KeyCorp Reports Third Quarter Net Income of $214 Million
Net interest income increases 6% from prior quarter
Continued loan growth driven by commercial and small businesses
Improved mix of earning assets and funding
Net interest margin expands 17 basis points from second quarter 2012
CLEVELAND, Oct. 18, 2012 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced third quarter net income from continuing operations attributable to Key common shareholders of $214 million, or $.23 per common share, compared to $221 million, or $.23 per common share for the second quarter of 2012, and $229 million, or $.24 per common share for the third quarter of 2011. For the nine months ended September 30, 2012, net income from continuing operations attributable to Key common shareholders was $634 million, or $.67 per common share, compared to $656 million, or $.71 per common share for the same period one year ago.
SIGNIFICANT EVENTS
Strategic acquisitions enhance revenue and contribute to higher noninterest expense, provision
- Completed branch and credit card acquisitions, improving asset and funding mix
- Acquisition of branches and credit card portfolio included one-time costs of $8 million and amortization expense of $8 million
Early termination of leveraged lease transactions
- Continued opportunity to realize economic benefit in low interest rate environment
- Realized nontaxable net gain of $26 million
- Net interest margin negatively impacted by seven (7) basis points due to the write-off of capitalized loan origination costs
Provision for loan losses impacted by acquisitions and updated guidance
- Acquired credit card portfolios and branch loans increased provision by $32 million
- Updated regulatory guidance increased net loan charge-offs and provision by $45 million
Executing on capital management priorities
- Repurchased 9.6 million Common Shares
- Redeemed $707 million of trust preferred securities realizing a $54 million gain
"During the third quarter, Key announced a number of actions aimed at enhancing the company's franchise, product offerings and profitability. We re-entered the credit card business, repositioned our merchant services and debit card processing, and improved market share with a 37-branch acquisition in Western New York," said Chairman and Chief Executive Officer Beth E. Mooney.
"Our third quarter results reflect the impact of these actions and underscore the company's sustained drive to increase revenue and reduce costs," Mooney continued. "Revenue trends benefited from the acquisitions, higher net interest margin due to lower funding costs, and the fourth consecutive quarter of average loan growth, primarily in our commercial, financial and agricultural portfolio. On the cost side, we made progress on our efficiency initiative goal and remain on track to capture $150 million to $200 million annual expense reductions by December 2013."
THIRD QUARTER 2012 FINANCIAL RESULTS
- Net interest income of $578 million, up $34 million from prior quarter
- Continued loan growth driven by 5.1% quarterly increase in commercial, financial and agricultural loans
- Net interest margin of 3.23%, up 17 basis points from prior quarter due to improved mix of earning assets and lower funding cost
- Provision for loan and lease losses increased $88 million, primarily due to acquisitions and the application of the recently updated regulatory guidance
- Asset quality trends impacted by updated regulatory guidance; net charge-offs increased $32 million, nonperforming assets down
- Maintained solid balance sheet with Tier 1 common equity of 11.4%
Selected Financial Highlights |
||||||||||||||||
dollars in millions, except per share data |
Change 3Q12 vs. |
|||||||||||||||
3Q12 |
2Q12 |
3Q11 |
2Q12 |
3Q11 |
||||||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
214 |
$ |
221 |
$ |
229 |
(3.2) |
% |
(6.6) |
% |
||||||
Income (loss) from continuing operations attributable to Key common shareholders per common share |
.23 |
.23 |
.24 |
|
(4.2) |
|||||||||||
Return on average total assets from continuing operations |
1.08 |
% |
1.12 |
% |
1.14 |
% |
N/A |
N/A |
||||||||
Tier 1 common equity |
11.43 |
11.63 |
11.28 |
N/A |
N/A |
|||||||||||
Book value at period end |
$ |
10.64 |
$ |
10.43 |
$ |
10.09 |
2.0 |
% |
5.5 |
% |
||||||
Net interest margin (TE) from continuing operations |
3.23 |
% |
3.06 |
% |
3.09 |
% |
N/A |
N/A |
||||||||
N/A = Not Applicable |
||||||||||||||||
INCOME STATEMENT HIGHLIGHTS |
||||||||||||||||
Revenue |
||||||||||||||||
dollars in millions |
Change 3Q12 vs. |
|||||||||||||||
3Q12 |
2Q12 |
3Q11 |
2Q12 |
3Q11 |
||||||||||||
Net interest income (TE) |
$ |
578 |
$ |
544 |
$ |
555 |
6.3 |
% |
4.1 |
% |
||||||
Noninterest income |
544 |
485 |
483 |
12.2 |
12.6 |
|||||||||||
Total revenue |
$ |
1,122 |
$ |
1,029 |
$ |
1,038 |
9.0 |
% |
8.1 |
% |
||||||
Taxable-equivalent net interest income was $578 million for the third quarter of 2012, and the net interest margin was 3.23%. These results compare to taxable-equivalent net interest income of $555 million and a net interest margin of 3.09% for the third quarter of 2011. The increase in net interest income and the net interest margin was primarily a result of a change in funding mix from the redemption of certain trust preferred securities and the continued maturity of higher-costing certificates of deposit and long-term debt during the third quarter of 2012. This funding was replaced with lower-cost deposits obtained through Key's branch acquisition, and an overall increase in demand deposits. The improvement in net interest income and the net interest margin was partially offset by a $13 million reduction to net interest income from the write-off of capitalized loan origination costs due to the early termination of leveraged leases, resulting in a seven (7) basis point decline in the net interest margin for the third quarter of 2012.
Compared to the second quarter of 2012, taxable-equivalent net interest income increased by $34 million, and the net interest margin improved by 17 basis points. The improvement was driven largely by lower funding costs, the redemption of trust preferred securities, the maturity of long-term debt in both the second and third quarters of 2012, and the maturity of higher rate certificates of deposit. The favorable impact of Key's credit card portfolio acquisition in the third quarter was largely offset by lower reinvestment yields on investment securities and other loans. The write-off of fees and capitalized loan origination costs from the early termination of leveraged leases was $13 million in both the second and third quarters of 2012.
Noninterest Income |
|||||||||||||||||
dollars in millions |
Change 3Q12 vs. |
||||||||||||||||
3Q12 |
2Q12 |
3Q11 |
2Q12 |
3Q11 |
|||||||||||||
Trust and investment services income |
$ |
106 |
$ |
102 |
$ |
107 |
3.9 |
% |
(.9) |
% |
|||||||
Service charges on deposit accounts |
74 |
70 |
74 |
5.7 |
|
||||||||||||
Operating lease income |
17 |
20 |
30 |
(15.0) |
(43.3) |
||||||||||||
Letter of credit and loan fees |
52 |
56 |
55 |
(7.1) |
(5.5) |
||||||||||||
Corporate-owned life insurance income |
26 |
30 |
31 |
(13.3) |
(16.1) |
||||||||||||
Electronic banking fees |
18 |
19 |
33 |
(5.3) |
(45.5) |
||||||||||||
Gains on leased equipment |
46 |
36 |
7 |
27.8 |
557.1 |
||||||||||||
Insurance income |
13 |
11 |
13 |
18.2 |
|
||||||||||||
Net gains (losses) from loan sales |
39 |
32 |
18 |
21.9 |
116.7 |
||||||||||||
Net gains (losses) from principal investing |
11 |
24 |
34 |
(54.2) |
(67.6) |
||||||||||||
Investment banking and capital markets income (loss) |
38 |
37 |
25 |
2.7 |
52.0 |
||||||||||||
Other income |
104 |
48 |
56 |
116.7 |
85.7 |
||||||||||||
Total noninterest income |
$ |
544 |
$ |
485 |
$ |
483 |
12.2 |
% |
12.6 |
% |
|||||||
N/M = Not Meaningful |
Key's noninterest income was $544 million for the third quarter of 2012, compared to $483 million for the year-ago quarter. Gains on leased equipment increased $39 million compared to the same period one year ago, primarily related to the early terminations of leveraged leases. Net gains (losses) from loan sales also increased $21 million from the year-ago quarter. Other income was $48 million higher due to a $54 million gain associated with the redemption of certain trust preferred securities in the third quarter of 2012. Investment banking and capital markets income (loss) also increased $13 million from one year ago. These increases in noninterest income were partially offset by a $23 million decrease in net gains (losses) from principal investing (including results attributable to noncontrolling interests), a $15 million decrease in electronic banking fees as a result of government pricing controls on debit transactions that went into effect October 1, 2011, and a $13 million decline in operating lease income.
Compared to the second quarter of 2012, noninterest income increased by $59 million. Other income increased $56 million resulting from a $54 million gain associated with the redemption of certain trust preferred securities in the third quarter of 2012 and an increase in credit card fees of $7 million primarily due to the credit card portfolio acquisition. Gains on leased equipment also increased $10 million, primarily related to the early terminations of leveraged leases in the third quarter of 2012. These increases in noninterest income were partially offset by a decline in net gains (losses) from principal investing (including results attributable to noncontrolling interests) of $13 million.
Noninterest Expense |
|||||||||||||||||
dollars in millions |
Change 3Q12 vs. |
||||||||||||||||
3Q12 |
2Q12 |
3Q11 |
2Q12 |
3Q11 |
|||||||||||||
Personnel expense |
$ |
411 |
$ |
389 |
$ |
382 |
5.7 |
% |
7.6 |
% |
|||||||
Nonpersonnel expense |
323 |
325 |
310 |
(.6) |
4.2 |
||||||||||||
Total noninterest expense |
$ |
734 |
$ |
714 |
$ |
692 |
2.8 |
% |
6.1 |
% |
|||||||
Key's noninterest expense was $734 million for the third quarter of 2012, compared to $692 million for the same period last year. Personnel expense increased $29 million due to increased salaries and incentive compensation expense resulting from the hiring of client-facing personnel and Key's acquisition of 37 branches in Western New York, which closed on July 13. Nonpersonnel expense increased $13 million from one year ago and included an increase of $8 million related to the amortization of the intangible assets associated with the third quarter 2012 acquisitions of the previously discussed credit card portfolio as well as the branches. Various other expenses also increased $14 million. These increases in noninterest expense were partially offset by a $10 million decrease in operating lease expense compared to the same period one year ago. The provision (credit) for losses on lending-related commitments was a credit of $8 million compared to a credit of $1 million for the year-ago quarter.
Compared to the second quarter of 2012, noninterest expense increased by $20 million. Personnel expense increased $22 million, primarily attributable to an increase in incentive compensation, and nonpersonnel expense decreased by $2 million. Included in nonpersonnel expense was an increase of $8 million related to the amortization of the intangible assets associated with the third quarter 2012 acquisitions of the previously discussed credit card portfolio and branches. The increase in amortization expense was offset by a decline in the provision (credit) for losses on lending-related commitments, which was a credit of $8 million in the current quarter compared to a charge of $6 million in the prior quarter, and a decrease in other real estate owned ("OREO") expense of $6 million compared to the prior quarter.
BALANCE SHEET HIGHLIGHTS
As of September 30, 2012, Key had total assets of $87.0 billion compared to $86.5 billion at June 30, 2012, and $89.3 billion at September 30, 2011.
Average Loans |
|||||||||||||||||
dollars in millions |
Change 9-30-12 vs. |
||||||||||||||||
9-30-12 |
6-30-12 |
9-30-11 |
6-30-12 |
9-30-11 |
|||||||||||||
Commercial, financial and agricultural (a) |
$ |
21,473 |
$ |
20,606 |
$ |
17,381 |
4.2 |
% |
23.5 |
% |
|||||||
Other commercial loans |
13,605 |
14,055 |
15,568 |
(3.2) |
(12.6) |
||||||||||||
Total home equity loans |
10,202 |
9,852 |
9,970 |
3.6 |
2.3 |
||||||||||||
Other consumer loans |
5,415 |
4,933 |
5,089 |
9.8 |
6.4 |
||||||||||||
Total loans |
$ |
50,695 |
$ |
49,446 |
$ |
48,008 |
2.5 |
% |
5.6 |
% |
|||||||
(a) |
Commercial, financial and agricultural average balance includes $54 million of assets from commercial credit cards. |
Average loans were $50.7 billion for the third quarter of 2012, an increase of $2.7 billion compared to the third quarter of 2011. Commercial, financial and agricultural loans grew by $4.1 billion over the year-ago quarter, with strong growth across Key's commercial and middle market segments. This growth was partially offset by declines in the commercial real estate portfolio, the equipment lease portfolios resulting from the early termination of certain leveraged leases in the exit portfolio, and run-off of consumer loans in the designated exit portfolio.
Compared to the second quarter of 2012, average loans increased by $1.2 billion. Commercial, financial and agricultural loans grew $867 million, and home equity loans increased $350 million as a result of Key's home equity loan campaign. The branch acquisition added $223 million of mostly consumer loans, and the credit card portfolio acquisition added $473 million (including commercial credit cards) to average balances in the third quarter. These increases were partially offset by the early termination of certain leveraged leases and other exit portfolio run-off.
Key originated approximately $9 billion in new or renewed lending commitments to consumers and businesses during the third quarter of 2012.
Average Deposits |
|||||||||||||||||
dollars in millions |
Change 9-30-12 vs. |
||||||||||||||||
9-30-12 |
6-30-12 |
9-30-11 |
6-30-12 |
9-30-11 |
|||||||||||||
Nontime deposits |
$ |
54,098 |
$ |
51,560 |
$ |
47,196 |
4.9 |
% |
14.6 |
% |
|||||||
Certificates of deposits ($100,000 or more) |
3,420 |
3,858 |
4,762 |
(11.4) |
(28.2) |
||||||||||||
Other time deposits |
5,158 |
5,645 |
6,942 |
(8.6) |
(25.7) |
||||||||||||
Total deposits |
$ |
62,676 |
$ |
61,063 |
$ |
58,900 |
2.6 |
% |
6.4 |
% |
|||||||
Cost of interest-bearing deposits |
.57 |
% |
.69 |
% |
.91 |
% |
N/A |
N/A |
|||||||||
N/A = Not Applicable |
Average deposits totaled $62.7 billion for the third quarter of 2012, an increase of $3.8 billion compared to the year-ago quarter. The growth reflects an increase in business demand deposits and the impact of Key's branch acquisition. The growth in nontime deposits more than offset the maturities in certificates of deposit.
Compared to the second quarter of 2012, average deposits increased by $1.6 billion. The increase in average balances was attributable to Key's branch acquisition in the third quarter 2012, which added $1.6 billion of mostly nontime consumer deposits.
ASSET QUALITY |
||||||||||||||||
dollars in millions |
Change 3Q12 vs. |
|||||||||||||||
3Q12 |
2Q12 |
3Q11 |
2Q12 |
3Q11 |
||||||||||||
Net loan charge-offs |
$ |
109 |
$ |
77 |
$ |
109 |
41.6 |
% |
|
|||||||
Net loan charge-offs to average loans |
.86 |
% |
.63 |
% |
.90 |
% |
N/A |
N/A |
||||||||
Nonperforming loans at period end (a) |
$ |
653 |
$ |
657 |
$ |
788 |
(.6) |
(17.1) |
% |
|||||||
Nonperforming assets at period end |
718 |
751 |
914 |
(4.4) |
(21.4) |
|||||||||||
Allowance for loan and lease losses |
888 |
888 |
1,131 |
|
(21.5) |
|||||||||||
Allowance for loan and lease losses to nonperforming loans |
136 |
% |
135 |
% |
144 |
% |
N/A |
N/A |
||||||||
Provision (credit) for loan and lease losses |
$ |
109 |
$ |
21 |
$ |
10 |
419.0 |
% |
990.0 |
% |
||||||
(a) September 30, 2012 amount excludes $25 million of purchased credit impaired loans acquired in July 2012. |
||||||||||||||||
N/A = Not Applicable, N/M = Not Meaningful |
Key's provision for loan and lease losses was $109 million for the third quarter of 2012, compared to $21 million for the second quarter of 2012 and $10 million for the year-ago quarter. Key's allowance for loan and lease losses was $888 million, or 1.73% of total period-end loans at September 30, 2012, compared to 1.79% at June 30, 2012, and 2.35% at September 30, 2011.
Net loan charge-offs for the third quarter of 2012 totaled $109 million, or .86% of average loans, including $45 million (.35% of average loans) of incremental net loan charge-offs reported in accordance with updated regulatory guidance requiring loans discharged through Chapter 7 bankruptcy and not reaffirmed by the borrower to be charged off to the collateral's fair market value less selling costs and classified as nonaccrual regardless of their delinquency status. The current period net loan charge-offs compare to $77 million, or .63% for the second quarter of 2012, and $109 million, or .90% for the same period last year.
Key also established an allowance for loan and lease losses for the acquired credit card and branch loans above the discount related to these acquired portfolios in accordance with the applicable accounting guidance. The allowance for these loan and lease losses was approximately $29 million at September 30, 2012.
At September 30, 2012, Key's nonperforming loans totaled $653 million and represented 1.27% of period-end portfolio loans. Included in this total was $38 million or the net carrying amount of the secured loans reclassified as troubled-debt restructurings under the updated regulatory guidance discussed above. Nonperforming loans at June 30, 2012 and September 30, 2011 represented 1.32% and 1.64% of period-end loans, respectively. Nonperforming assets at September 30, 2012, totaled $718 million and represented 1.39% of portfolio loans and OREO and other nonperforming assets, compared to 1.51% at June 30, 2012, and 1.89% at September 30, 2011.
CAPITAL
Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at September 30, 2012.
Capital Ratios |
|||||||||
9-30-12 |
6-30-12 |
9-30-11 |
|||||||
Tier 1 common equity (a), (b) |
11.43 |
% |
11.63 |
% |
11.28 |
% |
|||
Tier 1 risk-based capital (a) |
12.24 |
12.45 |
13.49 |
||||||
Total risk based capital (a) |
15.33 |
15.83 |
17.05 |
||||||
Tangible common equity to tangible assets (b) |
10.39 |
10.44 |
9.82 |
||||||
(a) |
9-30-12 ratio is estimated. |
(b) |
The table entitled "GAAP to Non-GAAP Reconciliations" presents the computations of certain financial measures related to "tangible common equity" and "Tier 1 common equity." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. |
As shown in the preceding table, at September 30, 2012, Key's estimated Tier 1 common equity and Tier 1 risk-based capital ratios stood at 11.4% and 12.2%, respectively. In addition, the tangible common equity ratio was 10.4% at September 30, 2012.
Summary of Changes in Common Shares Outstanding |
|||||||||||||||||
in thousands |
Change 3Q12 vs. |
||||||||||||||||
3Q12 |
2Q12 |
3Q11 |
2Q12 |
3Q11 |
|||||||||||||
Shares outstanding at beginning of period |
945,473 |
956,102 |
953,822 |
(1.1) |
% |
(.9) |
% |
||||||||||
Common shares repurchased |
(9,639) |
(10,468) |
|
N/M |
N/M |
||||||||||||
Shares reissued (returned) under employee benefit plans |
361 |
(161) |
(1,014) |
N/M |
N/M |
||||||||||||
Shares outstanding at end of period |
936,195 |
945,473 |
952,808 |
(1.0) |
% |
(1.7) |
% |
||||||||||
N/M = Not Meaningful |
As previously reported and as authorized by Key's Board of Directors and pursuant to Key's 2012 capital plan submitted to the Federal Reserve and not objected to by the Federal Reserve, Key had authority to repurchase up to $344 million of its Common Shares for general repurchase and repurchases in connection with employee elections under its compensation and benefit programs.
During the third quarter of 2012, Key completed $82 million of Common Share repurchases. Following completion of these repurchases, Key has remaining authority to repurchase up to $177 million of its Common Shares for general repurchase and repurchases in connection with employee elections under its compensation and benefit programs. Key's existing repurchase program does not have an expiration date. Common Share repurchases under the current authorization are expected to be executed through the first quarter of 2013.
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 3Q12 vs. |
||||||||||||||||
3Q12 |
2Q12 |
3Q11 |
2Q12 |
3Q11 |
|||||||||||||
Revenue from continuing operations (TE) |
|||||||||||||||||
Key Community Bank |
$ |
576 |
$ |
537 |
$ |
565 |
7.3 |
% |
1.9 |
% |
|||||||
Key Corporate Bank |
392 |
392 |
369 |
|
6.2 |
||||||||||||
Other segments |
160 |
99 |
103 |
61.6 |
55.3 |
||||||||||||
Total segments |
1,128 |
1,028 |
1,037 |
9.7 |
8.8 |
||||||||||||
Reconciling items |
(6) |
1 |
1 |
N/M |
N/M |
||||||||||||
Total |
$ |
1,122 |
$ |
1,029 |
$ |
1,038 |
9.0 |
% |
8.1 |
% |
|||||||
Income (loss) from continuing operations attributable to Key |
|||||||||||||||||
Key Community Bank |
$ |
(23) |
$ |
41 |
$ |
57 |
N/M |
N/M |
|||||||||
Key Corporate Bank |
118 |
104 |
123 |
13.5 |
% |
(4.1) |
% |
||||||||||
Other segments |
102 |
56 |
52 |
82.1 |
96.2 |
||||||||||||
Total segments |
197 |
201 |
232 |
(2.0) |
(15.1) |
||||||||||||
Reconciling items |
22 |
25 |
2 |
(12.0) |
N/M |
||||||||||||
Total |
$ |
219 |
$ |
226 |
$ |
234 |
(3.1) |
% |
(6.4) |
% |
|||||||
TE = Taxible equivalent, N/M = Not Meaningful |
Key Community Bank |
|||||||||||||||||
dollars in millions |
Change 3Q12 vs. |
||||||||||||||||
3Q12 |
2Q12 |
3Q11 |
2Q12 |
3Q11 |
|||||||||||||
Summary of operations |
|||||||||||||||||
Net interest income (TE) |
$ |
365 |
$ |
348 |
$ |
371 |
4.9 |
% |
(1.6) |
% |
|||||||
Noninterest income |
211 |
189 |
194 |
11.6 |
8.8 |
||||||||||||
Total revenue (TE) |
576 |
537 |
565 |
7.3 |
1.9 |
||||||||||||
Provision (credit) for loan and lease losses |
120 |
11 |
39 |
990.9 |
207.7 |
||||||||||||
Noninterest expense |
512 |
476 |
457 |
7.6 |
% |
12.0 |
% |
||||||||||
Income (loss) before income taxes (TE) |
(56) |
50 |
69 |
N/M |
N/M |
||||||||||||
Allocated income taxes (benefit) and TE adjustments |
(33) |
9 |
12 |
N/M |
N/M |
||||||||||||
Net income (loss) attributable to Key |
$ |
(23) |
$ |
41 |
$ |
57 |
N/M |
N/M |
|||||||||
Average balances |
|||||||||||||||||
Loans and leases |
$ |
28,386 |
$ |
27,043 |
$ |
26,270 |
5.0 |
% |
8.1 |
% |
|||||||
Total assets |
32,136 |
30,638 |
29,681 |
4.9 |
8.3 |
||||||||||||
Deposits |
49,537 |
48,253 |
47,672 |
2.7 |
3.9 |
||||||||||||
Assets under management at period end |
$ |
21,988 |
$ |
21,116 |
$ |
17,195 |
4.1 |
% |
27.9 |
% |
|||||||
TE = Taxable Equivalent, N/M = Not Meaningful |
Additional Key Community Bank Data |
|||||||||||||||||
dollars in millions |
Change 3Q12 vs. |
||||||||||||||||
3Q12 |
2Q12 |
3Q11 |
2Q12 |
3Q11 |
|||||||||||||
Noninterest income |
|||||||||||||||||
Trust and investment services income |
$ |
51 |
$ |
47 |
$ |
45 |
8.5 |
% |
13.3 |
% |
|||||||
Service charges on deposit accounts |
62 |
59 |
62 |
5.1 |
|
||||||||||||
Electronic banking fees |
18 |
18 |
33 |
|
(45.5) |
||||||||||||
Other noninterest income |
80 |
65 |
54 |
23.1 |
48.1 |
||||||||||||
Total noninterest income |
$ |
211 |
$ |
189 |
$ |
194 |
11.6 |
% |
8.8 |
% |
|||||||
Average deposit balances |
|||||||||||||||||
NOW and money market deposit accounts |
$ |
25,072 |
$ |
23,919 |
$ |
21,967 |
4.8 |
% |
14.1 |
% |
|||||||
Savings deposits |
2,373 |
2,078 |
1,971 |
14.2 |
20.4 |
||||||||||||
Certificates of deposit ($100,000 or more) |
2,941 |
3,275 |
3,862 |
(10.2) |
(23.8) |
||||||||||||
Other time deposits |
5,137 |
5,630 |
6,928 |
(8.8) |
(25.9) |
||||||||||||
Deposits in foreign office |
344 |
361 |
336 |
(4.7) |
2.4 |
||||||||||||
Noninterest-bearing deposits |
13,670 |
12,990 |
12,608 |
5.2 |
8.4 |
||||||||||||
Total deposits |
$ |
49,537 |
$ |
48,253 |
$ |
47,672 |
2.7 |
% |
3.9 |
% |
|||||||
Home equity loans |
|||||||||||||||||
Average balance |
$ |
9,734 |
$ |
9,359 |
$ |
9,388 |
|||||||||||
Weighted-average loan-to-value ratio (at date of origination) |
71 |
% |
71 |
% |
70 |
% |
|||||||||||
Percent first lien positions |
54 |
54 |
53 |
||||||||||||||
Other data |
|||||||||||||||||
Branches |
1,087 |
1,062 |
1,063 |
||||||||||||||
Automated teller machines |
1,620 |
1,576 |
1,584 |
||||||||||||||
Key Community Bank Summary of Operations
- Five consecutive quarters of average loan growth
- Acquisition of 37 branches and credit card portfolio added $696 million to average loans during the third quarter
- Continued migration to lower-cost deposits
- Net loan charge-offs increased to 1.30% of average loans primarily due to the application of recently updated regulatory guidance related to debts discharged through Chapter 7 bankruptcy
Key Community Bank recorded a net loss attributable to Key of $23 million for the third quarter of 2012, compared to net income attributable to Key of $57 million for the year-ago quarter. The net loss for the third quarter of 2012 is attributable to additional provision expense for loan and lease losses related to the acquisitions completed and implementing the updated regulatory guidance on debts discharged through Chapter 7 bankruptcy.
Taxable-equivalent net interest income declined by $6 million, or 1.6% from the third quarter of 2011. Average loans and leases grew 8.1% while average deposits increased 3.9% from one year ago. The branch and credit card portfolio acquisitions contributed $26 million to net interest income, $696 million to average loans and leases, and $1.6 billion to deposits. Given the prolonged low-rate environment, the value derived from deposits was less in the current period compared to the same period one year ago.
Noninterest income increased by $17 million, or 8.8% from the year-ago quarter. Credit card fees and trust and investment services income each increased $6 million primarily due to the credit card portfolio and branch acquisitions. Miscellaneous income also increased $15 million primarily due to gains realized on the sale of certain tax credits. Net gains (losses) from loan sales were also $4 million higher. These increases in noninterest income were partially offset by a $15 million decline in electronic banking fees resulting from government pricing controls on debit transactions that went into effect October 1, 2011.
The provision for loan and lease losses increased by $81 million, or 207.7% compared to the third quarter of 2011. The application of recently updated regulatory guidance related to debts discharged through Chapter 7 bankruptcy increased the provision $45 million, and the acquisition of the credit card portfolio and the loans associated with the branch acquisition increased the provision $32 million. Net loan charge-offs were $93 million for the third quarter of 2012, up $33 million from the same period one year ago, primarily due to the application of recently updated regulatory guidance discussed above.
Noninterest expense increased by $55 million, or 12% from the year-ago quarter. Key's third quarter 2012 branch and credit card portfolio acquisitions contributed $26 million to the increase in noninterest expense spread across several expense categories. Personnel expense was $13 million higher than one year ago. Amortization of the intangible assets associated with the third quarter 2012 acquisitions of the previously discussed credit card portfolio and the branches and internally-allocated support costs each increased $8 million, and other miscellaneous expenses also increased $21 million from the same period one year ago.
Key Corporate Bank |
|||||||||||||||||
dollars in millions |
Change 3Q12 vs. |
||||||||||||||||
3Q12 |
2Q12 |
3Q11 |
2Q12 |
3Q11 |
|||||||||||||
Summary of operations |
|||||||||||||||||
Net interest income (TE) |
$ |
182 |
$ |
182 |
$ |
172 |
|
5.8 |
% |
||||||||
Noninterest income |
210 |
210 |
197 |
|
6.6 |
||||||||||||
Total revenue (TE) |
392 |
392 |
369 |
|
6.2 |
||||||||||||
Provision (credit) for loan and lease losses |
(3) |
4 |
(40) |
N/M |
N/M |
||||||||||||
Noninterest expense |
209 |
218 |
216 |
(4.1) |
% |
(3.2) |
|||||||||||
Income (loss) before income taxes (TE) |
186 |
170 |
193 |
9.4 |
(3.6) |
||||||||||||
Allocated income taxes and TE adjustments |
68 |
62 |
70 |
9.7 |
(2.9) |
||||||||||||
Net income (loss) |
118 |
108 |
123 |
9.3 |
(4.1) |
||||||||||||
Less: Net income (loss) attributable to noncontrolling interests |
|
4 |
|
N/M |
N/M |
||||||||||||
Net income (loss) attributable to Key |
$ |
118 |
$ |
104 |
$ |
123 |
13.5 |
% |
(4.1) |
% |
|||||||
Average balances |
|||||||||||||||||
Loans and leases |
$ |
18,886 |
$ |
18,532 |
$ |
16,986 |
1.9 |
% |
11.2 |
% |
|||||||
Loans held for sale |
441 |
514 |
273 |
(14.2) |
61.5 |
||||||||||||
Total assets |
22,914 |
22,715 |
21,168 |
.9 |
8.2 |
||||||||||||
Deposits |
12,873 |
12,409 |
10,544 |
3.7 |
22.1 |
||||||||||||
Assets under management at period end |
$ |
27,682 |
$ |
28,033 |
$ |
34,389 |
(1.3) |
% |
(19.5) |
% |
|||||||
TE = Taxable Equivalent |
Additional Key Corporate Bank Data |
|||||||||||||||||
dollars in millions |
Change 3Q12 vs. |
||||||||||||||||
3Q12 |
2Q12 |
3Q11 |
2Q12 |
3Q11 |
|||||||||||||
Noninterest income |
|||||||||||||||||
Trust and investment services income |
$ |
56 |
$ |
55 |
$ |
62 |
1.8 |
% |
(9.7) |
% |
|||||||
Investment banking and debt placement fees (a) |
82 |
69 |
44 |
18.8 |
86.4 |
||||||||||||
Operating lease income and other leasing gains (b) |
20 |
20 |
29 |
|
(31.0) |
||||||||||||
Corporate services income (c) |
27 |
30 |
31 |
(10.0) |
(12.9) |
||||||||||||
Other noninterest income |
25 |
36 |
31 |
(30.6) |
% |
(19.4) |
|||||||||||
Total noninterest income |
$ |
210 |
$ |
210 |
$ |
197 |
|
6.6 |
% |
||||||||
(a) |
Included in "Investment banking and capital markets income (loss)," "Net gains (losses) from loan sales," and "Letter of credit and loan fees" on the Consolidated Statements of Income. |
||||||||||||||||
(b) |
Included in "Operating lease income" and "Gains on leased equipment" on the Consolidated Statements of Income. |
||||||||||||||||
(c) |
Included in "Service charges on deposit accounts," "Letter of credit and loan fees," and "Investment banking and capital markets income (loss)" on the Consolidated Statements of Income. |
Key Corporate Bank Summary of Operations
- Investment banking and debt placement fees were $82 million, up 18.8% from the second quarter
- Average loans up 11.2% from the prior year and 1.9% from the prior quarter
- Average deposits up 22.1% from the prior year and 3.7% from the prior quarter
Key Corporate Bank recorded net income attributable to Key of $118 million for the third quarter of 2012, compared to net income attributable to Key of $123 million for the same period one year ago.
Taxable-equivalent net interest income increased by $10 million, or 5.8% compared to the third quarter of 2011. Average earning assets increased $1.8 billion, or 9.7% from the year-ago quarter, resulting in an increase in earning asset spread of $4 million. Average deposit balances increased $2.3 billion, or 22.1% from one year ago, resulting in an increase in deposit spread of $6 million.
Noninterest income increased by $13 million, or 6.6% from the third quarter of 2011. Net gains (losses) from loan sales increased $20 million, and investment banking and capital markets income increased $16 million. These improvements in noninterest income were partially offset by a decrease in operating lease income of $8 million as that portfolio continues to run down. Trust and investment services income also declined $5 million, and other miscellaneous income items decreased $8 million compared to the year-ago quarter.
The provision for loan and lease losses in the third quarter of 2012 was a credit of $3 million compared to a credit of $40 million for the same period one year ago. The portfolio's asset quality continued to improve for the twelfth consecutive quarter. Net loan charge-offs in the third quarter of 2012 were $8 million compared to $22 million for the same period one year ago.
Noninterest expense decreased by $7 million, or 3.2% from the third quarter of 2011. The provision (credit) for losses on lending-related commitments was a credit of $6 million compared to a charge of $1 million one year ago. Also contributing to the decline in noninterest expense were decreases in operating lease expense of $7 million and various other miscellaneous expenses of $6 million. These decreases in noninterest expense were partially offset by an increase in personnel expense of $13 million.
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 $102 million for the third quarter of 2012, compared to net income attributable to Key of $52 million for the same period last year. These results were primarily attributable to an increase in other income of $71 million due to a $54 million gain on the redemption of certain trust preferred securities and a $26 million net gain resulting from the early terminations of leveraged leases in the third quarter of 2012 (a $39 million gain on leased equipment less a $13 million charge for the write-off of capitalized loan origination costs). These results were partially offset by a decrease in net gains (losses) from principal investing of $23 million.
*****
Key traces its history back more than 160 years and is headquartered in Cleveland, Ohio. One of the nation's largest bank-based financial services companies, Key has assets of approximately $87.0 billion at September 30, 2012.
Key provides deposit, lending, cash management and investment services to individuals and small businesses through its 14-state branch network under the name KeyBank National Association. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name.
For more information, visit https://www.key.com/. KeyBank is Member FDIC.
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Key's financial condition, results of operations, earnings outlook, asset quality trends and profitability. Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events, many of which, by their nature, are inherently uncertain and outside of Key's control. Key's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Factors that could cause Key's actual results to differ materially from those described in the forward-looking statements can be found in KeyCorp's Annual Report on Form 10-K for the year ended December 31, 2011, its Quarterly Report on Form 10-Q for the period ended March 31, 2012, and its Quarterly Report on Form 10-Q for the period ended June 30, 2012, each of which have been filed with the Securities and Exchange Commission and are available on Key's website (www.key.com/ir) and on the Securities and Exchange Commission's website (www.sec.gov). Forward-looking statements are not guarantees of future performance and should not be relied upon as representing management's views as of any subsequent date. Key does not undertake any obligation to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements. |
Notes to Editors:
A live Internet broadcast of KeyCorp's conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on Thursday, October 18, 2012. An audio replay of the call will be available through October 25, 2012.
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 |
|||||||||||||
9-30-12 |
6-30-12 |
9-30-11 |
|||||||||||
Summary of operations |
|||||||||||||
Net interest income (TE) |
$ |
578 |
$ |
544 |
$ |
555 |
|||||||
Noninterest income |
544 |
485 |
483 |
||||||||||
Total revenue (TE) |
1,122 |
1,029 |
1,038 |
||||||||||
Provision (credit) for loan and lease losses |
109 |
21 |
10 |
||||||||||
Noninterest expense |
734 |
714 |
692 |
||||||||||
Income (loss) from continuing operations attributable to Key |
219 |
226 |
234 |
||||||||||
Income (loss) from discontinued operations, net of taxes (b) |
|
10 |
(17) |
||||||||||
Net income (loss) attributable to Key |
219 |
236 |
217 |
||||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
214 |
$ |
221 |
$ |
229 |
|||||||
Income (loss) from discontinued operations, net of taxes (b) |
|
10 |
(17) |
||||||||||
Net income (loss) attributable to Key common shareholders |
214 |
231 |
212 |
||||||||||
Per common share |
|||||||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
.23 |
$ |
.23 |
$ |
.24 |
|||||||
Income (loss) from discontinued operations, net of taxes (b) |
|
.01 |
(.02) |
||||||||||
Net income (loss) attributable to Key common shareholders (e) |
.23 |
.24 |
.22 |
||||||||||
Income (loss) from continuing operations attributable to Key common shareholders assuming dilution |
.23 |
.23 |
.24 |
||||||||||
Income (loss) from discontinued operations, net of taxes assuming dilution (b) |
|
.01 |
(.02) |
||||||||||
Net income (loss) attributable to Key common shareholders assuming dilution (e) |
.23 |
.24 |
.22 |
||||||||||
Cash dividends paid |
.05 |
.05 |
.03 |
||||||||||
Book value at period end |
10.64 |
10.43 |
10.09 |
||||||||||
Tangible book value at period end |
9.54 |
9.45 |
9.10 |
||||||||||
Market price at period end |
8.74 |
7.74 |
5.93 |
||||||||||
Performance ratios |
|||||||||||||
From continuing operations: |
|||||||||||||
Return on average total assets |
1.08 |
% |
1.12 |
% |
1.14 |
% |
|||||||
Return on average common equity |
8.57 |
9.06 |
9.52 |
||||||||||
Return on tangible common equity (a) |
9.53 |
9.95 |
10.47 |
||||||||||
Net interest margin (TE) |
3.23 |
3.06 |
3.09 |
||||||||||
Cash efficiency ratio (a) |
64.62 |
69.29 |
66.57 |
||||||||||
From consolidated operations: |
|||||||||||||
Return on average total assets |
1.01 |
% |
1.10 |
% |
.98 |
% |
|||||||
Return on average common equity |
8.57 |
9.47 |
8.82 |
||||||||||
Return on tangible common equity (a) |
9.53 |
10.40 |
9.70 |
||||||||||
Net interest margin (TE) |
3.14 |
2.99 |
3.02 |
||||||||||
Loan to deposit (d) |
86.24 |
86.38 |
85.71 |
||||||||||
Capital ratios at period end |
|||||||||||||
Key shareholders' equity to assets |
11.79 |
% |
11.74 |
% |
11.09 |
% |
|||||||
Tangible Key shareholders' equity to tangible assets |
10.73 |
10.78 |
10.15 |
||||||||||
Tangible common equity to tangible assets (a) |
10.39 |
10.44 |
9.82 |
||||||||||
Tier 1 common equity (a), (c) |
11.43 |
11.63 |
11.28 |
||||||||||
Tier 1 risk-based capital (c) |
12.24 |
12.45 |
13.49 |
||||||||||
Total risk-based capital (c) |
15.33 |
15.83 |
17.05 |
||||||||||
Leverage (c) |
11.29 |
11.35 |
11.93 |
||||||||||
Asset quality from continuing operations |
|||||||||||||
Net loan charge-offs |
$ |
109 |
$ |
77 |
$ |
109 |
|||||||
Net loan charge-offs to average loans |
.86 |
% |
.63 |
% |
.90 |
% |
|||||||
Allowance for loan and lease losses to annualized net loan charge-offs |
204.78 |
286.74 |
261.54 |
||||||||||
Allowance for loan and lease losses |
$ |
888 |
$ |
888 |
$ |
1,131 |
|||||||
Allowance for credit losses |
931 |
939 |
1,187 |
||||||||||
Allowance for loan and lease losses to period-end loans |
1.73 |
% |
1.79 |
% |
2.35 |
% |
|||||||
Allowance for credit losses to period-end loans |
1.81 |
1.89 |
2.46 |
||||||||||
Allowance for loan and lease losses to nonperforming loans |
135.99 |
135.16 |
143.53 |
||||||||||
Allowance for credit losses to nonperforming loans |
142.57 |
142.92 |
150.63 |
||||||||||
Nonperforming loans at period end (f) |
$ |
653 |
$ |
657 |
$ |
788 |
|||||||
Nonperforming assets at period end |
718 |
751 |
914 |
||||||||||
Nonperforming loans to period-end portfolio loans |
1.27 |
% |
1.32 |
% |
1.64 |
% |
|||||||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets |
1.39 |
1.51 |
1.89 |
||||||||||
Trust and brokerage assets |
|||||||||||||
Assets under management |
$ |
49,670 |
$ |
49,149 |
$ |
51,584 |
|||||||
Nonmanaged and brokerage assets |
24,220 |
23,912 |
28,007 |
||||||||||
Other data |
|||||||||||||
Average full-time equivalent employees |
15,833 |
15,455 |
15,490 |
||||||||||
Branches |
1,087 |
1,062 |
1,063 |
||||||||||
Taxable-equivalent adjustment |
$ |
6 |
$ |
6 |
$ |
6 |
Financial Highlights (continued) |
|||||||||
(dollars in millions, except per share amounts) |
|||||||||
Nine months ended |
|||||||||
9-30-12 |
9-30-11 |
||||||||
Summary of operations |
|||||||||
Net interest income (TE) |
$ |
1,681 |
$ |
1,729 |
|||||
Noninterest income |
1,501 |
1,394 |
|||||||
Total revenue (TE) |
3,182 |
3,123 |
|||||||
Provision (credit) for loan and lease losses |
172 |
(38) |
|||||||
Noninterest expense |
2,151 |
2,073 |
|||||||
Income (loss) from continuing operations attributable to Key |
650 |
757 |
|||||||
Income (loss) from discontinued operations, net of taxes (b) |
5 |
(37) |
|||||||
Net income (loss) attributable to Key |
655 |
720 |
|||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
634 |
$ |
656 |
|||||
Income (loss) from discontinued operations, net of taxes (b) |
5 |
(37) |
|||||||
Net income (loss) attributable to Key common shareholders |
639 |
619 |
|||||||
Per common share |
|||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
.67 |
$ |
.71 |
|||||
Income (loss) from discontinued operations, net of taxes (b) |
.01 |
(.04) |
|||||||
Net income (loss) attributable to Key common shareholders (e) |
.68 |
.67 |
|||||||
Income (loss) from continuing operations attributable to Key common shareholders assuming dilution |
.67 |
.71 |
|||||||
Income (loss) from discontinued operations, net of taxes assuming dilution (b) |
.01 |
(.04) |
|||||||
Net income (loss) attributable to Key common shareholders assuming dilution (e) |
.67 |
.67 |
|||||||
Cash dividends paid |
.13 |
.07 |
|||||||
Performance ratios |
|||||||||
From continuing operations: |
|||||||||
Return on average total assets |
1.08 |
% |
1.23 |
% |
|||||
Return on average common equity |
8.63 |
9.62 |
|||||||
Net interest margin (TE) |
3.15 |
3.18 |
|||||||
From consolidated operations: |
|||||||||
Return on average total assets |
1.01 |
% |
1.09 |
% |
|||||
Return on average common equity |
8.70 |
9.08 |
|||||||
Net interest margin (TE) |
3.07 |
3.10 |
|||||||
Asset quality from continuing operations |
|||||||||
Net loan charge-offs |
$ |
287 |
$ |
436 |
|||||
Net loan charge-offs to average loans |
.77 |
% |
1.20 |
% |
|||||
Other data |
|||||||||
Average full-time equivalent employees |
15,565 |
15,381 |
|||||||
Taxable-equivalent adjustment |
$ |
18 |
$ |
19 |
(a) |
The following table entitled "GAAP to Non-GAAP Reconciliations" presents the computations of certain financial measures related to "tangible common equity," "Tier 1 common equity," and "cash efficiency." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. |
(b) |
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. As a result of these decisions, Key has accounted for these businesses as discontinued operations. |
(c) |
9-30-12 ratio is estimated. |
(d) |
Represents period-end consolidated total loans and loans held for sale (excluding education loans in the securitization trusts) divided by period-end consolidated total deposits (excluding deposits in foreign office). |
(e) |
Earnings per share may not foot due to rounding. |
(f) |
September 30, 2012 amount excludes $25 million of purchased credit impaired loans acquired in July 2012. |
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles |
GAAP to Non-GAAP Reconciliations
(dollars in millions)
The table below presents certain non-GAAP financial measures related to "tangible common equity," "return on tangible common equity," "Tier 1 common equity," "pre-provision net revenue," and "cash efficiency ratio."
The tangible common equity ratio and the return on tangible common equity ratio have been a focus for some investors, and management believes these ratios may assist investors in analyzing Key's capital position without regard to the effects of intangible assets and preferred stock. Traditionally, the banking regulators have assessed bank and bank holding company capital adequacy based on both the amount and the composition of capital, the calculation of which is prescribed in federal banking regulations. Since the commencement of the Comprehensive Capital Analysis and Review process in early 2009, the Federal Reserve has focused its assessment of capital adequacy on a component of Tier 1 risk-based capital known as Tier 1 common equity, a non-GAAP financial measure. Because the Federal Reserve has long indicated that voting common shareholders' equity (essentially Tier 1 risk-based capital less preferred stock, qualifying capital securities and noncontrolling interests in subsidiaries) generally should be the dominant element in Tier 1 risk-based capital, this focus on Tier 1 common equity is consistent with existing capital adequacy categories.
Tier 1 common equity is neither formally defined by GAAP nor prescribed in amount by federal banking regulations; this measure is considered to be a non-GAAP financial measure. Since analysts and banking regulators may assess Key's capital adequacy using tangible common equity and Tier 1 common equity, management believes it is useful to enable investors to assess Key's capital adequacy on these same bases. The table also reconciles the GAAP performance measures to the corresponding non-GAAP measures.
The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of the provision for loan and lease losses makes it easier to analyze the results by presenting them on a more comparable basis.
The cash efficiency ratio performance measure removes the impact of Key's intangible asset amortization from the calculation. Management believes this ratio provides greater consistency and comparability between Key's results and those of its peer banks. Additionally, this ratio is used by analysts and investors to assist in the development of their 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 |
|||||||||||||
9-30-12 |
6-30-12 |
9-30-11 |
|||||||||||
Tangible common equity to tangible assets at period end |
|||||||||||||
Key shareholders' equity (GAAP) |
$ |
10,251 |
$ |
10,155 |
$ |
9,901 |
|||||||
Less: |
Intangible assets (a) |
1,031 |
932 |
935 |
|||||||||
Preferred Stock, Series A |
291 |
291 |
291 |
||||||||||
Tangible common equity (non-GAAP) |
$ |
8,929 |
$ |
8,932 |
$ |
8,675 |
|||||||
Total assets (GAAP) |
$ |
86,950 |
$ |
86,523 |
$ |
89,262 |
|||||||
Less: |
Intangible assets (a) |
1,031 |
932 |
935 |
|||||||||
Tangible assets (non-GAAP) |
$ |
85,919 |
$ |
85,591 |
$ |
88,327 |
|||||||
Tangible common equity to tangible assets ratio (non-GAAP) |
10.39 |
% |
10.44 |
% |
9.82 |
% |
|||||||
Tier 1 common equity at period end |
|||||||||||||
Key shareholders' equity (GAAP) |
$ |
10,251 |
$ |
10,155 |
$ |
9,901 |
|||||||
Qualifying capital securities |
339 |
339 |
1,377 |
||||||||||
Less: |
Goodwill |
979 |
917 |
917 |
|||||||||
Accumulated other comprehensive income (loss) (b) |
(109) |
(109) |
88 |
||||||||||
Other assets (c) |
121 |
71 |
72 |
||||||||||
Total Tier 1 capital (regulatory) |
9,599 |
9,615 |
10,201 |
||||||||||
Less: |
Qualifying capital securities |
339 |
339 |
1,377 |
|||||||||
Preferred Stock, Series A |
291 |
291 |
291 |
||||||||||
Total Tier 1 common equity (non-GAAP) |
$ |
8,969 |
$ |
8,985 |
$ |
8,533 |
|||||||
Net risk-weighted assets (regulatory) (c), (d) |
$ |
78,447 |
$ |
77,236 |
$ |
75,643 |
|||||||
Tier 1 common equity ratio (non-GAAP) (d) |
11.43 |
% |
11.63 |
% |
11.28 |
% |
|||||||
Pre-provision net revenue |
|||||||||||||
Net interest income (GAAP) |
$ |
572 |
$ |
538 |
$ |
549 |
|||||||
Plus: |
Taxable-equivalent adjustment |
6 |
6 |
6 |
|||||||||
Noninterest income |
544 |
485 |
483 |
||||||||||
Less: |
Noninterest expense |
734 |
714 |
692 |
|||||||||
Pre-provision net revenue from continuing operations (non-GAAP) |
$ |
388 |
$ |
315 |
$ |
346 |
GAAP to Non-GAAP Reconciliations (continued) |
|||||||||||||
(dollars in millions) |
|||||||||||||
Three months ended |
|||||||||||||
9-30-12 |
6-30-12 |
9-30-11 |
|||||||||||
Return on tangible common equity from continuing operations |
|||||||||||||
Net income (loss) from continuing operations attributable to Key common shareholders |
$ |
214 |
$ |
221 |
$ |
229 |
|||||||
Tangible common equity (non-GAAP) |
8,929 |
8,932 |
8,675 |
||||||||||
Return on tangible common equity from continuing operations (non-GAAP) |
9.53 |
% |
9.95 |
% |
10.47 |
% |
|||||||
Return on tangible common equity consolidated |
|||||||||||||
Net income (loss) attributable to Key common shareholders |
$ |
214 |
$ |
231 |
$ |
212 |
|||||||
Tangible common equity (non-GAAP) |
8,929 |
8,932 |
8,675 |
||||||||||
Return on tangible common equity consolidated (non-GAAP) |
9.53 |
% |
10.40 |
% |
9.70 |
% |
|||||||
Cash efficiency ratio |
|||||||||||||
Noninterest expense (GAAP) |
$ |
734 |
$ |
714 |
$ |
692 |
|||||||
Less: |
Intangible asset amortization on credit cards |
6 |
|
|
|||||||||
Other intangible asset amortization |
3 |
1 |
1 |
||||||||||
Adjusted noninterest expense (non-GAAP) |
$ |
725 |
$ |
713 |
$ |
691 |
|||||||
Net interest income (GAAP) |
$ |
572 |
$ |
538 |
$ |
549 |
|||||||
Plus: |
Taxable-equivalent adjustment |
6 |
6 |
6 |
|||||||||
Noninterest income |
544 |
485 |
483 |
||||||||||
Total taxable-equivalent revenue (non-GAAP) |
$ |
1,122 |
$ |
1,029 |
$ |
1,038 |
|||||||
Cash efficiency ratio (non-GAAP) |
64.62 |
% |
69.29 |
% |
66.57 |
% |
(a) |
September 30, 2012 excludes $130 million of purchased credit card receivable intangible assets that are not fully excludable for capital purposes. |
(b) |
Includes net unrealized gains or losses on securities available for sale (except for net unrealized losses on marketable equity securities), net gains or losses on cash flow hedges, and amounts resulting from the December 31, 2006, adoption and subsequent application of the applicable accounting guidance for defined benefit and other postretirement plans. |
(c) |
Other assets deducted from Tier 1 capital and net risk-weighted assets consist of disallowed intangible assets (excluding goodwill) and deductible portions of nonfinancial equity investments. There were no disallowed deferred tax assets at September 30, 2012, June 30, 2012, and September 30, 2011. |
(d) |
9-30-12 amount is estimated. |
GAAP = U.S. generally accepted accounting principles |
Consolidated Balance Sheets |
|||||||||||||
(dollars in millions) |
|||||||||||||
9-30-12 |
6-30-12 |
9-30-11 |
|||||||||||
Assets |
|||||||||||||
Loans |
$ |
51,419 |
$ |
49,605 |
$ |
48,195 |
|||||||
Loans held for sale |
628 |
656 |
479 |
||||||||||
Securities available for sale |
11,962 |
13,205 |
17,612 |
||||||||||
Held-to-maturity securities |
4,153 |
4,352 |
1,176 |
||||||||||
Trading account assets |
663 |
679 |
729 |
||||||||||
Short-term investments |
2,208 |
2,216 |
4,766 |
||||||||||
Other investments |
1,106 |
1,186 |
1,210 |
||||||||||
Total earning assets |
72,139 |
71,899 |
74,167 |
||||||||||
Allowance for loan and lease losses |
(888) |
(888) |
(1,131) |
||||||||||
Cash and due from banks |
974 |
717 |
828 |
||||||||||
Premises and equipment |
942 |
931 |
924 |
||||||||||
Operating lease assets |
290 |
318 |
393 |
||||||||||
Goodwill |
979 |
917 |
917 |
||||||||||
Other intangible assets |
182 |
15 |
18 |
||||||||||
Corporate-owned life insurance |
3,309 |
3,285 |
3,227 |
||||||||||
Derivative assets |
771 |
818 |
940 |
||||||||||
Accrued income and other assets |
2,871 |
2,978 |
2,946 |
||||||||||
Discontinued assets |
5,381 |
5,533 |
6,033 |
||||||||||
Total assets |
$ |
86,950 |
$ |
86,523 |
$ |
89,262 |
|||||||
Liabilities |
|||||||||||||
Deposits in domestic offices: |
|||||||||||||
NOW and money market deposit accounts |
$ |
30,573 |
$ |
28,957 |
$ |
27,548 |
|||||||
Savings deposits |
2,393 |
2,103 |
1,968 |
||||||||||
Certificates of deposit ($100,000 or more) |
3,226 |
3,669 |
4,457 |
||||||||||
Other time deposits |
4,941 |
5,385 |
6,695 |
||||||||||
Total interest-bearing deposits |
41,133 |
40,114 |
40,668 |
||||||||||
Noninterest-bearing deposits |
22,486 |
21,435 |
19,803 |
||||||||||
Deposits in foreign office interest-bearing |
569 |
618 |
561 |
||||||||||
Total deposits |
64,188 |
62,167 |
61,032 |
||||||||||
Federal funds purchased and securities sold under repurchase agreements |
1,746 |
1,716 |
1,728 |
||||||||||
Bank notes and other short-term borrowings |
388 |
362 |
519 |
||||||||||
Derivative liabilities |
657 |
763 |
1,141 |
||||||||||
Accrued expense and other liabilities |
1,238 |
1,417 |
1,556 |
||||||||||
Long-term debt |
6,119 |
7,521 |
10,717 |
||||||||||
Discontinued liabilities |
2,335 |
2,401 |
2,651 |
||||||||||
Total liabilities |
76,671 |
76,347 |
79,344 |
||||||||||
Equity |
|||||||||||||
Preferred stock, Series A |
291 |
291 |
291 |
||||||||||
Common shares |
1,017 |
1,017 |
1,017 |
||||||||||
Capital surplus |
4,118 |
4,120 |
4,191 |
||||||||||
Retained earnings |
6,762 |
6,595 |
6,079 |
||||||||||
Treasury stock, at cost |
(1,868) |
(1,796) |
(1,820) |
||||||||||
Accumulated other comprehensive income (loss) |
(69) |
(72) |
143 |
||||||||||
Key shareholders' equity |
10,251 |
10,155 |
9,901 |
||||||||||
Noncontrolling interests |
28 |
21 |
17 |
||||||||||
Total equity |
10,279 |
10,176 |
9,918 |
||||||||||
Total liabilities and equity |
$ |
86,950 |
$ |
86,523 |
$ |
89,262 |
|||||||
Common shares outstanding (000) |
936,195 |
945,473 |
952,808 |
Consolidated Statements of Income |
||||||||||||||||||
(dollars in millions, except per share amounts) |
||||||||||||||||||
Three months ended |
Nine months ended |
|||||||||||||||||
9-30-12 |
6-30-12 |
9-30-11 |
9-30-12 |
9-30-11 |
||||||||||||||
Interest income |
||||||||||||||||||
Loans |
$ |
538 |
$ |
518 |
$ |
543 |
$ |
1,592 |
$ |
1,664 |
||||||||
Loans held for sale |
5 |
5 |
3 |
15 |
10 |
|||||||||||||
Securities available for sale |
93 |
105 |
140 |
314 |
455 |
|||||||||||||
Held-to-maturity securities |
21 |
17 |
2 |
50 |
3 |
|||||||||||||
Trading account assets |
4 |
5 |
5 |
15 |
21 |
|||||||||||||
Short-term investments |
1 |
2 |
3 |
4 |
5 |
|||||||||||||
Other investments |
9 |
10 |
9 |
27 |
33 |
|||||||||||||
Total interest income |
671 |
662 |
705 |
2,017 |
2,191 |
|||||||||||||
Interest expense |
||||||||||||||||||
Deposits |
60 |
71 |
95 |
208 |
305 |
|||||||||||||
Federal funds purchased and securities sold under repurchase agreements |
1 |
1 |
1 |
3 |
4 |
|||||||||||||
Bank notes and other short-term borrowings |
1 |
2 |
3 |
5 |
9 |
|||||||||||||
Long-term debt |
37 |
50 |
57 |
138 |
163 |
|||||||||||||
Total interest expense |
99 |
124 |
156 |
354 |
481 |
|||||||||||||
Net interest income |
572 |
538 |
549 |
1,663 |
1,710 |
|||||||||||||
Provision (credit) for loan and lease losses |
109 |
21 |
10 |
172 |
(38) |
|||||||||||||
Net interest income (expense) after provision for loan and lease losses |
463 |
517 |
539 |
1,491 |
1,748 |
|||||||||||||
Noninterest income |
||||||||||||||||||
Trust and investment services income |
106 |
102 |
107 |
317 |
330 |
|||||||||||||
Service charges on deposit accounts |
74 |
70 |
74 |
212 |
211 |
|||||||||||||
Operating lease income |
17 |
20 |
30 |
59 |
97 |
|||||||||||||
Letter of credit and loan fees |
52 |
56 |
55 |
162 |
157 |
|||||||||||||
Corporate-owned life insurance income |
26 |
30 |
31 |
86 |
86 |
|||||||||||||
Net securities gains (losses) (a) |
|
|
|
|
1 |
|||||||||||||
Electronic banking fees |
18 |
19 |
33 |
54 |
96 |
|||||||||||||
Gains on leased equipment |
46 |
36 |
7 |
109 |
16 |
|||||||||||||
Insurance income |
13 |
11 |
13 |
36 |
42 |
|||||||||||||
Net gains (losses) from loan sales |
39 |
32 |
18 |
93 |
48 |
|||||||||||||
Net gains (losses) from principal investing |
11 |
24 |
34 |
70 |
86 |
|||||||||||||
Investment banking and capital markets income (loss) |
38 |
37 |
25 |
118 |
110 |
|||||||||||||
Other income |
104 |
48 |
56 |
185 |
114 |
|||||||||||||
Total noninterest income |
544 |
485 |
483 |
1,501 |
1,394 |
|||||||||||||
Noninterest expense |
||||||||||||||||||
Personnel |
411 |
389 |
382 |
1,185 |
1,133 |
|||||||||||||
Net occupancy |
65 |
62 |
65 |
191 |
192 |
|||||||||||||
Operating lease expense |
13 |
15 |
23 |
45 |
76 |
|||||||||||||
Computer processing |
43 |
43 |
40 |
127 |
124 |
|||||||||||||
Business services and professional fees |
49 |
51 |
47 |
138 |
129 |
|||||||||||||
FDIC assessment |
7 |
8 |
7 |
23 |
45 |
|||||||||||||
OREO expense, net |
1 |
7 |
1 |
14 |
8 |
|||||||||||||
Equipment |
27 |
27 |
26 |
80 |
78 |
|||||||||||||
Marketing |
18 |
17 |
16 |
48 |
36 |
|||||||||||||
Provision (credit) for losses on lending-related commitments |
(8) |
6 |
(1) |
(2) |
(17) |
|||||||||||||
Intangible asset amortization on credit cards |
6 |
|
|
6 |
|
|||||||||||||
Other intangible asset amortization |
3 |
1 |
1 |
5 |
3 |
|||||||||||||
Other expense |
99 |
88 |
85 |
291 |
266 |
|||||||||||||
Total noninterest expense |
734 |
714 |
692 |
2,151 |
2,073 |
|||||||||||||
Income (loss) from continuing operations before income taxes |
273 |
288 |
330 |
841 |
1,069 |
|||||||||||||
Income taxes |
52 |
57 |
95 |
184 |
300 |
|||||||||||||
Income (loss) from continuing operations |
221 |
231 |
235 |
657 |
769 |
|||||||||||||
Income (loss) from discontinued operations, net of taxes |
|
10 |
(17) |
5 |
(37) |
|||||||||||||
Net income (loss) |
221 |
241 |
218 |
662 |
732 |
|||||||||||||
Less: Net income (loss) attributable to noncontrolling interests |
2 |
5 |
1 |
7 |
12 |
|||||||||||||
Net income (loss) attributable to Key |
$ |
219 |
$ |
236 |
$ |
217 |
$ |
655 |
$ |
720 |
||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
214 |
$ |
221 |
$ |
229 |
$ |
634 |
$ |
656 |
||||||||
Net income (loss) attributable to Key common shareholders |
214 |
231 |
212 |
639 |
619 |
|||||||||||||
Per common share |
||||||||||||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
.23 |
$ |
.23 |
$ |
.24 |
$ |
.67 |
$ |
.71 |
||||||||
Income (loss) from discontinued operations, net of taxes |
|
.01 |
(.02) |
.01 |
(.04) |
|||||||||||||
Net income (loss) attributable to Key common shareholders (b) |
.23 |
.24 |
.22 |
.68 |
.67 |
|||||||||||||
Per common share assuming dilution |
||||||||||||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
.23 |
$ |
.23 |
$ |
.24 |
$ |
.67 |
$ |
.71 |
||||||||
Income (loss) from discontinued operations, net of taxes |
|
.01 |
(.02) |
.01 |
(.04) |
|||||||||||||
Net income (loss) attributable to Key common shareholders (b) |
.23 |
.24 |
.22 |
.67 |
.67 |
|||||||||||||
Cash dividends declared per common share |
$ |
.05 |
$ |
.05 |
$ |
.03 |
$ |
.13 |
$ |
.07 |
||||||||
Weighted-average common shares outstanding (000) |
936,223 |
944,648 |
948,702 |
943,378 |
926,298 |
|||||||||||||
Weighted-average common shares and potential common shares outstanding (000) (c) |
940,764 |
948,087 |
950,686 |
947,582 |
930,449 |
|||||||||||||
(a) |
For the three months ended September 30, 2012, June 30, 2012, and September 30, 2011, Key did not have any impairment losses related to securities. |
|||||||||||||||||
(b) |
Earnings per share may not foot due to rounding. |
|||||||||||||||||
(c) |
Assumes conversion of stock options and/or Preferred Series A shares, as applicable. |
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations |
||||||||||||||||||||||||||||||||
(dollars in millions) |
||||||||||||||||||||||||||||||||
Third Quarter 2012 |
Second Quarter 2012 |
Third Quarter 2011 |
||||||||||||||||||||||||||||||
Average |
Average |
Average |
||||||||||||||||||||||||||||||
Balance |
Interest |
(a) |
Yield/Rate |
(a) |
Balance |
Interest |
(a) |
Yield/Rate |
(a) |
Balance |
Interest |
(a) |
Yield/Rate |
(a) |
||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Loans: (b), (c) |
||||||||||||||||||||||||||||||||
Commercial, financial and agricultural |
$ |
21,473 |
(h) |
$ |
203 |
3.76 |
% |
$ |
20,606 |
$ |
196 |
3.82 |
% |
$ |
17,381 |
$ |
175 |
3.98 |
% |
|||||||||||||
Real estate commercial mortgage |
7,463 |
83 |
4.40 |
7,613 |
85 |
4.50 |
7,978 |
89 |
4.47 |
|||||||||||||||||||||||
Real estate construction |
1,116 |
12 |
4.55 |
1,216 |
14 |
4.64 |
1,545 |
18 |
4.46 |
|||||||||||||||||||||||
Commercial lease financing |
5,026 |
39 |
3.13 |
5,226 |
45 |
3.45 |
6,045 |
72 |
4.80 |
|||||||||||||||||||||||
Total commercial loans |
35,078 |
337 |
3.83 |
34,661 |
340 |
3.94 |
32,949 |
354 |
4.27 |
|||||||||||||||||||||||
Real estate residential mortgage |
2,092 |
25 |
4.80 |
1,990 |
24 |
4.91 |
1,853 |
25 |
5.23 |
|||||||||||||||||||||||
Home equity: |
||||||||||||||||||||||||||||||||
Key Community Bank |
9,734 |
99 |
4.02 |
9,359 |
94 |
4.04 |
9,388 |
97 |
4.12 |
|||||||||||||||||||||||
Other |
468 |
9 |
7.73 |
493 |
9 |
7.66 |
582 |
11 |
7.69 |
|||||||||||||||||||||||
Total home equity loans |
10,202 |
108 |
4.19 |
9,852 |
103 |
4.23 |
9,970 |
108 |
4.33 |
|||||||||||||||||||||||
Consumer other Key Community Bank |
1,297 |
32 |
9.65 |
1,247 |
29 |
9.20 |
1,169 |
28 |
9.60 |
|||||||||||||||||||||||
Credit Cards |
432 |
17 |
15.38 |
|
|
|
|
|
|
|||||||||||||||||||||||
Consumer other: |
||||||||||||||||||||||||||||||||
Marine |
1,493 |
22 |
6.28 |
1,595 |
26 |
6.29 |
1,928 |
30 |
6.29 |
|||||||||||||||||||||||
Other |
101 |
3 |
8.02 |
101 |
2 |
8.49 |
139 |
3 |
7.89 |
|||||||||||||||||||||||
Total consumer other |
1,594 |
25 |
6.39 |
1,696 |
28 |
6.42 |
2,067 |
33 |
6.40 |
|||||||||||||||||||||||
Total consumer loans |
15,617 |
207 |
5.26 |
14,785 |
184 |
4.99 |
15,059 |
194 |
5.14 |
|||||||||||||||||||||||
Total loans |
50,695 |
544 |
4.27 |
49,446 |
524 |
4.26 |
48,008 |
548 |
4.54 |
|||||||||||||||||||||||
Loans held for sale |
532 |
5 |
3.28 |
585 |
5 |
3.43 |
341 |
3 |
3.75 |
|||||||||||||||||||||||
Securities available for sale (b), (e) |
12,608 |
94 |
3.07 |
13,865 |
105 |
3.13 |
18,165 |
141 |
3.16 |
|||||||||||||||||||||||
Held-to-maturity securities (b) |
4,251 |
21 |
1.94 |
3,493 |
17 |
1.98 |
354 |
2 |
2.59 |
|||||||||||||||||||||||
Trading account assets |
693 |
4 |
2.10 |
768 |
5 |
3.01 |
869 |
5 |
2.45 |
|||||||||||||||||||||||
Short-term investments |
1,868 |
1 |
.24 |
2,608 |
2 |
.29 |
3,348 |
3 |
.25 |
|||||||||||||||||||||||
Other investments (e) |
1,134 |
8 |
3.08 |
1,177 |
10 |
3.21 |
1,190 |
9 |
2.94 |
|||||||||||||||||||||||
Total earning assets |
71,781 |
677 |
3.78 |
71,942 |
668 |
3.74 |
72,275 |
711 |
3.93 |
|||||||||||||||||||||||
Allowance for loan and lease losses |
(883) |
(928) |
(1,176) |
|||||||||||||||||||||||||||||
Accrued income and other assets |
9,957 |
9,906 |
10,360 |
|||||||||||||||||||||||||||||
Discontinued assets education lending business |
5,421 |
5,633 |
6,079 |
|||||||||||||||||||||||||||||
Total assets |
$ |
86,276 |
$ |
86,553 |
$ |
87,538 |
||||||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||||||
NOW and money market deposit accounts |
$ |
30,176 |
14 |
.19 |
$ |
29,106 |
13 |
.18 |
$ |
26,917 |
18 |
.26 |
||||||||||||||||||||
Savings deposits |
2,378 |
1 |
.06 |
2,085 |
|
.03 |
1,980 |
|
.06 |
|||||||||||||||||||||||
Certificates of deposit ($100,000 or more) (f) |
3,420 |
22 |
2.53 |
3,858 |
27 |
2.85 |
4,762 |
36 |
3.03 |
|||||||||||||||||||||||
Other time deposits |
5,158 |
23 |
1.76 |
5,645 |
30 |
2.13 |
6,942 |
40 |
2.28 |
|||||||||||||||||||||||
Deposits in foreign office |
666 |
|
.21 |
759 |
1 |
.24 |
675 |
1 |
.28 |
|||||||||||||||||||||||
Total interest-bearing deposits |
41,798 |
60 |
.57 |
41,453 |
71 |
.69 |
41,276 |
95 |
.91 |
|||||||||||||||||||||||
Federal funds purchased and securities sold under repurchase agreements |
1,822 |
1 |
.17 |
1,880 |
1 |
.20 |
1,724 |
1 |
.28 |
|||||||||||||||||||||||
Bank notes and other short-term borrowings |
390 |
1 |
1.53 |
468 |
2 |
1.80 |
598 |
3 |
1.85 |
|||||||||||||||||||||||
Long-term debt (f), (g) |
3,793 |
37 |
4.43 |
5,463 |
50 |
4.01 |
7,777 |
57 |
3.14 |
|||||||||||||||||||||||
Total interest-bearing liabilities |
47,803 |
99 |
.83 |
49,264 |
124 |
1.02 |
51,375 |
156 |
1.21 |
|||||||||||||||||||||||
Noninterest-bearing deposits |
20,878 |
19,610 |
17,624 |
|||||||||||||||||||||||||||||
Accrued expense and other liabilities |
1,928 |
1,927 |
2,612 |
|||||||||||||||||||||||||||||
Discontinued liabilities education lending business (d), (g) |
5,421 |
5,633 |
6,079 |
|||||||||||||||||||||||||||||
Total liabilities |
76,030 |
76,434 |
77,690 |
|||||||||||||||||||||||||||||
Equity |
||||||||||||||||||||||||||||||||
Key shareholders' equity |
10,222 |
10,100 |
9,831 |
|||||||||||||||||||||||||||||
Noncontrolling interests |
24 |
19 |
17 |
|||||||||||||||||||||||||||||
Total equity |
10,246 |
10,119 |
9,848 |
|||||||||||||||||||||||||||||
Total liabilities and equity |
$ |
86,276 |
$ |
86,553 |
$ |
87,538 |
||||||||||||||||||||||||||
Interest rate spread (TE) |
2.95 |
% |
2.72 |
% |
2.72 |
% |
||||||||||||||||||||||||||
Net interest income (TE) and net interest margin (TE) |
578 |
3.23 |
% |
544 |
3.06 |
% |
555 |
3.09 |
% |
|||||||||||||||||||||||
TE adjustment (b) |
6 |
6 |
6 |
|||||||||||||||||||||||||||||
Net interest income, GAAP basis |
$ |
572 |
$ |
538 |
$ |
549 |
(a) |
Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (d) below, calculated using a matched funds transfer pricing methodology. |
(b) |
Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%. |
(c) |
For purposes of these computations, nonaccrual loans are included in average loan balances. |
(d) |
Discontinued liabilities include the liabilities of the education lending business and the dollar amount of any additional liabilities assumed necessary to support the assets associated with this business. |
(e) |
Yield is calculated on the basis of amortized cost. |
(f) |
Rate calculation excludes basis adjustments related to fair value hedges. |
(g) |
A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying our matched funds transfer pricing methodology to discontinued operations. |
(h) |
Commercial, financial and agricultural average balance includes $54 million of assets from commercial credit cards. |
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) |
|||||||||||||||||||||
Nine months ended September 30, 2012 |
Nine months ended September 30, 2011 |
||||||||||||||||||||
Average |
Average |
||||||||||||||||||||
Balance |
Interest |
(a) |
Yield/Rate |
(a) |
Balance |
Interest |
(a) |
Yield/ Rate |
(a) |
||||||||||||
Assets |
|||||||||||||||||||||
Loans: (b), (c) |
|||||||||||||||||||||
Commercial, financial and agricultural |
$ |
20,706 |
(h) |
$ |
597 |
3.85 |
% |
$ |
16,875 |
$ |
523 |
4.14 |
% |
||||||||
Real estate commercial mortgage |
7,689 |
257 |
4.46 |
8,554 |
288 |
4.51 |
|||||||||||||||
Real estate construction |
1,205 |
42 |
4.69 |
1,777 |
57 |
4.28 |
|||||||||||||||
Commercial lease financing |
5,234 |
138 |
3.52 |
6,157 |
227 |
4.92 |
|||||||||||||||
Total commercial loans |
34,834 |
1,034 |
3.97 |
33,363 |
1,095 |
4.39 |
|||||||||||||||
Real estate residential mortgage |
2,011 |
74 |
4.92 |
1,827 |
73 |
5.29 |
|||||||||||||||
Home equity: |
|||||||||||||||||||||
Key Community Bank |
9,423 |
286 |
4.05 |
9,427 |
291 |
4.13 |
|||||||||||||||
Other |
494 |
28 |
7.69 |
613 |
35 |
7.65 |
|||||||||||||||
Total home equity loans |
9,917 |
314 |
4.23 |
10,040 |
326 |
4.35 |
|||||||||||||||
Consumer other Key Community Bank |
1,246 |
89 |
9.49 |
1,159 |
83 |
9.62 |
|||||||||||||||
Credit cards |
145 |
17 |
15.38 |
|
|
|
|||||||||||||||
Consumer other: |
|||||||||||||||||||||
Marine |
1,601 |
75 |
6.29 |
2,050 |
96 |
6.26 |
|||||||||||||||
Other |
106 |
7 |
8.11 |
147 |
9 |
7.87 |
|||||||||||||||
Total consumer other |
1,707 |
82 |
6.40 |
2,197 |
105 |
6.36 |
|||||||||||||||
Total consumer loans |
15,026 |
576 |
5.11 |
15,223 |
587 |
5.15 |
|||||||||||||||
Total loans |
49,860 |
1,610 |
4.31 |
48,586 |
1,682 |
4.63 |
|||||||||||||||
Loans held for sale |
566 |
15 |
3.45 |
369 |
10 |
3.66 |
|||||||||||||||
Securities available for sale (b), (e) |
13,906 |
315 |
3.12 |
19,432 |
456 |
3.18 |
|||||||||||||||
Held-to-maturity securities (b) |
3,335 |
50 |
1.98 |
132 |
3 |
3.37 |
|||||||||||||||
Trading account assets |
756 |
15 |
2.63 |
926 |
21 |
3.04 |
|||||||||||||||
Short-term investments |
2,124 |
4 |
.27 |
2,413 |
5 |
.24 |
|||||||||||||||
Other investments (e) |
1,160 |
26 |
3.02 |
1,292 |
33 |
3.18 |
|||||||||||||||
Total earning assets |
71,707 |
2,035 |
3.81 |
73,150 |
2,210 |
4.05 |
|||||||||||||||
Allowance for loan and lease losses |
(926) |
(1,315) |
|||||||||||||||||||
Accrued income and other assets |
9,967 |
10,534 |
|||||||||||||||||||
Discontinued assets education lending business |
5,603 |
6,301 |
|||||||||||||||||||
Total assets |
$ |
86,351 |
$ |
88,670 |
|||||||||||||||||
Liabilities |
|||||||||||||||||||||
NOW and money market deposit accounts |
$ |
29,207 |
42 |
.19 |
$ |
26,758 |
56 |
.28 |
|||||||||||||
Savings deposits |
2,154 |
1 |
.05 |
1,956 |
1 |
.06 |
|||||||||||||||
Certificates of deposit ($100,000 or more) (f) |
3,770 |
78 |
2.77 |
5,152 |
117 |
3.03 |
|||||||||||||||
Other time deposits |
5,611 |
86 |
2.04 |
7,414 |
129 |
2.33 |
|||||||||||||||
Deposits in foreign office |
731 |
1 |
.23 |
860 |
2 |
.32 |
|||||||||||||||
Total interest-bearing deposits |
41,473 |
208 |
.67 |
42,140 |
305 |
.97 |
|||||||||||||||
Federal funds purchased and securities sold under repurchase agreements |
1,851 |
3 |
.19 |
2,060 |
4 |
.27 |
|||||||||||||||
Bank notes and other short-term borrowings |
449 |
5 |
1.62 |
669 |
9 |
1.83 |
|||||||||||||||
Long-term debt (f), (g) |
5,134 |
138 |
3.95 |
7,385 |
163 |
3.17 |
|||||||||||||||
Total interest-bearing liabilities |
48,907 |
354 |
.98 |
52,254 |
481 |
1.24 |
|||||||||||||||
Noninterest-bearing deposits |
19,656 |
17,016 |
|||||||||||||||||||
Accrued expense and other liabilities |
2,060 |
2,751 |
|||||||||||||||||||
Discontinued liabilities education lending business (d), (g) |
5,603 |
6,301 |
|||||||||||||||||||
Total liabilities |
76,226 |
78,322 |
|||||||||||||||||||
Key shareholders' equity |
10,105 |
10,197 |
|||||||||||||||||||
Noncontrolling interests |
20 |
151 |
|||||||||||||||||||
Total equity |
10,125 |
10,348 |
|||||||||||||||||||
Total liabilities and equity |
$ |
86,351 |
$ |
88,670 |
|||||||||||||||||
Interest rate spread (TE) |
2.83 |
% |
2.81 |
% |
|||||||||||||||||
Net interest income (TE) and net interest margin (TE) |
1,681 |
3.15 |
% |
1,729 |
3.18 |
% |
|||||||||||||||
TE adjustment (b) |
18 |
19 |
|||||||||||||||||||
Net interest income, GAAP basis |
$ |
1,663 |
$ |
1,710 |
(a) |
Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (d) below, calculated using a matched funds transfer pricing methodology. |
(b) |
Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%. |
(c) |
For purposes of these computations, nonaccrual loans are included in average loan balances. |
(d) |
Discontinued liabilities include the liabilities of the education lending business and the dollar amount of any additional liabilities assumed necessary to support the assets associated with this business. |
(e) |
Yield is calculated on the basis of amortized cost. |
(f) |
Rate calculation excludes basis adjustments related to fair value hedges. |
(g) |
A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying our matched funds transfer pricing methodology to discontinued operations. |
(h) |
Commercial, financial and agricultural average balance includes $18 million of assets from commercial credit cards. |
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles |
Noninterest Income |
|||||||||||||||
(in millions) |
|||||||||||||||
Three months ended |
Nine months ended |
||||||||||||||
9-30-12 |
6-30-12 |
9-30-11 |
9-30-12 |
9-30-11 |
|||||||||||
Trust and investment services income (a) |
$ |
106 |
$ |
102 |
$ |
107 |
$ |
317 |
$ |
330 |
|||||
Service charges on deposit accounts |
74 |
70 |
74 |
212 |
211 |
||||||||||
Operating lease income |
17 |
20 |
30 |
59 |
97 |
||||||||||
Letter of credit and loan fees |
52 |
56 |
55 |
162 |
157 |
||||||||||
Corporate-owned life insurance income |
26 |
30 |
31 |
86 |
86 |
||||||||||
Net securities gains (losses) |
|
|
|
|
1 |
||||||||||
Electronic banking fees |
18 |
19 |
33 |
54 |
96 |
||||||||||
Gains on leased equipment |
46 |
36 |
7 |
109 |
16 |
||||||||||
Insurance income |
13 |
11 |
13 |
36 |
42 |
||||||||||
Net gains (losses) from loan sales |
39 |
32 |
18 |
93 |
48 |
||||||||||
Net gains (losses) from principal investing |
11 |
24 |
34 |
70 |
86 |
||||||||||
Investment banking and capital markets income (loss) (a) |
38 |
37 |
25 |
118 |
110 |
||||||||||
Other income |
104 |
48 |
56 |
185 |
114 |
||||||||||
Total noninterest income |
$ |
544 |
$ |
485 |
$ |
483 |
$ |
1,501 |
$ |
1,394 |
|||||
(a) |
Additional detail provided in tables below. |
||||||||||||||
Trust and Investment Services Income |
|||||||||||||||
(in millions) |
|||||||||||||||
Three months ended |
Nine months ended |
||||||||||||||
9-30-12 |
6-30-12 |
9-30-11 |
9-30-12 |
9-30-11 |
|||||||||||
Brokerage commissions and fee income |
$ |
34 |
$ |
32 |
$ |
34 |
$ |
102 |
$ |
99 |
|||||
Personal asset management and custody fees |
41 |
39 |
37 |
119 |
115 |
||||||||||
Institutional asset management and custody fees |
31 |
31 |
36 |
96 |
116 |
||||||||||
Total trust and investment services income |
$ |
106 |
$ |
102 |
$ |
107 |
$ |
317 |
$ |
330 |
|||||
Investment Banking and Capital Markets Income (Loss) |
|||||||||||||||
(in millions) |
|||||||||||||||
Three months ended |
Nine months ended |
||||||||||||||
9-30-12 |
6-30-12 |
9-30-11 |
9-30-12 |
9-30-11 |
|||||||||||
Investment banking income |
$ |
32 |
$ |
25 |
$ |
16 |
$ |
77 |
$ |
67 |
|||||
Income (loss) from other investments |
2 |
4 |
6 |
11 |
18 |
||||||||||
Dealer trading and derivatives income (loss), proprietary (a), (b) |
4 |
(8) |
(10) |
(1) |
(18) |
||||||||||
Dealer trading and derivatives income (loss), nonproprietary (b) |
(9) |
6 |
2 |
3 |
11 |
||||||||||
Total dealer trading and derivatives income (loss) |
(5) |
(2) |
(8) |
2 |
(7) |
||||||||||
Foreign exchange income |
9 |
10 |
11 |
28 |
32 |
||||||||||
Total investment banking and capital markets income (loss) |
$ |
38 |
$ |
37 |
$ |
25 |
$ |
118 |
$ |
110 |
|||||
(a) |
For the quarters ended September 30, 2012, June 30, 2012, and September 30, 2011, fixed income securities trading comprised the vast majority of this amount. For the quarter ended September 30, 2012, income related to foreign exchange derivative trading and interest rate derivative trading was less than $1 million and was offset by losses from Key's credit portfolio management activities. For the quarter ended June 30, 2012, income related to foreign exchange derivative trading, interest rate derivative trading, and Key's credit portfolio management activities were all less than $1 million. For the quarter ended September 30, 2011, income related to foreign exchange and interest rate derivative trading was less than $2 million and was offset by losses from Key's credit portfolio management activities. |
||||||||||||||
(b) |
The allocation between proprietary and nonproprietary is made based upon whether the trade is conducted for the benefit of Key or Key's clients rather than based upon the proposed rulemakings under the Volcker Rule. The prohibitions and restrictions on proprietary trading activities contemplated by the Volcker Rule and the rules proposed thereunder are not yet final. Therefore, the ultimate impact of the rules proposed under the Volcker Rule is not yet known. |
Noninterest Expense |
||||||||||||||
(dollars in millions) |
||||||||||||||
Three months ended |
Nine months ended |
|||||||||||||
9-30-12 |
6-30-12 |
9-30-11 |
9-30-12 |
9-30-11 |
||||||||||
Personnel (a) |
$ |
411 |
$ |
389 |
$ |
382 |
$ |
1,185 |
$ |
1,133 |
||||
Net occupancy |
65 |
62 |
65 |
191 |
192 |
|||||||||
Operating lease expense |
13 |
15 |
23 |
45 |
76 |
|||||||||
Computer processing |
43 |
43 |
40 |
127 |
124 |
|||||||||
Business services and professional fees |
49 |
51 |
47 |
138 |
129 |
|||||||||
FDIC assessment |
7 |
8 |
7 |
23 |
45 |
|||||||||
OREO expense, net |
1 |
7 |
1 |
14 |
8 |
|||||||||
Equipment |
27 |
27 |
26 |
80 |
78 |
|||||||||
Marketing |
18 |
17 |
16 |
48 |
36 |
|||||||||
Provision (credit) for losses on lending-related commitments |
(8) |
6 |
(1) |
(2) |
(17) |
|||||||||
Intangible asset amortization on credit cards |
6 |
|
|
6 |
|
|||||||||
Other intangible asset amortization |
3 |
1 |
1 |
5 |
3 |
|||||||||
Other expense |
99 |
88 |
85 |
291 |
266 |
|||||||||
Total noninterest expense |
$ |
734 |
$ |
714 |
$ |
692 |
$ |
2,151 |
$ |
2,073 |
||||
Average full-time equivalent employees (b) |
15,833 |
15,455 |
15,490 |
15,565 |
15,381 |
|||||||||
(a) Additional detail provided in table below. |
||||||||||||||
(b) The number of average full-time equivalent employees has not been adjusted for discontinued operations. |
||||||||||||||
Personnel Expense |
||||||||||||||
(in millions) |
||||||||||||||
Three months ended |
Nine months ended |
|||||||||||||
9-30-12 |
6-30-12 |
9-30-11 |
9-30-12 |
9-30-11 |
||||||||||
Salaries |
$ |
251 |
$ |
245 |
$ |
233 |
$ |
732 |
$ |
685 |
||||
Incentive compensation |
89 |
71 |
78 |
226 |
224 |
|||||||||
Employee benefits |
55 |
56 |
54 |
176 |
174 |
|||||||||
Stock-based compensation |
11 |
13 |
11 |
38 |
32 |
|||||||||
Severance |
5 |
4 |
6 |
13 |
18 |
|||||||||
Total personnel expense |
$ |
411 |
$ |
389 |
$ |
382 |
$ |
1,185 |
$ |
1,133 |
Loan Composition |
||||||||||||||||||
(dollars in millions) |
||||||||||||||||||
Percent change 9-30-12 vs. |
||||||||||||||||||
9-30-12 |
6-30-12 |
9-30-11 |
6-30-12 |
9-30-11 |
||||||||||||||
Commercial, financial and agricultural (a) |
$ |
21,979 |
$ |
20,916 |
$ |
17,848 |
5.1 |
% |
23.1 |
% |
||||||||
Commercial real estate: |
||||||||||||||||||
Commercial mortgage |
7,529 |
7,409 |
7,958 |
1.6 |
(5.4) |
|||||||||||||
Construction |
1,067 |
1,172 |
1,456 |
(9.0) |
(26.7) |
|||||||||||||
Total commercial real estate loans |
8,596 |
8,581 |
9,414 |
.2 |
(8.7) |
|||||||||||||
Commercial lease financing |
4,960 |
5,106 |
5,957 |
(2.9) |
(16.7) |
|||||||||||||
Total commercial loans |
35,535 |
34,603 |
33,219 |
2.7 |
7.0 |
|||||||||||||
Residential prime loans: |
||||||||||||||||||
Real estate residential mortgage |
2,138 |
2,016 |
1,875 |
6.1 |
14.0 |
|||||||||||||
Home equity: |
||||||||||||||||||
Key Community Bank |
9,768 |
9,601 |
9,347 |
1.7 |
4.5 |
|||||||||||||
Other |
409 |
479 |
565 |
(14.6) |
(27.6) |
|||||||||||||
Total home equity loans |
10,177 |
10,080 |
9,912 |
1.0 |
2.7 |
|||||||||||||
Total residential prime loans |
12,315 |
12,096 |
11,787 |
1.8 |
4.5 |
|||||||||||||
Consumer other Key Community Bank |
1,313 |
1,263 |
1,187 |
4.0 |
10.6 |
|||||||||||||
Credit cards |
710 |
|
|
N/M |
N/M |
|||||||||||||
Consumer other: |
||||||||||||||||||
Marine |
1,448 |
1,542 |
1,871 |
(6.1) |
(22.6) |
|||||||||||||
Other |
98 |
101 |
131 |
(3.0) |
(25.2) |
|||||||||||||
Total consumer indirect loans |
1,546 |
1,643 |
2,002 |
(5.9) |
(22.8) |
|||||||||||||
Total consumer loans |
15,884 |
15,002 |
14,976 |
5.9 |
6.1 |
|||||||||||||
Total loans (b), (c) |
$ |
51,419 |
$ |
49,605 |
$ |
48,195 |
3.7 |
% |
6.7 |
% |
||||||||
Loans Held for Sale Composition |
||||||||||||||||||
(dollars in millions) |
||||||||||||||||||
Percent change 9-30-12 vs. |
||||||||||||||||||
9-30-12 |
6-30-12 |
9-30-11 |
6-30-12 |
9-30-11 |
||||||||||||||
Commercial, financial and agricultural |
$ |
13 |
$ |
18 |
$ |
29 |
(27.8) |
% |
(55.2) |
% |
||||||||
Real estate commercial mortgage |
484 |
523 |
325 |
(7.5) |
48.9 |
|||||||||||||
Real estate construction |
10 |
12 |
20 |
(16.7) |
(50.0) |
|||||||||||||
Commercial lease financing |
4 |
13 |
26 |
(69.2) |
(84.6) |
|||||||||||||
Real estate residential mortgage |
117 |
90 |
79 |
30.0 |
48.1 |
|||||||||||||
Total loans held for sale |
$ |
628 |
$ |
656 |
$ |
479 |
(4.3) |
% |
31.1 |
% |
||||||||
Summary of Changes in Loans Held for Sale |
||||||||||||||||||
(dollars in millions) |
||||||||||||||||||
3Q12 |
2Q12 |
1Q12 |
4Q11 |
3Q11 |
||||||||||||||
Balance at beginning of period |
$ |
656 |
$ |
511 |
$ |
728 |
$ |
479 |
$ |
381 |
||||||||
New originations |
1,280 |
1,308 |
935 |
1,235 |
853 |
|||||||||||||
Transfers from held to maturity, net |
13 |
7 |
19 |
19 |
23 |
|||||||||||||
Loan sales |
(1,311) |
(1,165) |
(1,168) |
(932) |
(759) |
|||||||||||||
Loan draws (payments), net |
(9) |
(4) |
(3) |
(72) |
1 |
|||||||||||||
Transfers to OREO / valuation adjustments |
(1) |
(1) |
|
(1) |
(20) |
|||||||||||||
Balance at end of period |
$ |
628 |
$ |
656 |
$ |
511 |
$ |
728 |
$ |
479 |
(a) |
September 30, 2012 loan balance includes $88 million of commercial credit card balances. |
(b) |
Excluded at September 30, 2012, June 30, 2012, and September 30, 2011, are loans in the amount of $5.3 billion, $5.5 billion, and $6.0 billion, respectively, related to the discontinued operations of the education lending business. |
(c) |
Includes purchased loans of $231 million of which $25 million were purchased credit impaired as of September 30, 2012. |
N/M = Not Meaningful |
Exit Loan Portfolio From Continuing Operations |
||||||||||||||||||||
(dollars in millions) |
||||||||||||||||||||
Balance |
Change |
Net Loan |
Balance on |
|||||||||||||||||
Outstanding |
9-30-12 vs. |
Charge-offs |
Nonperforming Status |
|||||||||||||||||
9-30-12 |
6-30-12 |
6-30-12 |
3Q12 |
(c) |
2Q12 |
9-30-12 |
6-30-12 |
|||||||||||||
Residential properties homebuilder |
$ |
31 |
$ |
33 |
$ |
(2) |
|
|
$ |
6 |
$ |
14 |
||||||||
Marine and RV floor plan |
35 |
39 |
(4) |
$ |
(1) |
$ |
2 |
12 |
15 |
|||||||||||
Commercial lease financing (a) |
1,035 |
1,237 |
(202) |
(3) |
1 |
8 |
9 |
|||||||||||||
Total commercial loans |
1,101 |
1,309 |
(208) |
(4) |
3 |
26 |
38 |
|||||||||||||
Home equity Other |
409 |
479 |
(70) |
5 |
7 |
18 |
17 |
|||||||||||||
Marine |
1,448 |
1,542 |
(94) |
6 |
7 |
31 |
19 |
|||||||||||||
RV and other consumer |
98 |
101 |
(3) |
(1) |
2 |
2 |
1 |
|||||||||||||
Total consumer loans |
1,955 |
2,122 |
(167) |
10 |
16 |
51 |
37 |
|||||||||||||
Total exit loans in loan portfolio |
$ |
3,056 |
$ |
3,431 |
$ |
(375) |
$ |
6 |
$ |
19 |
$ |
77 |
$ |
75 |
||||||
Discontinued operations education lending business (not included in exit loans above) (b) |
$ |
5,328 |
$ |
5,483 |
$ |
(155) |
$ |
12 |
$ |
12 |
$ |
22 |
$ |
18 |
||||||
(a) |
Includes (1) the business aviation, commercial vehicle, office products, construction and industrial leases; (2) Canadian lease financing portfolios; and (3) all remaining balances related to lease in, lease out; sale in, lease out; service contract leases; and qualified technological equipment leases. |
(b) |
Includes loans in Key's consolidated education loan securitization trusts. |
(c) |
Credit amounts indicate recoveries exceeded charge-offs. |
Asset Quality Statistics From Continuing Operations |
||||||||||||||||
(dollars in millions) |
||||||||||||||||
3Q12 |
2Q12 |
1Q12 |
4Q11 |
3Q11 |
||||||||||||
Net loan charge-offs |
$ |
109 |
$ |
77 |
$ |
101 |
$ |
105 |
$ |
109 |
||||||
Net loan charge-offs to average loans |
.86 |
% |
.63 |
% |
.82 |
% |
.86 |
% |
.90 |
% |
||||||
Allowance for loan and lease losses to annualized net loan charge-offs |
204.78 |
286.74 |
232.39 |
241.01 |
261.54 |
|||||||||||
Allowance for loan and lease losses |
$ |
888 |
$ |
888 |
$ |
944 |
$ |
1,004 |
$ |
1,131 |
||||||
Allowance for credit losses (a) |
931 |
939 |
989 |
1,049 |
1,187 |
|||||||||||
Allowance for loan and lease losses to period-end loans |
1.73 |
% |
1.79 |
% |
1.92 |
% |
2.03 |
% |
2.35 |
% |
||||||
Allowance for credit losses to period-end loans |
1.81 |
1.89 |
2.01 |
2.12 |
2.46 |
|||||||||||
Allowance for loan and lease losses to nonperforming loans |
135.99 |
135.16 |
141.74 |
138.10 |
143.53 |
|||||||||||
Allowance for credit losses to nonperforming loans |
142.57 |
142.92 |
148.50 |
144.29 |
150.63 |
|||||||||||
Nonperforming loans at period end (b) |
$ |
653 |
$ |
657 |
$ |
666 |
$ |
727 |
$ |
788 |
||||||
Nonperforming assets at period end |
718 |
751 |
767 |
859 |
914 |
|||||||||||
Nonperforming loans to period-end portfolio loans |
1.27 |
% |
1.32 |
% |
1.35 |
% |
1.47 |
% |
1.64 |
% |
||||||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets |
1.39 |
1.51 |
1.55 |
1.73 |
1.89 |
|||||||||||
(a) Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related commitments. |
||||||||||||||||
(b) September 30, 2012 amount excludes $25 million of purchased credit impaired loans acquired in July 2012. |
Summary of Loan and Lease Loss Experience From Continuing Operations |
|||||||||||||||
(dollars in millions) |
|||||||||||||||
Three months ended |
Nine months ended |
||||||||||||||
9-30-12 |
6-30-12 |
9-30-11 |
9-30-12 |
9-30-11 |
|||||||||||
Average loans outstanding |
$ |
50,695 |
$ |
49,446 |
$ |
48,008 |
$ |
49,860 |
$ |
48,586 |
|||||
Allowance for loan and lease losses at beginning of period |
$ |
888 |
$ |
944 |
$ |
1,230 |
$ |
1,004 |
$ |
1,604 |
|||||
Loans charged off: |
|||||||||||||||
Commercial, financial and agricultural |
16 |
23 |
31 |
65 |
124 |
||||||||||
Real estate commercial mortgage |
23 |
23 |
27 |
69 |
89 |
||||||||||
Real estate construction |
3 |
5 |
19 |
19 |
81 |
||||||||||
Total commercial real estate loans |
26 |
28 |
46 |
88 |
170 |
||||||||||
Commercial lease financing |
|
16 |
10 |
20 |
36 |
||||||||||
Total commercial loans |
42 |
67 |
87 |
173 |
330 |
||||||||||
Real estate residential mortgage |
6 |
7 |
5 |
19 |
22 |
||||||||||
Home equity: |
|||||||||||||||
Key Community Bank |
65 |
23 |
25 |
113 |
78 |
||||||||||
Other |
6 |
9 |
9 |
23 |
35 |
||||||||||
Total home equity loans |
71 |
32 |
34 |
136 |
113 |
||||||||||
Consumer other Key Community Bank |
9 |
10 |
11 |
29 |
34 |
||||||||||
Credit cards |
2 |
|
|
2 |
|
||||||||||
Consumer other: |
|||||||||||||||
Marine |
11 |
13 |
18 |
41 |
60 |
||||||||||
Other |
|
2 |
2 |
4 |
7 |
||||||||||
Total consumer other |
11 |
15 |
20 |
45 |
67 |
||||||||||
Total consumer loans |
99 |
64 |
70 |
231 |
236 |
||||||||||
Total loans charged off |
141 |
131 |
157 |
404 |
566 |
||||||||||
Recoveries: |
|||||||||||||||
Commercial, financial and agricultural |
9 |
20 |
8 |
40 |
33 |
||||||||||
Real estate commercial mortgage |
2 |
14 |
2 |
18 |
9 |
||||||||||
Real estate construction |
1 |
1 |
11 |
3 |
19 |
||||||||||
Total commercial real estate loans |
3 |
15 |
13 |
21 |
28 |
||||||||||
Commercial lease financing |
8 |
6 |
8 |
18 |
19 |
||||||||||
Total commercial loans |
20 |
41 |
29 |
79 |
80 |
||||||||||
Real estate residential mortgage |
|
1 |
1 |
2 |
3 |
||||||||||
Home equity: |
|||||||||||||||
Key Community Bank |
3 |
2 |
7 |
7 |
9 |
||||||||||
Other |
1 |
2 |
1 |
4 |
3 |
||||||||||
Total home equity loans |
4 |
4 |
8 |
11 |
12 |
||||||||||
Consumer other Key Community Bank |
2 |
2 |
2 |
5 |
6 |
||||||||||
Consumer other: |
|||||||||||||||
Marine |
5 |
6 |
7 |
18 |
26 |
||||||||||
Other |
1 |
|
1 |
2 |
3 |
||||||||||
Total consumer other |
6 |
6 |
8 |
20 |
29 |
||||||||||
Total consumer loans |
12 |
13 |
19 |
38 |
50 |
||||||||||
Total recoveries |
32 |
54 |
48 |
117 |
130 |
||||||||||
Net loan charge-offs |
(109) |
(77) |
(109) |
(287) |
(436) |
||||||||||
Provision (credit) for loan and lease losses |
109 |
21 |
10 |
172 |
(38) |
||||||||||
Foreign currency translation adjustment |
|
|
|
(1) |
1 |
||||||||||
Allowance for loan and lease losses at end of period |
$ |
888 |
$ |
888 |
$ |
1,131 |
$ |
888 |
$ |
1,131 |
|||||
Liability for credit losses on lending-related commitments at beginning of period |
$ |
51 |
$ |
45 |
$ |
57 |
$ |
45 |
$ |
73 |
|||||
Provision (credit) for losses on lending-related commitments |
(8) |
6 |
(1) |
(2) |
(17) |
||||||||||
Liability for credit losses on lending-related commitments at end of period (a) |
$ |
43 |
$ |
51 |
$ |
56 |
$ |
43 |
$ |
56 |
|||||
Total allowance for credit losses at end of period |
$ |
931 |
$ |
939 |
$ |
1,187 |
$ |
931 |
$ |
1,187 |
|||||
Net loan charge-offs to average loans |
.86 |
% |
.63 |
% |
.90 |
% |
.77 |
% |
1.20 |
% |
|||||
Allowance for loan and lease losses to annualized net loan charge-offs |
204.78 |
286.74 |
261.54 |
231.63 |
194.02 |
||||||||||
Allowance for loan and lease losses to period-end loans |
1.73 |
1.79 |
2.35 |
1.73 |
2.35 |
||||||||||
Allowance for credit losses to period-end loans |
1.81 |
1.89 |
2.46 |
1.81 |
2.46 |
||||||||||
Allowance for loan and lease losses to nonperforming loans |
135.99 |
135.16 |
143.53 |
135.99 |
143.53 |
||||||||||
Allowance for credit losses to nonperforming loans |
142.57 |
142.92 |
150.63 |
142.57 |
150.63 |
||||||||||
Discontinued operations education lending business: |
|||||||||||||||
Loans charged off |
$ |
17 |
$ |
16 |
$ |
34 |
$ |
56 |
$ |
107 |
|||||
Recoveries |
5 |
4 |
3 |
13 |
9 |
||||||||||
Net loan charge-offs |
$ |
(12) |
$ |
(12) |
$ |
(31) |
$ |
(43) |
$ |
(98) |
|||||
(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) |
|||||||||||||||
9-30-12 |
6-30-12 |
3-31-12 |
12-31-11 |
9-30-11 |
|||||||||||
Commercial, financial and agricultural |
$ |
132 |
$ |
141 |
$ |
168 |
$ |
188 |
$ |
188 |
|||||
Real estate commercial mortgage |
134 |
172 |
175 |
218 |
237 |
||||||||||
Real estate construction |
53 |
68 |
66 |
54 |
93 |
||||||||||
Total commercial real estate loans |
187 |
240 |
241 |
272 |
330 |
||||||||||
Commercial lease financing |
18 |
18 |
22 |
27 |
31 |
||||||||||
Total commercial loans |
337 |
399 |
431 |
487 |
549 |
||||||||||
Real estate residential mortgage |
83 |
78 |
82 |
87 |
88 |
||||||||||
Home equity: |
|||||||||||||||
Key Community Bank |
171 |
141 |
109 |
108 |
102 |
||||||||||
Other |
18 |
17 |
12 |
12 |
12 |
||||||||||
Total home equity loans |
189 |
158 |
121 |
120 |
114 |
||||||||||
Consumer other Key Community Bank |
3 |
2 |
1 |
1 |
4 |
||||||||||
Credit cards |
8 |
|
|
|
|
||||||||||
Consumer other: |
|||||||||||||||
Marine |
31 |
19 |
30 |
31 |
32 |
||||||||||
Other |
2 |
1 |
1 |
1 |
1 |
||||||||||
Total consumer other |
33 |
20 |
31 |
32 |
33 |
||||||||||
Total consumer loans |
316 |
258 |
235 |
240 |
239 |
||||||||||
Total nonperforming loans (a) |
653 |
657 |
666 |
727 |
788 |
||||||||||
Nonperforming loans held for sale |
19 |
38 |
24 |
46 |
42 |
||||||||||
OREO |
29 |
28 |
61 |
65 |
63 |
||||||||||
Other nonperforming assets |
17 |
28 |
16 |
21 |
21 |
||||||||||
Total nonperforming assets |
$ |
718 |
$ |
751 |
$ |
767 |
$ |
859 |
$ |
914 |
|||||
Accruing loans past due 90 days or more |
$ |
89 |
$ |
131 |
$ |
169 |
$ |
164 |
$ |
118 |
|||||
Accruing loans past due 30 through 89 days |
354 |
362 |
420 |
441 |
478 |
||||||||||
Restructured loans accruing and nonaccruing (b) |
323 |
274 |
293 |
276 |
277 |
||||||||||
Restructured loans included in nonperforming loans (b) |
217 |
163 |
184 |
191 |
178 |
||||||||||
Nonperforming assets from discontinued operations education lending business |
22 |
18 |
19 |
23 |
22 |
||||||||||
Nonperforming loans to period-end portfolio loans |
1.27 |
% |
1.32 |
% |
1.35 |
% |
1.47 |
% |
1.64 |
% |
|||||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets |
1.39 |
1.51 |
1.55 |
1.73 |
1.89 |
(a) |
September 30, 2012 amount excludes $25 million of purchased credit impaired loans acquired in July 2012. |
(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) |
|||||||||||||||
3Q12 |
2Q12 |
1Q12 |
4Q11 |
3Q11 |
|||||||||||
Balance at beginning of period |
$ |
657 |
$ |
666 |
$ |
727 |
$ |
788 |
$ |
842 |
|||||
Loans placed on nonaccrual status |
276 |
350 |
214 |
230 |
292 |
||||||||||
Charge-offs |
(141) |
(131) |
(132) |
(149) |
(157) |
||||||||||
Loans sold |
(43) |
(49) |
(27) |
(28) |
(16) |
||||||||||
Payments |
(74) |
(110) |
(65) |
(70) |
(125) |
||||||||||
Transfers to OREO |
(10) |
(6) |
(15) |
(12) |
(11) |
||||||||||
Transfers to nonperforming loans held for sale |
|
(16) |
|
(19) |
(24) |
||||||||||
Transfers to other nonperforming assets |
|
(14) |
|
(4) |
(3) |
||||||||||
Loans returned to accrual status |
(12) |
(33) |
(36) |
(9) |
(10) |
||||||||||
Balance at end of period (a) |
$ |
653 |
$ |
657 |
$ |
666 |
$ |
727 |
$ |
788 |
|||||
(a) September 30, 2012 amount excludes $25 million of purchased credit impaired loans acquired in July 2012. |
|||||||||||||||
Summary of Changes in Nonperforming Loans Held For Sale From Continuing Operations |
|||||||||||||||
(in millions) |
|||||||||||||||
3Q12 |
2Q12 |
1Q12 |
4Q11 |
3Q11 |
|||||||||||
Balance at beginning of period |
$ |
38 |
$ |
24 |
$ |
46 |
$ |
42 |
$ |
42 |
|||||
Transfers in |
|
16 |
|
19 |
24 |
||||||||||
Net advances / (payments) |
(1) |
|
(1) |
(3) |
(5) |
||||||||||
Loans sold |
(17) |
(1) |
(1) |
(11) |
(5) |
||||||||||
Transfers to OREO |
(1) |
|
|
(1) |
(19) |
||||||||||
Valuation adjustments |
|
(1) |
(1) |
|
(1) |
||||||||||
Loans returned to accrual status / other |
|
|
(19) |
|
6 |
||||||||||
Balance at end of period |
$ |
19 |
$ |
38 |
$ |
24 |
$ |
46 |
$ |
42 |
|||||
Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations |
|||||||||||||||
(in millions) |
|||||||||||||||
3Q12 |
2Q12 |
1Q12 |
4Q11 |
3Q11 |
|||||||||||
Balance at beginning of period |
$ |
28 |
$ |
61 |
$ |
65 |
$ |
63 |
$ |
52 |
|||||
Properties acquired nonperforming loans |
11 |
6 |
15 |
13 |
30 |
||||||||||
Valuation adjustments |
(2) |
(7) |
(7) |
(4) |
(3) |
||||||||||
Properties sold |
(8) |
(32) |
(12) |
(7) |
(16) |
||||||||||
Balance at end of period |
$ |
29 |
$ |
28 |
$ |
61 |
$ |
65 |
$ |
63 |
Line of Business Results |
||||||||||||||||||||||
(dollars in millions) |
||||||||||||||||||||||
Percent change 3Q12 vs. |
||||||||||||||||||||||
3Q12 |
2Q12 |
1Q12 |
4Q11 |
3Q11 |
2Q12 |
3Q11 |
||||||||||||||||
Key Community Bank |
||||||||||||||||||||||
Summary of operations |
||||||||||||||||||||||
Total revenue (TE) |
$ |
576 |
$ |
537 |
$ |
528 |
$ |
546 |
$ |
565 |
7.3 |
% |
1.9 |
% |
||||||||
Provision (credit) for loan and lease losses |
120 |
11 |
2 |
30 |
39 |
990.9 |
207.7 |
|||||||||||||||
Noninterest expense |
512 |
476 |
457 |
476 |
457 |
7.6 |
12.0 |
|||||||||||||||
Net income (loss) attributable to Key |
(23) |
41 |
57 |
40 |
57 |
N/M |
N/M |
|||||||||||||||
Average loans and leases |
28,386 |
27,043 |
26,617 |
26,406 |
26,270 |
5.0 |
8.1 |
|||||||||||||||
Average deposits |
49,537 |
48,253 |
47,768 |
48,076 |
47,672 |
2.7 |
3.9 |
|||||||||||||||
Net loan charge-offs |
93 |
50 |
49 |
71 |
60 |
86.0 |
55.0 |
|||||||||||||||
Net loan charge-offs to average loans |
1.30 |
% |
.74 |
% |
.74 |
% |
1.07 |
% |
.91 |
% |
N/A |
N/A |
||||||||||
Nonperforming assets at period end |
$ |
422 |
$ |
401 |
$ |
402 |
$ |
415 |
$ |
439 |
5.2 |
(3.9) |
||||||||||
Return on average allocated equity |
(3.11) |
% |
5.73 |
% |
7.74 |
% |
5.07 |
% |
7.19 |
% |
N/A |
N/A |
||||||||||
Average full-time equivalent employees |
9,139 |
8,757 |
8,719 |
8,633 |
8,641 |
4.4 |
5.8 |
|||||||||||||||
Key Corporate Bank |
||||||||||||||||||||||
Summary of operations |
||||||||||||||||||||||
Total revenue (TE) |
$ |
392 |
$ |
392 |
$ |
401 |
$ |
412 |
$ |
369 |
|
6.2 |
% |
|||||||||
Provision (credit) for loan and lease losses |
(3) |
4 |
13 |
(61) |
(40) |
N/M |
N/M |
|||||||||||||||
Noninterest expense |
209 |
218 |
230 |
228 |
216 |
(4.1) |
% |
(3.2) |
||||||||||||||
Net income (loss) attributable to Key |
118 |
104 |
100 |
156 |
123 |
13.5 |
(4.1) |
|||||||||||||||
Average loans and leases |
18,886 |
18,532 |
18,584 |
17,784 |
16,986 |
1.9 |
11.2 |
|||||||||||||||
Average loans held for sale |
441 |
514 |
509 |
356 |
273 |
(14.2) |
61.5 |
|||||||||||||||
Average deposits |
12,873 |
12,409 |
11,556 |
11,162 |
10,544 |
3.7 |
22.1 |
|||||||||||||||
Net loan charge-offs |
8 |
9 |
25 |
12 |
22 |
(11.1) |
(63.6) |
|||||||||||||||
Net loan charge-offs to average loans |
.17 |
% |
.20 |
% |
.54 |
% |
.27 |
% |
.51 |
% |
N/A |
N/A |
||||||||||
Nonperforming assets at period end |
$ |
197 |
$ |
248 |
$ |
237 |
$ |
294 |
$ |
326 |
(20.6) |
(39.6) |
||||||||||
Return on average allocated equity |
27.61 |
% |
23.53 |
% |
21.24 |
% |
30.03 |
% |
22.70 |
% |
N/A |
N/A |
||||||||||
Average full-time equivalent employees |
2,146 |
2,175 |
2,169 |
2,204 |
2,209 |
(1.3) |
(2.9) |
|||||||||||||||
Key Corporate Bank supplementary information (lines of business) |
||||||||||||||||||||||
Real Estate Capital and Corporate Banking Services |
||||||||||||||||||||||
Total revenue (TE) |
$ |
166 |
$ |
181 |
$ |
165 |
$ |
184 |
$ |
153 |
(8.3) |
% |
8.5 |
% |
||||||||
Provision (credit) for loan and lease losses |
(3) |
5 |
|
(31) |
(38) |
N/M |
N/M |
|||||||||||||||
Noninterest expense |
62 |
67 |
63 |
66 |
68 |
(7.5) |
(8.8) |
|||||||||||||||
Net income (loss) attributable to Key |
67 |
65 |
64 |
94 |
78 |
3.1 |
(14.1) |
|||||||||||||||
Average loans and leases |
7,342 |
7,344 |
7,700 |
7,446 |
7,089 |
|
3.6 |
|||||||||||||||
Average loans held for sale |
359 |
337 |
291 |
216 |
173 |
6.5 |
107.5 |
|||||||||||||||
Average deposits |
9,674 |
9,254 |
8,279 |
7,694 |
7,339 |
4.5 |
31.8 |
|||||||||||||||
Net loan charge-offs |
9 |
7 |
16 |
10 |
19 |
28.6 |
(52.6) |
|||||||||||||||
Net loan charge-offs to average loans |
.49 |
% |
.38 |
% |
.84 |
% |
.53 |
% |
1.06 |
% |
N/A |
N/A |
||||||||||
Nonperforming assets at period end |
$ |
142 |
$ |
186 |
$ |
173 |
$ |
209 |
$ |
240 |
(23.7) |
(40.8) |
||||||||||
Return on average allocated equity |
34.44 |
% |
31.27 |
% |
27.92 |
% |
36.35 |
% |
28.01 |
% |
N/A |
N/A |
||||||||||
Average full-time equivalent employees |
929 |
983 |
982 |
983 |
971 |
(5.5) |
(4.3) |
|||||||||||||||
Equipment Finance |
||||||||||||||||||||||
Total revenue (TE) |
$ |
57 |
$ |
57 |
$ |
64 |
$ |
62 |
$ |
68 |
|
(16.2) |
% |
|||||||||
Provision (credit) for loan and lease losses |
|
6 |
(2) |
(15) |
(8) |
N/M |
N/M |
|||||||||||||||
Noninterest expense |
35 |
37 |
37 |
48 |
45 |
(5.4) |
% |
(22.2) |
||||||||||||||
Net income (loss) attributable to Key |
14 |
9 |
18 |
18 |
19 |
55.6 |
(26.3) |
|||||||||||||||
Average loans and leases |
5,159 |
4,887 |
4,780 |
4,681 |
4,620 |
5.6 |
11.7 |
|||||||||||||||
Average loans held for sale |
7 |
23 |
24 |
10 |
7 |
(69.6) |
|
|||||||||||||||
Average deposits |
6 |
7 |
8 |
9 |
11 |
(14.3) |
(45.5) |
|||||||||||||||
Net loan charge-offs |
(1) |
4 |
5 |
(1) |
(1) |
N/M |
N/M |
|||||||||||||||
Net loan charge-offs to average loans |
(.08) |
% |
.33 |
% |
.42 |
% |
(.08) |
% |
(.09) |
% |
N/A |
N/A |
||||||||||
Nonperforming assets at period end |
$ |
30 |
$ |
33 |
$ |
28 |
$ |
41 |
$ |
31 |
(9.1) |
(3.2) |
||||||||||
Return on average allocated equity |
22.73 |
% |
14.48 |
% |
26.71 |
% |
23.19 |
% |
23.05 |
% |
N/A |
N/A |
||||||||||
Average full-time equivalent employees |
383 |
393 |
394 |
442 |
434 |
(2.5) |
(11.8) |
|||||||||||||||
Institutional and Capital Markets |
||||||||||||||||||||||
Total revenue (TE) |
$ |
169 |
$ |
154 |
$ |
172 |
$ |
166 |
$ |
148 |
9.7 |
% |
14.2 |
% |
||||||||
Provision (credit) for loan and lease losses |
|
(7) |
15 |
(15) |
6 |
N/M |
N/M |
|||||||||||||||
Noninterest expense |
112 |
114 |
130 |
114 |
103 |
(1.8) |
8.7 |
|||||||||||||||
Net income (loss) attributable to Key |
37 |
30 |
18 |
44 |
26 |
23.3 |
42.3 |
|||||||||||||||
Average loans and leases |
6,385 |
6,301 |
6,104 |
5,657 |
5,277 |
1.3 |
21.0 |
|||||||||||||||
Average loans held for sale |
75 |
154 |
194 |
130 |
93 |
(51.3) |
(19.4) |
|||||||||||||||
Average deposits |
3,193 |
3,148 |
3,269 |
3,459 |
3,194 |
1.4 |
|
|||||||||||||||
Net loan charge-offs |
|
(2) |
4 |
3 |
4 |
N/M |
N/M |
|||||||||||||||
Net loan charge-offs to average loans |
|
(.13) |
% |
.26 |
% |
.21 |
% |
.30 |
% |
N/A |
N/A |
|||||||||||
Nonperforming assets at period end |
$ |
25 |
$ |
29 |
$ |
36 |
$ |
44 |
$ |
55 |
(13.8) |
(54.5) |
||||||||||
Return on average allocated equity |
21.61 |
% |
17.44 |
% |
10.33 |
% |
24.01 |
% |
14.37 |
% |
N/A |
N/A |
||||||||||
Average full-time equivalent employees |
834 |
799 |
793 |
779 |
804 |
4.4 |
3.7 |
|||||||||||||||
TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful |
SOURCE KeyCorp
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