KeyCorp Reports Second Quarter 2018 Net Income Of $464 Million, Or $.44 Per Common Share
CLEVELAND, July 19, 2018 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced second quarter net income from continuing operations attributable to Key common shareholders of $464 million, or $.44 per common share, compared to $402 million, or $.38 per common share, for the first quarter of 2018 and $393 million, or $.36 per common share, for the second quarter of 2017. Key's results in the second quarter of 2018 and the second quarter of 2017 included a number of notable items; additional detail can be found on page 24 of this release.
"Second quarter results were strong, driven by broad-based growth and momentum in our commercial and consumer businesses. Continued loan growth, higher fees, and expense discipline drove positive operating leverage for the quarter. Importantly, our cash efficiency ratio improved to 58.8% and our return on tangible common equity was 16.7%. Across our franchise, we are benefitting from efforts to do more for our new and existing clients, while also increasing the productivity and efficiency of our businesses. Key's improved profitability and returns in the second quarter mark meaningful progress as we deliver on our commitments and work to achieve our long-term targets.
During the quarter, we also announced a 42% increase in our common share dividend along with a $1.2 billion share repurchase program, as part of our 2018 capital plan. Our plan marks a significant increase in shareholder payout as we move toward targeted levels of capital and common dividend payout, all to maximize long-term shareholder value."
- Beth Mooney, Chairman and CEO
|
Selected Financial Highlights |
|||||||||||||||
|
dollars in millions, except per share data |
Change 2Q18 vs. | ||||||||||||||
|
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 | |||||||||||
|
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
464 |
$ |
402 |
$ |
393 |
15.4 |
% |
18.1 |
% | |||||
|
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution |
.44 |
.38 |
.36 |
15.8 |
22.2 |
||||||||||
|
Return on average tangible common equity from continuing operations (a) |
16.73 |
% |
14.89 |
% |
13.80 |
% |
N/A |
N/A |
|||||||
|
Return on average total assets from continuing operations |
1.41 |
1.25 |
1.23 |
N/A |
N/A |
||||||||||
|
Common Equity Tier 1 ratio (b) |
10.12 |
9.99 |
9.91 |
N/A |
N/A |
||||||||||
|
Book value at period end |
$ |
13.29 |
$ |
13.07 |
$ |
13.02 |
1.7 |
% |
2.1 |
% | |||||
|
Net interest margin (TE) from continuing operations |
3.19 |
% |
3.15 |
% |
3.30 |
% |
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 "Return on average tangible common equity from continuing operations." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. | |||||||||||||||
|
(b) 6/30/2018 ratio is estimated. | |||||||||||||||
|
TE = Taxable Equivalent, N/A = Not Applicable | |||||||||||||||
|
INCOME STATEMENT HIGHLIGHTS |
||||||||||||||
|
Revenue |
||||||||||||||
|
dollars in millions |
Change 2Q18 vs. | |||||||||||||
|
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 | ||||||||||
|
Net interest income (TE) |
$ |
987 |
$ |
952 |
$ |
987 |
3.7 |
% |
— |
|||||
|
Noninterest income |
660 |
601 |
653 |
9.8 |
1.1 |
% | ||||||||
|
Total revenue |
$ |
1,647 |
$ |
1,553 |
$ |
1,640 |
6.1 |
% |
.4 |
% | ||||
|
TE = Taxable Equivalent | ||||||||||||||
Taxable-equivalent net interest income was $987 million for the second quarter of 2018, and the net interest margin was 3.19%, compared to taxable-equivalent net interest income of $987 million and a net interest margin of 3.30% for the second quarter of 2017. Second quarter 2018 net interest income included $28 million of purchase accounting accretion, a decline of $72 million from the second quarter of 2017. Excluding purchase accounting accretion, taxable-equivalent net interest income increased $72 million from the second quarter of 2017, and the net interest margin increased 13 basis points, reflecting the benefit from higher interest rates and higher earning asset balances.
Compared to the first quarter of 2018, taxable-equivalent net interest income increased by $35 million, and the net interest margin increased by four basis points. Both net interest income and the net interest margin benefited from higher interest rates and strong commercial loan growth. One additional day in the quarter further benefited net interest income. These benefits were partially offset by continued expected declines in purchase accounting accretion. Excluding purchase accounting accretion, taxable-equivalent net interest income increased $40 million from the first quarter of 2018 and the net interest margin increased six basis points.
|
Noninterest Income |
||||||||||||||
|
dollars in millions |
Change 2Q18 vs. | |||||||||||||
|
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 | ||||||||||
|
Trust and investment services income |
$ |
128 |
$ |
133 |
$ |
134 |
(3.8)% |
(4.5)% |
||||||
|
Investment banking and debt placement fees |
155 |
143 |
135 |
8.4 |
14.8 |
|||||||||
|
Service charges on deposit accounts |
91 |
89 |
90 |
2.2 |
1.1 |
|||||||||
|
Operating lease income and other leasing gains |
(6) |
32 |
30 |
N/M |
N/M |
|||||||||
|
Corporate services income |
61 |
62 |
55 |
(1.6) |
10.9 |
|||||||||
|
Cards and payments income |
71 |
62 |
70 |
14.5 |
1.4 |
|||||||||
|
Corporate-owned life insurance income |
32 |
32 |
33 |
— |
(3.0) |
|||||||||
|
Consumer mortgage income |
7 |
7 |
6 |
— |
16.7 |
|||||||||
|
Mortgage servicing fees |
22 |
20 |
15 |
10.0 |
46.7 |
|||||||||
|
Other income |
99 |
21 |
85 |
371.4 |
16.5 |
|||||||||
|
Total noninterest income |
$ |
660 |
$ |
601 |
$ |
653 |
9.8 |
% |
1.1 |
% | ||||
|
N/M = Not meaningful | ||||||||||||||
Key's noninterest income was $660 million for the second quarter of 2018, compared to $653 million for the year-ago quarter. Growth was driven by an increase in investment banking and debt placement fees, related to strength in advisory fees, including benefit from the acquisition of Cain Brothers. Mortgage servicing fees also increased, benefiting from portfolio growth and increases in special servicing fees. Other income increased compared to the year-ago quarter, largely due to a gain on the sale of Key Insurance and Benefits Services. These increases were partially offset by a decline in operating lease income and other leasing gains, driven by a $42 million lease residual loss in the second quarter of 2018. Trust and investment services income also declined, impacted by the sale of Key Insurance and Benefits Services.
Compared to the first quarter of 2018, noninterest income increased by $59 million. The primary driver of the quarter-over-quarter increase was a $78 million gain related to the sale of Key Insurance and Benefits Services, reported in other income. Additionally, investment banking and debt placement fees and cards and payments income, which increased $12 million and $9 million, respectively, benefited from ongoing investments and momentum across the franchise. These increases were partially offset by a decline in operating lease income related to a lease residual loss, as well as trust and investment services income, which was impacted by the sale of Key Insurance and Benefits Services.
|
Noninterest Expense |
||||||||||||||
|
dollars in millions |
Change 2Q18 vs. | |||||||||||||
|
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 | ||||||||||
|
Personnel expense |
$ |
586 |
$ |
594 |
$ |
553 |
(1.3)% |
6.0 |
% | |||||
|
Nonpersonnel expense |
407 |
412 |
442 |
(1.2) |
(7.9) |
|||||||||
|
Total noninterest expense |
$ |
993 |
$ |
1,006 |
$ |
995 |
(1.3) |
(.2) |
||||||
|
N/M = Not meaningful | ||||||||||||||
Key's noninterest expense was $993 million for the second quarter of 2018, compared to $995 million in the year-ago quarter. Growth from acquisitions and investments, including Cain Brothers and HelloWallet, as well as the addition of client-facing bankers and continued investment in our residential mortgage business, contributed to both personnel and nonpersonnel expense in the second quarter of 2018. Efficiency-related expenses of $22 million (largely severance) and $5 million of costs related to the sale of Key Insurance and Benefits Services also impacted the current quarter's results. The current quarter also benefited from the realization of merger-related cost savings. In the second quarter of 2017, Key incurred $44 million of merger-related charges and a $20 million charitable contribution.
Key's noninterest expense was $993 million for the second quarter of 2018, compared to $1 billion in the prior quarter. This quarter's decrease was largely driven by expected seasonal trends, including lower employee benefits expense, which declined $23 million, and lower occupancy and intangible asset amortization. Partially offsetting these declines were $22 million related to efficiency efforts (largely severance) and $5 million related to the sale of Key Insurance and Benefits Services.
BALANCE SHEET HIGHLIGHTS
|
Average Loans |
||||||||||||||
|
dollars in millions |
Change 2Q18 vs. | |||||||||||||
|
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 | ||||||||||
|
Commercial and industrial (a) |
$ |
45,030 |
$ |
42,733 |
$ |
40,666 |
5.4 |
% |
10.7 |
% | ||||
|
Other commercial loans |
20,394 |
20,705 |
21,990 |
(1.5) |
(7.3) |
|||||||||
|
Home equity loans |
11,601 |
11,877 |
12,473 |
(2.3) |
(7.0) |
|||||||||
|
Other consumer loans |
11,619 |
11,612 |
11,373 |
.1 |
2.2 |
|||||||||
|
Total loans |
$ |
88,644 |
$ |
86,927 |
$ |
86,502 |
2.0 |
% |
2.5 |
% | ||||
|
(a) Commercial and industrial average loan balances include $126 million, $120 million, and $117 million of assets from commercial credit cards at June 30, 2018, March 31, 2018, and June 30, 2017, respectively. | ||||||||||||||
Average loans were $88.6 billion for the second quarter of 2018, an increase of $2.1 billion compared to the second quarter of 2017, reflecting broad-based growth in commercial and industrial loans, partially offset by a decline in commercial real estate balances related to higher paydowns.
Compared to the first quarter of 2018, average loans increased by $1.7 billion, largely the result of growth in commercial and industrial loans. Key realized growth across commercial client segments, with commercial and industrial loans up 3% in the Community Bank and 7% in the Corporate Bank, unannualized.
|
Average Deposits |
||||||||||||||
|
dollars in millions |
Change 2Q18 vs. | |||||||||||||
|
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 | ||||||||||
|
Non-time deposits |
$ |
91,538 |
$ |
90,719 |
$ |
92,018 |
.9 |
% |
(.5) |
% | ||||
|
Certificates of deposit ($100,000 or more) |
7,516 |
6,972 |
6,111 |
7.8 |
23.0 |
|||||||||
|
Other time deposits |
4,949 |
4,865 |
4,650 |
1.7 |
6.4 |
|||||||||
|
Total deposits |
$ |
104,003 |
$ |
102,556 |
$ |
102,779 |
1.4 |
% |
1.2 |
% | ||||
|
Cost of total deposits |
.43 |
% |
.36 |
% |
.26 |
% |
N/A |
N/A | ||||||
|
N/A = Not Applicable | ||||||||||||||
Average deposits totaled $104 billion for the second quarter of 2018, an increase of $1.2 billion compared to the year-ago quarter, reflecting a shift to higher-yielding deposit products, as well as strength in Key's retail banking franchise and growth from commercial relationships. Growth was partially offset by the managed exit of certain higher cost corporate and public sector deposits.
Compared to the first quarter of 2018, average deposits increased by $1.4 billion. NOW and money market deposit accounts increased $1.2 billion and certificates of deposit and other time deposits increased $628 million, partly offset by a $471 million decline in noninterest-bearing deposits, as clients shift to higher-yielding deposit products. The linked quarter deposit growth continues to reflect strong retail deposit growth and growth from commercial relationships.
|
ASSET QUALITY |
||||||||||||||
|
dollars in millions |
Change 2Q18 vs. | |||||||||||||
|
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 | ||||||||||
|
Net loan charge-offs |
$ |
60 |
$ |
54 |
$ |
66 |
11.1 |
% |
(9.1) |
% | ||||
|
Net loan charge-offs to average total loans |
.27 |
% |
.25 |
% |
.31 |
% |
N/A |
N/A |
||||||
|
Nonperforming loans at period end (a) |
$ |
545 |
$ |
541 |
$ |
507 |
.7 |
7.5 |
||||||
|
Nonperforming assets at period end (a) |
571 |
569 |
556 |
.4 |
2.7 |
|||||||||
|
Allowance for loan and lease losses |
887 |
881 |
870 |
.7 |
2.0 |
|||||||||
|
Allowance for loan and lease losses to nonperforming loans (a) |
162.8 |
% |
162.8 |
% |
171.6 |
% |
N/A |
N/A |
||||||
|
Provision for credit losses |
$ |
64 |
$ |
61 |
$ |
66 |
4.9 |
% |
(3.0) |
% | ||||
|
(a) Nonperforming loan balances exclude $629 million, $690 million, and $835 million of purchased credit impaired loans at June 30, 2018, March 31, 2018, and June 30, 2017, respectively. | ||||||||||||||
|
N/A = Not Applicable | ||||||||||||||
Key's provision for credit losses was $64 million for the second quarter of 2018, compared to $66 million for the second quarter of 2017 and $61 million for the first quarter of 2018. Key's allowance for loan and lease losses was $887 million, or 1.01% of total period-end loans, at June 30, 2018, compared to 1.01% at June 30, 2017, and 1.00% at March 31, 2018.
Net loan charge-offs for the second quarter of 2018 totaled $60 million, or .27% of average total loans. These results compare to $66 million, or .31%, for the second quarter of 2017, and $54 million, or .25%, for the first quarter of 2018.
At June 30, 2018, Key's nonperforming loans totaled $545 million, which represented .62% of period-end portfolio loans. These results compare to .59% at June 30, 2017, and .61% at March 31, 2018. Nonperforming assets at June 30, 2018, totaled $571 million, and represented .65% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .64% at June 30, 2017, and .65% at March 31, 2018.
CAPITAL
Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at June 30, 2018.
|
Capital Ratios |
||||||
|
6/30/2018 |
3/31/2018 |
6/30/2017 | ||||
|
Common Equity Tier 1 (a) |
10.12 |
% |
9.99 |
% |
9.91 |
% |
|
Tier 1 risk-based capital (a) |
10.94 |
10.82 |
10.73 |
|||
|
Total risk based capital (a) |
12.83 |
12.73 |
12.64 |
|||
|
Tangible common equity to tangible assets (b) |
8.32 |
8.22 |
8.56 |
|||
|
Leverage (a) |
9.91 |
9.76 |
9.95 |
|||
|
(a) 6/30/2018 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." 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. | ||||||
Key's capital position remained strong in the second quarter. As shown in the preceding table, at June 30, 2018, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.12% and 10.94%, respectively. Key's tangible common equity ratio was 8.32% at June 30, 2018.
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 10.03% at June 30, 2018. 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 2Q18 vs. | |||||||||||
|
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 | ||||||||
|
Shares outstanding at beginning of period |
1,064,939 |
1,069,084 |
1,097,479 |
(.4) |
% |
(3.0) |
% | |||||
|
Open market repurchases and return of shares under employee compensation plans |
(6,259) |
(9,399) |
(5,072) |
(33.4) |
23.4 |
|||||||
|
Shares issued under employee compensation plans (net of cancellations) |
264 |
5,254 |
332 |
(95.0) |
(20.5) |
|||||||
|
Shares outstanding at end of period |
1,058,944 |
1,064,939 |
1,092,739 |
(.6) |
% |
(3.1) |
% | |||||
|
N/M = Not Meaningful | ||||||||||||
Consistent with Key's 2017 Capital Plan, during the second quarter of 2018, Key declared a dividend of $.12 per common share, and completed $126 million of common share repurchases during the quarter. These repurchases included $123 million of common share repurchases in the open market and $3 million of share repurchases related to employee equity compensation programs.
Key's 2018 Capital Plan received no objection from the Federal Reserve. The plan includes a 42% increase in the quarterly common share dividend from $0.12 per share to $0.17 per share, which is payable in the third quarter of 2018. Also included in the plan is a common share repurchase program of up to $1.225 billion. This authorization includes repurchases to offset issuances of common shares under our employee compensation plans. Repurchases are expected to be executed over the next four quarters.
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 2Q18 vs. | ||||||||||||||
|
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 | |||||||||||
|
Revenue from continuing operations (TE) |
|||||||||||||||
|
Key Community Bank |
$ |
996 |
$ |
958 |
$ |
998 |
4.0 |
% |
(.2) |
% | |||||
|
Key Corporate Bank |
542 |
559 |
597 |
(3.0) |
(9.2) |
||||||||||
|
Other Segments |
38 |
37 |
46 |
2.7 |
(17.4) |
||||||||||
|
Total segments |
1,576 |
1,554 |
1,641 |
1.4 |
(4.0) |
||||||||||
|
Reconciling Items (a) |
71 |
(1) |
(1) |
N/M |
N/M |
||||||||||
|
Total |
$ |
1,647 |
$ |
1,553 |
$ |
1,640 |
6.1 |
% |
.4 |
% | |||||
|
Income (loss) from continuing operations attributable to Key |
|||||||||||||||
|
Key Community Bank |
$ |
244 |
$ |
197 |
$ |
198 |
23.9 |
% |
23.2 |
% | |||||
|
Key Corporate Bank |
167 |
207 |
224 |
(19.3) |
(25.4) |
||||||||||
|
Other Segments |
25 |
18 |
24 |
38.9 |
4.2 |
||||||||||
|
Total segments |
436 |
422 |
446 |
3.3 |
(2.2) |
||||||||||
|
Reconciling Items (b) |
43 |
(6) |
(39) |
N/M |
N/M |
||||||||||
|
Total |
$ |
479 |
$ |
416 |
$ |
407 |
15.1 |
% |
17.7 |
% | |||||
|
(a) Reconciling items consists primarily of the gain on the sale of Key Insurance and Benefits Services for the second quarter of 2018. | |||||||||||||||
|
(b) Reconciling items consists primarily of the gain on the sale of Key Insurance and Benefits Services for the second quarter of 2018, the unallocated portion of merger-related charges for the second quarter of 2017, 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 2Q18 vs. | |||||||||||||
|
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 | ||||||||||
|
Summary of operations |
||||||||||||||
|
Net interest income (TE) |
$ |
715 |
$ |
688 |
$ |
676 |
3.9 |
% |
5.8 |
% | ||||
|
Noninterest income |
281 |
270 |
322 |
4.1 |
(12.7) |
|||||||||
|
Total revenue (TE) |
996 |
958 |
998 |
4.0 |
(.2) |
|||||||||
|
Provision for credit losses |
38 |
48 |
47 |
(20.8) |
(19.1) |
|||||||||
|
Noninterest expense |
639 |
652 |
635 |
(2.0) |
.6 |
|||||||||
|
Income (loss) before income taxes (TE) |
319 |
258 |
316 |
23.6 |
.9 |
|||||||||
|
Allocated income taxes (benefit) and TE adjustments |
75 |
61 |
118 |
23.0 |
(36.4) |
|||||||||
|
Net income (loss) attributable to Key |
$ |
244 |
$ |
197 |
$ |
198 |
23.9 |
% |
23.2 |
% | ||||
|
Average balances |
||||||||||||||
|
Loans and leases |
$ |
47,984 |
$ |
47,680 |
$ |
47,477 |
.6 |
% |
1.1 |
% | ||||
|
Total assets |
51,866 |
51,605 |
51,441 |
.5 |
.8 |
|||||||||
|
Deposits |
80,930 |
79,945 |
79,601 |
1.2 |
1.7 |
|||||||||
|
Assets under management at period end |
$ |
39,663 |
$ |
39,003 |
$ |
37,613 |
1.7 |
% |
5.5 |
% | ||||
|
TE = Taxable Equivalent | ||||||||||||||
|
Additional Key Community Bank Data |
||||||||||||||
|
dollars in millions |
Change 2Q18 vs. | |||||||||||||
|
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 | ||||||||||
|
Noninterest income |
||||||||||||||
|
Trust and investment services income |
$ |
92 |
$ |
89 |
$ |
86 |
3.4 |
% |
7.0 |
% | ||||
|
Service charges on deposit accounts |
77 |
76 |
77 |
1.3 |
— |
|||||||||
|
Cards and payments income |
59 |
51 |
60 |
15.7 |
(1.7) |
|||||||||
|
Other noninterest income |
53 |
54 |
99 |
(1.9) |
(46.5) |
|||||||||
|
Total noninterest income |
$ |
281 |
$ |
270 |
$ |
322 |
4.1 |
% |
(12.7) |
% | ||||
|
Average deposit balances |
||||||||||||||
|
NOW and money market deposit accounts |
$ |
45,112 |
$ |
44,291 |
$ |
45,127 |
1.9 |
% |
— |
|||||
|
Savings deposits |
5,078 |
5,056 |
5,293 |
.4 |
(4.1) |
% | ||||||||
|
Certificates of deposit ($100,000 or more) |
5,232 |
4,961 |
4,016 |
5.5 |
30.3 |
|||||||||
|
Other time deposits |
4,934 |
4,856 |
4,640 |
1.6 |
6.3 |
|||||||||
|
Noninterest-bearing deposits |
20,574 |
20,781 |
20,525 |
(1.0) |
.2 |
|||||||||
|
Total deposits |
$ |
80,930 |
$ |
79,945 |
$ |
79,601 |
1.2 |
% |
1.7 |
% | ||||
|
Home equity loans |
||||||||||||||
|
Average balance |
$ |
11,496 |
$ |
11,763 |
$ |
12,330 |
||||||||
|
Combined weighted-average loan-to-value ratio (at date of origination) |
70 |
% |
70 |
% |
71 |
% |
||||||||
|
Percent first lien positions |
60 |
60 |
60 |
|||||||||||
|
Other data |
||||||||||||||
|
Branches |
1,177 |
1,192 |
1,210 |
|||||||||||
|
Automated teller machines |
1,537 |
1,569 |
1,589 |
|||||||||||
Key Community Bank Summary of Operations (2Q18 vs. 2Q17)
- Net income increased $46 million, or 23.2%, from prior year
- Average commercial and industrial loans increased $1.1 billion, or 5.8%, from the prior year
Key Community Bank recorded net income attributable to Key of $244 million for the second quarter of 2018, compared to $198 million for the year-ago quarter, benefiting from momentum across Key's businesses, as well as a lower tax rate as a result of tax reform.
Taxable-equivalent net interest income increased by $39 million, or 5.8%, from the second quarter of 2017. The increase in net interest income was primarily attributable to the benefit from higher interest rates and growth in loans, partially offset by lower purchase accounting accretion. Average loans and leases increased $507 million, or 1.1%, largely driven by a $1.1 billion, or 5.8%, increase in commercial and industrial loans. Additionally, average deposits increased $1.3 billion, or 1.7%, from one year ago.
Noninterest income decreased $41 million, or 12.7%, from the year-ago quarter driven by a merchant services gain in the second quarter of 2017. Noninterest income, excluding the merchant services gain in the year-ago period, increased primarily due to higher assets under management from market growth.
The provision for credit losses decreased by $9 million, or 19.1%, from the second quarter of 2017. Net loan charge-offs decreased $13 million, or 27.7%, from the second quarter of 2017, as overall credit quality remained favorable.
Noninterest expense increased $4 million, or 0.6%, from the year-ago quarter. Personnel expense increased $11 million, primarily driven by recent acquisitions and ongoing investments, including residential mortgage and HelloWallet. Nonpersonnel expense decreased by $7 million, driven by a charitable contribution in the second quarter of 2017, which was partially offset by higher technology development costs.
|
Key Corporate Bank |
|||||||||||||||
|
dollars in millions |
Change 2Q18 vs. | ||||||||||||||
|
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 | |||||||||||
|
Summary of operations |
|||||||||||||||
|
Net interest income (TE) |
$ |
277 |
$ |
272 |
$ |
312 |
1.8 |
% |
(11.2) |
% | |||||
|
Noninterest income |
265 |
287 |
285 |
(7.7) |
(7.0) |
||||||||||
|
Total revenue (TE) |
542 |
559 |
597 |
(3.0) |
(9.2) |
||||||||||
|
Provision for credit losses |
28 |
14 |
19 |
100.0 |
47.4 |
||||||||||
|
Noninterest expense |
326 |
314 |
297 |
3.8 |
9.8 |
||||||||||
|
Income (loss) before income taxes (TE) |
188 |
231 |
281 |
(18.6) |
(33.1) |
||||||||||
|
Allocated income taxes and TE adjustments |
21 |
24 |
57 |
(12.5) |
(63.2) |
||||||||||
|
Net income (loss) attributable to Key |
$ |
167 |
$ |
207 |
$ |
224 |
(19.3) |
% |
(25.4) |
% | |||||
|
Average balances |
|||||||||||||||
|
Loans and leases |
$ |
39,710 |
$ |
38,260 |
$ |
37,704 |
3.8 |
% |
5.3 |
% | |||||
|
Loans held for sale |
1,299 |
1,118 |
1,000 |
16.2 |
29.9 |
||||||||||
|
Total assets |
47,213 |
45,549 |
44,131 |
3.7 |
7.0 |
||||||||||
|
Deposits |
21,057 |
20,815 |
21,145 |
1.2 |
(.4) |
||||||||||
|
TE = Taxable Equivalent, N/M = Not Meaningful | |||||||||||||||
|
Additional Key Corporate Bank Data |
|||||||||||
|
dollars in millions |
Change 2Q18 vs. | ||||||||||
|
2Q18 |
1Q18 |
2Q17 |
1Q18 |
2Q17 | |||||||
|
Noninterest income |
|||||||||||
|
Trust and investment services income |
$ |
29 |
$ |
29 |
$ |
35 |
— |
(17.1) |
% | ||
|
Investment banking and debt placement fees |
153 |
141 |
134 |
8.5 |
% |
14.2 |
|||||
|
Operating lease income and other leasing gains |
(10) |
27 |
22 |
N/M |
N/M |
||||||
|
Corporate services income |
44 |
44 |
38 |
— |
15.8 |
||||||
|
Service charges on deposit accounts |
13 |
13 |
13 |
— |
— |
||||||
|
Cards and payments income |
12 |
11 |
10 |
9.1 |
20.0 |
||||||
|
Payments and services income |
69 |
68 |
61 |
1.5 |
13.1 |
||||||
|
Mortgage servicing fees |
19 |
17 |
12 |
11.8 |
58.3 |
||||||
|
Other noninterest income |
5 |
5 |
21 |
— |
(76.2) |
||||||
|
Total noninterest income |
$ |
265 |
$ |
287 |
$ |
285 |
(7.7) |
% |
(7.0) |
% | |
|
N/M = Not Meaningful | |||||||||||
Key Corporate Bank Summary of Operations (2Q18 vs. 2Q17)
- Commercial and industrial loans up $3.3 billion, or 15%, from prior year
- Investment banking and debt placement fees up $19 million, or 14.2%, from prior year
Key Corporate Bank recorded net income attributable to Key of $167 million for the second quarter of 2018, compared to $224 million for the same period one year ago.
Taxable-equivalent net interest income decreased by $35 million, or 11.2%, compared to the second quarter of 2017. The decline is primarily related to $33 million of lower purchase accounting accretion, as well as loan spread compression. Average loan and lease balances increased $2 billion, or 5.3%, from the year-ago quarter, driven by broad-based growth in commercial and industrial loans. Average deposit balances decreased $88 million, or 0.4%, from the year-ago quarter, due to the managed exit of higher cost corporate and public sector deposits offsetting growth in core deposits.
Noninterest income was down $20 million, or 7.0%, from the prior year. This decrease was largely due to a $32 million decline in operating lease income and other leasing gains, driven by a lease residual loss in the second quarter of 2018. Other declines included other noninterest income down $16 million, mostly due to a merchant services gain in the year-ago period. These decreases were slightly offset by higher investment banking and debt placement fees of $19 million, related to strength in advisory fees, including benefit from the acquisition of Cain Brothers, as well as a $6 million increase in corporate services income from higher derivatives revenue.
During the second quarter of 2018, the provision for credit losses increased $9 million, or 47.8%, compared to the second quarter of 2017, mostly due to higher net loan charge-offs.
Noninterest expense increased by $29 million, or 9.8%, from the second quarter of 2017. The increase from the prior year was largely related to acquisitions and investments throughout the year, which drove an increase in personnel expense and intangible asset amortization. Operating lease expense also increased compared to the year-ago period.
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 $25 million for the second quarter of 2018, compared to $24 million for the same period last year.
*****
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 $137.8 billion at June 30, 2018.
Key provides deposit, lending, cash management, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of approximately 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, 2017, 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 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 10:00 a.m. ET, on Thursday, July 19, 2018. An audio replay of the call will be available through July 29, 2018.
*****
|
Financial Highlights | |||||||||||
|
(dollars in millions, except per share amounts) | |||||||||||
|
Three months ended | |||||||||||
|
6/30/2018 |
3/31/2018 |
6/30/2017 | |||||||||
|
Summary of operations |
|||||||||||
|
Net interest income (TE) |
$ |
987 |
$ |
952 |
$ |
987 |
|||||
|
Noninterest income |
660 |
601 |
653 |
||||||||
|
Total revenue (TE) |
1,647 |
1,553 |
1,640 |
||||||||
|
Provision for credit losses |
64 |
61 |
66 |
||||||||
|
Noninterest expense |
993 |
1,006 |
995 |
||||||||
|
Income (loss) from continuing operations attributable to Key |
479 |
416 |
407 |
||||||||
|
Income (loss) from discontinued operations, net of taxes (a) |
3 |
2 |
5 |
||||||||
|
Net income (loss) attributable to Key |
482 |
418 |
412 |
||||||||
|
Income (loss) from continuing operations attributable to Key common shareholders |
464 |
402 |
393 |
||||||||
|
Income (loss) from discontinued operations, net of taxes (a) |
3 |
2 |
5 |
||||||||
|
Net income (loss) attributable to Key common shareholders |
467 |
404 |
398 |
||||||||
|
Per common share |
|||||||||||
|
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
.44 |
$ |
.38 |
$ |
.36 |
|||||
|
Income (loss) from discontinued operations, net of taxes (a) |
— |
— |
— |
||||||||
|
Net income (loss) attributable to Key common shareholders (b) |
.44 |
.38 |
.37 |
||||||||
|
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution |
.44 |
.38 |
.36 |
||||||||
|
Income (loss) from discontinued operations, net of taxes — assuming dilution (a) |
— |
— |
— |
||||||||
|
Net income (loss) attributable to Key common shareholders — assuming dilution (b) |
.44 |
.38 |
.36 |
||||||||
|
Cash dividends declared |
.12 |
.105 |
.095 |
||||||||
|
Book value at period end |
13.29 |
13.07 |
13.02 |
||||||||
|
Tangible book value at period end |
10.59 |
10.35 |
10.40 |
||||||||
|
Market price at period end |
19.54 |
19.55 |
18.74 |
||||||||
|
Performance ratios |
|||||||||||
|
From continuing operations: |
|||||||||||
|
Return on average total assets |
1.41 |
% |
1.25 |
% |
1.23 |
% | |||||
|
Return on average common equity |
13.29 |
11.76 |
11.12 |
||||||||
|
Return on average tangible common equity (c) |
16.73 |
14.89 |
13.80 |
||||||||
|
Net interest margin (TE) |
3.19 |
3.15 |
3.30 |
||||||||
|
Cash efficiency ratio (c) |
58.8 |
62.9 |
59.3 |
||||||||
|
From consolidated operations: |
|||||||||||
|
Return on average total assets |
1.40 |
% |
1.24 |
% |
1.23 |
% | |||||
|
Return on average common equity |
13.37 |
11.82 |
11.26 |
||||||||
|
Return on average tangible common equity (c) |
16.84 |
14.97 |
13.98 |
||||||||
|
Net interest margin (TE) |
3.17 |
3.13 |
3.28 |
||||||||
|
Loan to deposit (d) |
86.9 |
86.9 |
87.2 |
||||||||
|
Capital ratios at period end |
|||||||||||
|
Key shareholders' equity to assets |
10.96 |
% |
10.90 |
% |
11.23 |
% | |||||
|
Key common shareholders' equity to assets |
10.21 |
10.16 |
10.48 |
||||||||
|
Tangible common equity to tangible assets (c) |
8.32 |
8.22 |
8.56 |
||||||||
|
Common Equity Tier 1 (e) |
10.12 |
9.99 |
9.91 |
||||||||
|
Tier 1 risk-based capital (e) |
10.94 |
10.82 |
10.73 |
||||||||
|
Total risk-based capital (e) |
12.83 |
12.73 |
12.64 |
||||||||
|
Leverage (e) |
9.91 |
9.76 |
9.95 |
||||||||
|
Asset quality — from continuing operations |
|||||||||||
|
Net loan charge-offs |
$ |
60 |
$ |
54 |
$ |
66 |
|||||
|
Net loan charge-offs to average loans |
.27 |
% |
.25 |
% |
.31 |
% | |||||
|
Allowance for loan and lease losses |
$ |
887 |
$ |
881 |
$ |
870 |
|||||
|
Allowance for credit losses |
945 |
941 |
918 |
||||||||
|
Allowance for loan and lease losses to period-end loans |
1.01 |
% |
1.00 |
% |
1.01 |
% | |||||
|
Allowance for credit losses to period-end loans |
1.07 |
1.07 |
1.06 |
||||||||
|
Allowance for loan and lease losses to nonperforming loans (f) |
162.8 |
162.8 |
171.6 |
||||||||
|
Allowance for credit losses to nonperforming loans (f) |
173.4 |
173.9 |
181.1 |
||||||||
|
Nonperforming loans at period-end (f) |
$ |
545 |
$ |
541 |
$ |
507 |
|||||
|
Nonperforming assets at period-end (f) |
571 |
569 |
556 |
||||||||
|
Nonperforming loans to period-end portfolio loans (f) |
.62 |
% |
.61 |
% |
.59 |
% | |||||
|
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (f) |
.65 |
.65 |
.64 |
||||||||
|
Trust assets |
|||||||||||
|
Assets under management |
$ |
39,663 |
$ |
39,003 |
$ |
37,613 |
|||||
|
Other data |
|||||||||||
|
Average full-time equivalent employees |
18,376 |
18,540 |
18,344 |
||||||||
|
Branches |
1,177 |
1,192 |
1,210 |
||||||||
|
Taxable-equivalent adjustment |
$ |
8 |
$ |
8 |
$ |
14 |
|||||
|
Financial Highlights (continued) | ||||||||
|
(dollars in millions, except per share amounts) | ||||||||
|
Six months ended | ||||||||
|
6/30/2018 |
6/30/2017 | |||||||
|
Summary of operations |
||||||||
|
Net interest income (TE) |
$ |
1,939 |
$ |
1,916 |
||||
|
Noninterest income |
1,261 |
1,230 |
||||||
|
Total revenue (TE) |
3,200 |
3,146 |
||||||
|
Provision for credit losses |
125 |
129 |
||||||
|
Noninterest expense |
1,999 |
2,008 |
||||||
|
Income (loss) from continuing operations attributable to Key |
895 |
731 |
||||||
|
Income (loss) from discontinued operations, net of taxes (a) |
5 |
5 |
||||||
|
Net income (loss) attributable to Key |
900 |
736 |
||||||
|
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
866 |
$ |
689 |
||||
|
Income (loss) from discontinued operations, net of taxes (a) |
5 |
5 |
||||||
|
Net income (loss) attributable to Key common shareholders |
871 |
694 |
||||||
|
Per common share |
||||||||
|
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
.82 |
$ |
.64 |
||||
|
Income (loss) from discontinued operations, net of taxes (a) |
— |
— |
||||||
|
Net income (loss) attributable to Key common shareholders (b) |
.82 |
.64 |
||||||
|
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution |
.81 |
.63 |
||||||
|
Income (loss) from discontinued operations, net of taxes — assuming dilution (a) |
— |
— |
||||||
|
Net income (loss) attributable to Key common shareholders — assuming dilution (b) |
.81 |
.63 |
||||||
|
Cash dividends paid |
.225 |
.18 |
||||||
|
Performance ratios |
||||||||
|
From continuing operations: |
||||||||
|
Return on average total assets |
1.33 |
% |
1.11 |
% | ||||
|
Return on average common equity |
12.53 |
9.97 |
||||||
|
Return on average tangible common equity (c) |
15.82 |
12.43 |
||||||
|
Net interest margin (TE) |
3.17 |
3.21 |
||||||
|
Cash efficiency ratio (c) |
60.8 |
62.4 |
||||||
|
From consolidated operations: |
||||||||
|
Return on average total assets |
1.33 |
% |
1.11 |
% | ||||
|
Return on average common equity |
12.60 |
10.04 |
||||||
|
Return on average tangible common equity (c) |
15.91 |
12.52 |
||||||
|
Net interest margin (TE) |
3.15 |
3.19 |
||||||
|
Asset quality — from continuing operations |
||||||||
|
Net loan charge-offs |
114 |
124 |
||||||
|
Net loan charge-offs to average total loans |
.26 |
% |
.29 |
% | ||||
|
Other data |
||||||||
|
Average full-time equivalent employees |
18,458 |
18,365 |
||||||
|
Taxable-equivalent adjustment |
16 |
25 |
||||||
|
(a) 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. | ||||||||
|
(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" 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. | ||||||||
|
(e) June 30, 2018, ratio is estimated. | ||||||||
|
(f) Nonperforming loan balances exclude $629 million, $690 million, and $835 million of purchased credit impaired loans at June 30, 2018, March 31, 2018, and June 30, 2017, respectively. | ||||||||
|
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," 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. | ||||||||||||||||
|
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. | ||||||||||||||||
|
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. Management believes this ratio provide greater consistency and comparability between Key's results and those of its peer banks. Additionally, this ratio is 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 |
Six months ended | |||||||||||||||
|
6/30/2018 |
3/31/2018 |
6/30/2017 |
6/30/2018 |
6/30/2017 | ||||||||||||
|
Tangible common equity to tangible assets at period-end |
||||||||||||||||
|
Key shareholders' equity (GAAP) |
$ |
15,100 |
$ |
14,944 |
$ |
15,253 |
||||||||||
|
Less: Intangible assets (a) |
2,858 |
2,902 |
2,866 |
|||||||||||||
|
Preferred Stock (b) |
1,009 |
1,009 |
1,009 |
|||||||||||||
|
Tangible common equity (non-GAAP) |
$ |
11,233 |
$ |
11,033 |
$ |
11,378 |
||||||||||
|
Total assets (GAAP) |
$ |
137,792 |
$ |
137,049 |
$ |
135,824 |
||||||||||
|
Less: Intangible assets (a) |
2,858 |
2,902 |
2,866 |
|||||||||||||
|
Tangible assets (non-GAAP) |
$ |
134,934 |
$ |
134,147 |
$ |
132,958 |
||||||||||
|
Tangible common equity to tangible assets ratio (non-GAAP) |
8.32 |
% |
8.22 |
% |
8.56 |
% |
||||||||||
|
Pre-provision net revenue |
||||||||||||||||
|
Net interest income (GAAP) |
$ |
979 |
$ |
944 |
$ |
973 |
$ |
1,923 |
$ |
1,891 |
||||||
|
Plus: Taxable-equivalent adjustment |
8 |
8 |
14 |
16 |
25 |
|||||||||||
|
Noninterest income |
660 |
601 |
653 |
1,261 |
1,230 |
|||||||||||
|
Less: Noninterest expense |
993 |
1,006 |
995 |
1,999 |
2,008 |
|||||||||||
|
Pre-provision new revenue from continuing operations (non-GAAP) |
$ |
654 |
$ |
547 |
$ |
645 |
$ |
1,201 |
$ |
1,138 |
||||||
|
Average tangible common equity |
||||||||||||||||
|
Average Key shareholders' equity (GAAP) |
$ |
15,032 |
$ |
14,889 |
$ |
15,200 |
$ |
14,961 |
$ |
15,192 |
||||||
|
Less: Intangible assets (average) (c) |
2,883 |
2,916 |
2,756 |
2,899 |
2,764 |
|||||||||||
|
Preferred stock (average) |
1,025 |
1,025 |
1,025 |
1,025 |
1,251 |
|||||||||||
|
Average tangible common equity (non-GAAP) |
$ |
11,124 |
$ |
10,948 |
$ |
11,419 |
$ |
11,037 |
$ |
11,177 |
||||||
|
Return on average tangible common equity from continuing operations |
||||||||||||||||
|
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) |
$ |
464 |
$ |
402 |
$ |
393 |
$ |
866 |
$ |
689 |
||||||
|
Average tangible common equity (non-GAAP) |
11,124 |
10,948 |
11,419 |
11,037 |
11,177 |
|||||||||||
|
Return on average tangible common equity from continuing operations (non-GAAP) |
16.73 |
% |
14.89 |
% |
13.80 |
% |
15.82 |
% |
12.43 |
% | ||||||
|
Return on average tangible common equity consolidated |
||||||||||||||||
|
Net income (loss) attributable to Key common shareholders (GAAP) |
$ |
467 |
$ |
404 |
$ |
398 |
$ |
871 |
$ |
694 |
||||||
|
Average tangible common equity (non-GAAP) |
11,124 |
10,948 |
11,419 |
11,037 |
11,177 |
|||||||||||
|
Return on average tangible common equity consolidated (non-GAAP) |
16.84 |
% |
14.97 |
% |
13.98 |
% |
15.91 |
% |
12.52 |
% | ||||||
|
Cash efficiency ratio |
||||||||||||||||
|
Noninterest expense (GAAP) |
$ |
993 |
$ |
1,006 |
$ |
995 |
$ |
1,999 |
$ |
2,008 |
||||||
|
Less: Intangible asset amortization |
25 |
29 |
22 |
54 |
44 |
|||||||||||
|
Adjusted noninterest expense (non-GAAP) |
$ |
968 |
$ |
977 |
$ |
973 |
$ |
1,945 |
$ |
1,964 |
||||||
|
Net interest income (GAAP) |
$ |
979 |
$ |
944 |
$ |
973 |
$ |
1,923 |
$ |
1,891 |
||||||
|
Plus: Taxable-equivalent adjustment |
8 |
8 |
14 |
16 |
25 |
|||||||||||
|
Noninterest income |
660 |
601 |
653 |
1,261 |
1,230 |
|||||||||||
|
Total taxable-equivalent revenue (non-GAAP) |
$ |
1,647 |
$ |
1,553 |
$ |
1,640 |
$ |
3,200 |
$ |
3,146 |
||||||
|
Cash efficiency ratio (non-GAAP) |
58.8 |
% |
62.9 |
% |
59.3 |
% |
60.8 |
% |
62.4 |
% | ||||||
|
GAAP to Non-GAAP Reconciliations (continued) | |||||
|
(dollars in millions) | |||||
|
Three months ended | |||||
|
6/30/2018 | |||||
|
Common Equity Tier 1 under the Regulatory Capital Rules ("RCR") (estimates) |
|||||
|
Common Equity Tier 1 under current RCR |
$ |
12,378 |
|||
|
Adjustments from current RCR to the fully phased-in RCR: |
|||||
|
Deferred tax assets and other intangible assets (d) |
— |
||||
|
Common Equity Tier 1 anticipated under the fully phased-in RCR (e) |
$ |
12,378 |
|||
|
Net risk-weighted assets under current RCR |
$ |
122,352 |
|||
|
Adjustments from current RCR to the fully phased-in RCR: |
|||||
|
Mortgage servicing assets (f) |
727 |
||||
|
Deferred tax assets |
319 |
||||
|
All other assets |
— |
||||
|
Total risk-weighted assets anticipated under the fully phased-in RCR (e) |
$ |
123,398 |
|||
|
Common Equity Tier 1 ratio under the fully phased-in RCR (e) |
10.03 |
% | |||
|
(a) For the three months ended June 30, 2018, March 31, 2018, and June 30, 2017, intangible assets exclude $20 million, $23 million, and $33 million, respectively, of period-end purchased credit card receivables. | |||||
|
(b) Net of capital surplus. | |||||
|
(c) For the three months ended June 30, 2018, March 31, 2018, and June 30, 2017, average intangible assets exclude $21 million, $24 million, and $36 million, respectively, of average purchased credit card receivables. For the six months ended June 30, 2018, and June 30, 2017, average intangible assets exclude $23 million and $38 million, respectively, of average purchased credit card receivables. | |||||
|
(d) 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. | |||||
|
(e) 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." | |||||
|
(f) Item is included in the 10%/15% exceptions bucket calculation and is risk-weighted at 250%. | |||||
|
GAAP = U.S. generally accepted accounting principles | |||||
|
Consolidated Balance Sheets | |||||||||||
|
(dollars in millions) | |||||||||||
|
6/30/2018 |
3/31/2018 |
6/30/2017 | |||||||||
|
Assets |
|||||||||||
|
Loans |
$ |
88,222 |
$ |
88,089 |
$ |
86,503 |
|||||
|
Loans held for sale |
1,418 |
1,667 |
1,743 |
||||||||
|
Securities available for sale |
17,367 |
17,888 |
18,024 |
||||||||
|
Held-to-maturity securities |
12,277 |
12,189 |
10,638 |
||||||||
|
Trading account assets |
833 |
769 |
1,081 |
||||||||
|
Short-term investments |
2,646 |
1,644 |
2,522 |
||||||||
|
Other investments |
709 |
715 |
732 |
||||||||
|
Total earning assets |
123,472 |
122,961 |
121,243 |
||||||||
|
Allowance for loan and lease losses |
(887) |
(881) |
(870) |
||||||||
|
Cash and due from banks |
784 |
643 |
601 |
||||||||
|
Premises and equipment |
892 |
916 |
919 |
||||||||
|
Operating lease assets |
903 |
838 |
691 |
||||||||
|
Goodwill |
2,516 |
2,538 |
2,464 |
||||||||
|
Other intangible assets |
361 |
387 |
435 |
||||||||
|
Corporate-owned life insurance |
4,147 |
4,142 |
4,100 |
||||||||
|
Accrued income and other assets |
4,382 |
4,216 |
4,783 |
||||||||
|
Discontinued assets |
1,222 |
1,289 |
1,458 |
||||||||
|
Total assets |
$ |
137,792 |
$ |
137,049 |
$ |
135,824 |
|||||
|
Liabilities |
|||||||||||
|
Deposits in domestic offices: |
|||||||||||
|
NOW and money market deposit accounts |
$ |
55,059 |
$ |
54,606 |
$ |
53,342 |
|||||
|
Savings deposits |
6,199 |
6,321 |
7,056 |
||||||||
|
Certificates of deposit ($100,000 or more) |
7,547 |
7,295 |
6,286 |
||||||||
|
Other time deposits |
4,943 |
4,928 |
4,605 |
||||||||
|
Total interest-bearing deposits |
73,748 |
73,150 |
71,289 |
||||||||
|
Noninterest-bearing deposits |
30,800 |
31,601 |
31,532 |
||||||||
|
Total deposits |
104,548 |
104,751 |
102,821 |
||||||||
|
Federal funds purchased and securities sold under repurchase agreements |
1,667 |
616 |
1,780 |
||||||||
|
Bank notes and other short-term borrowings |
639 |
1,133 |
924 |
||||||||
|
Accrued expense and other liabilities |
1,983 |
1,854 |
1,783 |
||||||||
|
Long-term debt |
13,853 |
13,749 |
13,261 |
||||||||
|
Total liabilities |
122,690 |
122,103 |
120,569 |
||||||||
|
Equity |
|||||||||||
|
Preferred stock |
1,025 |
1,025 |
1,025 |
||||||||
|
Common shares |
1,257 |
1,257 |
1,257 |
||||||||
|
Capital surplus |
6,315 |
6,289 |
6,310 |
||||||||
|
Retained earnings |
10,970 |
10,624 |
9,878 |
||||||||
|
Treasury stock, at cost |
(3,382) |
(3,260) |
(2,711) |
||||||||
|
Accumulated other comprehensive income (loss) |
(1,085) |
(991) |
(506) |
||||||||
|
Key shareholders' equity |
15,100 |
14,944 |
15,253 |
||||||||
|
Noncontrolling interests |
2 |
2 |
2 |
||||||||
|
Total equity |
15,102 |
14,946 |
15,255 |
||||||||
|
Total liabilities and equity |
$ |
137,792 |
$ |
137,049 |
$ |
135,824 |
|||||
|
Common shares outstanding (000) |
1,058,944 |
1,064,939 |
1,092,739 |
||||||||
|
Consolidated Statements of Income | ||||||||||||||||||
|
(dollars in millions, except per share amounts) | ||||||||||||||||||
|
Three months ended |
Six months ended | |||||||||||||||||
|
6/30/2018 |
3/31/2018 |
6/30/2017 |
6/30/2018 |
6/30/2017 | ||||||||||||||
|
Interest income |
||||||||||||||||||
|
Loans |
$ |
1,000 |
$ |
940 |
$ |
948 |
$ |
1,940 |
$ |
1,825 |
||||||||
|
Loans held for sale |
16 |
12 |
9 |
28 |
22 |
|||||||||||||
|
Securities available for sale |
97 |
95 |
90 |
192 |
185 |
|||||||||||||
|
Held-to-maturity securities |
72 |
69 |
55 |
141 |
106 |
|||||||||||||
|
Trading account assets |
7 |
7 |
7 |
14 |
14 |
|||||||||||||
|
Short-term investments |
8 |
8 |
5 |
16 |
8 |
|||||||||||||
|
Other investments |
5 |
6 |
3 |
11 |
7 |
|||||||||||||
|
Total interest income |
1,205 |
1,137 |
1,117 |
2,342 |
2,167 |
|||||||||||||
|
Interest expense |
||||||||||||||||||
|
Deposits |
112 |
91 |
66 |
203 |
124 |
|||||||||||||
|
Federal funds purchased and securities sold under repurchase agreements |
5 |
4 |
— |
9 |
1 |
|||||||||||||
|
Bank notes and other short-term borrowings |
7 |
6 |
4 |
13 |
9 |
|||||||||||||
|
Long-term debt |
102 |
92 |
74 |
194 |
142 |
|||||||||||||
|
Total interest expense |
226 |
193 |
144 |
419 |
276 |
|||||||||||||
|
Net interest income |
979 |
944 |
973 |
1,923 |
1,891 |
|||||||||||||
|
Provision for credit losses |
64 |
61 |
66 |
125 |
129 |
|||||||||||||
|
Net interest income after provision for credit losses |
915 |
883 |
907 |
1,798 |
1,762 |
|||||||||||||
|
Noninterest income |
||||||||||||||||||
|
Trust and investment services income |
128 |
133 |
134 |
261 |
269 |
|||||||||||||
|
Investment banking and debt placement fees |
155 |
143 |
135 |
298 |
262 |
|||||||||||||
|
Service charges on deposit accounts |
91 |
89 |
90 |
180 |
177 |
|||||||||||||
|
Operating lease income and other leasing gains |
(6) |
32 |
30 |
26 |
53 |
|||||||||||||
|
Corporate services income |
61 |
62 |
55 |
123 |
109 |
|||||||||||||
|
Cards and payments income |
71 |
62 |
70 |
133 |
135 |
|||||||||||||
|
Corporate-owned life insurance income |
32 |
32 |
33 |
64 |
63 |
|||||||||||||
|
Consumer mortgage income |
7 |
7 |
6 |
14 |
12 |
|||||||||||||
|
Mortgage servicing fees |
22 |
20 |
15 |
42 |
33 |
|||||||||||||
|
Other income (a) |
99 |
21 |
85 |
120 |
117 |
|||||||||||||
|
Total noninterest income |
660 |
601 |
653 |
1,261 |
1,230 |
|||||||||||||
|
Noninterest expense |
||||||||||||||||||
|
Personnel |
586 |
594 |
553 |
1,180 |
1,110 |
|||||||||||||
|
Net occupancy |
79 |
78 |
78 |
157 |
165 |
|||||||||||||
|
Computer processing |
51 |
52 |
55 |
103 |
115 |
|||||||||||||
|
Business services and professional fees |
51 |
41 |
45 |
92 |
91 |
|||||||||||||
|
Equipment |
26 |
26 |
27 |
52 |
54 |
|||||||||||||
|
Operating lease expense |
30 |
27 |
21 |
57 |
40 |
|||||||||||||
|
Marketing |
26 |
25 |
30 |
51 |
51 |
|||||||||||||
|
FDIC assessment |
21 |
21 |
21 |
42 |
41 |
|||||||||||||
|
Intangible asset amortization |
25 |
29 |
22 |
54 |
44 |
|||||||||||||
|
OREO expense, net |
— |
2 |
3 |
2 |
5 |
|||||||||||||
|
Other expense |
98 |
111 |
140 |
209 |
292 |
|||||||||||||
|
Total noninterest expense |
993 |
1,006 |
995 |
1,999 |
2,008 |
|||||||||||||
|
Income (loss) from continuing operations before income taxes |
582 |
478 |
565 |
1,060 |
984 |
|||||||||||||
|
Income taxes |
103 |
62 |
158 |
165 |
252 |
|||||||||||||
|
Income (loss) from continuing operations |
479 |
416 |
407 |
895 |
732 |
|||||||||||||
|
Income (loss) from discontinued operations, net of taxes |
3 |
2 |
5 |
5 |
5 |
|||||||||||||
|
Net income (loss) |
482 |
418 |
412 |
900 |
737 |
|||||||||||||
|
Less: Net income (loss) attributable to noncontrolling interests |
— |
— |
— |
— |
1 |
|||||||||||||
|
Net income (loss) attributable to Key |
$ |
482 |
$ |
418 |
$ |
412 |
$ |
900 |
$ |
736 |
||||||||
|
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
464 |
$ |
402 |
$ |
393 |
$ |
866 |
$ |
689 |
||||||||
|
Net income (loss) attributable to Key common shareholders |
467 |
404 |
398 |
871 |
694 |
|||||||||||||
|
Per common share |
||||||||||||||||||
|
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
.44 |
$ |
.38 |
$ |
.36 |
$ |
.82 |
$ |
.64 |
||||||||
|
Income (loss) from discontinued operations, net of taxes |
— |
— |
— |
— |
— |
|||||||||||||
|
Net income (loss) attributable to Key common shareholders (b) |
.44 |
.38 |
.37 |
.82 |
.64 |
|||||||||||||
|
Per common share — assuming dilution |
||||||||||||||||||
|
Income (loss) from continuing operations attributable to Key common shareholders |
$ |
.44 |
$ |
.38 |
$ |
.36 |
$ |
.81 |
$ |
.63 |
||||||||
|
Income (loss) from discontinued operations, net of taxes |
— |
— |
— |
— |
— |
|||||||||||||
|
Net income (loss) attributable to Key common shareholders (b) |
.44 |
.38 |
.36 |
.81 |
.63 |
|||||||||||||
|
Cash dividends declared per common share |
$ |
.12 |
$ |
.105 |
$ |
.095 |
$ |
.225 |
$ |
.18 |
||||||||
|
Weighted-average common shares outstanding (000) |
1,052,652 |
1,056,037 |
1,076,203 |
1,054,378 |
1,083,486 |
|||||||||||||
|
Effect of common share options and other stock awards |
13,141 |
15,749 |
16,836 |
14,561 |
15,808 |
|||||||||||||
|
Weighted-average common shares and potential common shares outstanding (000) (c) |
1,065,793 |
1,071,786 |
1,093,039 |
1,068,939 |
1,099,294 |
|||||||||||||
|
(a) For the three months ended June 30, 2018, and March 31, 2018, net securities gains (losses) totaled less than $1 million. For the three months ended June 30, 2017, net securities gains totaled $1 million. For the three months ended June 30, 2018, March 31, 2018, and June 30, 2017, Key did not have any impairment losses related to securities. | ||||||||||||||||||
|
(b) Earnings per share may not foot due to rounding. | ||||||||||||||||||
|
(c) Assumes conversion of common share options and other stock awards, as applicable. | ||||||||||||||||||
|
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations | |||||||||||||||||||||||||||
|
(dollars in millions) | |||||||||||||||||||||||||||
|
Second Quarter 2018 |
First Quarter 2018 |
Second Quarter 2017 | |||||||||||||||||||||||||
|
Average |
Yield/ |
Average |
Yield/ |
Average |
Yield/ | ||||||||||||||||||||||
|
Balance |
Interest (a) |
Rate (a) |
Balance |
Interest (a) |
Rate (a) |
Balance |
Interest (a) |
Rate (a) | |||||||||||||||||||
|
Assets |
|||||||||||||||||||||||||||
|
Loans: (b), (c) |
|||||||||||||||||||||||||||
|
Commercial and industrial (d) |
$ |
45,030 |
$ |
485 |
4.32 |
% |
$ |
42,733 |
$ |
434 |
4.11 |
% |
$ |
40,666 |
$ |
409 |
4.04 |
% | |||||||||
|
Real estate — commercial mortgage |
14,055 |
172 |
4.89 |
14,085 |
165 |
4.76 |
15,096 |
187 |
4.97 |
||||||||||||||||||
|
Real estate — construction |
1,789 |
23 |
4.97 |
1,957 |
22 |
4.64 |
2,204 |
31 |
5.51 |
||||||||||||||||||
|
Commercial lease financing |
4,550 |
41 |
3.61 |
4,663 |
41 |
3.53 |
4,690 |
50 |
4.33 |
||||||||||||||||||
|
Total commercial loans |
65,424 |
721 |
4.41 |
63,438 |
662 |
4.23 |
62,656 |
677 |
4.34 |
||||||||||||||||||
|
Real estate — residential mortgage |
5,451 |
54 |
3.97 |
5,479 |
54 |
3.95 |
5,509 |
52 |
3.77 |
||||||||||||||||||
|
Home equity loans |
11,601 |
135 |
4.67 |
11,877 |
134 |
4.56 |
12,473 |
135 |
4.31 |
||||||||||||||||||
|
Consumer direct loans |
1,768 |
33 |
7.54 |
1,766 |
33 |
7.53 |
1,743 |
31 |
7.07 |
||||||||||||||||||
|
Credit cards |
1,080 |
30 |
11.21 |
1,080 |
30 |
11.32 |
1,044 |
29 |
11.04 |
||||||||||||||||||
|
Consumer indirect loans |
3,320 |
35 |
4.26 |
3,287 |
35 |
4.29 |
3,077 |
38 |
5.02 |
||||||||||||||||||
|
Total consumer loans |
23,220 |
287 |
4.97 |
23,489 |
286 |
4.91 |
23,846 |
285 |
4.77 |
||||||||||||||||||
|
Total loans |
88,644 |
1,008 |
4.56 |
86,927 |
948 |
4.41 |
86,502 |
962 |
4.46 |
||||||||||||||||||
|
Loans held for sale |
1,375 |
16 |
4.50 |
1,187 |
12 |
4.10 |
1,082 |
9 |
3.58 |
||||||||||||||||||
|
Securities available for sale (b), (e) |
17,443 |
97 |
2.13 |
17,889 |
95 |
2.06 |
17,997 |
90 |
1.97 |
||||||||||||||||||
|
Held-to-maturity securities (b) |
12,226 |
72 |
2.36 |
12,041 |
69 |
2.30 |
10,469 |
55 |
2.09 |
||||||||||||||||||
|
Trading account assets |
943 |
7 |
3.21 |
907 |
7 |
2.99 |
1,042 |
7 |
3.00 |
||||||||||||||||||
|
Short-term investments |
2,015 |
8 |
1.76 |
2,048 |
8 |
1.51 |
1,970 |
5 |
.96 |
||||||||||||||||||
|
Other investments (e) |
710 |
5 |
3.08 |
723 |
6 |
2.96 |
687 |
3 |
1.87 |
||||||||||||||||||
|
Total earning assets |
123,356 |
1,213 |
3.92 |
121,722 |
1,145 |
3.78 |
119,749 |
1,131 |
3.78 |
||||||||||||||||||
|
Allowance for loan and lease losses |
(875) |
(875) |
(864) |
||||||||||||||||||||||||
|
Accrued income and other assets |
13,897 |
14,068 |
13,606 |
||||||||||||||||||||||||
|
Discontinued assets |
1,241 |
1,304 |
1,477 |
||||||||||||||||||||||||
|
Total assets |
$ |
137,619 |
$ |
136,219 |
$ |
133,968 |
|||||||||||||||||||||
|
Liabilities |
|||||||||||||||||||||||||||
|
NOW and money market deposit accounts |
$ |
54,749 |
59 |
.44 |
$ |
53,503 |
46 |
.34 |
$ |
54,416 |
34 |
.25 |
|||||||||||||||
|
Savings deposits |
6,276 |
5 |
.35 |
6,232 |
5 |
.29 |
6,854 |
4 |
.21 |
||||||||||||||||||
|
Certificates of deposit ($100,000 or more) |
7,516 |
32 |
1.70 |
6,972 |
27 |
1.58 |
6,111 |
19 |
1.23 |
||||||||||||||||||
|
Other time deposits |
4,949 |
16 |
1.22 |
4,865 |
13 |
1.12 |
4,650 |
9 |
.77 |
||||||||||||||||||
|
Total interest-bearing deposits |
73,490 |
112 |
.61 |
71,572 |
91 |
.51 |
72,031 |
66 |
.36 |
||||||||||||||||||
|
Federal funds purchased and securities sold under repurchase agreements |
1,475 |
5 |
1.41 |
1,421 |
4 |
1.11 |
466 |
— |
.23 |
||||||||||||||||||
|
Bank notes and other short-term borrowings |
1,116 |
7 |
2.27 |
1,342 |
6 |
1.87 |
1,216 |
4 |
1.43 |
||||||||||||||||||
|
Long-term debt (f), (g) |
12,748 |
102 |
3.20 |
12,465 |
92 |
2.95 |
11,046 |
74 |
2.68 |
||||||||||||||||||
|
Total interest-bearing liabilities |
88,829 |
226 |
1.02 |
86,800 |
193 |
.90 |
84,759 |
144 |
.68 |
||||||||||||||||||
|
Noninterest-bearing deposits |
30,513 |
30,984 |
30,748 |
||||||||||||||||||||||||
|
Accrued expense and other liabilities |
2,002 |
2,241 |
1,782 |
||||||||||||||||||||||||
|
Discontinued liabilities (g) |
1,241 |
1,304 |
1,477 |
||||||||||||||||||||||||
|
Total liabilities |
122,585 |
121,329 |
118,766 |
||||||||||||||||||||||||
|
Equity |
|||||||||||||||||||||||||||
|
Key shareholders' equity |
15,032 |
14,889 |
15,200 |
||||||||||||||||||||||||
|
Noncontrolling interests |
2 |
1 |
2 |
||||||||||||||||||||||||
|
Total equity |
15,034 |
14,890 |
15,202 |
||||||||||||||||||||||||
|
Total liabilities and equity |
$ |
137,619 |
$ |
136,219 |
$ |
133,968 |
|||||||||||||||||||||
|
Interest rate spread (TE) |
2.90 |
% |
2.88 |
% |
3.10 |
% | |||||||||||||||||||||
|
Net interest income (TE) and net interest margin (TE) |
987 |
3.19 |
% |
952 |
3.15 |
% |
987 |
3.30 |
% | ||||||||||||||||||
|
TE adjustment (b) |
8 |
8 |
14 |
||||||||||||||||||||||||
|
Net interest income, GAAP basis |
$ |
979 |
$ |
944 |
$ |
973 |
|||||||||||||||||||||
|
(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 21% for the three months ended June 30, 2018, and March 31, 2018, and 35% for the three months ended June 30, 2017. | |||||||||||||||||||||||||||
|
(c) For purposes of these computations, nonaccrual loans are included in average loan balances. | |||||||||||||||||||||||||||
|
(d) Commercial and industrial average balances include $126 million, $120 million, and $117 million of assets from commercial credit cards for the three months ended June 30, 2018, March 31, 2018, and June 30, 2017, 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) | ||||||||||||||||||
|
Six months ended June 30, 2018 |
Six months ended June 30, 2017 | |||||||||||||||||
|
Average |
Average |
|||||||||||||||||
|
Balance |
Interest (a) |
Yield/Rate (a) |
Balance |
Interest (a) |
Yield/ Rate (a) | |||||||||||||
|
Assets |
||||||||||||||||||
|
Loans: (b), (c) |
||||||||||||||||||
|
Commercial and industrial (d) |
$ |
43,888 |
$ |
919 |
4.22 |
% |
$ |
40,336 |
$ |
782 |
3.90 |
% | ||||||
|
Real estate — commercial mortgage |
14,070 |
337 |
4.83 |
15,142 |
351 |
4.68 |
||||||||||||
|
Real estate — construction |
1,872 |
45 |
4.80 |
2,278 |
57 |
5.01 |
||||||||||||
|
Commercial lease financing |
4,607 |
82 |
3.57 |
4,662 |
94 |
4.04 |
||||||||||||
|
Total commercial loans |
64,437 |
1,383 |
4.32 |
62,418 |
1,284 |
4.14 |
||||||||||||
|
Real estate — residential mortgage |
5,465 |
108 |
3.96 |
5,514 |
106 |
3.85 |
||||||||||||
|
Home equity loans |
11,738 |
269 |
4.61 |
12,542 |
266 |
4.27 |
||||||||||||
|
Consumer direct loans |
1,767 |
66 |
7.53 |
1,752 |
61 |
7.02 |
||||||||||||
|
Credit cards |
1,080 |
60 |
11.27 |
1,055 |
58 |
11.05 |
||||||||||||
|
Consumer indirect loans |
3,303 |
70 |
4.28 |
3,037 |
75 |
4.97 |
||||||||||||
|
Total consumer loans |
23,353 |
573 |
4.94 |
23,900 |
566 |
4.76 |
||||||||||||
|
Total loans |
87,790 |
1,956 |
4.49 |
86,318 |
1,850 |
4.31 |
||||||||||||
|
Loans held for sale |
1,282 |
28 |
4.31 |
1,135 |
22 |
3.95 |
||||||||||||
|
Securities available for sale (b), (e) |
17,665 |
192 |
2.09 |
18,586 |
185 |
1.96 |
||||||||||||
|
Held-to-maturity securities (b) |
12,134 |
141 |
2.33 |
10,230 |
106 |
2.07 |
||||||||||||
|
Trading account assets |
925 |
14 |
3.11 |
1,005 |
14 |
2.88 |
||||||||||||
|
Short-term investments |
2,032 |
16 |
1.64 |
1,791 |
8 |
.88 |
||||||||||||
|
Other investments (e) |
716 |
11 |
3.02 |
698 |
7 |
2.07 |
||||||||||||
|
Total earning assets |
122,544 |
2,358 |
3.85 |
119,763 |
2,192 |
3.67 |
||||||||||||
|
Allowance for loan and lease losses |
(875) |
(860) |
||||||||||||||||
|
Accrued income and other assets |
13,982 |
13,712 |
||||||||||||||||
|
Discontinued assets |
1,272 |
1,508 |
||||||||||||||||
|
Total assets |
$ |
136,923 |
$ |
134,123 |
||||||||||||||
|
Liabilities |
||||||||||||||||||
|
NOW and money market deposit accounts |
$ |
54,129 |
105 |
.39 |
$ |
54,356 |
66 |
.24 |
||||||||||
|
Savings deposits |
6,254 |
10 |
.32 |
6,604 |
5 |
.16 |
||||||||||||
|
Certificates of deposit ($100,000 or more) |
7,246 |
59 |
1.64 |
5,871 |
35 |
1.20 |
||||||||||||
|
Other time deposits |
4,907 |
29 |
1.17 |
4,677 |
18 |
.77 |
||||||||||||
|
Total interest-bearing deposits |
72,536 |
203 |
.56 |
71,508 |
124 |
.35 |
||||||||||||
|
Federal funds purchased and securities sold under repurchase agreements |
1,448 |
9 |
1.26 |
629 |
1 |
.28 |
||||||||||||
|
Bank notes and other short-term borrowings |
1,228 |
13 |
2.05 |
1,508 |
9 |
1.21 |
||||||||||||
|
Long-term debt (f), (g) |
12,608 |
194 |
3.08 |
10,940 |
142 |
2.61 |
||||||||||||
|
Total interest-bearing liabilities |
87,820 |
419 |
.96 |
84,585 |
276 |
.66 |
||||||||||||
|
Noninterest-bearing deposits |
30,747 |
30,922 |
||||||||||||||||
|
Accrued expense and other liabilities |
2,121 |
1,914 |
||||||||||||||||
|
Discontinued liabilities (g) |
1,272 |
1,509 |
||||||||||||||||
|
Total liabilities |
121,960 |
118,930 |
||||||||||||||||
|
Equity |
||||||||||||||||||
|
Key shareholders' equity |
14,961 |
15,192 |
||||||||||||||||
|
Noncontrolling interests |
2 |
1 |
||||||||||||||||
|
Total equity |
14,963 |
15,193 |
||||||||||||||||
|
Total liabilities and equity |
$ |
136,923 |
$ |
134,123 |
||||||||||||||
|
Interest rate spread (TE) |
2.89 |
% |
3.01 |
% | ||||||||||||||
|
Net interest income (TE) and net interest margin (TE) |
1,939 |
3.17 |
% |
1,916 |
3.21 |
% | ||||||||||||
|
TE adjustment (b) |
16 |
25 |
||||||||||||||||
|
Net interest income, GAAP basis |
$ |
1,923 |
$ |
1,891 |
||||||||||||||
|
(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 21% and 35% for the six months ended June 30, 2018, and June 30, 2017, respectively. | ||||||||||||||||||
|
(c) For purposes of these computations, nonaccrual loans are included in average loan balances. | ||||||||||||||||||
|
(d) Commercial and industrial average balances include $123 million and $115 million of assets from commercial credit cards for the six months ended June 30, 2018, and June 30, 2017, 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 |
Six months ended | |||||||||||||||
|
6/30/2018 |
3/31/2018 |
6/30/2017 |
6/30/2018 |
6/30/2017 | ||||||||||||
|
Personnel (a) |
$ |
586 |
$ |
594 |
$ |
553 |
$ |
1,180 |
$ |
1,110 |
||||||
|
Net occupancy |
79 |
78 |
78 |
157 |
165 |
|||||||||||
|
Computer processing |
51 |
52 |
55 |
103 |
115 |
|||||||||||
|
Business services and professional fees |
51 |
41 |
45 |
92 |
91 |
|||||||||||
|
Equipment |
26 |
26 |
27 |
52 |
54 |
|||||||||||
|
Operating lease expense |
30 |
27 |
21 |
57 |
40 |
|||||||||||
|
Marketing |
26 |
25 |
30 |
51 |
51 |
|||||||||||
|
FDIC assessment |
21 |
21 |
21 |
42 |
41 |
|||||||||||
|
Intangible asset amortization |
25 |
29 |
22 |
54 |
44 |
|||||||||||
|
OREO expense, net |
— |
2 |
3 |
2 |
5 |
|||||||||||
|
Other expense |
98 |
111 |
140 |
209 |
292 |
|||||||||||
|
Total noninterest expense |
$ |
993 |
$ |
1,006 |
$ |
995 |
$ |
1,999 |
$ |
2,008 |
||||||
|
Average full-time equivalent employees (b) |
18,376 |
18,540 |
18,344 |
18,458 |
18,365 |
|||||||||||
|
(a) Additional detail provided in Personnel Expense table below. | ||||||||||||||||
|
(b) The number of average full-time equivalent employees has not been adjusted for discontinued operations. | ||||||||||||||||
|
Personnel Expense | ||||||||||||||||
|
(in millions) | ||||||||||||||||
|
Three months ended |
Six months ended | |||||||||||||||
|
6/30/2018 |
3/31/2018 |
6/30/2017 |
6/30/2018 |
6/30/2017 | ||||||||||||
|
Salaries and contract labor |
$ |
341 |
$ |
339 |
$ |
332 |
$ |
680 |
$ |
656 |
||||||
|
Incentive and stock-based compensation |
147 |
145 |
137 |
292 |
264 |
|||||||||||
|
Employee benefits |
82 |
105 |
78 |
187 |
175 |
|||||||||||
|
Severance |
16 |
5 |
6 |
21 |
15 |
|||||||||||
|
Total personnel expense |
$ |
586 |
$ |
594 |
$ |
553 |
$ |
1,180 |
$ |
1,110 |
||||||
|
Merger-Related Charges | |||||||||||||
|
(in millions) | |||||||||||||
|
Three months ended |
Six months ended | ||||||||||||
|
6/30/2018 |
3/31/2018 |
6/30/2017 |
6/30/2018 |
6/30/2017 | |||||||||
|
Personnel |
— |
— |
$ |
31 |
— |
$ |
61 |
||||||
|
Net occupancy |
— |
— |
(1) |
— |
4 |
||||||||
|
Business services and professional fees |
— |
— |
6 |
— |
11 |
||||||||
|
Computer processing |
— |
— |
2 |
— |
7 |
||||||||
|
Marketing |
— |
— |
6 |
— |
12 |
||||||||
|
Other nonpersonnel expense |
— |
— |
— |
— |
30 |
||||||||
|
Total merger-related charges |
— |
— |
$ |
44 |
— |
$ |
125 |
||||||
|
Loan Composition | ||||||||||||||
|
(dollars in millions) | ||||||||||||||
|
Percent change 6/30/2018 vs. | ||||||||||||||
|
6/30/2018 |
3/31/2018 |
6/30/2017 |
3/31/2018 |
6/30/2017 | ||||||||||
|
Commercial and industrial (a) |
$ |
44,569 |
$ |
44,313 |
$ |
40,914 |
.6 |
% |
8.9 |
% | ||||
|
Commercial real estate: |
||||||||||||||
|
Commercial mortgage |
14,162 |
13,997 |
14,813 |
1.2 |
(4.4) |
|||||||||
|
Construction |
1,736 |
1,871 |
2,168 |
(7.2) |
(19.9) |
|||||||||
|
Total commercial real estate loans |
15,898 |
15,868 |
16,981 |
.2 |
(6.4) |
|||||||||
|
Commercial lease financing (b) |
4,509 |
4,598 |
4,737 |
(1.9) |
(4.8) |
|||||||||
|
Total commercial loans |
64,976 |
64,779 |
62,632 |
.3 |
3.7 |
|||||||||
|
Residential — prime loans: |
||||||||||||||
|
Real estate — residential mortgage |
5,452 |
5,473 |
5,517 |
(.4) |
(1.2) |
|||||||||
|
Home equity loans |
11,519 |
11,720 |
12,405 |
(1.7) |
(7.1) |
|||||||||
|
Total residential — prime loans |
16,971 |
17,193 |
17,922 |
(1.3) |
(5.3) |
|||||||||
|
Consumer direct loans |
1,785 |
1,758 |
1,755 |
1.5 |
1.7 |
|||||||||
|
Credit cards |
1,094 |
1,068 |
1,049 |
2.4 |
4.3 |
|||||||||
|
Consumer indirect loans |
3,396 |
3,291 |
3,145 |
3.2 |
8.0 |
|||||||||
|
Total consumer loans |
23,246 |
23,310 |
23,871 |
(.3) |
(2.6) |
|||||||||
|
Total loans (c) |
$ |
88,222 |
$ |
88,089 |
$ |
86,503 |
.2 |
% |
2.0 |
% | ||||
|
(a) Loan balances include $128 million, $121 million, and $118 million of commercial credit card balances at June 30, 2018, March 31, 2018, and June 30, 2017, respectively. | ||||||||||||||
|
(b) Commercial lease financing includes receivables held as collateral for a secured borrowing of $16 million, $16 million, and $47 million at June 30, 2018, March 31, 2018, and June 30, 2017, respectively. Principal reductions are based on the cash payments received from these related receivables. | ||||||||||||||
|
(c) Total loans exclude loans of $1.2 billion at June 30, 2018, $1.3 billion at March 31, 2018, and $1.4 billion at June 30, 2017, related to the discontinued operations of the education lending business. | ||||||||||||||
|
Loans Held for Sale Composition | ||||||||||||||
|
(dollars in millions) | ||||||||||||||
|
Percent change 6/30/2018 vs. | ||||||||||||||
|
6/30/2018 |
3/31/2018 |
6/30/2017 |
3/31/2018 |
6/30/2017 | ||||||||||
|
Commercial and industrial |
$ |
217 |
$ |
194 |
$ |
338 |
11.9 |
% |
(35.8) |
% | ||||
|
Real estate — commercial mortgage |
1,139 |
1,426 |
1,332 |
(20.1) |
(14.5) |
|||||||||
|
Commercial lease financing |
4 |
— |
10 |
N/M |
(60.0) |
|||||||||
|
Real estate — residential mortgage |
58 |
47 |
63 |
23.4 |
(7.9) |
|||||||||
|
Total loans held for sale (a) |
$ |
1,418 |
$ |
1,667 |
$ |
1,743 |
(14.9) |
% |
(18.6) |
% | ||||
|
(a) Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $58 million at June 30, 2018, $47 million at March 31, 2018, and $63 million at June 30, 2017. | ||||||||||||||
|
N/M = Not Meaningful | ||||||||||||||
|
Summary of Changes in Loans Held for Sale | |||||||||||||||
|
(in millions) | |||||||||||||||
|
2Q18 |
1Q18 |
4Q17 |
3Q17 |
2Q17 | |||||||||||
|
Balance at beginning of period |
$ |
1,667 |
$ |
1,107 |
$ |
1,341 |
$ |
1,743 |
$ |
1,384 |
|||||
|
New originations |
2,665 |
3,280 |
3,566 |
2,855 |
2,876 |
||||||||||
|
Transfers from (to) held to maturity, net |
(4) |
(14) |
(10) |
(63) |
(7) |
||||||||||
|
Loan sales |
(2,909) |
(2,705) |
(3,783) |
(3,191) |
(2,507) |
||||||||||
|
Loan draws (payments), net |
(1) |
(1) |
(7) |
(3) |
(3) |
||||||||||
|
Balance at end of period (a) |
$ |
1,418 |
$ |
1,667 |
$ |
1,107 |
$ |
1,341 |
$ |
1,743 |
|||||
|
(a) Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $58 million at June 30, 2018, $47 million at March 31, 2018, $71 million at December 31, 2017, $60 million at September 30, 2017, and $63 million at June 30, 2017. | |||||||||||||||
|
Summary of Loan and Lease Loss Experience From Continuing Operations | ||||||||||||||||
|
(dollars in millions) | ||||||||||||||||
|
Three months ended |
Six months ended | |||||||||||||||
|
6/30/2018 |
3/31/2018 |
6/30/2017 |
6/30/2018 |
6/30/2017 | ||||||||||||
|
Average loans outstanding |
$ |
88,644 |
$ |
86,927 |
$ |
86,502 |
$ |
87,790 |
$ |
86,318 |
||||||
|
Allowance for loan and lease losses at beginning of period |
$ |
881 |
$ |
877 |
$ |
870 |
$ |
877 |
$ |
858 |
||||||
|
Loans charged off: |
||||||||||||||||
|
Commercial and industrial |
39 |
37 |
40 |
76 |
72 |
|||||||||||
|
Real estate — commercial mortgage |
2 |
1 |
3 |
3 |
3 |
|||||||||||
|
Real estate — construction |
— |
— |
— |
— |
— |
|||||||||||
|
Total commercial real estate loans |
2 |
1 |
3 |
3 |
3 |
|||||||||||
|
Commercial lease financing |
4 |
1 |
1 |
5 |
8 |
|||||||||||
|
Total commercial loans |
45 |
39 |
44 |
84 |
83 |
|||||||||||
|
Real estate — residential mortgage |
— |
1 |
4 |
1 |
2 |
|||||||||||
|
Home equity loans |
6 |
4 |
9 |
10 |
17 |
|||||||||||
|
Consumer direct loans |
9 |
8 |
8 |
17 |
18 |
|||||||||||
|
Credit cards |
12 |
12 |
12 |
24 |
23 |
|||||||||||
|
Consumer indirect loans |
7 |
8 |
5 |
15 |
16 |
|||||||||||
|
Total consumer loans |
34 |
33 |
38 |
67 |
76 |
|||||||||||
|
Total loans charged off |
79 |
72 |
82 |
151 |
159 |
|||||||||||
|
Recoveries: |
||||||||||||||||
|
Commercial and industrial |
7 |
6 |
2 |
13 |
7 |
|||||||||||
|
Real estate — commercial mortgage |
1 |
— |
— |
1 |
— |
|||||||||||
|
Real estate — construction |
— |
1 |
— |
1 |
1 |
|||||||||||
|
Total commercial real estate loans |
1 |
1 |
— |
2 |
1 |
|||||||||||
|
Commercial lease financing |
— |
1 |
— |
1 |
2 |
|||||||||||
|
Total commercial loans |
8 |
8 |
2 |
16 |
10 |
|||||||||||
|
Real estate — residential mortgage |
— |
— |
1 |
— |
3 |
|||||||||||
|
Home equity loans |
3 |
3 |
5 |
6 |
8 |
|||||||||||
|
Consumer direct loans |
2 |
2 |
2 |
4 |
3 |
|||||||||||
|
Credit cards |
2 |
1 |
2 |
3 |
3 |
|||||||||||
|
Consumer indirect loans |
4 |
4 |
4 |
8 |
8 |
|||||||||||
|
Total consumer loans |
11 |
10 |
14 |
21 |
25 |
|||||||||||
|
Total recoveries |
19 |
18 |
16 |
37 |
35 |
|||||||||||
|
Net loan charge-offs |
(60) |
(54) |
(66) |
(114) |
(124) |
|||||||||||
|
Provision (credit) for loan and lease losses |
66 |
58 |
66 |
124 |
136 |
|||||||||||
|
Allowance for loan and lease losses at end of period |
$ |
887 |
$ |
881 |
$ |
870 |
$ |
887 |
$ |
870 |
||||||
|
Liability for credit losses on lending-related commitments at beginning of period |
$ |
60 |
$ |
57 |
$ |
48 |
$ |
57 |
$ |
55 |
||||||
|
Provision (credit) for losses on lending-related commitments |
(2) |
3 |
— |
1 |
(7) |
|||||||||||
|
Liability for credit losses on lending-related commitments at end of period (a) |
$ |
58 |
$ |
60 |
$ |
48 |
$ |
58 |
$ |
48 |
||||||
|
Total allowance for credit losses at end of period |
$ |
945 |
$ |
941 |
$ |
918 |
$ |
945 |
$ |
918 |
||||||
|
Net loan charge-offs to average total loans |
.27 |
% |
.25 |
% |
.31 |
% |
.26 |
% |
.29 |
% | ||||||
|
Allowance for loan and lease losses to period-end loans |
1.01 |
1.00 |
1.01 |
1.01 |
1.01 |
|||||||||||
|
Allowance for credit losses to period-end loans |
1.07 |
1.07 |
1.06 |
1.07 |
1.06 |
|||||||||||
|
Allowance for loan and lease losses to nonperforming loans |
162.8 |
162.8 |
171.6 |
162.8 |
171.6 |
|||||||||||
|
Allowance for credit losses to nonperforming loans |
173.4 |
173.9 |
181.1 |
173.4 |
181.1 |
|||||||||||
|
Discontinued operations — education lending business: |
||||||||||||||||
|
Loans charged off |
$ |
3 |
$ |
4 |
$ |
4 |
$ |
7 |
$ |
10 |
||||||
|
Recoveries |
1 |
2 |
2 |
3 |
4 |
|||||||||||
|
Net loan charge-offs |
$ |
(2) |
$ |
(2) |
$ |
(2) |
$ |
(4) |
$ |
(6) |
||||||
|
(a) Included in "Accrued expense and other liabilities" on the balance sheet. | ||||||||||||||||
|
Asset Quality Statistics From Continuing Operations | |||||||||||||||
|
(dollars in millions) | |||||||||||||||
|
2Q18 |
1Q18 |
4Q17 |
3Q17 |
2Q17 | |||||||||||
|
Net loan charge-offs |
$ |
60 |
$ |
54 |
$ |
52 |
$ |
32 |
$ |
66 |
|||||
|
Net loan charge-offs to average total loans |
.27 |
% |
.25 |
% |
.24 |
% |
.15 |
% |
.31 |
% | |||||
|
Allowance for loan and lease losses |
$ |
887 |
$ |
881 |
$ |
877 |
$ |
880 |
$ |
870 |
|||||
|
Allowance for credit losses (a) |
945 |
941 |
934 |
937 |
918 |
||||||||||
|
Allowance for loan and lease losses to period-end loans |
1.01 |
% |
1.00 |
% |
1.01 |
% |
1.02 |
% |
1.01 |
% | |||||
|
Allowance for credit losses to period-end loans |
1.07 |
1.07 |
1.08 |
1.08 |
1.06 |
||||||||||
|
Allowance for loan and lease losses to nonperforming loans (b) |
162.8 |
162.8 |
174.4 |
170.2 |
171.6 |
||||||||||
|
Allowance for credit losses to nonperforming loans (b) |
173.4 |
173.9 |
185.7 |
181.2 |
181.1 |
||||||||||
|
Nonperforming loans at period end (b) |
$ |
545 |
$ |
541 |
$ |
503 |
$ |
517 |
$ |
507 |
|||||
|
Nonperforming assets at period end (b) |
571 |
569 |
534 |
556 |
556 |
||||||||||
|
Nonperforming loans to period-end portfolio loans (b) |
.62 |
% |
.61 |
% |
.58 |
% |
.60 |
% |
.59 |
% | |||||
|
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (b) |
.65 |
.65 |
.62 |
.64 |
.64 |
||||||||||
|
(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 $629 million, $690 million, $738 million, $783 million, and $835 million of purchased credit impaired loans at June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017, and June 30, 2017, respectively. | |||||||||||||||
|
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations | |||||||||||||||
|
(dollars in millions) | |||||||||||||||
|
6/30/2018 |
3/31/2018 |
12/31/2017 |
9/30/2017 |
6/30/2017 | |||||||||||
|
Commercial and industrial |
$ |
178 |
$ |
189 |
$ |
153 |
$ |
169 |
$ |
178 |
|||||
|
Real estate — commercial mortgage |
42 |
33 |
30 |
30 |
34 |
||||||||||
|
Real estate — construction |
2 |
2 |
2 |
2 |
4 |
||||||||||
|
Total commercial real estate loans |
44 |
35 |
32 |
32 |
38 |
||||||||||
|
Commercial lease financing |
21 |
5 |
6 |
11 |
11 |
||||||||||
|
Total commercial loans |
243 |
229 |
191 |
212 |
227 |
||||||||||
|
Real estate — residential mortgage |
55 |
59 |
58 |
57 |
58 |
||||||||||
|
Home equity loans |
222 |
229 |
229 |
227 |
208 |
||||||||||
|
Consumer direct loans |
4 |
4 |
4 |
3 |
2 |
||||||||||
|
Credit cards |
2 |
2 |
2 |
2 |
2 |
||||||||||
|
Consumer indirect loans |
19 |
18 |
19 |
16 |
10 |
||||||||||
|
Total consumer loans |
302 |
312 |
312 |
305 |
280 |
||||||||||
|
Total nonperforming loans (a) |
545 |
541 |
503 |
517 |
507 |
||||||||||
|
OREO |
26 |
28 |
31 |
39 |
48 |
||||||||||
|
Other nonperforming assets |
— |
— |
— |
— |
1 |
||||||||||
|
Total nonperforming assets (a) |
$ |
571 |
$ |
569 |
$ |
534 |
$ |
556 |
$ |
556 |
|||||
|
Accruing loans past due 90 days or more |
$ |
103 |
$ |
82 |
$ |
89 |
$ |
86 |
$ |
85 |
|||||
|
Accruing loans past due 30 through 89 days |
429 |
305 |
359 |
329 |
340 |
||||||||||
|
Restructured loans — accruing and nonaccruing (b) |
347 |
317 |
317 |
315 |
333 |
||||||||||
|
Restructured loans included in nonperforming loans (b) |
184 |
179 |
189 |
187 |
193 |
||||||||||
|
Nonperforming assets from discontinued operations — education lending business |
6 |
6 |
7 |
8 |
5 |
||||||||||
|
Nonperforming loans to period-end portfolio loans (a) |
.62 |
% |
.61 |
% |
.58 |
% |
.60 |
% |
.59 |
% | |||||
|
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (a) |
.65 |
.65 |
.62 |
.64 |
.64 |
||||||||||
|
(a) Nonperforming loan balances exclude $629 million, $690 million, $738 million, $783 million, and $835 million of purchased credit impaired loans at June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017, and June 30, 2017, respectively. | |||||||||||||||
|
(b) Restructured loans (i.e., troubled debt restructuring) 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) | |||||||||||||||
|
2Q18 |
1Q18 |
4Q17 |
3Q17 |
2Q17 | |||||||||||
|
Balance at beginning of period |
$ |
541 |
$ |
503 |
$ |
517 |
$ |
507 |
$ |
573 |
|||||
|
Loans placed on nonaccrual status |
175 |
182 |
137 |
181 |
143 |
||||||||||
|
Charge-offs |
(78) |
(70) |
(67) |
(71) |
(82) |
||||||||||
|
Loans sold |
(1) |
— |
— |
(1) |
— |
||||||||||
|
Payments |
(33) |
(29) |
(52) |
(32) |
(84) |
||||||||||
|
Transfers to OREO |
(5) |
(4) |
(8) |
(10) |
(8) |
||||||||||
|
Transfers to other nonperforming assets |
— |
— |
— |
— |
— |
||||||||||
|
Loans returned to accrual status |
(54) |
(41) |
(24) |
(57) |
(35) |
||||||||||
|
Balance at end of period (a) |
$ |
545 |
$ |
541 |
$ |
503 |
$ |
517 |
$ |
507 |
|||||
|
(a) Nonperforming loan balances exclude $629 million, $690 million, $738 million, $783 million, and $835 million of purchased credit impaired loans at June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017, and June 30, 2017, respectively. | |||||||||||||||
|
Line of Business Results | ||||||||||||||||||||
|
(dollars in millions) | ||||||||||||||||||||
|
Percent change 2Q18 vs. | ||||||||||||||||||||
|
2Q18 |
1Q18 |
4Q17 |
3Q17 |
2Q17 |
1Q18 |
2Q17 | ||||||||||||||
|
Key Community Bank |
||||||||||||||||||||
|
Summary of operations |
||||||||||||||||||||
|
Total revenue (TE) |
$ |
996 |
$ |
958 |
$ |
961 |
$ |
945 |
$ |
998 |
4.0 |
% |
(.2) |
% | ||||||
|
Provision for credit losses |
38 |
48 |
57 |
59 |
47 |
(20.8) |
(19.1) |
|||||||||||||
|
Noninterest expense |
639 |
652 |
661 |
623 |
635 |
(2.0) |
.6 |
|||||||||||||
|
Net income (loss) attributable to Key |
244 |
197 |
154 |
165 |
198 |
23.9 |
23.2 |
|||||||||||||
|
Average loans and leases |
47,984 |
47,680 |
47,405 |
47,611 |
47,477 |
.6 |
1.1 |
|||||||||||||
|
Average deposits |
80,930 |
79,945 |
80,352 |
79,563 |
79,601 |
1.2 |
1.7 |
|||||||||||||
|
Net loan charge-offs |
34 |
42 |
35 |
41 |
47 |
(19.0) |
(27.7) |
|||||||||||||
|
Net loan charge-offs to average total loans |
.28 |
% |
.36 |
% |
.29 |
% |
.34 |
% |
.40 |
% |
N/A |
N/A |
||||||||
|
Nonperforming assets at period end |
$ |
468 |
$ |
425 |
$ |
405 |
$ |
427 |
$ |
406 |
10.1 |
15.3 |
||||||||
|
Return on average allocated equity |
20.22 |
% |
16.61 |
% |
12.62 |
% |
13.55 |
% |
16.59 |
% |
N/A |
N/A |
||||||||
|
Average full-time equivalent employees |
10,619 |
10,666 |
10,629 |
10,696 |
10,558 |
(.4) |
.6 |
|||||||||||||
|
Key Corporate Bank |
||||||||||||||||||||
|
Summary of operations |
||||||||||||||||||||
|
Total revenue (TE) |
$ |
542 |
$ |
559 |
$ |
605 |
$ |
561 |
$ |
597 |
(3.0) |
% |
(9.2) |
% | ||||||
|
Provision for credit losses |
28 |
14 |
(6) |
(11) |
19 |
100.0 |
47.4 |
|||||||||||||
|
Noninterest expense |
326 |
314 |
353 |
305 |
297 |
3.8 |
9.8 |
|||||||||||||
|
Net income (loss) attributable to Key |
167 |
207 |
222 |
189 |
224 |
(19.3) |
(25.4) |
|||||||||||||
|
Average loans and leases |
39,710 |
38,260 |
37,460 |
38,024 |
37,704 |
3.8 |
5.3 |
|||||||||||||
|
Average loans held for sale |
1,299 |
1,118 |
1,345 |
1,521 |
1,000 |
16.2 |
29.9 |
|||||||||||||
|
Average deposits |
21,057 |
20,815 |
21,558 |
21,559 |
21,145 |
1.2 |
(.4) |
|||||||||||||
|
Net loan charge-offs |
26 |
11 |
16 |
(9) |
19 |
136.4 |
36.8 |
|||||||||||||
|
Net loan charge-offs to average total loans |
.26 |
% |
.12 |
% |
.17 |
% |
(.09) |
% |
.20 |
% |
N/A |
N/A |
||||||||
|
Nonperforming assets at period end |
$ |
91 |
$ |
127 |
$ |
109 |
$ |
106 |
$ |
119 |
(28.3) |
(23.5) |
||||||||
|
Return on average allocated equity |
23.07 |
% |
29.46 |
% |
31.33 |
% |
26.90 |
% |
31.66 |
% |
N/A |
N/A |
||||||||
|
Average full-time equivalent employees |
2,537 |
2,543 |
2,418 |
2,460 |
2,364 |
(.2) |
7.3 |
|||||||||||||
|
TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful | ||||||||||||||||||||
|
Notable Items | |||||||||||||||
|
(in millions) | |||||||||||||||
|
Three months ended |
Six months ended | ||||||||||||||
|
6/30/2018 |
3/31/2018 |
6/30/2017 |
6/30/2018 |
6/30/2017 | |||||||||||
|
Gain on sale of Key Insurance and Benefits Services |
$ |
78 |
— |
— |
$ |
78 |
— |
||||||||
|
Expenses related to the sale of Key Insurance and Benefits Services |
5 |
— |
— |
5 |
— |
||||||||||
|
Net gain on sale of Key Insurance and Benefits Services |
73 |
— |
— |
73 |
— |
||||||||||
|
Efficiency efforts |
(22) |
— |
— |
(22) |
— |
||||||||||
|
Lease residual loss |
(42) |
— |
— |
(42) |
— |
||||||||||
|
Merger-related charges |
— |
— |
$ |
(44) |
— |
$ |
(125) |
||||||||
|
Merchant services gain |
— |
— |
64 |
— |
64 |
||||||||||
|
Purchase accounting finalization, net |
— |
— |
43 |
— |
43 |
||||||||||
|
Charitable contribution |
— |
— |
(20) |
— |
(20) |
||||||||||
|
Total notable items |
9 |
— |
$ |
43 |
9 |
$ |
(38) |
||||||||
|
Income taxes |
7 |
— |
16 |
7 |
(14) |
||||||||||
|
Total notable items, after tax |
$ |
2 |
— |
$ |
27 |
$ |
2 |
$ |
(24) |
||||||
View original content:http://www.prnewswire.com/news-releases/keycorp-reports-second-quarter-2018-net-income-of-464-million-or-44-per-common-share-300683554.html
SOURCE KeyCorp