KEYCORP CLEVELAND, Jan. 19, 2017 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced fourth quarter net income from continuing operations attributable to Key common shareholders of $213 million, or $.20 per common share, compared to $165 million, or $.16 per common share, for the third quarter of 2016, and $224 million, or $.27 per common share, for the fourth quarter of 2015. During the fourth quarter of 2016, Key incurred merger-related charges totaling $198 million, or $.11 per common share, compared to $207 million, or $.14 per common share, in the third quarter of 2016. Excluding merger-related charges, earnings per common share were $.31 for the fourth quarter of 2016 and $.30 for the third quarter of 2016. Merger-related charges were $6 million in the fourth quarter of 2015.
"Key's fourth quarter results reflect continued momentum in our core businesses and the successful integration of the largest acquisition in our company's history," said Chairman and Chief Executive Officer Beth Mooney. "Excluding merger-related charges, we generated positive operating leverage for the quarter, our return on tangible common equity was 12.5%, and our cash efficiency ratio declined to 63.3%, reflecting solid performance across Key's businesses and early progress on merger synergies."
"We continued to see positive trends in the Community Bank and Corporate Bank this quarter, with both segments contributing to our overall revenue growth. Noninterest income increased as we continued to do more with our clients and see results from our investments," Mooney continued. "We had our strongest quarter ever in investment banking and debt placement fees, and for the full year generated $482 million in fees, marking another record year, with results up 8% from last year."
"The contribution from our First Niagara acquisition and quality of our new team members continue to exceed our expectations," added Mooney. "As we continue to realize cost savings and begin to see traction on revenue opportunities, we remain confident in reaching our financial targets."
Selected Financial Highlights
dollars in millions, except per share data Change 4Q16 vs.
4Q16 3Q16 4Q15 3Q16 4Q15
---- ---- ---- ---- ----
Income (loss) from continuing operations
attributable to Key common shareholders $213 $165 $224 29.1% (4.9)%
Income (loss) from continuing operations
attributable to Key common shareholders per common
share -assuming dilution .20 .16 .27 25.0 (25.9)
Return on average total assets from continuing
operations .69% .55% .97% N/A N/A
Common Equity Tier 1 ratio (non-GAAP) (a), (b) 9.59 9.56 10.94 N/A N/A
Book value at period end $12.58 $12.78 $12.51 (1.6)% .6%
Net interest margin (TE) from continuing operations 3.12% 2.85% 2.87% 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) 12-31-16 ratio
is estimated.
TE = Taxable Equivalent, N/A = Not Applicable
INCOME STATEMENT HIGHLIGHTS
Net interest income
dollars in millions Change 4Q16 vs.
4Q16 3Q16 4Q15 3Q16 4Q15
---- ---- ---- ---- ----
Net interest income (TE) $948 $788 $610 20.3% 55.4%
Merger-related charges - (6) - N/M N/M
Total net interest income excluding merger-related charges $948 $794 $610 19.4% 55.4%
==== ==== ====
TE = Taxable Equivalent
Fourth quarter 2016 net interest income included $92 million of purchase accounting accretion related to the acquisition of First Niagara, including $34 million related to refinement of third quarter 2016 purchase accounting estimates.
Taxable-equivalent net interest income was $948 million for the fourth quarter of 2016, and the net interest margin was 3.12%, compared to taxable-equivalent net interest income of $610 million and a net interest margin of 2.87% for the fourth quarter of 2015, reflecting the benefit from the First Niagara acquisition and ongoing business activity.
Compared to the third quarter of 2016, taxable-equivalent net interest income increased by $160 million, and the net interest margin increased by 27 basis points. The increases in both net interest income and the net interest margin reflect the benefit from a full-quarter impact of the First Niagara acquisition and refinement of third quarter 2016 purchase accounting estimates. The net interest margin also benefited from the redeployment of excess liquidity into investment securities.
Noninterest Income
dollars in millions Change 4Q16 vs.
4Q16 3Q16 4Q15 3Q16 4Q15
---- ---- ---- ---- ----
Trust and investment services
income $123 $122 $105 .8% 17.1%
Investment banking and debt
placement fees 157 156 127 .6 23.6
Service charges on deposit
accounts 84 85 64 (1.2) 31.3
Operating lease income and other
leasing gains 21 6 15 250.0 40.0
Corporate services income 61 51 55 19.6 10.9
Cards and payments income 69 66 47 4.5 46.8
Corporate-owned life insurance
income 40 29 36 37.9 11.1
Consumer mortgage income 6 6 2 - 200.0
Mortgage servicing fees 20 15 15 33.3 33.3
Net gains (losses) from
principal investing 4 5 - (20.0) N/M
Other income 33 8 19 312.5 73.7
--- --- ---
Total noninterest income $618 $549 $485 12.6% 27.4%
==== ==== ====
Merger-related charges 9 (12) - N/M N/M
Total noninterest income
excluding merger-related
charges $609 $561 $485 8.6% 25.6%
==== ==== ====
N/M = Not Meaningful
Fourth quarter 2016 reported noninterest income includes a benefit of $9 million associated with merger-related charges that includes adjustments to purchase accounting, compared to charges of $12 million in the third quarter of 2016.
Key's noninterest income was $618 million for the fourth quarter of 2016, compared to $485 million for the year-ago quarter. The increase was driven by the acquisition of First Niagara, as well as continued positive momentum in Key's core businesses. Investment banking and debt placement fees, cards and payments income, service charges on deposit accounts, and other income all contributed to the growth.
Compared to the third quarter of 2016, noninterest income increased by $69 million. The increase included a full-quarter impact of the First Niagara acquisition as well as adjustments to purchase accounting that have been recorded as merger-related charges. Operating lease income and other leasing gains increased $15 million, with prior quarter results impacted by lease residual losses. Additionally, corporate-owned life insurance income increased $11 million, reflecting normal seasonality. Other income was impacted by merger-related charges, which contributed $19 million to the linked quarter increase.
Noninterest Expense
dollars in millions Change 4Q16 vs.
4Q16 3Q16 4Q15 3Q16 4Q15
---- ---- ---- ---- ----
Personnel expense $648 $594 $429 9.1% 51.0%
Nonpersonnel expense 572 488 307 17.2 86.3
--- --- --- ---- ----
Total noninterest expense $1,220 $1,082 $736 12.8 65.8
====== ====== ====
Merger-related charges 207 189 6 9.5 N/M
Total noninterest expense excluding
merger-related charges $1,013 $893 $730 13.4% 38.8%
====== ==== ====
N/M = Not Meaningful
Key's noninterest expense was $1.2 billion for the fourth quarter of 2016, which included $207 million of merger-related charges, as well as a pension settlement charge of $18 million. The merger-related charges were primarily made up of $80 million in personnel expense related to systems conversions, as well as fully-dedicated personnel for merger and integration efforts. The remaining $127 million of merger-related charges were nonpersonnel expense, largely recognized in net occupancy, computer processing, business services and professional fees, and marketing expense. In the third quarter of 2016, noninterest expense included $189 million of merger-related charges, while $6 million of merger-related charges were incurred in the fourth quarter of 2015.
Excluding merger-related charges, noninterest expense was $283 million higher than the fourth quarter of last year. The increase from the prior year, reflected in both personnel and nonpersonnel expense, was largely driven by the acquisition of First Niagara, as well as higher incentive and stock-based compensation. Additionally, Key incurred $14 million in an increased pension settlement charge, and intangible asset amortization increased $18 million.
Compared to the third quarter of 2016, excluding merger-related charges, noninterest expense increased by $120 million. The increase, reflected in both personnel and nonpersonnel expense, was largely driven by an extra month of impact from First Niagara, as well as a pension settlement charge of $18 million during the fourth quarter. Incentive and stock-based compensation also increased, primarily related to stock-based compensation plans, reflecting the impact of Key's higher share price. In the fourth quarter of 2016, intangible asset amortization increased $14 million.
BALANCE SHEET HIGHLIGHTS
In the fourth quarter of 2016, Key had average assets of $136 billion compared to $96.1 billion in the fourth quarter of 2015 and $125.1 billion in the third quarter of 2016, primarily reflecting the acquisition of First Niagara.
Average securities available-for-sale and held-to-maturity securities totaled $29.3 billion in the fourth quarter of 2016, compared to $19.1 billion in the fourth quarter of 2015 and $24.2 billion in the third quarter of 2016. The increase compared to both the year-ago quarter and prior quarter primarily reflects the impact of the First Niagara acquisition and the redeployment of excess liquidity into the investment portfolio.
Average Loans
dollars in millions Change 4Q16 vs.
4Q16 3Q16 4Q15 3Q16 4Q15
---- ---- ---- ---- ----
Commercial, financial and agricultural
(a) $39,495 $37,318 $30,884 5.8% 27.9%
Other commercial loans 21,617 19,110 12,996 13.1 66.3
Home equity loans 12,812 11,968 10,418 7.1 23.0
Other consumer loans 11,436 9,301 5,278 23.0 116.7
------ ----- -----
Total loans $85,360 $77,697 $59,576 9.9% 43.3%
======= ======= =======
(a) Commercial,
financial
and
agricultural
average loan
balances
include $119
million,
$107
million, and
$87 million
of assets
from
commercial
credit cards
at December
31, 2016,
September
30, 2016,
and December
31, 2015,
respectively.
During the fourth quarter, Key adjusted the fair value mark on the First Niagara acquired loan portfolio from $686 million to $548 million.
Average loans were $85.4 billion for the fourth quarter of 2016, an increase of $25.8 billion compared to the fourth quarter of 2015, primarily reflecting the impact of the First Niagara acquisition and growth in commercial, financial and agricultural loans.
Compared to the third quarter of 2016, average loans increased by $7.7 billion, with the change reflecting the full-quarter impact of the First Niagara acquisition, September branch divestitures, and the exit of acquired non-relationship commercial loans. On a period-end basis, Key's loan portfolio increased $510 million, driven by growth in commercial, financial and agricultural loans and improvement in the fair value mark on the acquired portfolio.
Average Deposits
dollars in millions Change 4Q16 vs.
4Q16 3Q16 4Q15 3Q16 4Q15
---- ---- ---- ---- ----
Non-time deposits (a) $94,414 $85,683 $66,270 10.2% 42.5%
Certificates of deposit ($100,000 or
more) 5,428 4,204 2,150 29.1 152.5
Other time deposits 4,849 5,031 3,047 (3.6) 59.1
----- ----- ----- ---- ----
Total deposits $104,691 $94,918 $71,467 10.3% 46.5%
===
Cost of total deposits (a) .22% .21% .15% N/A N/A
Excludes
deposits
in
foreign
(a) office.
N/A = Not Applicable
Average deposits, excluding deposits in foreign office, totaled $104.7 billion for the fourth quarter of 2016, an increase of $33.2 billion compared to the year-ago quarter, primarily reflecting the acquisition of First Niagara and higher interest-bearing deposits resulting from core deposit growth in Key's retail banking franchise and growth in escrow deposits from the commercial mortgage servicing business.
Compared to the third quarter of 2016, average deposits increased by $9.8 billion, reflecting the full-quarter impact of the First Niagara acquisition, core deposit growth in Key's retail banking franchise, and deposit inflows from Key's commercial clients.
ASSET QUALITY
dollars in millions Change 4Q16 vs.
4Q16 3Q16 4Q15 3Q16 4Q15
---- ---- ---- ---- ----
Net loan charge-offs $72 $44 $37 63.6% 94.6%
Net loan charge-offs to
average total loans .34% .23% .25% N/A N/A
Nonperforming loans at
period end (a) $625 $723 $387 (13.6) 61.5
Nonperforming assets at
period end (a) 676 760 403 (11.1) 67.7
Allowance for loan and
lease losses 858 865 796 (.8) 7.8
Allowance for loan and
lease losses to
nonperforming loans (a) 137.3% 119.6% 205.7% N/A N/A
Provision for credit
losses $66 $59 $45 11.9% 46.7%
(a) Nonperforming
loan balances
exclude $865
million, $959
million, and
$11 million
of purchased
credit
impaired
loans at
December 31,
2016,
September 30,
2016, and
December 31,
2015,
respectively.
N/A = Not Applicable
Key's provision for credit losses was $66 million for the fourth quarter of 2016, compared to $45 million for the fourth quarter of 2015 and $59 million for the third quarter of 2016. Key's allowance for loan and lease losses was $858 million, or 1.00% of total period-end loans, at December 31, 2016, compared to 1.33% at December 31, 2015, and 1.01% at September 30, 2016.
Net loan charge-offs for the fourth quarter of 2016 totaled $72 million, or .34% of average total loans, reflecting regulatory guidance on consumer bankruptcies and conforming First Niagara charge-off policies to Key. These results compare to $37 million, or .25%, for the fourth quarter of 2015, and $44 million, or .23%, for the third quarter of 2016.
At December 31, 2016, Key's nonperforming loans totaled $625 million, which represented .73% of period-end portfolio loans. These results compare to .65% at December 31, 2015, and .85% at September 30, 2016. Nonperforming assets at December 31, 2016, totaled $676 million, and represented .79% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .67% at December 31, 2015, and .89% at September 30, 2016.
CAPITAL
Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at December 31, 2016.
Capital Ratios
12/31/2016 9/30/2016 12/31/2015
---------- --------- ----------
Common Equity Tier 1 (a), (b) 9.59% 9.56% 10.94%
Tier 1 risk-based capital (a) 10.95 10.53 11.35
Total risk based capital (a) 12.92 12.63 12.97
Tangible common equity to tangible assets
(b) 8.09 8.27 9.98
Leverage (a) 9.89 10.22 10.72
(a) 12/31/2016
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.
As shown in the preceding table, at December 31, 2016, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.59% and 10.95%, respectively. In addition, the tangible common equity ratio was 8.09% at December 31, 2016.
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 9.47% at December 31, 2016. 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 4Q16 vs.
4Q16 3Q16 4Q15 3Q16 4Q15
---- ---- ---- ---- ----
Shares outstanding at
beginning of period 1,082,055 842,703 835,285 28.4% 29.5%
Common shares repurchased (4,380) (5,240) - (16.4) N/M
Shares reissued (returned)
under employee benefit
plans 1,642 4,857 466 (66.2) 252.4
Common shares issued to
acquire First Niagara (3) 239,735 - N/M N/M
--- ------- --- --- ---
Shares outstanding at end of
period 1,079,314 1,082,055 835,751 (.3)% 29.1%
=========
N/M = Not Meaningful
During the fourth quarter of 2016, Key completed $68 million of common share repurchases, including repurchases to offset issuances of common shares under our employee compensation plans, in accordance with Key's 2016 Capital Plan.
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 4Q16 vs.
4Q16 3Q16 4Q15 3Q16 4Q15
---- ---- ---- ---- ----
Revenue from continuing operations (TE)
--------------------------------------
Key Community Bank $901 $779 $588 15.7% 53.2%
Key Corporate Bank 630 554 479 13.7 31.5
Other Segments 40 17 31 135.3 29.0
--- --- --- ----- ----
Total segments 1,571 1,350 1,098 16.4 43.1
Reconciling Items (5) (13) (3) N/M N/M
--- --- --- --- ---
Total $1,566 $1,337 $1,095 17.1% 43.0%
===
Income (loss) from continuing operations attributable to Key
------------------------------------------------------------
Key Community Bank $115 $104 $70 10.6% 64.3%
Key Corporate Bank 221 159 142 39.0 55.6
Other Segments 29 16 25 81.3 16.0
--- --- --- ---- ----
Total segments 365 279 237 30.8 54.0
Reconciling Items (a) (132) (108) (7) N/M N/M
---- ---- --- --- ---
Total $233 $171 $230 36.3% 1.3%
===
(a) Reconciling items consists primarily of the unallocated portion of merger-related charges
and items not allocated to the business segments because they do not reflect their normal
operations.
TE = Taxable Equivalent, N/M = Not Meaningful
Key Community Bank
dollars in millions Change 4Q16 vs.
4Q16 3Q16 4Q15 3Q16 4Q15
---- ---- ---- ---- ----
Summary of operations
Net interest income (TE) $628 $530 $388 18.5% 61.9%
Noninterest income 273 249 200 9.6 36.5
--- --- --- --- ----
Total revenue (TE) 901 779 588 15.7 53.2
Provision for credit losses 44 37 20 18.9 120.0
Noninterest expense 673 577 456 16.6 47.6
--- --- --- ---- ----
Income (loss) before income taxes (TE) 184 165 112 11.5 64.3
Allocated income taxes (benefit)
and TE adjustments 69 61 42 13.1 64.3
--- --- --- ---- ----
Net income (loss) attributable to Key $115 $104 $70 10.6% 64.3%
===
Average balances
Loans and leases $47,032 $41,548 $30,925 13.2% 52.1%
Total assets 50,940 44,219 33,056 15.2 54.1
Deposits 79,357 69,397 52,219 14.4 52.0
Assets under management at period
end $36,592 $36,752 $33,983 (.4)% 7.7%
TE = Taxable Equivalent
Additional Key Community Bank Data
dollars in millions Change 4Q16 vs.
4Q16 3Q16 4Q15 3Q16 4Q15
---- ---- ---- ---- ----
Noninterest income
Trust and investment services income $88 $86 $73 2.3% 20.5%
Service charges on deposit accounts 71 70 54 1.4 31.5
Cards and payments income 59 55 44 7.3 34.1
Other noninterest income 55 38 29 44.7 89.7
--- --- --- ---- ----
Total noninterest income $273 $249 $200 9.6% 36.5%
===
Average deposit balances
NOW and money market deposit accounts $44,368 $38,417 $28,862 15.5% 53.7%
Savings deposits 5,326 4,369 2,330 21.9 128.6
Certificates of deposit ($100,000 or more) 3,658 2,607 1,686 40.3 117.0
Other time deposits 4,836 4,943 3,045 (2.2) 58.8
Deposits in foreign office - - 208 N/M N/M
Noninterest-bearing deposits 21,169 19,061 16,088 11.1 31.6
------ ------ ------ ---- ----
Total deposits $79,357 $69,397 $52,219 14.4% 52.0%
===
Home equity loans
Average balance $12,560 $11,703 $10,203
Combined weighted-average loan-to-value ratio (at date of
origination) 71% 70% 71%
Percent first lien positions 57 55 61
Other data
Branches 1,217 1,322 966
Automated teller machines 1,593 1,701 1,256
N/M = Not Meaningful
Key Community Bank Summary of Operations (4Q16 vs. 4Q15)
-- Positive operating leverage from prior year
-- Net income increased $45 million, or 64.3% from prior year
-- Average commercial, financial, and agricultural loans increased $4.9
billion, or 38.6% from the prior year
-- Average deposits increased $27.1 billion, or 52% from the prior year
Key Community Bank recorded net income attributable to Key of $115 million for the fourth quarter of 2016, compared to $70 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 $240 million, or 61.9%, from the fourth quarter of 2015. The increase is primarily attributable to the acquisition of First Niagara. Average loans and leases increased $16.1 billion, or 52.1%, largely driven by a $4.9 billion, or 38.6% increase in commercial, financial, and agricultural loans. Additionally, average deposits increased $27.1 billion, or 52% from one year ago.
Noninterest income increased $73 million, or 36.5%, from the year-ago quarter, with positive trends in cards and payments income and service charges on deposit accounts.
The provision for credit losses increased by $24 million, or 120%, from the fourth quarter of 2015, primarily related to the acquisition of First Niagara, which was partially offset by enhancements to the approach utilized to determine the consumer allowance for loan and lease losses in the fourth quarter of 2016. Net loan charge-offs increased $19 million, primarily related to the acquisition of First Niagara.
Noninterest expense increased by $217 million, or 47.6%, from the year-ago quarter, largely driven by the acquisition of First Niagara, as well as core business activity and investments. Personnel expense increased $73 million while non-personnel expense increased by $144 million, including higher intangible amortization expense and higher FDIC assessment expense.
Key Corporate Bank
dollars in millions Change 4Q16 vs.
4Q16 3Q16 4Q15 3Q16 4Q15
---- ---- ---- ---- ----
Summary of operations
Net interest income (TE) $332 $276 $224 20.3% 48.2%
Noninterest income 298 278 255 7.2 16.9
--- --- --- --- ----
Total revenue (TE) 630 554 479 13.7 31.5
Provision for credit losses 21 25 26 (16.0) (19.2)
Noninterest expense 325 307 257 5.9 26.5
--- --- --- --- ----
Income (loss) before income taxes (TE) 284 222 196 27.9 44.9
Allocated income taxes and TE
adjustments 63 63 51 - 23.5
--- --- --- --- ----
Net income (loss) 221 159 145 39.0 52.4
Less: Net income (loss)
attributable to noncontrolling
interests - - 3 N/M N/M
--- --- --- --- ---
Net income (loss) attributable to Key $221 $159 $142 39.0% 55.6%
===
Average balances
Loans and leases $36,769 $34,561 $26,981 6.4% 36.3%
Loans held for sale 1,223 1,103 820 10.9 49.1
Total assets 43,209 40,581 32,639 6.5 32.4
Deposits 23,173 22,708 19,080 2.0% 21.5%
TE = Taxable Equivalent, N/M = Not Meaningful
Additional Key Corporate Bank Data
dollars in millions Change 4Q16 vs.
4Q16 3Q16 4Q15 3Q16 4Q15
---- ---- ---- ---- ----
Noninterest income
Trust and investment services income $35 $36 $32 (2.8)% 9.4%
Investment banking and debt placement fees 154 153 125 .7 23.2
Operating lease income and other leasing gains 19 10 13 90.0 46.2
Corporate services income 43 36 44 19.4 (2.3)
Service charges on deposit accounts 13 15 10 (13.3) 30.0
Cards and payments income 10 11 3 (9.1) 233.3
--- --- --- -----
Payments and services income 66 62 57 6.5 15.8
Mortgage servicing fees 18 13 15 38.5 20.0
Other noninterest income 6 4 13 50.0 (53.8)
--- --- --- ----
Total noninterest income $298 $278 $255 7.2% 16.9%
===
Key Corporate Bank Summary of Operations (4Q16 vs. 4Q15)
-- Record quarter and year for investment banking and debt placement fees
-- Net income increased $79 million, or 55.6% from the prior year
-- Average loans and leases increased $9.8 billion, or 36.3% from the prior
year
-- Average deposits increased $4.1 billion, or 21.5% from the prior year
Key Corporate Bank recorded net income attributable to Key of $221 million for the fourth quarter of 2016, compared to $142 million for the same period one year ago, reflecting the impact of the First Niagara acquisition as well as positive trends in Key's core businesses.
Taxable-equivalent net interest income increased by $108 million, or 48.2%, compared to the fourth quarter of 2015. Average loan and lease balances increased $9.8 billion, or 36.3%, from the year-ago quarter, primarily driven by the First Niagara acquisition as well as growth in commercial, financial and agricultural loans. Average deposit balances increased $4.1 billion, or 21.5%, from the year-ago quarter, mostly driven by the First Niagara acquisition, as well as growth in commercial escrow deposits.
Noninterest income increased $43 million, or 16.9%, from the prior year. This growth was mostly due to investment banking and debt placement fees, which increased $29 million, or 23.2%, cards and payments income which increased $7 million, and operating lease income and other leasing gains which increased $6 million.
The provision for credit losses decreased $5 million, or 19.2%, compared to the fourth quarter of 2015.
Noninterest expense increased by $68 million, or 26.5%, from the fourth quarter of 2015. The increase from the prior year, reflected in both personnel and nonpersonnel expense, was largely driven by the acquisition of First Niagara, higher performance-based compensation and various other items, including operating lease and cards and payments expenses.
Key Corporate Bank also continued to benefit from a higher volume of low income housing and energy tax credits.
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 $29 million for the fourth quarter of 2016, compared to $25 million for the same period last year, largely due to higher net gains from principal investing.
*****
KeyCorp's roots trace back 190 years to Albany, New York. Headquartered in Cleveland, Ohio, Key is one of the nation's largest bank-based financial services companies, with assets of approximately $136.5 billion at December 31, 2016.
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, 2015, 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, January 19, 2017. An audio replay of the call will be available through January 29, 2017.
Financial Highlights
(dollars in millions, except per share amounts)
Three months ended
12/31/2016 9/30/2016 12/31/2015
---------- --------- ----------
Summary of operations
Net interest income
(TE) $948 $788 $610
Noninterest income 618 549 485
---
Total revenue (TE) 1,566 1,337 1,095
Provision for credit
losses 66 59 45
Noninterest expense 1,220 1,082 736
Income (loss) from
continuing operations
attributable to Key 233 171 230
Income (loss) from
discontinued
operations, net of
taxes (a) (4) 1 (4)
Net income (loss)
attributable to Key 229 172 226
Income (loss) from
continuing operations
attributable to Key
common shareholders 213 165 224
Income (loss) from
discontinued
operations, net of
taxes (a) (4) 1 (4)
Net income (loss)
attributable to Key
common shareholders 209 166 220
Per common share
Income (loss) from
continuing operations
attributable to Key
common shareholders $.20 $.17 $.27
Income (loss) from
discontinued
operations, net of
taxes (a) - - (.01)
Net income (loss)
attributable to Key
common shareholders
(b) .20 .17 .27
Income (loss) from
continuing operations
attributable to Key
common shareholders -
assuming dilution .20 .16 .27
Income (loss) from
discontinued
operations, net of
taxes -assuming
dilution (a) - - (.01)
Net income (loss)
attributable to Key
common shareholders -
assuming dilution (b) .19 .17 .26
Cash dividends
declared per common
share .085 .085 .075
Book value at period
end 12.58 12.78 12.51
Tangible book value at
period end 9.99 10.14 11.22
Market price at period
end 18.27 12.17 13.19
Performance ratios
From continuing
operations:
Return on average
total assets .69% .55% .97%
Return on average
common equity 6.22 5.09 8.51
Return on average
tangible common
equity (c) 7.88 6.16 9.50
Net interest margin
(TE) 3.12 2.85 2.87
Cash efficiency ratio
(c) 76.2 80.0 66.4
From consolidated
operations:
Return on average
total assets .67% .55% .93%
Return on average
common equity 6.10 5.12 8.36
Return on average
tangible common
equity (c) 7.73 6.20 9.33
Net interest margin
(TE) 3.09 2.83 2.84
Loan to deposit (d) 85.2 84.7 87.8
Capital ratios at period end
Key shareholders'
equity to assets 11.17% 11.04% 11.30%
Key common
shareholders' equity
to assets 9.95 10.18 10.99
Tangible common equity
to tangible assets
(c) 8.09 8.27 9.98
Common Equity Tier 1
(c), (e) 9.59 9.56 10.94
Tier 1 risk-based
capital (e) 10.95 10.53 11.35
Total risk-based
capital (e) 12.92 12.63 12.97
Leverage (e) 9.89 10.22 10.72
Asset quality - from continuing operations
Net loan charge-offs $72 $44 $37
Net loan charge-offs
to average loans .34% .23% .25%
Allowance for loan and
lease losses $858 $865 $796
Allowance for credit
losses 913 918 852
Allowance for loan and
lease losses to
period-end loans 1.00% 1.01% 1.33%
Allowance for credit
losses to period-end
loans 1.06 1.07 1.42
Allowance for loan and
lease losses to
nonperforming loans
(f) 137.3 119.6 205.7
Allowance for credit
losses to
nonperforming loans
(f) 146.1 127.0 220.2
Nonperforming loans at
period end (f) $625 $723 $387
Nonperforming assets
at period end (f) 676 760 403
Nonperforming loans to
period-end portfolio
loans (f) .73% .85% .65%
Nonperforming assets
to period-end
portfolio loans plus
OREO and other
nonperforming assets
(f) .79 .89 .67
Trust and brokerage assets
Assets under
management $36,592 $36,752 $33,983
Nonmanaged and
brokerage assets 45,358 45,338 47,681
Other data
Average full-time
equivalent employees 18,849 17,079 13,359
Branches 1,217 1,322 966
Taxable-equivalent adjustment $10 $8 $8
Financial Highlights (continued)
(dollars in millions, except per share amounts)
Twelve months ended
12/31/2016 12/31/2015
---------- ----------
Summary of
operations
Net interest
income (TE) $2,953 $2,348
Noninterest
income 2,071 1,880
-----
Total revenue (TE) 5,024 4,256
Provision for
credit
losses 266 166
Noninterest
expense 3,756 2,840
Income (loss)
from
continuing
operations
attributable
to Key 790 915
Income (loss)
from
discontinued
operations,
net of taxes
(a) 1 1
Net income
(loss)
attributable
to Key 791 916
Income (loss)
from
continuing
operations
attributable
to Key
common
shareholders $753 $892
Income (loss)
from
discontinued
operations,
net of taxes
(a) 1 1
Net income
(loss)
attributable
to Key
common
shareholders 754 893
Per common share
Income (loss)
from
continuing
operations
attributable
to Key
common
shareholders $.81 $1.06
Income (loss)
from
discontinued
operations,
net of taxes
(a) - -
Net income
(loss)
attributable
to Key
common
shareholders
(b) .81 1.06
Income (loss)
from
continuing
operations
attributable
to Key
common
shareholders
-assuming
dilution .80 1.05
Income (loss)
from
discontinued
operations,
net of taxes
-assuming
dilution (a) - -
Net income
(loss)
attributable
to Key
common
shareholders
-assuming
dilution (b) .80 1.05
Cash
dividends
paid .330 .290
Performance ratios
From
continuing
operations:
Return on
average
total assets .70% .99%
Return on
average
common
equity 6.26 8.63
Return on
average
tangible
common
equity (c) 7.39 9.64
Net interest
margin (TE) 2.92 2.88
Cash
efficiency
ratio (c) 73.7 65.9
From
consolidated
operations:
Return on
average
total assets .69% .97%
Return on
average
common
equity 6.27 8.64
Return on
average
tangible
common
equity(c) 7.40 9.65
Net interest
margin (TE) 2.91 2.85
Asset quality -
from continuing
operations
Net loan
charge-offs 205 142
Net loan
charge-offs
to average
total loans .29% .24%
Other data
Average full-
time
equivalent
employees 15,700 13,483
Taxable-
equivalent
adjustment 34 28
(a) In April 2009, management decided to
wind down the operations of Austin
Capital Management, Ltd., a
subsidiary that specialized in
managing hedge fund investments for
institutional customers. In
September 2009, management decided to
discontinue the education lending
business conducted through Key
Education Resources, the education
payment and financing unit of KeyBank
National Association. In February
2013, Key decided to sell its
investment subsidiary, Victory
Capital Management, and its broker-
dealer affiliate, Victory Capital
Advisors, to a private equity fund.
As a result of these decisions, Key
has accounted for these businesses as
discontinued operations.
(b) Earnings per share may not foot due to
rounding.
(c) The following table entitled "GAAP to
Non-GAAP Reconciliations" presents
the computations of certain financial
measures related to "tangible common
equity," "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) 12/31/2016 ratio is estimated.
(f) Nonperforming loan balances exclude,
$865 million, $959 million, and $11
million of purchased credit impaired
loans at December 31, 2016, September
30, 2016, and December 31, 2015,
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 "cash efficiency ratio."
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 merger-related charges, noninterest expense excluding merger-related charges, earnings per common share 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, and pre-provision net revenue excluding merger-related charges. Management believes that eliminating the effects of the merger-related charges 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
12/31/2016 9/30/2016 12/31/2015
---------- --------- ----------
Tangible common equity to tangible assets at period end
Key shareholders' equity
(GAAP) $15,240 $14,996 $10,746
Less: Intangible assets
(a) 2,788 2,855 1,080
Preferred Stock
(b) 1,640 1,150 281
----- ----- ---
Tangible common
equity (non-
GAAP) $10,812 $10,991 $9,385
======= ======= ======
Total assets (GAAP) $136,453 $135,805 $95,131
Less: Intangible assets
(a) 2,788 2,855 1,080
--------------
Tangible assets
(non-GAAP) $133,665 $132,950 $94,051
======== ======== =======
Tangible common equity to
tangible assets ratio
(non-GAAP) 8.09% 8.27% 9.98%
Common Equity Tier 1 at period end
Key shareholders' equity
(GAAP) $15,240 $14,996 $10,746
Less: Preferred Stock
(b) 1,640 1,150 281
--------------
Common Equity Tier
1 capital before
adjustments and
deductions 13,600 13,846 10,465
Less: Goodwill, net of
deferred taxes 2,416 2,450 1,034
Intangible assets,
net of deferred
taxes 159 216 26
Deferred tax
assets 6 6 1
Net unrealized
gains (losses) on
available-for-
sale securities,
net of deferred
taxes (185) 101 (58)
Accumulated gains
(losses) on cash
flow hedges, net
of deferred taxes (53) 39 (20)
Amounts in
accumulated other
comprehensive
income (loss)
attributed to
pension and postretirement benefit
costs, net of deferred taxes (339) (359) (365)
---- ---- ----
Total Common
Equity Tier 1
capital (c) $11,596 $11,393 $9,847
======= ======= ======
Net risk-weighted assets
(regulatory) (c) $120,887 $119,120 $89,980
Common Equity Tier 1
ratio (non-GAAP) (c) 9.59% 9.56% 10.94%
Pre-provision net revenue
Net interest income
(GAAP) $938 $780 $602
Plus: Taxable-
equivalent
adjustment 10 8 8
Noninterest income 618 549 485
Less: Noninterest
expense 1,220 1,082 736
------------
Pre-provision net
revenue from
continuing
operations (non-
GAAP) $346 $255 $359
==== ==== ====
GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
Three months ended
12/31/2016 9/30/2016 12/31/2015
---------- --------- ----------
Average tangible common equity
Average Key
shareholders' equity
(GAAP) $14,901 $13,552 $10,731
Less: Intangible assets (average) (d) 2,874 2,255 1,082
Preferred Stock (average) 1,274 648 290
----- --- ---
Average tangible common equity
(non-GAAP) $10,753 $10,649 $9,359
======= ======= ======
Return on average tangible common equity from continuing
operations
Net income (loss)
from continuing
operations
attributable to Key
common shareholders
(GAAP) $213 $165 $224
Average tangible
common equity (non-
GAAP) 10,753 10,649 9,359
Return on average
tangible common
equity from
continuing
operations (non-
GAAP) 7.88% 6.16% 9.50%
Return on average tangible common equity consolidated
Net income (loss)
attributable to Key
common shareholders
(GAAP) $209 $166 $220
Average tangible
common equity (non-
GAAP) 10,753 10,649 9,359
Return on average
tangible common
equity consolidated
(non-GAAP) 7.73% 6.20% 9.33%
Return on average tangible common equity from continuing
operations excluding merger-related charges
Net income (loss)
from continuing
operations
attributable to Key
common shareholders
(GAAP) $213 $165 $224
Merger-related
charges, after tax 124 132 4
Net income (loss)
from continuing
operations
attributable to Key
common shareholders
excluding
merger-related charges (non-GAAP) $337 $297 $228
==== ==== ====
Average tangible
common equity (non-
GAAP) $10,753 $10,649 $9,359
Return on average
tangible common
equity from
continuing
operations excluding
merger-related
charges (non-GAAP) 12.47% 11.10% 9.67%
Return on average tangible common equity consolidated excluding
merger-related charges
Net income (loss)
attributable to Key
common shareholders
(GAAP) $209 $166 $220
Merger-related
charges, after tax 124 132 4
---
Net income (loss)
attributable to Key
common shareholders
excluding merger-
related charges
(non-GAAP) $333 $298 $224
===
Average tangible
common equity (non-
GAAP) $10,753 $10,649 $9,359
Return on average
tangible common
equity consolidated
excluding merger-
related charges
(non-GAAP) 12.32% 11.13% 9.50%
Noninterest expense excluding merger-related charges
Noninterest expense
(GAAP) $1,220 $1,082 $736
Less: Merger-related charges 207 189 6
Noninterest expense excluding
merger-related charges (non-
GAAP) $1,013 $893 $730
====== ==== ====
Earnings per common share (EPS) excluding merger-related charges
EPS from continuing
operations
attributable to Key
common shareholders
-assuming dilution $.20 $.16 $.27
Add: EPS impact of merger-related
charges .11 .14 -
EPS from continuing operations
attributable to Key common
shareholders
excluding merger-related charges
(non-GAAP) $.31 $.30 $.27
==== ==== ====
Cash efficiency ratio
Noninterest expense
(GAAP) $1,220 $1,082 $736
Less: Intangible asset amortization 27 13 9
Adjusted noninterest expense (non-
GAAP) 1,193 1,069 727
Less: Merger-related charges 207 189 6
Adjusted noninterest expense
excluding merger-related charges
(non-GAAP) $986 $880 $721
==== ==== ====
Net interest income
(GAAP) $938 $780 $602
Plus: Taxable-equivalent adjustment 10 8 8
Noninterest income 618 549 485
--- --- ---
Total taxable-equivalent revenue
(non-GAAP) 1,566 1,337 1,095
Add: Merger-related charges (9) 18 -
Adjusted noninterest income
excluding merger-related charges
(non-GAAP) $1,557 $1,355 $1,095
====== ====== ======
Cash efficiency ratio
(non-GAAP) 76.2% 80.0% 66.4%
Cash efficiency ratio
excluding merger-
related charges
(non-GAAP) 63.3% 64.9% 65.8%
GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
Three months ended
12/31/2016 9/30/2016 12/31/2015
---------- --------- ----------
Return on average total assets from continuing operations
excluding merger-related charges
Income from
continuing
operations
attributable to Key
(GAAP) $233 $171 $230
Add: Merger-related charges, after tax 124 132 4
Income from continuing operations
attributable to Key excluding
merger-related
charges, after tax (non-GAAP) $357 $303 $234
==== ==== ====
Average total assets
from continuing
operations (GAAP) $134,428 $123,469 $94,117
===
Return on average
total assets from
continuing
operations excluding
merger-related
charges (non-GAAP) 1.06% .98% .99%
Three months ended
------------------
12/31/2016
----------
Common Equity Tier 1 under the Regulatory Capital Rules ("RCR")
(estimates)
Common Equity Tier 1
under current RCR $11,596
Adjustments from
current RCR to the
fully phased-in
RCR:
Deferred tax assets and other
intangible assets (e) (110)
----
Common Equity Tier 1 anticipated
under the fully phased-in RCR
(f) $11,486
=======
Net risk-weighted
assets under current
RCR $120,887
Adjustments from
current RCR to the
fully phased-in
RCR:
Mortgage servicing assets (g) 576
Volcker funds (185)
All other assets (2)
Total risk-weighted assets
anticipated under the fully
phased-in RCR (f) $121,276
========
Common Equity Tier 1
ratio under the
fully phased-in RCR
(f) 9.47%
GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
Twelve months ended
12/31/2016 12/31/2015
---------- ----------
Pre-provision net revenue excluding merger-
related charges
Net interest income
(GAAP) $2,919 $2,348
Plus: Taxable-equivalent adjustment 34 28
Noninterest income (GAAP) 2,071 1,880
Less: Noninterest expense (GAAP) 3,756 2,840
-----
Pre-provision net
revenue from
continuing
operations (non-
GAAP) $1,268 $1,416
Less: Merger-related charges 474 6
Pre-provision net
revenue from
continuing
operations excluding
merger-related
charges (non-GAAP) $1,742 $1,422
===
Average tangible common equity
Average Key
shareholders' equity
(GAAP) $12,647 $10,626
Less: Intangible assets (average) (h) 1,825 1,085
Preferred Stock (average) 627 290
--- ---
Average tangible common equity
(non-GAAP) $10,195 $9,251
======= ======
Return on average tangible common equity from
continuing operations
Net income (loss)
from continuing
operations
attributable to Key
common shareholders
(GAAP) $753 $892
Average tangible
common equity (non-
GAAP) 10,195 9,251
Return on average
tangible common
equity from
continuing
operations (non-
GAAP) 7.39% 9.64%
Return on average tangible common equity
consolidated
Net income (loss)
attributable to Key
common shareholders
(GAAP) $754 $893
Average tangible
common equity (non-
GAAP) 10,195 9,251
Return on average
tangible common
equity consolidated
(non-GAAP) 7.40% 9.65%
Cash efficiency ratio
Noninterest expense
(GAAP) $3,756 $2,840
Less: Intangible asset amortization
(GAAP) 55 36
---
Adjusted noninterest expense (non-
GAAP) 3,701 2,804
Less: Merger-related charges 465 6
---
Adjusted noninterest expense
excluding merger-related charges
(non-GAAP) $3,236 $2,798
====== ======
Net interest income
(GAAP) $2,919 $2,348
Plus: Taxable-equivalent adjustment 34 28
Noninterest income (GAAP) 2,071 1,880
----- -----
Total taxable-equivalent revenue
(non-GAAP) 5,024 4,256
Plus: Merger-related charges 9 -
---
Adjusted noninterest income
excluding merger-related charges
(non-GAAP) $5,033 $4,256
Cash efficiency ratio
(non-GAAP) 73.7% 65.9%
Cash efficiency ratio
excluding merger-
related charges
(non-GAAP) 64.3% 65.9%
Return on average total assets from continuing
operations excluding merger-related charges
Income from
continuing
operations
attributable to Key
(GAAP) $790 $915
Plus: Merger-related charges, after tax 299 4
---
Income from continuing operations
attributable to Key excluding
merger-related
charges, after tax (non-GAAP) $1,089 $919
====== ====
Average total assets
from continuing
operations (GAAP) $112,537 $94,117
===
Return on average
total assets from
continuing
operations excluding
merger-related
charges (non-GAAP) .97% .98%
(a) For the three months ended December
31, 2016, September 30, 2016, and
December 31, 2015, intangible
assets exclude $42 million, $51
million, and $45 million,
respectively, of period-end
purchased credit card receivables.
(b) Net of capital surplus.
(c) 12/31/16 amount is estimated.
(d) For the three months ended December
31, 2016, September 30, 2016, and
December 31, 2015, average
intangible assets exclude $46
million, $47 million, and $47
million, respectively, of average
purchased credit card receivables.
(e) 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.
(f) 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."
(g) Item is included in the 10%/15%
exceptions bucket calculation and
is risk-weighted at 250%.
(h) For the twelve months ended
December 31, 2016, and December
31, 2015, average intangible
assets exclude $43 million and $55
million, respectively, of average
purchased credit card receivables.
GAAP = U.S. generally accepted accounting
principles
Consolidated Balance Sheets
(dollars in millions)
12/31/2016 9/30/2016 12/31/2015
---------- --------- ----------
Assets
Loans $86,038 $85,528 $59,876
Loans held for sale 1,104 1,137 639
Securities available
for sale 20,212 20,540 14,218
Held-to-maturity
securities 10,232 8,995 4,897
Trading account assets 867 926 788
Short-term investments 2,775 3,216 2,707
Other investments 738 747 655
---
Total earning assets 121,966 121,089 83,780
Allowance for loan and
lease losses (858) (865) (796)
Cash and due from banks 677 749 607
Premises and equipment 978 1,023 779
Operating lease assets 540 430 340
Goodwill 2,446 2,480 1,060
Other intangible assets 384 426 65
Corporate-owned life
insurance 4,068 4,035 3,541
Derivative assets 803 1,304 619
Accrued income and
other assets 3,864 3,480 3,290
Discontinued assets 1,585 1,654 1,846
-----
Total assets $136,453 $135,805 $95,131
======== ======== =======
Liabilities
Deposits in domestic
offices:
NOW and money market deposit accounts $54,590 $56,432 $37,089
Savings deposits 6,491 5,335 2,341
Certificates of deposit ($100,000 or more) 5,483 4,601 2,392
Other time deposits 4,698 5,793 3,127
----- ----- -----
Total interest-bearing deposits 71,262 72,161 44,949
Noninterest-bearing deposits 32,825 32,024 26,097
Deposits in foreign
office - interest-
bearing - - -
---
Total deposits 104,087 104,185 71,046
Federal funds purchased
and securities sold
under repurchase
agreements 1,502 602 372
Bank notes and other
short-term borrowings 808 809 533
Derivative liabilities 636 850 632
Accrued expense and
other liabilities 1,796 1,739 1,605
Long-term debt 12,384 12,622 10,184
Total liabilities 121,213 120,807 84,372
Equity
Preferred stock 1,665 1,165 290
Common shares 1,257 1,257 1,017
Capital surplus 6,385 6,359 3,922
Retained earnings 9,378 9,260 8,922
Treasury stock, at cost (2,904) (2,863) (3,000)
Accumulated other
comprehensive income
(loss) (541) (182) (405)
Key shareholders' equity 15,240 14,996 10,746
Noncontrolling
interests - 2 13
---
Total equity 15,240 14,998 10,759
------ ------ ------
Total liabilities and equity $136,453 $135,805 $95,131
======== ======== =======
Common shares outstanding (000) 1,079,314 1,082,055 835,751
Consolidated Statements of Income
(dollars in millions, except per share amounts)
Three months ended Twelve months ended
12/31/2016 9/30/2016 12/31/2015 12/31/2016 12/31/2015
---------- --------- ---------- ---------- ----------
Interest income
Loans $898 $746 $552 $2,773 $2,149
Loans held for sale 11 10 8 34 37
Securities available
for sale 92 88 76 329 293
Held-to-maturity
securities 44 30 24 122 96
Trading account assets 6 4 6 23 21
Short-term investments 5 7 3 22 8
Other investments 6 5 4 16 18
---
Total interest income 1,062 890 673 3,319 2,622
Interest expense
Deposits 57 49 26 171 105
Federal funds purchased
and securities sold
under repurchase
agreements 1 - - 1 -
Bank notes and other
short-term borrowings 3 2 3 10 9
Long-term debt 63 59 42 218 160
---
Total interest expense 124 110 71 400 274
Net interest income 938 780 602 2,919 2,348
Provision for credit losses 66 59 45 266 166
--- --- --- --- ---
Net interest income after provision for credit losses 872 721 557 2,653 2,182
Noninterest income
Trust and investment
services income 123 122 105 464 433
Investment banking and
debt placement fees 157 156 127 482 445
Service charges on
deposit accounts 84 85 64 302 256
Operating lease income
and other leasing
gains 21 6 15 62 73
Corporate services
income 61 51 55 215 198
Cards and payments
income 69 66 47 233 183
Corporate-owned life
insurance income 40 29 36 125 127
Consumer mortgage
income 6 6 2 17 12
Mortgage servicing fees 20 15 15 57 48
Net gains (losses) from
principal investing 4 5 - 20 51
Other income (a), (b) 33 8 19 94 54
---
Total noninterest income 618 549 485 2,071 1,880
Noninterest expense
Personnel 648 594 429 2,073 1,652
Net occupancy 112 73 64 305 255
Computer processing 97 70 43 255 164
Business services and
professional fees 78 76 44 235 159
Equipment 30 26 22 98 88
Operating lease expense 17 15 13 59 47
Marketing 35 32 17 101 57
FDIC assessment 23 21 8 61 32
Intangible asset
amortization 27 13 9 55 36
OREO expense, net 3 3 1 9 6
Other expense 150 159 86 505 344
---
Total noninterest expense 1,220 1,082 736 3,756 2,840
----- ----- --- ----- -----
Income (loss) from continuing operations before income
taxes 270 188 306 968 1,222
Income taxes 38 16 73 179 303
---
Income (loss) from continuing operations 232 172 233 789 919
Income (loss) from
discontinued
operations, net of
taxes (4) 1 (4) 1 1
---
Net income (loss) 228 173 229 790 920
Less: Net income
(loss) attributable to
noncontrolling
interests (1) 1 3 (1) 4
---
Net income (loss) attributable to Key $229 $172 $226 $791 $916
==== ==== ==== ==== ====
Income (loss) from continuing operations attributable
to Key common shareholders $213 $165 $224 $753 $892
Net income (loss) attributable to Key common
shareholders 209 166 220 754 893
Per common share
----------------
Income (loss) from continuing operations attributable
to Key common shareholders $.20 $.17 $.27 $.81 $1.06
Income (loss) from discontinued operations, net of
taxes - - (.01) - -
Net income (loss) attributable to Key common
shareholders (c) .20 .17 .27 .81 1.06
Per common share - assuming dilution
------------------------------------
Income (loss) from continuing operations attributable
to Key common shareholders $.20 $.16 $.27 $.80 $1.05
Income (loss) from discontinued operations, net of
taxes - - (.01) - -
Net income (loss) attributable to Key common
shareholders (c) .19 .17 .26 .80 1.05
Cash dividends declared per common share $.085 $.085 $.075 $.33 $.29
Weighted-average common shares outstanding (000) 1,067,771 982,080 828,206 927,816 836,846
Effect of common share
options and other
stock awards 15,946 12,580 7,733 10,720 7,643
------
Weighted-average common shares and potential common
shares outstanding (000) (d) 1,083,717 994,660 835,939 938,536 844,489
========= ======= ======= ======= =======
(a) For the three months ended December 31, 2016, net securities gains totaled $6 million. For the three
months ended September 30, 2016, net securities losses totaled $6 million. For the three months
ended December 31, 2015, net securities gains totaled less than $1 million. For the three months
ended December 31, 2016, September 30, 2016, and December 31,2015, Key did not have any impairment
losses related to securities.
(b) For the twelve months ended December 31, 2016 and December 31, 2015, net securities gains (losses)
totaled less than $1 million. For the twelve months ended December 31, 2016, and December 31,2015,
Key did not have any impairment losses related to securities.
(c) Earnings per share may not foot due to rounding.
(d) 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)
Fourth Quarter 2016 Third Quarter 2016 Fourth Quarter 2015
Average Average Average
Balance Interest (a) Yield/Rate Balance Interest (a) Yield/Rate Balance Interest (a) Yield/Rate
(a) (a) (a)
----------- ----------- ------- ----------- ----------- ------- ----------- -----------
Assets
Loans: (b), (c)
Commercial, financial and
agricultural (d) $39,495 $365 3.68% $37,318 $317 3.38% % $30,884 $253 3.25%
Real estate - commercial mortgage 14,771 168 4.50 12,879 126 3.91 8,019 75 3.70
Real estate - construction 2,222 37 6.72 1,723 21 4.67 1,067 10 3.65
Commercial lease financing 4,624 50 4.34 4,508 38 3.33 3,910 36 3.68
-----
Total commercial loans 61,112 620 4.04 56,428 502 3.54 43,880 374 3.38
Real estate - residential mortgage 5,554 57 4.17 4,453 45 3.96 2,252 24 4.18
Home equity loans 12,812 129 3.99 11,968 122 4.07 10,418 105 3.97
Consumer direct loans 1,785 31 6.84 1,666 30 7.20 1,605 26 6.50
Credit cards 1,088 29 10.78 996 27 10.80 780 21 10.66
Consumer indirect loans 3,009 42 5.50 2,186 28 5.23 641 10 6.45
-----
Total consumer loans 24,248 288 4.73 21,269 252 4.73 15,696 186 4.69
------ --- ---- ------ --- ---- ------ --- ----
Total loans 85,360 908 4.24 77,697 754 3.86 59,576 560 3.72
Loans held for sale 1,323 11 3.39 1,152 10 3.48 841 8 4.13
Securities available for sale (b),
(e) 20,145 92 1.82 17,972 88 1.99 14,168 76 2.13
Held-to-maturity securities (b) 9,121 44 1.95 6,250 30 1.86 4,908 24 1.99
Trading account assets 892 6 2.54 860 4 2.12 822 6 3.31
Short-term investments 3,717 5 .49 5,911 7 .48 3,483 3 .28
Other investments (e) 741 6 3.23 717 5 2.74 674 4 2.71
---
Total earning assets 121,299 1,072 3.52 110,559 898 3.24 84,472 681 3.21
Allowance for loan and lease losses (855) (847) (790)
Accrued income and other assets 13,984 13,757 10,435
Discontinued assets 1,610 1,676 1,947
-----
Total assets $136,038 $125,145 $96,064
======== ======== =======
Liabilities
NOW and money market deposit
accounts $55,444 31 .22 $51,318 25 .20 $37,640 14 .15
Savings deposits 6,546 2 .10 4,521 1 .07 2,338 - .02
Certificates of deposit ($100,000
or more) (f) 5,428 15 1.11 4,204 12 1.15 2,150 7 1.31
Other time deposits 4,849 9 .77 5,031 11 .85 3,047 5 .72
Deposits in foreign office - - - - - - 354 - .24
---
Total interest-bearing deposits 72,267 57 .32 65,074 49 .30 45,529 26 .24
Federal funds purchased and
securities 592 1 .11 578 - .16 392 - .02
sold under repurchase agreements
Bank notes and other short-term
borrowings 934 3 1.11 1,186 2 .91 556 3 1.65
Long-term debt (f), (g) 10,914 63 2.38 10,415 59 2.31 8,316 42 2.05
------
Total interest-bearing liabilities 84,707 124 .58 77,253 110 .57 54,793 71 .52
------ --- --- ------ --- --- ------ --- ---
Noninterest-bearing deposits 32,424 29,844 26,292
Accrued expense and other
liabilities 2,394 2,818 2,289
Discontinued liabilities (g) 1,610 1,676 1,947
-----
Total liabilities 121,135 111,591 85,321
Equity
Key shareholders' equity 14,901 13,552 10,731
Noncontrolling interests 2 2 12
---
Total equity 14,903 13,554 10,743
Total liabilities and equity $136,038 $125,145 $96,064
======== ======== =======
Interest rate spread (TE) 2.94% 2.67% 2.69%
==== ==== ====
Net interest income (TE) and net interest margin (TE) 948 3.12% 788 2.85% 610 2.87%
==== ==== ====
TE adjustment (b) 10 8 8
--- --- ---
Net interest income, GAAP basis $938 $780 $602
(a) Results are from continuing
operations. Interest excludes the
interest associated with the
liabilities referred to in (g)
below, calculated using a matched
funds transfer pricing
methodology.
(b) Interest income on tax-exempt
securities and loans has been
adjusted to a taxable-equivalent
basis using the statutory federal
income tax rate of 35%.
(c) For purposes of these computations,
nonaccrual loans are included in
average loan balances.
(d) Commercial, financial and
agricultural average balances
include $119 million, $107
million, and $87 million of assets
from commercial credit cards for
the three months ended December
31, 2016, September 30, 2016, and
December 31, 2015, 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)
Twelve months ended December 31, 2016 Twelve months ended December 31, 2015
Average Average
Balance Interest (a) Yield/Rate Balance Interest (a) Yield/ Rate
(a) (a)
------- ----------- ----------- ------- ----------- ------------
Assets
Loans: (b), (c)
Commercial, financial and
agricultural (d) $35,276 $1,215 3.45% $29,658 $953 3.21%
Real estate -commercial
mortgage 11,063 451 4.07 8,020 295 3.68
Real estate - construction 1,460 76 5.22 1,143 43 3.73
Commercial lease financing 4,261 161 3.78 3,976 143 3.60
-----
Total commercial loans 52,060 1,903 3.66 42,797 1,434 3.35
Real estate -residential
mortgage 3,632 148 4.09 2,244 95 4.21
Home equity loans 11,286 456 4.04 10,503 418 3.98
Consumer direct loans 1,661 113 6.79 1,580 103 6.54
Credit cards 916 98 10.73 752 81 10.76
Consumer indirect loans 1,593 89 5.58 718 46 6.43
-----
Total consumer loans 19,088 904 4.74 15,797 743 4.70
------
Total loans 71,148 2,807 3.95 58,594 2,177 3.71
Loans held for sale 979 34 3.51 959 37 3.85
Securities available for sale
(b), (e) 16,661 329 1.98 13,720 293 2.14
Held-to-maturity securities (b) 6,275 122 1.94 4,936 96 1.95
Trading account assets 884 23 2.59 761 21 2.80
Short-term investments 4,656 22 .47 2,843 8 .27
Other investments (e) 679 16 2.37 706 18 2.63
---
Total earning assets 101,282 3,353 3.31 82,519 2,650 3.21
Allowance for loan and lease
losses (835) (791)
Accrued income and other assets 12,090 10,298
Discontinued assets 1,707 2,132
-----
Total assets $114,244 $94,158
===
Liabilities
NOW and money market deposit
accounts $46,079 87 .19 $36,258 56 .15
Savings deposits 3,957 3 .07 2,372 - .02
Certificates of deposit
($100,000 or more) (f) 3,911 48 1.22 2,041 26 1.28
Other time deposits 4,088 33 .81 3,115 22 .71
Deposits in foreign office - - - 489 1 .23
---
Total interest-bearing deposits 58,035 171 .30 44,275 105 .24
Federal funds purchased and
securities 487 1 .10 632 - .04
sold under repurchase agreements
Bank notes and other short-term
borrowings 852 10 1.18 572 9 1.52
Long-term debt (f), (g) 9,802 218 2.29 7,332 160 2.24
-----
Total interest-bearing liabilities 69,176 400 .58 52,811 274 .52
------ --- --- ------ --- ---
Noninterest-bearing deposits 28,317 26,355
Accrued expense and other
liabilities 2,393 2,222
Discontinued liabilities (g) 1,706 2,132
-----
Total liabilities 101,592 83,520
Equity
Key shareholders' equity 12,647 10,626
Noncontrolling interests 5 12
---
Total equity 12,652 10,638
Total liabilities and equity $114,244 $94,158
===
Interest rate spread (TE) 2.73% 2.69%
==== ====
Net interest income (TE) and net interest margin (TE) 2,953 2.92% 2,376 2.88%
==== ====
TE adjustment (b) 34 28
--- ---
Net interest income, GAAP basis $2,919 $2,348
(a) Results are from continuing
operations. Interest excludes
the interest associated with the
liabilities referred to in (g)
below, calculated using a matched
funds transfer pricing
methodology.
(b) Interest income on tax-exempt
securities and loans has been
adjusted to a taxable-equivalent
basis using the statutory federal
income tax rate of 35%.
(c) For purposes of these
computations, nonaccrual loans
are included in average loan
balances.
(d) Commercial, financial and
agricultural average balances
include $99 million and $88
million of assets from commercial
credit cards for the twelve
months ended December 31, 2016,
and December 31, 2015,
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 Twelve months ended
12/31/2016 9/30/2016 12/31/2015 12/31/2016 12/31/2015
---------- --------- ---------- ---------- ----------
Personnel(a) $648 $594 $429 $2,073 $1,652
Net occupancy 112 73 64 305 255
Computer processing 97 70 43 255 164
Business services and professional fees 78 76 44 235 159
Equipment 30 26 22 98 88
Operating lease expense 17 15 13 59 47
Marketing 35 32 17 101 57
FDIC assessment 23 21 8 61 32
Intangible asset amortization 27 13 9 55 36
OREO expense, net 3 3 1 9 6
Other expense 150 159 86 505 344
--- --- --- --- ---
Total noninterest expense $1,220 $1,082 $736 $3,756 $2,840
====== ====== ==== ====== ======
Merger-related charges(b) 207 189 6 465 6
Total noninterest expense excluding merger-related charges $1,013 $893 $730 $3,291 $2,834
====== ==== ==== ====== ======
Average full-time equivalent employees(c) 18,849 17,079 13,359 15,700 13,483
(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 Twelve months ended
12/31/2016 9/30/2016 12/31/2015 12/31/2016 12/31/2015
---------- --------- ---------- ---------- ----------
Salaries and contract labor $352 $329 $244 $1,191 $958
Incentive and stock-based compensation 185 162 115 537 410
Employee benefits 98 73 64 297 266
Severance 13 30 6 48 18
--- --- --- --- ---
Total personnel expense $648 $594 $429 $2,073 $1,652
==== ==== ==== ====== ======
Merger-related charges 80 97 - 228 -
Total personnel expense excluding merger-related charges $568 $497 $429 $1,845 $1,652
==== ==== ==== ====== ======
Merger-Related Charges
(in millions)
Three months ended Twelve months ended
12/31/2016 9/30/2016 12/31/2015 12/31/2016 12/31/2015
---------- --------- ---------- ---------- ----------
Net interest income - $(6) - $(6) -
Operating lease income and other leasing gains - (2) - (2) -
Other income $9 (10) - (1) -
--- --- --- --- ---
Noninterest income 9 (12) - (3) -
Personnel (a) 80 97 - 228 -
Net occupancy 29 - - 29 -
Business services and professional fees 22 32 $5 66 $5
Computer processing 38 15 - 53 -
Marketing 13 9 - 26 -
Other nonpersonnel expense 25 36 1 63 1
--- --- --- --- ---
Noninterest expense 207 189 6 465 6
--- --- --- --- ---
Total merger-related charges $198 $207 $6 $474 $6
==== ==== === ==== ===
(a) Personnel expense includes
severance, technology
development related to systems
conversion, and fully-
dedicated personnel for merger
and integration efforts.
Loan Composition
(dollars in millions)
Percent change 12/31/16
vs.
12/31/2016 9/30/2016 12/31/2015 9/30/2016 12/31/2015
---------- --------- ---------- --------- ----------
Commercial, financial and agricultural (a) $39,768 $39,433 $31,240 .8% 27.3%
Commercial real estate:
Commercial mortgage 15,111 14,979 7,959 .9 89.9
Construction 2,345 2,189 1,053 7.1 122.7
-----
Total commercial real
estate loans 17,456 17,168 9,012 1.7 93.7
Commercial lease financing (b) 4,685 4,783 4,020 (2.0) 16.5
----- ----- ----- ---- ----
Total commercial
loans 61,909 61,384 44,272 .9 39.8
Residential - prime loans:
Real estate -
residential mortgage 5,547 5,509 2,242 .7 147.4
Home equity loans 12,674 12,757 10,335 (.7) 22.6
------
Total residential - prime loans 18,221 18,266 12,577 (.2) 44.9
Consumer direct loans 1,788 1,764 1,600 1.4 11.8
Credit cards 1,111 1,084 806 2.5 37.8
Consumer indirect loans 3,009 3,030 621 (.7) 384.5
----- ----- --- --- -----
Total consumer loans 24,129 24,144 15,604 (.1) 54.6
------
Total loans (c), (d) $86,038 $85,528 $59,876 .6% 43.7%
=== === ===
(a) Loan balances include $116 million,
$117 million, and $85 million of
commercial credit card balances at
December 31, 2016, September 30,
2016, and December 31, 2015,
respectively.
(b) Commercial lease financing includes
receivables held as collateral for
a secured borrowing of $68
million, $76 million, and $134
million at December 31, 2016,
September 30, 2016, and December
31, 2015, respectively. Principal
reductions are based on the cash
payments received from these
related receivables.
(c) At December 31, 2016, total loans
include purchased loans of $21.0
billion, of which $865 million
were purchased credit impaired. At
September 30, 2016, total loans
include purchased loans of $22.4
billion, of which $959 million
were purchased credit impaired. At
December 31, 2015, total loans
include purchased loans of $114
million, of which $11 million were
purchased credit impaired.
(d) Total loans exclude loans of $1.6
billion at December 31, 2016, $1.6
billion at September 30, 2016, and
$1.8 billion at December 31, 2015,
related to the discontinued
operations of the education
lending business.
Loans Held for Sale Composition
(dollars in millions)
Percent change 12/31/16
vs.
12/31/2016 9/30/2016 12/31/2015 9/30/2016 12/31/2015
---------- --------- ---------- --------- ----------
Commercial, financial and agricultural $19 $56 $76 (66.1)% (75.0)%
Real estate - commercial mortgage 1,022 1,016 532 .6 92.1
Commercial lease financing - 3 14 N/M N/M
Real estate - residential mortgage 62 62 17 - 264.7
Real estate - construction 1 - - N/M N/M
--- --- --- --- ---
Total loans held for
sale (a) $1,104 $1,137 $639 (2.9)% 72.8%
===
(a) Total loans held for sale include
Real estate -residential mortgage
loans held for sale at fair value
of $62 million at December 31,
2016 and September 30, 2016.
N/M = Not Meaningful
Summary of Changes in Loans Held for Sale
(in millions)
4Q16 3Q16 2Q16 1Q16 4Q15
---- ---- ---- ---- ----
Balance at beginning of period $1,137 $442 $684 $639 $916
Purchases - 48 - - -
New originations 2,846 2,857 1,539 1,114 1,655
Transfers from
(to) held to
maturity, net 11 2 22 - 22
Loan sales (2,889) (2,180) (1,802) (1,108) (1,943)
Loan draws
(payments), net (1) (32) (1) 39 (11)
Balance at end of period (a) $1,104 $1,137 $442 $684 $639
====== ====== ==== ==== ====
(a) Total loans held for sale include
Real estate -residential mortgage
loans held for sale at fair value
of $62 million at December 31,
2016 and September 30, 2016.
Asset Quality Statistics From Continuing Operations
(dollars in millions)
4Q16 3Q16 2Q16 1Q16 4Q15
---- ---- ---- ---- ----
Net loan charge-offs $72 $44 $43 $46 $37
Net loan charge-offs
to average total
loans .34% .23% .28% .31% .25%
Allowance for loan and
lease losses $858 $865 $854 $826 $796
Allowance for credit
losses (a) 913 918 904 895 852
Allowance for loan and
lease losses to
period-end loans 1.00% 1.01% 1.38% 1.37% 1.33%
Allowance for credit
losses to period-end
loans 1.06 1.07 1.46 1.48 1.42
Allowance for loan and
lease losses to
nonperforming loans
(b) 137.3 119.6 138.0 122.2 205.7
Allowance for credit
losses to
nonperforming loans
(b) 146.1 127.0 146.0 132.4 220.2
Nonperforming loans at
period end (b) $625 $723 $619 $676 $387
Nonperforming assets
at period end (b) 676 760 637 692 403
Nonperforming loans to
period-end portfolio
loans (b) .73% .85% 1.00% 1.12% .65%
Nonperforming assets
to period-end
portfolio loans plus .79 .89 1.03 1.14 .67
OREO and other
nonperforming assets
(b)
(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
$865 million, $959 million, $11
million, $11 million, and $11
million of purchased credit
impaired loans at December 31,
2016, September 30, 2016, June 30,
2016, March 31, 2016 , and
December 31, 2015, respectively.
Summary of Loan and Lease Loss Experience From Continuing Operations
(dollars in millions)
Three months ended Twelve months ended
12/31/2016 9/30/2016 12/31/2015 12/31/2016 12/31/2015
---------- --------- ---------- ---------- ----------
Average loans outstanding $85,360 $77,697 $59,576 $71,148 $58,594
======= ======= ======= ======= =======
Allowance for loan and lease losses at
beginning of period $865 $854 $790 $796 $794
Loans charged off:
Commercial, financial and agricultural 40 17 18 118 77
Real estate - commercial mortgage 2 - 2 5 4
Real estate - construction - 9 - 9 1
--- --- --- --- ---
Total commercial real estate loans 2 9 2 14 5
Commercial lease financing 1 5 6 12 11
--- --- --- --- ---
Total commercial loans 43 31 26 144 93
Real estate - residential mortgage - 1 2 4 6
Home equity loans 8 5 7 30 32
Consumer direct loans 9 6 6 27 24
Credit cards 10 9 7 35 30
Consumer indirect loans 12 3 3 21 18
--- --- --- --- ---
Total consumer loans 39 24 25 117 110
--- --- --- --- ---
Total loans charged off 82 55 51 261 203
Recoveries:
Commercial, financial and agricultural 3 2 3 11 16
Real estate - commercial mortgage - 1 4 9 6
Real estate - construction - 1 - 2 1
--- --- --- --- ---
Total commercial real estate loans - 2 4 11 7
Commercial lease financing 1 - - 3 7
--- --- --- --- ---
Total commercial loans 4 4 7 25 30
Real estate - residential mortgage (2) 1 2 1 3
Home equity loans 4 3 2 14 11
Consumer direct loans 1 1 1 5 6
Credit cards 1 1 - 4 2
Consumer indirect loans 2 1 2 7 9
--- --- --- --- ---
Total consumer loans 6 7 7 31 31
--- --- --- --- ---
Total recoveries 10 11 14 56 61
--- --- --- --- ---
Net loan charge-offs (72) (44) (37) (205) (142)
Provision (credit) for loan and lease losses 64 56 43 267 145
Foreign currency translation adjustment 1 (1) - - (1)
--- --- --- --- ---
Allowance for loan and lease losses at end of
period $858 $865 $796 $858 $796
==== ==== ==== ==== ====
Liability for credit losses on lending-
related commitments at beginning of period $53 $50 $54 $56 $35
Provision (credit) for losses on lending-
related commitments 2 3 2 (1) 21
--- --- --- --- ---
Liability for credit losses on lending-
related commitments at end of period (a) $55 $53 $56 $55 $56
=== === === === ===
Total allowance for credit losses at end of
period $913 $918 $852 $913 $852
==== ==== ==== ==== ====
Net loan charge-offs to average total loans .34% .23% .25% .29% .24%
Allowance for loan and lease losses to
period-end loans 1.00 1.01 1.33 1.00 1.33
Allowance for credit losses to period-end
loans 1.06 1.07 1.42 1.06 1.42
Allowance for loan and lease losses to
nonperforming loans 137.3 119.6 205.7 137.3 205.7
Allowance for credit losses to nonperforming
loans 146.1 127.0 220.2 146.1 220.2
Discontinued operations -education lending
business:
Loans charged off $7 $6 $10 $28 $35
Recoveries 3 3 3 11 13
--- --- --- --- ---
Net loan charge-offs $(4) $(3) $(7) $(17) $(22)
=== === === ==== ====
(a) Included in "Accrued
expense and other
liabilities" on the
balance sheet.
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
(dollars in millions)
12/31/2016 9/30/2016 6/30/2016 3/31/2016 12/31/2015
---------- --------- --------- --------- ----------
Commercial, financial and agricultural $297 $335 $321 $380 $82
Real estate - commercial mortgage 26 32 14 16 19
Real estate - construction 3 17 25 12 9
--- --- --- --- ---
Total commercial real estate loans 29 49 39 28 28
Commercial lease financing 8 13 10 11 13
--- --- --- --- ---
Total commercial loans 334 397 370 419 123
Real estate - residential mortgage 56 72 54 59 64
Home equity loans 223 225 189 191 190
Consumer direct loans 6 2 1 1 2
Credit cards 2 3 2 2 2
Consumer indirect loans 4 24 3 4 6
--- --- --- --- ---
Total consumer loans 291 326 249 257 264
--- --- --- --- ---
Total nonperforming loans (a) 625 723 619 676 387
OREO 51 35 15 14 14
Other nonperforming assets - 2 3 2 2
--- --- --- --- ---
Total nonperforming assets (a) $676 $760 $637 $692 $403
==== ==== ==== ==== ====
Accruing loans past due 90 days or more $87 $49 $70 $70 $72
Accruing loans past due 30 through 89 days 404 317 203 237 208
Restructured loans - accruing and nonaccruing (b) 280 304 277 283 280
Restructured loans included in nonperforming loans (b) 141 149 133 151 159
Nonperforming assets from discontinued operations - 5 5 5 6 7
education lending business
Nonperforming loans to period-end portfolio loans (a) .73% .85% 1.00% 1.12% .65%
Nonperforming assets to period-end portfolio loans .79 .89 1.03 1.14 .67
plus OREO and other nonperforming assets (a)
(a) Nonperforming loan balances exclude
$865 million, $959 million, $11
million, $11 million, and $11
million, of purchased credit impaired
loans at December 31, 2016, September
30, 2016, June 30, 2016, March 31,
2016, and December 31, 2015,
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)
4Q16 3Q16 2Q16 1Q16 4Q15
---- ---- ---- ---- ----
Balance at beginning
of period $723 $619 $676 $387 $400
Loans placed on
nonaccrual status 170 78 124 406 81
Nonperforming loans
acquired from First
Niagara (a) (31) 150 - - -
Charge-offs (81) (53) (64) (60) (51)
Loans sold (9) - - (11) -
Payments (30) (32) (75) (8) (21)
Transfers to OREO (21) (5) (6) (4) (4)
Transfers to other
nonperforming assets - - - - (1)
Loans returned to
accrual status (96) (34) (36) (34) (17)
--- --- --- --- ---
Balance at end of
period (b) $625 $723 $619 $676 $387
==== ==== ==== ==== ====
(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
$865 million, $959 million, $11
million, $11 million, and $11
million of purchased credit
impaired loans at December 31,
2016, September 30, 2016, June 30,
2016, March 31, 2016, and December
31, 2015, respectively.
Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations
(in millions)
4Q16 3Q16 2Q16 1Q16 4Q15
---- ---- ---- ---- ----
Balance at beginning
of period $35 $15 $14 $14 $17
Properties acquired -
First Niagara - 19 - - -
Properties acquired -
nonperforming loans 21 5 6 4 4
Valuation adjustments (2) (2) (2) (1) (2)
Properties sold (3) (2) (3) (3) (5)
--- --- --- --- ---
Balance at end of
period $51 $35 $15 $14 $14
=== === === === ===
Line of Business Results
(dollars in millions)
Percent change 4Q16 vs.
4Q16 3Q16 2Q16 1Q16 4Q15 3Q16 4Q15
---- ---- ---- ---- ---- ---- ----
Key Community Bank
Summary of operations
Total revenue (TE) $901 $779 $598 $595 $588 15.7% 53.2%
Provision for credit losses 44 37 25 42 20 18.9 120.0
Noninterest expense 673 577 444 436 456 16.6 47.6
Net income (loss) attributable to
Key 115 104 81 74 70 10.6 64.3
Average loans and leases 47,032 41,548 30,936 30,789 30,925 13.2 52.1
Average deposits 79,357 69,397 53,794 52,803 52,219 14.4 52.0
Net loan charge-offs 42 31 17 23 23 35.5 82.6
Net loan charge-offs to average
total loans .36% .30% .22% .30% .30% N/A N/A
Nonperforming assets at period end $394 $430 $300 $303 $303 (8.4) 30.0
Return on average allocated equity 9.70% 11.52% 11.99% 11.09% 10.39% N/A N/A
Average full-time equivalent
employees 11,173 9,796 7,331 7,376 7,390 14.1 51.2
Key Corporate Bank
Summary of operations
Total revenue (TE) $630 $554 $452 $426 $479 13.7% 31.5%
Provision for credit losses 21 25 30 43 26 (16.0) (19.2)
Noninterest expense 325 307 259 237 257 5.9 26.5
Net income (loss) attributable to
Key 221 159 135 118 142 39.0 55.6
Average loans and leases 36,769 34,561 28,607 27,722 26,981 6.4 36.3
Average loans held for sale 1,223 1,103 591 811 820 10.9 49.1
Average deposits 23,173 22,708 19,129 18,074 19,080 2.0 21.5
Net loan charge-offs 26 12 27 18 12 116.7 116.7
Net loan charge-offs to average
total loans .28% .14% .38% .26% .18% N/A N/A
Nonperforming assets at period end $241 $313 $319 $372 $74 (23.0) 225.7
Return on average allocated equity 30.62% 25.86% 26.23% 23.15% 29.05% N/A N/A
Average full-time equivalent
employees 2,394 2,331 2,138 2,126 2,113 2.7 13.3
TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/keycorp-reports-fourth-quarter-2016-net-income-of-213-million-or-20-per-common-share-earnings-per-common-share-of-31-excluding-11-of-merger-related-charges-300393478.html
SOURCE KeyCorp
