KeyCorp Reports Second Quarter 2013 Net Income of $193 Million, or $.21 Per Common Share
Efficiency initiative results in achieved annualized run rate savings of approximately $171 million through the second quarter of 2013
CLEVELAND, July 18, 2013 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced second quarter net income from continuing operations attributable to Key common shareholders of $193 million, or $.21 per common share, compared to $196 million, or $.21 per common share for the first quarter of 2013, and $217 million, or $.23 per common share for the second quarter of 2012. During the second quarter, Key incurred $37 million, or $.03 per common share of costs associated with its previously announced efficiency initiative.
For the six months ended June 30, 2013, net income from continuing operations attributable to Key common shareholders was $389 million, or $.42 per common share, compared to $412 million, or $.43 per common share for the same period one year ago. During the first half of 2013, Key incurred $52 million, or $.04 per common share of costs related to its efficiency initiative.
CURRENT QUARTER DEVELOPMENTS
Executing on growth initiatives
- Acquiring a commercial mortgage servicing portfolio and special servicing business, building scale and becoming one of the top three largest named servicers of commercial/multifamily loans in the U.S. and the fifth largest special servicer of CMBS (Initial closing completed in June; final closing expected in July)
- Expanded mobile offering with the launch of new remote deposit capabilities for both consumer and commercial clients
Continued progress on efficiency initiative
- Achieved annualized run rate savings of approximately $171 million through the second quarter of 2013
- Recognized expenses of $37 million, or $.03 per common share associated with efficiency initiative during the second quarter of 2013
- Cash efficiency ratio of 69.06%, and adjusted cash efficiency ratio net of efficiency initiative charges of 65.42% for the second quarter of 2013
- Consolidated 33 branches during the second quarter of 2013
- Realigned Community Bank organization around core relationship strategy to drive profitability
Focused on capital management priorities
- Repurchased $112 million of common shares during the second quarter of 2013
- Increased common share dividend by 10% to $.055 per common share
"During the second quarter, the strength of our business model continued to drive results. Key made clear progress implementing growth initiatives, improving its cost structure and executing capital priorities," said Chairman and Chief Executive Officer Beth Mooney.
"Compared to the first quarter, cautious client behavior led to slower loan growth, higher levels of liquidity for Key and greater than anticipated pressure on our net interest margin. Despite the challenging economic backdrop, Key was able to produce slight increases in both loans and revenue and control expenses. Further, we stayed true to our commitment of disciplined capital management by repurchasing $112 million in common shares and increasing our dividend by 10%," continued Mooney.
Mooney added: "To maintain and enhance our growth, we also continued to invest in our businesses. We are in the process of acquiring a commercial mortgage servicing portfolio and special servicing business that will significantly enhance our scale and presence in the market. We also launched new mobile capabilities that add accessibility and functionality for both our consumer and commercial clients. Our efficiency initiative, which began in June 2012, remains on target to reach our goal of $200 million in annualized savings by the end of the year. Through the second quarter of 2013, we have achieved approximately $171 million of the targeted savings."
SECOND QUARTER 2013 FINANCIAL RESULTS
Compared with Second Quarter of 2012
- Total revenue increased $14 million
- Taxable-equivalent net interest income of $586 million, up $42 million, or 7.7%, which included $30 million associated with Key's third quarter 2012 branch and credit card portfolio acquisitions
- Noninterest income declined $28 million, or 6.1% primarily due to a gain on the early terminations of leveraged leases one year ago and a reduction in net gains (losses) from principal investing; noninterest income included $14 million associated with Key's acquisitions noted above
- Net interest margin of 3.13%, up 7 basis points
- Continued average loan growth driven by 13.9% increase in commercial, financial and agricultural loans
- Average deposits increased $4.6 billion, or 7.6%, which included $2 billion of deposits from Key's third quarter 2012 Western New York branch acquisition
- Noninterest expense up $18 million, which included $37 million associated with the efficiency initiative and $26 million associated with Key's acquisitions noted above
- Net loan charge-offs decreased 41.6% to .34% of average total loans
- Maintained solid capital position with Tier 1 common equity of 11.25%
Compared with First Quarter of 2013
- Total revenue relatively stable
- Taxable-equivalent net interest income down $3 million
- Noninterest income up $4 million
- Net interest margin down 11 basis points
- Average loans remained flat
- Average deposits increased $1.7 billion, or 2.7%, driven by growth in commercial balances
- Noninterest expense increased $30 million, which included a $22 million increase in costs associated with the efficiency initiative in the second quarter of 2013
- Net loan charge-offs decreased 8.2%
Selected Financial Highlights |
||||||||||||||||||||||||
dollars in millions, except per share data |
Change 2Q13 vs. |
|||||||||||||||||||||||
2Q13 |
1Q13 |
2Q12 |
1Q13 |
2Q12 |
||||||||||||||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
193 |
$ |
196 |
$ |
217 |
(1.5) |
% |
(11.1) |
% |
||||||||||||||
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution |
.21 |
.21 |
.23 |
— |
(8.7) |
|||||||||||||||||||
Return on average total assets from continuing operations |
.95 |
% |
.99 |
% |
1.10 |
% |
N/A |
N/A |
||||||||||||||||
Tier 1 common equity (a) |
11.25 |
11.40 |
11.63 |
N/A |
N/A |
|||||||||||||||||||
Book value at period end |
$ |
10.89 |
$ |
10.89 |
$ |
10.43 |
— |
4.4 |
% |
|||||||||||||||
Net interest margin (TE) from continuing operations |
3.13 |
% |
3.24 |
% |
3.06 |
% |
N/A |
N/A |
||||||||||||||||
(a) |
The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "Tier 1 common equity." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. |
|||||||||||||||||||||||
TE = Taxable Equivalent, N/A = Not Applicable |
||||||||||||||||||||||||
INCOME STATEMENT HIGHLIGHTS |
||||||||||||||||||||||||
Revenue |
||||||||||||||||||||||||
dollars in millions |
Change 2Q13 vs. |
|||||||||||||||||||||||
2Q13 |
1Q13 |
2Q12 |
1Q13 |
2Q12 |
||||||||||||||||||||
Net interest income (TE) |
$ |
586 |
$ |
589 |
$ |
544 |
(.5) |
% |
7.7 |
% |
||||||||||||||
Noninterest income |
429 |
425 |
457 |
.9 |
(6.1) |
|||||||||||||||||||
Total revenue |
$ |
1,015 |
$ |
1,014 |
$ |
1,001 |
.1 |
% |
1.4 |
% |
||||||||||||||
TE = Taxable Equivalent |
||||||||||||||||||||||||
Taxable-equivalent net interest income was $586 million for the second quarter of 2013, and the net interest margin was 3.13%. These results compare to taxable-equivalent net interest income of $544 million and a net interest margin of 3.06% for the second quarter of 2012. The increase in the net interest margin was primarily a result of a change in funding mix from the redemption of certain trust preferred securities, maturity of long-term debt, and maturity of higher-costing certificates of deposit over the past year.
Compared to the first quarter of 2013, taxable-equivalent net interest income decreased by $3 million, and the net interest margin declined by 11 basis points. The decrease in net interest income was primarily due to lower replacement yields on new loans and investments as compared to the yield on maturing loans and investments. This decline was partially offset by an increase in average earning asset balances and a higher day count in the second quarter. The decline in the net interest margin was largely attributable to a six basis point impact from lower loan yields and fees as well as a five basis point impact from higher levels of liquidity and securities. The net interest margin was also negatively impacted by approximately two basis points from the termination and maturity of $4.4 billion of interest rate swaps that were not replaced, as Key continues to increase its asset sensitivity to be better positioned for a rise in short-term interest rates.
Noninterest Income |
|||||||||||||||||
dollars in millions |
Change 2Q13 vs. |
||||||||||||||||
2Q13 |
1Q13 |
2Q12 |
1Q13 |
2Q12 |
|||||||||||||
Trust and investment services income |
$ |
100 |
$ |
95 |
$ |
90 |
5.3 |
% |
11.1 |
% |
|||||||
Investment banking and debt placement fees |
84 |
79 |
73 |
6.3 |
15.1 |
||||||||||||
Service charges on deposit accounts |
71 |
69 |
70 |
2.9 |
1.4 |
||||||||||||
Operating lease income and other leasing gains |
19 |
23 |
58 |
(17.4) |
(67.2) |
||||||||||||
Corporate services income |
43 |
45 |
44 |
(4.4) |
(2.3) |
||||||||||||
Cards and payments income |
42 |
37 |
31 |
13.5 |
35.5 |
||||||||||||
Corporate-owned life insurance income |
31 |
30 |
30 |
3.3 |
3.3 |
||||||||||||
Consumer mortgage income |
6 |
7 |
9 |
(14.3) |
(33.3) |
||||||||||||
Net gains (losses) from principal investing |
7 |
8 |
24 |
(12.5) |
(70.8) |
||||||||||||
Other income |
26 |
32 |
28 |
(18.8) |
(7.1) |
||||||||||||
Total noninterest income |
$ |
429 |
$ |
425 |
$ |
457 |
.9 |
% |
(6.1) |
% |
|||||||
Key's noninterest income was $429 million for the second quarter of 2013, compared to $457 million for the year-ago quarter. Operating lease income and other leasing gains decreased $39 million primarily due to a $31 million gain on the early terminations of leveraged leases one year ago, and net gains (losses) from principal investing decreased by $17 million. These decreases were partially offset by increases in investment banking and debt placement fees and cards and payments income of $11 million each, and trust and investment services income of $10 million.
Compared to the first quarter of 2013, noninterest income increased by $4 million. Trust and investment services income, investment banking and debt placement fees, and cards and payments income each increased $5 million. These increases in noninterest income were partially offset by declines in operating lease income and other leasing gains of $4 million and other income of $6 million.
Noninterest Expense |
|||||||||||||||||
dollars in millions |
Change 2Q13 vs. |
||||||||||||||||
2Q13 |
1Q13 |
2Q12 |
1Q13 |
2Q12 |
|||||||||||||
Personnel expense |
$ |
406 |
$ |
391 |
$ |
377 |
3.8 |
% |
7.7 |
% |
|||||||
Nonpersonnel expense |
305 |
290 |
316 |
5.2 |
(3.5) |
||||||||||||
Total noninterest expense |
$ |
711 |
$ |
681 |
$ |
693 |
4.4 |
% |
2.6 |
% |
|||||||
Key's noninterest expense was $711 million for the second quarter of 2013, compared to $693 million for the same period last year. Excluding the $37 million in expenses related to Key's efficiency initiative and the $26 million in incremental costs associated with acquisitions, noninterest expense was down $45 million compared to the prior year. Personnel expense increased $29 million due to an increase in severance expense primarily associated with Key's efficiency initiative and higher incentive compensation expense accruals. Nonpersonnel expense decreased $11 million from one year ago. Business services and professional fees declined $14 million, and marketing expense and other real estate owned (OREO) expense each decreased $6 million. These declines were partially offset by an increase in net occupancy of $10 million primarily due to charges related to the consolidation of 33 branches during the second quarter of 2013. Intangible asset amortization on credit cards and other intangible asset amortization associated with the third quarter 2012 acquisitions of the credit card portfolio and the branches in Western New York also increased $9 million in total.
Compared to the first quarter of 2013, noninterest expense increased by $30 million. Personnel expense increased $15 million as severance expense was $9 million higher; annual merit and incentive compensation also contributed to the increase. Nonpersonnel expense also increased $15 million from the first quarter of 2013. Net occupancy increased $8 million primarily due to charges related to the consolidation of 33 branches during the second quarter of 2013. Marketing expense also increased $5 million.
BALANCE SHEET HIGHLIGHTS
As of June 30, 2013, Key had total assets of $90.6 billion compared to $89.2 billion at March 31, 2013, and $86.5 billion at June 30, 2012.
Average Loans |
|||||||||||||||||
dollars in millions |
Change 6-30-13 vs. |
||||||||||||||||
6-30-13 |
3-31-13 |
6-30-12 |
3-31-13 |
6-30-12 |
|||||||||||||
Commercial, financial and agricultural (a) |
$ |
23,480 |
$ |
23,317 |
$ |
20,606 |
.7 |
% |
13.9 |
% |
|||||||
Other commercial loans |
13,290 |
13,493 |
14,055 |
(1.5) |
(5.4) |
||||||||||||
Total home equity loans |
10,381 |
10,200 |
9,852 |
1.8 |
5.4 |
||||||||||||
Other consumer loans |
5,545 |
5,616 |
4,933 |
(1.3) |
12.4 |
||||||||||||
Total loans |
$ |
52,696 |
$ |
52,626 |
$ |
49,446 |
.1 |
% |
6.6 |
% |
|||||||
(a) |
Commercial, financial and agricultural average balance for the three months ended June 30, 2013 and March 31, 2013 includes $96 million and $91 million, respectively, of assets from commercial credit cards. |
Average loans were $52.7 billion for the second quarter of 2013, an increase of $3.3 billion compared to the second quarter of 2012. Commercial, financial and agricultural loans grew by $2.9 billion over the year-ago quarter, with strong growth across Key's business segments. In addition, the third quarter 2012 credit card portfolio and Western New York branch acquisitions added $1 billion of mostly consumer loans. This growth was partially offset by declines in the commercial real estate portfolio, the equipment lease portfolio, which included the early termination of certain leveraged leases in the exit portfolio in 2012, and run-off of consumer loans in the designated exit portfolio.
Compared to the first quarter of 2013, average loans increased by $70 million. This average loan growth was attributable to an increase in commercial, financial and agricultural loans and home equity loans, which benefitted from Key's second quarter lending promotion. This growth in loans was partially offset by a decrease in commercial real estate, commercial lease financing, and other consumer loans.
Average Deposits |
|||||||||||||||||
dollars in millions |
Change 6-30-13 vs. |
||||||||||||||||
6-30-13 |
3-31-13 |
6-30-12 |
3-31-13 |
6-30-12 |
|||||||||||||
Non-time deposits (a) |
$ |
57,691 |
$ |
55,819 |
$ |
50,801 |
3.4 |
% |
13.6 |
% |
|||||||
Certificates of deposits ($100,000 or more) |
2,975 |
2,911 |
3,858 |
2.2 |
(22.9) |
||||||||||||
Other time deposits |
4,202 |
4,451 |
5,645 |
(5.6) |
(25.6) |
||||||||||||
Total deposits |
$ |
64,868 |
$ |
63,181 |
$ |
60,304 |
2.7 |
% |
7.6 |
% |
|||||||
Cost of total deposits (a) |
.26 |
% |
.29 |
% |
.47 |
% |
N/A |
N/A |
|||||||||
(a) Excludes deposits in foreign office. |
|||||||||||||||||
N/A = Not Applicable |
|||||||||||||||||
Average deposits, excluding deposits in foreign office, totaled $64.9 billion for the second quarter of 2013, an increase of $4.6 billion compared to the year-ago quarter. The growth reflects an increase in demand deposits of $2.7 billion and interest-bearing non-time deposits of $4.2 billion (including the impact of Key's third quarter 2012 Western New York branch acquisition, which added $2 billion of mostly interest-bearing non-time deposits). This deposit growth was partially offset by $2.3 billion of run-off from one year ago in certificates of deposit and other time deposits.
Compared to the first quarter of 2013, average deposits, excluding deposits in foreign office, increased by $1.7 billion. This deposit growth was primarily due to an increase in business demand and interest-bearing commercial deposits, reflecting deposits made by some of Key's larger clients.
ASSET QUALITY |
||||||||||||||||
dollars in millions |
Change 2Q13 vs. |
|||||||||||||||
2Q13 |
1Q13 |
2Q12 |
1Q13 |
2Q12 |
||||||||||||
Net loan charge-offs |
$ |
45 |
$ |
49 |
$ |
77 |
(8.2) |
% |
(41.6) |
% |
||||||
Net loan charge-offs to average total loans |
.34 |
% |
.38 |
% |
.63 |
% |
N/A |
N/A |
||||||||
Nonperforming loans at period end (a) |
$ |
652 |
$ |
650 |
$ |
657 |
.3 |
(.8) |
||||||||
Nonperforming assets at period end |
693 |
705 |
751 |
(1.7) |
(7.7) |
|||||||||||
Allowance for loan and lease losses |
876 |
893 |
888 |
(1.9) |
(1.4) |
|||||||||||
Allowance for loan and lease losses to nonperforming loans |
134.36 |
% |
137.38 |
% |
135.16 |
% |
N/A |
N/A |
||||||||
Provision (credit) for loan and lease losses |
$ |
28 |
$ |
55 |
$ |
21 |
(49.1) |
% |
33.3 |
% |
||||||
(a) June 30, 2013 and March 31, 2013 amounts exclude $19 million and $22 million, respectively, of purchased credit impaired loans acquired in July 2012. |
||||||||||||||||
N/A = Not Applicable |
||||||||||||||||
Key's provision for loan and lease losses was $28 million for the second quarter of 2013, compared to $55 million for the first quarter of 2013 and $21 million for the year-ago quarter. The decline in the provision for loan and lease losses from the prior quarter reflects Key's current asset quality measures and the quality of its new loan originations.
Key's allowance for loan and lease losses was $876 million, or 1.65% of total period-end loans at June 30, 2013, compared to 1.70% at March 31, 2013, and 1.79% at June 30, 2012.
Net loan charge-offs for the second quarter of 2013 totaled $45 million, or .34% of average total loans. These results compare to $49 million, or .38% for the first quarter of 2013, and $77 million, or .63% for the same period last year.
At June 30, 2013, Key's nonperforming loans totaled $652 million and represented 1.23% of period-end portfolio loans, compared to 1.24% at March 31, 2013 and 1.32% at June 30, 2012. Nonperforming assets at June 30, 2013, totaled $693 million and represented 1.30% of period-end portfolio loans and OREO and other nonperforming assets, compared to 1.34% at March 31, 2013, and 1.51% at June 30, 2012.
CAPITAL
Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at June 30, 2013.
Capital Ratios |
|||||||||
6-30-13 |
3-31-13 |
6-30-12 |
|||||||
Tier 1 common equity (a), (b) |
11.25 |
% |
11.40 |
% |
11.63 |
% |
|||
Tier 1 risk-based capital (a) |
12.01 |
12.19 |
12.45 |
||||||
Total risk based capital (a) |
14.75 |
15.02 |
15.83 |
||||||
Tangible common equity to tangible assets (b) |
9.96 |
10.24 |
10.44 |
||||||
Leverage (a) |
11.21 |
11.36 |
11.35 |
||||||
(a) |
6-30-13 ratio is estimated. |
(b) |
The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "tangible common equity" and "Tier 1 common equity." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. |
As shown in the preceding table, at June 30, 2013, Key's estimated Tier 1 common equity and Tier 1 risk-based capital ratios stood at 11.25% and 12.01%, respectively. In addition, the tangible common equity ratio was 9.96% at June 30, 2013.
On July 2, 2013 and July 9, 2013, the Federal Reserve and the OCC, respectively, approved a final rule that will implement the Basel III regulatory capital reforms and certain changes required by the Dodd-Frank Act. Consistent with the proposed rule published in August 2012, the final rule increases minimum requirements for both the quantity and quality of capital held by banking organizations and emphasizes Tier 1 common equity. While the final rule becomes effective in January 2014, the mandatory compliance date for Key begins in January 2015 and is subject to transitional provisions extending to January 2019. Key's estimated Tier 1 common equity as calculated under this final rule was 10.81% at June 30, 2013. This exceeds the fully phased-in required minimum Tier 1 common equity (including capital conservation buffer) of 7.00%.
Summary of Changes in Common Shares Outstanding |
|||||||||||||||||
in thousands |
Change 2Q13 vs. |
||||||||||||||||
2Q13 |
1Q13 |
2Q12 |
1Q13 |
2Q12 |
|||||||||||||
Shares outstanding at beginning of period |
922,581 |
925,769 |
956,102 |
(.3) |
% |
(3.5) |
% |
||||||||||
Common shares repurchased |
(10,786) |
(6,790) |
(10,468) |
58.9 |
3.0 |
||||||||||||
Shares reissued (returned) under employee benefit plans |
1,088 |
3,602 |
(161) |
(69.8) |
N/M |
||||||||||||
Shares outstanding at end of period |
912,883 |
922,581 |
945,473 |
(1.1) |
% |
(3.4) |
% |
||||||||||
N/M = Not Meaningful |
|||||||||||||||||
As previously reported and as authorized by Key's Board of Directors and pursuant to Key's 2013 capital plan submitted to and not objected to by the Federal Reserve, Key has authority to repurchase up to $426 million of its common shares. Common share repurchases under the 2013 capital plan authorization are expected to be executed through the first quarter of 2014.
The after-tax gain on the previously announced Victory divestiture is now expected to be lower than originally projected and in the range of $100 million to $115 million. The cash portion of this gain will be between $75 million and $90 million, and Key has received no objection from the Federal Reserve to use these cash proceeds for common share repurchases.
During the second quarter of 2013, Key completed $112 million of common share repurchases on the open market under Key's share repurchase program.
LINE OF BUSINESS RESULTS
The following table shows the contribution made by each major business segment to Key's taxable-equivalent revenue from continuing operations and income (loss) from continuing operations attributable to Key for the periods presented. For more detailed financial information pertaining to each business segment, see the tables at the end of this release.
Major Business Segments |
|||||||||||||||||
dollars in millions |
Change 2Q13 vs. |
||||||||||||||||
2Q13 |
1Q13 |
2Q12 |
1Q13 |
2Q12 |
|||||||||||||
Revenue from continuing operations (TE) |
|||||||||||||||||
Key Community Bank |
$ |
555 |
$ |
549 |
$ |
537 |
1.1 |
% |
3.4 |
% |
|||||||
Key Corporate Bank |
376 |
379 |
371 |
(.8) |
1.3 |
||||||||||||
Other Segments |
86 |
83 |
94 |
3.6 |
(8.5) |
||||||||||||
Total segments |
1,017 |
1,011 |
1,002 |
.6 |
1.5 |
||||||||||||
Reconciling items |
(2) |
3 |
(1) |
N/M |
N/M |
||||||||||||
Total |
$ |
1,015 |
$ |
1,014 |
$ |
1,001 |
.1 |
% |
1.4 |
% |
|||||||
Income (loss) from continuing operations attributable to Key |
|||||||||||||||||
Key Community Bank |
$ |
36 |
$ |
31 |
$ |
54 |
16.1 |
% |
(33.3) |
% |
|||||||
Key Corporate Bank |
117 |
105 |
95 |
11.4 |
23.2 |
||||||||||||
Other Segments |
70 |
68 |
49 |
2.9 |
42.9 |
||||||||||||
Total segments |
223 |
204 |
198 |
9.3 |
12.6 |
||||||||||||
Reconciling items |
(24) |
(3) |
24 |
N/M |
N/M |
||||||||||||
Total |
$ |
199 |
$ |
201 |
$ |
222 |
(1.0) |
% |
(10.4) |
% |
|||||||
TE = Taxable equivalent, N/M = Not Meaningful |
|||||||||||||||||
Key Community Bank |
|||||||||||||||||
dollars in millions |
Change 2Q13 vs. |
||||||||||||||||
2Q13 |
1Q13 |
2Q12 |
1Q13 |
2Q12 |
|||||||||||||
Summary of operations |
|||||||||||||||||
Net interest income (TE) |
$ |
357 |
$ |
361 |
$ |
356 |
(1.1) |
% |
.3 |
% |
|||||||
Noninterest income |
198 |
188 |
181 |
5.3 |
9.4 |
||||||||||||
Total revenue (TE) |
555 |
549 |
537 |
1.1 |
3.4 |
||||||||||||
Provision (credit) for loan and lease losses |
41 |
59 |
(4) |
(30.5) |
N/M |
||||||||||||
Noninterest expense |
456 |
440 |
455 |
3.6 |
.2 |
||||||||||||
Income (loss) before income taxes (TE) |
58 |
50 |
86 |
16.0 |
(32.6) |
||||||||||||
Allocated income taxes (benefit) and TE adjustments |
22 |
19 |
32 |
15.8 |
(31.3) |
||||||||||||
Net income (loss) attributable to Key |
$ |
36 |
$ |
31 |
$ |
54 |
16.1 |
% |
(33.3) |
% |
|||||||
Average balances |
|||||||||||||||||
Loans and leases |
$ |
29,161 |
$ |
28,977 |
$ |
26,413 |
.6 |
% |
10.4 |
% |
|||||||
Total assets |
31,570 |
31,473 |
28,695 |
.3 |
10.0 |
||||||||||||
Deposits |
49,473 |
49,349 |
47,946 |
.3 |
3.2 |
||||||||||||
Assets under management at period end |
$ |
23,213 |
$ |
23,867 |
$ |
21,116 |
(2.7) |
% |
9.9 |
% |
|||||||
TE = Taxable Equivalent, N/M = Not Meaningful |
|||||||||||||||||
Additional Key Community Bank Data |
|||||||||||||||||
dollars in millions |
Change 2Q13 vs. |
||||||||||||||||
2Q13 |
1Q13 |
2Q12 |
1Q13 |
2Q12 |
|||||||||||||
Noninterest income |
|||||||||||||||||
Trust and investment services income |
$ |
67 |
$ |
65 |
$ |
60 |
3.1 |
% |
11.7 |
% |
|||||||
Service charges on deposit accounts |
60 |
58 |
59 |
3.4 |
1.7 |
||||||||||||
Cards and payments income |
37 |
33 |
26 |
12.1 |
42.3 |
||||||||||||
Other noninterest income |
34 |
32 |
36 |
6.3 |
(5.6) |
||||||||||||
Total noninterest income |
$ |
198 |
$ |
188 |
$ |
181 |
5.3 |
% |
9.4 |
% |
|||||||
Average deposit balances |
|||||||||||||||||
NOW and money market deposit accounts |
$ |
26,341 |
$ |
26,109 |
$ |
23,824 |
.9 |
% |
10.6 |
% |
|||||||
Savings deposits |
2,536 |
2,463 |
2,074 |
3.0 |
22.3 |
||||||||||||
Certificates of deposit ($100,000 or more) |
2,443 |
2,498 |
3,269 |
(2.2) |
(25.3) |
||||||||||||
Other time deposits |
4,195 |
4,445 |
5,629 |
(5.6) |
(25.5) |
||||||||||||
Deposits in foreign office |
284 |
270 |
270 |
5.2 |
5.2 |
||||||||||||
Noninterest-bearing deposits |
13,674 |
13,564 |
12,880 |
.8 |
6.2 |
||||||||||||
Total deposits |
$ |
49,473 |
$ |
49,349 |
$ |
47,946 |
.3 |
% |
3.2 |
% |
|||||||
Home equity loans |
|||||||||||||||||
Average balance |
$ |
9,992 |
$ |
9,787 |
$ |
9,359 |
|||||||||||
Weighted-average loan-to-value ratio (at date of origination) |
71 |
% |
70 |
% |
71 |
% |
|||||||||||
Percent first lien positions |
57 |
55 |
54 |
||||||||||||||
Other data |
|||||||||||||||||
Branches |
1,052 |
1,084 |
1,062 |
||||||||||||||
Automated teller machines |
1,359 |
1,482 |
1,576 |
||||||||||||||
Key Community Bank Summary of Operations
- Realigned Community Bank structure and organization and closed 33 branches, resulting in expenses of $11 million in the second quarter of 2013
- Continued credit card penetration and successful integration of branches in Western New York
- Eight consecutive quarters of average loan growth
- Core deposits up $3.8 billion, or 9.7% from the prior year
Key Community Bank recorded net income attributable to Key of $36 million for the second quarter of 2013, compared to $54 million for the year-ago quarter.
Taxable-equivalent net interest income increased by $1 million, or .3% from the second quarter of 2012. Average loans and leases grew 10.4% while average deposits increased 3.2% from one year ago. The Western New York branch and credit card portfolio acquisitions contributed $30 million to net interest income, $1 billion to average loans and leases, and $2 billion to deposits. The positive contribution to net interest income from the acquisitions was partially offset by a lower earnings credit applied to deposits in the current period compared to the same period one year ago as a result of the continued low-rate environment.
Noninterest income increased by $17 million, or 9.4% from the year-ago quarter. Cards and payments income increased $11 million as a result of the third quarter 2012 credit card portfolio acquisition. Trust and investment services income increased $7 million, primarily due to an increase in assets under management resulting from strong market performance and increased production.
The provision for loan and lease losses was a charge of $41 million compared to a credit of $4 million for the second quarter of 2012. Net loan charge-offs, including the 2012 credit card portfolio acquisition, decreased $4 million from the same period one year ago.
Noninterest expense increased by $1 million, or .2% from the year-ago quarter. Expense reductions resulting from Key's efficiency initiative substantially offset the increase in expenses associated with Key's third quarter 2012 Western New York branch and credit card portfolio acquisitions.
Key Corporate Bank |
|||||||||||||||||
dollars in millions |
Change 2Q13 vs. |
||||||||||||||||
2Q13 |
1Q13 |
2Q12 |
1Q13 |
2Q12 |
|||||||||||||
Summary of operations |
|||||||||||||||||
Net interest income (TE) |
$ |
189 |
$ |
187 |
$ |
190 |
1.1 |
% |
(.5) |
% |
|||||||
Noninterest income |
187 |
192 |
181 |
(2.6) |
3.3 |
||||||||||||
Total revenue (TE) |
376 |
379 |
371 |
(.8) |
1.3 |
||||||||||||
Provision (credit) for loan and lease losses |
(10) |
4 |
4 |
N/M |
N/M |
||||||||||||
Noninterest expense |
202 |
210 |
213 |
(3.8) |
(5.2) |
||||||||||||
Income (loss) before income taxes (TE) |
184 |
165 |
154 |
11.5 |
19.5 |
||||||||||||
Allocated income taxes and TE adjustments |
67 |
60 |
56 |
11.7 |
19.6 |
||||||||||||
Net income (loss) |
117 |
105 |
98 |
11.4 |
19.4 |
||||||||||||
Less: Net income (loss) attributable to noncontrolling interests |
— |
— |
3 |
N/M |
N/M |
||||||||||||
Net income (loss) attributable to Key |
$ |
117 |
$ |
105 |
$ |
95 |
11.4 |
% |
23.2 |
% |
|||||||
Average balances |
|||||||||||||||||
Loans and leases |
$ |
20,133 |
$ |
20,044 |
$ |
18,541 |
.4 |
% |
8.6 |
% |
|||||||
Loans held for sale |
466 |
409 |
514 |
13.9 |
(9.3) |
||||||||||||
Total assets |
23,965 |
23,864 |
22,709 |
.4 |
5.5 |
||||||||||||
Deposits |
15,606 |
13,968 |
12,414 |
11.7 |
25.7 |
||||||||||||
Assets under management at period end |
$ |
12,331 |
$ |
11,847 |
$ |
14,032 |
4.1 |
% |
(12.1) |
% |
|||||||
TE = Taxable Equivalent, N/M = Not Meaningful |
|||||||||||||||||
Additional Key Corporate Bank Data |
|||||||||||||||||
dollars in millions |
Change 2Q13 vs. |
||||||||||||||||
2Q13 |
1Q13 |
2Q12 |
1Q13 |
2Q12 |
|||||||||||||
Noninterest income |
|||||||||||||||||
Trust and investment services income |
$ |
33 |
$ |
31 |
$ |
31 |
6.5 |
% |
6.5 |
% |
|||||||
Investment banking and debt placement fees |
82 |
78 |
69 |
5.1 |
18.8 |
||||||||||||
Operating lease income and other leasing gains |
13 |
17 |
21 |
(23.5) |
(38.1) |
||||||||||||
Corporate services income |
32 |
30 |
34 |
6.7 |
(5.9) |
||||||||||||
Service charges on deposit accounts |
11 |
11 |
11 |
— |
— |
||||||||||||
Cards and payments income |
5 |
4 |
5 |
25.0 |
— |
||||||||||||
Payments and services income |
48 |
45 |
50 |
6.7 |
(4.0) |
||||||||||||
Other noninterest income |
11 |
21 |
10 |
(47.6) |
10.0 |
||||||||||||
Total noninterest income |
$ |
187 |
$ |
192 |
$ |
181 |
(2.6) |
% |
3.3 |
% |
|||||||
Key Corporate Bank Summary of Operations
- Investment banking and debt placement fees were up $13 million, or 18.8% from the prior year
- Average loan balances up 8.6% from the prior year
- Average deposits up 25.7% from the prior year
Key Corporate Bank recorded net income attributable to Key of $117 million for the second quarter of 2013, compared to $95 million for the same period one year ago.
Taxable-equivalent net interest income decreased by $1 million, or .5% compared to the second quarter of 2012. Average earning assets increased $1.5 billion, or 7.2% from the year-ago quarter, driving a $2 million increase in earning asset spread. Average deposit balances increased $3.2 billion, or 25.7% from the year-ago quarter, driven by the continued execution of health care strategies and increase in public sector deposits. However, these increases in balances were offset by declines in the deposit spread as a result of the continued low-rate environment.
Noninterest income increased by $6 million, or 3.3% from the second quarter of 2012. Investment banking and debt placement fees increased $13 million, partially offset by a decrease in operating lease income and other leasing gains of $8 million compared to the year-ago quarter.
The provision for loan and lease losses was a credit of $10 million compared to a charge of $4 million for the second quarter of 2012. There were net loan recoveries of $6 million for the second quarter of 2013 compared to net loan charge-offs of $9 million for the same period one year ago.
Noninterest expense decreased by $11 million, or 5.2% from the second quarter of 2012. This decline was driven by decreases in professional fees, operating lease expense, and the provision (credit) for losses on lending-related commitments compared to the second quarter of 2012.
Other Segments
Other Segments consist of Corporate Treasury, Community Development, Key's Principal Investing unit, and various exit portfolios. Other Segments generated net income attributable to Key of $70 million for the second quarter of 2013, compared to net income attributable to Key of $49 million for the same period last year. These results were primarily attributable to an increase in net interest income of $44 million and a decrease in the provision for loan and lease losses of $25 million. These improvements were partially offset by a decline in noninterest income of $52 million primarily due to decreases in operating lease income and other leasing gains of $32 million and net gains (losses) from principal investing of $17 million.
*****
KeyCorp was organized more than 160 years ago and is headquartered in Cleveland, Ohio. One of the nation's largest bank-based financial services companies, Key had assets of approximately $90.6 billion at June 30, 2013.
Key provides deposit, lending, cash management and investment services to individuals and small and mid-sized businesses in 14 states under the name KeyBank National Association. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC.
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Key's financial condition, results of operations, and profitability. Forward-looking statements can be identified by words such as "expect," "believe," and "anticipate," and other similar references to future periods. Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events, many of which, by their nature, are inherently uncertain and outside of Key's control. Key's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Factors that could cause Key's actual results to differ materially from those described in the forward-looking statements can be found in KeyCorp's Form 10-K for the year ended December 31, 2012, and its Quarterly Report on Form 10-Q for the period ended March 31, 2013, each of which has been filed with the Securities and Exchange Commission and is available on Key's website (www.key.com/ir) and on the Securities and Exchange Commission's website (www.sec.gov). These factors may include, among others: continued strain on the global financial markets as a result of economic slowdowns and concerns; current regulatory initiatives in the U.S., including the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended, subjecting us to a variety of new and more stringent legal and regulatory requirements and increased scrutiny from our regulators; adverse behaviors in securities, public debt, and capital markets, including changes in market liquidity and volatility; and our ability to timely and effectively implement our strategic initiatives. Forward-looking statements are not guarantees of future performance and should not be relied upon as representing management's views as of any subsequent date. Key does not undertake any obligation to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements. |
Notes to Editors:
A live Internet broadcast of KeyCorp's conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on Thursday, July 18, 2013. An audio replay of the call will be available through July 25, 2013.
For up-to-date company information, media contacts, and facts and figures about Key's lines of business, visit our Media Newsroom at https://www.key.com/newsroom.
*****
Financial Highlights |
|||||||||||||
(dollars in millions, except per share amounts) |
|||||||||||||
Three months ended |
|||||||||||||
6-30-13 |
3-31-13 |
6-30-12 |
|||||||||||
Summary of operations |
|||||||||||||
Net interest income (TE) |
$ |
586 |
$ |
589 |
$ |
544 |
|||||||
Noninterest income |
429 |
425 |
457 |
||||||||||
Total revenue (TE) |
1,015 |
1,014 |
1,001 |
||||||||||
Provision (credit) for loan and lease losses |
28 |
55 |
21 |
||||||||||
Noninterest expense |
711 |
681 |
693 |
||||||||||
Income (loss) from continuing operations attributable to Key |
199 |
201 |
222 |
||||||||||
Income (loss) from discontinued operations, net of taxes (a) |
5 |
3 |
14 |
||||||||||
Net income (loss) attributable to Key |
204 |
204 |
236 |
||||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
193 |
$ |
196 |
$ |
217 |
|||||||
Income (loss) from discontinued operations, net of taxes (a) |
5 |
3 |
14 |
||||||||||
Net income (loss) attributable to Key common shareholders |
198 |
199 |
231 |
||||||||||
Per common share |
|||||||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
.21 |
$ |
.21 |
$ |
.23 |
|||||||
Income (loss) from discontinued operations, net of taxes (a) |
.01 |
— |
.01 |
||||||||||
Net income (loss) attributable to Key common shareholders (b) |
.22 |
.22 |
.24 |
||||||||||
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution |
.21 |
.21 |
.23 |
||||||||||
Income (loss) from discontinued operations, net of taxes — assuming dilution (a) |
.01 |
— |
.01 |
||||||||||
Net income (loss) attributable to Key common shareholders — assuming dilution (b) |
.22 |
.21 |
.24 |
||||||||||
Cash dividends paid |
.055 |
.05 |
.05 |
||||||||||
Book value at period end |
10.89 |
10.89 |
10.43 |
||||||||||
Tangible book value at period end |
9.77 |
9.78 |
9.45 |
||||||||||
Market price at period end |
11.04 |
9.96 |
7.74 |
||||||||||
Performance ratios |
|||||||||||||
From continuing operations: |
|||||||||||||
Return on average total assets |
.95 |
% |
.99 |
% |
1.10 |
% |
|||||||
Return on average common equity |
7.72 |
7.96 |
8.90 |
||||||||||
Return on average tangible common equity (c) |
8.60 |
8.87 |
9.83 |
||||||||||
Net interest margin (TE) |
3.13 |
3.24 |
3.06 |
||||||||||
Cash efficiency ratio (c) |
69.06 |
65.98 |
69.13 |
||||||||||
From consolidated operations: |
|||||||||||||
Return on average total assets |
.92 |
% |
.94 |
% |
1.10 |
% |
|||||||
Return on average common equity |
7.92 |
8.08 |
9.47 |
||||||||||
Return on average tangible common equity (c) |
8.82 |
9.01 |
10.46 |
||||||||||
Net interest margin (TE) |
3.07 |
3.16 |
2.99 |
||||||||||
Loan to deposit (d) |
83.63 |
86.95 |
86.38 |
||||||||||
Capital ratios at period end |
|||||||||||||
Key shareholders' equity to assets |
11.29 |
% |
11.59 |
% |
11.74 |
% |
|||||||
Key common shareholders' equity to assets |
10.96 |
11.27 |
11.40 |
||||||||||
Tangible common equity to tangible assets (c) |
9.96 |
10.24 |
10.44 |
||||||||||
Tier 1 common equity (c), (e) |
11.25 |
11.40 |
11.63 |
||||||||||
Tier 1 risk-based capital (e) |
12.01 |
12.19 |
12.45 |
||||||||||
Total risk-based capital (e) |
14.75 |
15.02 |
15.83 |
||||||||||
Leverage (e) |
11.21 |
11.36 |
11.35 |
||||||||||
Asset quality — from continuing operations |
|||||||||||||
Net loan charge-offs |
$ |
45 |
$ |
49 |
$ |
77 |
|||||||
Net loan charge-offs to average loans |
.34 |
% |
.38 |
% |
.63 |
% |
|||||||
Allowance for loan and lease losses to annualized net loan charge-offs |
485.33 |
449.37 |
286.74 |
||||||||||
Allowance for loan and lease losses |
$ |
876 |
$ |
893 |
$ |
888 |
|||||||
Allowance for credit losses |
913 |
925 |
939 |
||||||||||
Allowance for loan and lease losses to period-end loans |
1.65 |
% |
1.70 |
% |
1.79 |
% |
|||||||
Allowance for credit losses to period-end loans |
1.72 |
1.76 |
1.89 |
||||||||||
Allowance for loan and lease losses to nonperforming loans |
134.36 |
137.38 |
135.16 |
||||||||||
Allowance for credit losses to nonperforming loans |
140.03 |
142.31 |
142.92 |
||||||||||
Nonperforming loans at period end (f) |
$ |
652 |
$ |
650 |
$ |
657 |
|||||||
Nonperforming assets at period end |
693 |
705 |
751 |
||||||||||
Nonperforming loans to period-end portfolio loans |
1.23 |
% |
1.24 |
% |
1.32 |
% |
|||||||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets |
1.30 |
1.34 |
1.51 |
||||||||||
Trust and brokerage assets |
|||||||||||||
Assets under management |
$ |
35,544 |
$ |
35,714 |
$ |
35,148 |
|||||||
Nonmanaged and brokerage assets |
37,759 |
37,115 |
33,803 |
||||||||||
Other data |
|||||||||||||
Average full-time equivalent employees |
14,999 |
15,396 |
15,455 |
||||||||||
Branches |
1,052 |
1,084 |
1,062 |
||||||||||
Taxable-equivalent adjustment |
$ |
5 |
$ |
6 |
$ |
6 |
Financial Highlights (continued) |
|||||||||
(dollars in millions, except per share amounts) |
|||||||||
Six months ended |
|||||||||
6-30-13 |
6-30-12 |
||||||||
Summary of operations |
|||||||||
Net interest income (TE) |
$ |
1,175 |
$ |
1,103 |
|||||
Noninterest income |
854 |
899 |
|||||||
Total revenue (TE) |
2,029 |
2,002 |
|||||||
Provision (credit) for loan and lease losses |
83 |
63 |
|||||||
Noninterest expense |
1,392 |
1,372 |
|||||||
Income (loss) from continuing operations attributable to Key |
400 |
423 |
|||||||
Income (loss) from discontinued operations, net of taxes (a) |
8 |
13 |
|||||||
Net income (loss) attributable to Key |
408 |
436 |
|||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
389 |
$ |
412 |
|||||
Income (loss) from discontinued operations, net of taxes (a) |
8 |
13 |
|||||||
Net income (loss) attributable to Key common shareholders |
397 |
425 |
|||||||
Per common share |
|||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
.42 |
$ |
.44 |
|||||
Income (loss) from discontinued operations, net of taxes (a) |
.01 |
.01 |
|||||||
Net income (loss) attributable to Key common shareholders (b) |
.43 |
.45 |
|||||||
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution |
.42 |
.43 |
|||||||
Income (loss) from discontinued operations, net of taxes — assuming dilution (a) |
.01 |
.01 |
|||||||
Net income (loss) attributable to Key common shareholders — assuming dilution (b) |
.43 |
.45 |
|||||||
Cash dividends paid |
.105 |
.08 |
|||||||
Performance ratios |
|||||||||
From continuing operations: |
|||||||||
Return on average total assets |
.97 |
% |
1.05 |
% |
|||||
Return on average common equity |
7.84 |
8.49 |
|||||||
Return on average tangible common equity (c) |
8.73 |
9.39 |
|||||||
Net interest margin (TE) |
3.18 |
3.11 |
|||||||
Cash efficiency ratio (c) |
67.52 |
68.43 |
|||||||
From consolidated operations: |
|||||||||
Return on average total assets |
.93 |
% |
1.01 |
% |
|||||
Return on average common equity |
8.00 |
8.76 |
|||||||
Return on average tangible common equity (c) |
8.91 |
9.69 |
|||||||
Net interest margin (TE) |
3.12 |
3.03 |
|||||||
Asset quality — from continuing operations |
|||||||||
Net loan charge-offs |
$ |
94 |
$ |
178 |
|||||
Net loan charge-offs to average total loans |
.36 |
% |
.72 |
% |
|||||
Other data |
|||||||||
Average full-time equivalent employees |
15,197 |
15,430 |
|||||||
Taxable-equivalent adjustment |
$ |
11 |
$ |
12 |
(a) |
In April 2009, management decided to wind down the operations of Austin Capital Management, Ltd., a subsidiary that specialized in managing hedge fund investments for institutional customers. In September 2009, management decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank National Association. In February 2013, Key decided to sell its investment subsidiary, Victory Capital Management, and its broker-dealer affiliate, Victory Capital Advisors, to a private equity fund. As a result of these decisions, Key has accounted for these businesses as discontinued operations. |
(b) |
Earnings per share may not foot due to rounding. |
(c) |
The following table entitled "GAAP to Non-GAAP Reconciliations" presents the computations of certain financial measures related to "tangible common equity," "Tier 1 common equity," and "cash efficiency." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. |
(d) |
Represents period-end consolidated total loans and loans held for sale (excluding education loans in the securitization trusts) divided by period-end consolidated total deposits (excluding deposits in foreign office). |
(e) |
6-30-13 ratio is estimated. |
(f) |
June 30, 2013 and March 31, 2013 amounts exclude $19 million and $22 million, respectively, of purchased credit impaired loans acquired in July 2012. |
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles |
GAAP to Non-GAAP Reconciliations |
|||||||||||||
(dollars in millions) |
|||||||||||||
The table below presents certain non-GAAP financial measures related to "tangible common equity," "return on tangible common equity," "Tier 1 common equity," "pre-provision net revenue," "cash efficiency ratio," and "adjusted cash efficiency ratio." |
|||||||||||||
The tangible common equity ratio and the return on tangible common equity ratio have been a focus for some investors, and management believes these ratios may assist investors in analyzing Key's capital position without regard to the effects of intangible assets and preferred stock. Traditionally, the banking regulators have assessed bank and bank holding company capital adequacy based on both the amount and the composition of capital, the calculation of which is prescribed in federal banking regulations. Since the commencement of the Comprehensive Capital Analysis and Review process in early 2009, the Federal Reserve has focused its assessment of capital adequacy on a component of Tier 1 risk-based capital known as Tier 1 common equity, a non-GAAP financial measure. Because the Federal Reserve has long indicated that voting common shareholders' equity (essentially Tier 1 risk-based capital less preferred stock, qualifying capital securities and noncontrolling interests in subsidiaries) generally should be the dominant element in Tier 1 risk-based capital, this focus on Tier 1 common equity is consistent with existing capital adequacy categories. |
|||||||||||||
Tier 1 common equity is neither formally defined by GAAP nor prescribed in amount by federal banking regulations; this measure is considered to be a non-GAAP financial measure. Since analysts and banking regulators may assess Key's capital adequacy using tangible common equity and Tier 1 common equity, management believes it is useful to enable investors to assess Key's capital adequacy on these same bases. The table also reconciles the GAAP performance measures to the corresponding non-GAAP measures. |
|||||||||||||
The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of the provision for loan and lease losses makes it easier to analyze the results by presenting them on a more comparable basis. |
|||||||||||||
The cash efficiency ratio and the adjusted cash efficiency ratio are ratios of two non-GAAP performance measures. As such, there are no directly comparable GAAP performance measures. The cash efficiency ratio performance measure removes the impact of Key's intangible asset amortization from the calculation. The adjusted cash efficiency ratio further removes the impact of the efficiency initiative charges. Management believes these ratios provide greater consistency and comparability between Key's results and those of its peer banks. Additionally, these ratios are used by analysts and investors as they develop earnings forecasts and peer bank analysis. |
|||||||||||||
Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP. |
|||||||||||||
Three months ended |
|||||||||||||
6-30-13 |
3-31-13 |
6-30-12 |
|||||||||||
Tangible common equity to tangible assets at period end |
|||||||||||||
Key shareholders' equity (GAAP) |
$ |
10,229 |
$ |
10,340 |
$ |
10,155 |
|||||||
Less: |
Intangible assets (a) |
1,021 |
1,024 |
932 |
|||||||||
Preferred Stock, Series A (d) |
282 |
291 |
291 |
||||||||||
Tangible common equity (non-GAAP) |
$ |
8,926 |
$ |
9,025 |
$ |
8,932 |
|||||||
Total assets (GAAP) |
$ |
90,639 |
$ |
89,198 |
$ |
86,523 |
|||||||
Less: |
Intangible assets (a) |
1,021 |
1,024 |
932 |
|||||||||
Tangible assets (non-GAAP) |
$ |
89,618 |
$ |
88,174 |
$ |
85,591 |
|||||||
Tangible common equity to tangible assets ratio (non-GAAP) |
9.96 |
% |
10.24 |
% |
10.44 |
% |
|||||||
Tier 1 common equity at period end |
|||||||||||||
Key shareholders' equity (GAAP) |
$ |
10,229 |
$ |
10,340 |
$ |
10,155 |
|||||||
Qualifying capital securities |
339 |
339 |
339 |
||||||||||
Less: |
Goodwill |
979 |
979 |
917 |
|||||||||
Accumulated other comprehensive income (loss) (b) |
(359) |
(204) |
(109) |
||||||||||
Other assets (c) |
102 |
106 |
71 |
||||||||||
Total Tier 1 capital (regulatory) |
9,846 |
9,798 |
9,615 |
||||||||||
Less: |
Qualifying capital securities |
339 |
339 |
339 |
|||||||||
Preferred Stock, Series A (d) |
282 |
291 |
291 |
||||||||||
Total Tier 1 common equity (non-GAAP) |
$ |
9,225 |
$ |
9,168 |
$ |
8,985 |
|||||||
Net risk-weighted assets (regulatory) (c), (e) |
$ |
81,964 |
$ |
80,400 |
$ |
77,236 |
|||||||
Tier 1 common equity ratio (non-GAAP) (e) |
11.25 |
% |
11.40 |
% |
11.63 |
% |
|||||||
Pre-provision net revenue |
|||||||||||||
Net interest income (GAAP) |
$ |
581 |
$ |
583 |
$ |
538 |
|||||||
Plus: |
Taxable-equivalent adjustment |
5 |
6 |
6 |
|||||||||
Noninterest income (GAAP) |
429 |
425 |
457 |
||||||||||
Less: |
Noninterest expense (GAAP) |
711 |
681 |
693 |
|||||||||
Pre-provision net revenue from continuing operations (non-GAAP) |
$ |
304 |
$ |
333 |
$ |
308 |
GAAP to Non-GAAP Reconciliations (continued) |
|||||||||||||
(dollars in millions) |
|||||||||||||
Three months ended |
|||||||||||||
6-30-13 |
3-31-13 |
6-30-12 |
|||||||||||
Average tangible common equity |
|||||||||||||
Average Key shareholders' equity (GAAP) |
$ |
10,314 |
$ |
10,279 |
$ |
10,100 |
|||||||
Less: |
Intangible assets (average) (f) |
1,023 |
1,027 |
931 |
|||||||||
Preferred Stock, Series A (average) |
291 |
291 |
291 |
||||||||||
Average tangible common equity (non-GAAP) |
$ |
9,000 |
$ |
8,961 |
$ |
8,878 |
|||||||
Return on average tangible common equity from continuing operations |
|||||||||||||
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) |
$ |
193 |
$ |
196 |
$ |
217 |
|||||||
Average tangible common equity (non-GAAP) |
9,000 |
8,961 |
8,878 |
||||||||||
Return on average tangible common equity from continuing operations (non-GAAP) |
8.60 |
% |
8.87 |
% |
9.83 |
% |
|||||||
Return on average tangible common equity consolidated |
|||||||||||||
Net income (loss) attributable to Key common shareholders (GAAP) |
$ |
198 |
$ |
199 |
$ |
231 |
|||||||
Average tangible common equity (non-GAAP) |
9,000 |
8,961 |
8,878 |
||||||||||
Return on average tangible common equity consolidated (non-GAAP) |
8.82 |
% |
9.01 |
% |
10.46 |
% |
|||||||
Cash efficiency ratio |
|||||||||||||
Noninterest expense (GAAP) |
$ |
711 |
$ |
681 |
$ |
693 |
|||||||
Less: |
Intangible asset amortization on credit cards (GAAP) |
7 |
8 |
— |
|||||||||
Other intangible asset amortization (GAAP) |
3 |
4 |
1 |
||||||||||
Adjusted noninterest expense (non-GAAP) |
$ |
701 |
$ |
669 |
$ |
692 |
|||||||
Net interest income (GAAP) |
$ |
581 |
$ |
583 |
$ |
538 |
|||||||
Plus: |
Taxable-equivalent adjustment |
5 |
6 |
6 |
|||||||||
Noninterest income (GAAP) |
429 |
425 |
457 |
||||||||||
Total taxable-equivalent revenue (non-GAAP) |
$ |
1,015 |
$ |
1,014 |
$ |
1,001 |
|||||||
Cash efficiency ratio (non-GAAP) |
69.06 |
% |
65.98 |
% |
69.13 |
% |
|||||||
Cash efficiency ratio net of efficiency initiative charges |
|||||||||||||
Adjusted noninterest expense (non-GAAP) |
$ |
701 |
$ |
669 |
$ |
692 |
|||||||
Less: |
Efficiency initiative charges (non-GAAP) |
37 |
15 |
— |
|||||||||
Net adjusted noninterest expense (non-GAAP) |
$ |
664 |
$ |
654 |
$ |
692 |
|||||||
Total taxable-equivalent revenue (non-GAAP) |
$ |
1,015 |
$ |
1,014 |
$ |
1,001 |
|||||||
Cash efficiency ratio net of efficiency initiative charges (non-GAAP) |
65.42 |
% |
64.50 |
% |
69.13 |
% |
|||||||
Three months ended |
|||||||||||||
6-30-13 |
|||||||||||||
Tier 1 common equity under Basel III (estimates) |
|||||||||||||
Tier 1 common equity under current regulatory rules |
$ |
9,225 |
|||||||||||
Adjustments from current regulatory rules to Basel III: |
|||||||||||||
Deferred tax assets and other (g) |
(62) |
||||||||||||
Tier 1 common equity anticipated under Basel III (h) |
$ |
9,163 |
|||||||||||
Net risk-weighted assets under current regulatory rules |
$ |
81,964 |
|||||||||||
Adjustments from current regulatory rules to Basel III: |
|||||||||||||
Loan commitments less than one year |
826 |
||||||||||||
Past due loans |
253 |
||||||||||||
Mortgage servicing assets (i) |
292 |
||||||||||||
Deferred tax assets (i) |
279 |
||||||||||||
Other |
1,151 |
||||||||||||
Total risk-weighted assets under Basel III |
$ |
84,765 |
|||||||||||
Tier 1 common equity ratio under Basel III |
10.81 |
% |
GAAP to Non-GAAP Reconciliations (continued) |
|||||||||||||
(dollars in millions) |
|||||||||||||
Six months ended |
|||||||||||||
6-30-13 |
6-30-12 |
||||||||||||
Pre-provision net revenue |
|||||||||||||
Net interest income (GAAP) |
$ |
1,164 |
$ |
1,091 |
|||||||||
Plus: |
Taxable-equivalent adjustment |
11 |
12 |
||||||||||
Noninterest income (GAAP) |
854 |
899 |
|||||||||||
Less: |
Noninterest expense (GAAP) |
1,392 |
1,372 |
||||||||||
Pre-provision net revenue from continuing operations (non-GAAP) |
$ |
637 |
$ |
630 |
|||||||||
Average tangible common equity |
|||||||||||||
Average Key shareholders' equity (GAAP) |
$ |
10,297 |
$ |
10,046 |
|||||||||
Less: |
Intangible assets (average) (j) |
1,025 |
932 |
||||||||||
Preferred Stock, Series A (average) |
291 |
291 |
|||||||||||
Average tangible common equity (non-GAAP) |
$ |
8,981 |
$ |
8,823 |
|||||||||
Return on average tangible common equity from continuing operations |
|||||||||||||
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) |
$ |
389 |
$ |
412 |
|||||||||
Average tangible common equity (non-GAAP) |
8,981 |
8,823 |
|||||||||||
Return on average tangible common equity from continuing operations (non-GAAP) |
8.73 |
% |
9.39 |
% |
|||||||||
Return on average tangible common equity consolidated |
|||||||||||||
Net income (loss) attributable to Key common shareholders (GAAP) |
$ |
397 |
$ |
425 |
|||||||||
Average tangible common equity (non-GAAP) |
8,981 |
8,823 |
|||||||||||
Return on average tangible common equity consolidated (non-GAAP) |
8.91 |
% |
9.69 |
% |
|||||||||
Cash efficiency ratio |
|||||||||||||
Noninterest expense (GAAP) |
$ |
1,392 |
$ |
1,372 |
|||||||||
Less: |
Intangible asset amortization on credit cards (GAAP) |
15 |
— |
||||||||||
Other intangible asset amortization (GAAP) |
7 |
2 |
|||||||||||
Adjusted noninterest expense (non-GAAP) |
$ |
1,370 |
$ |
1,370 |
|||||||||
Net interest income (GAAP) |
$ |
1,164 |
$ |
1,091 |
|||||||||
Plus: |
Taxable-equivalent adjustment |
11 |
12 |
||||||||||
Noninterest income (GAAP) |
854 |
899 |
|||||||||||
Total taxable-equivalent revenue (non-GAAP) |
$ |
2,029 |
$ |
2,002 |
|||||||||
Cash efficiency ratio (non-GAAP) |
67.52 |
% |
68.43 |
% |
|||||||||
Adjusted cash efficiency ratio net of efficiency initiative charges |
|||||||||||||
Adjusted noninterest expense (non-GAAP) |
$ |
1,370 |
$ |
1,370 |
|||||||||
Less: |
Efficiency initiative charges (non-GAAP) |
52 |
— |
||||||||||
Net adjusted noninterest expense (non-GAAP) |
$ |
1,318 |
$ |
1,370 |
|||||||||
Total taxable-equivalent revenue (non-GAAP) |
$ |
2,029 |
$ |
2,002 |
|||||||||
Adjusted cash efficiency ratio net of efficiency initiative charges (non-GAAP) |
64.96 |
% |
68.43 |
% |
(a) |
Three months ended June 30, 2013 and March 31, 2013 exclude $107 million and $114 million, respectively, of period end purchased credit card receivable intangible assets. |
(b) |
Includes net unrealized gains or losses on securities available for sale (except for net unrealized losses on marketable equity securities), net gains or losses on cash flow hedges, and amounts resulting from the application of the applicable accounting guidance for defined benefit and other postretirement plans. |
(c) |
Other assets deducted from Tier 1 capital and net risk-weighted assets consist of disallowed intangible assets (excluding goodwill) and deductible portions of nonfinancial equity investments. There were no disallowed deferred tax assets at June 30, 2013, March 31, 2013, and June 30, 2012. |
(d) |
Net of capital surplus for the three months ended June 30, 2013. |
(e) |
6-30-13 amount is estimated. |
(f) |
Three months ended June 30, 2013 and March 31, 2013 exclude $110 million and $118 million, respectively, of average ending purchased credit card receivable intangible assets. |
(g) |
Includes the deferred tax asset subject to future taxable income for realization, primarily tax credit carryforwards. |
(h) |
The amount of regulatory capital and risk-weighted assets estimated under Basel III (as fully phased-in on January 1, 2019) is based upon the federal banking agencies' final Basel III rule, which implements Basel III under the Standardized Approach. |
(i) |
Item is included in the 10%/15% exceptions bucket calculation and is risk-weighted at 250%. |
(j) |
Six months ended June 30, 2013 excludes $114 million of average ending purchased credit card receivable intangible assets. |
GAAP = U.S. generally accepted accounting principles |
Consolidated Balance Sheets |
|||||||||||||
(dollars in millions) |
|||||||||||||
6-30-13 |
3-31-13 |
6-30-12 |
|||||||||||
Assets |
|||||||||||||
Loans |
$ |
53,101 |
$ |
52,574 |
$ |
49,605 |
|||||||
Loans held for sale |
402 |
434 |
656 |
||||||||||
Securities available for sale |
13,253 |
13,496 |
13,205 |
||||||||||
Held-to-maturity securities |
4,750 |
3,721 |
4,352 |
||||||||||
Trading account assets |
592 |
701 |
679 |
||||||||||
Short-term investments |
3,582 |
3,081 |
2,216 |
||||||||||
Other investments |
1,037 |
1,059 |
1,186 |
||||||||||
Total earning assets |
76,717 |
75,066 |
71,899 |
||||||||||
Allowance for loan and lease losses |
(876) |
(893) |
(888) |
||||||||||
Cash and due from banks |
696 |
621 |
716 |
||||||||||
Premises and equipment |
900 |
930 |
931 |
||||||||||
Operating lease assets |
303 |
309 |
318 |
||||||||||
Goodwill |
979 |
979 |
917 |
||||||||||
Other intangible assets |
149 |
159 |
15 |
||||||||||
Corporate-owned life insurance |
3,362 |
3,352 |
3,285 |
||||||||||
Derivative assets |
461 |
609 |
818 |
||||||||||
Accrued income and other assets |
2,864 |
2,884 |
2,967 |
||||||||||
Discontinued assets |
5,084 |
5,182 |
5,545 |
||||||||||
Total assets |
$ |
90,639 |
$ |
89,198 |
$ |
86,523 |
|||||||
Liabilities |
|||||||||||||
Deposits in domestic offices: |
|||||||||||||
NOW and money market deposit accounts |
$ |
32,689 |
$ |
32,700 |
$ |
28,957 |
|||||||
Savings deposits |
2,542 |
2,546 |
2,103 |
||||||||||
Certificates of deposit ($100,000 or more) |
2,918 |
2,998 |
3,669 |
||||||||||
Other time deposits |
4,089 |
4,324 |
5,385 |
||||||||||
Total interest-bearing deposits |
42,238 |
42,568 |
40,114 |
||||||||||
Noninterest-bearing deposits |
24,939 |
21,564 |
21,435 |
||||||||||
Deposits in foreign office — interest-bearing |
544 |
522 |
618 |
||||||||||
Total deposits |
67,721 |
64,654 |
62,167 |
||||||||||
Federal funds purchased and securities sold under repurchase agreements |
1,647 |
1,950 |
1,716 |
||||||||||
Bank notes and other short-term borrowings |
298 |
378 |
362 |
||||||||||
Derivative liabilities |
456 |
524 |
763 |
||||||||||
Accrued expense and other liabilities |
1,421 |
1,352 |
1,390 |
||||||||||
Long-term debt |
6,666 |
7,785 |
7,521 |
||||||||||
Discontinued liabilities |
2,169 |
2,176 |
2,428 |
||||||||||
Total liabilities |
80,378 |
78,819 |
76,347 |
||||||||||
Equity |
|||||||||||||
Preferred stock, Series A |
291 |
291 |
291 |
||||||||||
Common shares |
1,017 |
1,017 |
1,017 |
||||||||||
Capital surplus |
4,045 |
4,059 |
4,120 |
||||||||||
Retained earnings |
7,214 |
7,065 |
6,595 |
||||||||||
Treasury stock, at cost |
(2,020) |
(1,930) |
(1,796) |
||||||||||
Accumulated other comprehensive income (loss) |
(318) |
(162) |
(72) |
||||||||||
Key shareholders' equity |
10,229 |
10,340 |
10,155 |
||||||||||
Noncontrolling interests |
32 |
39 |
21 |
||||||||||
Total equity |
10,261 |
10,379 |
10,176 |
||||||||||
Total liabilities and equity |
$ |
90,639 |
$ |
89,198 |
$ |
86,523 |
|||||||
Common shares outstanding (000) |
912,883 |
922,581 |
945,473 |
Consolidated Statements of Income |
||||||||||||||||||
(dollars in millions, except per share amounts) |
||||||||||||||||||
Three months ended |
Six months ended |
|||||||||||||||||
6-30-13 |
3-31-13 |
6-30-12 |
6-30-13 |
6-30-12 |
||||||||||||||
Interest income |
||||||||||||||||||
Loans |
$ |
539 |
$ |
548 |
$ |
518 |
$ |
1,087 |
$ |
1,054 |
||||||||
Loans held for sale |
5 |
4 |
5 |
9 |
10 |
|||||||||||||
Securities available for sale |
80 |
80 |
105 |
160 |
221 |
|||||||||||||
Held-to-maturity securities |
20 |
18 |
17 |
38 |
29 |
|||||||||||||
Trading account assets |
4 |
6 |
5 |
10 |
11 |
|||||||||||||
Short-term investments |
1 |
2 |
2 |
3 |
3 |
|||||||||||||
Other investments |
8 |
9 |
10 |
17 |
18 |
|||||||||||||
Total interest income |
657 |
667 |
662 |
1,324 |
1,346 |
|||||||||||||
Interest expense |
||||||||||||||||||
Deposits |
42 |
45 |
71 |
87 |
148 |
|||||||||||||
Federal funds purchased and securities sold under repurchase agreements |
— |
1 |
1 |
1 |
2 |
|||||||||||||
Bank notes and other short-term borrowings |
2 |
1 |
2 |
3 |
4 |
|||||||||||||
Long-term debt |
32 |
37 |
50 |
69 |
101 |
|||||||||||||
Total interest expense |
76 |
84 |
124 |
160 |
255 |
|||||||||||||
Net interest income |
581 |
583 |
538 |
1,164 |
1,091 |
|||||||||||||
Provision (credit) for loan and lease losses |
28 |
55 |
21 |
83 |
63 |
|||||||||||||
Net interest income (expense) after provision for loan and lease losses |
553 |
528 |
517 |
1,081 |
1,028 |
|||||||||||||
Noninterest income |
||||||||||||||||||
Trust and investment services income |
100 |
95 |
90 |
195 |
186 |
|||||||||||||
Investment banking and debt placement fees |
84 |
79 |
73 |
163 |
134 |
|||||||||||||
Service charges on deposit accounts |
71 |
69 |
70 |
140 |
138 |
|||||||||||||
Operating lease income and other leasing gains |
19 |
23 |
58 |
42 |
110 |
|||||||||||||
Corporate services income |
43 |
45 |
44 |
88 |
88 |
|||||||||||||
Cards and payments income |
42 |
37 |
31 |
79 |
60 |
|||||||||||||
Corporate-owned life insurance income |
31 |
30 |
30 |
61 |
60 |
|||||||||||||
Consumer mortgage income |
6 |
7 |
9 |
13 |
18 |
|||||||||||||
Net gains (losses) from principal investing |
7 |
8 |
24 |
15 |
59 |
|||||||||||||
Other income (a) |
26 |
32 |
28 |
58 |
46 |
|||||||||||||
Total noninterest income |
429 |
425 |
457 |
854 |
899 |
|||||||||||||
Noninterest expense |
||||||||||||||||||
Personnel |
406 |
391 |
377 |
797 |
749 |
|||||||||||||
Net occupancy |
72 |
64 |
62 |
136 |
126 |
|||||||||||||
Computer processing |
39 |
39 |
43 |
78 |
84 |
|||||||||||||
Business services and professional fees |
37 |
35 |
51 |
72 |
88 |
|||||||||||||
Equipment |
27 |
26 |
27 |
53 |
53 |
|||||||||||||
Operating lease expense |
11 |
12 |
15 |
23 |
32 |
|||||||||||||
Marketing |
11 |
6 |
17 |
17 |
30 |
|||||||||||||
FDIC assessment |
8 |
8 |
8 |
16 |
16 |
|||||||||||||
Intangible asset amortization on credit cards |
7 |
8 |
— |
15 |
— |
|||||||||||||
Other intangible asset amortization |
3 |
4 |
1 |
7 |
2 |
|||||||||||||
Provision (credit) for losses on lending-related commitments |
5 |
3 |
6 |
8 |
6 |
|||||||||||||
OREO expense, net |
1 |
3 |
7 |
4 |
13 |
|||||||||||||
Other expense |
84 |
82 |
79 |
166 |
173 |
|||||||||||||
Total noninterest expense |
711 |
681 |
693 |
1,392 |
1,372 |
|||||||||||||
Income (loss) from continuing operations before income taxes |
271 |
272 |
281 |
543 |
555 |
|||||||||||||
Income taxes |
72 |
70 |
54 |
142 |
127 |
|||||||||||||
Income (loss) from continuing operations |
199 |
202 |
227 |
401 |
428 |
|||||||||||||
Income (loss) from discontinued operations, net of taxes |
5 |
3 |
14 |
8 |
13 |
|||||||||||||
Net income (loss) |
204 |
205 |
241 |
409 |
441 |
|||||||||||||
Less: Net income (loss) attributable to noncontrolling interests |
— |
1 |
5 |
1 |
5 |
|||||||||||||
Net income (loss) attributable to Key |
$ |
204 |
$ |
204 |
$ |
236 |
$ |
408 |
$ |
436 |
||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
193 |
$ |
196 |
$ |
217 |
$ |
389 |
$ |
412 |
||||||||
Net income (loss) attributable to Key common shareholders |
198 |
199 |
231 |
397 |
425 |
|||||||||||||
Per common share |
||||||||||||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
.21 |
$ |
.21 |
$ |
.23 |
$ |
.42 |
$ |
.44 |
||||||||
Income (loss) from discontinued operations, net of taxes |
.01 |
— |
.01 |
.01 |
.01 |
|||||||||||||
Net income (loss) attributable to Key common shareholders (b) |
.22 |
.22 |
.24 |
.43 |
.45 |
|||||||||||||
Per common share — assuming dilution |
||||||||||||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
.21 |
$ |
.21 |
$ |
.23 |
$ |
.42 |
$ |
.43 |
||||||||
Income (loss) from discontinued operations, net of taxes |
.01 |
— |
.01 |
.01 |
.01 |
|||||||||||||
Net income (loss) attributable to Key common shareholders (b) |
.22 |
.21 |
.24 |
.43 |
.45 |
|||||||||||||
Cash dividends declared per common share |
$ |
.055 |
$ |
.05 |
$ |
.05 |
$ |
.105 |
$ |
.08 |
||||||||
Weighted-average common shares outstanding (000) |
913,736 |
920,316 |
944,648 |
917,008 |
946,995 |
|||||||||||||
Weighted-average common shares and potential common shares outstanding (000) (c) |
918,628 |
926,051 |
948,087 |
922,319 |
951,029 |
|||||||||||||
(a) |
For the three months ended June 30, 2013, March 31, 2013, and June 30, 2012, Key did not have any impairment losses related to securities. |
|||||||||||||||||
(b) |
Earnings per share may not foot due to rounding. |
|||||||||||||||||
(c) |
Assumes conversion of stock options and/or Preferred Series A shares, as applicable. |
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations |
||||||||||||||||||||||||||||||||
(dollars in millions) |
||||||||||||||||||||||||||||||||
Second Quarter 2013 |
First Quarter 2013 |
Second Quarter 2012 |
||||||||||||||||||||||||||||||
Average |
Average |
Average |
||||||||||||||||||||||||||||||
Balance |
Interest |
(a) |
Yield/Rate |
(a) |
Balance |
Interest |
(a) |
Yield/Rate |
(a) |
Balance |
Interest |
(a) |
Yield/Rate |
(a) |
||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Loans: (b), (c) |
||||||||||||||||||||||||||||||||
Commercial, financial and agricultural |
$ |
23,480 |
(d) |
$ |
212 |
3.63 |
% |
$ |
23,317 |
(d) |
$ |
218 |
3.78 |
% |
$ |
20,606 |
$ |
196 |
3.82 |
% |
||||||||||||
Real estate — commercial mortgage |
7,494 |
78 |
4.14 |
7,616 |
79 |
4.24 |
7,613 |
85 |
4.50 |
|||||||||||||||||||||||
Real estate — construction |
1,049 |
11 |
4.30 |
1,034 |
11 |
4.27 |
1,216 |
14 |
4.64 |
|||||||||||||||||||||||
Commercial lease financing |
4,747 |
48 |
3.96 |
4,843 |
47 |
3.92 |
5,226 |
45 |
3.45 |
|||||||||||||||||||||||
Total commercial loans |
36,770 |
349 |
3.80 |
36,810 |
355 |
3.92 |
34,661 |
340 |
3.94 |
|||||||||||||||||||||||
Real estate — residential mortgage |
2,176 |
24 |
4.53 |
2,173 |
25 |
4.58 |
1,990 |
24 |
4.91 |
|||||||||||||||||||||||
Home equity: |
||||||||||||||||||||||||||||||||
Key Community Bank |
9,992 |
98 |
3.93 |
9,787 |
96 |
3.97 |
9,359 |
94 |
4.04 |
|||||||||||||||||||||||
Other |
389 |
7 |
7.66 |
413 |
8 |
7.70 |
493 |
9 |
7.66 |
|||||||||||||||||||||||
Total home equity loans |
10,381 |
105 |
4.07 |
10,200 |
104 |
4.12 |
9,852 |
103 |
4.23 |
|||||||||||||||||||||||
Consumer other — Key Community Bank |
1,392 |
26 |
7.35 |
1,343 |
25 |
7.58 |
1,247 |
29 |
9.20 |
|||||||||||||||||||||||
Credit cards |
697 |
20 |
11.91 |
704 |
22 |
12.61 |
— |
— |
— |
|||||||||||||||||||||||
Consumer other: |
||||||||||||||||||||||||||||||||
Marine |
1,206 |
20 |
6.24 |
1,311 |
20 |
6.29 |
1,595 |
26 |
6.29 |
|||||||||||||||||||||||
Other |
74 |
1 |
8.58 |
85 |
2 |
7.98 |
101 |
2 |
8.49 |
|||||||||||||||||||||||
Total consumer other |
1,280 |
21 |
6.37 |
1,396 |
22 |
6.39 |
1,696 |
28 |
6.42 |
|||||||||||||||||||||||
Total consumer loans |
15,926 |
196 |
4.94 |
15,816 |
198 |
5.00 |
14,785 |
184 |
4.99 |
|||||||||||||||||||||||
Total loans |
52,696 |
545 |
4.15 |
52,626 |
553 |
4.26 |
49,446 |
524 |
4.26 |
|||||||||||||||||||||||
Loans held for sale |
513 |
5 |
3.93 |
469 |
4 |
3.27 |
585 |
5 |
3.43 |
|||||||||||||||||||||||
Securities available for sale (b), (e) |
13,296 |
79 |
2.47 |
12,065 |
81 |
2.74 |
13,865 |
105 |
3.13 |
|||||||||||||||||||||||
Held-to-maturity securities (b) |
4,144 |
20 |
1.87 |
3,816 |
18 |
1.94 |
3,493 |
17 |
1.98 |
|||||||||||||||||||||||
Trading account assets |
749 |
4 |
2.31 |
710 |
6 |
3.44 |
768 |
5 |
3.01 |
|||||||||||||||||||||||
Short-term investments |
2,722 |
1 |
.23 |
2,999 |
2 |
.22 |
2,608 |
2 |
.29 |
|||||||||||||||||||||||
Other investments (e) |
1,048 |
8 |
2.61 |
1,059 |
9 |
3.59 |
1,177 |
10 |
3.21 |
|||||||||||||||||||||||
Total earning assets |
75,168 |
662 |
3.54 |
73,744 |
673 |
3.67 |
71,942 |
668 |
3.74 |
|||||||||||||||||||||||
Allowance for loan and lease losses |
(890) |
(896) |
(928) |
|||||||||||||||||||||||||||||
Accrued income and other assets |
9,770 |
9,867 |
9,866 |
|||||||||||||||||||||||||||||
Discontinued assets |
5,096 |
5,216 |
5,673 |
|||||||||||||||||||||||||||||
Total assets |
$ |
89,144 |
$ |
87,931 |
$ |
86,553 |
||||||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||||||
NOW and money market deposit accounts |
$ |
32,849 |
14 |
.17 |
$ |
31,946 |
14 |
.18 |
$ |
29,106 |
13 |
.18 |
||||||||||||||||||||
Savings deposits |
2,545 |
— |
.04 |
2,473 |
1 |
.05 |
2,085 |
— |
.03 |
|||||||||||||||||||||||
Certificates of deposit ($100,000 or more) (f) |
2,975 |
13 |
1.79 |
2,911 |
14 |
1.99 |
3,858 |
27 |
2.85 |
|||||||||||||||||||||||
Other time deposits |
4,202 |
14 |
1.35 |
4,451 |
16 |
1.42 |
5,645 |
30 |
2.13 |
|||||||||||||||||||||||
Deposits in foreign office |
573 |
1 |
.24 |
454 |
— |
.25 |
759 |
1 |
.24 |
|||||||||||||||||||||||
Total interest-bearing deposits |
43,144 |
42 |
.39 |
42,235 |
45 |
.43 |
41,453 |
71 |
.69 |
|||||||||||||||||||||||
Federal funds purchased and securities sold under repurchase agreements |
1,845 |
— |
.14 |
1,913 |
1 |
.15 |
1,880 |
1 |
.20 |
|||||||||||||||||||||||
Bank notes and other short-term borrowings |
367 |
2 |
1.84 |
387 |
1 |
1.75 |
468 |
2 |
1.80 |
|||||||||||||||||||||||
Long-term debt (f), (g) |
4,401 |
32 |
3.25 |
4,671 |
37 |
3.51 |
5,463 |
50 |
4.01 |
|||||||||||||||||||||||
Total interest-bearing liabilities |
49,757 |
76 |
.62 |
49,206 |
84 |
.70 |
49,264 |
124 |
1.02 |
|||||||||||||||||||||||
Noninterest-bearing deposits |
22,297 |
21,400 |
19,610 |
|||||||||||||||||||||||||||||
Accrued expense and other liabilities |
1,653 |
1,799 |
1,902 |
|||||||||||||||||||||||||||||
Discontinued liabilities (g) |
5,089 |
5,213 |
5,658 |
|||||||||||||||||||||||||||||
Total liabilities |
78,796 |
77,618 |
76,434 |
|||||||||||||||||||||||||||||
Equity |
||||||||||||||||||||||||||||||||
Key shareholders' equity |
10,314 |
10,279 |
10,100 |
|||||||||||||||||||||||||||||
Noncontrolling interests |
34 |
34 |
19 |
|||||||||||||||||||||||||||||
Total equity |
10,348 |
10,313 |
10,119 |
|||||||||||||||||||||||||||||
Total liabilities and equity |
$ |
89,144 |
$ |
87,931 |
$ |
86,553 |
||||||||||||||||||||||||||
Interest rate spread (TE) |
2.92 |
% |
2.97 |
% |
2.72 |
% |
||||||||||||||||||||||||||
Net interest income (TE) and net interest margin (TE) |
586 |
3.13 |
% |
589 |
3.24 |
% |
544 |
3.06 |
% |
|||||||||||||||||||||||
TE adjustment (b) |
5 |
6 |
6 |
|||||||||||||||||||||||||||||
Net interest income, GAAP basis |
$ |
581 |
$ |
583 |
$ |
538 |
(a) |
Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology. |
(b) |
Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%. |
(c) |
For purposes of these computations, nonaccrual loans are included in average loan balances. |
(d) |
Commercial, financial and agricultural average balance for the three months ended June 30, 2013 and March 31, 2013 includes $96 million and $91 million, respectively, of assets from commercial credit cards. |
(e) |
Yield is calculated on the basis of amortized cost. |
(f) |
Rate calculation excludes basis adjustments related to fair value hedges. |
(g) |
A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying our matched funds transfer pricing methodology to discontinued operations. |
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles |
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations |
|||||||||||||||||||||
(dollars in millions) |
|||||||||||||||||||||
Six months ended June 30, 2013 |
Six months ended June 30, 2012 |
||||||||||||||||||||
Average |
Average |
||||||||||||||||||||
Balance |
Interest |
(a) |
Yield/Rate |
(a) |
Balance |
Interest |
(a) |
Yield/ Rate |
(a) |
||||||||||||
Assets |
|||||||||||||||||||||
Loans: (b), (c) |
|||||||||||||||||||||
Commercial, financial and agricultural |
$ |
23,399 |
(d) |
$ |
430 |
3.71 |
% |
$ |
20,318 |
$ |
394 |
3.90 |
% |
||||||||
Real estate — commercial mortgage |
7,554 |
157 |
4.19 |
7,803 |
174 |
4.49 |
|||||||||||||||
Real estate — construction |
1,042 |
22 |
4.28 |
1,250 |
30 |
4.75 |
|||||||||||||||
Commercial lease financing |
4,795 |
95 |
3.94 |
5,340 |
99 |
3.70 |
|||||||||||||||
Total commercial loans |
36,790 |
704 |
3.86 |
34,711 |
697 |
4.03 |
|||||||||||||||
Real estate — residential mortgage |
2,174 |
49 |
4.55 |
1,970 |
49 |
4.98 |
|||||||||||||||
Home equity: |
|||||||||||||||||||||
Key Community Bank |
9,890 |
194 |
3.95 |
9,266 |
187 |
4.06 |
|||||||||||||||
Other |
401 |
15 |
7.68 |
507 |
19 |
7.67 |
|||||||||||||||
Total home equity loans |
10,291 |
209 |
4.10 |
9,773 |
206 |
4.25 |
|||||||||||||||
Consumer other — Key Community Bank |
1,368 |
51 |
7.46 |
1,220 |
57 |
9.40 |
|||||||||||||||
Credit cards |
700 |
42 |
12.26 |
— |
— |
— |
|||||||||||||||
Consumer other: |
|||||||||||||||||||||
Marine |
1,258 |
40 |
6.27 |
1,655 |
53 |
6.29 |
|||||||||||||||
Other |
80 |
3 |
8.26 |
109 |
4 |
8.11 |
|||||||||||||||
Total consumer other |
1,338 |
43 |
6.38 |
1,764 |
57 |
6.40 |
|||||||||||||||
Total consumer loans |
15,871 |
394 |
4.97 |
14,727 |
369 |
5.03 |
|||||||||||||||
Total loans |
52,661 |
1,098 |
4.21 |
49,438 |
1,066 |
4.33 |
|||||||||||||||
Loans held for sale |
491 |
9 |
3.61 |
583 |
10 |
3.52 |
|||||||||||||||
Securities available for sale (b), (e) |
12,684 |
160 |
2.59 |
14,562 |
221 |
3.14 |
|||||||||||||||
Held-to-maturity securities (b) |
3,981 |
38 |
1.90 |
2,872 |
29 |
2.02 |
|||||||||||||||
Trading account assets |
729 |
10 |
2.86 |
788 |
11 |
2.86 |
|||||||||||||||
Short-term investments |
2,860 |
3 |
.22 |
2,253 |
3 |
.29 |
|||||||||||||||
Other investments (e) |
1,054 |
17 |
3.10 |
1,173 |
18 |
2.99 |
|||||||||||||||
Total earning assets |
74,460 |
1,335 |
3.60 |
71,669 |
1,358 |
3.83 |
|||||||||||||||
Allowance for loan and lease losses |
(893) |
(948) |
|||||||||||||||||||
Accrued income and other assets |
9,818 |
9,931 |
|||||||||||||||||||
Discontinued assets |
5,156 |
5,736 |
|||||||||||||||||||
Total assets |
$ |
88,541 |
$ |
86,388 |
|||||||||||||||||
Liabilities |
|||||||||||||||||||||
NOW and money market deposit accounts |
$ |
32,400 |
28 |
.17 |
$ |
28,717 |
28 |
.20 |
|||||||||||||
Savings deposits |
2,509 |
1 |
.05 |
2,041 |
— |
.04 |
|||||||||||||||
Certificates of deposit ($100,000 or more) (f) |
2,943 |
27 |
1.89 |
3,947 |
56 |
2.88 |
|||||||||||||||
Other time deposits |
4,326 |
30 |
1.39 |
5,840 |
63 |
2.16 |
|||||||||||||||
Deposits in foreign office |
514 |
1 |
.25 |
764 |
1 |
.24 |
|||||||||||||||
Total interest-bearing deposits |
42,692 |
87 |
.41 |
41,309 |
148 |
.72 |
|||||||||||||||
Federal funds purchased and securities sold under repurchase agreements |
1,879 |
1 |
.15 |
1,865 |
2 |
.20 |
|||||||||||||||
Bank notes and other short-term borrowings |
377 |
3 |
1.80 |
479 |
4 |
1.66 |
|||||||||||||||
Long-term debt (f), (g) |
4,535 |
69 |
3.38 |
5,812 |
101 |
3.80 |
|||||||||||||||
Total interest-bearing liabilities |
49,483 |
160 |
.66 |
49,465 |
255 |
1.05 |
|||||||||||||||
Noninterest-bearing deposits |
21,851 |
19,038 |
|||||||||||||||||||
Accrued expense and other liabilities |
1,725 |
2,095 |
|||||||||||||||||||
Discontinued liabilities (d), (g) |
5,151 |
5,726 |
|||||||||||||||||||
Total liabilities |
78,210 |
76,324 |
|||||||||||||||||||
Equity |
|||||||||||||||||||||
Key shareholders' equity |
10,297 |
10,046 |
|||||||||||||||||||
Noncontrolling interests |
34 |
18 |
|||||||||||||||||||
Total equity |
10,331 |
10,064 |
|||||||||||||||||||
Total liabilities and equity |
$ |
88,541 |
$ |
86,388 |
|||||||||||||||||
Interest rate spread (TE) |
2.94 |
% |
2.78 |
% |
|||||||||||||||||
Net interest income (TE) and net interest margin (TE) |
1,175 |
3.18 |
% |
1,103 |
3.11 |
% |
|||||||||||||||
TE adjustment (b) |
11 |
12 |
|||||||||||||||||||
Net interest income, GAAP basis |
$ |
1,164 |
$ |
1,091 |
(a) |
Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (d) below, calculated using a matched funds transfer pricing methodology. |
(b) |
Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%. |
(c) |
For purposes of these computations, nonaccrual loans are included in average loan balances. |
(d) |
Commercial, financial and agricultural average balance for the six months ended June 30, 2013 includes $94 million of assets from commercial credit cards. |
(e) |
Yield is calculated on the basis of amortized cost. |
(f) |
Rate calculation excludes basis adjustments related to fair value hedges. |
(g) |
A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying our matched funds transfer pricing methodology to discontinued operations. |
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles |
Noninterest Expense |
||||||||||||||
(dollars in millions) |
||||||||||||||
Three months ended |
Six months ended |
|||||||||||||
6-30-13 |
3-31-13 |
6-30-12 |
6-30-13 |
6-30-12 |
||||||||||
Personnel (a) |
$ |
406 |
$ |
391 |
$ |
377 |
$ |
797 |
$ |
749 |
||||
Net occupancy |
72 |
64 |
62 |
136 |
126 |
|||||||||
Computer processing |
39 |
39 |
43 |
78 |
84 |
|||||||||
Business services and professional fees |
37 |
35 |
51 |
72 |
88 |
|||||||||
Equipment |
27 |
26 |
27 |
53 |
53 |
|||||||||
Operating lease expense |
11 |
12 |
15 |
23 |
32 |
|||||||||
Marketing |
11 |
6 |
17 |
17 |
30 |
|||||||||
FDIC assessment |
8 |
8 |
8 |
16 |
16 |
|||||||||
Intangible asset amortization on credit cards |
7 |
8 |
— |
15 |
— |
|||||||||
Other intangible asset amortization |
3 |
4 |
1 |
7 |
2 |
|||||||||
Provision (credit) for losses on lending-related commitments |
5 |
3 |
6 |
8 |
6 |
|||||||||
OREO expense, net |
1 |
3 |
7 |
4 |
13 |
|||||||||
Other expense |
84 |
82 |
79 |
166 |
173 |
|||||||||
Total noninterest expense |
$ |
711 |
$ |
681 |
$ |
693 |
$ |
1,392 |
$ |
1,372 |
||||
Average full-time equivalent employees (b) |
14,999 |
15,396 |
15,455 |
15,197 |
15,430 |
|||||||||
(a) Additional detail provided in table below. |
||||||||||||||
(b) The number of average full-time equivalent employees has not been adjusted for discontinued operations. |
||||||||||||||
Personnel Expense |
||||||||||||||
(in millions) |
||||||||||||||
Three months ended |
Six months ended |
|||||||||||||
6-30-13 |
3-31-13 |
6-30-12 |
6-30-13 |
6-30-12 |
||||||||||
Salaries |
$ |
227 |
$ |
222 |
$ |
228 |
$ |
449 |
$ |
447 |
||||
Technology contract labor, net |
19 |
18 |
13 |
37 |
25 |
|||||||||
Incentive compensation |
77 |
73 |
66 |
150 |
126 |
|||||||||
Employee benefits |
56 |
59 |
54 |
115 |
118 |
|||||||||
Stock-based compensation |
9 |
10 |
13 |
19 |
26 |
|||||||||
Severance |
18 |
9 |
3 |
27 |
7 |
|||||||||
Total personnel expense |
$ |
406 |
$ |
391 |
$ |
377 |
$ |
797 |
$ |
749 |
Loan Composition |
||||||||||||||||||
(dollars in millions) |
||||||||||||||||||
Percent change 6-30-13 vs. |
||||||||||||||||||
6-30-13 |
3-31-13 |
6-30-12 |
3-31-13 |
6-30-12 |
||||||||||||||
Commercial, financial and agricultural (a) |
$ |
23,715 |
$ |
23,412 |
$ |
20,916 |
1.3 |
% |
13.4 |
% |
||||||||
Commercial real estate: |
||||||||||||||||||
Commercial mortgage |
7,474 |
7,544 |
7,409 |
(.9) |
.9 |
|||||||||||||
Construction |
1,060 |
1,057 |
1,172 |
.3 |
(9.6) |
|||||||||||||
Total commercial real estate loans |
8,534 |
8,601 |
8,581 |
(.8) |
(.5) |
|||||||||||||
Commercial lease financing |
4,774 |
4,796 |
5,106 |
(.5) |
(6.5) |
|||||||||||||
Total commercial loans |
37,023 |
36,809 |
34,603 |
.6 |
7.0 |
|||||||||||||
Residential — prime loans: |
||||||||||||||||||
Real estate — residential mortgage |
2,176 |
2,176 |
2,016 |
— |
7.9 |
|||||||||||||
Home equity: |
||||||||||||||||||
Key Community Bank |
10,173 |
9,809 |
9,601 |
3.7 |
6.0 |
|||||||||||||
Other |
375 |
401 |
479 |
(6.5) |
(21.7) |
|||||||||||||
Total home equity loans |
10,548 |
10,210 |
10,080 |
3.3 |
4.6 |
|||||||||||||
Total residential — prime loans |
12,724 |
12,386 |
12,096 |
2.7 |
5.2 |
|||||||||||||
Consumer other — Key Community Bank |
1,424 |
1,353 |
1,263 |
5.2 |
12.7 |
|||||||||||||
Credit cards |
701 |
693 |
— |
1.2 |
N/M |
|||||||||||||
Consumer other: |
||||||||||||||||||
Marine |
1,160 |
1,254 |
1,542 |
(7.5) |
(24.8) |
|||||||||||||
Other |
69 |
79 |
101 |
(12.7) |
(31.7) |
|||||||||||||
Total consumer other |
1,229 |
1,333 |
1,643 |
(7.8) |
(25.2) |
|||||||||||||
Total consumer loans |
16,078 |
15,765 |
15,002 |
2.0 |
7.2 |
|||||||||||||
Total loans (b), (c) |
$ |
53,101 |
$ |
52,574 |
$ |
49,605 |
1.0 |
% |
7.0 |
% |
||||||||
Loans Held for Sale Composition |
||||||||||||||||||
(dollars in millions) |
||||||||||||||||||
Percent change 6-30-13 vs. |
||||||||||||||||||
6-30-13 |
3-31-13 |
6-30-12 |
3-31-13 |
6-30-12 |
||||||||||||||
Commercial, financial and agricultural |
$ |
22 |
$ |
180 |
$ |
18 |
(87.8) |
% |
22.2 |
% |
||||||||
Real estate — commercial mortgage |
318 |
196 |
523 |
62.2 |
(39.2) |
|||||||||||||
Real estate — construction |
— |
— |
12 |
N/M |
N/M |
|||||||||||||
Commercial lease financing |
14 |
9 |
13 |
55.6 |
7.7 |
|||||||||||||
Real estate — residential mortgage |
48 |
49 |
90 |
(2.0) |
(46.7) |
|||||||||||||
Total loans held for sale |
$ |
402 |
$ |
434 |
$ |
656 |
(7.4) |
% |
(38.7) |
% |
||||||||
Summary of Changes in Loans Held for Sale |
||||||||||||||||||
(dollars in millions) |
||||||||||||||||||
2Q13 |
1Q13 |
4Q12 |
3Q12 |
2Q12 |
||||||||||||||
Balance at beginning of period |
$ |
434 |
$ |
599 |
$ |
628 |
$ |
656 |
$ |
511 |
||||||||
New originations |
1,241 |
1,075 |
1,686 |
1,280 |
1,308 |
|||||||||||||
Transfers from held to maturity, net |
17 |
19 |
38 |
13 |
7 |
|||||||||||||
Loan sales |
(1,292) |
(1,257) |
(1,747) |
(1,311) |
(1,165) |
|||||||||||||
Loan draws (payments), net |
— |
— |
(4) |
(9) |
(4) |
|||||||||||||
Transfers to OREO / valuation adjustments |
2 |
(2) |
(2) |
(1) |
(1) |
|||||||||||||
Balance at end of period |
$ |
402 |
$ |
434 |
$ |
599 |
$ |
628 |
$ |
656 |
(a) |
June 30, 2013 and March 31, 2013 loan balances include $96 million and $93 million of commercial credit card balances, respectively. |
(b) |
Excluded at June 30, 2013, March 31, 2013, and June 30, 2012 are loans in the amount of $5.0 billion, $5.1 billion, and $5.5 billion, respectively, related to the discontinued operations of the education lending business. |
(c) |
June 30, 2013 includes purchased loans of $187 million of which $19 million were purchased credit impaired. March 31, 2013 includes purchased loans of $204 million of which $22 million were purchased credit impaired. |
N/M = Not Meaningful |
Exit Loan Portfolio From Continuing Operations |
||||||||||||||||||||
(dollars in millions) |
||||||||||||||||||||
Balance |
Change |
Net Loan |
Balance on |
|||||||||||||||||
Outstanding |
6-30-13 vs. |
Charge-offs |
Nonperforming Status |
|||||||||||||||||
6-30-13 |
3-31-13 |
3-31-13 |
2Q13 |
(c) |
1Q13 |
(c) |
6-30-13 |
3-31-13 |
||||||||||||
Residential properties — homebuilder |
$ |
26 |
$ |
29 |
$ |
(3) |
$ |
1 |
— |
$ |
8 |
$ |
10 |
|||||||
Marine and RV floor plan |
28 |
29 |
(1) |
— |
$ |
(3) |
7 |
6 |
||||||||||||
Commercial lease financing (a) |
931 |
966 |
(35) |
(2) |
(5) |
1 |
6 |
|||||||||||||
Total commercial loans |
985 |
1,024 |
(39) |
(1) |
(8) |
16 |
22 |
|||||||||||||
Home equity — Other |
375 |
401 |
(26) |
5 |
4 |
16 |
18 |
|||||||||||||
Marine |
1,160 |
1,254 |
(94) |
5 |
3 |
31 |
26 |
|||||||||||||
RV and other consumer |
69 |
79 |
(10) |
1 |
— |
— |
— |
|||||||||||||
Total consumer loans |
1,604 |
1,734 |
(130) |
11 |
7 |
47 |
44 |
|||||||||||||
Total exit loans in loan portfolio |
$ |
2,589 |
$ |
2,758 |
$ |
(169) |
$ |
10 |
$ |
(1) |
$ |
63 |
$ |
66 |
||||||
Discontinued operations — education lending business (not included in exit loans above) (b) |
$ |
4,992 |
$ |
5,086 |
$ |
(94) |
$ |
7 |
$ |
12 |
$ |
19 |
$ |
15 |
||||||
(a) |
Includes (1) the business aviation, commercial vehicle, office products, construction and industrial leases; (2) Canadian lease financing portfolios; and (3) all remaining balances related to lease in, lease out; sale in, lease out; service contract leases; and qualified technological equipment leases. |
(b) |
Includes loans in Key's consolidated education loan securitization trusts. |
(c) |
Credit amounts indicate recoveries exceeded charge-offs. |
Asset Quality Statistics From Continuing Operations |
||||||||||||||||
(dollars in millions) |
||||||||||||||||
2Q13 |
1Q13 |
4Q12 |
3Q12 |
2Q12 |
||||||||||||
Net loan charge-offs |
$ |
45 |
$ |
49 |
$ |
58 |
$ |
109 |
$ |
77 |
||||||
Net loan charge-offs to average total loans |
.34 |
% |
.38 |
% |
.44 |
% |
.86 |
% |
.63 |
% |
||||||
Allowance for loan and lease losses to annualized net loan charge-offs |
485.33 |
449.37 |
384.85 |
204.78 |
286.74 |
|||||||||||
Allowance for loan and lease losses |
$ |
876 |
$ |
893 |
$ |
888 |
$ |
888 |
$ |
888 |
||||||
Allowance for credit losses (a) |
913 |
925 |
917 |
931 |
939 |
|||||||||||
Allowance for loan and lease losses to period-end loans |
1.65 |
% |
1.70 |
% |
1.68 |
% |
1.73 |
% |
1.79 |
% |
||||||
Allowance for credit losses to period-end loans |
1.72 |
1.76 |
1.74 |
1.81 |
1.89 |
|||||||||||
Allowance for loan and lease losses to nonperforming loans |
134.36 |
137.38 |
131.75 |
135.99 |
135.16 |
|||||||||||
Allowance for credit losses to nonperforming loans |
140.03 |
142.31 |
136.05 |
142.57 |
142.92 |
|||||||||||
Nonperforming loans at period end (b) |
$ |
652 |
$ |
650 |
$ |
674 |
$ |
653 |
$ |
657 |
||||||
Nonperforming assets at period end |
693 |
705 |
735 |
718 |
751 |
|||||||||||
Nonperforming loans to period-end portfolio loans |
1.23 |
% |
1.24 |
% |
1.28 |
% |
1.27 |
% |
1.32 |
% |
||||||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets |
1.30 |
1.34 |
1.39 |
1.39 |
1.51 |
|||||||||||
(a) |
Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related commitments. |
|||||||||||||||
(b) |
June 30, 2013, March 31, 2013, December 31, 2012, and September 30, 2012 amounts exclude $19 million, $22 million, $23 million, and $25 million, respectively, of purchased credit impaired loans acquired in July 2012. |
Summary of Loan and Lease Loss Experience From Continuing Operations |
|||||||||||||||
(dollars in millions) |
|||||||||||||||
Three months ended |
Six months ended |
||||||||||||||
6-30-13 |
3-31-13 |
6-30-12 |
6-30-13 |
6-30-12 |
|||||||||||
Average loans outstanding |
$ |
52,696 |
$ |
52,626 |
$ |
49,446 |
$ |
52,661 |
$ |
49,438 |
|||||
Allowance for loan and lease losses at beginning of period |
$ |
893 |
$ |
888 |
$ |
944 |
$ |
888 |
$ |
1,004 |
|||||
Loans charged off: |
|||||||||||||||
Commercial, financial and agricultural |
15 |
14 |
23 |
29 |
49 |
||||||||||
Real estate — commercial mortgage |
3 |
13 |
23 |
16 |
46 |
||||||||||
Real estate — construction |
1 |
1 |
5 |
2 |
16 |
||||||||||
Total commercial real estate loans |
4 |
14 |
28 |
18 |
62 |
||||||||||
Commercial lease financing |
2 |
6 |
16 |
8 |
20 |
||||||||||
Total commercial loans |
21 |
34 |
67 |
55 |
131 |
||||||||||
Real estate — residential mortgage |
4 |
6 |
7 |
10 |
13 |
||||||||||
Home equity: |
|||||||||||||||
Key Community Bank |
18 |
18 |
23 |
36 |
48 |
||||||||||
Other |
6 |
6 |
9 |
12 |
17 |
||||||||||
Total home equity loans |
24 |
24 |
32 |
48 |
65 |
||||||||||
Consumer other — Key Community Bank |
7 |
9 |
10 |
16 |
20 |
||||||||||
Credit cards |
8 |
8 |
— |
16 |
— |
||||||||||
Consumer other: |
|||||||||||||||
Marine |
9 |
8 |
13 |
17 |
30 |
||||||||||
Other |
1 |
1 |
2 |
2 |
4 |
||||||||||
Total consumer other |
10 |
9 |
15 |
19 |
34 |
||||||||||
Total consumer loans |
53 |
56 |
64 |
109 |
132 |
||||||||||
Total loans charged off |
74 |
90 |
131 |
164 |
263 |
||||||||||
Recoveries: |
|||||||||||||||
Commercial, financial and agricultural |
7 |
12 |
20 |
19 |
31 |
||||||||||
Real estate — commercial mortgage |
5 |
5 |
14 |
10 |
16 |
||||||||||
Real estate — construction |
— |
8 |
1 |
8 |
2 |
||||||||||
Total commercial real estate loans |
5 |
13 |
15 |
18 |
18 |
||||||||||
Commercial lease financing |
4 |
4 |
6 |
8 |
10 |
||||||||||
Total commercial loans |
16 |
29 |
41 |
45 |
59 |
||||||||||
Real estate — residential mortgage |
— |
— |
1 |
— |
2 |
||||||||||
Home equity: |
|||||||||||||||
Key Community Bank |
4 |
2 |
2 |
6 |
4 |
||||||||||
Other |
1 |
2 |
2 |
3 |
3 |
||||||||||
Total home equity loans |
5 |
4 |
4 |
9 |
7 |
||||||||||
Consumer other — Key Community Bank |
2 |
2 |
2 |
4 |
3 |
||||||||||
Credit cards |
2 |
— |
— |
2 |
— |
||||||||||
Consumer other: |
|||||||||||||||
Marine |
4 |
5 |
6 |
9 |
13 |
||||||||||
Other |
— |
1 |
— |
1 |
1 |
||||||||||
Total consumer other |
4 |
6 |
6 |
10 |
14 |
||||||||||
Total consumer loans |
13 |
12 |
13 |
25 |
26 |
||||||||||
Total recoveries |
29 |
41 |
54 |
70 |
85 |
||||||||||
Net loan charge-offs |
(45) |
(49) |
(77) |
(94) |
(178) |
||||||||||
Provision (credit) for loan and lease losses |
28 |
55 |
21 |
83 |
63 |
||||||||||
Foreign currency translation adjustment |
— |
(1) |
— |
(1) |
(1) |
||||||||||
Allowance for loan and lease losses at end of period |
$ |
876 |
$ |
893 |
$ |
888 |
$ |
876 |
$ |
888 |
|||||
Liability for credit losses on lending-related commitments at beginning of period |
$ |
32 |
$ |
29 |
$ |
45 |
$ |
29 |
$ |
45 |
|||||
Provision (credit) for losses on lending-related commitments |
5 |
3 |
6 |
8 |
6 |
||||||||||
Liability for credit losses on lending-related commitments at end of period (a) |
$ |
37 |
$ |
32 |
$ |
51 |
$ |
37 |
$ |
51 |
|||||
Total allowance for credit losses at end of period |
$ |
913 |
$ |
925 |
$ |
939 |
$ |
913 |
$ |
939 |
|||||
Net loan charge-offs to average total loans |
.34 |
% |
.38 |
% |
.63 |
% |
.36 |
% |
.72 |
% |
|||||
Allowance for loan and lease losses to annualized net loan charge-offs |
485.33 |
449.37 |
286.74 |
462.13 |
248.08 |
||||||||||
Allowance for loan and lease losses to period-end loans |
1.65 |
1.70 |
1.79 |
1.65 |
1.79 |
||||||||||
Allowance for credit losses to period-end loans |
1.72 |
1.76 |
1.89 |
1.72 |
1.89 |
||||||||||
Allowance for loan and lease losses to nonperforming loans |
134.36 |
137.38 |
135.16 |
134.36 |
135.16 |
||||||||||
Allowance for credit losses to nonperforming loans |
140.03 |
142.31 |
142.92 |
140.03 |
142.92 |
||||||||||
Discontinued operations — education lending business: |
|||||||||||||||
Loans charged off |
$ |
12 |
$ |
16 |
$ |
16 |
$ |
28 |
$ |
39 |
|||||
Recoveries |
5 |
4 |
4 |
9 |
8 |
||||||||||
Net loan charge-offs |
$ |
(7) |
$ |
(12) |
$ |
(12) |
$ |
(19) |
$ |
(31) |
|||||
(a) Included in "accrued expense and other liabilities" on the balance sheet. |
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations |
|||||||||||||||
(dollars in millions) |
|||||||||||||||
6-30-13 |
3-31-13 |
12-31-12 |
9-30-12 |
6-30-12 |
|||||||||||
Commercial, financial and agricultural |
$ |
146 |
$ |
142 |
$ |
99 |
$ |
132 |
$ |
141 |
|||||
Real estate — commercial mortgage |
106 |
114 |
120 |
134 |
172 |
||||||||||
Real estate — construction |
26 |
27 |
56 |
53 |
68 |
||||||||||
Total commercial real estate loans |
132 |
141 |
176 |
187 |
240 |
||||||||||
Commercial lease financing |
14 |
12 |
16 |
18 |
18 |
||||||||||
Total commercial loans |
292 |
295 |
291 |
337 |
399 |
||||||||||
Real estate — residential mortgage (a) |
94 |
96 |
103 |
83 |
78 |
||||||||||
Home equity: |
|||||||||||||||
Key Community Bank |
205 |
199 |
210 |
171 |
141 |
||||||||||
Other |
16 |
18 |
21 |
18 |
17 |
||||||||||
Total home equity loans (a) |
221 |
217 |
231 |
189 |
158 |
||||||||||
Consumer other — Key Community Bank |
3 |
3 |
2 |
3 |
2 |
||||||||||
Credit cards |
11 |
13 |
11 |
8 |
— |
||||||||||
Consumer other: |
|||||||||||||||
Marine |
30 |
25 |
34 |
31 |
19 |
||||||||||
Other |
1 |
1 |
2 |
2 |
1 |
||||||||||
Total consumer other |
31 |
26 |
36 |
33 |
20 |
||||||||||
Total consumer loans |
360 |
355 |
383 |
316 |
258 |
||||||||||
Total nonperforming loans (b) |
652 |
650 |
674 |
653 |
657 |
||||||||||
Nonperforming loans held for sale |
14 |
23 |
25 |
19 |
38 |
||||||||||
OREO |
18 |
21 |
22 |
29 |
28 |
||||||||||
Other nonperforming assets |
9 |
11 |
14 |
17 |
28 |
||||||||||
Total nonperforming assets |
$ |
693 |
$ |
705 |
$ |
735 |
$ |
718 |
$ |
751 |
|||||
Accruing loans past due 90 days or more |
$ |
80 |
$ |
83 |
$ |
78 |
$ |
89 |
$ |
131 |
|||||
Accruing loans past due 30 through 89 days |
251 |
368 |
424 |
354 |
362 |
||||||||||
Restructured loans — accruing and nonaccruing (c) |
311 |
294 |
320 |
323 |
274 |
||||||||||
Restructured loans included in nonperforming loans (c) |
195 |
178 |
249 |
217 |
163 |
||||||||||
Nonperforming assets from discontinued operations — education lending business |
19 |
15 |
20 |
22 |
18 |
||||||||||
Nonperforming loans to period-end portfolio loans |
1.23 |
% |
1.24 |
% |
1.28 |
% |
1.27 |
% |
1.32 |
% |
|||||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets |
1.30 |
1.34 |
1.39 |
1.39 |
1.51 |
(a) |
All of the increase in real estate — residential mortgage and $26 million of the increase in total home equity loans from September 30, 2012 to December 31, 2012 was related to regulatory guidance issued in the second and third quarters of 2012. |
(b) |
June 30, 2013, March 31, 2013, December 31, 2012, and September 30, 2012 amounts exclude $19 million, $22 million, $23 million, and $25 million, respectively, of purchased credit impaired loans acquired in July 2012. |
(c) |
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. The majority of the increase in restructured loans included in nonperforming loans during the second half of 2012 was a result of updated regulatory guidance in the third quarter of 2012. |
Summary of Changes in Nonperforming Loans From Continuing Operations |
|||||||||||||||
(in millions) |
|||||||||||||||
2Q13 |
1Q13 |
4Q12 |
3Q12 |
2Q12 |
|||||||||||
Balance at beginning of period |
$ |
650 |
$ |
674 |
$ |
653 |
$ |
657 |
$ |
666 |
|||||
Loans placed on nonaccrual status |
160 |
278 |
288 |
276 |
350 |
||||||||||
Charge-offs |
(74) |
(91) |
(104) |
(141) |
(131) |
||||||||||
Loans sold |
(5) |
(42) |
(44) |
(43) |
(49) |
||||||||||
Payments |
(36) |
(83) |
(78) |
(74) |
(110) |
||||||||||
Transfers to OREO |
(7) |
(7) |
(7) |
(10) |
(6) |
||||||||||
Transfers to nonperforming loans held for sale |
— |
— |
(8) |
— |
(16) |
||||||||||
Transfers to other nonperforming assets |
— |
— |
(1) |
— |
(14) |
||||||||||
Loans returned to accrual status |
(36) |
(79) |
(25) |
(12) |
(33) |
||||||||||
Balance at end of period (a) |
$ |
652 |
$ |
650 |
$ |
674 |
$ |
653 |
$ |
657 |
|||||
(a) June 30, 2013, March 31, 2013, December 31, 2012, and September 30, 2012 amounts exclude $19 million, $22 million, $23 million, and $25 million, |
|||||||||||||||
respectively, of purchased credit impaired loans acquired in July 2012. |
|||||||||||||||
Summary of Changes in Nonperforming Loans Held For Sale From Continuing Operations |
|||||||||||||||
(in millions) |
|||||||||||||||
2Q13 |
1Q13 |
4Q12 |
3Q12 |
2Q12 |
|||||||||||
Balance at beginning of period |
$ |
23 |
$ |
25 |
$ |
19 |
$ |
38 |
$ |
24 |
|||||
Transfers in |
— |
— |
8 |
— |
16 |
||||||||||
Net advances / (payments) |
(1) |
— |
(1) |
(1) |
— |
||||||||||
Loans sold |
(8) |
— |
(1) |
(17) |
(1) |
||||||||||
Transfers to OREO |
— |
— |
— |
(1) |
— |
||||||||||
Valuation adjustments |
— |
(2) |
— |
— |
(1) |
||||||||||
Balance at end of period |
$ |
14 |
$ |
23 |
$ |
25 |
$ |
19 |
$ |
38 |
|||||
Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations |
|||||||||||||||
(in millions) |
|||||||||||||||
2Q13 |
1Q13 |
4Q12 |
3Q12 |
2Q12 |
|||||||||||
Balance at beginning of period |
$ |
21 |
$ |
22 |
$ |
29 |
$ |
28 |
$ |
61 |
|||||
Properties acquired — nonperforming loans |
7 |
7 |
7 |
11 |
6 |
||||||||||
Valuation adjustments |
(2) |
(3) |
(2) |
(2) |
(7) |
||||||||||
Properties sold |
(8) |
(5) |
(12) |
(8) |
(32) |
||||||||||
Balance at end of period |
$ |
18 |
$ |
21 |
$ |
22 |
$ |
29 |
$ |
28 |
Line of Business Results |
||||||||||||||||||||||
(dollars in millions) |
||||||||||||||||||||||
Percent change 2Q13 vs. |
||||||||||||||||||||||
2Q13 |
1Q13 |
4Q12 |
3Q12 |
2Q12 |
1Q13 |
2Q12 |
||||||||||||||||
Key Community Bank |
||||||||||||||||||||||
Summary of operations |
||||||||||||||||||||||
Total revenue (TE) |
$ |
555 |
$ |
549 |
$ |
580 |
$ |
575 |
$ |
537 |
1.1 |
% |
3.4 |
% |
||||||||
Provision (credit) for loan and lease losses |
41 |
59 |
26 |
123 |
(4) |
(30.5) |
N/M |
|||||||||||||||
Noninterest expense |
456 |
440 |
502 |
478 |
455 |
3.6 |
.2 |
|||||||||||||||
Net income (loss) attributable to Key |
36 |
31 |
32 |
(16) |
54 |
16.1 |
(33.3) |
|||||||||||||||
Average loans and leases |
29,161 |
28,977 |
28,629 |
27,764 |
26,413 |
.6 |
10.4 |
|||||||||||||||
Average deposits |
49,473 |
49,349 |
49,839 |
49,269 |
47,946 |
.3 |
3.2 |
|||||||||||||||
Net loan charge-offs |
42 |
47 |
12 |
91 |
46 |
(10.6) |
(8.7) |
|||||||||||||||
Net loan charge-offs to average total loans |
.58 |
% |
.66 |
% |
.17 |
% |
1.30 |
% |
.70 |
% |
N/A |
N/A |
||||||||||
Nonperforming assets at period end |
$ |
475 |
$ |
495 |
$ |
459 |
$ |
422 |
$ |
401 |
(4.0) |
18.5 |
||||||||||
Return on average allocated equity |
5.02 |
% |
4.38 |
% |
4.41 |
% |
(2.25) |
% |
7.82 |
% |
N/A |
N/A |
||||||||||
Average full-time equivalent employees |
8,437 |
8,830 |
8,998 |
9,193 |
8,742 |
(4.5) |
(3.5) |
|||||||||||||||
Key Corporate Bank |
||||||||||||||||||||||
Summary of operations |
||||||||||||||||||||||
Total revenue (TE) |
$ |
376 |
$ |
379 |
$ |
403 |
$ |
370 |
$ |
371 |
(.8) |
% |
1.3 |
% |
||||||||
Provision (credit) for loan and lease losses |
(10) |
4 |
11 |
(3) |
4 |
N/M |
N/M |
|||||||||||||||
Noninterest expense |
202 |
210 |
207 |
201 |
213 |
(3.8) |
(5.2) |
|||||||||||||||
Net income (loss) attributable to Key |
117 |
105 |
116 |
109 |
95 |
11.4 |
23.2 |
|||||||||||||||
Average loans and leases |
20,133 |
20,044 |
19,481 |
18,893 |
18,541 |
.4 |
8.6 |
|||||||||||||||
Average loans held for sale |
466 |
409 |
538 |
441 |
514 |
13.9 |
(9.3) |
|||||||||||||||
Average deposits |
15,606 |
13,968 |
13,681 |
12,879 |
12,414 |
11.7 |
25.7 |
|||||||||||||||
Net loan charge-offs |
(6) |
(1) |
21 |
8 |
9 |
N/M |
N/M |
|||||||||||||||
Net loan charge-offs to average total loans |
(.12) |
% |
(.02) |
% |
.43 |
% |
.17 |
% |
.20 |
% |
N/A |
N/A |
||||||||||
Nonperforming assets at period end |
$ |
136 |
$ |
136 |
$ |
175 |
$ |
197 |
$ |
248 |
— |
(45.2) |
||||||||||
Return on average allocated equity |
28.79 |
% |
26.37 |
% |
28.26 |
% |
26.06 |
% |
22.00 |
% |
N/A |
N/A |
||||||||||
Average full-time equivalent employees |
1,950 |
1,926 |
1,914 |
2,003 |
2,028 |
1.2 |
(3.8) |
|||||||||||||||
TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful |
SOURCE KeyCorp
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