investing; noninterest income included $14 million associated with Key's acquisitions noted above
  • Net interest margin of 3.13%, up 7 basis points
  • Continued average loan growth driven by 13.9% increase in commercial, financial and agricultural loans
  • Average deposits increased $4.6 billion, or 7.6%, which included $2 billion of deposits from Key's third quarter 2012 Western New York branch acquisition
  • Noninterest expense up $18 million, which included $37 million associated with the efficiency initiative and $26 million associated with Key's acquisitions noted above
  • Net loan charge-offs decreased 41.6% to .34% of average total loans
  • Maintained solid capital position with Tier 1 common equity of 11.25%

Compared with First Quarter of 2013

  • Total revenue relatively stable
    • Taxable-equivalent net interest income down $3 million
    • Noninterest income up $4 million
  • Net interest margin down 11 basis points
  • Average loans remained flat
  • Average deposits increased $1.7 billion, or 2.7%, driven by growth in commercial balances
  • Noninterest expense increased $30 million, which included a $22 million increase in costs associated with the efficiency initiative in the second quarter of 2013
  • Net loan charge-offs decreased 8.2%

Selected Financial Highlights

dollars in millions, except per share data

Change 2Q13 vs.

2Q13

1Q13

2Q12

1Q13

2Q12

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

$

193

$

196

$

217

(1.5)

%

(11.1)

%

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

     common share — assuming dilution

.21

.21

.23

(8.7)

Return on average total assets from continuing operations

.95

%

.99

%

1.10

%

N/A

N/A

Tier 1 common equity (a)

11.25

11.40

11.63

N/A

N/A

Book value at period end

$

10.89

$

10.89

$

10.43

4.4

%

Net interest margin (TE) from continuing operations

3.13

%

3.24

%

3.06

%

N/A

N/A

 (a)

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

TE = Taxable Equivalent, N/A = Not Applicable

INCOME STATEMENT HIGHLIGHTS

Revenue

dollars in millions

Change 2Q13 vs.

2Q13

1Q13

2Q12

1Q13

2Q12

Net interest income (TE)

$

586

$

589

$

544

(.5)

%

7.7

%

Noninterest income

429

425

457

.9

(6.1)

Total revenue

$

1,015

$

1,014

$

1,001

.1

%

1.4

%

TE = Taxable Equivalent

Taxable-equivalent net interest income was $586 million for the second quarter of 2013, and the net interest margin was 3.13%.  These results compare to taxable-equivalent net interest income of $544 million and a net interest margin of 3.06% for the second quarter of 2012.  The increase in 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 over the past year.

Compared to the first quarter of 2013, taxable-equivalent net interest income decreased by $3 million, and the net interest margin declined by 11 basis points.  The decrease in net interest income was primarily due to lower replacement yields on new loans and investments as compared to the yield on maturing loans and investments.  This decline was partially offset by an increase in average earning asset balances and a higher day count in the second quarter.  The decline in the net interest margin was largely attributable to a six basis point impact from lower loan yields and fees as well as a five basis point impact from higher levels of liquidity and securities. The net interest margin was also negatively impacted by approximately two basis points from the termination and maturity of $4.4 billion of interest rate swaps that were not replaced, as Key continues to increase its asset sensitivity to be better positioned for a rise in short-term interest rates.

Noninterest Income

dollars in millions

Change 2Q13 vs.

2Q13

1Q13

2Q12

1Q13

2Q12

Trust and investment services income

$

100

$

95

$

90

5.3

%

11.1

%

Investment banking and debt placement fees

84

79

73

6.3

15.1

Service charges on deposit accounts

71

69

70

2.9

1.4

Operating lease income and other leasing gains

19

23

58

(17.4)

(67.2)

Corporate services income

43

45

44

(4.4)

(2.3)

Cards and payments income

42

37

31

13.5

35.5

Corporate-owned life insurance income

31

30

30

3.3

3.3

Consumer mortgage income

6

7

9

(14.3)

(33.3)

Net gains (losses) from principal investing

7

8

24

(12.5)

(70.8)

Other income

26

32

28

(18.8)

(7.1)

Total noninterest income

$

429

$

425

$

457

.9

%

(6.1)

%

Key's noninterest income was $429 million for the second quarter of 2013, compared to $457 million for the year-ago quarter.  Operating lease income and other leasing gains decreased $39 million primarily due to a $31 million gain on the early terminations of leveraged leases one year ago, and net gains (losses) from principal investing decreased by $17 million.  These decreases were partially offset by increases in investment banking and debt placement fees and cards and payments income of $11 million each, and trust and investment services income of $10 million.

Compared to the first quarter of 2013, noninterest income increased by $4 million.  Trust and investment services income, investment banking and debt placement fees, and cards and payments income each increased $5 million. These increases in noninterest income were partially offset by declines in operating lease income and other leasing gains of $4 million and other income of $6 million.

Noninterest Expense

dollars in millions

Change 2Q13 vs.

2Q13

1Q13

2Q12

1Q13

2Q12

Personnel expense

$

406

$

391

$

377

3.8

%

7.7

%

Nonpersonnel expense

305

290

316

5.2

(3.5)

Total noninterest expense

$

711

$

681

$

693

4.4

%

2.6

%

Key's noninterest expense was $711 million for the second quarter of 2013, compared to $693 million for the same period last year.  Excluding the $37 million in expenses related to Key's efficiency initiative and the $26 million in incremental costs associated with acquisitions, noninterest expense was down $45 million compared to the prior year.  Personnel expense increased $29 million due to an increase in severance expense primarily associated with Key's efficiency initiative and higher incentive compensation expense accruals.  Nonpersonnel expense decreased $11 million from one year ago.  Business services and professional fees declined $14 million, and marketing expense and other real estate owned (OREO) expense each decreased $6 million.  These declines were partially offset by an increase in net occupancy of $10 million primarily due to charges related to the consolidation of 33 branches during the second quarter of 2013.   Intangible asset amortization on credit cards and other intangible asset amortization associated with the third quarter 2012 acquisitions of the credit card portfolio and the branches in Western New York also increased $9 million in total.

Compared to the first quarter of 2013, noninterest expense increased by $30 million.  Personnel expense increased $15 million as severance expense was $9 million higher; annual merit and incentive compensation also contributed to the increase.  Nonpersonnel expense also increased $15 million from the first quarter of 2013.  Net occupancy increased $8 million primarily due to charges related to the consolidation of 33 branches during the second quarter of 2013.  Marketing expense also increased $5 million.

BALANCE SHEET HIGHLIGHTS

As of June 30, 2013, Key had total assets of $90.6 billion compared to $89.2 billion at March 31, 2013, and $86.5 billion at June 30, 2012.

Average Loans

dollars in millions

Change 6-30-13 vs.

6-30-13

3-31-13

6-30-12

3-31-13

6-30-12

Commercial, financial and agricultural (a)

$

23,480

$

23,317

$

20,606

.7

%

13.9

%

Other commercial loans

13,290

13,493

14,055

(1.5)

(5.4)

Total home equity loans

10,381

10,200

9,852

1.8

5.4

Other consumer loans

5,545

5,616

4,933

(1.3)

12.4

Total loans

$

52,696

$

52,626

$

49,446

.1

%

6.6

%

(a)   

Commercial, financial and agricultural average balance for the three months ended June 30, 2013 and March 31, 2013 includes $96 million and $91 million, respectively, of assets from commercial credit cards.

Average loans were $52.7 billion for the second quarter of 2013, an increase of $3.3 billion compared to the second quarter of 2012.  Commercial, financial and agricultural loans grew by $2.9 billion over the year-ago quarter, with strong growth across Key's business 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 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 first quarter of 2013, average loans increased by $70 million.  This average loan growth was attributable to an increase in commercial, financial and agricultural loans and home equity loans, which benefitted from Key's second quarter lending promotion.  This growth in loans was partially offset by a decrease in commercial real estate, commercial lease financing, and other consumer loans.

Average Deposits

dollars in millions

Change 6-30-13 vs.

6-30-13

3-31-13

6-30-12

3-31-13

6-30-12

Non-time deposits (a)

$

57,691

$

55,819

$

50,801

3.4

%

13.6

%

Certificates of deposits ($100,000 or more)

2,975

2,911

3,858

2.2

(22.9)

Other time deposits

4,202

4,451

5,645

(5.6)

(25.6)

Total deposits

$

64,868

$

63,181

$

60,304

2.7

%

7.6

%

Cost of total deposits (a)

.26

%

.29

%

.47

%

N/A

N/A

(a)   Excludes deposits in foreign office.

N/A = Not Applicable

Average deposits, excluding deposits in foreign office, totaled $64.9 billion for the second quarter of 2013, an increase of $4.6 billion compared to the year-ago quarter.  The growth reflects an increase in demand deposits of $2.7 billion and interest-bearing non-time deposits of $4.2 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 $2.3 billion of run-off from one year ago in certificates of deposit and other time deposits.

Compared to the first quarter of 2013, average deposits, excluding deposits in foreign office, increased by $1.7 billion.  This deposit growth was primarily due to an increase in business demand and interest-bearing commercial deposits, reflecting deposits made by some of Key's larger clients.

ASSET QUALITY

dollars in millions

Change 2Q13 vs.

2Q13

1Q13

2Q12

1Q13

2Q12

Net loan charge-offs

$

45

$

49

$

77

(8.2)

%

(41.6)

%

Net loan charge-offs to average total loans

.34

%

.38

%

.63

%

N/A

N/A

Nonperforming loans at period end (a)

$

652

$

650

$

657

.3

(.8)

Nonperforming assets at period end

693

705

751

(1.7)

(7.7)

Allowance for loan and lease losses

876

893

888

(1.9)

(1.4)

Allowance for loan and lease losses to nonperforming loans

134.36

%

137.38

%

135.16

%

N/A

N/A

Provision (credit) for loan and lease losses

$

28

$

55

$

21

(49.1)

%

33.3

%

(a)  June 30, 2013 and March 31, 2013 amounts exclude $19 million and $22 million, respectively, of purchased credit impaired loans acquired in July 2012.

N/A = Not Applicable

Key's provision for loan and lease losses was $28 million for the second quarter of 2013, compared to $55 million for the first quarter of 2013 and $21 million for the year-ago quarter.  The decline in the provision for loan and lease losses from the prior quarter reflects Key's current asset quality measures and the quality of its new loan originations.

Key's allowance for loan and lease losses was $876 million, or 1.65% of total period-end loans at June 30, 2013, compared to 1.70% at March 31, 2013, and 1.79% at June 30, 2012.

Net loan charge-offs for the second quarter of 2013 totaled $45 million, or .34% of average total loans.  These results compare to $49 million, or .38% for the first quarter of 2013, and $77 million, or .63% for the same period last year. 

At June 30, 2013, Key's nonperforming loans totaled $652 million and represented 1.23% of period-end portfolio loans, compared to 1.24% at March 31, 2013 and 1.32% at June 30, 2012.  Nonperforming assets at June 30, 2013, totaled $693 million and represented 1.30% of period-end portfolio loans and OREO and other nonperforming assets, compared to 1.34% at March 31, 2013, and 1.51% at June 30, 2012.

CAPITAL

Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at June 30, 2013.

Capital Ratios

6-30-13

3-31-13

6-30-12

Tier 1 common equity (a), (b)

11.25

%

11.40

%

11.63

%

Tier 1 risk-based capital (a)

12.01

12.19

12.45

Total risk based capital (a)

14.75

15.02

15.83

Tangible common equity to tangible assets (b)

9.96

10.24

10.44

Leverage (a)

11.21

11.36

11.35

(a)   

6-30-13 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 June 30, 2013, Key's estimated Tier 1 common equity and Tier 1 risk-based capital ratios stood at 11.25% and 12.01%, respectively.  In addition, the tangible common equity ratio was 9.96% at June 30, 2013.

On July 2, 2013 and July 9, 2013, the Federal Reserve and the OCC, respectively, approved a final rule that will implement the Basel III regulatory capital reforms and certain changes required by the Dodd-Frank Act. Consistent with the proposed rule published in August 2012, the final rule increases minimum requirements for both the quantity and quality of capital held by banking organizations and emphasizes Tier 1 common equity.  While the final rule becomes effective in January 2014, the mandatory compliance date for Key begins in January 2015 and is subject to transitional provisions extending to January 2019. Key's estimated Tier 1 common equity as calculated under this final rule was 10.81% at June 30, 2013.  This exceeds the fully phased-in required minimum Tier 1 common equity (including capital conservation buffer) of 7.00%.

Summary of Changes in Common Shares Outstanding

in thousands

Change 2Q13 vs.

2Q13

1Q13

2Q12

1Q13

2Q12

Shares outstanding at beginning of period

922,581

925,769

956,102

(.3)

%

(3.5)

%

Common shares repurchased

(10,786)

(6,790)

(10,468)

58.9

3.0

Shares reissued (returned) under employee benefit plans

1,088

3,602

(161)

(69.8)

N/M

Shares outstanding at end of period

912,883

922,581

945,473

(1.1)

%

(3.4)

%

N/M = Not Meaningful

As previously reported and as authorized by Key's Board of Directors and pursuant to Key's 2013 capital plan submitted to and not objected to by the Federal Reserve, Key has authority to repurchase up to $426 million of its common shares.  Common share repurchases under the 2013 capital plan authorization are expected to be executed through the first quarter of 2014.  

The after-tax gain on the previously announced Victory divestiture is now expected to be lower than originally projected and in the range of $100 million to $115 million. The cash portion of this gain will be between $75 million and $90 million, and Key has received no objection from the Federal Reserve to use these cash proceeds for common share repurchases.

During the second quarter of 2013, Key completed $112 million of common share repurchases on the open market under Key's share repurchase program. 

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 2Q13 vs.

2Q13

1Q13

2Q12

1Q13

2Q12

Revenue from continuing operations (TE)

Key Community Bank

$

555

$

549

$

537

1.1

%

3.4

%

Key Corporate Bank

376

379

371

(.8)

1.3

Other Segments

86

83

94

3.6

(8.5)

Total segments

1,017

1,011

1,002

.6

1.5

Reconciling items

(2)

3

(1)

N/M

N/M

Total

$

1,015

$

1,014

$

1,001

.1

%

1.4

%

Income (loss) from continuing operations attributable to Key

Key Community Bank

$

36

$

31

$

54

16.1

%

(33.3)

%

Key Corporate Bank

117

105

95

11.4

23.2

Other Segments

70

68

49

2.9

42.9

Total segments

223

204

198

9.3

12.6

Reconciling items

(24)

(3)

24

N/M

N/M

Total

$

199

$

201

$

222

(1.0)

%

(10.4)

%

TE = Taxable equivalent, N/M = Not Meaningful

 

Key Community Bank

dollars in millions

Change 2Q13 vs.

2Q13

1Q13

2Q12

1Q13

2Q12

Summary of operations

Net interest income (TE)

$

357

$

361

$

356

(1.1)

%

.3

%

Noninterest income

198

188

181

5.3

9.4

Total revenue (TE)

555

549

537

1.1

3.4

Provision (credit) for loan and lease losses

41

59

(4)

(30.5)

N/M

Noninterest expense

456

440

455

3.6

.2

Income (loss) before income taxes (TE)

58

50

86

16.0

(32.6)

Allocated income taxes (benefit) and TE adjustments

22

19

32

15.8

(31.3)

Net income (loss) attributable to Key

$

36

$

31

$

54

16.1

%

(33.3)

%

Average balances

Loans and leases

$

29,161

$

28,977

$

26,413

.6

%

10.4

%

Total assets

31,570

31,473

28,695

.3

10.0

Deposits

49,473

49,349

47,946

.3

3.2

Assets under management at period end

$

23,213

$

23,867

$

21,116

(2.7)

%

9.9

%

TE = Taxable Equivalent, N/M = Not Meaningful

 

Additional Key Community Bank Data

dollars in millions

Change 2Q13 vs.

2Q13

1Q13

2Q12

1Q13

2Q12

Noninterest income

Trust and investment services income

$

67

$

65

$

60

3.1

%

11.7

%

Service charges on deposit accounts

60

58

59

3.4

1.7

Cards and payments income

37

33

26

12.1

42.3

Other noninterest income

34

32

36

6.3

(5.6)

Total noninterest income

$

198

$

188

$

181

5.3

%

9.4

%

Average deposit balances

NOW and money market deposit accounts

$

26,341

$

26,109

$

23,824

.9

%

10.6

%

Savings deposits

2,536

2,463

2,074

3.0

22.3

Certificates of deposit ($100,000 or more)

2,443

2,498

3,269

(2.2)

(25.3)

Other time deposits

4,195

4,445

5,629

(5.6)

(25.5)

Deposits in foreign office

284

270

270

5.2

5.2

Noninterest-bearing deposits

13,674

13,564

12,880

.8

6.2

Total deposits

$

49,473

$

49,349

$

47,946

.3

%

3.2

%

Home equity loans

Average balance

$

9,992

$

9,787

$

9,359

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

71

%

70

%

71

%

Percent first lien positions

57

55

54

Other data

Branches

1,052

1,084

1,062

Automated teller machines

1,359

1,482

1,576

Key Community Bank Summary of Operations

  • Realigned Community Bank structure and organization and closed 33 branches, resulting in expenses of $11 million in the second quarter of 2013
  • Continued credit card penetration and successful integration of branches in Western New York
  • Eight consecutive quarters of average loan growth
  • Core deposits up $3.8 billion, or 9.7% from the prior year

Key Community Bank recorded net income attributable to Key of $36 million for the second quarter of 2013, compared to $54 million for the year-ago quarter.

Taxable-equivalent net interest income increased by $1 million, or .3% from the second quarter of 2012.  Average loans and leases grew 10.4% while average deposits increased 3.2% from one year ago.  The Western New York branch and credit card portfolio acquisitions contributed $30 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 $17 million, or 9.4% from the year-ago quarter.  Cards and payments income increased $11 million as a result of the third quarter 2012 credit card portfolio acquisition.  Trust and investment services income increased $7 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 was a charge of $41 million compared to a credit of $4 million for the second quarter of 2012.  Net loan charge-offs, including the 2012 credit card portfolio acquisition, decreased $4 million from the same period one year ago.

Noninterest expense increased by $1 million, or .2% 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 2Q13 vs.

2Q13

1Q13

2Q12

1Q13

2Q12

Summary of operations

Net interest income (TE)

$

189

$

187

$

190

1.1

%

(.5)

%

Noninterest income

187

192

181

(2.6)

3.3

Total revenue (TE)

376

379

371

(.8)

1.3

Provision (credit) for loan and lease losses

(10)

4

4

N/M

N/M

Noninterest expense

202

210

213

(3.8)

(5.2)

Income (loss) before income taxes (TE)

184

165

154

11.5

19.5

Allocated income taxes and TE adjustments

67

60

56

11.7

19.6

Net income (loss)

117

105

98

11.4

19.4

Less: Net income (loss) attributable to noncontrolling interests

3

N/M

N/M

Net income (loss) attributable to Key

$

117

$

105

$

95

11.4

%

23.2

%

Average balances

Loans and leases 

$

20,133

$

20,044

$

18,541

.4

%

8.6

%

Loans held for sale 

466

409

514

13.9

(9.3)

Total assets

23,965

23,864

22,709

.4

5.5

Deposits

15,606

13,968

12,414

11.7

25.7

Assets under management at period end

$

12,331

$

11,847

$

14,032

4.1

%

(12.1)

%

TE = Taxable Equivalent, N/M = Not Meaningful

 

Additional Key Corporate Bank Data

dollars in millions

Change 2Q13 vs.

2Q13

1Q13

2Q12

1Q13

2Q12

Noninterest income

Trust and investment services income

$

33

$

31

$

31

6.5

%

6.5

%

Investment banking and debt placement fees

82

78

69

5.1

18.8

Operating lease income and other leasing gains

13

17

21

(23.5)

(38.1)

Corporate services income

32

30

34

6.7

(5.9)

Service charges on deposit accounts

11

11

11

Cards and payments income

5

4

5

25.0

Payments and services income

48

45

50

6.7

(4.0)

Other noninterest income

11

21

10

(47.6)

10.0

Total noninterest income

$

187

$

192

$

181

(2.6)

%

3.3

%

Key Corporate Bank Summary of Operations

  • Investment banking and debt placement fees were up $13 million, or 18.8% from the prior year
  • Average loan balances up 8.6% from the prior year
  • Average deposits up 25.7% from the prior year

Key Corporate Bank recorded net income attributable to Key of $117 million for the second quarter of 2013, compared to $95 million for the same period one year ago. 

Taxable-equivalent net interest income decreased by $1 million, or .5% compared to the second quarter of 2012.  Average earning assets increased $1.5 billion, or 7.2% from the year-ago quarter, driving a $2 million increase in earning asset spread.  Average deposit balances increased $3.2 billion, or 25.7% from the year-ago quarter, driven by the continued execution of health care strategies and increase in public sector deposits.  However, these increases in balances were offset by declines in the deposit spread as a result of the continued low-rate environment.    

Noninterest income increased by $6 million, or 3.3% from the second quarter of 2012.  Investment banking and debt placement fees increased $13 million, partially offset by a decrease in operating lease income and other leasing gains of $8 million compared to the year-ago quarter. 

The provision for loan and lease losses was a credit of $10 million compared to a charge of $4 million for the second quarter of 2012.  There were net loan recoveries of $6 million for the second quarter of 2013 compared to net loan charge-offs of $9 million for the same period one year ago.

Noninterest expense decreased by $11 million, or 5.2% from the second quarter of 2012.  This decline was driven by decreases in professional fees, operating lease expense, and the provision (credit) for losses on lending-related commitments compared to the second quarter of 2012. 

Other Segments

Other Segments consist of Corporate Treasury, Community Development, Key's Principal Investing unit, and various exit portfolios.  Other Segments generated net income attributable to Key of $70 million for the second quarter of 2013, compared to net income attributable to Key of $49 million for the same period last year.  These results were primarily attributable to an increase in net interest income of $44 million and a decrease in the provision for loan and lease losses of $25 million.  These improvements were partially offset by a decline in noninterest income of $52 million primarily due to decreases in operating lease income and other leasing gains of $32 million and net gains (losses) from principal investing of $17 million.

*****

KeyCorp was organized more than 160 years ago and is headquartered in Cleveland, Ohio.  One of the nation's largest bank-based financial services companies, Key had assets of approximately $90.6 billion at June 30, 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, and its Quarterly Report on Form 10-Q for the period ended March 31, 2013, each of 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, July 18, 2013. An audio replay of the call will be available through July 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

6-30-13

3-31-13

6-30-12

Summary of operations

Net interest income (TE)

$

586

$

589

$

544

Noninterest income

429

425

457

Total revenue (TE)

1,015

1,014

1,001

Provision (credit) for loan and lease losses

28

55

21

Noninterest expense

711

681

693

Income (loss) from continuing operations attributable to Key

199

201

222

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

5

3

14

Net income (loss) attributable to Key 

204

204

236

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

$

193

$

196

$

217

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

5

3

14

Net income (loss) attributable to Key common shareholders

198

199

231

Per common share

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

$

.21

$

.21

$

.23

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

.01

.01

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

.22

.22

.24

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

.21

.21

.23

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

.01

.01

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

.22

.21

.24

Cash dividends paid

.055

.05

.05

Book value at period end

10.89

10.89

10.43

Tangible book value at period end

9.77

9.78

9.45

Market price at period end

11.04

9.96

7.74

Performance ratios

From continuing operations:

Return on average total assets

.95

%

.99

%

1.10

%

Return on average common equity

7.72

7.96

8.90

Return on average tangible common equity (c)

8.60

8.87

9.83

Net interest margin (TE)

3.13

3.24

3.06

Cash efficiency ratio (c)

69.06

65.98

69.13

From consolidated operations:

Return on average total assets

.92

%

.94

%

1.10

%

Return on average common equity

7.92

8.08

9.47

Return on average tangible common equity (c)

8.82

9.01

10.46

Net interest margin (TE)

3.07

3.16

2.99

Loan to deposit (d)

83.63

86.95

86.38

Capital ratios at period end

Key shareholders' equity to assets

11.29

%

11.59

%

11.74

%

Key common shareholders' equity to assets

10.96

11.27

11.40

Tangible common equity to tangible assets (c)

9.96

10.24

10.44

Tier 1 common equity (c), (e)

11.25

11.40

11.63

Tier 1 risk-based capital (e)

12.01

12.19

12.45

Total risk-based capital (e)

14.75

15.02

15.83

Leverage (e)

11.21

11.36

11.35

Asset quality — from continuing operations

Net loan charge-offs

$

45

$

49

$

77

Net loan charge-offs to average loans

.34

%

.38

%

.63

%

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

485.33

449.37

286.74

Allowance for loan and lease losses

$

876

$

893

$

888

Allowance for credit losses

913

925

939

Allowance for loan and lease losses to period-end loans

1.65

%

1.70

%

1.79

%

Allowance for credit losses to period-end loans

1.72

1.76

1.89

Allowance for loan and lease losses to nonperforming loans

134.36

137.38

135.16

Allowance for credit losses to nonperforming loans

140.03

142.31

142.92

Nonperforming loans at period end (f)

$

652

$

650

$

657

Nonperforming assets at period end

693

705

751

Nonperforming loans to period-end portfolio loans

1.23

%

1.24

%

1.32

%

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

1.30

1.34

1.51

Trust and brokerage assets

Assets under management

$

35,544

$

35,714

$

35,148

Nonmanaged and brokerage assets

37,759

37,115

33,803

Other data

Average full-time equivalent employees

14,999

15,396

15,455

Branches

1,052

1,084

1,062

Taxable-equivalent adjustment

$

5

$

6

$

6

 

 

Financial Highlights (continued)

(dollars in millions, except per share amounts)

Six months ended

6-30-13

6-30-12

Summary of operations

Net interest income (TE)

$

1,175

$

1,103

Noninterest income

854

899

Total revenue (TE)

2,029

2,002

Provision (credit) for loan and lease losses

83

63

Noninterest expense

1,392

1,372

Income (loss) from continuing operations attributable to Key

400

423

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

8

13

Net income (loss) attributable to Key 

408

436

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

$

389

$

412

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

8

13

Net income (loss) attributable to Key common shareholders

397

425

Per common share

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

$

.42

$

.44

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

.01

.01

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

.43

.45

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

.42

.43

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

.01

.01

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

.43

.45

Cash dividends paid

.105

.08

Performance ratios

From continuing operations:

Return on average total assets

.97

%

1.05

%

Return on average common equity

7.84

8.49

Return on average tangible common equity  (c)

8.73

9.39

Net interest margin (TE)

3.18

3.11

Cash efficiency ratio (c)

67.52

68.43

From consolidated operations:

Return on average total assets

.93

%

1.01

%

Return on average common equity

8.00

8.76

Return on average tangible common equity  (c)

8.91

9.69

Net interest margin (TE)

3.12

3.03

Asset quality — from continuing operations

Net loan charge-offs

$

94

$

178

Net loan charge-offs to average total loans

.36

%

.72

%

Other data

Average full-time equivalent employees

15,197

15,430

Taxable-equivalent adjustment

$

11

$

12

(a)

In April 2009, management decided to wind down the operations of Austin Capital Management, Ltd., a subsidiary that specialized in managing hedge fund investments for institutional customers.  In September 2009, management decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank National Association.  In February 2013, Key decided to sell its investment subsidiary, Victory Capital Management, and its broker-dealer affiliate, Victory Capital Advisors, to a private equity fund.  As a result of these decisions, Key has accounted for these businesses as discontinued operations.

(b)

Earnings per share may not foot due to rounding.

(c)

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

(d)

Represents period-end consolidated total loans and loans held for sale (excluding education loans in the securitization trusts) divided by period-end consolidated total deposits (excluding deposits in foreign office).

(e)

6-30-13 ratio is estimated.

(f)

June 30, 2013 and March 31, 2013 amounts exclude $19 million and $22 million, respectively, of purchased credit impaired loans acquired in July 2012.

TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles 

 

GAAP to Non-GAAP Reconciliations

(dollars in millions)

The table below presents certain non-GAAP financial measures related to "tangible common equity," "return on tangible common equity," "Tier 1 common equity," "pre-provision net revenue," "cash efficiency ratio," and "adjusted cash efficiency ratio."

The tangible common equity ratio and the return on tangible common equity ratio have been a focus for some investors, and management believes these ratios may assist investors in analyzing Key's capital position without regard to the effects of intangible assets and preferred stock.  Traditionally, the banking regulators have assessed bank and bank holding company capital adequacy based on both the amount and the composition of capital, the calculation of which is prescribed in federal banking regulations.  Since the commencement of the Comprehensive Capital Analysis and Review process in early 2009, the Federal Reserve has focused its assessment of capital adequacy on a component of Tier 1 risk-based capital known as Tier 1 common equity, a non-GAAP financial measure.  Because the Federal Reserve has long indicated that voting common shareholders' equity (essentially Tier 1 risk-based capital less preferred stock, qualifying capital securities and noncontrolling interests in subsidiaries) generally should be the dominant element in Tier 1 risk-based capital, this focus on Tier 1 common equity is consistent with existing capital adequacy categories.

Tier 1 common equity is neither formally defined by GAAP nor prescribed in amount by federal banking regulations; this measure is considered to be a non-GAAP financial measure.  Since analysts and banking regulators may assess Key's capital adequacy using tangible common equity and Tier 1 common equity, management believes it is useful to enable investors to assess Key's capital adequacy on these same bases.  The table also reconciles the GAAP performance measures to the corresponding non-GAAP measures.

The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP.  Management believes that eliminating the effects of the provision for loan and lease losses makes it easier to analyze the results by presenting them on a more comparable basis.

The cash efficiency ratio and the adjusted cash efficiency ratio are ratios of two non-GAAP performance measures. As such, there are no directly comparable GAAP performance measures.  The cash efficiency ratio performance measure removes the impact of Key's intangible asset amortization from the calculation.  The adjusted cash efficiency ratio further removes the impact of the efficiency initiative 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

6-30-13

3-31-13

6-30-12

Tangible common equity to tangible assets at period end

Key shareholders' equity (GAAP)

$

10,229

$

10,340

$

10,155

Less:

Intangible assets  (a)

1,021

1,024

932

Preferred Stock, Series A (d) 

282

291

291

Tangible common equity (non-GAAP) 

$

8,926

$

9,025

$

8,932

Total assets (GAAP)

$

90,639

$

89,198

$

86,523

Less:

Intangible assets  (a)

1,021

1,024

932

Tangible assets (non-GAAP)

$

89,618

$

88,174

$

85,591

Tangible common equity to tangible assets ratio (non-GAAP)

9.96

%

10.24

%

10.44

%

Tier 1 common equity at period end

Key shareholders' equity (GAAP)

$

10,229

$

10,340

$

10,155

Qualifying capital securities

339

339

339

Less:

Goodwill

979

979

917

Accumulated other comprehensive income (loss) (b)

(359)

(204)

(109)

Other assets (c)

102

106

71

Total Tier 1 capital (regulatory)

9,846

9,798

9,615

Less:

Qualifying capital securities

339

339

339

Preferred Stock, Series A (d)

282

291

291

Total Tier 1 common equity (non-GAAP) 

$

9,225

$

9,168

$

8,985

Net risk-weighted assets (regulatory) (c), (e)

$

81,964

$

80,400

$

77,236

Tier 1 common equity ratio (non-GAAP) (e)

11.25

%

11.40

%

11.63

%

Pre-provision net revenue

Net interest income (GAAP)

$

581

$

583

$

538

Plus:

Taxable-equivalent adjustment

5

6

6

Noninterest income (GAAP)

429

425

457

Less:

Noninterest expense (GAAP)

711

681

693

Pre-provision net revenue from continuing operations (non-GAAP)          

$

304

$

333

$

308

 

 

GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)

Three months ended

6-30-13

3-31-13

6-30-12

Average tangible common equity

Average Key shareholders' equity (GAAP)

$

10,314

$

10,279

$

10,100

Less:

Intangible assets (average) (f)

1,023

1,027

931

Preferred Stock, Series A (average)

291

291

291

Average tangible common equity (non-GAAP)

$

9,000

$

8,961

$

8,878

Return on average tangible common equity from continuing operations

Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)

$

193

$

196

$

217

Average tangible common equity (non-GAAP)

9,000

8,961

8,878

Return on average tangible common equity from continuing operations (non-GAAP)

8.60

%

8.87

%

9.83

%

Return on average tangible common equity consolidated

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

$

198

$

199

$

231

Average tangible common equity (non-GAAP)

9,000

8,961

8,878

Return on average tangible common equity consolidated (non-GAAP)

8.82

%

9.01

%

10.46

%

Cash efficiency ratio

Noninterest expense (GAAP)

$

711

$

681

$

693

Less:

Intangible asset amortization on credit cards (GAAP)

7

8

Other intangible asset amortization (GAAP)

3

4

1

Adjusted noninterest expense (non-GAAP)

$

701

$

669

$

692

Net interest income (GAAP)

$

581

$

583

$

538

Plus:

Taxable-equivalent adjustment

5

6

6

Noninterest income (GAAP)

429

425

457

Total taxable-equivalent revenue (non-GAAP)

$

1,015

$

1,014

$

1,001

Cash efficiency ratio (non-GAAP)

69.06

%

65.98

%

69.13

%

Cash efficiency ratio net of efficiency initiative charges

Adjusted noninterest expense (non-GAAP)

$

701

$

669

$

692

Less:

Efficiency initiative charges (non-GAAP)

37

15

Net adjusted noninterest expense (non-GAAP)

$

664

$

654

$

692

Total taxable-equivalent revenue (non-GAAP)

$

1,015

$

1,014

$

1,001

Cash efficiency ratio net of efficiency initiative charges (non-GAAP)

65.42

%

64.50

%

69.13

%

Three months

ended

6-30-13

Tier 1 common equity under Basel III (estimates)

Tier 1 common equity under current regulatory rules

$

9,225

Adjustments from current regulatory rules to Basel III:

Deferred tax assets and other (g)

(62)

Tier 1 common equity anticipated under Basel III (h)

$

9,163

Net risk-weighted assets under current regulatory rules

$

81,964

Adjustments from current regulatory rules to Basel III:

Loan commitments less than one year

826

Past due loans

253

Mortgage servicing assets (i)

292

Deferred tax assets (i)

279

Other

1,151

Total risk-weighted assets under Basel III

$

84,765

Tier 1 common equity ratio under Basel III

10.81

%

 

 

GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)

Six months ended

6-30-13

6-30-12

Pre-provision net revenue

Net interest income (GAAP)

$

1,164

$

1,091

Plus:

Taxable-equivalent adjustment

11

12

Noninterest income (GAAP)

854

899

Less:

Noninterest expense (GAAP)

1,392

1,372

Pre-provision net revenue from continuing operations (non-GAAP)

$

637

$

630

Average tangible common equity

Average Key shareholders' equity (GAAP)

$

10,297

$

10,046

Less:

Intangible assets (average) (j)

1,025

932

Preferred Stock, Series A (average)

291

291

Average tangible common equity (non-GAAP)

$

8,981

$

8,823

Return on average tangible common equity from continuing operations

Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)

$

389

$

412

Average tangible common equity (non-GAAP)

8,981

8,823

Return on average tangible common equity from continuing operations (non-GAAP)

8.73

%

9.39

%

Return on average tangible common equity consolidated

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

$

397

$

425

Average tangible common equity (non-GAAP)

8,981

8,823

Return on average tangible common equity consolidated (non-GAAP)

8.91

%

9.69

%

Cash efficiency ratio

Noninterest expense (GAAP)

$

1,392

$

1,372

Less:

Intangible asset amortization on credit cards (GAAP)

15

Other intangible asset amortization (GAAP)

7

2

Adjusted noninterest expense (non-GAAP)

$

1,370

$

1,370

Net interest income (GAAP)

$

1,164

$

1,091

Plus:

Taxable-equivalent adjustment

11

12

Noninterest income (GAAP)

854

899

Total taxable-equivalent revenue (non-GAAP)

$

2,029

$

2,002

Cash efficiency ratio (non-GAAP)

67.52

%

68.43

%

Adjusted cash efficiency ratio net of efficiency initiative charges

Adjusted noninterest expense (non-GAAP)

$

1,370

$

1,370

Less:

Efficiency initiative charges (non-GAAP)

52

Net adjusted noninterest expense (non-GAAP)

$

1,318

$

1,370

Total taxable-equivalent revenue (non-GAAP)

$

2,029

$

2,002

Adjusted cash efficiency ratio net of efficiency initiative charges (non-GAAP)

64.96

%

68.43

%

(a)

Three months ended June 30, 2013 and March 31, 2013 exclude $107 million and $114 million, respectively, of period end purchased credit card receivable intangible assets. 

(b)

Includes net unrealized gains or losses on securities available for sale (except for net unrealized losses on marketable equity securities), net gains or losses on cash flow hedges, and amounts resulting from the application of the applicable accounting guidance for defined benefit and other postretirement plans.  

(c)

Other assets deducted from Tier 1 capital and net risk-weighted assets consist of disallowed intangible assets (excluding goodwill) and deductible portions of nonfinancial equity investments.  There were no disallowed deferred tax assets at June 30, 2013, March 31, 2013, and June 30, 2012.

(d)

Net of capital surplus for the three months ended June 30, 2013.

(e)

6-30-13 amount is estimated.

(f)

Three months ended June 30, 2013 and March 31, 2013 exclude $110 million and $118 million, respectively, of average ending purchased credit card receivable intangible assets. 

(g)

Includes the deferred tax asset subject to future taxable income for realization, primarily tax credit carryforwards.

(h)

The amount of regulatory capital and risk-weighted assets estimated under Basel III (as fully phased-in on January 1, 2019) is based upon the federal banking agencies' final Basel III rule, which implements Basel III under the Standardized Approach.

(i)

Item is included in the 10%/15% exceptions bucket calculation and is risk-weighted at 250%.

(j)

Six months ended June 30, 2013 excludes $114 million of average ending purchased credit card receivable intangible assets.

GAAP = U.S. generally accepted accounting principles

 

Consolidated Balance Sheets

(dollars in millions)

6-30-13

3-31-13

6-30-12

Assets

Loans

$

53,101

$

52,574

$

49,605

Loans held for sale

402

434

656

Securities available for sale

13,253

13,496

13,205

Held-to-maturity securities

4,750

3,721

4,352

Trading account assets

592

701

679

Short-term investments

3,582

3,081

2,216

Other investments

1,037

1,059

1,186

Total earning assets

76,717

75,066

71,899

Allowance for loan and lease losses

(876)

(893)

(888)

Cash and due from banks

696

621

716

Premises and equipment

900

930

931

Operating lease assets

303

309

318

Goodwill

979

979

917

Other intangible assets

149

159

15

Corporate-owned life insurance

3,362

3,352

3,285

Derivative assets

461

609

818

Accrued income and other assets

2,864

2,884

2,967

Discontinued assets

5,084

5,182

5,545

Total assets

$

90,639

$

89,198

$

86,523

Liabilities

Deposits in domestic offices:

NOW and money market deposit accounts

$

32,689

$

32,700

$

28,957

Savings deposits

2,542

2,546

2,103

Certificates of deposit ($100,000 or more)

2,918

2,998

3,669

Other time deposits

4,089

4,324

5,385

     Total interest-bearing deposits

42,238

42,568

40,114

Noninterest-bearing deposits

24,939

21,564

21,435

Deposits in foreign office — interest-bearing

544

522

618

     Total deposits

67,721

64,654

62,167

Federal funds purchased and securities

       sold under repurchase agreements

1,647

1,950

1,716

Bank notes and other short-term borrowings

298

378

362

Derivative liabilities

456

524

763

Accrued expense and other liabilities

1,421

1,352

1,390

Long-term debt

6,666

7,785

7,521

Discontinued liabilities

2,169

2,176

2,428

Total liabilities

80,378

78,819

76,347

Equity

Preferred stock, Series A

291

291

291

Common shares

1,017

1,017

1,017

Capital surplus

4,045

4,059

4,120

Retained earnings

7,214

7,065

6,595

Treasury stock, at cost

(2,020)

(1,930)

(1,796)

Accumulated other comprehensive income (loss)

(318)

(162)

(72)

Key shareholders' equity

10,229

10,340

10,155

Noncontrolling interests

32

39

21

Total equity

10,261

10,379

10,176

Total liabilities and equity

$

90,639

$

89,198

$

86,523

Common shares outstanding (000)

912,883

922,581

945,473

 

Consolidated Statements of Income 

(dollars in millions, except per share amounts)

Three months ended

Six months ended

6-30-13

3-31-13

6-30-12

6-30-13

6-30-12

Interest income

Loans

$

539

$

548

$

518

$

1,087

$

1,054

Loans held for sale

5

4

5

9

10

Securities available for sale

80

80

105

160

221

Held-to-maturity securities

20

18

17

38

29

Trading account assets

4

6

5

10

11

Short-term investments

1

2

2

3

3

Other investments

8

9

10

17

18

Total interest income

657

667

662

1,324

1,346

Interest expense

Deposits

42

45

71

87

148

Federal funds purchased and securities sold under repurchase agreements

1

1

1

2

Bank notes and other short-term borrowings

2

1

2

3

4

Long-term debt

32

37

50

69

101

Total interest expense

76

84

124

160

255

Net interest income

581

583

538

1,164

1,091

Provision (credit) for loan and lease losses

28

55

21

83

63

Net interest income (expense) after provision for loan and lease losses

553

528

517

1,081

1,028

Noninterest income

Trust and investment services income

100

95

90

195

186

Investment banking and debt placement fees

84

79

73

163

134

Service charges on deposit accounts

71

69

70

140

138

Operating lease income and other leasing gains

19

23

58

42

110

Corporate services income

43

45

44

88

88

Cards and payments income

42

37

31

79

60

Corporate-owned life insurance income

31

30

30

61

60

Consumer mortgage income

6

7

9

13

18

Net gains (losses) from principal investing

7

8

24

15

59

Other income (a)

26

32

28

58

46

Total noninterest income

429

425

457

854

899

Noninterest expense

Personnel

406

391

377

797

749

Net occupancy

72

64

62

136

126

Computer processing

39

39

43

78

84

Business services and professional fees

37

35

51

72

88

Equipment

27

26

27

53

53

Operating lease expense

11

12

15

23

32

Marketing

11

6

17

17

30

FDIC assessment

8

8

8

16

16

Intangible asset amortization on credit cards

7

8

15

Other intangible asset amortization

3

4

1

7

2

Provision (credit) for losses on lending-related commitments

5

3

6

8

6

OREO expense, net

1

3

7

4

13

Other expense

84

82

79

166

173

Total noninterest expense

711

681

693

1,392

1,372

Income (loss) from continuing operations before income taxes

271

272

281

543

555

Income taxes

72

70

54

142

127

Income (loss) from continuing operations

199

202

227

401

428

Income (loss) from discontinued operations, net of taxes

5

3

14

8

13

Net income (loss)

204

205

241

409

441

Less:  Net income (loss) attributable to noncontrolling interests 

1

5

1

5

Net income (loss) attributable to Key

$

204

$

204

$

236

$

408

$

436

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

$

193

$

196

$

217

$

389

$

412

Net income (loss) attributable to Key common shareholders 

198

199

231

397

425

Per common share

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

$

.21

$

.21

$

.23

$

.42

$

.44

Income (loss) from discontinued operations, net of taxes

.01

.01

.01

.01

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

.22

.22

.24

.43

.45

Per common share — assuming dilution

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

$

.21

$

.21

$

.23

$

.42

$

.43

Income (loss) from discontinued operations, net of taxes

.01

.01

.01

.01

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

.22

.21

.24

.43

.45

Cash dividends declared per common share

$

.055

$

.05

$

.05

$

.105

$

.08

Weighted-average common shares outstanding (000)

913,736

920,316

944,648

917,008

946,995

Weighted-average common shares and potential  common shares outstanding (000) (c)

918,628

926,051

948,087

922,319

951,029

(a)

For the three months ended June 30, 2013, March 31, 2013, and June 30, 2012, Key did not have any impairment losses related to securities.

(b)

Earnings per share may not foot due to rounding.

(c)

Assumes conversion of stock options and/or Preferred Series A shares, as applicable.

 

Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations

(dollars in millions)

Second Quarter 2013

First Quarter 2013

Second Quarter 2012

Average

Average

Average

Balance

Interest

(a)

Yield/Rate

(a)

Balance

Interest

(a)

Yield/Rate

(a)

Balance

Interest

(a)

Yield/Rate

(a)

Assets

Loans: (b), (c)

Commercial, financial and agricultural

$

23,480

(d)

$

212

3.63

%

$

23,317

(d)

$

218

3.78

%

$

20,606

$

196

3.82

%

Real estate — commercial mortgage

7,494

78

4.14

7,616

79

4.24

7,613

85

4.50

Real estate — construction

1,049

11

4.30

1,034

11

4.27

1,216

14

4.64

Commercial lease financing

4,747

48

3.96

4,843

47

3.92

5,226

45

3.45

    Total commercial loans

36,770

349

3.80

36,810

355

3.92

34,661

340

3.94

Real estate — residential mortgage

2,176

24

4.53

2,173

25

4.58

1,990

24

4.91

Home equity:

Key Community Bank

9,992

98

3.93

9,787

96

3.97

9,359

94

4.04

Other

389

7

7.66

413

8

7.70

493

9

7.66

    Total home equity loans

10,381

105

4.07

10,200

104

4.12

9,852

103

4.23

Consumer other — Key Community Bank

1,392

26

7.35

1,343

25

7.58

1,247

29

9.20

Credit cards

697

20

11.91

704

22

12.61

Consumer other:

Marine

1,206

20

6.24

1,311

20

6.29

1,595

26

6.29

Other

74

1

8.58

85

2

7.98

101

2

8.49

    Total consumer other 

1,280

21

6.37

1,396

22

6.39

1,696

28

6.42

    Total consumer loans

15,926

196

4.94

15,816

198

5.00

14,785

184

4.99

    Total loans

52,696

545

4.15

52,626

553

4.26

49,446

524

4.26

Loans held for sale

513

5

3.93

469

4

3.27

585

5

3.43

Securities available for sale (b), (e)

13,296

79

2.47

12,065

81

2.74

13,865

105

3.13

Held-to-maturity securities (b)

4,144

20

1.87

3,816

18

1.94

3,493

17

1.98

Trading account assets

749

4

2.31

710

6

3.44

768

5

3.01

Short-term investments

2,722

1

.23

2,999

2

.22

2,608

2

.29

Other investments (e)

1,048

8

2.61

1,059

9

3.59

1,177

10

3.21

    Total earning assets

75,168

662

3.54

73,744

673

3.67

71,942

668

3.74

Allowance for loan and lease losses

(890)

(896)

(928)

Accrued income and other assets

9,770

9,867

9,866

Discontinued assets

5,096

5,216

5,673

    Total assets

$

89,144

$

87,931

$

86,553

Liabilities

NOW and money market deposit accounts

$

32,849

14

.17

$

31,946

14

.18

$

29,106

13

.18

Savings deposits

2,545

.04

2,473

1

.05

2,085

.03

Certificates of deposit ($100,000 or more) (f)

2,975

13

1.79

2,911

14

1.99

3,858

27

2.85

Other time deposits

4,202

14

1.35

4,451

16

1.42

5,645

30

2.13

Deposits in foreign office

573

1

.24

454

.25

759

1

.24

    Total interest-bearing deposits

43,144

42

.39

42,235

45

.43

41,453

71

.69

Federal funds purchased and securities

        sold under repurchase agreements

1,845

.14

1,913

1

.15

1,880

1

.20

Bank notes and other short-term borrowings

367

2

1.84

387

1

1.75

468

2

1.80

Long-term debt (f), (g)

4,401

32

3.25

4,671

37

3.51

5,463

50

4.01

    Total interest-bearing liabilities

49,757

76

.62

49,206

84

.70

49,264

124

1.02

Noninterest-bearing deposits

22,297

21,400

19,610

Accrued expense and other liabilities

1,653

1,799

1,902

Discontinued liabilities (g)

5,089

5,213

5,658

    Total liabilities

78,796

77,618

76,434

Equity

Key shareholders' equity

10,314

10,279

10,100

Noncontrolling interests

34

34

19

    Total equity

10,348

10,313

10,119

    Total liabilities and equity

$

89,144

$

87,931

$

86,553

Interest rate spread (TE)

2.92

%

2.97

%

2.72

%

Net interest income (TE) and net interest margin (TE)

586

3.13

%

589

3.24

%

544

3.06

%

TE adjustment (b)

5

6

6

Net interest income, GAAP basis

$

581

$

583

$

538

(a)

Results are from continuing operations.  Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.

(b)

Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%.  

(c)

For purposes of these computations, nonaccrual loans are included in average loan balances.

(d)

Commercial, financial and agricultural average balance for the three months ended June 30, 2013 and March 31, 2013 includes $96 million and $91 million, respectively, of assets from commercial credit cards.

(e)

Yield is calculated on the basis of amortized cost.

(f)

Rate calculation excludes basis adjustments related to fair value hedges. 

(g)

A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying our matched funds transfer pricing methodology to discontinued operations.

TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles    

 

Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates  From Continuing Operations

(dollars in millions)

Six months ended June 30, 2013

Six months ended June 30, 2012

Average

Average

Balance

Interest

 (a)

Yield/Rate

 (a)

Balance

Interest

 (a)

Yield/ Rate

 (a)

Assets

Loans: (b), (c)

Commercial, financial and agricultural

$

23,399

(d)

$

430

3.71

%

$

20,318

$

394

3.90

%

Real estate — commercial mortgage

7,554

157

4.19

7,803

174

4.49

Real estate — construction

1,042

22

4.28

1,250

30

4.75

Commercial lease financing

4,795

95

3.94

5,340

99

3.70

    Total commercial loans

36,790

704

3.86

34,711

697

4.03

Real estate — residential mortgage

2,174

49

4.55

1,970

49

4.98

Home equity:

Key Community Bank

9,890

194

3.95

9,266

187

4.06

Other

401

15

7.68

507

19

7.67

         Total home equity loans

10,291

209

4.10

9,773

206

4.25

Consumer other — Key Community Bank

1,368

51

7.46

1,220

57

9.40

Credit cards

700

42

12.26

Consumer other:

Marine

1,258

40

6.27

1,655

53

6.29

Other

80

3

8.26

109

4

8.11

   Total consumer other 

1,338

43

6.38

1,764

57

6.40

         Total consumer loans

15,871

394

4.97

14,727

369

5.03

         Total loans

52,661

1,098

4.21

49,438

1,066

4.33

Loans held for sale

491

9

3.61

583

10

3.52

Securities available for sale (b), (e)

12,684

160

2.59

14,562

221

3.14

Held-to-maturity securities (b)

3,981

38

1.90

2,872

29

2.02

Trading account assets

729

10

2.86

788

11

2.86

Short-term investments

2,860

3

.22

2,253

3

.29

Other investments (e)

1,054

17

3.10

1,173

18

2.99

         Total earning assets

74,460

1,335

3.60

71,669

1,358

3.83

Allowance for loan and lease losses

(893)

(948)

Accrued income and other assets

9,818

9,931

Discontinued assets

5,156

5,736

         Total assets

$

88,541

$

86,388

Liabilities

NOW and money market deposit accounts

$

32,400

28

.17

$

28,717

28

.20

Savings deposits

2,509

1

.05

2,041

.04

Certificates of deposit ($100,000 or more) (f)

2,943

27

1.89

3,947

56

2.88

Other time deposits

4,326

30

1.39

5,840

63

2.16

Deposits in foreign office

514

1

.25

764

1

.24

    Total interest-bearing deposits

42,692

87

.41

41,309

148

.72

Federal funds purchased and securities

     sold under repurchase agreements

1,879

1

.15

1,865

2

.20

Bank notes and other short-term borrowings

377

3

1.80

479

4

1.66

Long-term debt (f), (g)

4,535

69

3.38

5,812

101

3.80

    Total interest-bearing liabilities

49,483

160

.66

49,465

255

1.05

Noninterest-bearing deposits

21,851

19,038

Accrued expense and other liabilities

1,725

2,095

Discontinued liabilities (d), (g)

5,151

5,726

         Total liabilities

78,210

76,324

Equity

Key shareholders' equity

10,297

10,046

Noncontrolling interests

34

18

         Total equity

10,331

10,064

         Total liabilities and equity

$

88,541

$

86,388

Interest rate spread (TE)

2.94

%

2.78

%

Net interest income (TE) and net interest margin (TE)

1,175

3.18

%

1,103

3.11

%

TE adjustment (b)

11

12

Net interest income, GAAP basis

$

1,164

$

1,091

(a)

Results are from continuing operations.  Interest excludes the interest associated with the liabilities referred to in (d) below, calculated using a matched funds transfer pricing methodology.

(b)

Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%.  

(c)

For purposes of these computations, nonaccrual loans are included in average loan balances.

(d)

Commercial, financial and agricultural average balance for the six months ended June 30, 2013 includes $94 million of assets from commercial credit cards.

(e)

Yield is calculated on the basis of amortized cost.

(f)

Rate calculation excludes basis adjustments related to fair value hedges.  

(g)

A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying our matched funds transfer pricing methodology to discontinued operations.

TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

 

Noninterest Expense

(dollars in millions)

Three months ended

Six months ended

6-30-13

3-31-13

6-30-12

6-30-13

6-30-12

Personnel (a)

$

406

$

391

$

377

$

797

$

749

Net occupancy

72

64

62

136

126

Computer processing

39

39

43

78

84

Business services and professional fees

37

35

51

72

88

Equipment

27

26

27

53

53

Operating lease expense

11

12

15

23

32

Marketing

11

6

17

17

30

FDIC assessment

8

8

8

16

16

Intangible asset amortization on credit cards

7

8

15

Other intangible asset amortization

3

4

1

7

2

Provision (credit) for losses on lending-related commitments

5

3

6

8

6

OREO expense, net

1

3

7

4

13

Other expense

84

82

79

166

173

     Total noninterest expense

$

711

$

681

$

693

$

1,392

$

1,372

Average full-time equivalent employees (b)

14,999

15,396

15,455

15,197

15,430

(a)  Additional detail provided in table below.

(b)  The number of average full-time equivalent employees has not been adjusted for discontinued operations.

Personnel Expense

(in millions)

Three months ended

Six months ended

6-30-13

3-31-13

6-30-12

6-30-13

6-30-12

Salaries

$

227

$

222

$

228

$

449

$

447

Technology contract labor, net

19

18

13

37

25

Incentive compensation

77

73

66

150

126

Employee benefits

56

59

54

115

118

Stock-based compensation

9

10

13

19

26

Severance

18

9

3

27

7

     Total personnel expense

$

406

$

391

$

377

$

797

$

749

 

Loan Composition

(dollars in millions)

Percent change 6-30-13 vs.

6-30-13

3-31-13

6-30-12

3-31-13

6-30-12

Commercial, financial and agricultural  (a)

$

23,715

$

23,412

$

20,916

1.3

%

13.4

%

Commercial real estate:

Commercial mortgage

7,474

7,544

7,409

(.9)

.9

Construction

1,060

1,057

1,172

.3

(9.6)

     Total commercial real estate loans

8,534

8,601

8,581

(.8)

(.5)

Commercial lease financing

4,774

4,796

5,106

(.5)

(6.5)

     Total commercial loans

37,023

36,809

34,603

.6

7.0

Residential — prime loans:

Real estate — residential mortgage

2,176

2,176

2,016

7.9

Home equity:

Key Community Bank

10,173

9,809

9,601

3.7

6.0

Other

375

401

479

(6.5)

(21.7)

Total home equity loans

10,548

10,210

10,080

3.3

4.6

Total residential — prime loans

12,724

12,386

12,096

2.7

5.2

Consumer other — Key Community Bank

1,424

1,353

1,263

5.2

12.7

Credit cards

701

693

1.2

N/M

Consumer other:

Marine

1,160

1,254

1,542

(7.5)

(24.8)

Other

69

79

101

(12.7)

(31.7)

     Total consumer other

1,229

1,333

1,643

(7.8)

(25.2)

     Total consumer loans

16,078

15,765

15,002

2.0

7.2

Total loans (b), (c)

$

53,101

$

52,574

$

49,605

1.0

%

7.0

%

Loans Held for Sale Composition

(dollars in millions)

Percent change 6-30-13 vs.

6-30-13

3-31-13

6-30-12

3-31-13

6-30-12

Commercial, financial and agricultural

$

22

$

180

$

18

(87.8)

%

22.2

%

Real estate — commercial mortgage

318

196

523

62.2

(39.2)

Real estate — construction

12

N/M

N/M

Commercial lease financing

14

9

13

55.6

7.7

Real estate — residential mortgage

48

49

90

(2.0)

(46.7)

Total loans held for sale

$

402

$

434

$

656

(7.4)

%

(38.7)

%

Summary of Changes in Loans Held for Sale

(dollars in millions)

2Q13

1Q13

4Q12

3Q12

2Q12

Balance at beginning of period

$

434

$

599

$

628

$

656

$

511

New originations

1,241

1,075

1,686

1,280

1,308

Transfers from held to maturity, net

17

19

38

13

7

Loan sales

(1,292)

(1,257)

(1,747)

(1,311)

(1,165)

Loan draws (payments), net

(4)

(9)

(4)

Transfers to OREO / valuation adjustments

2

(2)

(2)

(1)

(1)

Balance at end of period

$

402

$

434

$

599

$

628

$

656

(a)

June 30, 2013 and March 31, 2013 loan balances include $96 million and $93 million of commercial credit card balances, respectively.

(b)

Excluded at June 30, 2013, March 31, 2013, and June 30, 2012 are loans in the amount of $5.0 billion, $5.1 billion, and $5.5 billion, respectively, related to the discontinued operations of the education lending business.

(c)

June 30, 2013 includes purchased loans of $187 million of which $19 million were purchased credit impaired.  March 31, 2013 includes purchased loans of $204 million of which $22 million were purchased credit impaired. 

N/M = Not Meaningful

Exit Loan Portfolio From Continuing Operations

(dollars in millions)

Balance

Change

Net Loan

Balance on

Outstanding

6-30-13 vs.

Charge-offs

Nonperforming Status

6-30-13

3-31-13

3-31-13

2Q13

 (c)

1Q13

 (c)

6-30-13

3-31-13

Residential properties — homebuilder

$

26

$

29

$

(3)

$

1

$

8

$

10

Marine and RV floor plan

28

29

(1)

$

(3)

7

6

Commercial lease financing (a)

931

966

(35)

(2)

(5)

1

6

     Total commercial loans

985

1,024

(39)

(1)

(8)

16

22

Home equity — Other

375

401

(26)

5

4

16

18

Marine

1,160

1,254

(94)

5

3

31

26

RV and other consumer

69

79

(10)

1

     Total consumer loans

1,604

1,734

(130)

11

7

47

44

     Total exit loans in loan portfolio

$

2,589

$

2,758

$

(169)

$

10

$

(1)

$

63

$

66

Discontinued operations — education

   lending business (not included in exit loans above) (b)

$

4,992

$

5,086

$

(94)

$

7

$

12

$

19

$

15

(a)

Includes (1) the business aviation, commercial vehicle, office products, construction and industrial leases; (2) Canadian lease financing portfolios; and (3) all remaining balances

related to lease in, lease out; sale in, lease out; service contract leases; and qualified technological equipment leases.

(b)

Includes loans in Key's consolidated education loan securitization trusts.

(c)

Credit amounts indicate recoveries exceeded charge-offs.

 

Asset Quality Statistics From Continuing Operations

(dollars in millions)

2Q13

1Q13

4Q12

3Q12

2Q12

Net loan charge-offs

$

45

$

49

$

58

$

109

$

77

Net loan charge-offs to average total loans

.34

%

.38

%

.44

%

.86

%

.63

%

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

485.33

449.37

384.85

204.78

286.74

Allowance for loan and lease losses

$

876

$

893

$

888

$

888

$

888

Allowance for credit losses (a)

913

925

917

931

939

Allowance for loan and lease losses to period-end loans

1.65

%

1.70

%

1.68

%

1.73

%

1.79

%

Allowance for credit losses to period-end loans

1.72

1.76

1.74

1.81

1.89

Allowance for loan and lease losses to nonperforming loans

134.36

137.38

131.75

135.99

135.16

Allowance for credit losses to nonperforming loans

140.03

142.31

136.05

142.57

142.92

Nonperforming loans at period end (b)

$

652

$

650

$

674

$

653

$

657

Nonperforming assets at period end

693

705

735

718

751

Nonperforming loans to period-end portfolio loans

1.23

%

1.24

%

1.28

%

1.27

%

1.32

%

Nonperforming assets to period-end portfolio loans plus

       OREO and other nonperforming assets

1.30

1.34

1.39

1.39

1.51

(a)

Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related commitments.

(b)

June 30, 2013, March 31, 2013, December 31, 2012, and September 30, 2012 amounts exclude $19 million, $22 million, $23 million, and $25 million, respectively, of

purchased credit impaired loans acquired in July 2012.

 

Summary of Loan and Lease Loss Experience From Continuing Operations

(dollars in millions)

Three months ended

Six months ended

6-30-13

3-31-13

6-30-12

6-30-13

6-30-12

Average loans outstanding

$

52,696

$

52,626

$

49,446

$

52,661

$

49,438

Allowance for loan and lease losses at beginning of period 

$

893

$

888

$

944

$

888

$

1,004

Loans charged off: 

     Commercial, financial and agricultural 

15

14

23

29

49

     Real estate — commercial mortgage 

3

13

23

16

46

     Real estate — construction  

1

1

5

2

16

              Total commercial real estate loans

4

14

28

18

62

     Commercial lease financing 

2

6

16

8

20

              Total commercial loans 

21

34

67

55

131

     Real estate — residential mortgage 

4

6

7

10

13

     Home equity:

          Key Community Bank

18

18

23

36

48

          Other

6

6

9

12

17

              Total home equity loans

24

24

32

48

65

     Consumer other — Key Community Bank

7

9

10

16

20

     Credit cards

8

8

16

     Consumer other:

          Marine

9

8

13

17

30

          Other

1

1

2

2

4

              Total consumer other 

10

9

15

19

34

              Total consumer loans 

53

56

64

109

132

              Total loans charged off

74

90

131

164

263

Recoveries: 

     Commercial, financial and agricultural 

7

12

20

19

31

     Real estate — commercial mortgage 

5

5

14

10

16

     Real estate — construction

8

1

8

2

              Total commercial real estate loans 

5

13

15

18

18

     Commercial lease financing

4

4

6

8

10

              Total commercial loans 

16

29

41

45

59

     Real estate — residential mortgage

1

2

     Home equity:

          Key Community Bank

4

2

2

6

4

          Other

1

2

2

3

3

              Total home equity loans

5

4

4

9

7

     Consumer other — Key Community Bank

2

2

2

4

3

     Credit cards

2

2

     Consumer other:

          Marine

4

5

6

9

13

          Other

1

1

1

              Total consumer other  

4

6

6

10

14

              Total consumer loans 

13

12

13

25

26

              Total recoveries 

29

41

54

70

85

Net loan charge-offs

(45)

(49)

(77)

(94)

(178)

Provision (credit) for loan and lease losses

28

55

21

83

63

Foreign currency translation adjustment

(1)

(1)

(1)

Allowance for loan and lease losses at end of period

$

876

$

893

$

888

$

876

$

888

Liability for credit losses on lending-related commitments at beginning of period

$

32

$

29

$

45

$

29

$

45

Provision (credit) for losses on lending-related commitments

5

3

6

8

6

Liability for credit losses on lending-related commitments at end of period (a)

$

37

$

32

$

51

$

37

$

51

Total allowance for credit losses at end of period

$

913

$

925

$

939

$

913

$

939

Net loan charge-offs to average total loans

.34

%

.38

%

.63

%

.36

%

.72

%

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

485.33

449.37

286.74

462.13

248.08

Allowance for loan and lease losses to period-end loans

1.65

1.70

1.79

1.65

1.79

Allowance for credit losses to period-end loans

1.72

1.76

1.89

1.72

1.89

Allowance for loan and lease losses to nonperforming loans

134.36

137.38

135.16

134.36

135.16

Allowance for credit losses to nonperforming loans

140.03

142.31

142.92

140.03

142.92

Discontinued operations — education lending business:

     Loans charged off

$

12

$

16

$

16

$

28

$

39

     Recoveries

5

4

4

9

8

     Net loan charge-offs

$

(7)

$

(12)

$

(12)

$

(19)

$

(31)

(a)  Included in "accrued expense and other liabilities" on the balance sheet.