KeyCorp Reports Third Quarter 2013 Net Income Of $229 Million, Or $.25 Per Common Share
Loans up 5% from prior year, driven by an 11% increase in commercial, financial and agricultural
Achieved expense target with $207 million in annualized savings
Credit quality improves, with nonperforming assets down 19% from prior year
CLEVELAND, Oct. 16, 2013 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced third quarter net income from continuing operations attributable to Key common shareholders of $229 million, or $.25 per common share, compared to $193 million, or $.21 per common share for the second quarter of 2013, and $211 million, or $.22 per common share for the third quarter of 2012. During the third quarter, Key incurred $41 million, or $.03 per common share of costs related to both its previously announced efficiency initiative and a pension settlement charge.
For the nine months ended September 30, 2013, net income from continuing operations attributable to Key common shareholders was $618 million, or $.67 per common share, compared to $623 million, or $.66 per common share for the same period one year ago. During the nine months ended September 30, 2013, Key incurred $93 million, or $.06 per common share of costs related to both its efficiency initiative and a pension settlement charge.
CURRENT QUARTER DEVELOPMENTS
Executing on growth initiatives
- Acquired commercial mortgage servicing portfolio and special servicing business, adding over $1 billion in low-cost funding through escrow deposit balances
- Grew and expanded client relationships by executing on Key's relationship model and focusing on targeted client segments
Continued progress on efficiency initiative
- Achieved annualized run rate savings of $207 million, focused on further efficiency improvements
- Recognized expenses of $41 million, or $.03 per common share, associated with the efficiency initiative and a pension settlement charge during the third quarter of 2013
- Consolidated eight branches during the third quarter, reaching 65 total consolidated branches since the launch of the efficiency initiative
Focused on capital management priorities
- Completed Victory divestiture on July 31, realizing an after-tax net gain of $92 million in discontinued operations; additional gain may be realized, resulting from consents received through January 2014
- Repurchased $198 million of common shares during the third quarter of 2013
"Key's results reflect another quarter of improved performance as we continued to grow our businesses, improve efficiency and execute on our capital priorities," said Chairman and Chief Executive Officer Beth Mooney. "Revenue benefited from solid loan growth, driven by an 11% increase from the prior year in commercial, financial and agricultural loans, as well as improved trends in several of our fee-based businesses. These results reflect the success of our distinctive business model and our progress in implementing our growth initiatives. Expense levels continued to be well-managed. Importantly, we accomplished our goal that we set in June of 2012 to achieve annualized cost savings of $200 million. This is an important milestone for us, and we believe that our cost discipline is now embedded within our culture, which will allow us to drive further efficiency improvements. Credit quality also improved, with net charge-offs to average loans now at their lowest level since the first quarter of 2007."
"We continued to invest in our business, as well as address areas that do not fit our relationship strategy. This quarter, we executed on both parts of our strategy by completing the previously announced acquisition of commercial real estate servicing and the sale of Victory Capital Management," continued Mooney.
THIRD QUARTER 2013 FINANCIAL RESULTS
Compared with Third Quarter of 2012, from continuing operations
- Total revenue decreased $53 million
- Taxable-equivalent net interest income of $584 million, up $6 million; third quarter of 2013 included an $8 million write-off of capitalized loan origination costs due to the early termination of leveraged leases compared to $13 million in the third quarter of 2012
- Noninterest income declined $59 million primarily due to a $54 million gain associated with the redemption of trust preferred securities one year ago
- Net interest margin of 3.11%, down 12 basis points
- Continued average loan growth driven by 11.1% increase in commercial, financial and agricultural loans
- Average deposits increased $3.4 billion, or 5.4%, partially attributable to $1 billion in escrow deposit balances from the commercial mortgage servicing portfolio and special servicing business acquisition
- Noninterest expense up $4 million, which included a pension settlement charge of $25 million and $16 million associated with the efficiency initiative compared to $9 million one year ago
- Net loan charge-offs decreased 66.1% to .28% of average total loans
- Maintained solid capital position with Tier 1 common equity of 11.11%
Compared with Second Quarter of 2013, from continuing operations
- Total revenue increased $28 million
- Taxable-equivalent net interest income down $2 million, partially due to a write-off of $8 million of capitalized loan origination costs associated with the early termination of leveraged leases
- Noninterest income up $30 million primarily due to a $23 million gain on the early termination of leveraged leases
- Net interest margin down two basis points due to the write-off of capitalized loan origination costs associated with the early termination of leveraged leases, resulting in a four basis point decline
- Average loans up 1.1% primarily due to an increase in commercial, financial and agricultural loans
- Average deposits up slightly due to addition of escrow deposit balances from the commercial mortgage servicing portfolio and special servicing business acquisition
- Noninterest expense increased $5 million, which included a pension settlement charge of $25 million partially offset by a $21 million decrease in costs associated with the efficiency initiative
- Net loan charge-offs decreased 17.8%
Discontinued Operations
- Realized an after-tax gain of $92 million on Victory divestiture; the cash portion of this gain was $72 million
- Recognized a net after-tax loss of $48 million related to the fair value of the loans and securities in Key's ten education loan securitization trusts
The remaining discussion pertains only to continuing operations unless otherwise noted.
Selected Financial Highlights |
||||||||||||||||
dollars in millions, except per share data |
Change 3Q13 vs. |
|||||||||||||||
3Q13 |
2Q13 |
3Q12 |
2Q13 |
3Q12 |
||||||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
229 |
$ |
193 |
$ |
211 |
18.7 |
% |
8.5 |
% |
||||||
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution |
.25 |
.21 |
.22 |
19.0 |
13.6 |
|||||||||||
Return on average total assets from continuing operations |
1.12 |
% |
.95 |
% |
1.06 |
% |
N/A |
N/A |
||||||||
Tier 1 common equity (a) |
11.11 |
11.18 |
11.30 |
N/A |
N/A |
|||||||||||
Book value at period end |
$ |
11.05 |
$ |
10.89 |
$ |
10.64 |
1.5 |
3.9 |
% |
|||||||
Net interest margin (TE) from continuing operations |
3.11 |
% |
3.13 |
% |
3.23 |
% |
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 3Q13 vs. |
|||||||||||||||
3Q13 |
2Q13 |
3Q12 |
2Q13 |
3Q12 |
||||||||||||
Net interest income (TE) |
$ |
584 |
$ |
586 |
$ |
578 |
(.3) |
% |
1.0 |
% |
||||||
Noninterest income |
459 |
429 |
518 |
7.0 |
(11.4) |
|||||||||||
Total revenue |
$ |
1,043 |
$ |
1,015 |
$ |
1,096 |
2.8 |
% |
(4.8) |
% |
||||||
TE = Taxable Equivalent |
Taxable-equivalent net interest income was $584 million for the third quarter of 2013, and the net interest margin was 3.11%. These results compare to taxable-equivalent net interest income of $578 million and a net interest margin of 3.23% for the third quarter of 2012. The increase in net interest income was primarily due to a decline of $5 million of recognized unamortized lease origination costs related to the early termination of leveraged leases in the third quarter of 2013 compared to the third quarter of 2012. The decrease in the net interest margin was primarily a result of earning asset yields falling faster than the cost of funds over the past year.
Compared to the second quarter of 2013, taxable-equivalent net interest income decreased by $2 million, and the net interest margin declined by two basis points. The decrease in net interest income was primarily due to the recognition of unamortized lease origination costs of $8 million in connection with the early termination of two leveraged leases in the third quarter of 2013. The decline was partially offset by a higher day count in the third quarter and lower funding costs from the maturity of higher rate debt and certificates of deposit. The decrease in the net interest margin was largely attributable to the recognition of unamortized lease origination costs and lower yields on loans. This decrease was partially offset by a lower cost of funds.
Noninterest Income |
||||||||||||||||
dollars in millions |
Change 3Q13 vs. |
|||||||||||||||
3Q13 |
2Q13 |
3Q12 |
2Q13 |
3Q12 |
||||||||||||
Trust and investment services income |
$ |
100 |
$ |
100 |
$ |
94 |
— |
6.4 |
% |
|||||||
Investment banking and debt placement fees |
86 |
84 |
83 |
2.4 |
% |
3.6 |
||||||||||
Service charges on deposit accounts |
73 |
71 |
74 |
2.8 |
(1.4) |
|||||||||||
Operating lease income and other leasing gains |
43 |
19 |
66 |
126.3 |
(34.8) |
|||||||||||
Corporate services income |
44 |
43 |
39 |
2.3 |
12.8 |
|||||||||||
Cards and payments income |
43 |
42 |
37 |
2.4 |
16.2 |
|||||||||||
Corporate-owned life insurance income |
26 |
31 |
26 |
(16.1) |
— |
|||||||||||
Consumer mortgage income |
3 |
6 |
11 |
(50.0) |
(72.7) |
|||||||||||
Net gains (losses) from principal investing |
17 |
7 |
11 |
142.9 |
54.5 |
|||||||||||
Other income |
24 |
26 |
77 |
(7.7) |
(68.8) |
|||||||||||
Total noninterest income |
$ |
459 |
$ |
429 |
$ |
518 |
7.0 |
% |
(11.4) |
% |
||||||
Key's noninterest income was $459 million for the third quarter of 2013, compared to $518 million for the year-ago quarter. Other income declined $53 million due to a $54 million gain associated with the redemption of trust preferred securities one year ago. Operating lease income and other leasing gains also decreased $23 million, partially due to a $39 million gain on the early termination of leveraged leases one year ago compared to a $23 million gain on the early termination of leveraged leases in the current quarter. These decreases were partially offset by increases in trust and investment services income, cards and payments income, and net gains (losses) from principal investing of $6 million each.
Compared to the second quarter of 2013, noninterest income increased by $30 million. Operating lease income and other leasing gains increased $24 million primarily due to a $23 million gain on the early termination of leveraged leases. Net gains (losses) from principal investing also increased $10 million. These increases were partially offset by a $5 million decline in corporate-owned life insurance income.
Noninterest Expense |
||||||||||||||||
dollars in millions |
Change 3Q13 vs. |
|||||||||||||||
3Q13 |
2Q13 |
3Q12 |
2Q13 |
3Q12 |
||||||||||||
Personnel expense |
$ |
414 |
$ |
406 |
$ |
399 |
2.0 |
% |
3.8 |
% |
||||||
Nonpersonnel expense |
302 |
305 |
313 |
(1.0) |
(3.5) |
|||||||||||
Total noninterest expense |
$ |
716 |
$ |
711 |
$ |
712 |
.7 |
% |
.6 |
% |
||||||
Key's noninterest expense was $716 million for the third quarter of 2013, compared to $712 million for the same period last year. Excluding the $41 million in expenses related to Key's efficiency initiative and the pension settlement charge compared to the $9 million in efficiency initiative expenses one year ago, noninterest expense was down $28 million from prior year. Personnel expense increased $15 million. Employee benefits, a component of personnel expense, increased $24 million due to a $25 million pension settlement charge as a result of an increase in lump sum payments made from the pension plans. This increase in employee benefits was partially offset by a $5 million decrease in salaries and a $2 million decline in both incentive compensation and stock-based compensation. Nonpersonnel expense decreased $11 million from one year ago primarily due to a decline in business services and professional fees.
Compared to the second quarter of 2013, noninterest expense increased by $5 million. Excluding the $41 million in expenses related to Key's efficiency initiative and the pension settlement charge compared to the $37 million in efficiency initiative expenses last quarter, noninterest expense was up $1 million from the second quarter of 2013. Personnel expense increased $8 million. Employee benefits, a component of personnel expense, increased $22 million due to a $25 million pension settlement charge as a result of an increase in lump sum payments made from the pension plans. Incentive compensation also increased $4 million. These increases were partially offset by a $12 million decline in severance expense and a $5 million decrease in salaries. Nonpersonnel expense declined $3 million from the second quarter of 2013. Net occupancy decreased $6 million, which was partially offset by an increase in marketing expense of $5 million.
BALANCE SHEET HIGHLIGHTS
As of September 30, 2013, Key had total assets of $90.7 billion compared to $90.6 billion at June 30, 2013, and $87.0 billion at September 30, 2012.
Average Loans |
||||||||||||||||
dollars in millions |
Change 9-30-13 vs. |
|||||||||||||||
9-30-13 |
6-30-13 |
9-30-12 |
6-30-13 |
9-30-12 |
||||||||||||
Commercial, financial and agricultural (a) |
$ |
23,864 |
$ |
23,480 |
$ |
21,473 |
1.6 |
% |
11.1 |
% |
||||||
Other commercial loans |
13,281 |
13,290 |
13,605 |
(.1) |
(2.4) |
|||||||||||
Total home equity loans |
10,611 |
10,381 |
10,202 |
2.2 |
4.0 |
|||||||||||
Other consumer loans |
5,515 |
5,545 |
5,415 |
(.5) |
1.8 |
|||||||||||
Total loans |
$ |
53,271 |
$ |
52,696 |
$ |
50,695 |
1.1 |
% |
5.1 |
% |
||||||
(a) |
Commercial, financial and agricultural average balance for the three months ended September 30, 2013, June 30, 2013, and September 30, 2012, includes $96 million, $96 million, and $54 million, respectively, of assets from commercial credit cards. |
Average loans were $53.3 billion for the third quarter of 2013, an increase of $2.6 billion compared to the third quarter of 2012. Commercial, financial and agricultural loans grew by $2.4 billion over the year-ago quarter, with strong growth across Key's lending to business clients. In addition, home equity loans grew $409 million primarily as a result of lending campaigns launched in the Fall of 2012 and Spring of 2013. Credit cards also increased $268 million as a result of Key's third quarter 2012 credit card portfolio acquisition. Loan growth was partially offset by declines in the equipment lease portfolio, which included the early termination of certain leveraged leases, and run-off of consumer loans in the designated exit portfolio.
Compared to the second quarter of 2013, average loans increased by $575 million. This average loan growth was attributable to an increase in commercial, financial and agricultural loans of $384 million mostly in the Key Equipment Finance and KeyBank Real Estate Capital lines of business. Home equity loans also grew $230 million, benefitting from Key's Spring lending promotion. This growth in loans was partially offset by the impact of the early termination of certain leveraged leases and consumer exit loan run-off.
Average Deposits |
||||||||||||||||
dollars in millions |
Change 9-30-13 vs. |
|||||||||||||||
9-30-13 |
6-30-13 |
9-30-12 |
6-30-13 |
9-30-12 |
||||||||||||
Non-time deposits (a) |
$ |
58,620 |
$ |
57,691 |
$ |
53,432 |
1.6 |
% |
9.7 |
% |
||||||
Certificates of deposits ($100,000 or more) |
2,785 |
2,975 |
3,420 |
(6.4) |
(18.6) |
|||||||||||
Other time deposits |
3,957 |
4,202 |
5,158 |
(5.8) |
(23.3) |
|||||||||||
Total deposits |
$ |
65,362 |
$ |
64,868 |
$ |
62,010 |
.8 |
% |
5.4 |
% |
||||||
Cost of total deposits (a) |
.22 |
% |
.26 |
% |
.38 |
% |
N/A |
N/A |
||||||||
(a) |
Excludes deposits in foreign office. |
|||||||||||||||
N/A = Not Applicable |
Average deposits, excluding deposits in foreign office, totaled $65.4 billion for the third quarter of 2013, an increase of $3.4 billion compared to the year-ago quarter. The growth was driven by corporate clients and the addition of escrow demand deposits from Key's servicing business acquisition. The overall growth resulted from an increase in demand deposits of $2.5 billion and interest-bearing non-time deposits of $2.7 billion. This deposit growth was partially offset by $1.8 billion of run-off of certificates of deposit and other time deposits.
Compared to the second quarter of 2013, average deposits, excluding deposits in foreign office, increased by $494 million. This deposit growth was primarily due to $1 billion of acquired escrow deposits that were added during the quarter and an increase in interest-bearing commercial deposits. This growth was partially offset by expected money market deposit withdrawals and run-off in certificates of deposit.
ASSET QUALITY |
||||||||||||||||
dollars in millions |
Change 3Q13 vs. |
|||||||||||||||
3Q13 |
2Q13 |
3Q12 |
2Q13 |
3Q12 |
||||||||||||
Net loan charge-offs |
$ |
37 |
$ |
45 |
$ |
109 |
(17.8) |
% |
(66.1) |
% |
||||||
Net loan charge-offs to average total loans |
.28 |
% |
.34 |
% |
.86 |
% |
N/A |
N/A |
||||||||
Nonperforming loans at period end (a) |
$ |
541 |
$ |
652 |
$ |
653 |
(17.0) |
(17.2) |
||||||||
Nonperforming assets at period end |
579 |
693 |
718 |
(16.5) |
(19.4) |
|||||||||||
Allowance for loan and lease losses |
868 |
876 |
888 |
(.9) |
% |
(2.3) |
||||||||||
Allowance for loan and lease losses to nonperforming loans |
160.4 |
% |
134.4 |
% |
136.0 |
% |
N/A |
N/A |
||||||||
Provision (credit) for loan and lease losses |
$ |
28 |
$ |
28 |
$ |
109 |
— |
(74.3) |
% |
|||||||
(a) September 30, 2013, June 30, 2013, and September 30, 2012 amounts exclude $18 million, $19 million, and $25 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 third quarter of 2013, compared to $28 million for the second quarter of 2013 and $109 million for the year-ago quarter. Key's allowance for loan and lease losses was $868 million, or 1.62% of total period-end loans at September 30, 2013, compared to 1.65% at June 30, 2013, and 1.73% at September 30, 2012. During the third quarter of 2012, Key established an allowance for loan and lease losses for the acquired credit card and branch loans; the allowance for these loan and lease losses was approximately $29 million at September 30, 2012.
Net loan charge-offs for the third quarter of 2013 totaled $37 million, or .28% of average total loans. These results compare to $45 million, or .34% for the second quarter of 2013, and $109 million, or .86% for the same period last year. Net loan charge-offs in the third quarter of 2012 included $45 million of incremental net loan charge-offs reported in accordance with updated regulatory guidance requiring loans discharged through Chapter 7 bankruptcy and not reaffirmed by the borrower to be charged off to the collateral's fair market value less selling costs and classified as nonaccrual regardless of their delinquency status.
At September 30, 2013, Key's nonperforming loans totaled $541 million and represented 1.01% of period-end portfolio loans, compared to 1.23% at June 30, 2013 and 1.27% at September 30, 2012. Nonperforming loans at September 30, 2012 included $38 million that was the net carrying amount of the secured loans reclassified as troubled-debt restructurings under the updated regulatory guidance discussed above. Nonperforming assets at September 30, 2013 totaled $579 million and represented 1.08% of period-end portfolio loans and OREO and other nonperforming assets, compared to 1.30% at June 30, 2013, and 1.39% at September 30, 2012.
CAPITAL
Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at September 30, 2013.
Capital Ratios |
||||||||
9-30-13 |
6-30-13 |
9-30-12 |
||||||
Tier 1 common equity (a), (b) |
11.11 |
% |
11.18 |
% |
11.30 |
% |
||
Tier 1 risk-based capital (a) |
11.85 |
11.93 |
12.10 |
|||||
Total risk based capital (a) |
14.30 |
14.65 |
15.17 |
|||||
Tangible common equity to tangible assets (b) |
9.93 |
9.96 |
10.39 |
|||||
Leverage (a) |
11.32 |
11.25 |
11.37 |
|||||
(a) |
9-30-13 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 September 30, 2013, Key's estimated Tier 1 common equity and Tier 1 risk-based capital ratios stood at 11.11% and 11.85%, respectively. In addition, the tangible common equity ratio was 9.93% at September 30, 2013.
In July 2013, the Federal banking regulators approved the final Basel III capital framework for U.S. banking organizations (the "Regulatory Capital Rules"). While the Regulatory Capital Rules are effective January 1, 2014, the mandatory compliance date for Key begins on January 1, 2015, and is subject to transitional provisions extending to January 1, 2019. Key's estimated Tier 1 common equity as calculated under the Regulatory Capital Rules was 10.56% at September 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 3Q13 vs. |
||||||||||||||
3Q13 |
2Q13 |
3Q12 |
2Q13 |
3Q12 |
|||||||||||
Shares outstanding at beginning of period |
912,883 |
922,581 |
945,473 |
(1.1) |
% |
(3.4) |
% |
||||||||
Common shares repurchased |
(16,364) |
(10,786) |
(9,639) |
51.7 |
69.8 |
||||||||||
Shares reissued (returned) under employee benefit plans |
1,302 |
1,088 |
361 |
19.7 |
260.7 |
||||||||||
Shares outstanding at end of period |
897,821 |
912,883 |
936,195 |
(1.6) |
% |
(4.1) |
% |
||||||||
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. During the third quarter of 2013, Key completed $198 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 3Q13 vs. |
|||||||||||||||
3Q13 |
2Q13 |
3Q12 |
2Q13 |
3Q12 |
||||||||||||
Revenue from continuing operations (TE) |
||||||||||||||||
Key Community Bank |
$ |
551 |
$ |
556 |
$ |
575 |
(.9) |
% |
(4.2) |
% |
||||||
Key Corporate Bank |
377 |
375 |
370 |
.5 |
1.9 |
|||||||||||
Other Segments |
114 |
86 |
157 |
32.6 |
(27.4) |
|||||||||||
Total segments |
1,042 |
1,017 |
1,102 |
2.5 |
(5.4) |
|||||||||||
Reconciling items |
1 |
(2) |
(6) |
N/M |
N/M |
|||||||||||
Total |
$ |
1,043 |
$ |
1,015 |
$ |
1,096 |
2.8 |
% |
(4.8) |
% |
||||||
Income (loss) from continuing operations attributable to Key |
||||||||||||||||
Key Community Bank |
$ |
54 |
$ |
37 |
$ |
(16) |
45.9 |
% |
N/M |
|||||||
Key Corporate Bank |
96 |
116 |
109 |
(17.2) |
(11.9) |
% |
||||||||||
Other Segments |
92 |
70 |
104 |
31.4 |
(11.5) |
|||||||||||
Total segments |
242 |
223 |
197 |
8.5 |
22.8 |
|||||||||||
Reconciling items |
(7) |
(24) |
19 |
N/M |
N/M |
|||||||||||
Total |
$ |
235 |
$ |
199 |
$ |
216 |
18.1 |
% |
8.8 |
% |
||||||
TE = Taxable equivalent, N/M = Not Meaningful |
||||||||||||||||
Key Community Bank |
||||||||||||||||
dollars in millions |
Change 3Q13 vs. |
|||||||||||||||
3Q13 |
2Q13 |
3Q12 |
2Q13 |
3Q12 |
||||||||||||
Summary of operations |
||||||||||||||||
Net interest income (TE) |
$ |
357 |
$ |
357 |
$ |
376 |
— |
(5.1) |
% |
|||||||
Noninterest income |
194 |
199 |
199 |
(2.5) |
% |
(2.5) |
||||||||||
Total revenue (TE) |
551 |
556 |
575 |
(.9) |
(4.2) |
|||||||||||
Provision (credit) for loan and lease losses |
24 |
41 |
123 |
(41.5) |
(80.5) |
|||||||||||
Noninterest expense |
441 |
456 |
478 |
(3.3) |
(7.7) |
% |
||||||||||
Income (loss) before income taxes (TE) |
86 |
59 |
(26) |
45.8 |
N/M |
|||||||||||
Allocated income taxes (benefit) and TE adjustments |
32 |
22 |
(10) |
45.5 |
N/M |
|||||||||||
Net income (loss) attributable to Key |
$ |
54 |
$ |
37 |
$ |
(16) |
45.9 |
% |
N/M |
|||||||
Average balances |
||||||||||||||||
Loans and leases |
$ |
29,495 |
$ |
29,161 |
$ |
27,764 |
1.1 |
% |
6.2 |
% |
||||||
Total assets |
31,679 |
31,570 |
30,305 |
.3 |
4.5 |
|||||||||||
Deposits |
49,652 |
49,473 |
49,269 |
.4 |
.8 |
|||||||||||
Assets under management at period end |
$ |
25,574 |
$ |
24,395 |
$ |
21,988 |
(100.0) |
% |
(100.0) |
% |
||||||
TE = Taxable Equivalent, N/M = Not Meaningful |
||||||||||||||||
Additional Key Community Bank Data |
||||||||||||||||
dollars in millions |
Change 3Q13 vs. |
|||||||||||||||
3Q13 |
2Q13 |
3Q12 |
2Q13 |
3Q12 |
||||||||||||
Noninterest income |
||||||||||||||||
Trust and investment services income |
$ |
68 |
$ |
68 |
$ |
65 |
— |
4.6 |
% |
|||||||
Service charges on deposit accounts |
61 |
60 |
62 |
1.7 |
% |
(1.6) |
||||||||||
Cards and payments income |
36 |
37 |
33 |
(2.7) |
9.1 |
|||||||||||
Other noninterest income |
29 |
34 |
39 |
(14.7) |
(25.6) |
|||||||||||
Total noninterest income |
$ |
194 |
$ |
199 |
$ |
199 |
(2.5) |
% |
(2.5) |
% |
||||||
Average deposit balances |
||||||||||||||||
NOW and money market deposit accounts |
$ |
26,564 |
$ |
26,341 |
$ |
24,991 |
.8 |
% |
6.3 |
% |
||||||
Savings deposits |
2,510 |
2,536 |
2,368 |
(1.0) |
6.0 |
|||||||||||
Certificates of deposit ($100,000 or more) |
2,264 |
2,443 |
2,936 |
(7.3) |
(22.9) |
|||||||||||
Other time deposits |
3,949 |
4,195 |
5,137 |
(5.9) |
(23.1) |
|||||||||||
Deposits in foreign office |
278 |
284 |
292 |
(2.1) |
(4.8) |
|||||||||||
Noninterest-bearing deposits |
14,087 |
13,674 |
13,545 |
3.0 |
4.0 |
|||||||||||
Total deposits |
$ |
49,652 |
$ |
49,473 |
$ |
49,269 |
.4 |
% |
.8 |
% |
||||||
Home equity loans |
||||||||||||||||
Average balance |
$ |
10,247 |
$ |
9,992 |
$ |
9,734 |
||||||||||
Weighted-average loan-to-value ratio (at date of origination) |
71 |
% |
71 |
% |
71 |
% |
||||||||||
Percent first lien positions |
58 |
57 |
54 |
|||||||||||||
Other data |
||||||||||||||||
Branches |
1,044 |
1,052 |
1,087 |
|||||||||||||
Automated teller machines |
1,350 |
1,359 |
1,620 |
|||||||||||||
Key Community Bank Summary of Operations
- Continued credit card penetration and successful integration of branches in Western New York
- Nine consecutive quarters of average loan growth
- Core deposits up $2.3 billion, or 5.5% from the prior year
Key Community Bank recorded net income attributable to Key of $54 million for the third quarter of 2013, compared to a net loss attributable to Key of $16 million for the year-ago quarter.
Taxable-equivalent net interest income decreased by $19 million, or 5.1% from the third quarter of 2012 due to declines in the deposit spread in the current period as a result of the continued low-rate environment. Average loans and leases grew 6.2% while average deposits increased .8% from one year ago.
Noninterest income declined by $5 million, or 2.5% from the year-ago quarter. Consumer mortgage income decreased $8 million, and other income declined $3 million. These decreases were partially offset by increases in cards and payments income and trust and investment services income of $3 million each.
The provision for loan and lease losses decreased by $99 million, or 80.5% from the third quarter of 2012. During the third quarter of 2012, the application of updated regulatory guidance related to debts discharged through Chapter 7 bankruptcy increased the provision $45 million, and the acquisition of the credit card portfolio and Western New York branches increased the provision $32 million. Net loan charge-offs decreased $64 million from the same period one year ago, partially due to the application of the updated regulatory guidance in the third quarter of 2012 as discussed above.
Noninterest expense declined by $37 million, or 7.7 % from the year-ago quarter as a result of Key's efficiency initiative. Personnel expense decreased $17 million primarily due to declines in salaries, incentive compensation, and employee benefits. Nonpersonnel expense declined $20 million primarily due to declines in business services and professional fees, computer processing, and internally-allocated costs.
Key Corporate Bank |
||||||||||||||||
dollars in millions |
Change 3Q13 vs. |
|||||||||||||||
3Q13 |
2Q13 |
3Q12 |
2Q13 |
3Q12 |
||||||||||||
Summary of operations |
||||||||||||||||
Net interest income (TE) |
$ |
188 |
$ |
189 |
$ |
189 |
(.5) |
% |
(.5) |
% |
||||||
Noninterest income |
189 |
186 |
181 |
1.6 |
4.4 |
|||||||||||
Total revenue (TE) |
377 |
375 |
370 |
.5 |
1.9 |
|||||||||||
Provision (credit) for loan and lease losses |
13 |
(10) |
(3) |
N/M |
N/M |
|||||||||||
Noninterest expense |
217 |
202 |
201 |
7.4 |
8.0 |
|||||||||||
Income (loss) before income taxes (TE) |
147 |
183 |
172 |
(19.7) |
(14.5) |
|||||||||||
Allocated income taxes and TE adjustments |
51 |
67 |
63 |
(23.9) |
(19.0) |
|||||||||||
Net income (loss) attributable to Key |
$ |
96 |
$ |
116 |
$ |
109 |
(17.2) |
% |
(11.9) |
% |
||||||
Average balances |
||||||||||||||||
Loans and leases |
$ |
20,586 |
$ |
20,133 |
$ |
18,893 |
2.3 |
% |
9.0 |
% |
||||||
Loans held for sale |
422 |
466 |
441 |
(9.4) |
(4.3) |
|||||||||||
Total assets |
24,487 |
23,965 |
22,912 |
2.2 |
6.9 |
|||||||||||
Deposits |
16,125 |
15,606 |
12,879 |
3.3 |
25.2 |
|||||||||||
Assets under management at period end |
$ |
— |
$ |
12,331 |
$ |
13,599 |
(100.0) |
% |
(100.0) |
% |
||||||
TE = Taxable Equivalent, N/M = Not Meaningful |
||||||||||||||||
Additional Key Corporate Bank Data |
||||||||||||||||
dollars in millions |
Change 3Q13 vs. |
|||||||||||||||
3Q13 |
2Q13 |
3Q12 |
2Q13 |
3Q12 |
||||||||||||
Noninterest income |
||||||||||||||||
Trust and investment services income |
$ |
31 |
$ |
33 |
$ |
31 |
(6.1) |
% |
— |
|||||||
Investment banking and debt placement fees |
85 |
82 |
82 |
3.7 |
3.7 |
% |
||||||||||
Operating lease income and other leasing gains |
14 |
13 |
21 |
7.7 |
(33.3) |
|||||||||||
Corporate services income |
34 |
32 |
28 |
6.3 |
21.4 |
|||||||||||
Service charges on deposit accounts |
11 |
11 |
12 |
— |
(8.3) |
|||||||||||
Cards and payments income |
6 |
5 |
6 |
20.0 |
— |
|||||||||||
Payments and services income |
51 |
48 |
46 |
6.3 |
10.9 |
|||||||||||
Other noninterest income |
8 |
10 |
1 |
(20.0) |
700.0 |
|||||||||||
Total noninterest income |
$ |
189 |
$ |
186 |
$ |
181 |
1.6 |
% |
4.4 |
% |
||||||
Key Corporate Bank Summary of Operations
- Investment banking and debt placement fees increased 3.7% from the prior year
- Average loan balances up 9% from the prior year
- Average deposits up 25.2% from the prior year
Key Corporate Bank recorded net income attributable to Key of $96 million for the third quarter of 2013, compared to $109 million for the same period one year ago.
Taxable-equivalent net interest income decreased by $1 million, or .5% compared to the third quarter of 2012. Average earning assets increased $1.7 billion, or 8.3% from the year-ago quarter, driving a $7 million increase in earning asset spread. Average deposit balances increased $3.2 billion, or 25.2% from the year-ago quarter, driven by third-party servicing acquisitions and increased 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 $8 million, or 4.4% from the third quarter of 2012. Increases in investment banking and debt placement fees, corporate services, and other income were partially offset by a decrease in operating lease income and other leasing gains compared to the year-ago quarter.
The provision for loan and lease losses was a charge of $13 million compared to a credit of $3 million for the third quarter of 2012 due to loan growth and lower levels of recovery.
Noninterest expense increased by $16 million, or 8% from the third quarter of 2012. This increase was driven by a $2 million charge in the provision (credit) for losses on lending-related commitments compared to a credit of $6 million the third quarter of 2012. Internally-allocated costs were also higher in the current quarter than one year ago.
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 $92 million for the third quarter of 2013, compared to net income attributable to Key of $104 million for the same period last year. These results were primarily attributable to a decrease in other income due to a $54 million gain on the redemption of certain trust preferred securities. The net gain resulting from the early termination of leveraged leases was $15 million (a $23 million gain in operating lease income less an $8 million charge for the write-off of capitalized loan origination costs) in the third quarter of 2013 compared to a net gain of $26 million in the third quarter of 2012, which also contributed to the decline in other segments. These decreases were partially offset by an increase in net interest income of $24 million, adjusted for the impact of the leveraged lease terminations discussed above, and a decline in noninterest expense of $19 million.
Discontinued Operations
On July 31, 2013, Key closed the sale of Victory and completed the divestiture of this business. This sale resulted in an after-tax gain of $92 million; the cash portion of this gain was $72 million. Additional gain may be realized, resulting from consents received through January 2014. The gain on the Victory divestiture was partially offset by a net after-tax loss of $48 million related to the fair value of the loans and securities in Key's ten education loan securitization trusts. During the third quarter, additional market participant information about projected trends for default and recovery rates became available. Based on this information and Key's related internal analysis, certain assumptions related to valuing the loans in these securitization trusts were adjusted.
*****
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 $90.7 billion at September 30, 2013.
Key provides deposit, lending, cash management and investment services to individuals and small and mid-sized businesses in 13 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 Reports on Form 10-Q for the periods ended March 31, 2013, and June 30, 2013, each of which has been filed with the Securities and Exchange Commission and is available on Key's website (www.key.com/ir) and on the Securities and Exchange Commission's website (www.sec.gov). These factors may include, among others: 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 Wednesday, October 16, 2013. An audio replay of the call will be available through October 23, 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.
*****
KeyCorp |
|
Third Quarter 2013 |
|
Financial Supplement |
|
Page |
|
14 |
Financial Highlights |
16 |
GAAP to Non-GAAP Reconciliation |
19 |
Consolidated Balance Sheets |
20 |
Consolidated Statements of Income |
21 |
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations |
23 |
Noninterest Expense |
23 |
Personnel Expense |
24 |
Loan Composition |
24 |
Loans Held for Sale Composition |
24 |
Summary of Changes in Loans Held for Sale |
25 |
Exit Loan Portfolio From Continuing Operations |
25 |
Asset Quality Statistics From Continuing Operations |
26 |
Summary of Loan and Lease Loss Experience From Continuing Operations |
27 |
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations |
28 |
Summary of Changes in Nonperforming Loans From Continuing Operations |
28 |
Summary of Changes in Nonperforming Loans Held for Sale From Continuing Operations |
28 |
Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations |
29 |
Line of Business Results |
Financial Highlights |
|||||||||||||
(dollars in millions, except per share amounts) |
|||||||||||||
Three months ended |
|||||||||||||
9-30-13 |
6-30-13 |
9-30-12 |
|||||||||||
Summary of operations |
|||||||||||||
Net interest income (TE) |
$ |
584 |
$ |
586 |
$ |
578 |
|||||||
Noninterest income |
459 |
429 |
518 |
||||||||||
Total revenue (TE) |
1,043 |
1,015 |
1,096 |
||||||||||
Provision (credit) for loan and lease losses |
28 |
28 |
109 |
||||||||||
Noninterest expense |
716 |
711 |
712 |
||||||||||
Income (loss) from continuing operations attributable to Key |
235 |
199 |
216 |
||||||||||
Income (loss) from discontinued operations, net of taxes (a) |
37 |
5 |
3 |
||||||||||
Net income (loss) attributable to Key |
272 |
204 |
219 |
||||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
229 |
$ |
193 |
$ |
211 |
|||||||
Income (loss) from discontinued operations, net of taxes (a) |
37 |
5 |
3 |
||||||||||
Net income (loss) attributable to Key common shareholders |
266 |
198 |
214 |
||||||||||
Per common share |
|||||||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
.25 |
$ |
.21 |
$ |
.23 |
|||||||
Income (loss) from discontinued operations, net of taxes (a) |
.04 |
.01 |
— |
||||||||||
Net income (loss) attributable to Key common shareholders (b) |
.29 |
.22 |
.23 |
||||||||||
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution |
.25 |
.21 |
.22 |
||||||||||
Income (loss) from discontinued operations, net of taxes — assuming dilution (a) |
.04 |
.01 |
— |
||||||||||
Net income (loss) attributable to Key common shareholders — assuming dilution (b) |
.29 |
.22 |
.23 |
||||||||||
Cash dividends paid |
.055 |
.055 |
.05 |
||||||||||
Book value at period end |
11.05 |
10.89 |
10.64 |
||||||||||
Tangible book value at period end |
9.92 |
9.77 |
9.54 |
||||||||||
Market price at period end |
11.40 |
11.04 |
8.74 |
||||||||||
Performance ratios |
|||||||||||||
From continuing operations: |
|||||||||||||
Return on average total assets |
1.12 |
% |
.95 |
% |
1.06 |
% |
|||||||
Return on average common equity |
9.13 |
7.72 |
8.45 |
||||||||||
Return on average tangible common equity (c) |
10.18 |
8.60 |
9.43 |
||||||||||
Net interest margin (TE) |
3.11 |
3.13 |
3.23 |
||||||||||
Cash efficiency ratio (c) |
67.5 |
69.1 |
64.1 |
||||||||||
From consolidated operations: |
|||||||||||||
Return on average total assets |
1.22 |
% |
.92 |
% |
1.01 |
% |
|||||||
Return on average common equity |
10.61 |
7.92 |
8.57 |
||||||||||
Return on average tangible common equity (c) |
11.82 |
8.82 |
9.56 |
||||||||||
Net interest margin (TE) |
3.06 |
3.07 |
3.14 |
||||||||||
Loan to deposit (d) |
83.8 |
83.6 |
86.2 |
||||||||||
Capital ratios at period end |
|||||||||||||
Key shareholders' equity to assets |
11.25 |
% |
11.29 |
% |
11.79 |
% |
|||||||
Key common shareholders' equity to assets |
10.94 |
10.96 |
11.45 |
||||||||||
Tangible common equity to tangible assets (c) |
9.93 |
9.96 |
10.39 |
||||||||||
Tier 1 common equity (c), (e) |
11.11 |
11.18 |
11.30 |
||||||||||
Tier 1 risk-based capital (e) |
11.85 |
11.93 |
12.10 |
||||||||||
Total risk-based capital (e) |
14.30 |
14.65 |
15.17 |
||||||||||
Leverage (e) |
11.32 |
11.25 |
11.37 |
||||||||||
Asset quality — from continuing operations |
|||||||||||||
Net loan charge-offs |
$ |
37 |
$ |
45 |
$ |
109 |
|||||||
Net loan charge-offs to average loans |
.28 |
% |
.34 |
% |
.86 |
% |
|||||||
Allowance for loan and lease losses to annualized net loan charge-offs |
591.3 |
485.3 |
204.8 |
||||||||||
Allowance for loan and lease losses |
$ |
868 |
$ |
876 |
$ |
888 |
|||||||
Allowance for credit losses |
908 |
913 |
931 |
||||||||||
Allowance for loan and lease losses to period-end loans |
1.62 |
% |
1.65 |
% |
1.73 |
% |
|||||||
Allowance for credit losses to period-end loans |
1.69 |
1.72 |
1.81 |
||||||||||
Allowance for loan and lease losses to nonperforming loans |
160.4 |
134.4 |
136.0 |
||||||||||
Allowance for credit losses to nonperforming loans |
167.8 |
140.0 |
142.6 |
||||||||||
Nonperforming loans at period end (f) |
$ |
541 |
$ |
652 |
$ |
653 |
|||||||
Nonperforming assets at period end |
579 |
693 |
718 |
||||||||||
Nonperforming loans to period-end portfolio loans |
1.01 |
% |
1.23 |
% |
1.27 |
% |
|||||||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets |
1.08 |
1.30 |
1.39 |
||||||||||
Trust and brokerage assets |
|||||||||||||
Assets under management |
$ |
- |
$ |
35,544 |
$ |
35,587 |
|||||||
Nonmanaged and brokerage assets |
- |
37,759 |
34,322 |
||||||||||
Other data |
|||||||||||||
Average full-time equivalent employees |
14,555 |
14,999 |
15,833 |
||||||||||
Branches |
1,044 |
1,052 |
1,087 |
||||||||||
Taxable-equivalent adjustment |
$ |
6 |
$ |
5 |
$ |
6 |
Financial Highlights (continued) |
|||||||||
(dollars in millions, except per share amounts) |
|||||||||
Nine months ended |
|||||||||
9-30-13 |
9-30-12 |
||||||||
Summary of operations |
|||||||||
Net interest income (TE) |
$ |
1,759 |
$ |
1,681 |
|||||
Noninterest income |
1,313 |
1,417 |
|||||||
Total revenue (TE) |
3,072 |
3,098 |
|||||||
Provision (credit) for loan and lease losses |
111 |
172 |
|||||||
Noninterest expense |
2,108 |
2,084 |
|||||||
Income (loss) from continuing operations attributable to Key |
635 |
639 |
|||||||
Income (loss) from discontinued operations, net of taxes (a) |
45 |
16 |
|||||||
Net income (loss) attributable to Key |
680 |
655 |
|||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
618 |
$ |
623 |
|||||
Income (loss) from discontinued operations, net of taxes (a) |
45 |
16 |
|||||||
Net income (loss) attributable to Key common shareholders |
663 |
639 |
|||||||
Per common share |
|||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
.68 |
$ |
.66 |
|||||
Income (loss) from discontinued operations, net of taxes (a) |
.05 |
.02 |
|||||||
Net income (loss) attributable to Key common shareholders (b) |
.73 |
.68 |
|||||||
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution |
.67 |
.66 |
|||||||
Income (loss) from discontinued operations, net of taxes — assuming dilution (a) |
.05 |
.02 |
|||||||
Net income (loss) attributable to Key common shareholders — assuming dilution (b) |
.72 |
.67 |
|||||||
Cash dividends paid |
.16 |
.13 |
|||||||
Performance ratios |
|||||||||
From continuing operations: |
|||||||||
Return on average total assets |
1.02 |
% |
1.06 |
% |
|||||
Return on average common equity |
8.27 |
8.48 |
|||||||
Return on average tangible common equity (c) |
9.22 |
9.40 |
|||||||
Net interest margin (TE) |
3.16 |
3.15 |
|||||||
Cash efficiency ratio (c) |
67.5 |
66.9 |
|||||||
From consolidated operations: |
|||||||||
Return on average total assets |
1.03 |
% |
1.01 |
% |
|||||
Return on average common equity |
8.88 |
8.70 |
|||||||
Return on average tangible common equity (c) |
9.89 |
9.64 |
|||||||
Net interest margin (TE) |
3.10 |
3.07 |
|||||||
Asset quality — from continuing operations |
|||||||||
Net loan charge-offs |
$ |
131 |
$ |
287 |
|||||
Net loan charge-offs to average total loans |
.33 |
% |
.77 |
% |
|||||
Other data |
|||||||||
Average full-time equivalent employees |
14,980 |
15,565 |
|||||||
Taxable-equivalent adjustment |
$ |
17 |
$ |
18 |
(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) |
9-30-13 ratio is estimated. |
(f) |
September 30, 2013, June 30, 2013, and September 30, 2012 amounts exclude $18 million, $19 million, and $25 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 |
|||||||||||||
9-30-13 |
6-30-13 |
9-30-12 |
|||||||||||
Tangible common equity to tangible assets at period end |
|||||||||||||
Key shareholders' equity (GAAP) |
$ |
10,206 |
$ |
10,229 |
$ |
10,251 |
|||||||
Less: |
Intangible assets (a) |
1,017 |
1,021 |
1,031 |
|||||||||
Preferred Stock, Series A (b) |
282 |
282 |
291 |
||||||||||
Tangible common equity (non-GAAP) |
$ |
8,907 |
$ |
8,926 |
$ |
8,929 |
|||||||
Total assets (GAAP) |
$ |
90,708 |
$ |
90,639 |
$ |
86,950 |
|||||||
Less: |
Intangible assets (a) |
1,017 |
1,021 |
1,031 |
|||||||||
Tangible assets (non-GAAP) |
$ |
89,691 |
$ |
89,618 |
$ |
85,919 |
|||||||
Tangible common equity to tangible assets ratio (non-GAAP) |
9.93 |
% |
9.96 |
% |
10.39 |
% |
|||||||
Tier 1 common equity at period end |
|||||||||||||
Key shareholders' equity (GAAP) |
$ |
10,206 |
$ |
10,229 |
$ |
10,251 |
|||||||
Qualifying capital securities |
339 |
339 |
339 |
||||||||||
Less: |
Goodwill |
979 |
979 |
979 |
|||||||||
Accumulated other comprehensive income (loss) (c) |
(409) |
(359) |
(109) |
||||||||||
Other assets (d) |
97 |
101 |
121 |
||||||||||
Total Tier 1 capital (regulatory) |
9,878 |
9,847 |
9,599 |
||||||||||
Less: |
Qualifying capital securities |
339 |
339 |
339 |
|||||||||
Preferred Stock, Series A (b) |
282 |
282 |
291 |
||||||||||
Total Tier 1 common equity (non-GAAP) |
$ |
9,257 |
$ |
9,226 |
$ |
8,969 |
|||||||
Net risk-weighted assets (regulatory) (d), (e) |
$ |
83,335 |
$ |
82,528 |
$ |
79,363 |
|||||||
Tier 1 common equity ratio (non-GAAP) (e) |
11.11 |
% |
11.18 |
% |
11.30 |
% |
|||||||
Pre-provision net revenue |
|||||||||||||
Net interest income (GAAP) |
$ |
578 |
$ |
581 |
$ |
572 |
|||||||
Plus: |
Taxable-equivalent adjustment |
6 |
5 |
6 |
|||||||||
Noninterest income (GAAP) |
459 |
429 |
518 |
||||||||||
Less: |
Noninterest expense (GAAP) |
716 |
711 |
712 |
|||||||||
Pre-provision net revenue from continuing operations (non-GAAP) |
$ |
327 |
$ |
304 |
$ |
384 |
GAAP to Non-GAAP Reconciliations (continued) |
|||||||||||||
(dollars in millions) |
|||||||||||||
Three months ended |
|||||||||||||
9-30-13 |
6-30-13 |
9-30-12 |
|||||||||||
Average tangible common equity |
|||||||||||||
Average Key shareholders' equity (GAAP) |
$ |
10,237 |
$ |
10,314 |
$ |
10,222 |
|||||||
Less: |
Intangible assets (average) (f) |
1,019 |
1,023 |
1,026 |
|||||||||
Preferred Stock, Series A (average) |
291 |
291 |
291 |
||||||||||
Average tangible common equity (non-GAAP) |
$ |
8,927 |
$ |
9,000 |
$ |
8,905 |
|||||||
Return on average tangible common equity from continuing operations |
|||||||||||||
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) |
$ |
229 |
$ |
193 |
$ |
211 |
|||||||
Average tangible common equity (non-GAAP) |
8,927 |
9,000 |
8,905 |
||||||||||
Return on average tangible common equity from continuing operations (non-GAAP) |
10.18 |
% |
8.60 |
% |
9.43 |
% |
|||||||
Return on average tangible common equity consolidated |
|||||||||||||
Net income (loss) attributable to Key common shareholders (GAAP) |
$ |
266 |
$ |
198 |
$ |
214 |
|||||||
Average tangible common equity (non-GAAP) |
8,927 |
9,000 |
8,905 |
||||||||||
Return on average tangible common equity consolidated (non-GAAP) |
11.82 |
% |
8.82 |
% |
9.56 |
% |
|||||||
Cash efficiency ratio |
|||||||||||||
Noninterest expense (GAAP) |
$ |
716 |
$ |
711 |
$ |
712 |
|||||||
Less: |
Intangible asset amortization on credit cards (GAAP) |
8 |
7 |
6 |
|||||||||
Other intangible asset amortization (GAAP) |
4 |
3 |
3 |
||||||||||
Adjusted noninterest expense (non-GAAP) |
$ |
704 |
$ |
701 |
$ |
703 |
|||||||
Net interest income (GAAP) |
$ |
578 |
$ |
581 |
$ |
572 |
|||||||
Plus: |
Taxable-equivalent adjustment |
6 |
5 |
6 |
|||||||||
Noninterest income (GAAP) |
459 |
429 |
518 |
||||||||||
Total taxable-equivalent revenue (non-GAAP) |
$ |
1,043 |
$ |
1,015 |
$ |
1,096 |
|||||||
Cash efficiency ratio (non-GAAP) |
67.5 |
% |
69.1 |
% |
64.1 |
% |
|||||||
Adjusted cash efficiency ratio net of efficiency initiative charges |
|||||||||||||
Adjusted noninterest expense (non-GAAP) |
$ |
704 |
$ |
701 |
$ |
703 |
|||||||
Less: |
Efficiency initiative and pension settlement charges (non-GAAP) |
41 |
37 |
9 |
|||||||||
Net adjusted noninterest expense (non-GAAP) |
$ |
663 |
$ |
664 |
$ |
694 |
|||||||
Total taxable-equivalent revenue (non-GAAP) |
$ |
1,043 |
$ |
1,015 |
$ |
1,096 |
|||||||
Adjusted cash efficiency ratio net of efficiency initiative charges (non-GAAP) |
63.6 |
% |
65.4 |
% |
63.3 |
% |
|||||||
Three months ended |
|||||||||||||
9-30-13 |
6-30-13 |
||||||||||||
Tier 1 common equity under the Regulatory Capital Rules (estimates) |
|||||||||||||
Tier 1 common equity under current regulatory rules |
$ |
9,257 |
$ |
9,226 |
|||||||||
Adjustments from current regulatory rules to the Regulatory Capital Rules: |
|||||||||||||
Deferred tax assets and other (g) |
(140) |
(62) |
|||||||||||
Tier 1 common equity anticipated under the Regulatory Capital Rules (h) |
$ |
9,117 |
$ |
9,164 |
|||||||||
Net risk-weighted assets under current regulatory rules |
$ |
83,335 |
$ |
82,528 |
|||||||||
Adjustments from current regulatory rules to the Regulatory Capital Rules: |
|||||||||||||
Loan commitments less than one year |
496 |
826 |
|||||||||||
Past due loans |
244 |
253 |
|||||||||||
Mortgage servicing assets (i) |
576 |
487 |
|||||||||||
Deferred tax assets (i) |
240 |
279 |
|||||||||||
Other |
1,451 |
1,029 |
|||||||||||
Total risk-weighted assets anticipated under the Regulatory Capital Rules |
$ |
86,342 |
$ |
85,402 |
|||||||||
Tier 1 common equity ratio under the Regulatory Capital Rules (h) |
10.56 |
% |
10.73 |
% |
GAAP to Non-GAAP Reconciliations (continued) |
|||||||||||||
(dollars in millions) |
|||||||||||||
Nine months ended |
|||||||||||||
9-30-13 |
9-30-12 |
||||||||||||
Pre-provision net revenue |
|||||||||||||
Net interest income (GAAP) |
$ |
1,742 |
$ |
1,663 |
|||||||||
Plus: |
Taxable-equivalent adjustment |
17 |
18 |
||||||||||
Noninterest income (GAAP) |
1,313 |
1,417 |
|||||||||||
Less: |
Noninterest expense (GAAP) |
2,108 |
2,084 |
||||||||||
Pre-provision net revenue from continuing operations (non-GAAP) |
$ |
964 |
$ |
1,014 |
|||||||||
Average tangible common equity |
|||||||||||||
Average Key shareholders' equity (GAAP) |
$ |
10,277 |
$ |
10,105 |
|||||||||
Less: |
Intangible assets (average) (j) |
1,023 |
964 |
||||||||||
Preferred Stock, Series A (average) |
291 |
291 |
|||||||||||
Average tangible common equity (non-GAAP) |
$ |
8,963 |
$ |
8,850 |
|||||||||
Return on average tangible common equity from continuing operations |
|||||||||||||
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) |
$ |
618 |
$ |
623 |
|||||||||
Average tangible common equity (non-GAAP) |
8,963 |
8,850 |
|||||||||||
Return on average tangible common equity from continuing operations (non-GAAP) |
9.22 |
% |
9.40 |
% |
|||||||||
Return on average tangible common equity consolidated |
|||||||||||||
Net income (loss) attributable to Key common shareholders (GAAP) |
$ |
663 |
$ |
639 |
|||||||||
Average tangible common equity (non-GAAP) |
8,963 |
8,850 |
|||||||||||
Return on average tangible common equity consolidated (non-GAAP) |
9.89 |
% |
9.64 |
% |
|||||||||
Cash efficiency ratio |
|||||||||||||
Noninterest expense (GAAP) |
$ |
2,108 |
$ |
2,084 |
|||||||||
Less: |
Intangible asset amortization on credit cards (GAAP) |
23 |
6 |
||||||||||
Other intangible asset amortization (GAAP) |
11 |
5 |
|||||||||||
Adjusted noninterest expense (non-GAAP) |
$ |
2,074 |
$ |
2,073 |
|||||||||
Net interest income (GAAP) |
$ |
1,742 |
$ |
1,663 |
|||||||||
Plus: |
Taxable-equivalent adjustment |
17 |
18 |
||||||||||
Noninterest income (GAAP) |
1,313 |
1,417 |
|||||||||||
Total taxable-equivalent revenue (non-GAAP) |
$ |
3,072 |
$ |
3,098 |
|||||||||
Cash efficiency ratio (non-GAAP) |
67.5 |
% |
66.9 |
% |
|||||||||
Adjusted cash efficiency ratio net of efficiency initiative charges |
|||||||||||||
Adjusted noninterest expense (non-GAAP) |
$ |
2,074 |
$ |
2,073 |
|||||||||
Less: |
Efficiency initiative and pension settlement charges (non-GAAP) |
93 |
9 |
||||||||||
Net adjusted noninterest expense (non-GAAP) |
$ |
1,981 |
$ |
2,064 |
|||||||||
Total taxable-equivalent revenue (non-GAAP) |
$ |
3,072 |
$ |
3,098 |
|||||||||
Adjusted cash efficiency ratio net of efficiency initiative charges (non-GAAP) |
64.5 |
% |
66.6 |
% |
(a) |
Three months ended September 30, 2013, June 30, 2013, and September 30, 2012 exclude $99 million, $107 million, and $130 million, respectively, of period end purchased credit card receivable intangible assets. |
(b) |
Net of capital surplus for the three months ended September 30, 2013 and June 30, 2013. |
(c) |
Includes net unrealized gains or losses on securities available for sale (except for net unrealized losses on marketable equity securities), net gains or losses on cash flow hedges, and amounts resulting from the application of the applicable accounting guidance for defined benefit and other postretirement plans. |
(d) |
Other assets deducted from Tier 1 capital and net risk-weighted assets consist of disallowed intangible assets (excluding goodwill) and deductible portions of nonfinancial equity investments. There were no disallowed deferred tax assets at September 30, 2013, June 30, 2013, and September 30, 2012. |
(e) |
9-30-13 amount is estimated. |
(f) |
Three months ended September 30, 2013, June 30, 2013 and September 30, 2012 exclude $103 million, $110 million, and $86 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 anticipated amount of regulatory capital and risk-weighted assets is based upon the federal banking agencies' Regulatory Capital Rules (as fully phased-in on January 1, 2019); Key is subject to the Regulatory Capital Rules under the "standardized approach." |
(i) |
Item is included in the 10%/15% exceptions bucket calculation and is risk-weighted at 250%. |
(j) |
Nine months ended September 30, 2013 and September 30, 2012 excludes $110 million and $29 million, respectively, of average ending purchased credit card receivable intangible assets. |
GAAP = U.S. generally accepted accounting principles |
Consolidated Balance Sheets |
|||||||||||||
(dollars in millions) |
|||||||||||||
9-30-13 |
6-30-13 |
9-30-12 |
|||||||||||
Assets |
|||||||||||||
Loans |
$ |
53,597 |
$ |
53,101 |
$ |
51,419 |
|||||||
Loans held for sale |
699 |
402 |
628 |
||||||||||
Securities available for sale |
12,606 |
13,253 |
11,962 |
||||||||||
Held-to-maturity securities |
4,835 |
4,750 |
4,153 |
||||||||||
Trading account assets |
806 |
592 |
663 |
||||||||||
Short-term investments |
3,535 |
3,582 |
2,208 |
||||||||||
Other investments |
1,007 |
1,037 |
1,106 |
||||||||||
Total earning assets |
77,085 |
76,717 |
72,139 |
||||||||||
Allowance for loan and lease losses |
(868) |
(876) |
(888) |
||||||||||
Cash and due from banks |
748 |
696 |
973 |
||||||||||
Premises and equipment |
890 |
900 |
942 |
||||||||||
Operating lease assets |
293 |
303 |
290 |
||||||||||
Goodwill |
979 |
979 |
979 |
||||||||||
Other intangible assets |
137 |
149 |
182 |
||||||||||
Corporate-owned life insurance |
3,384 |
3,362 |
3,309 |
||||||||||
Derivative assets |
475 |
461 |
771 |
||||||||||
Accrued income and other assets |
2,747 |
2,864 |
2,853 |
||||||||||
Discontinued assets |
4,838 |
5,084 |
5,400 |
||||||||||
Total assets |
$ |
90,708 |
$ |
90,639 |
$ |
86,950 |
|||||||
Liabilities |
|||||||||||||
Deposits in domestic offices: |
|||||||||||||
NOW and money market deposit accounts |
$ |
33,132 |
$ |
32,689 |
$ |
30,573 |
|||||||
Savings deposits |
2,489 |
2,542 |
2,393 |
||||||||||
Certificates of deposit ($100,000 or more) |
2,698 |
2,918 |
3,226 |
||||||||||
Other time deposits |
3,833 |
4,089 |
4,941 |
||||||||||
Total interest-bearing deposits |
42,152 |
42,238 |
41,133 |
||||||||||
Noninterest-bearing deposits |
25,778 |
24,939 |
22,486 |
||||||||||
Deposits in foreign office — interest-bearing |
605 |
544 |
569 |
||||||||||
Total deposits |
68,535 |
67,721 |
64,188 |
||||||||||
Federal funds purchased and securities sold under repurchase agreements |
1,455 |
1,647 |
1,746 |
||||||||||
Bank notes and other short-term borrowings |
466 |
298 |
388 |
||||||||||
Derivative liabilities |
450 |
456 |
657 |
||||||||||
Accrued expense and other liabilities |
1,375 |
1,421 |
1,205 |
||||||||||
Long-term debt |
6,154 |
6,666 |
6,119 |
||||||||||
Discontinued liabilities |
2,037 |
2,169 |
2,368 |
||||||||||
Total liabilities |
80,472 |
80,378 |
76,671 |
||||||||||
Equity |
|||||||||||||
Preferred stock, Series A |
291 |
291 |
291 |
||||||||||
Common shares |
1,017 |
1,017 |
1,017 |
||||||||||
Capital surplus |
4,029 |
4,045 |
4,118 |
||||||||||
Retained earnings |
7,431 |
7,214 |
6,762 |
||||||||||
Treasury stock, at cost |
(2,193) |
(2,020) |
(1,868) |
||||||||||
Accumulated other comprehensive income (loss) |
(369) |
(318) |
(69) |
||||||||||
Key shareholders' equity |
10,206 |
10,229 |
10,251 |
||||||||||
Noncontrolling interests |
30 |
32 |
28 |
||||||||||
Total equity |
10,236 |
10,261 |
10,279 |
||||||||||
Total liabilities and equity |
$ |
90,708 |
$ |
90,639 |
$ |
86,950 |
|||||||
Common shares outstanding (000) |
897,821 |
912,883 |
936,195 |
Consolidated Statements of Income |
||||||||||||||||||
(dollars in millions, except per share amounts) |
||||||||||||||||||
Three months ended |
Nine months ended |
|||||||||||||||||
9-30-13 |
6-30-13 |
9-30-12 |
9-30-13 |
9-30-12 |
||||||||||||||
Interest income |
||||||||||||||||||
Loans |
$ |
532 |
$ |
539 |
$ |
538 |
$ |
1,619 |
$ |
1,592 |
||||||||
Loans held for sale |
5 |
5 |
5 |
14 |
15 |
|||||||||||||
Securities available for sale |
76 |
80 |
93 |
236 |
314 |
|||||||||||||
Held-to-maturity securities |
22 |
20 |
21 |
60 |
50 |
|||||||||||||
Trading account assets |
5 |
4 |
4 |
15 |
15 |
|||||||||||||
Short-term investments |
1 |
1 |
1 |
4 |
4 |
|||||||||||||
Other investments |
6 |
8 |
9 |
23 |
27 |
|||||||||||||
Total interest income |
647 |
657 |
671 |
1,971 |
2,017 |
|||||||||||||
Interest expense |
||||||||||||||||||
Deposits |
37 |
42 |
60 |
124 |
208 |
|||||||||||||
Federal funds purchased and securities sold under repurchase agreements |
1 |
— |
1 |
2 |
3 |
|||||||||||||
Bank notes and other short-term borrowings |
2 |
2 |
1 |
5 |
5 |
|||||||||||||
Long-term debt |
29 |
32 |
37 |
98 |
138 |
|||||||||||||
Total interest expense |
69 |
76 |
99 |
229 |
354 |
|||||||||||||
Net interest income |
578 |
581 |
572 |
1,742 |
1,663 |
|||||||||||||
Provision (credit) for loan and lease losses |
28 |
28 |
109 |
111 |
172 |
|||||||||||||
Net interest income (expense) after provision for loan and lease losses |
550 |
553 |
463 |
1,631 |
1,491 |
|||||||||||||
Noninterest income |
||||||||||||||||||
Trust and investment services income |
100 |
100 |
94 |
295 |
280 |
|||||||||||||
Investment banking and debt placement fees |
86 |
84 |
83 |
249 |
217 |
|||||||||||||
Service charges on deposit accounts |
73 |
71 |
74 |
213 |
212 |
|||||||||||||
Operating lease income and other leasing gains |
43 |
19 |
66 |
85 |
176 |
|||||||||||||
Corporate services income |
44 |
43 |
39 |
132 |
127 |
|||||||||||||
Cards and payments income |
43 |
42 |
37 |
122 |
97 |
|||||||||||||
Corporate-owned life insurance income |
26 |
31 |
26 |
87 |
86 |
|||||||||||||
Consumer mortgage income |
3 |
6 |
11 |
16 |
29 |
|||||||||||||
Net gains (losses) from principal investing |
17 |
7 |
11 |
32 |
70 |
|||||||||||||
Other income (a) |
24 |
26 |
77 |
82 |
123 |
|||||||||||||
Total noninterest income |
459 |
429 |
518 |
1,313 |
1,417 |
|||||||||||||
Noninterest expense |
||||||||||||||||||
Personnel |
414 |
406 |
399 |
1,211 |
1,148 |
|||||||||||||
Net occupancy |
66 |
72 |
65 |
202 |
191 |
|||||||||||||
Computer processing |
38 |
39 |
42 |
116 |
126 |
|||||||||||||
Business services and professional fees |
37 |
37 |
48 |
109 |
136 |
|||||||||||||
Equipment |
25 |
27 |
27 |
78 |
80 |
|||||||||||||
Operating lease expense |
14 |
11 |
13 |
37 |
45 |
|||||||||||||
Marketing |
16 |
11 |
18 |
33 |
48 |
|||||||||||||
FDIC assessment |
7 |
8 |
7 |
23 |
23 |
|||||||||||||
Intangible asset amortization on credit cards |
8 |
7 |
6 |
23 |
6 |
|||||||||||||
Other intangible asset amortization |
4 |
3 |
3 |
11 |
5 |
|||||||||||||
Provision (credit) for losses on lending-related commitments |
3 |
5 |
(8) |
11 |
(2) |
|||||||||||||
OREO expense, net |
1 |
1 |
1 |
5 |
14 |
|||||||||||||
Other expense |
83 |
84 |
91 |
249 |
264 |
|||||||||||||
Total noninterest expense |
716 |
711 |
712 |
2,108 |
2,084 |
|||||||||||||
Income (loss) from continuing operations before income taxes |
293 |
271 |
269 |
836 |
824 |
|||||||||||||
Income taxes |
59 |
72 |
51 |
201 |
178 |
|||||||||||||
Income (loss) from continuing operations |
234 |
199 |
218 |
635 |
646 |
|||||||||||||
Income (loss) from discontinued operations, net of taxes |
37 |
5 |
3 |
45 |
16 |
|||||||||||||
Net income (loss) |
271 |
204 |
221 |
680 |
662 |
|||||||||||||
Less: Net income (loss) attributable to noncontrolling interests |
(1) |
— |
2 |
— |
7 |
|||||||||||||
Net income (loss) attributable to Key |
$ |
272 |
$ |
204 |
$ |
219 |
$ |
680 |
$ |
655 |
||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
229 |
$ |
193 |
$ |
211 |
$ |
618 |
$ |
623 |
||||||||
Net income (loss) attributable to Key common shareholders |
266 |
198 |
214 |
663 |
639 |
|||||||||||||
Per common share |
||||||||||||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
.25 |
$ |
.21 |
$ |
.23 |
$ |
.68 |
$ |
.66 |
||||||||
Income (loss) from discontinued operations, net of taxes |
.04 |
.01 |
— |
.05 |
.02 |
|||||||||||||
Net income (loss) attributable to Key common shareholders (b) |
.29 |
.22 |
.23 |
.73 |
.68 |
|||||||||||||
Per common share — assuming dilution |
||||||||||||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
.25 |
$ |
.21 |
$ |
.22 |
$ |
.67 |
$ |
.66 |
||||||||
Income (loss) from discontinued operations, net of taxes |
.04 |
.01 |
— |
.05 |
.02 |
|||||||||||||
Net income (loss) attributable to Key common shareholders (b) |
.29 |
.22 |
.23 |
.72 |
.67 |
|||||||||||||
Cash dividends declared per common share |
$ |
.055 |
$ |
.055 |
$ |
.05 |
$ |
.16 |
$ |
.13 |
||||||||
Weighted-average common shares outstanding (000) |
901,904 |
913,736 |
936,223 |
911,918 |
943,378 |
|||||||||||||
Weighted-average common shares and potential common shares outstanding (000) (c) |
928,854 |
918,628 |
940,764 |
917,579 |
947,582 |
|||||||||||||
(a) |
For the three months ended September 30, 2013, June 30, 2013, and September 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) |
||||||||||||||||||||||||||||||||
Third Quarter 2013 |
Second Quarter 2013 |
Third Quarter 2012 |
||||||||||||||||||||||||||||||
Average |
Average |
Average |
||||||||||||||||||||||||||||||
Balance |
Interest |
(a) |
Yield/Rate |
(a) |
Balance |
Interest |
(a) |
Yield/Rate |
(a) |
Balance |
Interest |
(a) |
Yield/Rate |
(a) |
||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Loans: (b), (c) |
||||||||||||||||||||||||||||||||
Commercial, financial and agricultural (d) |
$ |
23,864 |
$ |
213 |
3.54 |
% |
$ |
23,480 |
$ |
212 |
3.63 |
% |
$ |
21,473 |
$ |
203 |
3.76 |
% |
||||||||||||||
Real estate — commercial mortgage |
7,575 |
77 |
4.06 |
7,494 |
78 |
4.14 |
7,463 |
83 |
4.40 |
|||||||||||||||||||||||
Real estate — construction |
1,073 |
12 |
4.24 |
1,049 |
11 |
4.30 |
1,116 |
12 |
4.55 |
|||||||||||||||||||||||
Commercial lease financing |
4,633 |
36 |
3.14 |
4,747 |
48 |
3.96 |
5,026 |
39 |
3.13 |
|||||||||||||||||||||||
Total commercial loans |
37,145 |
338 |
3.61 |
36,770 |
349 |
3.80 |
35,078 |
337 |
3.83 |
|||||||||||||||||||||||
Real estate — residential mortgage |
2,193 |
25 |
4.43 |
2,176 |
24 |
4.53 |
2,092 |
25 |
4.80 |
|||||||||||||||||||||||
Home equity: |
||||||||||||||||||||||||||||||||
Key Community Bank |
10,247 |
101 |
3.92 |
9,992 |
98 |
3.93 |
9,734 |
99 |
4.02 |
|||||||||||||||||||||||
Other |
364 |
7 |
7.72 |
389 |
7 |
7.66 |
468 |
9 |
7.73 |
|||||||||||||||||||||||
Total home equity loans |
10,611 |
108 |
4.05 |
10,381 |
105 |
4.07 |
10,202 |
108 |
4.19 |
|||||||||||||||||||||||
Consumer other — Key Community Bank |
1,435 |
26 |
7.24 |
1,392 |
26 |
7.35 |
1,297 |
32 |
9.65 |
|||||||||||||||||||||||
Credit cards |
700 |
21 |
11.77 |
697 |
20 |
11.91 |
432 |
17 |
15.38 |
|||||||||||||||||||||||
Consumer other: |
||||||||||||||||||||||||||||||||
Marine |
1,120 |
17 |
6.26 |
1,206 |
20 |
6.24 |
1,493 |
22 |
6.28 |
|||||||||||||||||||||||
Other |
67 |
2 |
8.72 |
74 |
1 |
8.58 |
101 |
3 |
8.02 |
|||||||||||||||||||||||
Total consumer other |
1,187 |
19 |
6.40 |
1,280 |
21 |
6.37 |
1,594 |
25 |
6.39 |
|||||||||||||||||||||||
Total consumer loans |
16,126 |
199 |
4.93 |
15,926 |
196 |
4.94 |
15,617 |
207 |
5.26 |
|||||||||||||||||||||||
Total loans |
53,271 |
537 |
4.00 |
52,696 |
545 |
4.15 |
50,695 |
544 |
4.27 |
|||||||||||||||||||||||
Loans held for sale |
456 |
5 |
4.06 |
513 |
5 |
3.93 |
532 |
5 |
3.28 |
|||||||||||||||||||||||
Securities available for sale (b), (e) |
12,926 |
77 |
2.37 |
13,296 |
79 |
2.47 |
12,608 |
94 |
3.07 |
|||||||||||||||||||||||
Held-to-maturity securities (b) |
4,796 |
22 |
1.84 |
4,144 |
20 |
1.87 |
4,251 |
21 |
1.94 |
|||||||||||||||||||||||
Trading account assets |
747 |
5 |
2.52 |
749 |
4 |
2.31 |
693 |
4 |
2.10 |
|||||||||||||||||||||||
Short-term investments |
1,615 |
1 |
.20 |
2,722 |
1 |
.23 |
1,868 |
1 |
.24 |
|||||||||||||||||||||||
Other investments (e) |
1,022 |
6 |
2.67 |
1,048 |
8 |
2.61 |
1,134 |
8 |
3.01 |
|||||||||||||||||||||||
Total earning assets |
74,833 |
653 |
3.49 |
75,168 |
662 |
3.54 |
71,781 |
677 |
3.78 |
|||||||||||||||||||||||
Allowance for loan and lease losses |
(873) |
(890) |
(883) |
|||||||||||||||||||||||||||||
Accrued income and other assets |
9,549 |
9,770 |
9,907 |
|||||||||||||||||||||||||||||
Discontinued assets |
5,061 |
5,096 |
5,471 |
|||||||||||||||||||||||||||||
Total assets |
$ |
88,570 |
$ |
89,144 |
$ |
86,276 |
||||||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||||||
NOW and money market deposit accounts |
$ |
32,736 |
13 |
.15 |
$ |
32,849 |
14 |
.17 |
$ |
30,176 |
14 |
.19 |
||||||||||||||||||||
Savings deposits |
2,520 |
— |
.04 |
2,545 |
— |
.04 |
2,378 |
1 |
.06 |
|||||||||||||||||||||||
Certificates of deposit ($100,000 or more) (f) |
2,785 |
12 |
1.67 |
2,975 |
13 |
1.79 |
3,420 |
22 |
2.53 |
|||||||||||||||||||||||
Other time deposits |
3,957 |
12 |
1.24 |
4,202 |
14 |
1.35 |
5,158 |
23 |
1.76 |
|||||||||||||||||||||||
Deposits in foreign office |
621 |
— |
.20 |
573 |
1 |
.24 |
666 |
— |
.21 |
|||||||||||||||||||||||
Total interest-bearing deposits |
42,619 |
37 |
.35 |
43,144 |
42 |
.39 |
41,798 |
60 |
.57 |
|||||||||||||||||||||||
Federal funds purchased and securities sold under repurchase agreements |
1,837 |
1 |
.08 |
1,845 |
— |
.14 |
1,822 |
1 |
.17 |
|||||||||||||||||||||||
Bank notes and other short-term borrowings |
383 |
2 |
1.98 |
367 |
2 |
1.84 |
390 |
1 |
1.53 |
|||||||||||||||||||||||
Long-term debt (f), (g) |
3,504 |
29 |
3.41 |
4,401 |
32 |
3.25 |
3,793 |
37 |
4.43 |
|||||||||||||||||||||||
Total interest-bearing liabilities |
48,343 |
69 |
.56 |
49,757 |
76 |
.62 |
47,803 |
99 |
.83 |
|||||||||||||||||||||||
Noninterest-bearing deposits |
23,364 |
22,297 |
20,878 |
|||||||||||||||||||||||||||||
Accrued expense and other liabilities |
1,626 |
1,653 |
1,900 |
|||||||||||||||||||||||||||||
Discontinued liabilities (g) |
4,968 |
5,089 |
5,449 |
|||||||||||||||||||||||||||||
Total liabilities |
78,301 |
78,796 |
76,030 |
|||||||||||||||||||||||||||||
Equity |
||||||||||||||||||||||||||||||||
Key shareholders' equity |
10,237 |
10,314 |
10,222 |
|||||||||||||||||||||||||||||
Noncontrolling interests |
32 |
34 |
24 |
|||||||||||||||||||||||||||||
Total equity |
10,269 |
10,348 |
10,246 |
|||||||||||||||||||||||||||||
Total liabilities and equity |
$ |
88,570 |
$ |
89,144 |
$ |
86,276 |
||||||||||||||||||||||||||
Interest rate spread (TE) |
2.93 |
% |
2.92 |
% |
2.95 |
% |
||||||||||||||||||||||||||
Net interest income (TE) and net interest margin (TE) |
584 |
3.11 |
% |
586 |
3.13 |
% |
578 |
3.23 |
% |
|||||||||||||||||||||||
TE adjustment (b) |
6 |
5 |
6 |
|||||||||||||||||||||||||||||
Net interest income, GAAP basis |
$ |
578 |
$ |
581 |
$ |
572 |
(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 September 30, 2013, June 30, 2013, and September 30, 2012 includes $96 million, $96 million, and $54 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) |
|||||||||||||||||||||
Nine months ended September 30, 2013 |
Nine months ended September 30, 2012 |
||||||||||||||||||||
Average |
Average |
||||||||||||||||||||
Balance |
Interest |
(a) |
Yield/Rate |
(a) |
Balance |
Interest |
(a) |
Yield/ Rate |
(a) |
||||||||||||
Assets |
|||||||||||||||||||||
Loans: (b), (c) |
|||||||||||||||||||||
Commercial, financial and agricultural (d) |
$ |
23,556 |
$ |
643 |
3.65 |
% |
$ |
20,706 |
$ |
597 |
3.85 |
% |
|||||||||
Real estate — commercial mortgage |
7,561 |
234 |
4.15 |
7,689 |
257 |
4.46 |
|||||||||||||||
Real estate — construction |
1,053 |
34 |
4.27 |
1,205 |
42 |
4.69 |
|||||||||||||||
Commercial lease financing |
4,740 |
131 |
3.68 |
5,234 |
138 |
3.52 |
|||||||||||||||
Total commercial loans |
36,910 |
1,042 |
3.77 |
34,834 |
1,034 |
3.97 |
|||||||||||||||
Real estate — residential mortgage |
2,181 |
74 |
4.51 |
2,011 |
74 |
4.92 |
|||||||||||||||
Home equity: |
|||||||||||||||||||||
Key Community Bank |
10,011 |
295 |
3.94 |
9,423 |
286 |
4.05 |
|||||||||||||||
Other |
388 |
22 |
7.69 |
494 |
28 |
7.69 |
|||||||||||||||
Total home equity loans |
10,399 |
317 |
4.08 |
9,917 |
314 |
4.23 |
|||||||||||||||
Consumer other — Key Community Bank |
1,390 |
77 |
7.38 |
1,246 |
89 |
9.49 |
|||||||||||||||
Credit cards |
700 |
63 |
12.10 |
145 |
17 |
15.38 |
|||||||||||||||
Consumer other: |
|||||||||||||||||||||
Marine |
1,212 |
57 |
6.27 |
1,601 |
75 |
6.29 |
|||||||||||||||
Other |
75 |
5 |
8.40 |
106 |
7 |
8.11 |
|||||||||||||||
Total consumer other |
1,287 |
62 |
6.39 |
1,707 |
82 |
6.40 |
|||||||||||||||
Total consumer loans |
15,957 |
593 |
4.95 |
15,026 |
576 |
5.11 |
|||||||||||||||
Total loans |
52,867 |
1,635 |
4.14 |
49,860 |
1,610 |
4.31 |
|||||||||||||||
Loans held for sale |
479 |
14 |
3.75 |
566 |
15 |
3.45 |
|||||||||||||||
Securities available for sale (b), (e) |
12,766 |
237 |
2.52 |
13,906 |
315 |
3.12 |
|||||||||||||||
Held-to-maturity securities (b) |
4,256 |
60 |
1.88 |
3,335 |
50 |
1.98 |
|||||||||||||||
Trading account assets |
735 |
15 |
2.74 |
756 |
15 |
2.63 |
|||||||||||||||
Short-term investments |
2,440 |
4 |
.22 |
2,124 |
4 |
.27 |
|||||||||||||||
Other investments (e) |
1,043 |
23 |
2.96 |
1,160 |
26 |
3.02 |
|||||||||||||||
Total earning assets |
74,586 |
1,988 |
3.56 |
71,707 |
2,035 |
3.81 |
|||||||||||||||
Allowance for loan and lease losses |
(886) |
(926) |
|||||||||||||||||||
Accrued income and other assets |
9,727 |
9,923 |
|||||||||||||||||||
Discontinued assets |
5,124 |
5,647 |
|||||||||||||||||||
Total assets |
$ |
88,551 |
$ |
86,351 |
|||||||||||||||||
Liabilities |
|||||||||||||||||||||
NOW and money market deposit accounts |
$ |
32,513 |
41 |
.17 |
$ |
29,207 |
42 |
.19 |
|||||||||||||
Savings deposits |
2,513 |
1 |
.05 |
2,154 |
1 |
.05 |
|||||||||||||||
Certificates of deposit ($100,000 or more) (f) |
2,890 |
39 |
1.82 |
3,770 |
78 |
2.77 |
|||||||||||||||
Other time deposits |
4,202 |
42 |
1.34 |
5,611 |
86 |
2.04 |
|||||||||||||||
Deposits in foreign office |
550 |
1 |
.23 |
731 |
1 |
.23 |
|||||||||||||||
Total interest-bearing deposits |
42,668 |
124 |
.39 |
41,473 |
208 |
.67 |
|||||||||||||||
Federal funds purchased and securities sold under repurchase agreements |
1,865 |
2 |
.12 |
1,851 |
3 |
.19 |
|||||||||||||||
Bank notes and other short-term borrowings |
379 |
5 |
1.86 |
449 |
5 |
1.62 |
|||||||||||||||
Long-term debt (f), (g) |
4,187 |
98 |
3.39 |
5,134 |
138 |
3.95 |
|||||||||||||||
Total interest-bearing liabilities |
49,099 |
229 |
.63 |
48,907 |
354 |
.98 |
|||||||||||||||
Noninterest-bearing deposits |
22,361 |
19,656 |
|||||||||||||||||||
Accrued expense and other liabilities |
1,692 |
2,030 |
|||||||||||||||||||
Discontinued liabilities (g) |
5,089 |
5,633 |
|||||||||||||||||||
Total liabilities |
78,241 |
76,226 |
|||||||||||||||||||
Equity |
|||||||||||||||||||||
Key shareholders' equity |
10,277 |
10,105 |
|||||||||||||||||||
Noncontrolling interests |
33 |
20 |
|||||||||||||||||||
Total equity |
10,310 |
10,125 |
|||||||||||||||||||
Total liabilities and equity |
$ |
88,551 |
$ |
86,351 |
|||||||||||||||||
Interest rate spread (TE) |
2.93 |
% |
2.83 |
% |
|||||||||||||||||
Net interest income (TE) and net interest margin (TE) |
1,759 |
3.16 |
% |
1,681 |
3.15 |
% |
|||||||||||||||
TE adjustment (b) |
17 |
18 |
|||||||||||||||||||
Net interest income, GAAP basis |
$ |
1,742 |
$ |
1,663 |
(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 nine months ended September 30, 2013 and September 30, 2012 includes $95 million and $18 million, respectively, of assets from commercial credit cards. |
(e) |
Yield is calculated on the basis of amortized cost. |
(f) |
Rate calculation excludes basis adjustments related to fair value hedges. |
(g) |
A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying our matched funds transfer pricing methodology to discontinued operations. |
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles |
Noninterest Expense |
||||||||||||||
(dollars in millions) |
||||||||||||||
Three months ended |
Nine months ended |
|||||||||||||
9-30-13 |
6-30-13 |
9-30-12 |
9-30-13 |
9-30-12 |
||||||||||
Personnel (a) |
$ |
414 |
$ |
406 |
$ |
399 |
$ |
1,211 |
$ |
1,148 |
||||
Net occupancy |
66 |
72 |
65 |
202 |
191 |
|||||||||
Computer processing |
38 |
39 |
42 |
116 |
126 |
|||||||||
Business services and professional fees |
37 |
37 |
48 |
109 |
136 |
|||||||||
Equipment |
25 |
27 |
27 |
78 |
80 |
|||||||||
Operating lease expense |
14 |
11 |
13 |
37 |
45 |
|||||||||
Marketing |
16 |
11 |
18 |
33 |
48 |
|||||||||
FDIC assessment |
7 |
8 |
7 |
23 |
23 |
|||||||||
Intangible asset amortization on credit cards |
8 |
7 |
6 |
23 |
6 |
|||||||||
Other intangible asset amortization |
4 |
3 |
3 |
11 |
5 |
|||||||||
Provision (credit) for losses on lending-related commitments |
3 |
5 |
(8) |
11 |
(2) |
|||||||||
OREO expense, net |
1 |
1 |
1 |
5 |
14 |
|||||||||
Other expense |
83 |
84 |
91 |
249 |
264 |
|||||||||
Total noninterest expense |
$ |
716 |
$ |
711 |
$ |
712 |
$ |
2,108 |
$ |
2,084 |
||||
Average full-time equivalent employees (b) |
14,555 |
14,999 |
15,833 |
14,980 |
15,565 |
|||||||||
(a) Additional detail provided in table below. |
||||||||||||||
(b) The number of average full-time equivalent employees has not been adjusted for discontinued operations. |
||||||||||||||
Personnel Expense |
||||||||||||||
(in millions) |
||||||||||||||
Three months ended |
Nine months ended |
|||||||||||||
9-30-13 |
6-30-13 |
9-30-12 |
9-30-13 |
9-30-12 |
||||||||||
Salaries |
$ |
222 |
$ |
227 |
$ |
227 |
$ |
671 |
$ |
674 |
||||
Technology contract labor, net |
19 |
19 |
20 |
56 |
45 |
|||||||||
Incentive compensation |
81 |
77 |
83 |
231 |
209 |
|||||||||
Employee benefits |
78 |
56 |
54 |
193 |
172 |
|||||||||
Stock-based compensation |
8 |
9 |
10 |
27 |
36 |
|||||||||
Severance |
6 |
18 |
5 |
33 |
12 |
|||||||||
Total personnel expense |
$ |
414 |
$ |
406 |
$ |
399 |
$ |
1,211 |
$ |
1,148 |
Loan Composition |
||||||||||||||||||
(dollars in millions) |
||||||||||||||||||
Percent change 9-30-13 vs. |
||||||||||||||||||
9-30-13 |
6-30-13 |
9-30-12 |
6-30-13 |
9-30-12 |
||||||||||||||
Commercial, financial and agricultural (a) |
$ |
24,317 |
$ |
23,715 |
$ |
21,979 |
2.5 |
% |
10.6 |
% |
||||||||
Commercial real estate: |
||||||||||||||||||
Commercial mortgage |
7,544 |
7,474 |
7,529 |
.9 |
.2 |
|||||||||||||
Construction |
1,058 |
1,060 |
1,067 |
(.2) |
(.8) |
|||||||||||||
Total commercial real estate loans |
8,602 |
8,534 |
8,596 |
.8 |
.1 |
|||||||||||||
Commercial lease financing |
4,550 |
4,774 |
4,960 |
(4.7) |
(8.3) |
|||||||||||||
Total commercial loans |
37,469 |
37,023 |
35,535 |
1.2 |
5.4 |
|||||||||||||
Residential — prime loans: |
||||||||||||||||||
Real estate — residential mortgage |
2,198 |
2,176 |
2,138 |
1.0 |
2.8 |
|||||||||||||
Home equity: |
||||||||||||||||||
Key Community Bank |
10,285 |
10,173 |
9,768 |
1.1 |
5.3 |
|||||||||||||
Other |
353 |
375 |
409 |
(d) |
(5.9) |
(13.7) |
||||||||||||
Total home equity loans |
10,638 |
10,548 |
10,177 |
.9 |
4.5 |
|||||||||||||
Total residential — prime loans |
12,836 |
12,724 |
12,315 |
.9 |
4.2 |
|||||||||||||
Consumer other — Key Community Bank |
1,440 |
1,424 |
1,313 |
1.1 |
9.7 |
|||||||||||||
Credit cards |
698 |
701 |
710 |
(.4) |
(1.7) |
|||||||||||||
Consumer other: |
||||||||||||||||||
Marine |
1,083 |
1,160 |
1,448 |
(6.6) |
(25.2) |
|||||||||||||
Other |
71 |
69 |
98 |
2.9 |
(27.6) |
|||||||||||||
Total consumer other |
1,154 |
1,229 |
1,546 |
(6.1) |
(25.4) |
|||||||||||||
Total consumer loans |
16,128 |
16,078 |
15,884 |
.3 |
1.5 |
|||||||||||||
Total loans (b), (c) |
$ |
53,597 |
$ |
53,101 |
$ |
51,419 |
.9 |
% |
4.2 |
% |
||||||||
Loans Held for Sale Composition |
||||||||||||||||||
(dollars in millions) |
||||||||||||||||||
Percent change 9-30-13 vs. |
||||||||||||||||||
9-30-13 |
6-30-13 |
9-30-12 |
6-30-13 |
9-30-12 |
||||||||||||||
Commercial, financial and agricultural |
$ |
68 |
$ |
22 |
$ |
13 |
209.1 |
% |
423.1 |
% |
||||||||
Real estate — commercial mortgage |
608 |
318 |
484 |
91.2 |
25.6 |
|||||||||||||
Real estate — construction |
— |
— |
10 |
N/M |
N/M |
|||||||||||||
Commercial lease financing |
— |
14 |
4 |
N/M |
N/M |
|||||||||||||
Real estate — residential mortgage |
23 |
48 |
117 |
(52.1) |
(80.3) |
|||||||||||||
Total loans held for sale |
$ |
699 |
$ |
402 |
$ |
628 |
73.9 |
% |
11.3 |
% |
||||||||
Summary of Changes in Loans Held for Sale |
||||||||||||||||||
(dollars in millions) |
||||||||||||||||||
3Q13 |
2Q13 |
1Q13 |
4Q12 |
3Q12 |
||||||||||||||
Balance at beginning of period |
$ |
402 |
$ |
434 |
$ |
599 |
$ |
628 |
$ |
656 |
||||||||
New originations |
1,467 |
1,241 |
1,075 |
1,686 |
1,280 |
|||||||||||||
Transfers from held to maturity, net |
15 |
17 |
19 |
38 |
13 |
|||||||||||||
Loan sales |
(1,181) |
(1,292) |
(1,257) |
(1,747) |
(1,311) |
|||||||||||||
Loan draws (payments), net |
(4) |
— |
— |
(4) |
(9) |
|||||||||||||
Transfers to OREO / valuation adjustments |
— |
2 |
(2) |
(2) |
(1) |
|||||||||||||
Balance at end of period |
$ |
699 |
$ |
402 |
$ |
434 |
$ |
599 |
$ |
628 |
(a) |
September 30, 2013, June 30, 2013 and September 30, 2012 loan balances include $96 million, $96 million, and $88 million, respectively, of commercial credit card balances. |
(b) |
Excluded at September 30, 2013, June 30, 2013, and September 30, 2012 are loans in the amount of $4.7 billion, $5.0 billion, and $5.3 billion, respectively, related to the discontinued operations of the education lending business. |
(c) |
September 30, 2013 loan balance includes purchased loans of $176 million of which $18 million were purchased credit impaired. June 30, 2013 loan balance includes purchased loans of $187 million of which $19 million were purchased credit impaired. September 30, 2012 includes purchased loans of $231 million of which $25 million were purchased credit impaired. |
(d) |
This loan category was impacted by $45 million in net loan charge-offs taken during the third quarter of 2012 related to updated regulatory guidance. |
N/M = Not Meaningful |
Exit Loan Portfolio From Continuing Operations |
||||||||||||||||||||
(dollars in millions) |
||||||||||||||||||||
Balance |
Change |
Net Loan |
Balance on |
|||||||||||||||||
Outstanding |
9-30-13 vs. |
Charge-offs |
Nonperforming Status |
|||||||||||||||||
9-30-13 |
6-30-13 |
6-30-13 |
3Q13 |
(c) |
2Q13 |
(c) |
9-30-13 |
6-30-13 |
||||||||||||
Residential properties — homebuilder |
$ |
26 |
$ |
26 |
— |
— |
$ |
1 |
$ |
8 |
$ |
8 |
||||||||
Marine and RV floor plan |
25 |
28 |
$ |
(3) |
— |
— |
6 |
7 |
||||||||||||
Commercial lease financing (a) |
796 |
931 |
(135) |
$ |
(2) |
(2) |
1 |
1 |
||||||||||||
Total commercial loans |
847 |
985 |
(138) |
(2) |
(1) |
15 |
16 |
|||||||||||||
Home equity — Other |
353 |
375 |
(22) |
2 |
5 |
14 |
16 |
|||||||||||||
Marine |
1,083 |
1,160 |
(77) |
1 |
5 |
25 |
31 |
|||||||||||||
RV and other consumer |
71 |
69 |
2 |
— |
1 |
2 |
— |
|||||||||||||
Total consumer loans |
1,507 |
1,604 |
(97) |
3 |
11 |
41 |
47 |
|||||||||||||
Total exit loans in loan portfolio |
$ |
2,354 |
$ |
2,589 |
$ |
(235) |
$ |
1 |
$ |
10 |
$ |
56 |
$ |
63 |
||||||
Discontinued operations — education lending business (not included in exit loans above) (b) |
$ |
4,738 |
$ |
4,992 |
$ |
(254) |
$ |
9 |
$ |
7 |
$ |
23 |
$ |
19 |
||||||
(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) |
||||||||||||||||
3Q13 |
2Q13 |
1Q13 |
4Q12 |
3Q12 |
||||||||||||
Net loan charge-offs |
$ |
37 |
$ |
45 |
$ |
49 |
$ |
58 |
$ |
109 |
||||||
Net loan charge-offs to average total loans |
.28 |
% |
.34 |
% |
.38 |
% |
.44 |
% |
.86 |
% |
||||||
Allowance for loan and lease losses to annualized net loan charge-offs |
591.3 |
485.3 |
449.4 |
384.9 |
204.8 |
|||||||||||
Allowance for loan and lease losses |
$ |
868 |
$ |
876 |
$ |
893 |
$ |
888 |
$ |
888 |
||||||
Allowance for credit losses (a) |
908 |
913 |
925 |
917 |
931 |
|||||||||||
Allowance for loan and lease losses to period-end loans |
1.62 |
% |
1.65 |
% |
1.70 |
% |
1.68 |
% |
1.73 |
% |
||||||
Allowance for credit losses to period-end loans |
1.69 |
1.72 |
1.76 |
1.74 |
1.81 |
|||||||||||
Allowance for loan and lease losses to nonperforming loans |
160.4 |
134.4 |
137.4 |
131.8 |
136.0 |
|||||||||||
Allowance for credit losses to nonperforming loans |
167.8 |
140.0 |
142.3 |
136.1 |
142.6 |
|||||||||||
Nonperforming loans at period end (b) |
$ |
541 |
$ |
652 |
$ |
650 |
$ |
674 |
$ |
653 |
||||||
Nonperforming assets at period end |
579 |
693 |
705 |
735 |
718 |
|||||||||||
Nonperforming loans to period-end portfolio loans |
1.01 |
% |
1.23 |
% |
1.24 |
% |
1.28 |
% |
1.27 |
% |
||||||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets |
1.08 |
1.30 |
1.34 |
1.39 |
1.39 |
|||||||||||
(a) |
Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related commitments. |
|||||||||||||||
(b) |
September 30, 2013, June 30, 2013, March 31, 2013, December 31, 2012, and September 30, 2012 amounts exclude $18 million, $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 |
Nine months ended |
||||||||||||||
9-30-13 |
6-30-13 |
9-30-12 |
9-30-13 |
9-30-12 |
|||||||||||
Average loans outstanding |
$ |
53,271 |
$ |
52,696 |
$ |
50,695 |
$ |
52,867 |
$ |
49,860 |
|||||
Allowance for loan and lease losses at beginning of period |
$ |
876 |
$ |
893 |
$ |
888 |
$ |
888 |
$ |
1,004 |
|||||
Loans charged off: |
|||||||||||||||
Commercial, financial and agricultural |
15 |
15 |
16 |
44 |
65 |
||||||||||
Real estate — commercial mortgage |
2 |
3 |
23 |
18 |
69 |
||||||||||
Real estate — construction |
— |
1 |
3 |
2 |
19 |
||||||||||
Total commercial real estate loans |
2 |
4 |
26 |
20 |
88 |
||||||||||
Commercial lease financing |
17 |
2 |
— |
25 |
20 |
||||||||||
Total commercial loans |
34 |
21 |
42 |
89 |
173 |
||||||||||
Real estate — residential mortgage |
3 |
4 |
6 |
13 |
19 |
||||||||||
Home equity: |
|||||||||||||||
Key Community Bank |
14 |
18 |
65 |
50 |
113 |
||||||||||
Other |
4 |
6 |
6 |
16 |
23 |
||||||||||
Total home equity loans |
18 |
24 |
71 |
66 |
136 |
||||||||||
Consumer other — Key Community Bank |
8 |
7 |
9 |
24 |
29 |
||||||||||
Credit cards |
9 |
8 |
2 |
25 |
2 |
||||||||||
Consumer other: |
|||||||||||||||
Marine |
5 |
9 |
11 |
22 |
41 |
||||||||||
Other |
1 |
1 |
— |
3 |
4 |
||||||||||
Total consumer other |
6 |
10 |
11 |
25 |
45 |
||||||||||
Total consumer loans |
44 |
53 |
99 |
153 |
231 |
||||||||||
Total loans charged off |
78 |
74 |
141 |
242 |
404 |
||||||||||
Recoveries: |
|||||||||||||||
Commercial, financial and agricultural |
11 |
7 |
9 |
30 |
40 |
||||||||||
Real estate — commercial mortgage |
10 |
5 |
2 |
20 |
18 |
||||||||||
Real estate — construction |
6 |
— |
1 |
14 |
3 |
||||||||||
Total commercial real estate loans |
16 |
5 |
3 |
34 |
21 |
||||||||||
Commercial lease financing |
2 |
4 |
8 |
10 |
18 |
||||||||||
Total commercial loans |
29 |
16 |
20 |
74 |
79 |
||||||||||
Real estate — residential mortgage |
1 |
— |
— |
1 |
2 |
||||||||||
Home equity: |
|||||||||||||||
Key Community Bank |
2 |
4 |
3 |
8 |
7 |
||||||||||
Other |
2 |
1 |
1 |
5 |
4 |
||||||||||
Total home equity loans |
4 |
5 |
4 |
13 |
11 |
||||||||||
Consumer other — Key Community Bank |
1 |
2 |
2 |
5 |
5 |
||||||||||
Credit cards |
1 |
2 |
— |
3 |
— |
||||||||||
Consumer other: |
|||||||||||||||
Marine |
4 |
4 |
5 |
13 |
18 |
||||||||||
Other |
1 |
— |
1 |
2 |
2 |
||||||||||
Total consumer other |
5 |
4 |
6 |
15 |
20 |
||||||||||
Total consumer loans |
12 |
13 |
12 |
37 |
38 |
||||||||||
Total recoveries |
41 |
29 |
32 |
111 |
117 |
||||||||||
Net loan charge-offs |
(37) |
(45) |
(109) |
(131) |
(287) |
||||||||||
Provision (credit) for loan and lease losses |
28 |
28 |
109 |
111 |
172 |
||||||||||
Foreign currency translation adjustment |
1 |
— |
— |
— |
(1) |
||||||||||
Allowance for loan and lease losses at end of period |
$ |
868 |
$ |
876 |
$ |
888 |
$ |
868 |
$ |
888 |
|||||
Liability for credit losses on lending-related commitments at beginning of period |
$ |
37 |
$ |
32 |
$ |
51 |
$ |
29 |
$ |
45 |
|||||
Provision (credit) for losses on lending-related commitments |
3 |
5 |
(8) |
11 |
(2) |
||||||||||
Liability for credit losses on lending-related commitments at end of period (a) |
$ |
40 |
$ |
37 |
$ |
43 |
$ |
40 |
$ |
43 |
|||||
Total allowance for credit losses at end of period |
$ |
908 |
$ |
913 |
$ |
931 |
$ |
908 |
$ |
931 |
|||||
Net loan charge-offs to average total loans |
.28 |
% |
.34 |
% |
.86 |
% |
.33 |
% |
.77 |
% |
|||||
Allowance for loan and lease losses to annualized net loan charge-offs |
591.3 |
485.3 |
204.8 |
495.6 |
231.6 |
||||||||||
Allowance for loan and lease losses to period-end loans |
1.62 |
1.65 |
1.73 |
1.62 |
1.73 |
||||||||||
Allowance for credit losses to period-end loans |
1.69 |
1.72 |
1.81 |
1.69 |
1.81 |
||||||||||
Allowance for loan and lease losses to nonperforming loans |
160.4 |
134.4 |
136.0 |
160.4 |
136.0 |
||||||||||
Allowance for credit losses to nonperforming loans |
167.8 |
140.0 |
142.6 |
167.8 |
142.6 |
||||||||||
Discontinued operations — education lending business: |
|||||||||||||||
Loans charged off |
$ |
14 |
$ |
12 |
$ |
17 |
$ |
42 |
$ |
56 |
|||||
Recoveries |
5 |
5 |
5 |
14 |
13 |
||||||||||
Net loan charge-offs |
$ |
(9) |
$ |
(7) |
$ |
(12) |
$ |
(28) |
$ |
(43) |
|||||
(a) Included in "accrued expense and other liabilities" on the balance sheet. |
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations |
|||||||||||||||
(dollars in millions) |
|||||||||||||||
9-30-13 |
6-30-13 |
3-31-13 |
12-31-12 |
9-30-12 |
|||||||||||
Commercial, financial and agricultural |
$ |
102 |
$ |
146 |
$ |
142 |
$ |
99 |
$ |
132 |
|||||
Real estate — commercial mortgage |
58 |
106 |
114 |
120 |
134 |
||||||||||
Real estate — construction |
17 |
26 |
27 |
56 |
53 |
||||||||||
Total commercial real estate loans |
75 |
132 |
141 |
176 |
187 |
||||||||||
Commercial lease financing |
22 |
14 |
12 |
16 |
18 |
||||||||||
Total commercial loans |
199 |
292 |
295 |
291 |
337 |
||||||||||
Real estate — residential mortgage (a) |
98 |
94 |
96 |
103 |
83 |
||||||||||
Home equity: |
|||||||||||||||
Key Community Bank |
198 |
205 |
199 |
210 |
171 |
||||||||||
Other |
13 |
16 |
18 |
21 |
18 |
||||||||||
Total home equity loans (a) |
211 |
221 |
217 |
231 |
189 |
||||||||||
Consumer other — Key Community Bank |
2 |
3 |
3 |
2 |
3 |
||||||||||
Credit cards |
4 |
11 |
13 |
11 |
8 |
||||||||||
Consumer other: |
|||||||||||||||
Marine |
25 |
30 |
25 |
34 |
31 |
||||||||||
Other |
2 |
1 |
1 |
2 |
2 |
||||||||||
Total consumer other |
27 |
31 |
26 |
36 |
33 |
||||||||||
Total consumer loans |
342 |
360 |
355 |
383 |
316 |
||||||||||
Total nonperforming loans (b) |
541 |
652 |
650 |
674 |
653 |
||||||||||
Nonperforming loans held for sale |
13 |
14 |
23 |
25 |
19 |
||||||||||
OREO |
15 |
18 |
21 |
22 |
29 |
||||||||||
Other nonperforming assets |
10 |
9 |
11 |
14 |
17 |
||||||||||
Total nonperforming assets |
$ |
579 |
$ |
693 |
$ |
705 |
$ |
735 |
$ |
718 |
|||||
Accruing loans past due 90 days or more |
$ |
90 |
$ |
80 |
$ |
83 |
$ |
78 |
$ |
89 |
|||||
Accruing loans past due 30 through 89 days |
288 |
251 |
368 |
424 |
354 |
||||||||||
Restructured loans — accruing and nonaccruing (c) |
349 |
311 |
294 |
320 |
323 |
||||||||||
Restructured loans included in nonperforming loans (c) |
228 |
195 |
178 |
249 |
217 |
||||||||||
Nonperforming assets from discontinued operations — education lending business |
23 |
19 |
15 |
20 |
22 |
||||||||||
Nonperforming loans to period-end portfolio loans |
1.01 |
% |
1.23 |
% |
1.24 |
% |
1.28 |
% |
1.27 |
% |
|||||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets |
1.08 |
1.30 |
1.34 |
1.39 |
1.39 |
(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) |
September 30, 2013, June 30, 2013, March 31, 2013, December 31, 2012, and September 30, 2012 amounts exclude $18 million, $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) |
|||||||||||||||
3Q13 |
2Q13 |
1Q13 |
4Q12 |
3Q12 |
|||||||||||
Balance at beginning of period |
$ |
652 |
$ |
650 |
$ |
674 |
$ |
653 |
$ |
657 |
|||||
Loans placed on nonaccrual status |
161 |
160 |
278 |
288 |
276 |
||||||||||
Charge-offs |
(78) |
(74) |
(91) |
(104) |
(141) |
||||||||||
Loans sold |
(61) |
(5) |
(42) |
(44) |
(43) |
||||||||||
Payments |
(43) |
(36) |
(83) |
(78) |
(74) |
||||||||||
Transfers to OREO |
(2) |
(7) |
(7) |
(7) |
(10) |
||||||||||
Transfers to nonperforming loans held for sale |
— |
— |
— |
(8) |
— |
||||||||||
Transfers to other nonperforming assets |
— |
— |
— |
(1) |
— |
||||||||||
Loans returned to accrual status |
(88) |
(36) |
(79) |
(25) |
(12) |
||||||||||
Balance at end of period (a) |
$ |
541 |
$ |
652 |
$ |
650 |
$ |
674 |
$ |
653 |
|||||
(a) September 30, 2013, June 30, 2013, March 31, 2013, December 31, 2012, and September 30, 2012 amounts exclude $18 million, $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) |
|||||||||||||||
3Q13 |
2Q13 |
1Q13 |
4Q12 |
3Q12 |
|||||||||||
Balance at beginning of period |
$ |
14 |
$ |
23 |
$ |
25 |
$ |
19 |
$ |
38 |
|||||
Transfers in |
— |
— |
— |
8 |
— |
||||||||||
Net advances / (payments) |
(1) |
(1) |
— |
(1) |
(1) |
||||||||||
Loans sold |
— |
(8) |
— |
(1) |
(17) |
||||||||||
Transfers to OREO |
— |
— |
— |
— |
(1) |
||||||||||
Valuation adjustments |
— |
— |
(2) |
— |
— |
||||||||||
Balance at end of period |
$ |
13 |
$ |
14 |
$ |
23 |
$ |
25 |
$ |
19 |
|||||
Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations |
|||||||||||||||
(in millions) |
|||||||||||||||
3Q13 |
2Q13 |
1Q13 |
4Q12 |
3Q12 |
|||||||||||
Balance at beginning of period |
$ |
18 |
$ |
21 |
$ |
22 |
$ |
29 |
$ |
28 |
|||||
Properties acquired — nonperforming loans |
2 |
7 |
7 |
7 |
11 |
||||||||||
Valuation adjustments |
(1) |
(2) |
(3) |
(2) |
(2) |
||||||||||
Properties sold |
(4) |
(8) |
(5) |
(12) |
(8) |
||||||||||
Balance at end of period |
$ |
15 |
$ |
18 |
$ |
21 |
$ |
22 |
$ |
29 |
Line of Business Results |
||||||||||||||||||||||
(dollars in millions) |
||||||||||||||||||||||
Percent change 3Q13 vs. |
||||||||||||||||||||||
3Q13 |
2Q13 |
1Q13 |
4Q12 |
3Q12 |
2Q13 |
3Q12 |
||||||||||||||||
Key Community Bank |
||||||||||||||||||||||
Summary of operations |
||||||||||||||||||||||
Total revenue (TE) |
$ |
551 |
$ |
556 |
$ |
549 |
$ |
580 |
$ |
575 |
(.9) |
% |
(4.2) |
% |
||||||||
Provision (credit) for loan and lease losses |
24 |
41 |
59 |
26 |
123 |
(41.5) |
(80.5) |
|||||||||||||||
Noninterest expense |
441 |
456 |
439 |
502 |
478 |
(3.3) |
(7.7) |
|||||||||||||||
Net income (loss) attributable to Key |
54 |
37 |
32 |
33 |
(16) |
45.9 |
N/M |
|||||||||||||||
Average loans and leases |
29,495 |
29,161 |
28,977 |
28,629 |
27,764 |
1.1 |
6.2 |
|||||||||||||||
Average deposits |
49,652 |
49,473 |
49,349 |
49,839 |
49,269 |
.4 |
.8 |
|||||||||||||||
Net loan charge-offs |
27 |
42 |
47 |
12 |
91 |
(35.7) |
(70.3) |
|||||||||||||||
Net loan charge-offs to average total loans |
.36 |
% |
.58 |
% |
.66 |
% |
.17 |
% |
1.30 |
% |
N/A |
N/A |
||||||||||
Nonperforming assets at period end |
$ |
382 |
$ |
475 |
$ |
495 |
$ |
459 |
$ |
422 |
(19.6) |
(9.5) |
||||||||||
Return on average allocated equity |
7.49 |
% |
5.16 |
% |
4.53 |
% |
4.56 |
% |
(2.25) |
% |
N/A |
N/A |
||||||||||
Average full-time equivalent employees |
7,990 |
8,316 |
8,709 |
8,869 |
9,064 |
(3.9) |
(11.8) |
|||||||||||||||
Key Corporate Bank |
||||||||||||||||||||||
Summary of operations |
||||||||||||||||||||||
Total revenue (TE) |
$ |
377 |
$ |
375 |
$ |
379 |
$ |
402 |
$ |
370 |
.5 |
% |
1.9 |
% |
||||||||
Provision (credit) for loan and lease losses |
13 |
(10) |
4 |
11 |
(3) |
N/M |
N/M |
|||||||||||||||
Noninterest expense |
217 |
202 |
210 |
207 |
201 |
7.4 |
8.0 |
|||||||||||||||
Net income (loss) attributable to Key |
96 |
116 |
105 |
115 |
109 |
(17.2) |
(11.9) |
|||||||||||||||
Average loans and leases |
20,586 |
20,133 |
20,044 |
19,481 |
18,893 |
2.3 |
9.0 |
|||||||||||||||
Average loans held for sale |
422 |
466 |
409 |
538 |
441 |
(9.4) |
(4.3) |
|||||||||||||||
Average deposits |
16,125 |
15,606 |
13,968 |
13,681 |
12,879 |
3.3 |
25.2 |
|||||||||||||||
Net loan charge-offs |
7 |
(6) |
(1) |
21 |
8 |
N/M |
(12.5) |
|||||||||||||||
Net loan charge-offs to average total loans |
.13 |
% |
(.12) |
% |
(.02) |
% |
.43 |
% |
.17 |
% |
N/A |
N/A |
||||||||||
Nonperforming assets at period end |
$ |
119 |
$ |
136 |
$ |
136 |
$ |
175 |
$ |
197 |
(12.5) |
(39.6) |
||||||||||
Return on average allocated equity |
23.31 |
% |
28.54 |
% |
26.35 |
% |
28.02 |
% |
26.06 |
% |
N/A |
N/A |
||||||||||
Average full-time equivalent employees |
2,018 |
1,955 |
1,930 |
1,920 |
2,009 |
3.2 |
.4 |
|||||||||||||||
TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful |
SOURCE KeyCorp
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