KeyCorp Reports Fourth Quarter 2013 Net Income of $229 Million, or $.26 per Common Share and Full Year Net Income of $847 Million, or $.93 per Common Share

Average loans up 5% for the full year, driven by a 12% increase in commercial, financial and agricultural

Credit quality remains strong, with net loan charge-offs to average loans of .27%

Disciplined capital management, returning 76% of net income to shareholders in 2013

Jan 23, 2014, 06:45 ET from KeyCorp

CLEVELAND, Jan. 23, 2014 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced fourth quarter net income from continuing operations attributable to Key common shareholders of $229 million, or $.26 per common share, compared to $229 million, or $.25 per common share for the third quarter of 2013, and $190 million, or $.20 per common share for the fourth quarter of 2012.   During the fourth quarter of 2013, Key incurred $24 million, or $.02 per common share of costs related to both its previously announced efficiency initiative and a pension settlement charge.

For the twelve months ended December 31, 2013, net income from continuing operations attributable to Key common shareholders was $847 million, or $.93 per common share, compared to $813 million, or $.86 per common share for the same period one year ago.  During 2013, Key incurred $117 million, or $.08 per common share of costs related to both its efficiency initiative and pension settlement charge.

"2013 was a significant year for Key," said Chairman and Chief Executive Officer Beth Mooney.  "We executed our strategy, acquired relationships, successfully invested in our businesses and returned peer-leading capital to shareholders." 

"Reflecting the success of our distinctive business model, average loans were up 5% in 2013 compared to the prior year, driven by a 12% increase in commercial, financial and agricultural loans, and our credit quality improved to levels not seen since 2007," Mooney added.  "Both commercial and consumer loans grew relative to the full year and fourth quarter of 2012.  Fee income benefitted from the investments we have made in several of our businesses.  Cards and payments income was up 20% from 2012, and mortgage servicing fees more than doubled.  We also had a record year for investment banking and debt placement fees, with five consecutive years of growth.  We achieved the goal we set in June 2012, by implementing annualized cost savings of $241 million.  With increased cost discipline embedded in our culture, we are poised to drive further improvements in efficiency and productivity."

"We have also maintained our disciplined approach to capital management by investing in our businesses and returning 76% of our net income to our shareholders through dividends and common share repurchases in 2013.  At year end our capital remained in the top tier of our peer group, positioning us well for the future," continued Mooney.

FOURTH QUARTER 2013 FINANCIAL RESULTS, from continuing operations

Compared with Fourth Quarter of 2012

  • Average loans up 3.4% (5% excluding impact of exit portfolios), driven by growth in commercial, financial and agricultural loans; period ending loans up 3.1%
  • Average deposits up 7.5% due to commercial mortgage servicing acquisition and growth in commercial and consumer deposits
  • Net interest income (taxable-equivalent) down $18 million, primarily due to yield pressure on new loans and reinvestment yields on securities
  • Noninterest income up $14 million, reflecting higher principal investing gains and benefits from investments in payments and commercial mortgage servicing
  • Noninterest expense down $22 million, reflecting successful execution of efficiency initiative
  • Asset quality improved, with net loan charge-offs to average loans declining from .44% to .27%
  • Disciplined capital management, with total shareholder payout of 76% of net income attributable to Key common shareholders in 2013, including the repurchase of $474 million of common shares for the year

Compared with Third Quarter of 2013

  • Average loans up .6%, driven by growth in commercial, financial and agricultural loans; period ending loans up 1.6%
  • Average deposits up 3.7% due to growth in commercial mortgage escrow deposits and continued client inflows
  • Net interest income (taxable-equivalent) up $5 million, with growth in average earning assets and lower net interest margin
  • Noninterest income down $6 million, including decline of $19 million in gains related to leveraged lease terminations
  • Noninterest expense down $4 million, which included higher efficiency-related charges, a lower pension settlement adjustment and higher expenses from incentives and business services and professional fees
  • Asset quality remains strong and stable with net loan charge-offs to average loans of .27%
  • Disciplined capital management, repurchasing $99 million of common shares during the fourth quarter of 2013 and maintaining top tier capital position with Tier 1 common equity of 11.23%

 

Selected Financial Highlights

dollars in millions, except per share data

Change 4Q13 vs.

4Q13

3Q13

4Q12

3Q13

4Q12

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

$

229

$

229

$

190

20.5

%

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

     common share — assuming dilution

.26

.25

.20

4.0

%

30.0

Return on average total assets from continuing operations

1.08

%

1.12

%

.96

%

N/A

N/A

Tier 1 common equity (a)

11.23

11.17

11.36

N/A

N/A

Book value at period end

$

11.25

$

11.05

$

10.78

1.8

%

4.4

%

Net interest margin (TE) from continuing operations

3.01

%

3.11

%

3.37

%

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 4Q13 vs.

4Q13

3Q13

4Q12

3Q13

4Q12

Net interest income (TE)

$

589

$

584

$

607

.9

%

(3.0)

%

Noninterest income

453

459

439

(1.3)

3.2

Total revenue

$

1,042

$

1,043

$

1,046

(.1)

%

(.4)

%

TE = Taxable Equivalent

 

Taxable-equivalent net interest income was $589 million for the fourth quarter of 2013, and the net interest margin was 3.01%.  These results compare to taxable-equivalent net interest income of $607 million and a net interest margin of 3.37% for the fourth quarter of 2012.  The decrease in net interest income and net interest margin is attributable to the impact of lower interest rates on asset yields combined with a significant increase in liquidity levels resulting from strong deposit inflows.  The decreases were partially offset by the maturity of higher-rate certificates of deposit and a more favorable mix of lower-cost deposits. 

Compared to the third quarter of 2013, taxable-equivalent net interest income increased by $5 million, and the net interest margin declined by 10 basis points.  The increase in net interest income was primarily due to $5 million less of amortized lease origination costs recognized in the fourth quarter of 2013 compared to the third quarter of 2013 in connection with the early termination of leveraged leases.  The decrease in the net interest margin was largely attributable to higher levels of liquidity, which were deployed in lower-yielding short-term investments. 

 

Noninterest Income

dollars in millions

Change 4Q13 vs.

4Q13 

3Q13 

4Q12 

3Q13 

4Q12 

Trust and investment services income

$

98

$

100

$

95

(2.0)

%

3.2

%

Investment banking and debt placement fees

84

86

110

(2.3)

(23.6)

Service charges on deposit accounts

68

73

75

(6.8)

(9.3)

Operating lease income and other leasing gains

23

43

19

(46.5)

21.1

Corporate services income

40

44

41

(9.1)

(2.4)

Cards and payments income

40

43

38

(7.0)

5.3

Corporate-owned life insurance income

33

26

36

26.9

(8.3)

Consumer mortgage income

3

3

11

(72.7)

Mortgage servicing fees

22

15

7

46.7

214.3

Net gains (losses) from principal investing

20

17

2

17.6

900.0

Other income

22

9

5

144.4

340.0

Total noninterest income

$

453

$

459

$

439

(1.3)

%

3.2

%

 

Key's noninterest income was $453 million for the fourth quarter of 2013, compared to $439 million for the year-ago quarter.  The fourth quarter reflects the benefits from Key's recent investments in payments and commercial mortgage servicing, with cards and payments income up $2 million and mortgage servicing fees up $15 million.  In addition, net gains from principal investing increased $18 million.  These increases were partially offset by decreases in investment banking and debt placement fees of $26 million and consumer mortgage income of $8 million

Compared to the third quarter of 2013, noninterest income decreased by $6 million.  Operating lease income and other leasing gains decreased $20 million primarily due to a $19 million decrease in gains on the early termination of leveraged leases.  This decrease was partially offset by increases in other income of $13 million and mortgage servicing fees of $7 million primarily due to higher special servicing fees.

 

 

Noninterest Expense

dollars in millions

Change 4Q13 vs.

4Q13

3Q13

4Q12

3Q13

4Q12

Personnel expense

$

398

$

414

$

422

(3.9)

%

(5.7)

%

Nonpersonnel expense

314

302

312

4.0

.6

Total noninterest expense

$

712

$

716

$

734

(.6)

%

(3.0)

%

 

Key's noninterest expense was $712 million for the fourth quarter of 2013, compared to $734 million for the same period last year.  Excluding the $22 million in expenses related to Key's efficiency initiative and the pension settlement charge of $2 million in the fourth quarter of 2013 and the $16 million in efficiency initiative expenses one year ago, noninterest expense was down $30 million from the prior year.  Personnel expense decreased $24 million, due to the realization of expense efficiencies.  Nonpersonnel expense increased $2 million.  The provision (credit) for losses on lending-related commitments increased $11 million, offset by a $12 million decrease in business services and professional fees.

Compared to the third quarter of 2013, noninterest expense decreased by $4 million.  The reduction in expenses reflected $17 million in lower expenses related to Key's efficiency initiative and pension settlement charges.  This reduction was partially offset by increases in incentive compensation of $6 million and business services and professional fees of $5 million

BALANCE SHEET HIGHLIGHTS

As of December 31, 2013, Key had total assets of $92.9 billion compared to $90.7 billion at September 30, 2013, and $89.2 billion at December 31, 2012.

 

Average Loans

dollars in millions

Change 12-31-13 vs.

12-31-13

9-30-13

12-31-12

9-30-13

12-31-12

Commercial, financial and agricultural (a)

$

24,218

$

23,864

$

22,436

1.5

%

7.9

%

Other commercial loans

13,266

13,281

13,494

(.1)

(1.7)

Total home equity loans

10,653

10,611

10,218

.4

4.3

Other consumer loans

5,471

5,515

5,711

(.8)

(4.2)

Total loans

$

53,608

$

53,271

$

51,859

.6

%

3.4

%

 

(a) Commercial, financial and agricultural average balance for the three months ended December 31, 2013, September 30, 2013, and December 31, 2012, includes $97 million, $96 million, and $90 million, respectively, of assets from commercial credit cards.

 

Average loans were $53.6 billion for the fourth quarter of 2013, an increase of $1.7 billion compared to the fourth quarter of 2012.  Total commercial loans increased $1.6 billion, mostly due to commercial, financial and agricultural loan growth across Key's business lending segments, which was modestly offset by leveraged lease terminations occurring in 2013. Consumer loans grew modestly, as growth in Key's home equity portfolio was partially offset by exit portfolio run-off.    

Compared to the third quarter of 2013, average loans increased by $337 million.  The loan growth occurred primarily in commercial lending within our commercial, financial and agricultural and commercial mortgage portfolios.  Much of the growth occurred toward the latter part of the fourth quarter, resulting in a larger increase in period end loans than average loans.  Consumer loans remained relatively unchanged for the fourth quarter.

 

 

 

 

Average Deposits

dollars in millions

Change 12-31-13 vs.

12-31-13

9-30-13

12-31-12

9-30-13

12-31-12

Non-time deposits (a)

$

61,394

$

58,620

$

55,355

4.7

%

10.9

%

Certificates of deposits ($100,000 or more)

2,649

2,785

2,992

(4.9)

(11.5)

Other time deposits

3,736

3,957

4,714

(5.6)

(20.7)

Total deposits

$

67,779

$

65,362

$

63,061

3.7

%

7.5

%

Cost of total deposits (a)

.20

%

.22

%

.31

%

N/A

N/A

(a)  Excludes deposits in foreign office.

N/A = Not Applicable

 

Average deposits, excluding deposits in foreign office, totaled $67.8 billion for the fourth quarter of 2013, an increase of $4.7 billion compared to the year-ago quarter.  The growth was driven by corporate clients and the addition of escrow demand deposits from the commercial mortgage servicing acquisition completed earlier in 2013.  Demand deposits were up $3.2 billion, and interest-bearing non-time deposits were up $2.9 billion. This deposit growth was partially offset by $1.3 billion of run-off of certificates of deposit and other time deposits. 

Compared to the third quarter of 2013, average deposits, excluding deposits in foreign office, increased by $2.4 billion.  Demand deposits increased by $1.7 billion mostly due to average escrow deposits and interest-bearing non-time deposits growth of $1.1 billion associated with deposits from business and public sector clients. This growth was partially offset by run-off in certificates of deposit.

 

ASSET QUALITY

dollars in millions

Change 4Q13 vs.

4Q13

3Q13

4Q12

3Q13

4Q12

Net loan charge-offs

$

37

$

37

$

58

(36.2)

%

Net loan charge-offs to average total loans

.27

%

.28

%

.44

%

N/A

N/A

Nonperforming loans at period end (a)

$

508

$

541

$

674

(6.1)

%

(24.6)

Nonperforming assets at period end

531

579

735

(8.3)

(27.8)

Allowance for loan and lease losses

848

868

888

(2.3)

(4.5)

Allowance for loan and lease losses to nonperforming loans

166.9

%

160.4

%

131.8

%

N/A

N/A

Provision (credit) for loan and lease losses

$

19

$

28

$

57

(32.1)

%

(66.7)

%

(a)  December 31, 2013, September 30, 2013, and December 31, 2012 amounts exclude $16 million, $18 million, and $23 million, respectively, of purchased credit impaired loans acquired in July 2012.

N/A = Not Applicable

 

Key's provision for loan and lease losses was $19 million for the fourth quarter of 2013, compared to $28 million for the third quarter of 2013 and $57 million for the year-ago quarter.  Key's allowance for loan and lease losses was $848 million, or 1.56% of total period-end loans at December 31, 2013, compared to 1.62% at September 30, 2013, and 1.68% at December 31, 2012. 

Net loan charge-offs for the fourth quarter of 2013 totaled $37 million, or .27% of average total loans.  These results compare to $37 million, or .28% for the third quarter of 2013, and $58 million, or .44% for the same period last year.  

At December 31, 2013, Key's nonperforming loans totaled $508 million and represented .93% of period-end portfolio loans, compared to 1.01% at September 30, 2013, and 1.28% at December 31, 2012.  Nonperforming assets at December 31, 2013 totaled $531 million and represented .97% of period-end portfolio loans and OREO and other nonperforming assets, compared to 1.08% at September 30, 2013, and 1.39% at December 31, 2012.  

CAPITAL

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

 

Capital Ratios

12-31-13

9-30-13

12-31-12

Tier 1 common equity (a), (b)

11.23

%

11.17

%

11.36

%

Tier 1 risk-based capital (a)

11.97

11.92

12.15

Total risk based capital (a)

14.34

14.37

15.13

Tangible common equity to tangible assets (b)

9.80

9.93

10.15

Leverage (a)

11.09

11.33

11.41

 

(a)  12-31-13 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 December 31, 2013, Key's estimated Tier 1 common equity and Tier 1 risk-based capital ratios stood at 11.23% and 11.97%, respectively.  In addition, the tangible common equity ratio was 9.80% at December 31, 2013.

In July 2013, the Federal banking regulators approved the final Basel III capital framework for U.S. banking organizations (the "Regulatory Capital Rules").  While the Regulatory Capital Rules are effective January 1, 2014, the mandatory compliance date for Key as a "standardized approach" banking organization begins on January 1, 2015, and is subject to transitional provisions extending to January 1, 2019.  Key's estimated Tier 1 common equity as calculated under the Regulatory Capital Rules was 10.63% at December 31, 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 4Q13 vs.

4Q13

3Q13

4Q12

3Q13

4Q12

Shares outstanding at beginning of period

897,821

912,883

936,195

(1.6)

%

(4.1)

%

Common shares repurchased

(7,659)

(16,364)

(10,530)

(53.2)

(27.3)

Shares reissued (returned) under employee benefit plans

562

1,302

104

(56.8)

440.4

Shares outstanding at end of period

890,724

897,821

925,769

(.8)

%

(3.8)

%

 

Key completed $474 million of common share repurchases during calendar year 2013, including $99 million of repurchases in the fourth quarter of 2013.  Common share repurchases under Key's 2013 CCAR capital plan are expected to be executed 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 4Q13 vs.

4Q13

3Q13

4Q12

3Q13

4Q12

Revenue from continuing operations (TE)

Key Community Bank

$

534

$

551

$

580

(3.1)

%

(7.9)

%

Key Corporate Bank

407

377

402

8.0

1.2

Other Segments

103

114

69

(9.6)

49.3

Total segments

1,044

1,042

1,051

.2

(.7)

Reconciling Items

(2)

1

(5)

N/M

N/M

Total

$

1,042

$

1,043

$

1,046

(.1)

%

(.4)

%

Income (loss) from continuing operations attributable to Key

Key Community Bank

$

28

$

54

$

33

(48.1)

%

(15.2)

%

Key Corporate Bank

127

96

115

32.3

10.4

Other Segments

84

92

53

(8.7)

58.5

Total segments

239

242

201

(1.2)

%

18.9

Reconciling Items

(4)

(7)

(5)

N/M

N/M

Total

$

235

$

235

$

196

19.9

%

TE = Taxable equivalent, N/M = Not Meaningful

 

Key Community Bank

dollars in millions

Change 4Q13 vs.

4Q13

3Q13

4Q12

3Q13

4Q12

Summary of operations

Net interest income (TE)

$

350

$

357

$

383

(2.0)

%

(8.6)

%

Noninterest income

184

194

197

(5.2)

(6.6)

Total revenue (TE)

534

551

580

(3.1)

(7.9)

Provision (credit) for loan and lease losses

33

24

26

37.5

26.9

Noninterest expense

456

441

502

3.4

(9.2)

Income (loss) before income taxes (TE)

45

86

52

(47.7)

(13.5)

Allocated income taxes (benefit) and TE adjustments

17

32

19

(46.9)

(10.5)

Net income (loss) attributable to Key

$

28

$

54

$

33

(48.1)

%

(15.2)

%

Average balances

Loans and leases

$

29,596

$

29,495

$

28,629

.3

%

3.4

%

Total assets

31,784

31,679

31,224

.3

1.8

Deposits

50,409

49,652

49,839

1.5

1.1

Assets under management at period end

$

26,664

$

25,574

$

23,638

4.3

%

12.8

%

TE = Taxable Equivalent

 

 

 

 

Additional Key Community Bank Data

dollars in millions

Change 4Q13 vs.

4Q13

3Q13

4Q12

3Q13

4Q12

Noninterest income 

Trust and investment services income 

$

67

$

68

$

66

(1.5)

%

1.5

%

Service charges on deposit accounts 

58

61

61

(4.9)

(4.9)

Cards and payments income 

37

36

34

2.8

8.8

Other noninterest income 

22

29

36

(24.1)

(38.9)

Total noninterest income 

$

184

$

194

$

197

(5.2)

%

(6.6)

%

Average deposit balances

NOW and money market deposit accounts

$

27,438

$

26,564

$

25,697

3.3

%

6.8

%

Savings deposits

2,472

2,510

2,399

(1.5)

3.0

Certificates of deposit ($100,000 or more)

2,124

2,264

2,619

(6.2)

(18.9)

Other time deposits

3,731

3,949

4,702

(5.5)

(20.7)

Deposits in foreign office

285

278

287

2.5

(.7)

Noninterest-bearing deposits

14,359

14,087

14,135

1.9

1.6

Total deposits 

$

50,409

$

49,652

$

49,839

1.5

%

1.1

%

Home equity loans 

Average balance

$

10,310

$

10,247

$

9,807

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

71

%

71

%

70

%

Percent first lien positions

58

58

55

Other data

Branches

1,028

1,044

1,088

Automated teller machines

1,335

1,350

1,611

 

Key Community Bank Summary of Operations

  • Successfully completed integrations of credit card and Western New York branches
  • Loan growth of $967 million, or 3.4% from prior year
  • Core deposits up $2.0 billion, or 4.8% from the prior year

Key Community Bank recorded net income attributable to Key of $28 million for the fourth quarter of 2013, compared to net income attributable to Key of $33 million for the year-ago quarter.

Taxable-equivalent net interest income decreased by $33 million, or 8.6% from the fourth quarter of 2012 due to declines in the deposit spread in the current period as a result of the continued low-rate environment.  Average loans and leases grew 3.4% while average deposits increased 1.1% from one year ago. 

Noninterest income declined by $13 million, or 6.6% from the year-ago quarter.  Consumer mortgage income decreased $8 million, service charges on deposit accounts declined $3 million, and other income declined by $4 million. These decreases were partially offset by increases in cards and payments income of $3 million.

The provision for loan and lease losses increased by $7 million, or 26.9% from the fourth quarter of 2012.  Net loan charge-offs increased $20 million from the same period one year ago.

Noninterest expense declined by $46 million, or 9.2 % from the year-ago quarter as a result of Key's efficiency initiative.  Personnel expense decreased $15 million primarily due to declines in salaries and employee benefits.  Nonpersonnel expense declined $31 million primarily due to declines in business services and professional fees, computer processing, and other support costs.

 

 

 

Key Corporate Bank

dollars in millions

Change 4Q13 vs.

4Q13

3Q13

4Q12

3Q13

4Q12

Summary of operations

Net interest income (TE)

$

192

$

188

$

195

2.1

%

(1.5)

%

Noninterest income

215

189

207

13.8

3.9

Total revenue (TE)

407

377

402

8.0

1.2

Provision (credit) for loan and lease losses

(13)

13

11

N/M

N/M

Noninterest expense

225

217

207

3.7

8.7

Income (loss) before income taxes (TE)

195

147

184

32.7

6.0

Allocated income taxes and TE adjustments

68

51

69

33.3

(1.4)

Net income (loss) attributable to Key

$

127

$

96

$

115

32.3

%

10.4

%

Average balances

Loans and leases   

$

21,013

$

20,586

$

19,481

2.1

%

7.9

%

Loans held for sale   

668

422

538

58.3

24.2

Total assets

25,114

24,487

23,450

2.6

7.1

Deposits

17,372

16,125

13,681

7.7

27.0

Assets under management at period end

$

10,241

$

10,536

$

11,106

(2.8)

%

(7.8)

%

TE = Taxable Equivalent, N/M = Not Meaningful

 

Additional Key Corporate Bank Data

dollars in millions

Change 4Q13 vs.

4Q13

3Q13

4Q12

3Q13

4Q12

Noninterest income

Trust and investment services income

$

32

$

31

$

30

3.2

%

6.7

%

Investment banking and debt placement fees

84

85

109

(1.2)

(22.9)

Operating lease income and other leasing gains

19

14

18

35.7

5.6

Corporate services income

30

34

31

(11.8)

(3.2)

Service charges on deposit accounts

11

11

14

(21.4)

Cards and payments income

3

6

4

(50.0)

(25.0)

Payments and services income

44

51

49

(13.7)

(10.2)

Mortgage servicing fees

21

16

7

31.3

200.0

Other noninterest income

15

(8)

(6)

N/M

N/M

Total noninterest income

$

215

$

189

$

207

13.8

%

3.9

%

N/M = Not Meaningful

 

Key Corporate Bank Summary of Operations

  • Average loan balances up 7.9% from the prior year
  • Average deposits up 27% from the prior year
  • Total revenue increased 1.2% from prior year
  • Investment banking and debt placement fees declined 22.9% from the prior year, but increased 3.1% for the full year

Key Corporate Bank recorded net income attributable to Key of $127 million for the fourth quarter of 2013, compared to $115 million for the same period one year ago. 

Taxable-equivalent net interest income decreased by $3 million, or 1.5% compared to the fourth quarter of 2012.  Average earning assets increased $1.9 billion, or 9% from the year-ago quarter, driving an $8 million increase in earning asset spread.  Average deposit balances increased $3.7 billion, or 27% from the year-ago quarter, driven by the commercial mortgage servicing acquisition and increases in other business flows.  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 $8 million, or 3.9% from the fourth quarter of 2012.  Mortgage servicing fees increased $14 million due to higher levels of core servicing fees, special servicing fees, and the impact of the previously announced acquisition of a commercial mortgage servicing portfolio.   Other noninterest income increased $21 million mostly driven by gains related to the disposition of certain investments held by the Real Estate Capital line of business.  Offsetting these increases was a $25 million decrease in investment banking and debt placement fees from the fourth quarter of 2012 as a result of a business mix shift in Key's real estate business. 

The provision for loan and lease losses decreased $24 million compared to the fourth quarter of 2012 due to improved credit quality within the portfolio.

Noninterest expense increased by $18 million, or 8.7% from the fourth quarter of 2012, mostly due to an increase of $14 million in the provision (credit) for losses on lending-related commitments.  There was a credit of $2 million in the provision (credit) for losses on lending-related commitments in the fourth quarter of 2013 compared to a credit of $16 million for the fourth 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 $84 million for the fourth quarter of 2013, compared to net income attributable to Key of $53 million for the same period last year.  These results were primarily attributable to an increase in net gains (losses) from principal investing of $18 million, and an increase in net interest income 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 $92.9 billion at December 31, 2013.

Key provides deposit, lending, cash management and investment services to individuals and small and mid-sized businesses in 12 states under the name KeyBank National Association.  Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name.  For more information, visit https://www.key.com/.  KeyBank is Member FDIC.

INVESTOR RELATIONS: www.key.com/ir

KEY MEDIA NEWSROOM: www.key.com/newsroom

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Key's financial condition, results of operations, and profitability.  Forward-looking statements can be identified by words such as "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 Reports on Form 10-Q for the periods ended March 31, 2013, June 30, 2013, and September 30, 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: economic, political or other shocks to financial markets in the United States and abroad; current reform 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, January 23, 2014.  An audio replay of the call will be available through January 30, 2014.

For up-to-date company information, media contacts, and facts and figures about Key's lines of business, visit our Media Newsroom at https://www.key.com/newsroom.

*****

 

KeyCorp

Fourth Quarter 2013

Financial Supplement

Page    

13

Financial Highlights

15

GAAP to Non-GAAP Reconciliation

18

Consolidated Balance Sheets

19

Consolidated Statements of Income

20

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

22

Noninterest Expense

22

Personnel Expense

23

Loan Composition

23

Loans Held for Sale Composition

23

Summary of Changes in Loans Held for Sale

24

Exit Loan Portfolio From Continuing Operations

24

Asset Quality Statistics From Continuing Operations

25

Summary of Loan and Lease Loss Experience From Continuing Operations

26

Summary of Nonperforming Assets and Past Due Loans From Continuing Operations

27

Summary of Changes in Nonperforming Loans From Continuing Operations

27

Summary of Changes in Nonperforming Loans Held for Sale From Continuing Operations

27

Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations

28

Line of Business Results

 

Financial Highlights 

(dollars in millions, except per share amounts)

Three months ended

12-31-13

9-30-13

12-31-12

Summary of operations 

Net interest income (TE)

$

589

$

584

$

607

Noninterest income

453

459

439

Total revenue (TE) 

1,042

1,043

1,046

Provision (credit) for loan and lease losses

19

28

57

Noninterest expense

712

716

734

Income (loss) from continuing operations attributable to Key

235

235

196

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

(5)

37

7

Net income (loss) attributable to Key 

230

272

203

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

$

229

$

229

$

190

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

(5)

37

7

Net income (loss) attributable to Key common shareholders

224

266

197

Per common share 

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

$

.26

$

.25

$

.21

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

(.01)

.04

.01

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

.25

.29

.21

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

.26

.25

.20

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

(.01)

.04

.01

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

.25

.29

.21

Cash dividends paid 

.055

.055

.05

Book value at period end 

11.25

11.05

10.78

Tangible book value at period end 

10.11

9.92

9.67

Market price at period end 

13.42

11.40

8.42

Performance ratios 

From continuing operations: 

Return on average total assets 

1.08

%

1.12

%

.96

%

Return on average common equity 

9.10

9.13

7.58

Return on average tangible common equity  (c)

10.13

10.18

8.45

Net interest margin (TE) 

3.01

3.11

3.37

Cash efficiency ratio  (c)

67.4

67.5

69.0

From consolidated operations: 

Return on average total assets 

1.00

%

1.22

%

.93

%

Return on average common equity 

8.90

10.61

7.86

Return on average tangible common equity  (c)

9.91

11.82

8.77

Net interest margin (TE) 

2.91

3.06

3.29

Loan to deposit  (d)

83.8

83.8

85.8

Capital ratios at period end 

Key shareholders' equity to assets  

11.09

%

11.25

%

11.51

%

Key common shareholders' equity to assets 

10.78

10.94

11.18

Tangible common equity to tangible assets  (c)

9.80

9.93

10.15

Tier 1 common equity  (c), (e)

11.23

11.17

11.36

Tier 1 risk-based capital  (e)

11.97

11.92

12.15

Total risk-based capital  (e)

14.34

14.37

15.13

Leverage  (e)

11.09

11.33

11.41

Asset quality — from continuing operations 

Net loan charge-offs 

$

37

$

37

$

58

Net loan charge-offs to average loans  

.27

%

.28

%

.44

%

Allowance for loan and lease losses 

$

848

$

868

$

888

Allowance for credit losses

885

908

917

Allowance for loan and lease losses to period-end loans 

1.56

%

1.62

%

1.68

%

Allowance for credit losses to period-end loans 

1.63

1.69

1.74

Allowance for loan and lease losses to nonperforming loans 

166.9

160.4

131.8

Allowance for credit losses to nonperforming loans  

174.2

167.8

136.1

Nonperforming loans at period end  (f)

$

508

$

541

$

674

Nonperforming assets at period end 

531

579

735

Nonperforming loans to period-end portfolio loans 

.93

%

1.01

%

1.28

%

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

.97

1.08

1.39

Trust and brokerage assets 

Assets under management 

$

36,905

$

36,110

$

34,744

Nonmanaged and brokerage assets  

47,418

38,525

35,550

Other data 

Average full-time equivalent employees 

14,197

14,555

15,589

Branches 

1,028

1,044

1,088

Taxable-equivalent adjustment 

$

6

$

6

$

6

 

Financial Highlights (continued) 

(dollars in millions, except per share amounts) 

Twelve months ended

12-31-13

12-31-12

Summary of operations 

Net interest income (TE) 

$

2,348

$

2,288

Noninterest income 

1,766

1,856

Total revenue (TE) 

4,114

4,144

Provision (credit) for loan and lease losses 

130

229

Noninterest expense 

2,820

2,818

Income (loss) from continuing operations attributable to Key 

870

835

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

40

23

Net income (loss) attributable to Key   

910

858

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

$

847

$

813

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

40

23

Net income (loss) attributable to Key common shareholders 

887

836

Per common share 

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

$

.93

$

.87

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

.04

.02

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

.98

.89

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

.93

.86

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

.04

.02

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

.97

.89

Cash dividends paid 

.215

.18

Performance ratios  

From continuing operations:  

Return on average total assets  

1.03

%

1.03

%

Return on average common equity  

8.48

8.25

Return on average tangible common equity   (c)

9.45

9.16

Net interest margin (TE)  

3.12

3.21

Cash efficiency ratio  (c)

67.5

67.4

From consolidated operations: 

Return on average total assets 

1.02

%

.99

%

Return on average common equity 

8.88

8.48

Return on average tangible common equity   (c)

9.90

9.42

Net interest margin (TE) 

3.02

3.13

Asset quality — from continuing operations 

Net loan charge-offs 

$

168

$

345

Net loan charge-offs to average total loans  

.32

%

.69

%

Other data 

Average full-time equivalent employees 

14,783

15,589

Taxable-equivalent adjustment 

$

23

$

24

 

(a)  In April 2009, management decided to wind down the operations of Austin Capital Management, Ltd., a subsidiary that specialized in managing hedge fund investments for institutional customers.  In September 2009, management decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank National Association.  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)  12-31-13 ratio is estimated.

(f)   December 31, 2013, September 30, 2013, and December 31, 2012 amounts exclude $16 million, $18 million, and $23 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  

12-31-13

9-30-13

12-31-12

Tangible common equity to tangible assets at period end 

Key shareholders' equity (GAAP) 

$

10,303

$

10,206

$

10,271

Less:  

Intangible assets   (a)

1,014

1,017

1,027

Preferred Stock, Series A   (b)

282

282

291

Tangible common equity (non-GAAP)   

$

9,007

$

8,907

$

8,953

Total assets (GAAP) 

$

92,934

$

90,708

$

89,236

Less:  

Intangible assets   (a)

1,014

1,017

1,027

Tangible assets (non-GAAP) 

$

91,920

$

89,691

$

88,209

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

9.80

%

9.93

%

10.15

%

Tier 1 common equity at period end 

Key shareholders' equity (GAAP)  

$

10,303

$

10,206

$

10,271

Qualifying capital securities  

339

340

339

Less: 

Goodwill  

979

979

979

Accumulated other comprehensive income (loss)  (c)

(394)

(409)

(172)

Other assets  (d)

91

96

114

Total Tier 1 capital (regulatory) 

9,966

9,880

9,689

Less:  

Qualifying capital securities  

339

340

339

Preferred Stock, Series A  (b)

282

282

291

Total Tier 1 common equity (non-GAAP)   

$

9,345

$

9,258

$

9,059

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

$

83,251

$

82,913

$

79,734

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

11.23

%

11.17

%

11.36

%

Pre-provision net revenue 

Net interest income (GAAP) 

$

583

$

578

$

601

Plus: 

Taxable-equivalent adjustment 

6

6

6

Noninterest income (GAAP) 

453

459

439

Less: 

Noninterest expense (GAAP) 

712

716

734

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

$

330

$

327

$

312

 

GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)

Three months ended

12-31-13

9-30-13

12-31-12

Average tangible common equity

Average Key shareholders' equity (GAAP)

$

10,272

$

10,237

$

10,261

Less:

Intangible assets (average) (f)

1,016

1,019

1,030

Preferred Stock, Series A (average)

291

291

291

Average tangible common equity (non-GAAP)

$

8,965

$

8,927

$

8,940

Return on average tangible common equity from continuing operations

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

$

229

$

229

$

190

Average tangible common equity (non-GAAP)

8,965

8,927

8,940

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

10.13

%

10.18

%

8.45

%

Return on average tangible common equity consolidated

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

$

224

$

266

$

197

Average tangible common equity (non-GAAP)

8,965

8,927

8,940

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

9.91

%

11.82

%

8.77

%

Cash efficiency ratio

Noninterest expense (GAAP)

$

712

$

716

$

734

Less:

Intangible asset amortization on credit cards (GAAP)

7

8

8

Other intangible asset amortization (GAAP)

3

4

4

Adjusted noninterest expense (non-GAAP)

$

702

$

704

$

722

Net interest income (GAAP)

$

583

$

578

$

601

Plus:

Taxable-equivalent adjustment

6

6

6

Noninterest income (GAAP)

453

459

439

Total taxable-equivalent revenue (non-GAAP)

$

1,042

$

1,043

$

1,046

Cash efficiency ratio (non-GAAP)

67.4

%

67.5

%

69.0

%

Adjusted cash efficiency ratio net of efficiency initiative charges

Adjusted noninterest expense (non-GAAP)

$

702

$

704

$

722

Less:

Efficiency initiative and pension settlement charges (non-GAAP)

24

41

16

Net adjusted noninterest expense (non-GAAP)

$

678

$

663

$

706

Total taxable-equivalent revenue (non-GAAP)

$

1,042

$

1,043

$

1,046

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

65.1

%

63.6

%

67.5

%

Three months ended

12-31-13

9-30-13

Tier 1 common equity under the Regulatory Capital Rules (estimates)

Tier 1 common equity under current regulatory rules

$

9,345

$

9,258

Adjustments from current regulatory rules to the Regulatory Capital Rules:

Deferred tax assets and other (g)

(130)

(140)

Tier 1 common equity anticipated under the Regulatory Capital Rules (h)

$

9,215

$

9,118

Net risk-weighted assets under current regulatory rules

$

83,251

$

82,913

Adjustments from current regulatory rules to the Regulatory Capital Rules:

Loan commitments less than one year

891

496

Past due loans

206

244

Mortgage servicing assets (i)

576

576

Deferred tax assets (i)

240

240

Other

1,490

1,451

Total risk-weighted assets anticipated under the Regulatory Capital Rules

$

86,654

$

85,920

Tier 1 common equity ratio under the Regulatory Capital Rules (h)

10.63

%

10.61

%

 

GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)

Twelve months ended

12-31-13

12-31-12

Pre-provision net revenue

Net interest income (GAAP)

$

2,325

$

2,264

Plus:

Taxable-equivalent adjustment

23

24

Noninterest income (GAAP)

1,766

1,856

Less:

Noninterest expense (GAAP)

2,820

2,818

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

$

1,294

$

1,326

Average tangible common equity

Average Key shareholders' equity (GAAP)

$

10,276

$

10,144

Less:

Intangible assets (average) (j)

1,021

978

Preferred Stock, Series A (average)

291

291

Average tangible common equity (non-GAAP)

$

8,964

$

8,875

Return on average tangible common equity from continuing operations

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

$

847

$

813

Average tangible common equity (non-GAAP)

8,964

8,875

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

9.45

%

9.16

%

Return on average tangible common equity consolidated

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

$

887

$

836

Average tangible common equity (non-GAAP)

8,964

8,875

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

9.90

%

9.42

%

Cash efficiency ratio

Noninterest expense (GAAP)

$

2,820

$

2,818

Less:

Intangible asset amortization on credit cards (GAAP)

30

14

Other intangible asset amortization (GAAP)

14

9

Adjusted noninterest expense (non-GAAP)

$

2,776

$

2,795

Net interest income (GAAP)

$

2,325

$

2,264

Plus:

Taxable-equivalent adjustment

23

24

Noninterest income (GAAP)

1,766

1,856

Total taxable-equivalent revenue (non-GAAP)

$

4,114

$

4,144

Cash efficiency ratio (non-GAAP)

67.5

%

67.4

%

Adjusted cash efficiency ratio net of efficiency initiative charges

Adjusted noninterest expense (non-GAAP)

$

2,776

$

2,795

Less:

Efficiency initiative and pension settlement charges (non-GAAP)

117

25

Net adjusted noninterest expense (non-GAAP)

$

2,659

$

2,770

Total taxable-equivalent revenue (non-GAAP)

$

4,114

$

4,144

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

64.6

%

66.8

%

 

(a)   Three months ended December 31, 2013, September 30, 2013, and December 31, 2012 exclude $92 million, $99 million, and $123 million, respectively, of period end purchased credit card receivable intangible assets. 

(b)   Net of capital surplus for the three months ended December 31, 2013 and September 30, 2013.

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

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

(e)  12-31-13 amount is estimated.

(f)   Three months ended December 31, 2013, September 30, 2013, and December 31, 2012 exclude $96 million, $103 million, and $126 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, as well as the deductible potion of purchased credit card receivables.

(h)  The anticipated amount of regulatory capital and risk-weighted assets is based upon the federal banking agencies' Regulatory Capital Rules (as fully phased-in on January 1, 2019); Key is subject to the Regulatory Capital Rules under the "standardized approach."

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

(j)   Twelve months ended December 31, 2013 and December 31, 2012 exclude $107 million and $55 million, respectively, of average ending purchased credit card receivable intangible assets.

GAAP = U.S. generally accepted accounting principles

 

Consolidated Balance Sheets 

(dollars in millions) 

12-31-13

9-30-13

12-31-12

Assets 

Loans 

$

54,457

$

53,597

$

52,822

Loans held for sale 

611

699

599

Securities available for sale 

12,346

12,606

12,094

Held-to-maturity securities  

4,756

4,835

3,931

Trading account assets 

738

806

605

Short-term investments 

5,590

3,535

3,940

Other investments 

969

1,007

1,064

Total earning assets 

79,467

77,085

75,055

Allowance for loan and lease losses 

(848)

(868)

(888)

Cash and due from banks 

617

748

584

Premises and equipment 

885

890

965

Operating lease assets 

305

293

288

Goodwill 

979

979

979

Other intangible assets 

127

137

171

Corporate-owned life insurance 

3,408

3,384

3,333

Derivative assets 

407

475

693

Accrued income and other assets 

3,015

2,747

2,774

Discontinued assets 

4,572

4,838

5,282

Total assets 

$

92,934

$

90,708

$

89,236

Liabilities 

Deposits in domestic offices: 

NOW and money market deposit accounts 

$

33,952

$

33,132

$

32,380

Savings deposits 

2,472

2,489

2,433

Certificates of deposit ($100,000 or more) 

2,631

2,698

2,879

Other time deposits 

3,648

3,833

4,575

     Total interest-bearing deposits 

42,703

42,152

42,267

Noninterest-bearing deposits 

26,001

25,778

23,319

Deposits in foreign office — interest-bearing 

558

605

407

     Total deposits 

69,262

68,535

65,993

Federal funds purchased and securities

       sold under repurchase agreements 

1,534

1,455

1,609

Bank notes and other short-term borrowings 

343

466

287

Derivative liabilities 

414

450

584

Accrued expense and other liabilities 

1,557

1,375

1,387

Long-term debt 

7,650

6,154

6,847

Discontinued liabilities  

1,854

2,037

2,220

Total liabilities 

82,614

80,472

78,927

Equity 

Preferred stock, Series A 

291

291

291

Common shares 

1,017

1,017

1,017

Capital surplus 

4,022

4,029

4,126

Retained earnings 

7,606

7,431

6,913

Treasury stock, at cost 

(2,281)

(2,193)

(1,952)

Accumulated other comprehensive income (loss) 

(352)

(369)

(124)

Key shareholders' equity 

10,303

10,206

10,271

Noncontrolling interests 

17

30

38

Total equity 

10,320

10,236

10,309

Total liabilities and equity 

$

92,934

$

90,708

$

89,236

Common shares outstanding (000) 

890,724

897,821

925,769

 

Consolidated Statements of Income   

(dollars in millions, except per share amounts) 

Three months ended 

Twelve months ended 

12-31-13

9-30-13

12-31-12

12-31-13

12-31-12

Interest income 

Loans 

$

532

$

532

$

563

$

2,151

$

2,155

Loans held for sale 

6

5

5

20

20

Securities available for sale 

75

76

85

311

399

Held-to-maturity securities  

22

22

19

82

69

Trading account assets 

6

5

3

21

18

Short-term investments 

2

1

2

6

6

Other investments 

6

6

11

29

38

Total interest income 

649

647

688

2,620

2,705

Interest expense 

Deposits 

34

37

49

158

257

Federal funds purchased and securities sold under repurchase agreements 

1

1

2

4

Bank notes and other short-term borrowings 

3

2

2

8

7

Long-term debt 

29

29

35

127

173

Total interest expense 

66

69

87

295

441

Net interest income 

583

578

601

2,325

2,264

Provision (credit) for loan and lease losses 

19

28

57

130

229

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

564

550

544

2,195

2,035

Noninterest income 

Trust and investment services income  

98

100

95

393

375

Investment banking and debt placement fees 

84

86

110

333

327

Service charges on deposit accounts 

68

73

75

281

287

Operating lease income and other leasing gains 

23

43

19

108

195

Corporate services income 

40

44

41

172

168

Cards and payments income 

40

43

38

162

135

Corporate-owned life insurance income 

33

26

36

120

122

Consumer mortgage income 

3

3

11

19

40

Mortgage servicing fees 

22

15

7

58

24

Net gains (losses) from principal investing 

20

17

2

52

72

Other income  (a)

22

9

5

68

111

Total noninterest income 

453

459

439

1,766

1,856

Noninterest expense 

Personnel 

398

414

422

1,609

1,570

Net occupancy 

73

66

69

275

260

Computer processing 

40

38

38

156

164

Business services and professional fees 

42

37

54

151

190

Equipment 

26

25

27

104

107

Operating lease expense 

10

14

12

47

57

Marketing 

18

16

20

51

68

FDIC assessment 

7

7

8

30

31

Intangible asset amortization on credit cards 

7

8

8

30

14

Other intangible asset amortization 

3

4

4

14

9

Provision (credit) for losses on lending-related commitments 

(3)

3

(14)

8

(16)

OREO expense, net

2

1

1

7

15

Other expense 

89

83

85

338

349

Total noninterest expense 

712

716

734

2,820

2,818

Income (loss) from continuing operations before income taxes

305

293

249

1,141

1,073

Income taxes 

70

59

53

271

231

Income (loss) from continuing operations

235

234

196

870

842

Income (loss) from discontinued operations, net of taxes

(5)

37

7

40

23

Net income (loss)

230

271

203

910

865

Less:  Net income (loss) attributable to noncontrolling interests   

(1)

7

Net income (loss) attributable to Key

$

230

$

272

$

203

$

910

$

858

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

$

229

$

229

$

190

$

847

$

813

Net income (loss) attributable to Key common shareholders 

224

266

197

887

836

Per common share 

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

$

.26

$

.25

$

.21

$

.93

$

.87

Income (loss) from discontinued operations, net of taxes 

(.01)

.04

.01

.04

.02

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

.25

.29

.21

.98

.89

Per common share — assuming dilution 

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

$

.26

$

.25

$

.20

$

.93

$

.86

Income (loss) from discontinued operations, net of taxes 

(.01)

.04

.01

.04

.02

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

.25

.29

.21

.97

.89

Cash dividends declared per common share 

$

.055

$

.055

$

.05

$

.215

$

.18

Weighted-average common shares outstanding (000) 

890,516

901,904

925,725

906,524

938,941

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

897,712

928,854

930,382

912,571

943,259

(a)  For the three months ended December 31, 2013, September 30, 2013, and December 31, 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)

Fourth Quarter 2013

Third Quarter 2013

Fourth 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 (d)

$

24,218

$

212

3.47

 %

$

23,864

$

213

3.54

 %

$

22,436

$

213

3.77

 %

Real estate — commercial mortgage

7,678

78

4.01

7,575

77

4.06

7,555

82

4.35

Real estate — construction

1,075

11

4.21

1,073

12

4.24

1,070

14

4.94

Commercial lease financing

4,513

41

3.62

4,633

36

3.14

4,869

49

4.01

    Total commercial loans

37,484

342

3.62

37,145

338

3.61

35,930

358

3.96

Real estate — residential mortgage

2,199

24

4.43

2,193

25

4.43

2,164

26

4.70

Home equity:

Key Community Bank

10,310

102

3.92

10,247

101

3.92

9,807

98

3.99

Other

343

7

7.72

364

7

7.72

411

9

8.23

    Total home equity loans

10,653

109

4.04

10,611

108

4.05

10,218

107

4.16

Consumer other — Key Community Bank

1,446

26

7.18

1,435

26

7.24

1,339

32

9.63

Credit cards

701

20

11.17

700

21

11.77

714

23

13.15

Consumer other:

Marine

1,056

17

6.24

1,120

17

6.26

1,403

22

6.16

Other

69

1

8.03

67

2

8.72

91

1

8.25

    Total consumer other 

1,125

18

6.35

1,187

19

6.40

1,494

23

6.29

    Total consumer loans

16,124

197

4.88

16,126

199

4.93

15,929

211

5.30

    Total loans

53,608

539

3.98

53,271

537

4.00

51,859

569

4.37

Loans held for sale

688

6

3.65

456

5

4.06

618

5

3.47

Securities available for sale (b), (e)

12,464

74

2.40

12,926

77

2.37

11,980

84

2.95

Held-to-maturity securities (b)

4,775

22

1.85

4,796

22

1.84

4,036

19

1.94

Trading account assets

819

6

2.90

747

5

2.52

606

3

1.91

Short-term investments

4,455

2

.18

1,615

1

.20

2,090

2

.27

Other investments (e)

983

6

2.47

1,022

6

2.67

1,088

12

4.05

    Total earning assets

77,792

655

3.37

74,833

653

3.49

72,277

694

3.85

Allowance for loan and lease losses

(859)

(873)

(898)

Accrued income and other assets

9,467

9,549

9,878

Discontinued assets

4,777

5,061

5,350

    Total assets

$

91,177

$

88,570

$

86,607

Liabilities

NOW and money market deposit accounts

$

33,834

12

.15

$

32,736

13

.15

$

31,058

14

.18

Savings deposits

2,483

.03

2,520

.04

2,408

.06

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

2,649

11

1.57

2,785

12

1.67

2,992

16

2.15

Other time deposits

3,736

11

1.16

3,957

12

1.24

4,714

18

1.52

Deposits in foreign office

615

.21

621

.20

874

1

.21

    Total interest-bearing deposits

43,317

34

.32

42,619

37

.35

42,046

49

.47

Federal funds purchased and securities

        sold under repurchase agreements

1,618

.15

1,837

1

.08

1,702

1

.16

Bank notes and other short-term borrowings

438

3

1.96

383

2

1.98

306

2

1.97

Long-term debt (f), (g)

4,174

29

2.94

3,504

29

3.41

3,301

35

4.84

    Total interest-bearing liabilities

49,547

66

.53

48,343

69

.56

47,355

87

.73

Noninterest-bearing deposits

25,077

23,364

21,889

Accrued expense and other liabilities

1,548

1,626

1,747

Discontinued liabilities (g)

4,717

4,968

5,321

    Total liabilities

80,889

78,301

76,312

Equity

Key shareholders' equity

10,272

10,237

10,261

Noncontrolling interests

16

32

34

    Total equity

10,288

10,269

10,295

    Total liabilities and equity

$

91,177

$

88,570

$

86,607

Interest rate spread (TE)

2.84

 %

2.93

 %

3.12

 %

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

589

3.01

 %

584

3.11

 %

607

3.37

 %

TE adjustment (b)

6

6

6

Net interest income, GAAP basis

$

583

$

578

$

601

 

(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 December 31, 2013, September 30, 2013, and December 31, 2012 includes $97 million, $96 million, and $90 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)

Twelve months ended December 31, 2013

Twelve months ended December 31, 2012

Average

Average

Balance

Interest

 (a)

Yield/Rate

 (a)

Balance

Interest

 (a)

Yield/Rate

 (a)

Assets

Loans: (b), (c)

Commercial, financial and agricultural  (d)

$

23,723

$

855

3.60

 %

$

21,141

$

810

3.83

 %

Real estate — commercial mortgage

7,591

312

4.11

7,656

339

4.43

Real estate — construction

1,058

45

4.25

1,171

56

4.74

Commercial lease financing

4,683

172

3.67

5,142

187

3.64

    Total commercial loans

37,055

1,384

3.73

35,110

1,392

3.96

Real estate — residential mortgage

2,185

98

4.49

2,049

100

4.86

Home equity:

Key Community Bank

10,086

397

3.93

9,520

384

4.03

Other

377

29

7.70

473

37

7.81

         Total home equity loans

10,463

426

4.07

9,993

421

4.21

Consumer other — Key Community Bank

1,404

103

7.33

1,269

121

9.53

Credit cards

701

83

11.86

288

40

13.99

Consumer other:

Marine

1,172

74

6.26

1,551

97

6.26

Other

74

6

8.32

102

8

8.14

   Total consumer other 

1,246

80

6.38

1,653

105

6.38

         Total consumer loans

15,999

790

4.94

15,252

787

5.16

         Total loans

53,054

2,174

4.10

50,362

2,179

4.33

Loans held for sale

532

20

3.72

579

20

3.45

Securities available for sale (b), (e) 

12,689

311

2.49

13,422

399

3.08

Held-to-maturity securities (b) 

4,387

82

1.87

3,511

69

1.97

Trading account assets

756

21

2.78

718

18

2.48

Short-term investments

2,948

6

.20

2,116

6

.27

Other investments (e) 

1,028

29

2.84

1,141

38

3.27

         Total earning assets

75,394

2,643

3.51

71,849

2,729

3.82

Allowance for loan and lease losses

(879)

(919)

Accrued income and other assets

9,662

9,912

Discontinued assets

5,036

5,573

         Total assets

$

89,213

$

86,415

Liabilities

NOW and money market deposit accounts

$

32,846

53

.16

$

29,673

56

.19

Savings deposits

2,505

1

.04

2,218

1

.05

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

2,829

50

1.76

3,574

94

2.64

Other time deposits

4,084

53

1.30

5,386

104

1.92

Deposits in foreign office

567

1

.23

767

2

.23

    Total interest-bearing deposits

42,831

158

.37

41,618

257

.62

Federal funds purchased and securities

     sold under repurchase agreements

1,802

2

.13

1,814

4

.19

Bank notes and other short-term borrowings

394

8

1.89

413

7

1.69

Long-term debt (f), (g) 

4,184

127

3.28

4,673

173

4.10

    Total interest-bearing liabilities

49,211

295

.60

48,518

441

.92

Noninterest-bearing deposits

23,046

20,217

Accrued expense and other liabilities

1,656

1,958

Discontinued liabilities (g) 

4,995

5,555

         Total liabilities

78,908

76,248

Equity

Key shareholders' equity

10,276

10,144

Noncontrolling interests

29

23

         Total equity

10,305

10,167

         Total liabilities and equity

$

89,213

$

86,415

Interest rate spread (TE)

2.91

 %

2.90

 %

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

2,348

3.12

 %

2,288

3.21

 %

TE adjustment (b) 

23

24

Net interest income, GAAP basis

$

2,325

$

2,264

 

(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 twelve months ended December 31, 2013 and December 31, 2012 includes $95 million and $36 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

 

Noninterest Expense 

(dollars in millions) 

Three months ended

Twelve months ended

12-31-13

9-30-13

12-31-12

12-31-13

12-31-12

Personnel  (a)

$

398

$

414

$

422

$

1,609

$

1,570

Net occupancy 

73

66

69

275

260

Computer processing 

40

38

38

156

164

Business services and professional fees 

42

37

54

151

190

Equipment 

26

25

27

104

107

Operating lease expense 

10

14

12

47

57

Marketing 

18

16

20

51

68

FDIC assessment 

7

7

8

30

31

Intangible asset amortization on credit cards 

7

8

8

30

14

Other intangible asset amortization 

3

4

4

14

9

Provision (credit) for losses on lending-related commitments 

(3)

3

(14)

8

(16)

OREO expense, net 

2

1

1

7

15

Other expense 

89

83

85

338

349

     Total noninterest expense 

$

712

$

716

$

734

$

2,820

$

2,818

Average full-time equivalent employees  (b)

14,197

14,555

15,589

14,783

15,589

(a)  Additional detail provided in table below.

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

Personnel Expense 

(in millions) 

Three months ended

Twelve months ended

12-31-13

9-30-13

12-31-12

12-31-13

12-31-12

Salaries

$

226

$

222

$

228

$

897

$

902

Technology contract labor, net

16

19

24

72

69

Incentive compensation 

87

81

81

318

290

Employee benefits

56

78

65

249

237

Stock-based compensation 

8

8

13

35

49

Severance

5

6

11

38

23

     Total personnel expense

$

398

$

414

$

422

$

1,609

$

1,570

 

Loan Composition 

(dollars in millions)

Percent change 12-31-13 vs.

12-31-13

9-30-13

12-31-12

9-30-13

12-31-12

Commercial, financial and agricultural  (a)

$

24,963

$

24,317

$

23,242

2.7

%

7.4

%

Commercial real estate:

Commercial mortgage

7,720

7,544

7,720

2.3

Construction

1,093

1,058

1,003

3.3

9.0

     Total commercial real estate loans

8,813

8,602

8,723

2.5

1.0

Commercial lease financing

4,551

4,550

4,915

(7.4)

     Total commercial loans

38,327

37,469

36,880

2.3

3.9

Residential — prime loans:

Real estate — residential mortgage

2,187

2,198

2,174

(.5)

.6

Home equity:

Key Community Bank

10,340

10,285

9,816

.5

5.3

Other

334

353

423

(5.4)

(21.0)

Total home equity loans

10,674

10,638

10,239

.3

4.2

Total residential — prime loans

12,861

12,836

12,413

.2

3.6

Consumer other — Key Community Bank

1,449

1,440

1,349

.6

7.4

Credit cards

722

698

729

3.4

(1.0)

Consumer other:

Marine

1,028

1,083

1,358

(5.1)

(24.3)

Other

70

71

93

(1.4)

(24.7)

     Total consumer other

1,098

1,154

1,451

(4.9)

(24.3)

     Total consumer loans

16,130

16,128

15,942

1.2

Total loans (b), (c)

$

54,457

$

53,597

$

52,822

1.6

%

3.1

%

Loans Held for Sale Composition

(dollars in millions)

Percent change 12-31-13 vs.

12-31-13

9-30-13

12-31-12

9-30-13

12-31-12

Commercial, financial and agricultural

$

278

$

68

$

29

308.8

%

858.6

%

Real estate — commercial mortgage

307

608

477

(49.5)

(35.6)

Commercial lease financing

9

8

N/M

12.5

Real estate — residential mortgage

17

23

85

(26.1)

(80.0)

Total loans held for sale

$

611

$

699

$

599

(12.6)

%

2.0

%

Summary of Changes in Loans Held for Sale

(dollars in millions)

4Q13

3Q13

2Q13

1Q13

4Q12

Balance at beginning of period

$

699

$

402

$

434

$

599

$

628

New originations

1,669

1,467

1,241

1,075

1,686

Transfers from held to maturity, net

1

15

17

19

38

Loan sales

(1,750)

(1,181)

(1,292)

(1,257)

(1,747)

Loan draws (payments), net

(8)

(4)

(4)

Transfers to OREO / valuation adjustments

2

(2)

(2)

Balance at end of period

$

611

$

699

$

402

$

434

$

599

 

(a)  December 31, 2013, September 30, 2013, and December 31, 2012 loan balances include $94 million, $96 million, and $90 million, respectively, of commercial credit card balances.

(b)  Excluded at December 31, 2013, September 30, 2013, and December 31, 2012 are loans in the amount of $4.5 billion, $4.7 billion, and $5.2 billion, respectively, related to the discontinued operations of the education lending business.

(c)  December 31, 2013 loan balance includes purchased loans of $166 million of which $16 million were purchased credit impaired.  September 30, 2013 loan balance includes purchased loans of $176 million of which $18 million were purchased credit impaired.  December 31, 2012 loan balance includes purchased loans of $217 million of which $23 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

12-31-13 vs.

Charge-offs

Nonperforming Status

12-31-13

9-30-13

9-30-13

4Q13

 (c)

3Q13

 (c)

12-31-13

9-30-13

Residential properties — homebuilder

$

20

$

26

$

(6)

$

7

$

8

Marine and RV floor plan

24

25

(1)

6

6

Commercial lease financing (a)

782

796

(14)

$

(2)

$

(2)

1

     Total commercial loans

826

847

(21)

(2)

(2)

13

15

Home equity — Other

334

353

(19)

3

2

16

14

Marine

1,028

1,083

(55)

5

1

26

25

RV and other consumer

70

71

(1)

1

1

2

     Total consumer loans

1,432

1,507

(75)

9

3

43

41

     Total exit loans in loan portfolio

$

2,258

$

2,354

$

(96)

$

7

$

1

$

56

$

56

Discontinued operations — education

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

$

4,497

$

4,738

$

(241)

$

9

$

9

$

25

$

23

 

(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)

4Q13 

3Q13 

2Q13 

1Q13 

4Q12 

Net loan charge-offs

$

37

$

37

$

45

$

49

$

58

Net loan charge-offs to average total loans

.27

%

.28

%

.34

%

.38

%

.44

%

Allowance for loan and lease losses

$

848

$

868

$

876

$

893

$

888

Allowance for credit losses (a)

885

908

913

925

917

Allowance for loan and lease losses to period-end loans

1.56

%

1.62

%

1.65

%

1.70

%

1.68

%

Allowance for credit losses to period-end loans

1.63

1.69

1.72

1.76

1.74

Allowance for loan and lease losses to nonperforming loans

166.9

160.4

134.4

137.4

131.8

Allowance for credit losses to nonperforming loans

174.2

167.8

140.0

142.3

136.1

Nonperforming loans at period end (b)

$

508

$

541

$

652

$

650

$

674

Nonperforming assets at period end

531

579

693

705

735

Nonperforming loans to period-end portfolio loans

.93

%

1.01

%

1.23

%

1.24

%

1.28

%

Nonperforming assets to period-end portfolio loans plus

       OREO and other nonperforming assets

.97

1.08

1.30

1.34

1.39

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

(b)  December 31, 2013, September 30, 2013, June 30, 2013, March 31, 2013, and December 31, 2012 amounts exclude $16 million, $18 million, $19 million, $22 million, and $23 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

Twelve months ended

12-31-13

9-30-13

12-31-12

12-31-13

12-31-12

Average loans outstanding

$

53,608

$

53,271

$

51,859

$

53,054

$

50,362

Allowance for loan and lease losses at beginning of period 

$

868

$

876

$

888

$

888

$

1,004

Loans charged off: 

     Commercial, financial and agricultural 

18

15

15

62

80

     Real estate — commercial mortgage 

2

2

33

20

102

     Real estate — construction  

1

5

3

24

              Total commercial real estate loans

3

2

38

23

126

     Commercial lease financing 

2

17

7

27

27

              Total commercial loans 

23

34

60

112

233

     Real estate — residential mortgage   (a)

7

3

8

20

27

     Home equity:

          Key Community Bank (a)

12

14

(14)

62

99

          Other (a)

4

4

12

20

35

              Total home equity loans

16

18

(2)

82

134

     Consumer other — Key Community Bank

7

8

9

31

38

     Credit cards

5

9

9

30

11

     Consumer other:

          Marine (a)

7

5

18

29

59

          Other (a)

1

1

2

4

6

              Total consumer other 

8

6

20

33

65

              Total consumer loans 

43

44

44

196

275

              Total loans charged off

66

78

104

308

508

Recoveries: 

     Commercial, financial and agricultural 

9

11

23

39

63

     Real estate — commercial mortgage 

7

10

5

27

23

     Real estate — construction

6

2

14

5

              Total commercial real estate loans 

7

16

7

41

28

     Commercial lease financing

5

2

4

15

22

              Total commercial loans 

21

29

34

95

113

     Real estate — residential mortgage

1

1

1

2

3

     Home equity:

          Key Community Bank

2

2

4

10

11

          Other

1

2

1

6

5

              Total home equity loans

3

4

5

16

16

     Consumer other — Key Community Bank

2

1

1

7

6

     Credit cards

1

3

     Consumer other:

          Marine

2

4

4

15

22

          Other

1

1

2

3

              Total consumer other  

2

5

5

17

25

              Total consumer loans 

8

12

12

45

50

              Total recoveries 

29

41

46

140

163

Net loan charge-offs

(37)

(37)

(58)

(168)

(345)

Provision (credit) for loan and lease losses

19

28

57

130

229

Foreign currency translation adjustment

(2)

1

1

(2)

Allowance for loan and lease losses at end of period

$

848

$

868

$

888

$

848

$

888

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

$

40

$

37

$

43

$

29

$

45

Provision (credit) for losses on lending-related commitments

(3)

3

(14)

8

(16)

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

$

37

$

40

$

29

$

37

$

29

Total allowance for credit losses at end of period

$

885

$

908

$

917

$

885

$

917

Net loan charge-offs to average total loans

.27

%

.28

%

.44

%

.32

%

.69

%

Allowance for loan and lease losses to period-end loans

1.56

1.62

1.68

1.56

1.68

Allowance for credit losses to period-end loans

1.63

1.69

1.74

1.63

1.74

Allowance for loan and lease losses to nonperforming loans

166.9

160.4

131.8

166.9

131.8

Allowance for credit losses to nonperforming loans

174.2

167.8

136.1

174.2

136.1

Discontinued operations — education lending business:

     Loans charged off

$

13

$

14

$

19

$

55

$

75

     Recoveries

4

5

4

18

17

     Net loan charge-offs

$

(9)

$

(9)

$

(15)

$

(37)

$

(58)

(a)  Further review of the loans subject to updated regulatory guidance in the third quarter of 2012 was performing during the fourth quarter of 2012.  This review resulted in a partial home equity loan charge-off reversal and reallocation of the updated charge-off amounts to other consumer loan portfolios.  Home equity — Key Community Bank charge-offs were $18 million prior to adjustments made from this review.  Prior to reallocation, Real estate — residential mortgage, Home equity — Other, Consumer other — Marine, and Consumer other — Other charge-offs were $3 million, $6 million, $11 million, and $1 million, respectively.  

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

 

Summary of Nonperforming Assets and Past Due Loans From Continuing Operations