KeyCorp Reports Second Quarter 2017 Net Income Of $393 Million, Or $.36 Per Common Share
2Q17 included a net benefit of $.02 per common share from notable items: merchant services gain, purchase accounting finalization, merger-related charges, and charitable contribution
Positive operating leverage of 10% compared to the prior year and 2% compared to the prior quarter, excluding notable items
Achieved annualized cost savings of $400 million; expect to reach $450 million by early 2018
Cash efficiency ratio improved to 59.3%, in 2Q17, or 59.4%, excluding notable items
Return on average tangible common equity of 13.8% for 2Q17, or 12.9%, excluding notable items
CLEVELAND, July 20, 2017 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced second quarter net income from continuing operations attributable to Key common shareholders of $393 million, or $.36 per common share, compared to $296 million or $.27 per common share, for the first quarter of 2017 and $193 million, or $.23 per common share, for the second quarter of 2016. During the second quarter of 2017, Key's results included a number of notable items, including a gain related to our merchant services business, the finalization of purchase accounting, merger-related charges, and a charitable contribution. These notable items had a pre-tax net benefit of $43 million, or $.02 per common share for the second quarter of 2017.
"We were pleased with the strength and quality of our second quarter results, which reflect Key's continued business momentum and realization of value from the First Niagara acquisition," said Chairman and Chief Executive Officer Beth Mooney. "We also made investments for growth across our franchise, including the repositioning of our merchant services business and the recent acquisition of HelloWallet."
"We continued to generate positive operating leverage versus the prior year and prior quarter, and our cash efficiency ratio improved to 59.3%, or 59.4%, excluding notable items," Mooney continued. "Revenue growth was driven by both net interest income and fee-based businesses, and importantly, we achieved $400 million in annualized cost savings from First Niagara. We remain on track to achieve an incremental $50 million in savings by early 2018, and remain confident in our ability to achieve our targets and continue to deliver value for our shareholders."
"Our risk and capital positions remained strong in the second quarter," added Mooney. "We increased our common share dividend by 12% while also repurchasing $94 million of common shares. We were pleased to receive no objection from the Federal Reserve on our 2017 Capital Plan, which includes two additional dividend increases, subject to Board approval, and an increased common share repurchase authorization."
Selected Financial Highlights |
|||||||||||||||
dollars in millions, except per share data |
Change 2Q17 vs. |
||||||||||||||
2Q17 |
1Q17 |
2Q16 |
1Q17 |
2Q16 |
|||||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
393 |
$ |
296 |
$ |
193 |
32.8% |
103.6% |
|||||||
Income (loss) from continuing operations attributable to Key common shareholders per |
.36 |
.27 |
.23 |
33.3 |
56.5 |
||||||||||
Return on average total assets from continuing operations |
1.23% |
.99% |
.82% |
N/A |
N/A |
||||||||||
Common Equity Tier 1 ratio (non-GAAP) (a), (b) |
9.97 |
9.91 |
11.10 |
N/A |
N/A |
||||||||||
Book value at period end |
$ |
13.02 |
$ |
12.71 |
$ |
13.08 |
2.4% |
(.5)% |
|||||||
Net interest margin (TE) from continuing operations |
3.30% |
3.13% |
2.76% |
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 "Common Equity Tier 1." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. For further information on the Regulatory Capital Rules, see the "Capital" section of this release. |
||||||||||||||
(b) |
6/30/2017 ratio is estimated. |
||||||||||||||
TE = Taxable Equivalent, N/A = Not Applicable |
INCOME STATEMENT HIGHLIGHTS |
||||||||||||||
Revenue |
||||||||||||||
dollars in millions |
Change 2Q17 vs. |
|||||||||||||
2Q17 |
1Q17 |
2Q16 |
1Q17 |
2Q16 |
||||||||||
Net interest income (TE) |
$ |
987 |
$ |
929 |
$ |
605 |
6.2 |
% |
63.1 |
% |
||||
Noninterest income |
653 |
577 |
473 |
13.2 |
% |
38.1 |
% |
|||||||
Total revenue |
$ |
1,640 |
$ |
1,506 |
$ |
1,078 |
8.9 |
% |
52.1 |
% |
||||
TE = Taxable Equivalent; N/M = Not Meaningful |
Second quarter 2017 net interest income included $100 million of purchase accounting accretion related to the acquisition of First Niagara, including $42 million related to the finalization of previous purchase accounting estimates. First quarter 2017 results included $53 million of purchase accounting accretion.
Taxable-equivalent net interest income was $987 million for the second quarter of 2017, and the net interest margin was 3.30%, compared to taxable-equivalent net interest income of $605 million and a net interest margin of 2.76% for the second quarter of 2016, reflecting benefit from the First Niagara acquisition, including purchase accounting accretion, as well as higher earning asset yields and balances.
Compared to the first quarter of 2017, taxable-equivalent net interest income increased by $58 million, and the net interest margin increased by 17 basis points. The increase in net interest income and the net interest margin reflects an increase in purchase accounting accretion and higher earning asset yields, partly offset by a decline in loan fees and higher interest-bearing deposit costs, largely the result of an increase in commercial deposit rates and growth in higher-yielding deposit products. Net interest income also benefited from one additional day in the second quarter of 2017.
Excluding purchase accounting accretion, taxable-equivalent net interest income increased $282 million from the second quarter of 2016 and $11 million from the first quarter of 2017.
Noninterest Income |
||||||||||||||
dollars in millions |
Change 2Q17 vs. |
|||||||||||||
2Q17 |
1Q17 |
2Q16 |
1Q17 |
2Q16 |
||||||||||
Trust and investment services income |
$ |
134 |
$ |
135 |
$ |
110 |
(.7)% |
21.8% |
||||||
Investment banking and debt placement fees |
135 |
127 |
98 |
6.3 |
37.8 |
|||||||||
Service charges on deposit accounts |
90 |
87 |
68 |
3.4 |
32.4 |
|||||||||
Operating lease income and other leasing gains |
30 |
23 |
18 |
30.4 |
66.7 |
|||||||||
Corporate services income |
55 |
54 |
53 |
1.9 |
3.8 |
|||||||||
Cards and payments income |
70 |
65 |
52 |
7.7 |
34.6 |
|||||||||
Corporate-owned life insurance income |
33 |
30 |
28 |
10.0 |
17.9 |
|||||||||
Consumer mortgage income |
6 |
6 |
3 |
— |
100.0 |
|||||||||
Mortgage servicing fees |
15 |
18 |
10 |
(16.7) |
50.0 |
|||||||||
Net gains (losses) from principal investing |
— |
1 |
11 |
N/M |
N/M |
|||||||||
Other income |
85 |
31 |
22 |
174.2 |
286.4 |
|||||||||
Total noninterest income |
$ |
653 |
$ |
577 |
$ |
473 |
13.2% |
38.1% |
||||||
N/M = Not Meaningful |
Key's noninterest income was $653 million for the second quarter of 2017, compared to $473 million for the year-ago quarter. Growth was largely driven by the acquisition of First Niagara, as well as core business momentum and a $64 million one-time gain from acquiring the remaining ownership interest in a merchant services joint venture. Investment banking and debt placement fees grew $37 million, related to strong commercial mortgage banking, underwriting, and advisory fees.
Compared to the first quarter of 2017, noninterest income increased by $76 million. The largest driver of the increase was a $64 million one-time gain related to Key's merchant services business, realized in other income. Investment banking and debt placement fees continue to be a source of growth, up $8 million from the prior quarter, related to strong advisory fees. Operating lease income and other leasing gains grew $7 million, and cards and payments income increased $5 million.
Noninterest Expense |
||||||||||||||
dollars in millions |
Change 2Q17 vs. |
|||||||||||||
2Q17 |
1Q17 |
2Q16 |
1Q17 |
2Q16 |
||||||||||
Personnel expense |
$ |
551 |
$ |
556 |
$ |
427 |
(.9)% |
29.0% |
||||||
Non-personnel expense |
444 |
457 |
324 |
(2.8) |
37.0 |
|||||||||
Total noninterest expense |
$ |
995 |
$ |
1,013 |
$ |
751 |
(1.8) |
32.5 |
||||||
Merger-related charges |
44 |
81 |
45 |
(45.7) |
(2.2) |
|||||||||
Total noninterest expense excluding merger-related charges |
$ |
951 |
$ |
932 |
$ |
706 |
2.0% |
34.7% |
||||||
Key's noninterest expense was $995 million for the second quarter of 2017, and included $44 million of merger-related charges. Merger-related charges for the quarter were made up of $31 million of personnel expense and $13 million of non-personnel expense, largely reflected in business services and professional fees and marketing expense.
Excluding merger-related charges, noninterest expense was $245 million higher than the second quarter of last year. The increase from the prior year, reflected in both personnel and non-personnel expense, was primarily driven by the acquisition of First Niagara. Higher incentive compensation related to stronger capital markets performance also contributed to the year-over-year increase.
Excluding merger-related charges, noninterest expense was $19 million higher than the first quarter of 2017, mostly related to seasonal trends, including higher marketing expense. Incentive and stock-based compensation and salaries expense increased but were more than offset by lower employee benefits expense. Other notable items which impacted the second quarter included a $20 million charitable contribution and $4 million benefit from purchase accounting finalization, both of which are reflected in other expense.
BALANCE SHEET HIGHLIGHTS
Average Loans |
||||||||||||||
dollars in millions |
Change 2Q17 vs. |
|||||||||||||
2Q17 |
1Q17 |
2Q16 |
1Q17 |
2Q16 |
||||||||||
Commercial and industrial (a) |
$ |
40,666 |
$ |
40,002 |
$ |
32,630 |
1.7% |
24.6% |
||||||
Other commercial loans |
21,990 |
22,175 |
13,222 |
(.8) |
66.3 |
|||||||||
Home equity loans |
12,473 |
12,611 |
10,098 |
(1.1) |
23.5 |
|||||||||
Other consumer loans |
11,373 |
11,345 |
5,198 |
.2 |
118.8 |
|||||||||
Total loans |
$ |
86,502 |
$ |
86,133 |
$ |
61,148 |
.4% |
41.5% |
||||||
(a) |
Commercial and industrial average loan balances include $117 million, $114 million, and $87 million of assets from commercial credit cards at June 30, 2017, March 31, 2017, and June 30, 2016, respectively. |
During the second quarter of 2017, Key finalized the fair value of the First Niagara acquired loan portfolio, adjusting the discount from $548 million to $603 million. At June 30, 2017, $345 million of the fair value discount remained.
Average loans were $86.5 billion for the second quarter of 2017, an increase of $25.4 billion compared to the second quarter of 2016, primarily reflecting the impact of the First Niagara acquisition, as well as growth in commercial and industrial loans which was broad-based and spread across Key's commercial lines of business.
Compared to the first quarter of 2017, average loans increased by $369 million. Commercial and industrial loans increased $664 million, with strength in middle market lending. Consumer loans decreased $110 million, mostly from continued declines in the home equity loan portfolio, largely the result of paydowns on home equity lines of credit.
Average Deposits |
|||||||||||||||
dollars in millions |
Change 2Q17 vs. |
||||||||||||||
2Q17 |
1Q17 |
2Q16 |
1Q17 |
2Q16 |
|||||||||||
Non-time deposits |
$ |
92,018 |
$ |
91,745 |
$ |
67,419 |
.3% |
36.5% |
|||||||
Certificates of deposit ($100,000 or more) |
6,111 |
5,627 |
3,233 |
8.6 |
89.0 |
||||||||||
Other time deposits |
4,650 |
4,706 |
3,252 |
(1.2) |
43.0 |
||||||||||
Total deposits |
$ |
102,779 |
$ |
102,078 |
$ |
73,904 |
.7% |
39.1% |
|||||||
Cost of total deposits |
.26% |
.23% |
.19% |
N/A |
N/A |
||||||||||
N/A = Not Applicable |
Average deposits totaled $102.8 billion for the second quarter of 2017, an increase of $28.9 billion compared to the year-ago quarter, primarily reflecting the acquisition of First Niagara and core retail and commercial deposit growth.
Compared to the first quarter of 2017, average deposits increased by $701 million, driven by growth in certificates of deposits and NOW and money market deposit accounts, partly offset by a decline in escrow deposits. During the quarter, Key also experienced a shift in deposit mix from noninterest-bearing and low-cost interest-bearing deposits to higher-yielding deposit products. On a period-end basis, total deposits decreased $1.1 billion compared to the linked-quarter, largely the result of seasonal deposit growth that occurred in the first quarter of 2017.
ASSET QUALITY |
||||||||||||||
dollars in millions |
Change 2Q17 vs. |
|||||||||||||
2Q17 |
1Q17 |
2Q16 |
1Q17 |
2Q16 |
||||||||||
Net loan charge-offs |
$ |
66 |
$ |
58 |
$ |
43 |
13.8% |
53.5% |
||||||
Net loan charge-offs to average total loans |
.31% |
.27% |
.28% |
N/A |
N/A |
|||||||||
Nonperforming loans at period end (a) |
$ |
507 |
$ |
573 |
$ |
619 |
(11.5) |
(18.1) |
||||||
Nonperforming assets at period end (a) |
556 |
623 |
637 |
(10.8) |
(12.7) |
|||||||||
Allowance for loan and lease losses |
870 |
870 |
854 |
.0 |
1.9 |
|||||||||
Allowance for loan and lease losses to nonperforming loans (a) |
171.6% |
151.8% |
138.0% |
N/A |
N/A |
|||||||||
Provision for credit losses |
$ |
66 |
$ |
63 |
$ |
52 |
4.8% |
26.9% |
||||||
(a) |
Nonperforming loan balances exclude $835 million, $812 million, and $11 million of purchased credit impaired loans at June 30, 2017, March 31, 2017, and June 30, 2016, respectively. |
N/A = Not Applicable |
Key's provision for credit losses was $66 million for the second quarter of 2017, compared to $52 million for the second quarter of 2016 and $63 million for the first quarter of 2017. Key's allowance for loan and lease losses was $870 million, or 1.01% of total period-end loans, at June 30, 2017, compared to 1.38% at June 30, 2016, and 1.01% at March 31, 2017.
Net loan charge-offs for the second quarter of 2017 totaled $66 million, or .31% of average total loans. These results compare to $43 million, or .28%, for the second quarter of 2016, and $58 million, or .27%, for the first quarter of 2017.
At June 30, 2017, Key's nonperforming loans totaled $507 million, which represented .59% of period-end portfolio loans. These results compare to 1.00% at June 30, 2016, and .67% at March 31, 2017. Nonperforming assets at June 30, 2017, totaled $556 million, and represented .64% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to 1.03% at June 30, 2016, and .72% at March 31, 2017.
CAPITAL
Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at June 30, 2017.
Capital Ratios |
||||||
6/30/2017 |
3/31/2017 |
6/30/2016 |
||||
Common Equity Tier 1 (a), (b) |
9.97% |
9.91% |
11.10% |
|||
Tier 1 risk-based capital (a) |
10.79 |
10.74 |
11.41 |
|||
Total risk based capital (a) |
12.71 |
12.69 |
13.63 |
|||
Tangible common equity to tangible assets (b) |
8.56 |
8.51 |
9.95 |
|||
Leverage (a) |
9.96 |
9.81 |
10.59 |
|||
(a) |
6/30/2017 ratio is estimated. |
(b) |
The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "tangible common equity" and "Common Equity Tier 1." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. See below for further information on the Regulatory Capital Rules. |
Key's capital position remained strong throughout the first quarter. As shown in the preceding table, at June 30, 2017, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.97% and 10.79%, respectively. In addition, the tangible common equity ratio was 8.56% at June 30, 2017.
As a "standardized approach" banking organization, Key's mandatory compliance with the final Basel III capital framework for U.S. banking organizations (the "Regulatory Capital Rules") began on January 1, 2015, subject to transitional provisions extending to January 1, 2019. Key's estimated Common Equity Tier 1 ratio as calculated under the fully phased-in Regulatory Capital Rules was 9.87% at June 30, 2017. This estimate exceeds the fully phased-in required minimum Common Equity Tier 1 and Capital Conservation Buffer of 7.00%.
Summary of Changes in Common Shares Outstanding |
||||||||||||
in thousands |
Change 2Q17 vs. |
|||||||||||
2Q17 |
1Q17 |
2Q16 |
1Q17 |
2Q16 |
||||||||
Shares outstanding at beginning of period |
1,097,479 |
1,079,314 |
842,290 |
1.7% |
30.3% |
|||||||
Open market repurchases and return of shares under employee compensation plans |
(5,072) |
(8,673) |
— |
(41.5) |
N/M |
|||||||
Shares issued under employee compensation plans (net of cancellations) |
332 |
6,270 |
413 |
(94.7) |
(19.6) |
|||||||
Common shares exchanged for Series A Preferred Stock |
— |
20,568 |
— |
N/M |
N/M |
|||||||
Shares outstanding at end of period |
1,092,739 |
1,097,479 |
842,703 |
(.4)% |
29.7% |
|||||||
N/M = Not Meaningful |
Consistent with Key's 2016 Capital Plan, during the second quarter of 2017, Key declared an increased dividend of $.095 per common share, representing a 12% increase compared to the first quarter of 2017. Key also completed $94 million of common share repurchases during the quarter, including $88 million of common share repurchases in the open market and $6 million of share repurchases related to employee equity compensation programs.
Key's 2017 Capital Plan, which received no objection from the Federal Reserve, includes two common share dividend increases (subject to Board approval), as well as a common share repurchase program of up to $800 million. This authorization includes repurchases to offset issuances of common shares under our employee compensation plans. Repurchases are expected to be executed over the next four quarters.
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 2Q17 vs. |
||||||||||||||
2Q17 |
1Q17 |
2Q16 |
1Q17 |
2Q16 |
|||||||||||
Revenue from continuing operations (TE) |
|||||||||||||||
Key Community Bank |
$ |
1,012 |
$ |
907 |
$ |
598 |
11.6% |
69.2% |
|||||||
Key Corporate Bank |
596 |
579 |
451 |
2.9 |
32.2 |
||||||||||
Other Segments |
35 |
29 |
31 |
20.7 |
12.9 |
||||||||||
Total segments |
1,643 |
1,515 |
1,080 |
8.4 |
52.1 |
||||||||||
Reconciling Items |
(3) |
(9) |
(2) |
N/M |
N/M |
||||||||||
Total |
$ |
1,640 |
$ |
1,506 |
$ |
1,078 |
8.9% |
52.1% |
|||||||
Income (loss) from continuing operations attributable to Key |
|||||||||||||||
Key Community Bank |
$ |
197 |
$ |
146 |
$ |
80 |
34.9% |
146.3% |
|||||||
Key Corporate Bank |
222 |
182 |
135 |
22.0 |
64.4 |
||||||||||
Other Segments |
28 |
21 |
25 |
33.3 |
12.0 |
||||||||||
Total segments |
447 |
349 |
240 |
28.1 |
86.3 |
||||||||||
Reconciling Items (a) |
(40) |
(25) |
(41) |
N/M |
N/M |
||||||||||
Total |
$ |
407 |
$ |
324 |
$ |
199 |
25.6% |
104.5% |
|||||||
(a) |
Reconciling items consists primarily of the unallocated portion of merger-related charges and items not allocated to the business segments because they do not reflect their normal operations. |
TE = Taxable Equivalent, N/M = Not Meaningful |
Key Community Bank |
|||||||||||||||
dollars in millions |
Change 2Q17 vs. |
||||||||||||||
2Q17 |
1Q17 |
2Q16 |
1Q17 |
2Q16 |
|||||||||||
Summary of operations |
|||||||||||||||
Net interest income (TE) |
$ |
676 |
$ |
630 |
$ |
392 |
7.3% |
72.4% |
|||||||
Noninterest income |
336 |
277 |
206 |
21.3 |
63.1 |
||||||||||
Total revenue (TE) |
1,012 |
907 |
598 |
11.6 |
69.2 |
||||||||||
Provision for credit losses |
47 |
47 |
25 |
— |
88.0 |
||||||||||
Noninterest expense |
652 |
628 |
445 |
3.8 |
46.5 |
||||||||||
Income (loss) before income taxes (TE) |
313 |
232 |
128 |
34.9 |
144.5 |
||||||||||
Allocated income taxes (benefit) and TE adjustments |
116 |
86 |
48 |
34.9 |
141.7 |
||||||||||
Net income (loss) attributable to Key |
$ |
197 |
$ |
146 |
$ |
80 |
34.9% |
146.3% |
|||||||
Average balances |
|||||||||||||||
Loans and leases |
$ |
47,431 |
$ |
47,036 |
$ |
30,936 |
.8% |
53.3% |
|||||||
Total assets |
51,419 |
50,963 |
32,963 |
.9 |
56.0 |
||||||||||
Deposits |
79,716 |
79,393 |
53,794 |
.4 |
48.2 |
||||||||||
Assets under management at period end |
$ |
37,613 |
$ |
37,417 |
$ |
34,535 |
.5% |
8.9% |
|||||||
TE = Taxable Equivalent |
Additional Key Community Bank Data |
|||||||||||||||
dollars in millions |
Change 2Q17 vs. |
||||||||||||||
2Q17 |
1Q17 |
2Q16 |
1Q17 |
2Q16 |
|||||||||||
Noninterest income |
|||||||||||||||
Trust and investment services income |
$ |
99 |
$ |
98 |
$ |
73 |
1.0% |
35.6% |
|||||||
Service charges on deposit accounts |
77 |
75 |
56 |
2.7 |
37.5 |
||||||||||
Cards and payments income |
60 |
55 |
46 |
9.1 |
30.4 |
||||||||||
Other noninterest income |
100 |
49 |
31 |
104.1 |
222.6 |
||||||||||
Total noninterest income |
$ |
336 |
$ |
277 |
$ |
206 |
21.3% |
63.1% |
|||||||
Average deposit balances |
|||||||||||||||
NOW and money market deposit accounts |
$ |
45,243 |
$ |
45,027 |
$ |
30,144 |
.5% |
50.1% |
|||||||
Savings deposits |
5,293 |
5,268 |
2,365 |
.5 |
123.8 |
||||||||||
Certificates of deposit ($100,000 or more) |
4,016 |
3,878 |
2,383 |
3.6 |
68.5 |
||||||||||
Other time deposits |
4,640 |
4,692 |
3,245 |
(1.1) |
43.0 |
||||||||||
Noninterest-bearing deposits |
20,524 |
20,528 |
15,657 |
— |
31.1 |
||||||||||
Total deposits |
$ |
79,716 |
$ |
79,393 |
$ |
53,794 |
.4% |
48.2% |
|||||||
Home equity loans |
|||||||||||||||
Average balance |
$ |
12,330 |
$ |
12,456 |
$ |
9,908 |
|||||||||
Combined weighted-average loan-to-value ratio (at date of origination) |
71% |
70% |
71% |
||||||||||||
Percent first lien positions |
60 |
60 |
61 |
||||||||||||
Other data |
|||||||||||||||
Branches |
1,210 |
1,216 |
949 |
||||||||||||
Automated teller machines |
1,589 |
1,594 |
1,236 |
||||||||||||
Key Community Bank Summary of Operations (2Q17 vs. 2Q16)
- Positive operating leverage compared to prior year
- Net income increased $117 million, or 146.3%, from prior year
- Average commercial and industrial loans increased $5.4 billion, or 41.2%, from the prior year
- Average deposits increased $25.9 billion, or 48.2%, from the prior year
Key Community Bank recorded net income attributable to Key of $197 million for the second quarter of 2017, compared to $80 million for the year-ago quarter, benefiting from momentum in Key's core businesses, as well as the impact of the First Niagara acquisition.
Taxable-equivalent net interest income increased by $284 million, or 72.4%, from the second quarter of 2016. The increase was primarily attributable to the acquisition of First Niagara, as well as the benefit from higher interest rates. Average loans and leases increased $16.5 billion, or 53.3%, largely driven by a $5.4 billion, or 41.2%, increase in commercial and industrial loans. Additionally, average deposits increased $25.9 billion, or 48.2%, from one year ago.
Noninterest income was up $130 million, or 63.1%, from the year-ago quarter, driven by the acquisition of First Niagara, including the addition of Key Insurance and Benefits Services. Strength in cards and payments and higher assets under management from market growth also contributed to the increase. The increase in other noninterest income was largely driven by the one-time gain related to Key's merchant services business.
The provision for credit losses increased by $22 million, or 88.0%, and net loan charge-offs increased $30 million from the second quarter of 2016, primarily related to the acquisition of First Niagara.
Noninterest expense increased by $207 million, or 46.5%, from the year-ago quarter, largely driven by the acquisition of First Niagara, as well as core business activity and investments. Personnel expense increased $76 million, while non-personnel expense increased by $131 million, including higher intangible amortization expense and higher FDIC assessment expense.
Key Corporate Bank |
|||||||||||||||
dollars in millions |
Change 2Q17 vs. |
||||||||||||||
2Q17 |
1Q17 |
2Q16 |
1Q17 |
2Q16 |
|||||||||||
Summary of operations |
|||||||||||||||
Net interest income (TE) |
$ |
312 |
$ |
304 |
$ |
221 |
2.6% |
41.2% |
|||||||
Noninterest income |
284 |
275 |
230 |
3.3 |
23.5 |
||||||||||
Total revenue (TE) |
596 |
579 |
451 |
2.9 |
32.2 |
||||||||||
Provision for credit losses |
19 |
17 |
30 |
11.8 |
(36.7) |
||||||||||
Noninterest expense |
299 |
303 |
259 |
(1.3) |
15.4 |
||||||||||
Income (loss) before income taxes (TE) |
278 |
259 |
162 |
7.3 |
71.6 |
||||||||||
Allocated income taxes and TE adjustments |
56 |
77 |
29 |
(27.3) |
93.1 |
||||||||||
Net income (loss) |
222 |
182 |
133 |
22.0 |
66.9 |
||||||||||
Less: Net income (loss) attributable to noncontrolling interests |
— |
— |
(2) |
N/M |
N/M |
||||||||||
Net income (loss) attributable to Key |
$ |
222 |
$ |
182 |
$ |
135 |
22.0% |
64.4% |
|||||||
Average balances |
|||||||||||||||
Loans and leases |
$ |
37,750 |
$ |
37,737 |
$ |
28,607 |
— |
32.0% |
|||||||
Loans held for sale |
1,000 |
1,097 |
591 |
(8.8)% |
69.2 |
||||||||||
Total assets |
44,177 |
44,173 |
33,908 |
— |
30.3 |
||||||||||
Deposits |
21,146 |
21,003 |
19,129 |
.7% |
10.5% |
||||||||||
TE = Taxable Equivalent, N/M = Not Meaningful |
Additional Key Corporate Bank Data |
|||||||||||||||
dollars in millions |
Change 2Q17 vs. |
||||||||||||||
2Q17 |
1Q17 |
2Q16 |
1Q17 |
2Q16 |
|||||||||||
Noninterest income |
|||||||||||||||
Trust and investment services income |
$ |
35 |
$ |
37 |
$ |
37 |
(5.4)% |
(5.4)% |
|||||||
Investment banking and debt placement fees |
134 |
124 |
94 |
8.1 |
42.6 |
||||||||||
Operating lease income and other leasing gains |
22 |
21 |
15 |
4.8 |
46.7 |
||||||||||
Corporate services income |
38 |
38 |
40 |
— |
(5.0) |
||||||||||
Service charges on deposit accounts |
13 |
12 |
12 |
8.3 |
8.3 |
||||||||||
Cards and payments income |
10 |
10 |
6 |
— |
66.7 |
||||||||||
Payments and services income |
61 |
60 |
58 |
1.7 |
5.2 |
||||||||||
Mortgage servicing fees |
12 |
16 |
10 |
(25.0) |
20.0 |
||||||||||
Other noninterest income |
20 |
17 |
16 |
17.6 |
25.0 |
||||||||||
Total noninterest income |
$ |
284 |
$ |
275 |
$ |
230 |
3.3% |
23.5% |
|||||||
Key Corporate Bank Summary of Operations (2Q17 vs. 2Q16)
- Positive operating leverage compared to prior year
- Average loan and lease balances up $9.1 billion, or 32%, from the prior year
- Revenue up $145 million, or 32.2%, from the prior year
- Investment banking and debt placement fees up $40 million, or 42.6%, from the prior year
Key Corporate Bank recorded net income attributable to Key of $222 million for the second quarter of 2017, compared to $135 million for the same period one year ago.
Taxable-equivalent net interest income increased by $91 million, or 41.2%, compared to the second quarter of 2016 driven by higher earning asset yields and balances. Average loan and lease balances increased $9.1 billion, or 32%, from the year-ago quarter, primarily driven by the First Niagara acquisition as well as growth in commercial and industrial loans. Average deposit balances increased $2 billion, or 10.5%, from the year-ago quarter, mostly driven by the First Niagara acquisition.
Noninterest income was up $54 million, or 23.5%, from the prior year. This growth was mostly due to $40 million of higher investment banking and debt placement fees related to stronger commercial mortgage banking, underwriting, and advisory fees, as well as an increase of $7 million in operating lease income and other leasing gains related to higher originations. Additional increases of $4 million in both cards and payments income and other noninterest income were partially offset by a $2 million decrease in trust and investment services income.
The provision for credit losses decreased $11 million, or 36.7%, compared to the second quarter of 2016 due to $8 million of lower net loan charge-offs and improvement in the oil and gas portfolio.
Noninterest expense increased by $40 million, or 15.4%, from the second quarter of 2016. The increase from the prior year, reflected in both personnel and non-personnel expense, was largely driven by the acquisition of First Niagara, higher performance-based compensation and various other items, including operating lease, FDIC, and cards and payments expenses.
Other Segments
Other Segments consist of Corporate Treasury, Key's Principal Investing unit, and various exit portfolios. Other Segments generated net income attributable to Key of $28 million for the second quarter of 2017, compared to $25 million for the same period last year, driven by increases in operating lease income and other leasing gains and corporate-owned life insurance income.
KeyCorp's roots trace back 190 years to Albany, New York. Headquartered in Cleveland, Ohio, Key is one of the nation's largest bank-based financial services companies, with assets of approximately $135.8 billion at June 30, 2017.
Key provides deposit, lending, cash management, insurance, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of more than 1,200 branches and more than 1,500 ATMs. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC.
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements do not relate strictly to historical or current facts. Forward-looking statements usually can be identified by the use of words such as "goal," "objective," "plan," "expect," "assume," "anticipate," "intend," "project," "believe," "estimate," or other words of similar meaning. Forward-looking statements provide our current expectations or forecasts of future events, circumstances, results, or aspirations. Forward-looking statements, by their nature, are subject to assumptions, risks and uncertainties, many of which are outside of our control. Our actual results may differ materially from those set forth in our forward-looking statements. There is no assurance that any list of risks and uncertainties or risk factors is complete. Factors that could cause Key's actual results to differ from those described in the forward-looking statements can be found in KeyCorp's Form 10-K for the year ended December 31, 2016, as well as in KeyCorp's subsequent SEC filings, all of which have been filed with the Securities and Exchange Commission (the "SEC") and are available on Key's website (www.key.com/ir) and on the SEC's website (www.sec.gov). These factors may include, among others: deterioration of commercial real estate market fundamentals, adverse changes in credit quality trends, declining asset prices, a reversal of the U.S. economic recovery due to financial, political, or other shocks, and the extensive and increasing regulation of the U.S. financial services industry. Any forward-looking statements made by us or on our behalf speak only as of the date they are made and we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances. |
Notes to Editors:
A live Internet broadcast of KeyCorp's conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on Thursday, July 20, 2017. An audio replay of the call will be available through July 30, 2017.
For up-to-date company information, media contacts, and facts and figures about Key's lines of business, visit our Media Newsroom at https://www.key.com/newsroom.
Financial Highlights |
|||||||||||
(dollars in millions, except per share amounts) |
|||||||||||
Three months ended |
|||||||||||
6/30/2017 |
3/31/2017 |
6/30/2016 |
|||||||||
Summary of operations |
|||||||||||
Net interest income (TE) |
$ |
987 |
$ |
929 |
$ |
605 |
|||||
Noninterest income |
653 |
577 |
473 |
||||||||
Total revenue (TE) |
1,640 |
1,506 |
1,078 |
||||||||
Provision for credit losses |
66 |
63 |
52 |
||||||||
Noninterest expense |
995 |
1,013 |
751 |
||||||||
Income (loss) from continuing operations attributable to Key |
407 |
324 |
199 |
||||||||
Income (loss) from discontinued operations, net of taxes (a) |
5 |
— |
3 |
||||||||
Net income (loss) attributable to Key |
412 |
324 |
202 |
||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
393 |
296 |
193 |
||||||||
Income (loss) from discontinued operations, net of taxes (a) |
5 |
— |
3 |
||||||||
Net income (loss) attributable to Key common shareholders |
398 |
296 |
196 |
||||||||
Per common share |
|||||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
.36 |
$ |
.28 |
$ |
.23 |
|||||
Income (loss) from discontinued operations, net of taxes (a) |
— |
— |
— |
||||||||
Net income (loss) attributable to Key common shareholders (b) |
.37 |
.28 |
.23 |
||||||||
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution |
.36 |
.27 |
.23 |
||||||||
Income (loss) from discontinued operations, net of taxes — assuming dilution (a) |
— |
— |
— |
||||||||
Net income (loss) attributable to Key common shareholders — assuming dilution (b) |
.36 |
.27 |
.23 |
||||||||
Cash dividends declared |
.095 |
.085 |
.085 |
||||||||
Book value at period end |
13.02 |
12.71 |
13.08 |
||||||||
Tangible book value at period end |
10.40 |
10.21 |
11.81 |
||||||||
Market price at period end |
18.74 |
17.78 |
11.05 |
||||||||
Performance ratios |
|||||||||||
From continuing operations: |
|||||||||||
Return on average total assets |
1.23 |
% |
.99 |
% |
.82 |
% |
|||||
Return on average common equity |
11.12 |
8.76 |
7.15 |
||||||||
Return on average tangible common equity (c) |
13.80 |
10.98 |
7.94 |
||||||||
Net interest margin (TE) |
3.30 |
3.13 |
2.76 |
||||||||
Cash efficiency ratio (c) |
59.3 |
65.8 |
69.0 |
||||||||
From consolidated operations: |
|||||||||||
Return on average total assets |
1.23 |
% |
.98 |
% |
.82 |
% |
|||||
Return on average common equity |
11.26 |
8.76 |
7.26 |
||||||||
Return on average tangible common equity (c) |
13.98 |
10.98 |
8.06 |
||||||||
Net interest margin (TE) |
3.28 |
3.11 |
2.74 |
||||||||
Loan to deposit (d) |
87.2 |
85.6 |
85.3 |
||||||||
Capital ratios at period end |
|||||||||||
Key shareholders' equity to assets |
11.23 |
% |
11.14 |
% |
11.18 |
% |
|||||
Key common shareholders' equity to assets |
10.48 |
10.37 |
10.90 |
||||||||
Tangible common equity to tangible assets (c) |
8.56 |
8.51 |
9.95 |
||||||||
Common Equity Tier 1 (c), (e) |
9.97 |
9.91 |
11.10 |
||||||||
Tier 1 risk-based capital (e) |
10.79 |
10.74 |
11.41 |
||||||||
Total risk-based capital (e) |
12.71 |
12.69 |
13.63 |
||||||||
Leverage (e) |
9.96 |
9.81 |
10.59 |
||||||||
Asset quality — from continuing operations |
|||||||||||
Net loan charge-offs |
$ |
66 |
$ |
58 |
$ |
43 |
|||||
Net loan charge-offs to average loans |
.31 |
% |
.27 |
% |
.28 |
% |
|||||
Allowance for loan and lease losses |
$ |
870 |
$ |
870 |
$ |
854 |
|||||
Allowance for credit losses |
918 |
918 |
904 |
||||||||
Allowance for loan and lease losses to period-end loans |
1.01 |
% |
1.01 |
% |
1.38 |
% |
|||||
Allowance for credit losses to period-end loans |
1.06 |
1.07 |
1.46 |
||||||||
Allowance for loan and lease losses to nonperforming loans (f) |
171.6 |
151.8 |
138.0 |
||||||||
Allowance for credit losses to nonperforming loans (f) |
181.1 |
160.2 |
146.0 |
||||||||
Nonperforming loans at period-end (f) |
$ |
507 |
$ |
573 |
$ |
619 |
|||||
Nonperforming assets at period-end (f) |
556 |
623 |
637 |
||||||||
Nonperforming loans to period-end portfolio loans (f) |
.59 |
% |
.67 |
% |
1.00 |
% |
|||||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (f) |
.64 |
.72 |
1.03 |
||||||||
Trust assets |
|||||||||||
Assets under management |
$ |
37,613 |
$ |
37,417 |
$ |
34,535 |
|||||
Other data |
|||||||||||
Average full-time equivalent employees |
18,344 |
18,386 |
13,419 |
||||||||
Branches |
1,210 |
1,216 |
949 |
||||||||
Taxable-equivalent adjustment |
$ |
14 |
$ |
11 |
$ |
8 |
Financial Highlights (continued) |
||||||||
(dollars in millions, except per share amounts) |
||||||||
Six months ended |
||||||||
6/30/2017 |
6/30/2016 |
|||||||
Summary of operations |
||||||||
Net interest income (TE) |
$ |
1,916 |
$ |
1,217 |
||||
Noninterest income |
1,230 |
904 |
||||||
Total revenue (TE) |
3,146 |
2,121 |
||||||
Provision for credit losses |
129 |
141 |
||||||
Noninterest expense |
2,008 |
1,454 |
||||||
Income (loss) from continuing operations attributable to Key |
731 |
386 |
||||||
Income (loss) from discontinued operations, net of taxes (a) |
5 |
4 |
||||||
Net income (loss) attributable to Key |
736 |
390 |
||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
689 |
$ |
375 |
||||
Income (loss) from discontinued operations, net of taxes (a) |
5 |
4 |
||||||
Net income (loss) attributable to Key common shareholders |
694 |
379 |
||||||
Per common share |
||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
.64 |
$ |
.45 |
||||
Income (loss) from discontinued operations, net of taxes (a) |
— |
— |
||||||
Net income (loss) attributable to Key common shareholders (b) |
.64 |
.45 |
||||||
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution |
.63 |
.44 |
||||||
Income (loss) from discontinued operations, net of taxes — assuming dilution (a) |
— |
— |
||||||
Net income (loss) attributable to Key common shareholders — assuming dilution (b) |
.63 |
.45 |
||||||
Cash dividends paid |
.18 |
.16 |
||||||
Performance ratios |
||||||||
From continuing operations: |
||||||||
Return on average total assets |
1.11 |
% |
.81 |
% |
||||
Return on average common equity |
9.97 |
7.01 |
||||||
Return on average tangible common equity (c) |
12.43 |
7.79 |
||||||
Net interest margin (TE) |
3.21 |
2.83 |
||||||
Cash efficiency ratio (c) |
62.4 |
67.8 |
||||||
From consolidated operations: |
||||||||
Return on average total assets |
1.11 |
% |
.80 |
% |
||||
Return on average common equity |
10.04 |
7.08 |
||||||
Return on average tangible common equity (c) |
12.52 |
7.87 |
||||||
Net interest margin (TE) |
3.19 |
2.80 |
||||||
Asset quality — from continuing operations |
||||||||
Net loan charge-offs |
124 |
89 |
||||||
Net loan charge-offs to average total loans |
.29 |
% |
.30 |
% |
||||
Other data |
||||||||
Average full-time equivalent employees |
18,365 |
13,411 |
||||||
Taxable-equivalent adjustment |
25 |
16 |
(a) |
In April 2009, management decided to wind down the operations of Austin Capital Management, Ltd., a subsidiary that specialized in managing hedge fund investments for institutional customers. In September 2009, management decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank National Association. |
(b) |
Earnings per share may not foot due to rounding. |
(c) |
The following table entitled "GAAP to Non-GAAP Reconciliations" presents the computations of certain financial measures related to "tangible common equity," "Common Equity Tier 1," and "cash efficiency." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. For further information on the Regulatory Capital Rules, see the "Capital" section of this release. |
(d) |
Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits (excluding deposits in foreign office). |
(e) |
June 30, 2017, ratio is estimated. |
(f) |
Nonperforming loan balances exclude $835 million, $812 million, and $11 million of purchased credit impaired loans at June 30, 2017, March 31, 2017, and June 30, 2016, respectively. |
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles |
GAAP to Non-GAAP Reconciliations
(dollars in millions)
The table below presents certain non-GAAP financial measures related to "tangible common equity," "return on average tangible common equity," "Common Equity Tier 1," "pre-provision net revenue," certain financial measures excluding merger-related charges and/or other notable items, and "cash efficiency ratio."
Notable items include certain revenue or expense items that may occur in a reporting period which management does not consider indicative of ongoing financial performance. Management believes it is useful to consider certain financial metrics with and without merger-related charges and/or other notable items in order to enable a better understanding of Company results, increase comparability of period-to-period results, and to evaluate and forecast those results.
The tangible common equity ratio and the return on average tangible common equity ratio have been a focus for some investors, and management believes these ratios may assist investors in analyzing Key's capital position without regard to the effects of intangible assets and preferred stock. Traditionally, the banking regulators have assessed bank and bank holding company capital adequacy based on both the amount and the composition of capital, the calculation of which is prescribed in federal banking regulations. In October 2013, the federal banking regulators published the final Basel III capital framework for U.S. banking organizations (the "Regulatory Capital Rules"). The Regulatory Capital Rules require higher and better-quality capital and introduced a new capital measure, "Common Equity Tier 1," a non-GAAP financial measure. The mandatory compliance date for Key as a "standardized approach" banking organization began on January 1, 2015, subject to transitional provisions extending to January 1, 2019.
Common Equity Tier 1 is not formally defined by GAAP and 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 Common Equity Tier 1, 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 credit losses makes it easier to analyze the results by presenting them on a more comparable basis.
As previously disclosed, Key completed its purchase of First Niagara on August 1, 2016. The definitive agreement and plan of merger to acquire First Niagara was originally announced on October 30, 2015. As a result of this transaction, Key has recognized merger-related charges. The table below shows the computation of noninterest expense excluding merger-related charges, return on average tangible common equity excluding merger-related charges, return on average assets from continuing operations excluding merger-related charges, cash efficiency ratio excluding merger-related charges, and pre-provision net revenue excluding merger-related charges. For the second quarter of 2017, merger-related charges are included in the total for "notable items," the detail of which is provided below. Management believes that eliminating the effects of the merger-related charges and other notable items makes it easier to analyze the results by presenting them on a more comparable basis.
The cash efficiency ratio is a ratio of two non-GAAP performance measures. As such, there is no directly comparable GAAP performance measure. The cash efficiency ratio performance measure removes the impact of Key's intangible asset amortization from the calculation. The table below also shows the computation for the cash efficiency ratio excluding merger-related charges. Management believes these ratios provide greater consistency and comparability between Key's results and those of its peer banks. Additionally, these ratios are used by analysts and investors as they develop earnings forecasts and peer bank analysis.
Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.
Three months ended |
Six months ended |
||||||||||||||||||
6/30/2017 |
3/31/2017 |
6/30/2016 |
6/30/2017 |
6/30/2016 |
|||||||||||||||
Tangible common equity to tangible assets at period end |
|||||||||||||||||||
Key shareholders' equity (GAAP) |
$ |
15,253 |
$ |
14,976 |
$ |
11,313 |
|||||||||||||
Less: |
Intangible assets (a) |
2,866 |
2,751 |
1,074 |
|||||||||||||||
Preferred Stock (b) |
1,009 |
1,009 |
281 |
||||||||||||||||
Tangible common equity (non-GAAP) |
$ |
11,378 |
$ |
11,216 |
$ |
9,958 |
|||||||||||||
Total assets (GAAP) |
$ |
135,824 |
$ |
134,476 |
$ |
101,150 |
|||||||||||||
Less: |
Intangible assets (a) |
2,866 |
2,751 |
1,074 |
|||||||||||||||
Tangible assets (non-GAAP) |
$ |
132,958 |
$ |
131,725 |
$ |
100,076 |
|||||||||||||
Tangible common equity to tangible assets ratio (non-GAAP) |
8.56 |
% |
8.51 |
% |
9.95 |
% |
|||||||||||||
Common Equity Tier 1 at period end |
|||||||||||||||||||
Key shareholders' equity (GAAP) |
$ |
15,253 |
$ |
14,976 |
$ |
11,313 |
|||||||||||||
Less: |
Preferred Stock (b) |
1,009 |
1,009 |
281 |
|||||||||||||||
Common Equity Tier 1 capital before adjustments and deductions |
14,244 |
13,967 |
11,032 |
||||||||||||||||
Less: |
Goodwill, net of deferred taxes |
2,417 |
2,379 |
1,031 |
|||||||||||||||
Intangible assets, net of deferred taxes |
252 |
194 |
30 |
||||||||||||||||
Deferred tax assets |
11 |
11 |
1 |
||||||||||||||||
Net unrealized gains (losses) on available-for-sale securities, net of deferred taxes |
(144) |
(179) |
129 |
||||||||||||||||
Accumulated gains (losses) on cash flow hedges, net of deferred taxes |
(64) |
(76) |
77 |
||||||||||||||||
Amounts in accumulated other comprehensive income (loss) attributed to |
|||||||||||||||||||
pension and postretirement benefit costs, net of deferred taxes |
(334) |
(335) |
(362) |
||||||||||||||||
Total Common Equity Tier 1 capital (c) |
$ |
12,106 |
$ |
11,973 |
$ |
10,126 |
|||||||||||||
Net risk-weighted assets (regulatory) (c) |
$ |
121,484 |
$ |
120,852 |
$ |
91,195 |
|||||||||||||
Common Equity Tier 1 ratio (non-GAAP) (c) |
9.97 |
% |
9.91 |
% |
11.10 |
% |
|||||||||||||
Notable items |
|||||||||||||||||||
Merger-related charges |
$ |
(44) |
$ |
(81) |
$ |
(45) |
$ |
(125) |
$ |
(69) |
|||||||||
Merchant services gain |
64 |
— |
— |
64 |
— |
||||||||||||||
Purchase accounting finalization, net |
43 |
— |
— |
43 |
— |
||||||||||||||
Charitable contribution |
(20) |
— |
— |
(20) |
— |
||||||||||||||
Total notable items |
$ |
43 |
$ |
(81) |
$ |
(45) |
$ |
(38) |
$ |
(69) |
|||||||||
Income taxes |
16 |
(30) |
(17) |
(14) |
(26) |
||||||||||||||
Total notable items after tax |
$ |
27 |
$ |
(51) |
$ |
(28) |
$ |
(24) |
$ |
(43) |
GAAP to Non-GAAP Reconciliations (continued) |
||||||||||||||||||
(dollars in millions) |
||||||||||||||||||
Three months ended |
Six months ended |
|||||||||||||||||
6/30/2017 |
3/31/2017 |
6/30/2016 |
6/30/2017 |
6/30/2016 |
||||||||||||||
Pre-provision net revenue |
||||||||||||||||||
Net interest income (GAAP) |
$ |
973 |
$ |
918 |
$ |
597 |
$ |
1,891 |
$ |
1,201 |
||||||||
Plus: |
Taxable-equivalent adjustment |
14 |
11 |
8 |
25 |
16 |
||||||||||||
Noninterest income |
653 |
577 |
473 |
1,230 |
904 |
|||||||||||||
Less: |
Noninterest expense |
995 |
1,013 |
751 |
2,008 |
1,454 |
||||||||||||
Pre-provision net revenue from continuing operations (non-GAAP) |
$ |
645 |
$ |
493 |
$ |
327 |
$ |
1,138 |
$ |
667 |
||||||||
Plus: |
Notable items |
(43) |
81 |
45 |
38 |
69 |
||||||||||||
Pre-provision net revenue from continuing operations excluding notable items (non-GAAP) |
$ |
602 |
$ |
574 |
$ |
372 |
$ |
1,176 |
$ |
736 |
||||||||
Average tangible common equity |
||||||||||||||||||
Average Key shareholders' equity (GAAP) |
$ |
15,200 |
$ |
15,184 |
$ |
11,147 |
$ |
15,192 |
$ |
11,050 |
||||||||
Less: |
Intangible assets (average) (d) |
2,756 |
2,772 |
1,076 |
2,764 |
1,077 |
||||||||||||
Preferred Stock (average) |
1,025 |
1,480 |
290 |
1,251 |
290 |
|||||||||||||
Average tangible common equity (non-GAAP) |
$ |
11,419 |
$ |
10,932 |
$ |
9,781 |
$ |
11,177 |
$ |
9,683 |
||||||||
Return on average tangible common equity from continuing operations |
||||||||||||||||||
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) |
$ |
393 |
$ |
296 |
$ |
193 |
$ |
689 |
$ |
375 |
||||||||
Plus: |
Notable items, after tax |
(27) |
51 |
28 |
24 |
43 |
||||||||||||
Net income (loss) from continuing operations attributable to Key common shareholders excluding |
||||||||||||||||||
notable items (non-GAAP) |
$ |
366 |
$ |
347 |
$ |
221 |
$ |
713 |
$ |
418 |
||||||||
Average tangible common equity (non-GAAP) |
11,419 |
10,932 |
9,781 |
11,177 |
9,683 |
|||||||||||||
Return on average tangible common equity from continuing operations (non-GAAP) |
13.80 |
% |
10.98 |
% |
7.94 |
% |
12.43 |
% |
7.79 |
% |
||||||||
Return on average tangible common equity from continuing operations excluding notable items (non-GAAP) |
12.86 |
12.87 |
9.09 |
12.86 |
8.68 |
|||||||||||||
Return on average tangible common equity consolidated |
||||||||||||||||||
Net income (loss) attributable to Key common shareholders (GAAP) |
$ |
398 |
$ |
296 |
$ |
196 |
$ |
694 |
$ |
379 |
||||||||
Average tangible common equity (non-GAAP) |
11,419 |
10,932 |
9,781 |
11,177 |
9,683 |
|||||||||||||
Return on average tangible common equity consolidated (non-GAAP) |
13.98 |
% |
10.98 |
% |
8.06 |
% |
12.52 |
% |
7.87 |
% |
||||||||
Cash efficiency ratio |
||||||||||||||||||
Noninterest expense (GAAP) |
$ |
995 |
$ |
1,013 |
$ |
751 |
$ |
2,008 |
$ |
1,454 |
||||||||
Less: |
Intangible asset amortization |
22 |
22 |
7 |
44 |
15 |
||||||||||||
Adjusted noninterest expense (non-GAAP) |
973 |
991 |
744 |
1,964 |
1,439 |
|||||||||||||
Less: |
Notable items (e) |
60 |
81 |
45 |
141 |
69 |
||||||||||||
Adjusted noninterest expense excluding notable items (non-GAAP) |
$ |
913 |
$ |
910 |
$ |
699 |
$ |
1,823 |
$ |
1,370 |
||||||||
Net interest income (GAAP) |
$ |
973 |
$ |
918 |
$ |
597 |
$ |
1,891 |
$ |
1,201 |
||||||||
Plus: |
Taxable-equivalent adjustment |
14 |
11 |
8 |
25 |
16 |
||||||||||||
Noninterest income |
653 |
577 |
473 |
1,230 |
904 |
|||||||||||||
Total taxable-equivalent revenue (non-GAAP) |
1,640 |
1,506 |
1,078 |
3,146 |
2,121 |
|||||||||||||
Plus: |
Notable items (f) |
(103) |
— |
— |
(103) |
— |
||||||||||||
Adjusted total taxable-equivalent revenue excluding notable items (non-GAAP) |
$ |
1,537 |
$ |
1,506 |
$ |
1,078 |
$ |
3,043 |
$ |
2,121 |
||||||||
Cash efficiency ratio (non-GAAP) |
59.3 |
% |
65.8 |
% |
69.0 |
% |
62.4 |
% |
67.8 |
% |
||||||||
Cash efficiency ratio excluding notable items (non-GAAP) |
59.4 |
60.4 |
64.8 |
59.9 |
64.6 |
|||||||||||||
Return on average total assets from continuing operations excluding notable items |
||||||||||||||||||
Income from continuing operations attributable to Key (GAAP) |
$ |
407 |
$ |
324 |
$ |
199 |
$ |
731 |
$ |
386 |
||||||||
Plus: |
Notable items, after tax |
(27) |
51 |
28 |
24 |
43 |
||||||||||||
Income from continuing operations attributable to Key excluding notable items, after tax (non-GAAP) |
$ |
380 |
$ |
375 |
$ |
227 |
$ |
755 |
$ |
429 |
||||||||
Average total assets from continuing operations (GAAP) |
$ |
132,491 |
$ |
132,741 |
$ |
97,413 |
$ |
132,615 |
$ |
95,945 |
||||||||
Return on average total assets from continuing operations excluding notable items (non-GAAP) |
1.15 |
% |
1.15 |
% |
.94 |
% |
1.15 |
% |
.90 |
% |
GAAP to Non-GAAP Reconciliations (continued) |
|||||||
(dollars in millions) |
|||||||
Three months ended |
|||||||
6/30/2017 |
|||||||
Common Equity Tier 1 under the Regulatory Capital Rules ("RCR") (estimates) |
|||||||
Common Equity Tier 1 under current RCR |
$ |
12,106 |
|||||
Adjustments from current RCR to the fully phased-in RCR: |
|||||||
Deferred tax assets and other intangible assets (g) |
(66) |
||||||
Common Equity Tier 1 anticipated under the fully phased-in RCR (h) |
$ |
12,040 |
|||||
Net risk-weighted assets under current RCR |
$ |
121,484 |
|||||
Adjustments from current RCR to the fully phased-in RCR: |
|||||||
Mortgage servicing assets (i) |
603 |
||||||
Volcker funds |
(140) |
||||||
All other assets |
46 |
||||||
Total risk-weighted assets anticipated under the fully phased-in RCR (h) |
$ |
121,993 |
|||||
Common Equity Tier 1 ratio under the fully phased-in RCR (h) |
9.87 |
% |
Change 2Q17 vs. |
||||||||||||||
2Q17 |
1Q17 |
2Q16 |
1Q17 |
2Q16 |
||||||||||
Operating leverage excluding notable items |
||||||||||||||
Total revenue (TE) |
$ |
1,640 |
$ |
1,506 |
$ |
1,078 |
||||||||
Less: Notable items (f) |
103 |
— |
— |
|||||||||||
Total revenue (TE) excluding notable items |
$ |
1,537 |
$ |
1,506 |
$ |
1,078 |
2.1 |
% |
42.6 |
% |
||||
Noninterest expense |
$ |
995 |
$ |
1,013 |
$ |
751 |
||||||||
Less: Notable items (e) |
60 |
81 |
45 |
|||||||||||
Noninterest expense excluding notable items |
$ |
935 |
$ |
932 |
$ |
706 |
.3 |
% |
32.4 |
% |
||||
Operating leverage excluding notable items (non-GAAP) (j) |
1.8 |
% |
10.2 |
% |
(a) |
For the three months ended June 30, 2017, March 31, 2017, and June 30, 2016, intangible assets exclude $33 million, $38 million, and $36 million, respectively, of period-end purchased credit card receivables. |
(b) |
Net of capital surplus. |
(c) |
June 30, 2017, amount is estimated. |
(d) |
For the three months ended June 30, 2017, March 31, 2017, and June 30, 2016, average intangible assets exclude $36 million, $40 million, and $38 million, respectively, of average purchased credit card receivables. For the six months ended June 30, 2017, and June 30, 2016, average intangible assets exclude $38 million and $40 million, respectively, of average purchased credit card receivables. |
(e) |
Notable items for the three months ended June 30, 2017, includes $44 million of merger-related expense, $20 million charitable contribution, and a credit of $4 million related to purchase accounting finalization. |
(f) |
Notable items for the three months ended June 30, 2017, includes $64 million related to the merchant services gain and $39 million related to purchase accounting finalization. |
(g) |
Includes the deferred tax assets subject to future taxable income for realization, primarily tax credit carryforwards, as well as intangible assets (other than goodwill and mortgage servicing assets) subject to the transition provisions of the final rule. |
(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) |
Operating leverage excluding notable items is calculated as the difference in the change in total revenue (TE) excluding notable items from the change in noninterest expense excluding notable items. |
GAAP = U.S. generally accepted accounting principles |
Consolidated Balance Sheets |
|||||||||||
(dollars in millions) |
|||||||||||
6/30/2017 |
3/31/2017 |
6/30/2016 |
|||||||||
Assets |
|||||||||||
Loans |
$ |
86,503 |
$ |
86,125 |
$ |
62,098 |
|||||
Loans held for sale |
1,743 |
1,384 |
442 |
||||||||
Securities available for sale |
18,024 |
18,431 |
14,552 |
||||||||
Held-to-maturity securities |
10,638 |
10,186 |
4,832 |
||||||||
Trading account assets |
1,081 |
921 |
965 |
||||||||
Short-term investments |
2,522 |
2,525 |
6,599 |
||||||||
Other investments |
732 |
689 |
577 |
||||||||
Total earning assets |
121,243 |
120,261 |
90,065 |
||||||||
Allowance for loan and lease losses |
(870) |
(870) |
(854) |
||||||||
Cash and due from banks |
601 |
549 |
496 |
||||||||
Premises and equipment |
919 |
935 |
742 |
||||||||
Operating lease assets |
691 |
563 |
399 |
||||||||
Goodwill |
2,464 |
2,427 |
1,060 |
||||||||
Other intangible assets |
435 |
362 |
50 |
||||||||
Corporate-owned life insurance |
4,100 |
4,087 |
3,568 |
||||||||
Derivative assets |
636 |
578 |
1,234 |
||||||||
Accrued income and other assets |
4,147 |
4,064 |
2,673 |
||||||||
Discontinued assets |
1,458 |
1,520 |
1,717 |
||||||||
Total assets |
$ |
135,824 |
$ |
134,476 |
$ |
101,150 |
|||||
Liabilities |
|||||||||||
Deposits in domestic offices: |
|||||||||||
NOW and money market deposit accounts |
$ |
53,342 |
$ |
55,095 |
$ |
40,195 |
|||||
Savings deposits |
7,056 |
6,306 |
2,355 |
||||||||
Certificates of deposit ($100,000 or more) |
6,286 |
5,859 |
3,381 |
||||||||
Other time deposits |
4,605 |
4,694 |
3,267 |
||||||||
Total interest-bearing deposits |
71,289 |
71,954 |
49,198 |
||||||||
Noninterest-bearing deposits |
31,532 |
32,028 |
26,127 |
||||||||
Total deposits |
102,821 |
103,982 |
75,325 |
||||||||
Federal funds purchased and securities sold under repurchase agreements |
1,780 |
442 |
360 |
||||||||
Bank notes and other short-term borrowings |
924 |
943 |
687 |
||||||||
Derivative liabilities |
308 |
255 |
746 |
||||||||
Accrued expense and other liabilities |
1,475 |
1,552 |
1,326 |
||||||||
Long-term debt |
13,261 |
12,324 |
11,388 |
||||||||
Total liabilities |
120,569 |
119,498 |
89,832 |
||||||||
Equity |
|||||||||||
Preferred stock |
1,025 |
1,025 |
290 |
||||||||
Common shares |
1,257 |
1,257 |
1,017 |
||||||||
Capital surplus |
6,310 |
6,287 |
3,835 |
||||||||
Retained earnings |
9,878 |
9,584 |
9,166 |
||||||||
Treasury stock, at cost |
(2,711) |
(2,623) |
(2,881) |
||||||||
Accumulated other comprehensive income (loss) |
(506) |
(554) |
(114) |
||||||||
Key shareholders' equity |
15,253 |
14,976 |
11,313 |
||||||||
Noncontrolling interests |
2 |
2 |
5 |
||||||||
Total equity |
15,255 |
14,978 |
11,318 |
||||||||
Total liabilities and equity |
$ |
135,824 |
$ |
134,476 |
$ |
101,150 |
|||||
Common shares outstanding (000) |
1,092,739 |
1,097,479 |
842,703 |
Consolidated Statements of Income |
||||||||||||||||||
(dollars in millions, except per share amounts) |
||||||||||||||||||
Three months ended |
Six months ended |
|||||||||||||||||
6/30/2017 |
3/31/2017 |
6/30/2016 |
6/30/2017 |
6/30/2016 |
||||||||||||||
Interest income |
||||||||||||||||||
Loans |
$ |
948 |
$ |
877 |
$ |
567 |
$ |
1,825 |
$ |
1,129 |
||||||||
Loans held for sale |
9 |
13 |
5 |
22 |
13 |
|||||||||||||
Securities available for sale |
90 |
95 |
74 |
185 |
149 |
|||||||||||||
Held-to-maturity securities |
55 |
51 |
24 |
106 |
48 |
|||||||||||||
Trading account assets |
7 |
7 |
6 |
14 |
13 |
|||||||||||||
Short-term investments |
5 |
3 |
6 |
8 |
10 |
|||||||||||||
Other investments |
3 |
4 |
2 |
7 |
5 |
|||||||||||||
Total interest income |
1,117 |
1,050 |
684 |
2,167 |
1,367 |
|||||||||||||
Interest expense |
||||||||||||||||||
Deposits |
66 |
58 |
34 |
124 |
65 |
|||||||||||||
Federal funds purchased and securities sold under repurchase agreements |
— |
1 |
— |
1 |
— |
|||||||||||||
Bank notes and other short-term borrowings |
4 |
5 |
3 |
9 |
5 |
|||||||||||||
Long-term debt |
74 |
68 |
50 |
142 |
96 |
|||||||||||||
Total interest expense |
144 |
132 |
87 |
276 |
166 |
|||||||||||||
Net interest income |
973 |
918 |
597 |
1,891 |
1,201 |
|||||||||||||
Provision for credit losses |
66 |
63 |
52 |
129 |
141 |
|||||||||||||
Net interest income after provision for credit losses |
907 |
855 |
545 |
1,762 |
1,060 |
|||||||||||||
Noninterest income |
||||||||||||||||||
Trust and investment services income |
134 |
135 |
110 |
269 |
219 |
|||||||||||||
Investment banking and debt placement fees |
135 |
127 |
98 |
262 |
169 |
|||||||||||||
Service charges on deposit accounts |
90 |
87 |
68 |
177 |
133 |
|||||||||||||
Operating lease income and other leasing gains |
30 |
23 |
18 |
53 |
35 |
|||||||||||||
Corporate services income |
55 |
54 |
53 |
109 |
103 |
|||||||||||||
Cards and payments income |
70 |
65 |
52 |
135 |
98 |
|||||||||||||
Corporate-owned life insurance income |
33 |
30 |
28 |
63 |
56 |
|||||||||||||
Consumer mortgage income |
6 |
6 |
3 |
12 |
5 |
|||||||||||||
Mortgage servicing fees |
15 |
18 |
10 |
33 |
22 |
|||||||||||||
Net gains (losses) from principal investing |
— |
1 |
11 |
1 |
11 |
|||||||||||||
Other income (a) |
85 |
31 |
22 |
116 |
53 |
|||||||||||||
Total noninterest income |
653 |
577 |
473 |
1,230 |
904 |
|||||||||||||
Noninterest expense |
||||||||||||||||||
Personnel |
551 |
556 |
427 |
1,107 |
831 |
|||||||||||||
Net occupancy |
78 |
87 |
59 |
165 |
120 |
|||||||||||||
Computer processing |
55 |
60 |
45 |
115 |
88 |
|||||||||||||
Business services and professional fees |
45 |
46 |
40 |
91 |
81 |
|||||||||||||
Equipment |
27 |
27 |
21 |
54 |
42 |
|||||||||||||
Operating lease expense |
21 |
19 |
14 |
40 |
27 |
|||||||||||||
Marketing |
30 |
21 |
22 |
51 |
34 |
|||||||||||||
FDIC assessment |
21 |
20 |
8 |
41 |
17 |
|||||||||||||
Intangible asset amortization |
22 |
22 |
7 |
44 |
15 |
|||||||||||||
OREO expense, net |
3 |
2 |
2 |
5 |
3 |
|||||||||||||
Other expense |
142 |
153 |
106 |
295 |
196 |
|||||||||||||
Total noninterest expense |
995 |
1,013 |
751 |
2,008 |
1,454 |
|||||||||||||
Income (loss) from continuing operations before income taxes |
565 |
419 |
267 |
984 |
510 |
|||||||||||||
Income taxes |
158 |
94 |
69 |
252 |
125 |
|||||||||||||
Income (loss) from continuing operations |
407 |
325 |
198 |
732 |
385 |
|||||||||||||
Income (loss) from discontinued operations, net of taxes |
5 |
— |
3 |
5 |
4 |
|||||||||||||
Net income (loss) |
412 |
325 |
201 |
737 |
389 |
|||||||||||||
Less: Net income (loss) attributable to noncontrolling interests |
— |
1 |
(1) |
1 |
(1) |
|||||||||||||
Net income (loss) attributable to Key |
$ |
412 |
$ |
324 |
$ |
202 |
$ |
736 |
$ |
390 |
||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
393 |
$ |
296 |
$ |
193 |
$ |
689 |
$ |
375 |
||||||||
Net income (loss) attributable to Key common shareholders |
398 |
296 |
196 |
694 |
379 |
|||||||||||||
Per common share |
||||||||||||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
.36 |
$ |
.28 |
$ |
.23 |
$ |
.64 |
$ |
.45 |
||||||||
Income (loss) from discontinued operations, net of taxes |
— |
— |
— |
— |
— |
|||||||||||||
Net income (loss) attributable to Key common shareholders (b) |
.37 |
.28 |
.23 |
.64 |
.45 |
|||||||||||||
Per common share — assuming dilution |
||||||||||||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
.36 |
$ |
.27 |
$ |
.23 |
$ |
.63 |
$ |
.44 |
||||||||
Income (loss) from discontinued operations, net of taxes |
— |
— |
— |
— |
— |
|||||||||||||
Net income (loss) attributable to Key common shareholders (b) |
.36 |
.27 |
.23 |
.63 |
.45 |
|||||||||||||
Cash dividends declared per common share |
$ |
.095 |
$ |
.085 |
$ |
.085 |
$ |
.18 |
$ |
.16 |
||||||||
Weighted-average common shares outstanding (000) |
1,076,203 |
1,068,609 |
831,899 |
1,083,486 |
829,640 |
|||||||||||||
Effect of common share options and other stock awards |
16,836 |
17,931 |
6,597 |
15,808 |
7,138 |
|||||||||||||
Weighted-average common shares and potential common shares outstanding (000) (c) |
1,093,039 |
1,086,540 |
838,496 |
1,099,294 |
836,778 |
|||||||||||||
(a) |
For the three months ended June 30, 2017, net securities gains (losses) totaled $1 million. For the three months ended March 31, 2017, net securities gains (losses) totaled $1 million. For the three months ended June 30, 2016, net securities gains (losses) totaled less than $1 million. For the three months ended June 30, 2017, March 31, 2017, and June 30, 2016, Key did not have any impairment losses related to securities. |
|||||||||||||||||
(b) |
Earnings per share may not foot due to rounding. |
|||||||||||||||||
(c) |
Assumes conversion of common share options and other stock awards and/or convertible preferred stock, as applicable. |
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations |
|||||||||||||||||||||||||||
(dollars in millions) |
|||||||||||||||||||||||||||
Second Quarter 2017 |
First Quarter 2017 |
Second Quarter 2016 |
|||||||||||||||||||||||||
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 and industrial (d) |
$ |
40,666 |
$ |
409 |
4.04 |
% |
$ |
40,002 |
$ |
373 |
3.77 |
% |
$ |
32,630 |
$ |
270 |
3.32 |
% |
|||||||||
Real estate — commercial mortgage |
15,096 |
187 |
4.97 |
15,187 |
164 |
4.39 |
8,404 |
80 |
3.85 |
||||||||||||||||||
Real estate — construction |
2,204 |
31 |
5.51 |
2,353 |
26 |
4.54 |
869 |
8 |
3.78 |
||||||||||||||||||
Commercial lease financing |
4,690 |
50 |
4.33 |
4,635 |
44 |
3.76 |
3,949 |
37 |
3.77 |
||||||||||||||||||
Total commercial loans |
62,656 |
677 |
4.34 |
62,177 |
607 |
3.95 |
45,852 |
395 |
3.47 |
||||||||||||||||||
Real estate — residential mortgage |
5,509 |
52 |
3.77 |
5,520 |
54 |
3.94 |
2,253 |
22 |
4.11 |
||||||||||||||||||
Home equity loans |
12,473 |
135 |
4.31 |
12,611 |
131 |
4.22 |
10,098 |
102 |
4.04 |
||||||||||||||||||
Consumer direct loans |
1,743 |
31 |
7.07 |
1,762 |
30 |
6.97 |
1,599 |
26 |
6.53 |
||||||||||||||||||
Credit cards |
1,044 |
29 |
11.04 |
1,067 |
29 |
11.06 |
792 |
21 |
10.58 |
||||||||||||||||||
Consumer indirect loans |
3,077 |
38 |
5.02 |
2,996 |
37 |
4.91 |
554 |
9 |
6.56 |
||||||||||||||||||
Total consumer loans |
23,846 |
285 |
4.77 |
23,956 |
281 |
4.75 |
15,296 |
180 |
4.74 |
||||||||||||||||||
Total loans |
86,502 |
962 |
4.46 |
86,133 |
888 |
4.17 |
61,148 |
575 |
3.78 |
||||||||||||||||||
Loans held for sale |
1,082 |
9 |
3.58 |
1,188 |
13 |
4.28 |
611 |
5 |
3.18 |
||||||||||||||||||
Securities available for sale (b), (e) |
17,997 |
90 |
1.97 |
19,181 |
95 |
1.95 |
14,268 |
74 |
2.08 |
||||||||||||||||||
Held-to-maturity securities (b) |
10,469 |
55 |
2.09 |
9,988 |
51 |
2.04 |
4,883 |
24 |
1.98 |
||||||||||||||||||
Trading account assets |
1,042 |
7 |
3.00 |
968 |
7 |
2.75 |
967 |
6 |
2.28 |
||||||||||||||||||
Short-term investments |
1,970 |
5 |
.96 |
1,610 |
3 |
.79 |
5,559 |
6 |
.45 |
||||||||||||||||||
Other investments (e) |
687 |
3 |
1.87 |
709 |
4 |
2.26 |
610 |
2 |
1.54 |
||||||||||||||||||
Total earning assets |
119,749 |
1,131 |
3.78 |
119,777 |
1,061 |
3.57 |
88,046 |
692 |
3.16 |
||||||||||||||||||
Allowance for loan and lease losses |
(864) |
(855) |
(833) |
||||||||||||||||||||||||
Accrued income and other assets |
13,606 |
13,819 |
10,200 |
||||||||||||||||||||||||
Discontinued assets |
1,477 |
1,540 |
1,738 |
||||||||||||||||||||||||
Total assets |
$ |
133,968 |
$ |
134,281 |
$ |
99,151 |
|||||||||||||||||||||
Liabilities |
|||||||||||||||||||||||||||
NOW and money market deposit accounts |
$ |
54,416 |
34 |
.25 |
$ |
54,295 |
32 |
.24 |
$ |
39,687 |
16 |
.17 |
|||||||||||||||
Savings deposits |
6,854 |
4 |
.21 |
6,351 |
1 |
.10 |
2,375 |
— |
.02 |
||||||||||||||||||
Certificates of deposit ($100,000 or more) |
6,111 |
19 |
1.23 |
5,627 |
16 |
1.16 |
3,233 |
11 |
1.39 |
||||||||||||||||||
Other time deposits |
4,650 |
9 |
.77 |
4,706 |
9 |
.76 |
3,252 |
7 |
.85 |
||||||||||||||||||
Total interest-bearing deposits |
72,031 |
66 |
.36 |
70,979 |
58 |
.33 |
48,547 |
34 |
.29 |
||||||||||||||||||
Federal funds purchased and securities |
466 |
— |
.23 |
795 |
1 |
.32 |
337 |
— |
.01 |
||||||||||||||||||
Bank notes and other short-term borrowings |
1,216 |
4 |
1.43 |
1,802 |
5 |
1.06 |
694 |
3 |
1.39 |
||||||||||||||||||
Long-term debt (f), (g) |
11,046 |
74 |
2.68 |
10,833 |
68 |
2.54 |
9,294 |
50 |
2.25 |
||||||||||||||||||
Total interest-bearing liabilities |
84,759 |
144 |
.68 |
84,409 |
132 |
.63 |
58,872 |
87 |
.60 |
||||||||||||||||||
Noninterest-bearing deposits |
30,748 |
31,099 |
25,357 |
||||||||||||||||||||||||
Accrued expense and other liabilities |
1,782 |
2,048 |
2,032 |
||||||||||||||||||||||||
Discontinued liabilities (g) |
1,477 |
1,540 |
1,738 |
||||||||||||||||||||||||
Total liabilities |
118,766 |
119,096 |
87,999 |
||||||||||||||||||||||||
Equity |
|||||||||||||||||||||||||||
Key shareholders' equity |
15,200 |
15,184 |
11,147 |
||||||||||||||||||||||||
Noncontrolling interests |
2 |
1 |
5 |
||||||||||||||||||||||||
Total equity |
15,202 |
15,185 |
11,152 |
||||||||||||||||||||||||
Total liabilities and equity |
$ |
133,968 |
$ |
134,281 |
$ |
99,151 |
|||||||||||||||||||||
Interest rate spread (TE) |
3.10 |
% |
2.94 |
% |
2.56 |
% |
|||||||||||||||||||||
Net interest income (TE) and net interest margin (TE) |
987 |
3.30 |
% |
929 |
3.13 |
% |
605 |
2.76 |
% |
||||||||||||||||||
TE adjustment (b) |
14 |
11 |
8 |
||||||||||||||||||||||||
Net interest income, GAAP basis |
$ |
973 |
$ |
918 |
$ |
597 |
(a) |
Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology. |
(b) |
Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%. |
(c) |
For purposes of these computations, nonaccrual loans are included in average loan balances. |
(d) |
Commercial and industrial average balances include $117 million, $114 million, and $87 million of assets from commercial credit cards for the three months ended June 30, 2017, March 31, 2017, and June 30, 2016, respectively. |
(e) |
Yield is calculated on the basis of amortized cost. |
(f) |
Rate calculation excludes basis adjustments related to fair value hedges. |
(g) |
A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key's matched funds transfer pricing methodology to discontinued operations. |
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles |
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations |
||||||||||||||||||
(dollars in millions) |
||||||||||||||||||
Six months ended June 30, 2017 |
Six months ended June 30, 2016 |
|||||||||||||||||
Average |
Average |
|||||||||||||||||
Balance |
Interest (a) |
Yield/Rate (a) |
Balance |
Interest (a) |
Yield/ Rate (a) |
|||||||||||||
Assets |
||||||||||||||||||
Loans: (b), (c) |
||||||||||||||||||
Commercial and industrial (d) |
$ |
40,336 |
$ |
782 |
3.90 |
% |
$ |
32,110 |
$ |
533 |
3.33 |
% |
||||||
Real estate — commercial mortgage |
15,142 |
351 |
4.68 |
8,271 |
157 |
3.81 |
||||||||||||
Real estate — construction |
2,278 |
57 |
5.01 |
942 |
18 |
3.96 |
||||||||||||
Commercial lease financing |
4,662 |
94 |
4.04 |
3,953 |
73 |
3.71 |
||||||||||||
Total commercial loans |
62,418 |
1,284 |
4.14 |
45,276 |
781 |
3.47 |
||||||||||||
Real estate — residential mortgage |
5,514 |
106 |
3.85 |
2,245 |
46 |
4.15 |
||||||||||||
Home equity loans |
12,542 |
266 |
4.27 |
10,169 |
205 |
4.05 |
||||||||||||
Consumer direct loans |
1,752 |
61 |
7.02 |
1,596 |
52 |
6.53 |
||||||||||||
Credit cards |
1,055 |
58 |
11.05 |
788 |
42 |
10.65 |
||||||||||||
Consumer indirect loans |
3,037 |
75 |
4.97 |
578 |
19 |
6.50 |
||||||||||||
Total consumer loans |
23,900 |
566 |
4.76 |
15,376 |
364 |
4.75 |
||||||||||||
Total loans |
86,318 |
1,850 |
4.31 |
60,652 |
1,145 |
3.79 |
||||||||||||
Loans held for sale |
1,135 |
22 |
3.95 |
718 |
13 |
3.66 |
||||||||||||
Securities available for sale (b), (e) |
18,586 |
185 |
1.96 |
14,238 |
149 |
2.10 |
||||||||||||
Held-to-maturity securities (b) |
10,230 |
106 |
2.07 |
4,850 |
48 |
2.00 |
||||||||||||
Trading account assets |
1,005 |
14 |
2.88 |
892 |
13 |
2.83 |
||||||||||||
Short-term investments |
1,791 |
8 |
.88 |
4,495 |
10 |
.45 |
||||||||||||
Other investments (e) |
698 |
7 |
2.07 |
629 |
5 |
1.64 |
||||||||||||
Total earning assets |
119,763 |
2,192 |
3.67 |
86,474 |
1,383 |
3.21 |
||||||||||||
Allowance for loan and lease losses |
(860) |
(818) |
||||||||||||||||
Accrued income and other assets |
13,712 |
10,289 |
||||||||||||||||
Discontinued assets |
1,508 |
1,771 |
||||||||||||||||
Total assets |
$ |
134,123 |
$ |
97,716 |
||||||||||||||
Liabilities |
||||||||||||||||||
NOW and money market deposit accounts |
$ |
54,356 |
66 |
.24 |
$ |
38,698 |
31 |
.16 |
||||||||||
Savings deposits |
6,604 |
5 |
.16 |
2,362 |
— |
.02 |
||||||||||||
Certificates of deposit ($100,000 or more) |
5,871 |
35 |
1.20 |
2,997 |
21 |
1.38 |
||||||||||||
Other time deposits |
4,677 |
18 |
.77 |
3,226 |
13 |
.82 |
||||||||||||
Total interest-bearing deposits |
71,508 |
124 |
.35 |
47,283 |
65 |
.28 |
||||||||||||
Federal funds purchased and securities sold under repurchase agreements |
629 |
1 |
.28 |
387 |
— |
.04 |
||||||||||||
Bank notes and other short-term borrowings |
1,508 |
9 |
1.21 |
643 |
5 |
1.50 |
||||||||||||
Long-term debt (f), (g) |
10,940 |
142 |
2.61 |
8,930 |
96 |
2.22 |
||||||||||||
Total interest-bearing liabilities |
84,585 |
276 |
.66 |
57,243 |
166 |
.59 |
||||||||||||
Noninterest-bearing deposits |
30,922 |
25,468 |
||||||||||||||||
Accrued expense and other liabilities |
1,914 |
2,177 |
||||||||||||||||
Discontinued liabilities (g) |
1,509 |
1,771 |
||||||||||||||||
Total liabilities |
118,930 |
86,659 |
||||||||||||||||
Equity |
||||||||||||||||||
Key shareholders' equity |
15,192 |
11,050 |
||||||||||||||||
Noncontrolling interests |
1 |
7 |
||||||||||||||||
Total equity |
15,193 |
11,057 |
||||||||||||||||
Total liabilities and equity |
$ |
134,123 |
$ |
97,716 |
||||||||||||||
Interest rate spread (TE) |
3.01 |
% |
2.62 |
% |
||||||||||||||
Net interest income (TE) and net interest margin (TE) |
1,916 |
3.21 |
% |
1,217 |
2.83 |
% |
||||||||||||
TE adjustment (b) |
25 |
16 |
||||||||||||||||
Net interest income, GAAP basis |
$ |
1,891 |
$ |
1,201 |
(a) |
Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology. |
(b) |
Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%. |
(c) |
For purposes of these computations, nonaccrual loans are included in average loan balances. |
(d) |
Commercial and industrial average balances include $115 million and $86 million of assets from commercial credit cards for the six months ended June 30, 2017, and June 30, 2016, respectively. |
(e) |
Yield is calculated on the basis of amortized cost. |
(f) |
Rate calculation excludes basis adjustments related to fair value hedges. |
(g) |
A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key's matched funds transfer pricing methodology to discontinued operations. |
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles |
Noninterest Expense |
|||||||||||||||||||
(dollars in millions) |
|||||||||||||||||||
Three months ended |
Six months ended |
||||||||||||||||||
6/30/2017 |
3/31/2017 |
6/30/2016 |
6/30/2017 |
6/30/2016 |
|||||||||||||||
Personnel (a) |
$ |
551 |
$ |
556 |
$ |
427 |
$ |
1,107 |
$ |
831 |
|||||||||
Net occupancy |
78 |
87 |
59 |
165 |
120 |
||||||||||||||
Computer processing |
55 |
60 |
45 |
115 |
88 |
||||||||||||||
Business services and professional fees |
45 |
46 |
40 |
91 |
81 |
||||||||||||||
Equipment |
27 |
27 |
21 |
54 |
42 |
||||||||||||||
Operating lease expense |
21 |
19 |
14 |
40 |
27 |
||||||||||||||
Marketing |
30 |
21 |
22 |
51 |
34 |
||||||||||||||
FDIC assessment |
21 |
20 |
8 |
41 |
17 |
||||||||||||||
Intangible asset amortization |
22 |
22 |
7 |
44 |
15 |
||||||||||||||
OREO expense, net |
3 |
2 |
2 |
5 |
3 |
||||||||||||||
Other expense |
142 |
153 |
106 |
295 |
196 |
||||||||||||||
Total noninterest expense |
$ |
995 |
$ |
1,013 |
$ |
751 |
$ |
2,008 |
$ |
1,454 |
|||||||||
Merger-related charges (b) |
44 |
81 |
45 |
125 |
69 |
||||||||||||||
Total noninterest expense excluding merger-related charges |
$ |
951 |
$ |
932 |
$ |
706 |
$ |
1,883 |
$ |
1,385 |
|||||||||
Average full-time equivalent employees (c) |
18,344 |
18,386 |
13,419 |
18,365 |
13,411 |
(a) |
Additional detail provided in Personnel Expense table below. |
(b) |
Additional detail provide in Merger-Related Charges table below. |
(c) |
The number of average full-time equivalent employees has not been adjusted for discontinued operations. |
Personnel Expense |
|||||||||||||||||||
(in millions) |
|||||||||||||||||||
Three months ended |
Six months ended |
||||||||||||||||||
6/30/2017 |
3/31/2017 |
6/30/2016 |
6/30/2017 |
6/30/2016 |
|||||||||||||||
Salaries and contract labor |
$ |
332 |
$ |
324 |
$ |
266 |
$ |
656 |
$ |
510 |
|||||||||
Incentive and stock-based compensation |
137 |
127 |
101 |
264 |
190 |
||||||||||||||
Employee benefits |
76 |
96 |
58 |
172 |
126 |
||||||||||||||
Severance |
6 |
9 |
2 |
15 |
5 |
||||||||||||||
Total personnel expense |
$ |
551 |
$ |
556 |
$ |
427 |
$ |
1,107 |
$ |
831 |
|||||||||
Merger-related charges |
31 |
30 |
35 |
61 |
51 |
||||||||||||||
Total personnel expense excluding merger-related charges |
$ |
520 |
$ |
526 |
$ |
392 |
$ |
1,046 |
$ |
780 |
|||||||||
Merger-Related Charges |
|||||||||||||||||||
(in millions) |
|||||||||||||||||||
Three months ended |
Six months ended |
||||||||||||||||||
6/30/2017 |
3/31/2017 |
6/30/2016 |
6/30/2017 |
6/30/2016 |
|||||||||||||||
Personnel |
$ |
31 |
$ |
30 |
$ |
35 |
61 |
$ |
51 |
||||||||||
Net occupancy |
(1) |
5 |
— |
4 |
— |
||||||||||||||
Business services and professional fees |
6 |
5 |
5 |
11 |
12 |
||||||||||||||
Computer processing |
2 |
5 |
— |
7 |
— |
||||||||||||||
Marketing |
6 |
6 |
3 |
12 |
4 |
||||||||||||||
Other non-personnel expense |
— |
30 |
2 |
30 |
2 |
||||||||||||||
Noninterest expense |
44 |
81 |
45 |
125 |
69 |
||||||||||||||
Total merger-related charges |
$ |
44 |
$ |
81 |
$ |
45 |
$ |
125 |
$ |
69 |
Loan Composition |
||||||||||||||
(dollars in millions) |
||||||||||||||
Percent change 6/30/2017 vs. |
||||||||||||||
6/30/2017 |
3/31/2017 |
6/30/2016 |
3/31/2017 |
6/30/2016 |
||||||||||
Commercial and industrial (a) |
$ |
40,914 |
$ |
40,112 |
$ |
33,376 |
2.0 |
% |
22.6 |
% |
||||
Commercial real estate: |
||||||||||||||
Commercial mortgage |
14,813 |
15,260 |
8,582 |
(2.9) |
72.6 |
|||||||||
Construction |
2,168 |
2,270 |
881 |
(4.5) |
146.1 |
|||||||||
Total commercial real estate loans |
16,981 |
17,530 |
9,463 |
(3.1) |
79.4 |
|||||||||
Commercial lease financing (b) |
4,737 |
4,665 |
3,988 |
1.5 |
18.8 |
|||||||||
Total commercial loans |
62,632 |
62,307 |
46,827 |
.5 |
33.8 |
|||||||||
Residential — prime loans: |
||||||||||||||
Real estate — residential mortgage |
5,517 |
5,507 |
2,285 |
.2 |
141.4 |
|||||||||
Home equity loans |
12,405 |
12,541 |
10,062 |
(1.1) |
23.3 |
|||||||||
Total residential — prime loans |
17,922 |
18,048 |
12,347 |
(.7) |
45.2 |
|||||||||
Consumer direct loans |
1,755 |
1,735 |
1,584 |
1.2 |
10.8 |
|||||||||
Credit cards |
1,049 |
1,037 |
813 |
1.2 |
29.0 |
|||||||||
Consumer indirect loans |
3,145 |
2,998 |
527 |
4.9 |
496.8 |
|||||||||
Total consumer loans |
23,871 |
23,818 |
15,271 |
.2 |
56.3 |
|||||||||
Total loans (c), (d) |
$ |
86,503 |
$ |
86,125 |
$ |
62,098 |
.4 |
% |
39.3 |
% |
(a) |
Loan balances include $118 million, $114 million, and $88 million of commercial credit card balances at June 30, 2017, March 31, 2017, and June 30, 2016, respectively. |
(b) |
Commercial lease financing includes receivables held as collateral for a secured borrowing of $47 million, $55 million, and $102 million at June 30, 2017, March 31, 2017, and June 30, 2016, respectively. Principal reductions are based on the cash payments received from these related receivables. |
(c) |
At June 30, 2017, total loans include purchased loans of $17.8 billion, of which $835 million were purchased credit impaired. At March 31, 2017, total loans include purchased loans of $19.0 billion, of which $812 million were purchased credit impaired. At June 30, 2016, total loans include purchased loans of $104 million, of which $11 million were purchased credit impaired. |
(d) |
Total loans exclude loans of $1.4 billion at June 30, 2017, $1.5 billion at March 31, 2017, and $1.7 billion at June 30, 2016, related to the discontinued operations of the education lending business. |
Loans Held for Sale Composition |
||||||||||||||
(dollars in millions) |
||||||||||||||
Percent change 6/30/2017 vs. |
||||||||||||||
6/30/2017 |
3/31/2017 |
6/30/2016 |
3/31/2017 |
6/30/2016 |
||||||||||
Commercial and industrial |
$ |
338 |
$ |
171 |
$ |
150 |
97.7 |
% |
125.3 |
% |
||||
Real estate — commercial mortgage |
1,332 |
1,150 |
270 |
15.8 |
393.3 |
|||||||||
Commercial lease financing |
10 |
1 |
3 |
900.0 |
233.3 |
|||||||||
Real estate — residential mortgage |
63 |
62 |
19 |
1.6 |
231.6 |
|||||||||
Total loans held for sale (a) |
$ |
1,743 |
$ |
1,384 |
$ |
442 |
25.9 |
% |
294.3 |
% |
(a) |
Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $63 million at June 30, 2017, and $62 million at March 31, 2017. |
N/M = Not Meaningful |
Summary of Changes in Loans Held for Sale |
|||||||||||||||
(in millions) |
|||||||||||||||
2Q17 |
1Q17 |
4Q16 |
3Q16 |
2Q16 |
|||||||||||
Balance at beginning of period |
$ |
1,384 |
$ |
1,104 |
$ |
1,137 |
$ |
442 |
$ |
684 |
|||||
Purchases |
— |
— |
— |
48 |
— |
||||||||||
New originations |
2,876 |
2,563 |
2,846 |
2,857 |
1,539 |
||||||||||
Transfers from (to) held to maturity, net |
(7) |
17 |
11 |
2 |
22 |
||||||||||
Loan sales |
(2,507) |
(2,299) |
(2,889) |
(2,180) |
(1,802) |
||||||||||
Loan draws (payments), net |
(3) |
(1) |
(1) |
(32) |
(1) |
||||||||||
Balance at end of period (a) |
$ |
1,743 |
$ |
1,384 |
$ |
1,104 |
$ |
1,137 |
$ |
442 |
(a) |
Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $63 million at June 30, 2017, and $62 million at March 31, 2017, December 31, 2016, and September 30, 2016. |
Summary of Loan and Lease Loss Experience From Continuing Operations |
||||||||||||||||
(dollars in millions) |
||||||||||||||||
Three months ended |
Six months ended |
|||||||||||||||
6/30/2017 |
3/31/2017 |
6/30/2016 |
6/30/2017 |
6/30/2016 |
||||||||||||
Average loans outstanding |
$ |
86,502 |
$ |
86,133 |
$ |
61,148 |
$ |
86,318 |
$ |
60,652 |
||||||
Allowance for loan and lease losses at beginning of period |
$ |
870 |
$ |
858 |
$ |
826 |
$ |
858 |
$ |
796 |
||||||
Loans charged off: |
||||||||||||||||
Commercial and industrial |
40 |
32 |
35 |
72 |
61 |
|||||||||||
Real estate — commercial mortgage |
3 |
— |
2 |
3 |
3 |
|||||||||||
Real estate — construction |
— |
— |
— |
— |
— |
|||||||||||
Total commercial real estate loans |
3 |
— |
2 |
3 |
3 |
|||||||||||
Commercial lease financing |
1 |
7 |
3 |
8 |
6 |
|||||||||||
Total commercial loans |
44 |
39 |
40 |
83 |
70 |
|||||||||||
Real estate — residential mortgage |
4 |
(2) |
1 |
2 |
3 |
|||||||||||
Home equity loans |
9 |
8 |
7 |
17 |
17 |
|||||||||||
Consumer direct loans |
8 |
10 |
6 |
18 |
12 |
|||||||||||
Credit cards |
12 |
11 |
8 |
23 |
16 |
|||||||||||
Consumer indirect loans |
5 |
11 |
2 |
16 |
6 |
|||||||||||
Total consumer loans |
38 |
38 |
24 |
76 |
54 |
|||||||||||
Total loans charged off |
82 |
77 |
64 |
159 |
124 |
|||||||||||
Recoveries: |
||||||||||||||||
Commercial and industrial |
2 |
5 |
3 |
7 |
6 |
|||||||||||
Real estate — commercial mortgage |
— |
— |
6 |
— |
8 |
|||||||||||
Real estate — construction |
— |
1 |
— |
1 |
1 |
|||||||||||
Total commercial real estate loans |
— |
1 |
6 |
1 |
9 |
|||||||||||
Commercial lease financing |
— |
2 |
2 |
2 |
2 |
|||||||||||
Total commercial loans |
2 |
8 |
11 |
10 |
17 |
|||||||||||
Real estate — residential mortgage |
1 |
2 |
— |
3 |
2 |
|||||||||||
Home equity loans |
5 |
3 |
4 |
8 |
7 |
|||||||||||
Consumer direct loans |
2 |
1 |
2 |
3 |
3 |
|||||||||||
Credit cards |
2 |
1 |
1 |
3 |
2 |
|||||||||||
Consumer indirect loans |
4 |
4 |
3 |
8 |
4 |
|||||||||||
Total consumer loans |
14 |
11 |
10 |
25 |
18 |
|||||||||||
Total recoveries |
16 |
19 |
21 |
35 |
35 |
|||||||||||
Net loan charge-offs |
(66) |
(58) |
(43) |
(124) |
(89) |
|||||||||||
Provision (credit) for loan and lease losses |
66 |
70 |
71 |
136 |
147 |
|||||||||||
Foreign currency translation adjustment |
— |
— |
— |
— |
— |
|||||||||||
Allowance for loan and lease losses at end of period |
$ |
870 |
$ |
870 |
$ |
854 |
$ |
870 |
$ |
854 |
||||||
Liability for credit losses on lending-related commitments at beginning of period |
$ |
48 |
$ |
55 |
$ |
69 |
$ |
55 |
$ |
56 |
||||||
Provision (credit) for losses on lending-related commitments |
— |
(7) |
(19) |
(7) |
(6) |
|||||||||||
Liability for credit losses on lending-related commitments at end of period (a) |
$ |
48 |
$ |
48 |
$ |
50 |
$ |
48 |
$ |
50 |
||||||
Total allowance for credit losses at end of period |
$ |
918 |
$ |
918 |
$ |
904 |
$ |
918 |
$ |
904 |
||||||
Net loan charge-offs to average total loans |
.31 |
% |
.27 |
% |
.28 |
% |
.29 |
% |
.30 |
% |
||||||
Allowance for loan and lease losses to period-end loans |
1.01 |
1.01 |
1.38 |
1.01 |
1.38 |
|||||||||||
Allowance for credit losses to period-end loans |
1.06 |
1.07 |
1.46 |
1.06 |
1.46 |
|||||||||||
Allowance for loan and lease losses to nonperforming loans |
171.6 |
151.8 |
138.0 |
171.6 |
138.0 |
|||||||||||
Allowance for credit losses to nonperforming loans |
181.1 |
160.2 |
146.0 |
181.1 |
146.0 |
|||||||||||
Discontinued operations — education lending business: |
||||||||||||||||
Loans charged off |
$ |
4 |
$ |
6 |
$ |
6 |
$ |
10 |
$ |
15 |
||||||
Recoveries |
2 |
2 |
2 |
4 |
5 |
|||||||||||
Net loan charge-offs |
$ |
(2) |
$ |
(4) |
$ |
(4) |
$ |
(6) |
$ |
(10) |
(a) |
Included in "Accrued expense and other liabilities" on the balance sheet. |
Asset Quality Statistics From Continuing Operations |
|||||||||||||||
(dollars in millions) |
|||||||||||||||
2Q17 |
1Q17 |
4Q16 |
3Q16 |
2Q16 |
|||||||||||
Net loan charge-offs |
$ |
66 |
$ |
58 |
$ |
72 |
$ |
44 |
$ |
43 |
|||||
Net loan charge-offs to average total loans |
.31 |
% |
.27 |
% |
.34 |
% |
.23 |
% |
.28 |
% |
|||||
Allowance for loan and lease losses |
$ |
870 |
$ |
870 |
$ |
858 |
$ |
865 |
$ |
854 |
|||||
Allowance for credit losses (a) |
918 |
918 |
913 |
918 |
904 |
||||||||||
Allowance for loan and lease losses to period-end loans |
1.01 |
% |
1.01 |
% |
1.00 |
% |
1.01 |
% |
1.38 |
% |
|||||
Allowance for credit losses to period-end loans |
1.06 |
1.07 |
1.06 |
1.07 |
1.46 |
||||||||||
Allowance for loan and lease losses to nonperforming loans (b) |
171.6 |
151.8 |
137.3 |
119.6 |
138.0 |
||||||||||
Allowance for credit losses to nonperforming loans (b) |
181.1 |
160.2 |
146.1 |
127.0 |
146.0 |
||||||||||
Nonperforming loans at period end (b) |
$ |
507 |
$ |
573 |
$ |
625 |
$ |
723 |
$ |
619 |
|||||
Nonperforming assets at period end (b) |
556 |
623 |
676 |
760 |
637 |
||||||||||
Nonperforming loans to period-end portfolio loans (b) |
.59 |
% |
.67 |
% |
.73 |
% |
.85 |
% |
1.00 |
% |
|||||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (b) |
.64 |
.72 |
.79 |
.89 |
1.03 |
(a) |
Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related unfunded commitments. |
(b) |
Nonperforming loan balances exclude $835 million, $812 million, $865 million, $959 million, and $11 million of purchased credit impaired loans at June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016, and June 30, 2016, respectively. |
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations |
|||||||||||||||
(dollars in millions) |
|||||||||||||||
6/30/2017 |
3/31/2017 |
12/31/2016 |
9/30/2016 |
6/30/2016 |
|||||||||||
Commercial and industrial |
$ |
178 |
$ |
258 |
$ |
297 |
$ |
335 |
$ |
321 |
|||||
Real estate — commercial mortgage |
34 |
32 |
26 |
32 |
14 |
||||||||||
Real estate — construction |
4 |
2 |
3 |
17 |
25 |
||||||||||
Total commercial real estate loans |
38 |
34 |
29 |
49 |
39 |
||||||||||
Commercial lease financing |
11 |
5 |
8 |
13 |
10 |
||||||||||
Total commercial loans |
227 |
297 |
334 |
397 |
370 |
||||||||||
Real estate — residential mortgage |
58 |
54 |
56 |
72 |
54 |
||||||||||
Home equity loans |
208 |
207 |
223 |
225 |
189 |
||||||||||
Consumer direct loans |
2 |
3 |
6 |
2 |
1 |
||||||||||
Credit cards |
2 |
3 |
2 |
3 |
2 |
||||||||||
Consumer indirect loans |
10 |
9 |
4 |
24 |
3 |
||||||||||
Total consumer loans |
280 |
276 |
291 |
326 |
249 |
||||||||||
Total nonperforming loans (a) |
507 |
573 |
625 |
723 |
619 |
||||||||||
OREO |
48 |
49 |
51 |
35 |
15 |
||||||||||
Other nonperforming assets |
1 |
1 |
0 |
2 |
3 |
||||||||||
Total nonperforming assets (a) |
$ |
556 |
$ |
623 |
$ |
676 |
$ |
760 |
$ |
637 |
|||||
Accruing loans past due 90 days or more |
$ |
85 |
$ |
79 |
$ |
87 |
$ |
49 |
$ |
70 |
|||||
Accruing loans past due 30 through 89 days |
340 |
312 |
404 |
317 |
203 |
||||||||||
Restructured loans — accruing and nonaccruing (b) |
333 |
302 |
280 |
304 |
277 |
||||||||||
Restructured loans included in nonperforming loans (b) |
193 |
161 |
141 |
149 |
133 |
||||||||||
Nonperforming assets from discontinued operations — education lending business |
5 |
4 |
5 |
5 |
5 |
||||||||||
Nonperforming loans to period-end portfolio loans (a) |
.59 |
% |
.67 |
% |
.73 |
% |
.85 |
% |
1.00 |
% |
|||||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (a) |
.64 |
.72 |
.79 |
.89 |
1.03 |
(a) |
Nonperforming loan balances exclude $835 million, $812 million, $865 million, $959 million, and $11 million, of purchased credit impaired loans at June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016, and June 30, 2016, respectively. |
(b) |
Restructured loans (i.e., troubled debt restructurings) are those for which Key, for reasons related to a borrower's financial difficulties, grants a concession to the borrower that it would not otherwise consider. These concessions are made to improve the collectability of the loan and generally take the form of a reduction of the interest rate, extension of the maturity date or reduction in the principal balance. |
Summary of Changes in Nonperforming Loans From Continuing Operations |
|||||||||||||||
(in millions) |
|||||||||||||||
2Q17 |
1Q17 |
4Q16 |
3Q16 |
2Q16 |
|||||||||||
Balance at beginning of period |
$ |
573 |
$ |
625 |
$ |
723 |
$ |
619 |
$ |
676 |
|||||
Loans placed on nonaccrual status |
143 |
218 |
170 |
78 |
124 |
||||||||||
Nonperforming loans acquired from First Niagara (a) |
— |
— |
(31) |
150 |
— |
||||||||||
Charge-offs |
(82) |
(77) |
(81) |
(53) |
(64) |
||||||||||
Loans sold |
— |
(8) |
(9) |
— |
— |
||||||||||
Payments |
(84) |
(59) |
(30) |
(32) |
(75) |
||||||||||
Transfers to OREO |
(8) |
(11) |
(21) |
(5) |
(6) |
||||||||||
Transfers to other nonperforming assets |
— |
— |
— |
— |
— |
||||||||||
Loans returned to accrual status |
(35) |
(115) |
(96) |
(34) |
(36) |
||||||||||
Balance at end of period (b) |
$ |
507 |
$ |
573 |
$ |
625 |
$ |
723 |
$ |
619 |
(a) |
During the fourth quarter of 2016, Key adjusted the estimated fair value of the First Niagara acquired loan portfolio recorded during the third quarter of 2016, resulting in a $31 million decrease in the balance of acquired nonperforming loans. |
(b) |
Nonperforming loan balances exclude $835 million, $812 million, $865 million, $959 million, and $11 million of purchased credit impaired loans at June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016, and June 30, 2016, respectively. |
Line of Business Results |
||||||||||||||||||||
(dollars in millions) |
||||||||||||||||||||
Percent change 2Q17 vs. |
||||||||||||||||||||
2Q17 |
1Q17 |
4Q16 |
3Q16 |
2Q16 |
1Q17 |
2Q16 |
||||||||||||||
Key Community Bank |
||||||||||||||||||||
Summary of operations |
||||||||||||||||||||
Total revenue (TE) |
$ |
1,012 |
$ |
907 |
$ |
902 |
$ |
783 |
$ |
598 |
11.6 |
% |
69.2 |
% |
||||||
Provision for credit losses |
47 |
47 |
48 |
37 |
25 |
— |
88.0 |
|||||||||||||
Noninterest expense |
652 |
628 |
682 |
589 |
445 |
3.8 |
46.5 |
|||||||||||||
Net income (loss) attributable to Key |
197 |
146 |
108 |
98 |
80 |
34.9 |
146.3 |
|||||||||||||
Average loans and leases |
47,431 |
47,036 |
47,031 |
41,548 |
30,936 |
.8 |
53.3 |
|||||||||||||
Average deposits |
79,716 |
79,393 |
79,358 |
69,397 |
53,794 |
.4 |
48.2 |
|||||||||||||
Net loan charge-offs |
47 |
43 |
42 |
31 |
17 |
9.3 |
176.5 |
|||||||||||||
Net loan charge-offs to average total loans |
.40 |
% |
.37 |
% |
.36 |
% |
.30 |
% |
.22 |
% |
N/A |
N/A |
||||||||
Nonperforming assets at period end |
$ |
406 |
$ |
395 |
$ |
412 |
$ |
428 |
$ |
651 |
2.8 |
(37.6) |
||||||||
Return on average allocated equity |
16.62 |
% |
12.61 |
% |
9.05 |
% |
10.95 |
% |
11.76 |
% |
N/A |
N/A |
||||||||
Average full-time equivalent employees |
10,899 |
10,804 |
11,198 |
9,805 |
7,331 |
.9 |
48.7 |
|||||||||||||
Key Corporate Bank |
||||||||||||||||||||
Summary of operations |
||||||||||||||||||||
Total revenue (TE) |
$ |
596 |
$ |
579 |
$ |
630 |
$ |
556 |
$ |
451 |
2.9 |
% |
32.2 |
% |
||||||
Provision for credit losses |
19 |
17 |
20 |
25 |
30 |
11.8 |
(36.7) |
|||||||||||||
Noninterest expense |
299 |
303 |
326 |
310 |
259 |
(1.3) |
15.4 |
|||||||||||||
Net income (loss) attributable to Key |
222 |
182 |
222 |
159 |
135 |
22.0 |
64.4 |
|||||||||||||
Average loans and leases |
37,750 |
37,737 |
36,773 |
34,561 |
28,607 |
— |
32.0 |
|||||||||||||
Average loans held for sale |
1,000 |
1,097 |
1,223 |
1,103 |
591 |
(8.8) |
69.2 |
|||||||||||||
Average deposits |
21,146 |
21,003 |
23,172 |
22,708 |
19,129 |
.7 |
10.5 |
|||||||||||||
Net loan charge-offs |
19 |
14 |
26 |
12 |
27 |
35.7 |
(29.6) |
|||||||||||||
Net loan charge-offs to average total loans |
.20 |
% |
.15 |
% |
.28 |
% |
.14 |
% |
.38 |
% |
N/A |
N/A |
||||||||
Nonperforming assets at period end |
$ |
119 |
$ |
197 |
$ |
244 |
$ |
318 |
$ |
355 |
(39.6) |
(66.5) |
||||||||
Return on average allocated equity |
31.29 |
% |
25.06 |
% |
30.89 |
% |
26.72 |
% |
26.23 |
% |
N/A |
N/A |
||||||||
Average full-time equivalent employees |
2,364 |
2,384 |
2,380 |
2,330 |
2,138 |
(.8) |
10.6 |
|||||||||||||
TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful |
SOURCE KeyCorp
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