KeyCorp Reports Fourth Quarter 2016 Net Income Of $213 Million, Or $.20 Per Common Share; Earnings Per Common Share Of $.31, Excluding $.11 Of Merger-Related Charges

CLEVELAND, Jan. 19, 2017 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced fourth quarter net income from continuing operations attributable to Key common shareholders of $213 million, or $.20 per common share, compared to $165 million, or $.16 per common share, for the third quarter of 2016, and $224 million, or $.27 per common share, for the fourth quarter of 2015. During the fourth quarter of 2016, Key incurred merger-related charges totaling $198 million, or $.11 per common share, compared to $207 million, or $.14 per common share, in the third quarter of 2016. Excluding merger-related charges, earnings per common share were $.31 for the fourth quarter of 2016 and $.30 for the third quarter of 2016. Merger-related charges were $6 million in the fourth quarter of 2015.

"Key's fourth quarter results reflect continued momentum in our core businesses and the successful integration of the largest acquisition in our company's history," said Chairman and Chief Executive Officer Beth Mooney. "Excluding merger-related charges, we generated positive operating leverage for the quarter, our return on tangible common equity was 12.5%, and our cash efficiency ratio declined to 63.3%, reflecting solid performance across Key's businesses and early progress on merger synergies."

"We continued to see positive trends in the Community Bank and Corporate Bank this quarter, with both segments contributing to our overall revenue growth. Noninterest income increased as we continued to do more with our clients and see results from our investments," Mooney continued. "We had our strongest quarter ever in investment banking and debt placement fees, and for the full year generated $482 million in fees, marking another record year, with results up 8% from last year."

"The contribution from our First Niagara acquisition and quality of our new team members continue to exceed our expectations," added Mooney. "As we continue to realize cost savings and begin to see traction on revenue opportunities, we remain confident in reaching our financial targets."

 



Selected Financial Highlights















dollars in millions, except per share data





Change 4Q16 vs.



4Q16

3Q16

4Q15


3Q16

4Q15

Income (loss) from continuing operations attributable to Key common shareholders

$

213


$

165


$

224



29.1

%

(4.9)%


 Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution

.20


.16


.27



25.0


(25.9)


Return on average total assets from continuing operations

.69

%

.55

%

.97

%


N/A


N/A


 Common Equity Tier 1 ratio (non-GAAP) (a), (b)

9.59


9.56


10.94



N/A


N/A


Book value at period end

$

12.58


$

12.78


$

12.51



(1.6)

%

.6

%

Net interest margin (TE) from continuing operations

3.12

%

2.85

%

2.87

%


N/A


N/A


















(a)

The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "Common Equity Tier 1."  The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. For further information on the Regulatory Capital Rules, see the "Capital" section of this release.



(b)

12-31-16 ratio is estimated.



TE = Taxable Equivalent, N/A = Not Applicable

 

 

INCOME STATEMENT HIGHLIGHTS














Net interest income














dollars in millions





Change 4Q16 vs.


4Q16

3Q16

4Q15


3Q16

4Q15

Net interest income (TE)

$

948


$

788


$

610



20.3

%

55.4

%

Merger-related charges


(6)




N/M


N/M


Total net interest income excluding merger-related charges

$

948


$

794


$

610



19.4

%

55.4

%








TE = Taxable Equivalent

 

Fourth quarter 2016 net interest income included $92 million of purchase accounting accretion related to the acquisition of First Niagara, including $34 million related to refinement of third quarter 2016 purchase accounting estimates.

Taxable-equivalent net interest income was $948 million for the fourth quarter of 2016, and the net interest margin was 3.12%, compared to taxable-equivalent net interest income of $610 million and a net interest margin of 2.87% for the fourth quarter of 2015, reflecting the benefit from the First Niagara acquisition and ongoing business activity.

Compared to the third quarter of 2016, taxable-equivalent net interest income increased by $160 million, and the net interest margin increased by 27 basis points. The increases in both net interest income and the net interest margin reflect the benefit from a full-quarter impact of the First Niagara acquisition and refinement of third quarter 2016 purchase accounting estimates. The net interest margin also benefited from the redeployment of excess liquidity into investment securities.

 


Noninterest Income














dollars in millions





Change 4Q16 vs.


4Q16

3Q16

4Q15


3Q16

4Q15

Trust and investment services income

$

123


$

122


$

105



.8

%

17.1

%

Investment banking and debt placement fees

157


156


127



.6


23.6


Service charges on deposit accounts

84


85


64



(1.2)


31.3


Operating lease income and other leasing gains

21


6


15



250.0


40.0


Corporate services income

61


51


55



19.6


10.9


Cards and payments income

69


66


47



4.5


46.8


Corporate-owned life insurance income

40


29


36



37.9


11.1


Consumer mortgage income

6


6


2




200.0


Mortgage servicing fees

20


15


15



33.3


33.3


Net gains (losses) from principal investing

4


5




(20.0)


N/M


Other income

33


8


19



312.5


73.7


Total noninterest income

$

618


$

549


$

485



12.6

%

27.4

%

Merger-related charges

9


(12)




N/M


N/M


Total noninterest income excluding merger-related charges

$

609


$

561


$

485



8.6

%

25.6

%








N/M = Not Meaningful

 

Fourth quarter 2016 reported noninterest income includes a benefit of $9 million associated with merger-related charges that includes adjustments to purchase accounting, compared to charges of $12 million in the third quarter of 2016.

Key's noninterest income was $618 million for the fourth quarter of 2016, compared to $485 million for the year-ago quarter. The increase was driven by the acquisition of First Niagara, as well as continued positive momentum in Key's core businesses. Investment banking and debt placement fees, cards and payments income, service charges on deposit accounts, and other income all contributed to the growth.

Compared to the third quarter of 2016, noninterest income increased by $69 million. The increase included a full-quarter impact of the First Niagara acquisition as well as adjustments to purchase accounting that have been recorded as merger-related charges. Operating lease income and other leasing gains increased $15 million, with prior quarter results impacted by lease residual losses. Additionally, corporate-owned life insurance income increased $11 million, reflecting normal seasonality. Other income was impacted by merger-related charges, which contributed $19 million to the linked quarter increase.

 


Noninterest Expense














dollars in millions





Change 4Q16 vs.


4Q16

3Q16

4Q15


3Q16

4Q15

Personnel expense

$

648


$

594


$

429



9.1

%

51.0

%

Nonpersonnel expense

572


488


307



17.2


86.3


     Total noninterest expense

$

1,220


$

1,082


$

736



12.8


65.8









Merger-related charges

207


189


6



9.5


N/M


     Total noninterest expense excluding merger-related charges

$

1,013


$

893


$

730



13.4

%

38.8

%








N/M = Not Meaningful

 

Key's noninterest expense was $1.2 billion for the fourth quarter of 2016, which included $207 million of merger-related charges, as well as a pension settlement charge of $18 million. The merger-related charges were primarily made up of $80 million in personnel expense related to systems conversions, as well as fully-dedicated personnel for merger and integration efforts. The remaining $127 million of merger-related charges were nonpersonnel expense, largely recognized in net occupancy, computer processing, business services and professional fees, and marketing expense. In the third quarter of 2016, noninterest expense included $189 million of merger-related charges, while $6 million of merger-related charges were incurred in the fourth quarter of 2015.

Excluding merger-related charges, noninterest expense was $283 million higher than the fourth quarter of last year. The increase from the prior year, reflected in both personnel and nonpersonnel expense, was largely driven by the acquisition of First Niagara, as well as higher incentive and stock-based compensation. Additionally, Key incurred $14 million in an increased pension settlement charge, and intangible asset amortization increased $18 million.

Compared to the third quarter of 2016, excluding merger-related charges, noninterest expense increased by $120 million. The increase, reflected in both personnel and nonpersonnel expense, was largely driven by an extra month of impact from First Niagara, as well as a pension settlement charge of $18 million during the fourth quarter. Incentive and stock-based compensation also increased, primarily related to stock-based compensation plans, reflecting the impact of Key's higher share price. In the fourth quarter of 2016, intangible asset amortization increased $14 million.

BALANCE SHEET HIGHLIGHTS

In the fourth quarter of 2016, Key had average assets of $136 billion compared to $96.1 billion in the fourth quarter of 2015 and $125.1 billion in the third quarter of 2016, primarily reflecting the acquisition of First Niagara.

Average securities available-for-sale and held-to-maturity securities totaled $29.3 billion in the fourth quarter of 2016, compared to $19.1 billion in the fourth quarter of 2015 and $24.2 billion in the third quarter of 2016.  The increase compared to both the year-ago quarter and prior quarter primarily reflects the impact of the First Niagara acquisition and the redeployment of excess liquidity into the investment portfolio.

 



Average Loans














dollars in millions





Change 4Q16 vs.


4Q16

3Q16

4Q15


3Q16

4Q15

Commercial, financial and agricultural (a)

$

39,495


$

37,318


$

30,884



5.8

%

27.9

%

Other commercial loans

21,617


19,110


12,996



13.1


66.3


Home equity loans

12,812


11,968


10,418



7.1


23.0


Other consumer loans

11,436


9,301


5,278



23.0


116.7


Total loans

$

85,360


$

77,697


$

59,576



9.9

%

43.3

%








(a)

Commercial, financial and agricultural average loan balances include $119 million, $107 million, and $87 million of assets from commercial credit cards at December 31, 2016, September 30, 2016, and December 31, 2015, respectively.

 

During the fourth quarter, Key adjusted the fair value mark on the First Niagara acquired loan portfolio from $686 million to $548 million.

Average loans were $85.4 billion for the fourth quarter of 2016, an increase of $25.8 billion compared to the fourth quarter of 2015, primarily reflecting the impact of the First Niagara acquisition and growth in commercial, financial and agricultural loans.

Compared to the third quarter of 2016, average loans increased by $7.7 billion, with the change reflecting the full-quarter impact of the First Niagara acquisition, September branch divestitures, and the exit of acquired non-relationship commercial loans. On a period-end basis, Key's loan portfolio increased $510 million, driven by growth in commercial, financial and agricultural loans and improvement in the fair value mark on the acquired portfolio.

 



Average Deposits















dollars in millions





Change 4Q16 vs.



4Q16

3Q16

4Q15


3Q16

4Q15

Non-time deposits (a)

$

94,414


$

85,683


$

66,270



10.2

%

42.5

%

Certificates of deposit ($100,000 or more)

5,428


4,204


2,150



29.1


152.5


Other time deposits

4,849


5,031


3,047



(3.6)


59.1



Total deposits

$

104,691


$

94,918


$

71,467



10.3

%

46.5

%









Cost of total deposits (a)

.22

%

.21

%

.15

%


N/A


N/A










(a)

Excludes deposits in foreign office.


N/A = Not Applicable

 

Average deposits, excluding deposits in foreign office, totaled $104.7 billion for the fourth quarter of 2016, an increase of $33.2 billion compared to the year-ago quarter, primarily reflecting the acquisition of First Niagara and higher interest-bearing deposits resulting from core deposit growth in Key's retail banking franchise and growth in escrow deposits from the commercial mortgage servicing business. 

Compared to the third quarter of 2016, average deposits increased by $9.8 billion, reflecting the full-quarter impact of the First Niagara acquisition, core deposit growth in Key's retail banking franchise, and deposit inflows from Key's commercial clients.

 



ASSET QUALITY














dollars in millions





Change 4Q16 vs.


4Q16

3Q16

4Q15


3Q16

4Q15

Net loan charge-offs

$

72


$

44


$

37



63.6

%

94.6

%

Net loan charge-offs to average total loans

.34

%

.23

%

.25

%


N/A


N/A


Nonperforming loans at period end (a)

$

625


$

723


$

387



(13.6)


61.5


Nonperforming assets at period end (a)

676


760


403



(11.1)


67.7


Allowance for loan and lease losses

858


865


796



(.8)


7.8


Allowance for loan and lease losses to nonperforming loans (a)

137.3

%

119.6

%

205.7

%


N/A


N/A


Provision for credit losses

$

66


$

59


$

45



11.9

%

46.7

%








(a)

Nonperforming loan balances exclude $865 million, $959 million, and $11 million of purchased credit impaired loans at December 31, 2016, September 30, 2016, and December 31, 2015, respectively.



N/A = Not Applicable

 

Key's provision for credit losses was $66 million for the fourth quarter of 2016, compared to $45 million for the fourth quarter of 2015 and $59 million for the third quarter of 2016.  Key's allowance for loan and lease losses was $858 million, or 1.00% of total period-end loans, at December 31, 2016, compared to 1.33% at December 31, 2015, and 1.01% at September 30, 2016.

Net loan charge-offs for the fourth quarter of 2016 totaled $72 million, or .34% of average total loans, reflecting regulatory guidance on consumer bankruptcies and conforming First Niagara charge-off policies to Key. These results compare to $37 million, or .25%, for the fourth quarter of 2015, and $44 million, or .23%, for the third quarter of 2016.

At December 31, 2016, Key's nonperforming loans totaled $625 million, which represented .73% of period-end portfolio loans. These results compare to .65% at December 31, 2015, and .85% at September 30, 2016. Nonperforming assets at December 31, 2016, totaled $676 million, and represented .79% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .67% at December 31, 2015, and .89% at September 30, 2016.

CAPITAL

Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at December 31, 2016.

 


Capital Ratios









12/31/2016

9/30/2016

12/31/2015

Common Equity Tier 1 (a), (b)

9.59

%

9.56

%

10.94

%

Tier 1 risk-based capital (a)

10.95


10.53


11.35


Total risk based capital (a)

12.92


12.63


12.97


Tangible common equity to tangible assets (b)

8.09


8.27


9.98


Leverage (a)

9.89


10.22


10.72






(a)

12/31/2016 ratio is estimated.



(b)

The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "tangible common equity" and "Common Equity Tier 1." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. See below for further information on the Regulatory Capital Rules.

 

As shown in the preceding table, at December 31, 2016, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.59% and 10.95%, respectively.  In addition, the tangible common equity ratio was 8.09% at December 31, 2016.

As a "standardized approach" banking organization, Key's mandatory compliance with the final Basel III capital framework for U.S. banking organizations (the "Regulatory Capital Rules") began on January 1, 2015, subject to transitional provisions extending to January 1, 2019. Key's estimated Common Equity Tier 1 ratio as calculated under the fully phased-in Regulatory Capital Rules was 9.47% at December 31, 2016.  This estimate exceeds the fully phased-in required minimum Common Equity Tier 1 and Capital Conservation Buffer of 7.00%.

 


Summary of Changes in Common Shares Outstanding













in thousands





Change 4Q16 vs.



4Q16

3Q16

4Q15


3Q16

4Q15

Shares outstanding at beginning of period

1,082,055


842,703


835,285



28.4

%

29.5

%

Common shares repurchased

(4,380)


(5,240)




(16.4)


N/M


Shares reissued (returned) under employee benefit plans

1,642


4,857


466



(66.2)


252.4


Common shares issued to acquire First Niagara

(3)


239,735




N/M


N/M



Shares outstanding at end of period

1,079,314


1,082,055


835,751



(.3)%


29.1

%









N/M = Not Meaningful

 


During the fourth quarter of 2016, Key completed $68 million of common share repurchases, including repurchases to offset issuances of common shares under our employee compensation plans, in accordance with Key's 2016 Capital Plan.

LINE OF BUSINESS RESULTS

The following table shows the contribution made by each major business segment to Key's taxable-equivalent revenue from continuing operations and income (loss) from continuing operations attributable to Key for the periods presented.  For more detailed financial information pertaining to each business segment, see the tables at the end of this release.

 


Major Business Segments















dollars in millions





Change 4Q16 vs.



4Q16

3Q16

4Q15


3Q16

4Q15

Revenue from continuing operations (TE)







Key Community Bank

$

901


$

779


$

588



15.7

%

53.2

%

Key Corporate Bank

630


554


479



13.7


31.5


Other Segments

40


17


31



135.3


29.0



Total segments

1,571


1,350


1,098



16.4


43.1


Reconciling Items

(5)


(13)


(3)



N/M


N/M



Total

$

1,566


$

1,337


$

1,095



17.1

%

43.0

%









Income (loss) from continuing operations attributable to Key







Key Community Bank

$

115


$

104


$

70



10.6

%

64.3

%

Key Corporate Bank

221


159


142



39.0


55.6


Other Segments

29


16


25



81.3


16.0



Total segments

365


279


237



30.8


54.0


Reconciling Items (a)

(132)


(108)


(7)



N/M


N/M



Total

$

233


$

171


$

230



36.3

%

1.3

%









(a)

Reconciling items consists primarily of the unallocated portion of merger-related charges and items not allocated to the business segments because they do not reflect their normal operations.



TE = Taxable Equivalent, N/M = Not Meaningful

 

 


Key Community Bank























dollars in millions





Change 4Q16 vs.



4Q16

3Q16

4Q15


3Q16

4Q15

Summary of operations







Net interest income (TE)

$

628


$

530


$

388



18.5

%

61.9

%

Noninterest income

273


249


200



9.6


36.5



Total revenue (TE)

901


779


588



15.7


53.2


Provision for credit losses

44


37


20



18.9


120.0


Noninterest expense

673


577


456



16.6


47.6



Income (loss) before income taxes (TE)

184


165


112



11.5


64.3


Allocated income taxes (benefit) and TE adjustments

69


61


42



13.1


64.3



Net income (loss) attributable to Key

$

115


$

104


$

70



10.6

%

64.3

%









Average balances







Loans and leases

$

47,032


$

41,548


$

30,925



13.2

%

52.1

%

Total assets

50,940


44,219


33,056



15.2


54.1


Deposits

79,357


69,397


52,219



14.4


52.0










Assets under management at period end

$

36,592


$

36,752


$

33,983



(.4)

%

7.7

%









TE = Taxable Equivalent

 

 


Additional Key Community Bank Data















dollars in millions





Change 4Q16 vs.



4Q16

3Q16

4Q15


3Q16

4Q15

Noninterest income







Trust and investment services income

$

88


$

86


$

73



2.3

%

20.5

%

Service charges on deposit accounts

71


70


54



1.4


31.5


Cards and payments income

59


55


44



7.3


34.1


Other noninterest income

55


38


29



44.7


89.7



Total noninterest income

$

273


$

249


$

200



9.6

%

36.5

%









Average deposit balances







NOW and money market deposit accounts

$

44,368


$

38,417


$

28,862



15.5

%

53.7

%

Savings deposits

5,326


4,369


2,330



21.9


128.6


Certificates of deposit ($100,000 or more)

3,658


2,607


1,686



40.3


117.0


Other time deposits

4,836


4,943


3,045



(2.2)


58.8


Deposits in foreign office



208



N/M


N/M


Noninterest-bearing deposits

21,169


19,061


16,088



11.1


31.6



Total deposits

$

79,357


$

69,397


$

52,219



14.4

%

52.0

%









Home equity loans







Average balance

$

12,560


$

11,703


$

10,203





Combined weighted-average loan-to-value ratio (at date of origination)

71

%

70

%

71

%




Percent first lien positions

57


55


61













Other data







Branches

1,217


1,322


966





Automated teller machines

1,593


1,701


1,256













N/M = Not Meaningful

 

Key Community Bank Summary of Operations (4Q16 vs. 4Q15)

  • Positive operating leverage from prior year
  • Net income increased $45 million, or 64.3% from prior year
  • Average commercial, financial, and agricultural loans increased $4.9 billion, or 38.6% from the prior year
  • Average deposits increased $27.1 billion, or 52% from the prior year

Key Community Bank recorded net income attributable to Key of $115 million for the fourth quarter of 2016, compared to $70 million for the year-ago quarter, benefiting from momentum in Key's core businesses, as well as the impact of the First Niagara acquisition.

Taxable-equivalent net interest income increased by $240 million, or 61.9%, from the fourth quarter of 2015. The increase is primarily attributable to the acquisition of First Niagara. Average loans and leases increased $16.1 billion, or 52.1%, largely driven by a $4.9 billion, or 38.6% increase in commercial, financial, and agricultural loans. Additionally, average deposits increased $27.1 billion, or 52% from one year ago.

Noninterest income increased $73 million, or 36.5%, from the year-ago quarter, with positive trends in cards and payments income and service charges on deposit accounts.

The provision for credit losses increased by $24 million, or 120%, from the fourth quarter of 2015,  primarily related to the acquisition of First Niagara, which was partially offset by enhancements to the approach utilized to determine the consumer allowance for loan and lease losses in the fourth quarter of 2016. Net loan charge-offs increased $19 million, primarily related to the acquisition of First Niagara.

Noninterest expense increased by $217 million, or 47.6%, from the year-ago quarter, largely driven by the acquisition of First Niagara, as well as core business activity and investments. Personnel expense increased $73 million while non-personnel expense increased by $144 million, including higher intangible amortization expense and higher FDIC assessment expense.

 


Key Corporate Bank























dollars in millions





Change 4Q16 vs.



4Q16

3Q16

4Q15


3Q16

4Q15

Summary of operations







Net interest income (TE)

$

332


$

276


$

224



20.3

%

48.2

%

Noninterest income

298


278


255



7.2


16.9



Total revenue (TE)

630


554


479



13.7


31.5


Provision for credit losses

21


25


26



(16.0)


(19.2)


Noninterest expense

325


307


257



5.9


26.5



Income (loss) before income taxes (TE)

284


222


196



27.9


44.9


Allocated income taxes and TE adjustments

63


63


51




23.5



Net income (loss)

221


159


145



39.0


52.4


Less: Net income (loss) attributable to noncontrolling interests



3



N/M


N/M



Net income (loss) attributable to Key

$

221


$

159


$

142



39.0

%

55.6

%









Average balances







Loans and leases

$

36,769


$

34,561


$

26,981



6.4

%

36.3

%

Loans held for sale

1,223


1,103


820



10.9


49.1


Total assets

43,209


40,581


32,639



6.5


32.4


Deposits

23,173


22,708


19,080



2.0

%

21.5

%










TE = Taxable Equivalent, N/M = Not Meaningful

 

 


Additional Key Corporate Bank Data















dollars in millions





Change 4Q16 vs.



4Q16

3Q16

4Q15


3Q16

4Q15

Noninterest income







Trust and investment services income

$

35


$

36


$

32



(2.8)

%

9.4

%

Investment banking and debt placement fees

154


153


125



.7


23.2


Operating lease income and other leasing gains

19


10


13



90.0


46.2










Corporate services income

43


36


44



19.4


(2.3)


Service charges on deposit accounts

13


15


10



(13.3)


30.0


Cards and payments income

10


11


3



(9.1)


233.3



Payments and services income

66


62


57



6.5


15.8










Mortgage servicing fees

18


13


15



38.5


20.0


Other noninterest income

6


4


13



50.0


(53.8)



Total noninterest income

$

298


$

278


$

255



7.2

%

16.9

%

















 


Key Corporate Bank Summary of Operations (4Q16 vs. 4Q15)

  • Record quarter and year for investment banking and debt placement fees
  • Net income increased $79 million, or 55.6% from the prior year
  • Average loans and leases increased $9.8 billion, or 36.3% from the prior year
  • Average deposits increased $4.1 billion, or 21.5% from the prior year

Key Corporate Bank recorded net income attributable to Key of $221 million for the fourth quarter of 2016, compared to $142 million for the same period one year ago, reflecting the impact of the First Niagara acquisition as well as positive trends in Key's core businesses.

Taxable-equivalent net interest income increased by $108 million, or 48.2%, compared to the fourth quarter of 2015.  Average loan and lease balances increased $9.8 billion, or 36.3%, from the year-ago quarter, primarily driven by the First Niagara acquisition as well as growth in commercial, financial and agricultural loans. Average deposit balances increased $4.1 billion, or 21.5%, from the year-ago quarter, mostly driven by the First Niagara acquisition, as well as growth in commercial escrow deposits.

Noninterest income increased $43 million, or 16.9%, from the prior year.  This growth was mostly due to investment banking and debt placement fees, which increased $29 million, or 23.2%, cards and payments income which increased $7 million, and operating lease income and other leasing gains which increased $6 million.

The provision for credit losses decreased $5 million, or 19.2%, compared to the fourth quarter of 2015.

Noninterest expense increased by $68 million, or 26.5%, from the fourth quarter of 2015. The increase from the prior year, reflected in both personnel and nonpersonnel expense, was largely driven by the acquisition of First Niagara, higher performance-based compensation and various other items, including operating lease and cards and payments expenses.

Key Corporate Bank also continued to benefit from a higher volume of low income housing and energy tax credits.

Other Segments

Other Segments consist of Corporate Treasury, Key's Principal Investing unit, and various exit portfolios.  Other Segments generated net income attributable to Key of $29 million for the fourth quarter of 2016, compared to $25 million for the same period last year, largely due to higher net gains from principal investing.

*****

KeyCorp's roots trace back 190 years to Albany, New York. Headquartered in Cleveland, Ohio, Key is one of the nation's largest bank-based financial services companies, with assets of approximately $136.5 billion at December 31, 2016.

Key provides deposit, lending, cash management, insurance, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of more than 1,200 branches and more than 1,500 ATMs.  Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC.

 

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements do not relate strictly to historical or current facts.  Forward-looking statements usually can be identified by the use of words such as "goal," "objective," "plan," "expect," "assume," "anticipate," "intend," "project," "believe," "estimate," or other words of similar meaning. Forward-looking statements provide our current expectations or forecasts of future events, circumstances, results, or aspirations. Forward-looking statements, by their nature, are subject to assumptions, risks and uncertainties, many of which are outside of our control. Our actual results may differ materially from those set forth in our forward-looking statements. There is no assurance that any list of risks and uncertainties or risk factors is complete.  Factors that could cause Key's actual results to differ from those described in the forward-looking statements can be found in KeyCorp's Form 10-K for the year ended December 31, 2015, as well as in KeyCorp's subsequent SEC filings, all of which have been filed with the Securities and Exchange Commission (the "SEC") and are available on Key's website (www.key.com/ir) and on the SEC's website (www.sec.gov).  These factors may include, among others: deterioration of commercial real estate market fundamentals, adverse changes in credit quality trends, declining asset prices, a reversal of the U.S. economic recovery due to financial, political, or other shocks, and the extensive and increasing regulation of the U.S. financial services industry. Any forward-looking statements made by us or on our behalf speak only as of the date they are made and we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances.

 

Notes to Editors:

A live Internet broadcast of KeyCorp's conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on Thursday, January 19, 2017.  An audio replay of the call will be available through January 29, 2017.

 

Financial Highlights

(dollars in millions, except per share amounts)




Three months ended




12/31/2016


9/30/2016


12/31/2015

Summary of operations







Net interest income (TE)

$

948



$

788



$

610



Noninterest income

618



549



485




Total revenue (TE)

1,566



1,337



1,095



Provision for credit losses

66



59



45



Noninterest expense

1,220



1,082



736



Income (loss) from continuing operations attributable to Key

233



171



230



Income (loss) from discontinued operations, net of taxes (a)

(4)



1



(4)



Net income (loss) attributable to Key

229



172



226











Income (loss) from continuing operations attributable to Key common shareholders

213



165



224



Income (loss) from discontinued operations, net of taxes (a)

(4)



1



(4)



Net income (loss) attributable to Key common shareholders

209



166



220










Per common share







Income (loss) from continuing operations attributable to Key common shareholders

$

.20



$

.17



$

.27



Income (loss) from discontinued operations, net of taxes (a)





(.01)



Net income (loss) attributable to Key common shareholders (b)

.20



.17



.27











Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution

.20



.16



.27



Income (loss) from discontinued operations, net of taxes — assuming dilution (a)





(.01)



Net income (loss) attributable to Key common shareholders — assuming dilution (b)

.19



.17



.26











Cash dividends declared per common share

.085



.085



.075



Book value at period end

12.58



12.78



12.51



Tangible book value at period end

9.99



10.14



11.22



Market price at period end

18.27



12.17



13.19










Performance ratios







From continuing operations:







Return on average total assets

.69

%


.55

%


.97

%


Return on average common equity

6.22



5.09



8.51



Return on average tangible common equity (c)

7.88



6.16



9.50



Net interest margin (TE)

3.12



2.85



2.87



Cash efficiency ratio (c)

76.2



80.0



66.4











From consolidated operations:







Return on average total assets

.67

%


.55

%


.93

%


Return on average common equity

6.10



5.12



8.36



Return on average tangible common equity (c)

7.73



6.20



9.33



Net interest margin (TE)

3.09



2.83



2.84



Loan to deposit (d)

85.2



84.7



87.8










Capital ratios at period end







Key shareholders' equity to assets

11.17

%


11.04

%


11.30

%


Key common shareholders' equity to assets

9.95



10.18



10.99



Tangible common equity to tangible assets (c)

8.09



8.27



9.98



Common Equity Tier 1 (c), (e)

9.59



9.56



10.94



Tier 1 risk-based capital (e)

10.95



10.53



11.35



Total risk-based capital (e)

12.92



12.63



12.97



Leverage (e)

9.89



10.22



10.72










Asset quality — from continuing operations







Net loan charge-offs

$

72



$

44



$

37



Net loan charge-offs to average loans

.34

%


.23

%


.25

%


Allowance for loan and lease losses

$

858



$

865



$

796



Allowance for credit losses

913



918



852



Allowance for loan and lease losses to period-end loans

1.00

%


1.01

%


1.33

%


Allowance for credit losses to period-end loans

1.06



1.07



1.42



Allowance for loan and lease losses to nonperforming loans (f)

137.3



119.6



205.7



Allowance for credit losses to nonperforming loans (f)

146.1



127.0



220.2



Nonperforming loans at period end (f)

$

625



$

723



$

387



Nonperforming assets at period end (f)

676



760



403



Nonperforming loans to period-end portfolio loans (f)

.73

%


.85

%


.65

%


Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (f)

.79



.89



.67










Trust and brokerage assets







Assets under management

$

36,592



$

36,752



$

33,983



 Nonmanaged and brokerage assets

45,358



45,338



47,681










Other data







Average full-time equivalent employees

18,849



17,079



13,359



Branches

1,217



1,322



966










Taxable-equivalent adjustment

$

10



$

8



$

8


 

          

Financial Highlights (continued)

(dollars in millions, except per share amounts)




Twelve months ended




12/31/2016


12/31/2015

Summary of operations





Net interest income (TE)

$

2,953



$

2,348



Noninterest income

2,071



1,880




Total revenue (TE)

5,024



4,256



Provision for credit losses

266



166



Noninterest expense

3,756



2,840



Income (loss) from continuing operations attributable to Key

790



915



Income (loss) from discontinued operations, net of taxes (a)

1



1



Net income (loss) attributable to Key

791



916









Income (loss) from continuing operations attributable to Key common shareholders

$

753



$

892



Income (loss) from discontinued operations, net of taxes (a)

1



1



Net income (loss) attributable to Key common shareholders

754



893








Per common share





Income (loss) from continuing operations attributable to Key common shareholders

$

.81



$

1.06



Income (loss) from discontinued operations, net of taxes (a)





Net income (loss) attributable to Key common shareholders (b)

.81



1.06









Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution

.80



1.05



Income (loss) from discontinued operations, net of taxes — assuming dilution (a)





Net income (loss) attributable to Key common shareholders — assuming dilution (b)

.80



1.05









Cash dividends paid

.330



.290








Performance ratios





From continuing operations:





Return on average total assets

.70

%


.99

%


Return on average common equity

6.26



8.63



Return on average tangible common equity (c)

7.39



9.64



Net interest margin (TE)

2.92



2.88



Cash efficiency ratio (c)

73.7



65.9









From consolidated operations:





Return on average total assets

.69

%


.97

%


Return on average common equity

6.27



8.64



Return on average tangible common equity(c)

7.40



9.65



Net interest margin (TE)

2.91



2.85








Asset quality — from continuing operations





Net loan charge-offs

205



142



Net loan charge-offs to average total loans

.29

%


.24

%







Other data





Average full-time equivalent employees

15,700



13,483








Taxable-equivalent adjustment

34



28


 

 

(a)

In April 2009, management decided to wind down the operations of Austin Capital Management, Ltd., a subsidiary that specialized in managing hedge fund investments for institutional customers.  In September 2009, management decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank National Association.  In February 2013, Key decided to sell its investment subsidiary, Victory Capital Management, and its broker-dealer affiliate, Victory Capital Advisors, to a private equity fund.  As a result of these decisions, Key has accounted for these businesses as discontinued operations.



(b)

Earnings per share may not foot due to rounding.



(c)

The following table entitled "GAAP to Non-GAAP Reconciliations" presents the computations of certain financial measures related to "tangible common equity,"  "Common Equity Tier 1," and "cash efficiency."  The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.  For further information on the Regulatory Capital Rules, see the "Capital" section of this release.



(d)

Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits (excluding deposits in foreign office).



(e)

12/31/2016 ratio is estimated.



(f)

Nonperforming loan balances exclude, $865 million, $959 million, and $11 million of purchased credit impaired loans at December 31, 2016, September 30, 2016, and December 31, 2015, respectively.



TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

 

GAAP to Non-GAAP Reconciliations
(dollars in millions)

The table below presents certain non-GAAP financial measures related to "tangible common equity," "return on average tangible common equity," "Common Equity Tier 1," "pre-provision net revenue," certain financial measures excluding merger-related charges, and "cash efficiency ratio."

The tangible common equity ratio and the return on average tangible common equity ratio have been a focus for some investors, and management believes these ratios may assist investors in analyzing Key's capital position without regard to the effects of intangible assets and preferred stock.  Traditionally, the banking regulators have assessed bank and bank holding company capital adequacy based on both the amount and the composition of capital, the calculation of which is prescribed in federal banking regulations.  In October 2013, the federal banking regulators published the final Basel III capital framework for U.S. banking organizations (the "Regulatory Capital Rules").  The Regulatory Capital Rules require higher and better-quality capital and introduced a new capital measure, "Common Equity Tier 1," a non-GAAP financial measure.  The mandatory compliance date for Key as a "standardized approach" banking organization began on January 1, 2015, subject to transitional provisions extending to January 1, 2019.

Common Equity Tier 1 is not formally defined by GAAP and is considered to be a non-GAAP financial measure.  Since analysts and banking regulators may assess Key's capital adequacy using tangible common equity and Common Equity Tier 1, management believes it is useful to enable investors to assess Key's capital adequacy on these same bases.  The table also reconciles the GAAP performance measures to the corresponding non-GAAP measures.

The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP.  Management believes that eliminating the effects of the provision for credit losses makes it easier to analyze the results by presenting them on a more comparable basis.

As previously disclosed, Key completed its purchase of First Niagara on August 1, 2016.  The definitive agreement and plan of merger to acquire First Niagara was originally announced on October 30, 2015.  As a result of this transaction, Key has recognized merger-related charges.  The table below shows the computation of merger-related charges, noninterest expense excluding merger-related charges, earnings per common share excluding merger-related charges, return on average tangible common equity excluding merger-related charges, return on average assets from continuing operations excluding merger-related charges, and pre-provision net revenue excluding merger-related charges.  Management believes that eliminating the effects of the merger-related charges makes it easier to analyze the results by presenting them on a more comparable basis.

The cash efficiency ratio is a ratio of two non-GAAP performance measures. As such, there is no directly comparable GAAP performance measure.  The cash efficiency ratio performance measure removes the impact of Key's intangible asset amortization from the calculation.  The table below also shows the computation for the cash efficiency ratio excluding merger-related charges. Management believes these ratios provide greater consistency and comparability between Key's results and those of its peer banks.  Additionally, these ratios are used by analysts and investors as they develop earnings forecasts and peer bank analysis.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited.  Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.

 





Three months ended





12/31/2016

9/30/2016

12/31/2015

Tangible common equity to tangible assets at period end





Key shareholders' equity (GAAP)

$

15,240


$

14,996


$

10,746



Less:

Intangible assets  (a)

2,788


2,855


1,080




Preferred Stock  (b)

1,640


1,150


281




Tangible common equity (non-GAAP)

$

10,812


$

10,991


$

9,385










Total assets (GAAP)

$

136,453


$

135,805


$

95,131



Less:

Intangible assets  (a)

2,788


2,855


1,080




Tangible assets (non-GAAP)

$

133,665


$

132,950


$

94,051










Tangible common equity to tangible assets ratio (non-GAAP)

8.09

%

8.27

%

9.98

%








Common Equity Tier 1 at period end





Key shareholders' equity (GAAP)

$

15,240


$

14,996


$

10,746



Less:

Preferred Stock (b)

1,640


1,150


281




Common Equity Tier 1 capital before adjustments and deductions

13,600


13,846


10,465



Less:

Goodwill, net of deferred taxes

2,416


2,450


1,034




Intangible assets, net of deferred taxes

159


216


26




Deferred tax assets

6


6


1




Net unrealized gains (losses) on available-for-sale securities, net of deferred taxes

(185)


101


(58)




Accumulated gains (losses) on cash flow hedges, net of deferred taxes

(53)


39


(20)




Amounts in accumulated other comprehensive income (loss) attributed to







pension and postretirement benefit costs, net of deferred taxes

(339)


(359)


(365)




Total Common Equity Tier 1 capital  (c)

$

11,596


$

11,393


$

9,847










Net risk-weighted assets (regulatory)  (c)

$

120,887


$

119,120


$

89,980










Common Equity Tier 1 ratio (non-GAAP)  (c)

9.59

%

9.56

%

10.94

%








Pre-provision net revenue





Net interest income (GAAP)

$

938


$

780


$

602



Plus:

Taxable-equivalent adjustment

10


8


8




Noninterest income

618


549


485



Less:

Noninterest expense

1,220


1,082


736




Pre-provision net revenue from continuing operations (non-GAAP)

$

346


$

255


$

359


 

 

GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)




Three months ended




12/31/2016

9/30/2016

12/31/2015

Average tangible common equity





Average Key shareholders' equity (GAAP)

$

14,901


$

13,552


$

10,731



Less:

Intangible assets (average) (d)

2,874


2,255


1,082




Preferred Stock (average)

1,274


648


290




Average tangible common equity (non-GAAP)

$

10,753


$

10,649


$

9,359








Return on average tangible common equity from continuing operations





Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)

$

213


$

165


$

224



Average tangible common equity (non-GAAP)

10,753


10,649


9,359









Return on average tangible common equity from continuing operations (non-GAAP)

7.88

%

6.16

%

9.50

%







Return on average tangible common equity consolidated





Net income (loss) attributable to Key common shareholders (GAAP)

$

209


$

166


$

220



Average tangible common equity (non-GAAP)

10,753


10,649


9,359









Return on average tangible common equity consolidated (non-GAAP)

7.73

%

6.20

%

9.33

%







Return on average tangible common equity from continuing operations excluding merger-related charges





Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)

$

213


$

165


$

224



Merger-related charges, after tax

124


132


4



Net income (loss) from continuing operations attributable to Key common shareholders excluding






merger-related charges (non-GAAP)

$

337


$

297


$

228









Average tangible common equity (non-GAAP)

$

10,753


$

10,649


$

9,359









Return on average tangible common equity from continuing operations excluding merger-related






charges (non-GAAP)

12.47

%

11.10

%

9.67

%







Return on average tangible common equity consolidated excluding merger-related charges





Net income (loss) attributable to Key common shareholders (GAAP)

$

209


$

166


$

220



Merger-related charges, after tax

124


132


4



Net income (loss) attributable to Key common shareholders excluding merger-related charges (non-GAAP)

$

333


$

298


$

224









Average tangible common equity (non-GAAP)

$

10,753


$

10,649


$

9,359









Return on average tangible common equity consolidated excluding merger-related charges (non-GAAP)

12.32

%

11.13

%

9.50

%







Noninterest expense excluding merger-related charges





Noninterest expense (GAAP)

$

1,220


$

1,082


$

736



Less:

Merger-related charges

207


189


6




Noninterest expense excluding merger-related charges (non-GAAP)

$

1,013


$

893


$

730








Earnings per common share (EPS) excluding merger-related charges





EPS from continuing operations attributable to Key common shareholders  — assuming dilution

$

.20


$

.16


$

.27



Add:

EPS impact of merger-related charges

.11


.14





EPS from continuing operations attributable to Key common shareholders






excluding merger-related charges (non-GAAP)

$

.31


$

.30


$

.27








Cash efficiency ratio





Noninterest expense (GAAP)

$

1,220


$

1,082


$

736



Less:

Intangible asset amortization

27


13


9




Adjusted noninterest expense (non-GAAP)

1,193


1,069


727



Less:

Merger-related charges

207


189


6




Adjusted noninterest expense excluding merger-related charges (non-GAAP)

$

986


$

880


$

721









Net interest income (GAAP)

$

938


$

780


$

602



Plus:

Taxable-equivalent adjustment

10


8


8




Noninterest income

618


549


485




Total taxable-equivalent revenue (non-GAAP)

1,566


1,337


1,095



Add:

Merger-related charges

(9)


18





Adjusted noninterest income excluding merger-related charges (non-GAAP)

$

1,557


$

1,355


$

1,095









Cash efficiency ratio (non-GAAP)

76.2

%

80.0

%

66.4

%








Cash efficiency ratio excluding merger-related charges (non-GAAP)

63.3

%

64.9

%

65.8

%











































GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)




Three months ended




12/31/2016

9/30/2016

12/31/2015

Return on average total assets from continuing operations excluding merger-related charges





Income from continuing operations attributable to Key (GAAP)

$

233


$

171


$

230



Add:

Merger-related charges, after tax

124


132


4




Income from continuing operations attributable to Key excluding merger-related






charges, after tax (non-GAAP)

$

357


$

303


$

234









Average total assets from continuing operations (GAAP)

$

134,428


$

123,469


$

94,117









Return on average total assets from continuing operations excluding merger-related






charges (non-GAAP)

1.06

%

.98

%

.99

%










Three months ended






12/31/2016



Common Equity Tier 1 under the Regulatory Capital Rules ("RCR") (estimates)





Common Equity Tier 1 under current RCR

$

11,596





Adjustments from current RCR to the fully phased-in RCR:






Deferred tax assets and other intangible assets (e)

(110)






Common Equity Tier 1 anticipated under the fully phased-in RCR (f)

$

11,486











Net risk-weighted assets under current RCR

$

120,887





Adjustments from current RCR to the fully phased-in RCR:






Mortgage servicing assets (g)

576






Volcker funds

(185)






All other assets

(2)






Total risk-weighted assets anticipated under the fully phased-in RCR (f)

$

121,276











Common Equity Tier 1 ratio under the fully phased-in RCR (f)

9.47

%



 

 

 

GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)




Twelve months ended




12/31/2016

12/31/2015

Pre-provision net revenue excluding merger-related charges




Net interest income (GAAP)

$

2,919


$

2,348



Plus:

Taxable-equivalent adjustment

34


28




Noninterest income (GAAP)

2,071


1,880



Less:

Noninterest expense (GAAP)

3,756


2,840



Pre-provision net revenue from continuing operations (non-GAAP)

$

1,268


$

1,416



Less:

Merger-related charges

474


6



Pre-provision net revenue from continuing operations excluding merger-related charges (non-GAAP)

$

1,742


$

1,422







Average tangible common equity




Average Key shareholders' equity (GAAP)

$

12,647


$

10,626



Less:

Intangible assets (average) (h)

1,825


1,085




Preferred Stock (average)

627


290




Average tangible common equity (non-GAAP)

$

10,195


$

9,251







Return on average tangible common equity from continuing operations




Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)

$

753


$

892



Average tangible common equity (non-GAAP)

10,195


9,251








Return on average tangible common equity from continuing operations (non-GAAP)

7.39

%

9.64

%






Return on average tangible common equity consolidated




Net income (loss) attributable to Key common shareholders (GAAP)

$

754


$

893



Average tangible common equity (non-GAAP)

10,195


9,251








Return on average tangible common equity consolidated (non-GAAP)

7.40

%

9.65

%






Cash efficiency ratio




Noninterest expense (GAAP)

$

3,756


$

2,840



Less:

Intangible asset amortization (GAAP)

55


36




Adjusted noninterest expense (non-GAAP)

3,701


2,804



Less:

Merger-related charges

465


6




Adjusted noninterest expense excluding merger-related charges (non-GAAP)

$

3,236


$

2,798








Net interest income (GAAP)

$

2,919


$

2,348



Plus:

Taxable-equivalent adjustment

34


28




Noninterest income (GAAP)

2,071


1,880




Total taxable-equivalent revenue (non-GAAP)

5,024


4,256



Plus:

Merger-related charges

9





Adjusted noninterest income excluding merger-related charges (non-GAAP)

$

5,033


$

4,256








Cash efficiency ratio (non-GAAP)

73.7

%

65.9

%







Cash efficiency ratio excluding merger-related charges (non-GAAP)

64.3

%

65.9

%






Return on average total assets from continuing operations excluding merger-related charges




Income from continuing operations attributable to Key (GAAP)

$

790


$

915



Plus:

Merger-related charges, after tax

299


4




Income from continuing operations attributable to Key excluding merger-related





charges, after tax (non-GAAP)

$

1,089


$

919








Average total assets from continuing operations (GAAP)

$

112,537


$

94,117








Return on average total assets from continuing operations excluding merger-related





charges (non-GAAP)

.97

%

.98

%

(a)

For the three months ended December 31, 2016, September 30, 2016, and December 31, 2015, intangible assets exclude $42 million, $51 million, and $45 million, respectively, of period-end purchased credit card receivables. 



(b)

Net of capital surplus.



(c)

12/31/16 amount is estimated.



(d)

For the three months ended December 31, 2016, September 30, 2016, and December 31, 2015, average intangible assets exclude $46 million, $47 million, and $47 million, respectively, of average purchased credit card receivables. 



(e)

Includes the deferred tax assets subject to future taxable income for realization, primarily tax credit carryforwards, as well as intangible assets (other than goodwill and mortgage servicing assets) subject to the transition provisions of the final rule.



(f)

The anticipated amount of regulatory capital and risk-weighted assets is based upon the federal banking agencies' Regulatory Capital Rules (as fully phased-in on January 1, 2019); Key is subject to the Regulatory Capital Rules under the "standardized approach."



(g)

Item is included in the 10%/15% exceptions bucket calculation and is risk-weighted at 250%.



(h)

For the twelve months ended December 31, 2016, and December 31, 2015, average intangible assets exclude $43 million and $55 million, respectively, of average purchased credit card receivables.



GAAP = U.S. generally accepted accounting principles

 

Consolidated Balance Sheets

(dollars in millions)










12/31/2016

9/30/2016

12/31/2015

Assets





Loans

$

86,038


$

85,528


$

59,876



Loans held for sale

1,104


1,137


639



Securities available for sale

20,212


20,540


14,218



Held-to-maturity securities

10,232


8,995


4,897



Trading account assets

867


926


788



Short-term investments

2,775


3,216


2,707



Other investments

738


747


655




Total earning assets

121,966


121,089


83,780



Allowance for loan and lease losses

(858)


(865)


(796)



Cash and due from banks

677


749


607



Premises and equipment

978


1,023


779



Operating lease assets

540


430


340



Goodwill

2,446


2,480


1,060



Other intangible assets

384


426


65



Corporate-owned life insurance

4,068


4,035


3,541



Derivative assets

803


1,304


619



Accrued income and other assets

3,864


3,480


3,290



Discontinued assets

1,585


1,654


1,846




Total assets

$

136,453


$

135,805


$

95,131








Liabilities





Deposits in domestic offices:






NOW and money market deposit accounts

$

54,590


$

56,432


$

37,089




Savings deposits

6,491


5,335


2,341




Certificates of deposit ($100,000 or more)

5,483


4,601


2,392




Other time deposits

4,698


5,793


3,127




Total interest-bearing deposits

71,262


72,161


44,949




Noninterest-bearing deposits

32,825


32,024


26,097



Deposits in foreign office — interest-bearing






Total deposits

104,087


104,185


71,046



Federal funds purchased and securities sold under repurchase agreements

1,502


602


372



Bank notes and other short-term borrowings

808


809


533



Derivative liabilities

636


850


632



Accrued expense and other liabilities

1,796


1,739


1,605



Long-term debt

12,384


12,622


10,184




Total liabilities

121,213


120,807


84,372








Equity





Preferred stock

1,665


1,165


290



Common shares

1,257


1,257


1,017



Capital surplus

6,385


6,359


3,922



Retained earnings

9,378


9,260


8,922



Treasury stock, at cost

(2,904)


(2,863)


(3,000)



Accumulated other comprehensive income (loss)

(541)


(182)


(405)




Key shareholders' equity

15,240


14,996


10,746



Noncontrolling interests


2


13




Total equity

15,240


14,998


10,759


Total liabilities and equity

$

136,453


$

135,805


$

95,131








Common shares outstanding (000)

1,079,314


1,082,055


835,751


 

 

Consolidated Statements of Income

(dollars in millions, except per share amounts)




Three months ended


Twelve months ended




12/31/2016

9/30/2016

12/31/2015


12/31/2016

12/31/2015

Interest income








Loans

$

898


$

746


$

552



$

2,773


$

2,149



Loans held for sale

11


10


8



34


37



Securities available for sale

92


88


76



329


293



Held-to-maturity securities

44


30


24



122


96



Trading account assets

6


4


6



23


21



Short-term investments

5


7


3



22


8



Other investments

6


5


4



16


18




Total interest income

1,062


890


673



3,319


2,622











Interest expense








Deposits

57


49


26



171


105



Federal funds purchased and securities sold under repurchase agreements

1





1




Bank notes and other short-term borrowings

3


2


3



10


9



Long-term debt

63


59


42



218


160




Total interest expense

124


110


71



400


274











Net interest income

938


780


602



2,919


2,348


Provision for credit losses

66


59


45



266


166


Net interest income after provision for credit losses

872


721


557



2,653


2,182











Noninterest income








Trust and investment services income

123


122


105



464


433



Investment banking and debt placement fees

157


156


127



482


445



Service charges on deposit accounts

84


85


64



302


256



Operating lease income and other leasing gains

21


6


15



62


73



Corporate services income

61


51


55



215


198



Cards and payments income

69


66


47



233


183



Corporate-owned life insurance income

40


29


36



125


127



Consumer mortgage income

6


6


2



17


12



Mortgage servicing fees

20


15


15



57


48



Net gains (losses) from principal investing

4


5




20


51



Other income  (a), (b)

33


8


19



94


54




Total noninterest income

618


549


485



2,071


1,880











Noninterest expense








Personnel

648


594


429



2,073


1,652



Net occupancy

112


73


64



305


255



Computer processing

97


70


43



255


164



Business services and professional fees

78


76


44



235


159



Equipment

30


26


22



98


88



Operating lease expense

17


15


13



59


47



Marketing

35


32


17



101


57



FDIC assessment

23


21


8



61


32



Intangible asset amortization

27


13


9



55


36



OREO expense, net

3


3


1



9


6



Other expense

150


159


86



505


344




Total noninterest expense

1,220


1,082


736



3,756


2,840


Income (loss) from continuing operations before income taxes

270


188


306



968


1,222



Income taxes

38


16


73



179


303


Income (loss) from continuing operations

232


172


233



789


919



Income (loss) from discontinued operations, net of taxes

(4)


1


(4)



1


1


Net income (loss)

228


173


229



790


920



Less:  Net income (loss) attributable to noncontrolling interests

(1)


1


3



(1)


4


Net income (loss) attributable to Key

$

229


$

172


$

226



$

791


$

916











Income (loss) from continuing operations attributable to Key common shareholders

$

213


$

165


$

224



$

753


$

892


Net income (loss) attributable to Key common shareholders

209


166


220



754


893











Per common share







Income (loss) from continuing operations attributable to Key common shareholders

$

.20


$

.17


$

.27



$

.81


$

1.06


Income (loss) from discontinued operations, net of taxes



(.01)





Net income (loss) attributable to Key common shareholders  (c)

.20


.17


.27



.81


1.06











Per common share — assuming dilution







Income (loss) from continuing operations attributable to Key common shareholders

$

.20


$

.16


$

.27



$

.80


$

1.05


Income (loss) from discontinued operations, net of taxes



(.01)





Net income (loss) attributable to Key common shareholders  (c)

.19


.17


.26



.80


1.05











Cash dividends declared per common share

$

.085


$

.085


$

.075



$

.33


$

.29











Weighted-average common shares outstanding (000)

1,067,771


982,080


828,206



927,816


836,846



Effect of common share options and other stock awards

15,946


12,580


7,733



10,720


7,643


Weighted-average common shares and potential common shares outstanding (000)  (d)

1,083,717


994,660


835,939



938,536


844,489











(a)

For the three months ended December 31, 2016, net securities gains totaled $6 million. For the three months ended September 30, 2016, net securities losses totaled $6 million. For the three months ended December 31, 2015, net securities gains totaled less than $1 million. For the three months ended December 31, 2016, September 30, 2016, and December 31,2015, Key did not have any impairment losses related to securities.



(b)

For the twelve months ended December 31, 2016 and December 31, 2015, net securities gains (losses) totaled less than $1 million. For the twelve months ended December 31, 2016, and December 31,2015, Key did not have any impairment losses related to securities.



(c)

Earnings per share may not foot due to rounding.



(d)

Assumes conversion of common share options and other stock awards and/or convertible preferred stock, as applicable.

 

 

Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations

(dollars in millions)


















Fourth Quarter 2016


Third Quarter 2016


Fourth Quarter 2015




Average




Average




Average






Balance

Interest (a)

Yield/Rate (a)


Balance

Interest (a)

Yield/Rate (a)


Balance

Interest (a)

Yield/Rate (a)

Assets













Loans: (b), (c)













Commercial, financial and agricultural (d)

$

39,495


$

365


3.68

%


$

37,318


$

317


3.38

%

 %

$

30,884


$

253


3.25

%


Real estate — commercial mortgage

14,771


168


4.50



12,879


126


3.91



8,019


75


3.70



Real estate — construction

2,222


37


6.72



1,723


21


4.67



1,067


10


3.65



Commercial lease financing

4,624


50


4.34



4,508


38


3.33



3,910


36


3.68




Total commercial loans

61,112


620


4.04



56,428


502


3.54



43,880


374


3.38



Real estate — residential mortgage

5,554


57


4.17



4,453


45


3.96



2,252


24


4.18



Home equity loans

12,812


129


3.99



11,968


122


4.07



10,418


105


3.97



Consumer direct loans

1,785


31


6.84



1,666


30


7.20



1,605


26


6.50



Credit cards

1,088


29


10.78



996


27


10.80



780


21


10.66



Consumer indirect loans

3,009


42


5.50



2,186


28


5.23



641


10


6.45




Total consumer loans

24,248


288


4.73



21,269


252


4.73



15,696


186


4.69




Total loans

85,360


908


4.24



77,697


754


3.86



59,576


560


3.72



Loans held for sale

1,323


11


3.39



1,152


10


3.48



841


8


4.13



Securities available for sale (b), (e)

20,145


92


1.82



17,972


88


1.99



14,168


76


2.13



Held-to-maturity securities (b)

9,121


44


1.95



6,250


30


1.86



4,908


24


1.99



Trading account assets

892


6


2.54



860


4


2.12



822


6


3.31



Short-term investments

3,717


5


.49



5,911


7


.48



3,483


3


.28



Other investments (e)

741


6


3.23



717


5


2.74



674


4


2.71




Total earning assets

121,299


1,072


3.52



110,559


898


3.24



84,472


681


3.21



Allowance for loan and lease losses

(855)





(847)





(790)





Accrued income and other assets

13,984





13,757





10,435





Discontinued assets

1,610





1,676





1,947






Total assets

$

136,038





$

125,145





$

96,064




Liabilities













NOW and money market deposit accounts

$

55,444


31


.22



$

51,318


25


.20



$

37,640


14


.15



Savings deposits

6,546


2


.10



4,521


1


.07



2,338



.02



Certificates of deposit ($100,000 or more) (f)

5,428


15


1.11



4,204


12


1.15



2,150


7


1.31



Other time deposits

4,849


9


.77



5,031


11


.85



3,047


5


.72



Deposits in foreign office









354



.24




Total interest-bearing deposits

72,267


57


.32



65,074


49


.30



45,529


26


.24



Federal funds purchased and securities
        sold under repurchase agreements

592


1


.11



578



.16



392



.02



Bank notes and other short-term borrowings

934


3


1.11



1,186


2


.91



556


3


1.65



Long-term debt (f), (g)

10,914


63


2.38



10,415


59


2.31



8,316


42


2.05




Total interest-bearing liabilities

84,707


124


.58



77,253


110


.57



54,793


71


.52



Noninterest-bearing deposits

32,424





29,844





26,292





Accrued expense and other liabilities

2,394





2,818





2,289





Discontinued liabilities (g)

1,610





1,676





1,947






Total liabilities

121,135





111,591





85,321




Equity













Key shareholders' equity

14,901





13,552





10,731





Noncontrolling interests

2





2





12






Total equity

14,903





13,554





10,743






Total liabilities and equity

$

136,038





$

125,145





$

96,064




Interest rate spread (TE)



2.94

%




2.67

%




2.69

%

Net interest income (TE) and net interest margin (TE)


948


3.12

%



788


2.85

%



610


2.87

%

TE adjustment (b)


10





8





8




Net interest income, GAAP basis


$

938





$

780





$

602



(a)

Results are from continuing operations.  Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.



(b)

Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%.  



(c)

For purposes of these computations, nonaccrual loans are included in average loan balances.



(d)

Commercial, financial and agricultural average balances include $119 million, $107 million, and $87 million of assets from commercial credit cards for the three months ended December 31, 2016, September 30, 2016, and December 31, 2015, respectively.



(e)

Yield is calculated on the basis of amortized cost.



(f)

Rate calculation excludes basis adjustments related to fair value hedges. 



(g)

A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key's matched funds transfer pricing methodology to discontinued operations.



TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

 

Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates  From Continuing Operations

(dollars in millions)














Twelve months ended December 31, 2016


Twelve months ended December 31, 2015




Average




Average






Balance

Interest (a)

Yield/Rate (a)


Balance

Interest (a)

Yield/ Rate (a)

Assets









Loans: (b), (c)









Commercial, financial and agricultural  (d)

$

35,276


$

1,215


3.45

%


$

29,658


$

953


3.21

%


Real estate — commercial mortgage

11,063


451


4.07



8,020


295


3.68



Real estate — construction

1,460


76


5.22



1,143


43


3.73



Commercial lease financing

4,261


161


3.78



3,976


143


3.60




Total commercial loans

52,060


1,903


3.66



42,797


1,434


3.35



Real estate — residential mortgage

3,632


148


4.09



2,244


95


4.21



Home equity loans

11,286


456


4.04



10,503


418


3.98



Consumer direct loans

1,661


113


6.79



1,580


103


6.54



Credit cards

916


98


10.73



752


81


10.76



Consumer indirect loans

1,593


89


5.58



718


46


6.43



Total consumer loans

19,088


904


4.74



15,797


743


4.70



Total loans

71,148


2,807


3.95



58,594


2,177


3.71



Loans held for sale

979


34


3.51



959


37


3.85



Securities available for sale (b), (e)

16,661


329


1.98



13,720


293


2.14



Held-to-maturity securities (b)

6,275


122


1.94



4,936


96


1.95



Trading account assets

884


23


2.59



761


21


2.80



Short-term investments

4,656


22


.47



2,843


8


.27



Other investments (e)

679


16


2.37



706


18


2.63



Total earning assets

101,282


3,353


3.31



82,519


2,650


3.21



Allowance for loan and lease losses

(835)





(791)





Accrued income and other assets

12,090





10,298





Discontinued assets

1,707





2,132





Total assets

$

114,244





$

94,158




Liabilities









NOW and money market deposit accounts

$

46,079


87


.19



$

36,258


56


.15



Savings deposits

3,957


3


.07



2,372



.02



Certificates of deposit ($100,000 or more) (f)

3,911


48


1.22



2,041


26


1.28



Other time deposits

4,088


33


.81



3,115


22


.71



Deposits in foreign office





489


1


.23




Total interest-bearing deposits

58,035


171


.30



44,275


105


.24



Federal funds purchased and securities

     sold under repurchase agreements

487


1


.10



632



.04



Bank notes and other short-term borrowings

852


10


1.18



572


9


1.52



Long-term debt (f), (g)

9,802


218


2.29



7,332


160


2.24




Total interest-bearing liabilities

69,176


400


.58



52,811


274


.52



Noninterest-bearing deposits

28,317





26,355





Accrued expense and other liabilities

2,393





2,222





Discontinued liabilities (g)

1,706





2,132





Total liabilities

101,592





83,520




Equity









Key shareholders' equity

12,647





10,626





Noncontrolling interests

5





12





Total equity

12,652





10,638





Total liabilities and equity

$

114,244





$

94,158




Interest rate spread (TE)



2.73

%




2.69

%

Net interest income (TE) and net interest margin (TE)


2,953

2.92

%



2,376


2.88

%

TE adjustment (b)


34




28




Net interest income, GAAP basis


$

2,919





$

2,348



(a) 

Results are from continuing operations.  Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.



(b) 

Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%.  



(c)  

For purposes of these computations, nonaccrual loans are included in average loan balances.



(d)  

Commercial, financial and agricultural average balances include $99 million and $88 million of assets from commercial credit cards for the twelve months ended December 31, 2016, and December 31, 2015, respectively.



(e)  

Yield is calculated on the basis of amortized cost.



(f) 

Rate calculation excludes basis adjustments related to fair value hedges.  



(g) 

A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key's matched funds transfer pricing methodology to discontinued operations.


TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

 

 

Noninterest Expense

(dollars in millions)












Three months ended


Twelve months ended


12/31/2016


9/30/2016


12/31/2015


12/31/2016


12/31/2015

Personnel(a)

$

648



$

594



$

429



$

2,073



$

1,652


Net occupancy

112



73



64



305



255


Computer processing

97



70



43



255



164


Business services and professional fees

78



76



44



235



159


Equipment

30



26



22



98



88


Operating lease expense

17



15



13



59



47


Marketing

35



32



17



101



57


FDIC assessment

23



21



8



61



32


Intangible asset amortization

27



13



9



55



36


OREO expense, net

3



3



1



9



6


Other expense

150



159



86



505



344


Total noninterest expense

$

1,220



$

1,082



$

736



$

3,756



$

2,840


Merger-related charges(b)

207



189



6



465



6


Total noninterest expense excluding merger-related charges

$

1,013



$

893



$

730



$

3,291



$

2,834


Average full-time equivalent employees(c)

18,849



17,079



13,359



15,700



13,483


(a)

Additional detail provided in Personnel Expense table below.



(b)

Additional detail provide in Merger-Related Charges table below.



(c)

The number of average full-time equivalent employees has not been adjusted for discontinued operations.

 

Personnel Expense

(in millions)












Three months ended


Twelve months ended


12/31/2016


9/30/2016


12/31/2015


12/31/2016


12/31/2015

Salaries and contract labor

$

352



$

329



$

244



$

1,191



$

958


Incentive and stock-based compensation

185



162



115



537



410


Employee benefits

98



73



64



297



266


Severance

13



30



6



48



18


Total personnel expense

$

648



$

594



$

429



$

2,073



$

1,652


Merger-related charges

80



97





228




Total personnel expense excluding merger-related charges

$

568



$

497



$

429



$

1,845



$

1,652























Merger-Related Charges

(in millions)












Three months ended


Twelve months ended


12/31/2016


9/30/2016


12/31/2015


12/31/2016


12/31/2015

Net interest income



$

(6)





$

(6)














Operating lease income and other leasing gains



(2)





(2)




Other income

$

9



(10)





(1)




Noninterest income

9



(12)





(3)














Personnel (a)

80



97





228




Net occupancy

29







29




Business services and professional fees

22



32



$

5



66



$

5


Computer processing

38



15





53




Marketing

13



9





26




Other nonpersonnel expense

25



36



1



63



1


Noninterest expense

207



189



6



465



6


Total merger-related charges

$

198



$

207



$

6



$

474



$

6


 

(a)

Personnel expense includes severance, technology development related to systems conversion, and fully-dedicated personnel for merger and integration efforts.

 

 

Loan Composition

(dollars in millions)















Percent change 12/31/16 vs.




12/31/2016

9/30/2016

12/31/2015


9/30/2016

12/31/2015

Commercial, financial and agricultural  (a)

$

39,768


$

39,433


$

31,240



.8

%

27.3

%

Commercial real estate:








Commercial mortgage

15,111


14,979


7,959



.9


89.9



Construction

2,345


2,189


1,053



7.1


122.7



Total commercial real estate loans

17,456


17,168


9,012



1.7


93.7


Commercial lease financing  (b)

4,685


4,783


4,020



(2.0)


16.5



Total commercial loans

61,909


61,384


44,272



.9


39.8


Residential — prime loans:








Real estate — residential mortgage

5,547


5,509


2,242



.7


147.4



Home equity loans

12,674


12,757


10,335



(.7)


22.6


Total residential — prime loans

18,221


18,266


12,577



(.2)


44.9


Consumer direct loans

1,788


1,764


1,600



1.4


11.8


Credit cards

1,111


1,084


806



2.5


37.8


Consumer indirect loans

3,009


3,030


621



(.7)


384.5



Total consumer loans

24,129


24,144


15,604



(.1)


54.6



Total loans (c), (d)

$

86,038


$

85,528


$

59,876



.6

%

43.7

%

(a)

Loan balances include $116 million, $117 million, and $85 million of commercial credit card balances at December 31, 2016, September 30, 2016, and December 31, 2015, respectively.





(b)   

Commercial lease financing includes receivables held as collateral for a secured borrowing of $68 million, $76 million, and $134 million at December 31, 2016, September 30, 2016, and December 31, 2015, respectively. Principal reductions are based on the cash payments received from these related receivables.





(c)

At December 31, 2016, total loans include purchased loans of $21.0 billion, of which $865 million were purchased credit impaired. At September 30, 2016, total loans include purchased loans of $22.4 billion, of which $959 million were purchased credit impaired. At December 31, 2015, total loans include purchased loans of $114 million, of which $11 million were purchased credit impaired.





(d)

Total loans exclude loans of $1.6 billion at December 31, 2016, $1.6 billion at September 30, 2016, and $1.8 billion at December 31, 2015, related to the discontinued operations of the education lending business.

 

Loans Held for Sale Composition

(dollars in millions)

















Percent change 12/31/16 vs.




12/31/2016

9/30/2016

12/31/2015


9/30/2016

12/31/2015

Commercial, financial and agricultural

$

19


$

56


$

76



(66.1)%


(75.0)%


Real estate — commercial mortgage

1,022


1,016


532



.6


92.1


Commercial lease financing


3


14



N/M


N/M


Real estate — residential mortgage

62


62


17




264.7


Real estate — construction

1





N/M


N/M



Total loans held for sale (a)

$

1,104


$

1,137


$

639



(2.9)%


72.8

%

 

(a)

Total loans held for sale include Real estate - residential mortgage loans held for sale at fair value of $62 million at December 31, 2016 and September 30, 2016.



N/M = Not Meaningful

 

Summary of Changes in Loans Held for Sale

(in millions)












4Q16

3Q16

2Q16

1Q16

4Q15

Balance at beginning of period

$

1,137


$

442


$

684


$

639


$

916



Purchases


48






New originations

2,846


2,857


1,539


1,114


1,655



Transfers from (to) held to maturity, net

11


2


22



22



Loan sales

(2,889)


(2,180)


(1,802)


(1,108)


(1,943)



Loan draws (payments), net

(1)


(32)


(1)


39


(11)


Balance at end of period (a)

$

1,104


$

1,137


$

442


$

684


$

639


(a)

Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $62 million at December 31, 2016 and September 30, 2016.

 

 

Asset Quality Statistics From Continuing Operations

(dollars in millions)










4Q16

3Q16

2Q16

1Q16

4Q15

Net loan charge-offs

$

72


$

44


$

43


$

46


$

37


Net loan charge-offs to average total loans

.34

%

.23

%

.28

%

.31

%

.25

%

Allowance for loan and lease losses

$

858


$

865


$

854


$

826


$

796


Allowance for credit losses (a)

913


918


904


895


852


Allowance for loan and lease losses to period-end loans

1.00

%

1.01

%

1.38

%

1.37

%

1.33

%

Allowance for credit losses to period-end loans

1.06


1.07


1.46


1.48


1.42


Allowance for loan and lease losses to nonperforming loans (b)

137.3


119.6


138.0


122.2


205.7


Allowance for credit losses to nonperforming loans  (b)

146.1


127.0


146.0


132.4


220.2


Nonperforming loans at period end (b)

$

625


$

723


$

619


$

676


$

387


Nonperforming assets at period end (b)

676


760


637


692


403


Nonperforming loans to period-end portfolio loans (b)

.73

%

.85

%

1.00

%

1.12

%

.65

%

Nonperforming assets to period-end portfolio loans plus

       OREO and other nonperforming assets (b)

.79


.89


1.03


1.14


.67


 

(a)

Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related unfunded commitments.



(b)   

Nonperforming loan balances exclude $865 million, $959 million, $11 million, $11 million, and $11 million of purchased credit impaired loans at December 31, 2016, September 30, 2016, June 30, 2016,  March 31, 2016 , and December 31, 2015, respectively.



 

Summary of Loan and Lease Loss Experience From Continuing Operations

(dollars in millions)









Three months ended


Twelve months ended


12/31/2016

9/30/2016

12/31/2015


12/31/2016

12/31/2015

Average loans outstanding

$

85,360


$

77,697


$

59,576



$

71,148


$

58,594


Allowance for loan and lease losses at beginning of period

$

865


$

854


$

790



$

796


$

794


Loans charged off:







Commercial, financial and agricultural

40


17


18



118


77


Real estate — commercial mortgage

2



2



5


4


Real estate — construction


9




9


1


Total commercial real estate loans

2


9


2



14


5


Commercial lease financing

1


5


6



12


11


Total commercial loans

43


31


26



144


93


Real estate — residential mortgage


1


2



4


6


Home equity loans

8


5


7



30


32


Consumer direct loans

9


6


6



27


24


Credit cards

10


9


7



35


30


Consumer indirect loans

12


3


3



21


18


Total consumer loans

39


24


25



117


110


Total loans charged off

82


55


51



261


203


Recoveries:







Commercial, financial and agricultural

3


2


3



11


16


Real estate — commercial mortgage


1


4



9


6


Real estate — construction


1




2


1


Total commercial real estate loans


2


4



11


7


Commercial lease financing

1





3


7


Total commercial loans

4


4


7



25


30


Real estate — residential mortgage

(2)


1


2



1


3


Home equity loans

4


3


2



14


11


Consumer direct loans

1


1


1



5


6


Credit cards

1


1




4


2


Consumer indirect loans

2


1


2



7


9


Total consumer loans

6


7


7



31


31


Total recoveries

10


11


14



56


61


Net loan charge-offs

(72)


(44)


(37)



(205)


(142)


Provision (credit) for loan and lease losses

64


56


43



267


145


Foreign currency translation adjustment

1


(1)





(1)


Allowance for loan and lease losses at end of period

$

858


$

865


$

796



$

858


$

796


Liability for credit losses on lending-related commitments at beginning of period

$

53


$

50


$

54



$

56


$

35


Provision (credit) for losses on lending-related commitments

2


3


2



(1)


21


Liability for credit losses on lending-related commitments at end of period (a)

$

55


$

53


$

56



$

55


$

56


Total allowance for credit losses at end of period

$

913


$

918


$

852



$

913


$

852


Net loan charge-offs to average total loans

.34

%

.23

%

.25

%


.29

%

.24

%

Allowance for loan and lease losses to period-end loans

1.00


1.01


1.33



1.00


1.33


Allowance for credit losses to period-end loans

1.06


1.07


1.42



1.06


1.42


Allowance for loan and lease losses to nonperforming loans

137.3


119.6


205.7



137.3


205.7


Allowance for credit losses to nonperforming loans

146.1


127.0


220.2



146.1


220.2


Discontinued operations — education lending business:







Loans charged off

$

7


$

6


$

10



$

28


$

35


Recoveries

3


3


3



11


13


Net loan charge-offs

$

(4)


$

(3)


$

(7)



$

(17)


$

(22)


 

(a)

Included in "Accrued expense and other liabilities" on the balance sheet.



 

Summary of Nonperforming Assets and Past Due Loans From Continuing Operations

(dollars in millions)








12/31/2016

9/30/2016

6/30/2016

3/31/2016

12/31/2015

Commercial, financial and agricultural

$

297


$

335


$

321


$

380


$

82


Real estate — commercial mortgage

26


32


14


16


19


Real estate — construction

3


17


25


12


9


  Total commercial real estate loans

29


49


39


28


28


Commercial lease financing

8


13


10


11


13


  Total commercial loans

334


397


370


419


123


Real estate — residential mortgage

56


72


54


59


64


Home equity loans

223


225


189


191


190


Consumer direct loans

6


2


1


1


2


Credit cards

2


3


2


2


2


Consumer indirect loans

4


24


3


4


6


  Total consumer loans

291


326


249


257


264


         Total nonperforming loans (a)

625


723


619


676


387


OREO

51


35


15


14


14


Other nonperforming assets


2


3


2


2


     Total nonperforming assets (a)

$

676


$

760


$

637


$

692


$

403


Accruing loans past due 90 days or more

$

87


$

49


$

70


$

70


$

72


Accruing loans past due 30 through 89 days

404


317


203


237


208


Restructured loans — accruing and nonaccruing (b)

280


304


277


283


280


Restructured loans included in nonperforming loans (b)

141


149


133


151


159


Nonperforming assets from discontinued operations —

      education lending business

5


5


5


6


7


Nonperforming loans to period-end portfolio loans  (a)

.73

%

.85

%

1.00

%

1.12

%

.65

%

Nonperforming assets to period-end portfolio loans

      plus OREO and other nonperforming assets (a)

.79


.89


1.03


1.14


.67




(a)

Nonperforming loan balances exclude $865 million, $959 million, $11 million, $11 million, and $11 million, of purchased credit impaired loans at December 31, 2016, September 30, 2016, June 30, 2016, March 31, 2016, and December 31, 2015, respectively.       



(b)

Restructured loans (i.e., troubled debt restructurings) are those for which Key, for reasons related to a borrower's financial difficulties, grants a concession to the borrower that it would not otherwise consider.  These concessions are made to improve the collectability of the loan and generally take the form of a reduction of the interest rate, extension of the maturity date or reduction in the principal balance.

 

Summary of Changes in Nonperforming Loans From Continuing Operations

(in millions)








4Q16

3Q16

2Q16

1Q16

4Q15

Balance at beginning of period

$

723


$

619


$

676


$

387


$

400


Loans placed on nonaccrual status

170


78


124


406


81


Nonperforming loans acquired from First Niagara (a)

(31)


150





Charge-offs

(81)


(53)


(64)


(60)


(51)


Loans sold

(9)




(11)



Payments

(30)


(32)


(75)


(8)


(21)


Transfers to OREO

(21)


(5)


(6)


(4)


(4)


Transfers to other nonperforming assets





(1)


Loans returned to accrual status

(96)


(34)


(36)


(34)


(17)


Balance at end of period (b)

$

625


$

723


$

619


$

676


$

387


 



(a)

During the fourth quarter of 2016, Key adjusted the estimated fair value of the First Niagara acquired loan portfolio recorded during the third quarter of 2016, resulting in a $31 million decrease in the balance of acquired nonperforming loans.



(b)

Nonperforming loan balances exclude $865 million, $959 million, $11 million, $11 million, and $11 million of purchased credit impaired loans at December 31, 2016, September 30, 2016, June 30, 2016, March 31, 2016, and December 31, 2015, respectively.

 

Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations

(in millions)








4Q16

3Q16

2Q16

1Q16

4Q15

Balance at beginning of period

$

35


$

15


$

14


$

14


$

17


Properties acquired — First Niagara


19





Properties acquired — nonperforming loans

21


5


6


4


4


Valuation adjustments

(2)


(2)


(2)


(1)


(2)


Properties sold

(3)


(2)


(3)


(3)


(5)


Balance at end of period

$

51


$

35


$

15


$

14


$

14


 

 

Line of Business Results

(dollars in millions)

















Percent change 4Q16 vs.


4Q16

3Q16

2Q16

1Q16

4Q15


3Q16

4Q15

Key Community Bank









Summary of operations









Total revenue (TE)

$

901


$

779


$

598


$

595


$

588



15.7

%

53.2

%

Provision for credit losses

44


37


25


42


20



18.9


120.0


Noninterest expense

673


577


444


436


456



16.6


47.6


Net income (loss) attributable to Key

115


104


81


74


70



10.6


64.3


Average loans and leases

47,032


41,548


30,936


30,789


30,925



13.2


52.1


Average deposits

79,357


69,397


53,794


52,803


52,219



14.4


52.0


Net loan charge-offs

42


31


17


23


23



35.5


82.6


Net loan charge-offs to average total loans

.36

%

.30

%

.22

%

.30

%

.30

%


N/A


N/A


Nonperforming assets at period end

$

394


$

430


$

300


$

303


$

303



(8.4)


30.0


Return on average allocated equity

9.70

%

11.52

%

11.99

%

11.09

%

10.39

%


N/A


N/A


Average full-time equivalent employees

11,173

9,796

7,331

7,376

7,390


14.1


51.2











Key Corporate Bank









Summary of operations









Total revenue (TE)

$

630


$

554


$

452


$

426


$

479



13.7

%

31.5

%

Provision for credit losses

21


25


30


43


26



(16.0)


(19.2)


Noninterest expense

325


307


259


237


257



5.9


26.5


Net income (loss) attributable to Key

221


159


135


118


142



39.0


55.6


Average loans and leases

36,769


34,561


28,607


27,722


26,981



6.4


36.3


Average loans held for sale

1,223


1,103


591


811


820



10.9


49.1


Average deposits

23,173


22,708


19,129


18,074


19,080



2.0


21.5


Net loan charge-offs

26


12


27


18


12



116.7


116.7


Net loan charge-offs to average total loans

.28

%

.14

%

.38

%

.26

%

.18

%


N/A


N/A


Nonperforming assets at period end

$

241


$

313


$

319


$

372


$

74



(23.0)


225.7


Return on average allocated equity

30.62

%

25.86

%

26.23

%

23.15

%

29.05

%


N/A


N/A


Average full-time equivalent employees

2,394

2,331

2,138

2,126

2,113


2.7


13.3




TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful


 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/keycorp-reports-fourth-quarter-2016-net-income-of-213-million-or-20-per-common-share-earnings-per-common-share-of-31-excluding-11-of-merger-related-charges-300393478.html

SOURCE KeyCorp

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