Exhibit 99.1

 

				NEWS
		FOR IMMEDIATE RELEASE

KEYCORP REPORTS FOURTH QUARTER 2015

NET INCOME OF $224 MILLION, OR $.27 PER COMMON SHARE AND

FULL-YEAR NET INCOME OF $892 MILLION, OR $1.05 PER COMMON SHARE

Positive operating leverage for 2015, with pre-provision net revenue up 5%

Revenue growth for the quarter and full year

Full-year average loans up 5% from 2014, driven by a

12% increase in commercial, financial and agricultural loans

Credit quality remains strong, with net charge-offs to average loans of .25%

Announced acquisition of First Niagara Financial Group earlier in the quarter

Merger-related costs and pension settlement charge total $10 million,

or $.01 per common share, for the quarter

CLEVELAND, January 21, 2016 – KeyCorp (NYSE: KEY) today announced fourth quarter net income from continuing operations attributable to Key common shareholders of $224 million, or $.27 per common share, compared to $216 million, or $.26 per common share, for the third quarter of 2015, and $246 million, or $.28 per common share, for the fourth quarter of 2014. During the fourth quarter of 2015, Key incurred merger-related costs and a pension settlement charge totaling $10 million, or $.01 per common share. Key incurred pension settlement charges of $19 million, or $.01 per common share, during the third quarter of 2015, and $3 million during the fourth quarter of 2014.

For the year ended December 31, 2015, net income from continuing operations attributable to Key common shareholders was $892 million, or $1.05 per common share, compared to $917 million, or $1.04 per common share, for the same period one year ago.

“We were pleased with our fourth quarter and full-year results,” said Chairman and Chief Executive Officer Beth Mooney. “Our fourth quarter results reflect continued revenue growth, well-managed expenses, and strong credit quality.”

“Full-year results reflect positive operating leverage, driven by a 3% increase in revenue, benefiting from continued loan growth and ongoing momentum in our fee-based businesses. Investment banking and debt placement fees had another record year, and our cards and payments income was up 10%. Expenses reflect the ongoing investments we have made in our businesses to drive revenue growth, including the addition of client-facing personnel across our franchise,” continued Mooney. “Capital ratios also remain strong, and reflect $460 million of common share repurchases and a 16% increase in our common share dividend for the year.”

“Additionally, we continue to make good progress on our announced acquisition of First Niagara Financial Group. Integration teams, including some of the top talent at both Key and First Niagara, are focused on the approval process and ensuring a smooth transition and sustained momentum,” added Mooney.

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KeyCorp Reports Fourth Quarter 2015 Profit

January 21, 2016

Page 2

 

FOURTH QUARTER 2015 FINANCIAL RESULTS, from continuing operations

Compared to Fourth Quarter of 2014

 

•

Average loans up 5%, driven by 14% growth in commercial, financial and agricultural loans

 

•

Average deposits, excluding deposits in foreign office, up 3%, due to strength in the commercial mortgage servicing business and inflows from commercial and consumer clients

 

•

Net interest income (taxable-equivalent) up $22 million, attributable to higher earning asset balances partially offset by lower earning asset yields

 

•

Noninterest income down $5 million, due to lower net gains from principal investing and trust and investment services income, partially offset by increases in cards and payments income, mortgage servicing fees, and other income

 

•

Noninterest expense up $32 million, primarily attributable to an increase in personnel expense related to investments made across the business and higher employee benefits expense, along with merger-related costs

 

•

Credit quality remained strong, with net loan charge-offs to average loans of .25%

Compared to Third Quarter of 2015

 

•

Average loans up .5%, driven by a 2% increase in commercial, financial and agricultural loans

 

•

Average deposits, excluding deposits in foreign office, up 2%, due to seasonal and short-term deposit inflows from commercial clients, along with growth in NOW and money market deposit accounts and certificates of deposit

 

•

Net interest income (taxable-equivalent) up $12 million, driven by higher earning asset yields and loan fees

 

•

Noninterest income up $15 million, primarily due to higher investment banking and debt placement fees

 

•

Noninterest expense up $12 million, primarily driven by higher incentive and stock-based compensation, merger-related costs, and increased costs associated with Key’s continuous improvement and efficiency efforts, partially offset by lower employee benefits expense

 

•

Strong credit quality, with net loan charge-offs to average loans remaining below our targeted range of 40-60 basis points

Selected Financial Highlights

 

														Change 4Q15 vs.
dollars in millions, except per share data		4Q15				3Q15				4Q14				3Q15				4Q14
Income (loss) from continuing operations attributable to Key common shareholders		$	224			$	216			$	246				3.7	%			(8.9	)%
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution			.27				.26				.28				3.8				(3.6	)
Return on average total assets from continuing operations			.97	%			.95	%			1.12	%			N/A				N/A
Common Equity Tier 1 (a), (b)			10.95				10.47				N/A				N/A				N/A
Tier 1 common equity (a)			N/A				N/A				11.17	%			N/A				N/A
Book value at period end		$	12.51			$	12.47			$	11.91				.3	%			5.0	%
Net interest margin (TE) from continuing operations			2.87	%			2.87	%			2.94	%			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” (compliance date of January 1, 2015, under the Regulatory Capital Rules) and “Tier 1 common equity” (prior to January 1, 2015). 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)	12-31-15 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable

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KeyCorp Reports Fourth Quarter 2015 Profit

January 21, 2016

Page 3

 

INCOME STATEMENT HIGHLIGHTS

Revenue

 

														Change 4Q15 vs.
dollars in millions		4Q15				3Q15				4Q14				3Q15				4Q14
Net interest income (TE)		$	610			$	598			$	588				2.0	%			3.7	%
Noninterest income			485				470				490				3.2				(1.0	)
Total revenue		$	1,095			$	1,068			$	1,078				2.5	%			1.6	%

TE = Taxable Equivalent

Taxable-equivalent net interest income was $610 million for the fourth quarter of 2015, and the net interest margin was 2.87%. These results compare to taxable-equivalent net interest income of $588 million and a net interest margin of 2.94% for the fourth quarter of 2014. The $22 million increase in net interest income reflects higher earning asset balances, partially offset by lower earning asset yields, which also drove the decline in the net interest margin.

Compared to the third quarter of 2015, taxable-equivalent net interest income increased by $12 million, and the net interest margin was unchanged. The increase in net interest income was primarily attributable to higher earning asset yields and loan fees. The net interest margin was stable as the impact of higher earning asset yields and loan fees was offset by higher levels of excess liquidity driven by short-term commercial deposit growth.

Noninterest Income

 

														Change 4Q15 vs.
dollars in millions		4Q15				3Q15				4Q14				3Q15				4Q14
Trust and investment services income		$	105			$	108			$	112				(2.8	)%			(6.3	)%
Investment banking and debt placement fees			127				109				126				16.5				.8
Service charges on deposit accounts			64				68				64				(5.9	)			—
Operating lease income and other leasing gains			15				15				15				—				—
Corporate services income			55				57				53				(3.5	)			3.8
Cards and payments income			47				47				43				—				9.3
Corporate-owned life insurance income			36				30				38				20.0				(5.3	)
Consumer mortgage income			2				3				3				(33.3	)			(33.3	)
Mortgage servicing fees			15				11				11				36.4				36.4
Net gains (losses) from principal investing			—				11				18				N/M				N/M
Other income			19				11				7				72.7				171.4
Total noninterest income		$	485			$	470			$	490				3.2	%			(1.0	)%

N/M = Not Meaningful

Key’s noninterest income was $485 million for the fourth quarter of 2015, compared to $490 million for the year-ago quarter. The slight decrease from the prior year was predominantly attributable to a decline in net gains from principal investing of $18 million and $7 million of lower trust and investment services income reflecting market variability. These decreases were partially offset by a $12 million increase in other income and growth in some of Key’s other core fee-based businesses, including $4 million of higher cards and payments income due to higher credit card and merchant fees and a $4 million increase in mortgage servicing fees.

Compared to the third quarter of 2015, noninterest income increased by $15 million. The primary driver was $18 million in higher investment banking and debt placement fees, marking a strong finish to a record year. Additionally, there was an $8 million increase in other income and a $6 million increase in corporate-owned life insurance, reflecting normal seasonality. Partially offsetting these increases were a decrease of $11 million in net gains from principal investing and a decline of $4 million in service charges on deposit accounts.

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KeyCorp Reports Fourth Quarter 2015 Profit

January 21, 2016

Page 4

 

Noninterest Expense

 

														Change 4Q15 vs.
dollars in millions		4Q15				3Q15				4Q14				3Q15				4Q14
Personnel expense		$	429			$	426			$	409				.7	%			4.9	%
Nonpersonnel expense			307				298				295				3.0				4.1
Total noninterest expense		$	736			$	724			$	704				1.7	%			4.5	%

Key’s noninterest expense was $736 million for the fourth quarter of 2015. During the quarter, Key incurred merger-related costs of $6 million, a pension settlement charge of $4 million, and costs associated with continuous improvement and efficiency efforts of $10 million. These costs impacted both personnel and nonpersonnel expense.

Compared to $704 million for the fourth quarter of last year, the increase in noninterest expense was primarily attributable to a $20 million increase in personnel expense related to investments made across the business, along with an increase in employee benefits expense. Nonpersonnel expense increased $12 million, most notably from higher business services and professional fees, partially due to merger-related costs.

Compared to the third quarter of 2015, noninterest expense increased by $12 million. This increase was primarily attributable to higher incentive and stock-based compensation expense as a result of a strong capital markets performance, partially offset by a decrease in employee benefits expense due to a lower pension settlement charge. Additionally, $6 million in merger-related costs contributed to the increase, largely attributable to higher business services and professional fees. Costs associated with Key’s continuous improvement and efficiency efforts also increased $6 million.

BALANCE SHEET HIGHLIGHTS

In the fourth quarter of 2015, Key had average assets of $96.1 billion compared to $91.1 billion in the fourth quarter of 2014 and $94.8 billion in the third quarter of 2015. Compared to the third quarter of 2015, Key experienced more short-term commercial deposit inflows, which contributed to higher levels of liquidity and drove the increase in average earning assets in the fourth quarter of 2015.

Average Loans

 

														Change 12-31-15 vs.
dollars in millions		12-31-15				9-30-15				12-31-14				9-30-15				12-31-14
Commercial, financial and agricultural (a)		$	30,884			$	30,374			$	27,188				1.7	%			13.6	%
Other commercial loans			12,996				13,098				13,357				(.8	)			(2.7	)
Total home equity loans			10,418				10,510				10,639				(.9	)			(2.1	)
Other consumer loans			5,278				5,299				5,357				(.4	)			(1.5	)
Total loans		$	59,576			$	59,281			$	56,541				.5	%			5.4	%

 

(a)	Commercial, financial and agricultural average loan balances include $87 million, $88 million, and $90 million of assets from commercial credit cards at December 31, 2015, September 30, 2015, and December 31, 2014, respectively.

Average loans were $59.6 billion for the fourth quarter of 2015, an increase of $3 billion compared to the fourth quarter of 2014. The loan growth occurred in the commercial, financial and agricultural portfolio, which increased $3.7 billion and was broad-based across Key’s commercial lines of business. Consumer loans declined $300 million as a result of the run-off in Key’s consumer exit portfolios.

Compared to the third quarter of 2015, average loans increased by $295 million, driven by commercial, financial and agricultural loans, which grew $510 million.

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KeyCorp Reports Fourth Quarter 2015 Profit

January 21, 2016

Page 5

 

Average Deposits

 

dollars in millions														Change 12-31-15 vs.
		12-31-15				9-30-15				12-31-14				9-30-15				12-31-14
Non-time deposits (a)		$	66,270			$	64,928			$	63,541				2.1	%			4.3	%
Certificates of deposit ($100,000 or more)			2,150				1,985				2,277				8.3				(5.6	)
Other time deposits			3,047				3,064				3,306				(.6	)			(7.8	)
Total deposits		$	71,467			$	69,977			$	69,124				2.1	%			3.4	%
Cost of total deposits (a)			.15	%			.15	%			.15	%			N/A				N/A

 

(a)	Excludes deposits in foreign office.

N/A = Not Applicable

Average deposits, excluding deposits in foreign office, totaled $71.5 billion for the fourth quarter of 2015, an increase of $2.3 billion compared to the year-ago quarter. NOW and money market deposit accounts increased by $2.8 billion, reflecting growth in the commercial mortgage servicing business and inflows from commercial and consumer clients. This increase was partially offset by declines in certificates of deposit and other time deposits.

Compared to the third quarter of 2015, average deposits, excluding deposits in foreign office, increased by $1.5 billion. This increase was driven by both seasonal and short-term deposit inflows from commercial clients, along with growth in NOW and money market deposit accounts and certificates of deposit.

ASSET QUALITY

 

dollars in millions														Change 4Q15 vs.
		4Q15				3Q15				4Q14				3Q15				4Q14
Net loan charge-offs		$	37			$	41			$	32				(9.8	)%			15.6	%
Net loan charge-offs to average total loans			.25	%			.27	%			.22	%			N/A				N/A
Nonperforming loans at period end (a)		$	387			$	400			$	418				(3.3	)%			(7.4	)%
Nonperforming assets at period end			403				417				436				(3.4	)			(7.6	)
Allowance for loan and lease losses			796				790				794				.8				.3
Allowance for loan and lease losses to nonperforming loans			205.7	%			197.5	%			190.0	%			N/A				N/A
Provision for credit losses		$	45			$	45			$	22				—				104.5	%

 

(a)	Loan balances exclude $11 million, $12 million, and $13 million of purchased credit impaired loans at December 31, 2015, September 30, 2015, and December 31, 2014, respectively.

N/A = Not Applicable

Key’s provision for credit losses was $45 million for the fourth quarter of 2015, compared to $22 million for the fourth quarter of 2014 and $45 million for the third quarter of 2015. Key’s allowance for loan and lease losses was $796 million, or 1.33% of total period-end loans, at December 31, 2015, compared to 1.38% at December 31, 2014, and 1.31% at September 30, 2015.

Net loan charge-offs for the fourth quarter of 2015 totaled $37 million, or .25% of average total loans. These results compare to $32 million, or .22%, for the fourth quarter of 2014, and $41 million, or .27%, for the third quarter of 2015.

At December 31, 2015, Key’s nonperforming loans totaled $387 million and represented .65% of period-end portfolio loans, compared to .73% at December 31, 2014, and .67% at September 30, 2015. Nonperforming assets at December 31, 2015 totaled $403 million and represented .67% of period-end portfolio loans and OREO and other nonperforming assets, compared to .76% at December 31, 2014, and .69% at September 30, 2015.

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KeyCorp Reports Fourth Quarter 2015 Profit

January 21, 2016

Page 6

 

CAPITAL

Key’s estimated risk-based capital ratios included in the following table continued to exceed all “well-capitalized” regulatory benchmarks at December 31, 2015.

Capital Ratios

 

		12-31-15				9-30-15				12-31-14
Common Equity Tier 1 (a), (b)			10.95	%			10.47	%			N/A
Tier 1 common equity (b)			N/A				N/A				11.17	%
Tier 1 risk-based capital (a)			11.36	%			10.87	%			11.90
Total risk based capital (a)			12.98				12.47				13.89
Tangible common equity to tangible assets (b)			9.98				9.90				9.88
Leverage (a)			10.71				10.68				11.26

 

(a)	12-31-15 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 “Common Equity Tier 1” (compliance date of January 1, 2015, under the Regulatory Capital Rules) and “Tier 1 common equity” (prior to January 1, 2015). 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, 2015, Key’s estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.95% and 11.36%, respectively. In addition, the tangible common equity ratio was 9.98% at December 31, 2015.

In October 2013, federal banking regulators published the final Basel III capital framework for U.S. banking organizations (the “Regulatory Capital Rules”). 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. Key’s estimated Common Equity Tier 1 ratio as calculated under the fully phased-in Regulatory Capital Rules was 10.85% at December 31, 2015. 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 4Q15 vs.
		4Q15				3Q15				4Q14				3Q15				4Q14
Shares outstanding at beginning of period			835,285				843,608				868,477				(1.0	)%			(3.8	)%
Common shares repurchased			—				(8,386	)			(9,786	)			N/M				N/M
Shares reissued (returned) under employee benefit plans			466				63				712				639.7				(34.6	)
Shares outstanding at end of period			835,751				835,285				859,403				.1	%			(2.8	)%

N/M = Not Meaningful

During 2015, Key repurchased $460 million of common shares and increased its quarterly common share dividend by 15% in the second quarter.

As previously reported, Key’s existing share repurchase program is suspended through the second quarter of 2016. Share repurchases are expected to be included in the upcoming 2016 Comprehensive Capital Analysis and Review submission.

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KeyCorp Reports Fourth Quarter 2015 Profit

January 21, 2016

Page 7

 

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.

As previously reported, in the third quarter of 2015, Key enhanced the approach used to determine the commercial reserve factors used in estimating the quantitative component of the commercial allowance for loan and lease losses. In addition, Key began utilizing an enhanced framework to quantify commercial allowance for loan and lease loss adjustments resulting from qualitative factors not fully captured within the statistical analysis of incurred loss. These methodology enhancements did not create a significant difference in provisioning between segments.

Major Business Segments

 

														Change 4Q15 vs.
dollars in millions		4Q15				3Q15				4Q14				3Q15				4Q14
Revenue from continuing operations (TE)
Key Community Bank		$	588			$	579			$	558				1.6	%			5.4	%
Key Corporate Bank			479				454				460				5.5				4.1
Other Segments			32				35				62				(8.6	)			(48.4	)
Total segments			1,099				1,068				1,080				2.9				1.8
Reconciling Items			(4	)			—				(2	)			N/M				N/M
Total		$	1,095			$	1,068			$	1,078				2.5	%			1.6	%
Income (loss) from continuing operations attributable to Key
Key Community Bank		$	68			$	71			$	62				(4.2	)%			9.7	%
Key Corporate Bank			145				138				149				5.1				(2.7	)
Other Segments			23				26				38				(11.5	)			(39.5	)
Total segments			236				235				249				.4				(5.2	)
Reconciling Items			(6	)			(13	)			2				N/M				N/M
Total		$	230			$	222			$	251				3.6	%			(8.4	)%

TE = Taxable Equivalent, N/M = Not Meaningful

Key Community Bank

 

														Change 4Q15 vs.
dollars in millions		4Q15				3Q15				4Q14				3Q15				4Q14
Summary of operations
Net interest income (TE)		$	388			$	379			$	362				2.4	%			7.2	%
Noninterest income			200				200				196				—				2.0
Total revenue (TE)			588				579				558				1.6				5.4
Provision for credit losses			20				18				11				11.1				81.8
Noninterest expense			459				448				449				2.5				2.2
Income (loss) before income taxes (TE)			109				113				98				(3.5	)			11.2
Allocated income taxes (benefit) and TE adjustments			41				42				36				(2.4	)			13.9
Net income (loss) attributable to Key		$	68			$	71			$	62				(4.2	)%			9.7	%
Average balances
Loans and leases		$	30,925			$	31,039			$	30,478				(.4	)%			1.5	%
Total assets			32,997				33,090				32,558				(.3	)			1.3
Deposits			52,219				51,234				50,851				1.9				2.7
Assets under management at period end		$	33,983			$	35,158			$	39,157				(3.3	)%			(13.2	)%

TE = Taxable Equivalent

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KeyCorp Reports Fourth Quarter 2015 Profit

January 21, 2016

Page 8

 

Additional Key Community Bank Data

 

														Change 4Q15 vs.
dollars in millions		4Q15				3Q15				4Q14				3Q15				4Q14
Noninterest income
Trust and investment services income		$	73			$	73			$	75				—				(2.7	)%
Service charges on deposit accounts			54				56				54				(3.6	)%			—
Cards and payments income			44				43				40				2.3				10.0
Other noninterest income			29				28				27				3.6				7.4
Total noninterest income		$	200			$	200			$	196				—				2.0	%
Average deposit balances
NOW and money market deposit accounts		$	28,861			$	28,568			$	27,691				1.0	%			4.2	%
Savings deposits			2,330				2,362				2,378				(1.4	)			(2.0	)
Certificates of deposit ($100,000 or more)			1,687				1,560				1,793				8.1				(5.9	)
Other time deposits			3,045				3,060				3,301				(.5	)			(7.8	)
Deposits in foreign office			208				271				332				(23.2	)			(37.3	)
Noninterest-bearing deposits			16,088				15,413				15,356				4.4				4.8
Total deposits		$	52,219			$	51,234			$	50,851				1.9	%			2.7	%
Home equity loans
Average balance		$	10,203			$	10,281			$	10,365
Weighted-average loan-to-value ratio (at date of origination)			71	%			71	%			71	%
Percent first lien positions			61				60				60
Other data
Branches			966				972				994
Automated teller machines			1,256				1,259				1,287

Key Community Bank Summary of Operations

 

•

Positive operating leverage from prior year

 

•

Net income increased to $68 million, up 9.7% from prior year

 

•

Commercial, financial and agricultural loan growth of $672 million, or 5.6% from prior year

 

•

Average deposits up $1.4 billion, or 2.7% from the prior year

Key Community Bank recorded net income attributable to Key of $68 million for the fourth quarter of 2015, compared to net income attributable to Key of $62 million for the year-ago quarter.

Taxable-equivalent net interest income increased by $26 million, or 7.2%, from the fourth quarter of 2014 due to increases in average loans and leases of 1.5% and average deposits of 2.7% from one year ago. Commercial, financial and agricultural loans grew by $672 million, or 5.6%, from the prior year.

Noninterest income increased $4 million, or 2.0%, from the year-ago quarter. This growth was driven by increases in cards and payments income of $4 million and strong investment banking and debt placement fees, which increased $4 million from one year ago. These increases were partially offset by lower trust and investment services income due to weaker market trends.

The provision for credit losses increased by $9 million, or 82%, from the fourth quarter of 2014. Net loan charge-offs decreased $5 million from the same period one year ago.

Noninterest expense increased by $10 million, or 2.2%, from the year-ago quarter. Personnel expense increased by $8 million, driven by hiring across the franchise as well as higher performance-based compensation, while nonpersonnel expense increased by $2 million.

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KeyCorp Reports Fourth Quarter 2015 Profit

January 21, 2016

Page 9

 

Key Corporate Bank

 

														Change 4Q15 vs.
dollars in millions		4Q15				3Q15				4Q14				3Q15				4Q14
Summary of operations
Net interest income (TE)		$	224			$	220			$	219				1.8	%			2.3	%
Noninterest income			255				234				241				9.0				5.8
Total revenue (TE)			479				454				460				5.5				4.1
Provision for credit losses			26				30				7				(13.3	)			271.4
Noninterest expense			254				246				244				3.3				4.1
Income (loss) before income taxes (TE)			199				178				209				11.8				(4.8	)
Allocated income taxes and TE adjustments			52				42				60				23.8				(13.3	)
Net income (loss)			147				136				149				8.1				(1.3	)
Less: Net income (loss) attributable to noncontrolling interests			2				(2	)			—				N/M				N/M
Net income (loss) attributable to Key		$	145			$	138			$	149				5.1	%			(2.7	)%
Average balances
Loans and leases		$	26,981			$	26,425			$	23,798				2.1	%			13.4	%
Loans held for sale			820				918				855				(10.7	)			(4.1	)
Total assets			32,718				32,163				28,997				1.7				12.8
Deposits			19,081				18,809				18,355				1.4				4.0

TE = Taxable Equivalent, N/M = Not Meaningful

Additional Key Corporate Bank Data

 

														Change 4Q15 vs.
dollars in millions		4Q15				3Q15				4Q14				3Q15				4Q14
Noninterest income
Trust and investment services income		$	32			$	35			$	37				(8.6	)%			(13.5	)%
Investment banking and debt placement fees			125				107				125				16.8				—
Operating lease income and other leasing gains			13				16				17				(18.8	)			(23.5	)
Corporate services income			44				46				43				(4.3	)			2.3
Service charges on deposit accounts			10				11				10				(9.1	)			—
Cards and payments income			3				4				3				(25.0	)			—
Payments and services income			57				61				56				(6.6	)			1.8
Mortgage servicing fees			15				11				11				36.4				36.4
Other noninterest income			13				4				(5	)			225.0				N/M
Total noninterest income		$	255			$	234			$	241				9.0	%			5.8	%

N/M = Not Meaningful

Key Corporate Bank Summary of Operations

 

•

Record year for investment banking and debt placement fees

 

•

Revenue up 4.1% from the prior year

 

•

Average loan and lease balances up 13.4% from the prior year

Key Corporate Bank recorded net income attributable to Key of $145 million for the fourth quarter of 2015, a decrease of $4 million, or 2.7%, from the same period one year ago.

Taxable-equivalent net interest income increased by $5 million, or 2.3%, compared to the fourth quarter of 2014. Average earning assets increased $3.1 billion, or 12.1%, from the year-ago quarter, primarily driven by growth in commercial, financial and agricultural loans. Average deposit balances increased $726 million, or 4.0%, from the year-ago quarter, driven by commercial mortgage servicing deposits.

Noninterest income was up $14 million, or 5.8% from the prior year. Other noninterest income increased $18 million mostly driven by gains related to the disposition of certain investments held by the Real Estate Capital line of business. Mortgage servicing fees increased $4 million, or 36.4%, due to higher

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KeyCorp Reports Fourth Quarter 2015 Profit

January 21, 2016

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transaction volumes. Partially offsetting these increases were declines in trust and investment services income of $5 million and operating lease income and other leasing gains of $4 million.

The provision for credit losses increased $19 million, or 271.4%, from the same period one year ago, primarily due to higher net loan charge-offs, as well as a 13.4% increase in average loan and lease balances.

Noninterest expense increased by $10 million, or 4.1%, from the fourth quarter of 2014. This increase was primarily driven by higher personnel expense due to new hires across the platform and an increase in business services and professional fees.

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 $23 million for the fourth quarter of 2015, compared to $38 million for the same period last year. This decline was primarily attributable to lower net gains from principal investing.

*****

KeyCorp was organized more than 160 years ago and is headquartered in Cleveland, Ohio. One of the nation’s largest bank-based financial services companies, Key had assets of approximately $95.1 billion at December 31, 2015.

Key provides deposit, lending, cash management and investment services to individuals and small and mid-sized businesses in 12 states under the name KeyBank National Association. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC.

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KeyCorp Reports Fourth Quarter 2015 Profit

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CONTACTS:
ANALYSTS		MEDIA
Vernon L. Patterson		Jack Sparks
216.689.0520		720.904.4554
Vernon_Patterson@KeyBank.com		Jack_Sparks@KeyBank.com
		Twitter: @keybank_news
Kelly L. Dillon
216.689.3133
Kelly_L_Dillon@KeyBank.com
Melanie S. Misconish
216.689.4545
Melanie_S_Misconish@KeyBank.com
INVESTOR		KEY MEDIA
RELATIONS: www.key.com/ir		NEWSROOM: www.key.com/newsroom

 

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, January 21, 2016. An audio replay of the call will be available through January 28, 2016.

For up-to-date company information, media contacts, and facts and figures about Key’s lines of business, visit our Media Newsroom at https://www.key.com/newsroom.

*****

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KeyCorp

Fourth Quarter 2015

Financial Supplement

 

Page
13		Financial Highlights
15		GAAP to Non-GAAP Reconciliation
18		Consolidated Balance Sheets
19		Consolidated Statements of Income
20		Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
22		Noninterest Expense
22		Personnel Expense
23		Loan Composition
23		Loans Held for Sale Composition
23		Summary of Changes in Loans Held for Sale
24		Exit Loan Portfolio From Continuing Operations
24		Asset Quality Statistics From Continuing Operations
25		Summary of Loan and Lease Loss Experience From Continuing Operations
26		Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
27		Summary of Changes in Nonperforming Loans From Continuing Operations
27		Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations
28		Line of Business Results

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Financial Highlights

(dollars in millions, except per share amounts)

 

		Three months ended
		12-31-15				9-30-15				12-31-14
Summary of operations
Net interest income (TE)		$	610			$	598			$	588
Noninterest income			485				470				490
Total revenue (TE)			1,095				1,068				1,078
Provision for credit losses			45				45				22
Noninterest expense			736				724				704
Income (loss) from continuing operations attributable to Key			230				222				251
Income (loss) from discontinued operations, net of taxes (a)			(4	)			(3	)			2
Net income (loss) attributable to Key			226				219				253
Income (loss) from continuing operations attributable to Key common shareholders		$	224			$	216			$	246
Income (loss) from discontinued operations, net of taxes (a)			(4	)			(3	)			2
Net income (loss) attributable to Key common shareholders			220				213				248
Per common share
Income (loss) from continuing operations attributable to Key common shareholders		$	.27			$	.26			$	.29
Income (loss) from discontinued operations, net of taxes (a)			(.01	)			—				—
Net income (loss) attributable to Key common shareholders (b)			.27				.26				.29
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution			.27				.26				.28
Income (loss) from discontinued operations, net of taxes — assuming dilution (a)			(.01	)			—				—
Net income (loss) attributable to Key common shareholders — assuming dilution (b)			.26				.25				.28
Cash dividends paid			.075				.075				.065
Book value at period end			12.51				12.47				11.91
Tangible book value at period end			11.22				11.17				10.65
Market price at period end			13.19				13.01				13.90
Performance ratios
From continuing operations:
Return on average total assets			.97	%			.95	%			1.12	%
Return on average common equity			8.51				8.30				9.50
Return on average tangible common equity (c)			9.50				9.27				10.64
Net interest margin (TE)			2.87				2.87				2.94
Cash efficiency ratio (c)			66.4				66.9				64.4
From consolidated operations:
Return on average total assets			.93	%			.92	%			1.10	%
Return on average common equity			8.36				8.19				9.58
Return on average tangible common equity (c)			9.33				9.14				10.72
Net interest margin (TE)			2.84				2.84				2.93
Loan to deposit (d)			87.8				89.3				84.6
Capital ratios at period end
Key shareholders’ equity to assets			11.30	%			11.22	%			11.22	%
Key common shareholders’ equity to assets			10.99				10.91				10.91
Tangible common equity to tangible assets (c)			9.98				9.90				9.88
Common Equity Tier 1 (c), (e)			10.95				10.47				N/A
Tier 1 common equity (c)			N/A				N/A				11.17
Tier 1 risk-based capital (e)			11.36				10.87				11.90
Total risk-based capital (e)			12.98				12.47				13.89
Leverage (e)			10.71				10.68				11.26
Asset quality — from continuing operations
Net loan charge-offs		$	37			$	41			$	32
Net loan charge-offs to average loans			.25	%			.27	%			.22	%
Allowance for loan and lease losses		$	796			$	790			$	794
Allowance for credit losses			852				844				829
Allowance for loan and lease losses to period-end loans			1.33	%			1.31	%			1.38	%
Allowance for credit losses to period-end loans			1.42				1.40				1.44
Allowance for loan and lease losses to nonperforming loans			205.7				197.5				190.0
Allowance for credit losses to nonperforming loans			220.2				211.0				198.3
Nonperforming loans at period end (f)		$	387			$	400			$	418
Nonperforming assets at period end			403				417				436
Nonperforming loans to period-end portfolio loans			.65	%			.67	%			.73	%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets			.67				.69				.76
Trust and brokerage assets
Assets under management		$	33,983			$	35,158			$	39,157
Nonmanaged and brokerage assets			47,681				46,796				49,147
Other data
Average full-time equivalent employees			13,359				13,555				13,590
Branches			966				972				994
Taxable-equivalent adjustment		$	8			$	7			$	6

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Financial Highlights (continued)

(dollars in millions, except per share amounts)

 

		Twelve months ended
		12-31-15				12-31-14
Summary of operations
Net interest income (TE)		$	2,376			$	2,317
Noninterest income			1,880				1,797
Total revenue (TE)			4,256				4,114
Provision for credit losses			166				57
Noninterest expense			2,840				2,761
Income (loss) from continuing operations attributable to Key			915				939
Income (loss) from discontinued operations, net of taxes (a)			1				(39	)
Net income (loss) attributable to Key			916				900
Income (loss) from continuing operations attributable to Key common shareholders		$	892			$	917
Income (loss) from discontinued operations, net of taxes (a)			1				(39	)
Net income (loss) attributable to Key common shareholders			893				878
Per common share
Income (loss) from continuing operations attributable to Key common shareholders		$	1.06			$	1.05
Income (loss) from discontinued operations, net of taxes (a)			—				(.04	)
Net income (loss) attributable to Key common shareholders (b)			1.06				1.01
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution			1.05				1.04
Income (loss) from discontinued operations, net of taxes — assuming dilution (a)			—				(.04	)
Net income (loss) attributable to Key common shareholders — assuming dilution (b)			1.05				.99
Cash dividends paid			.29				.25
Performance ratios
From continuing operations:
Return on average total assets			.99	%			1.08	%
Return on average common equity			8.63				9.01
Return on average tangible common equity (c)			9.64				10.04
Net interest margin (TE)			2.88				2.97
Cash efficiency ratio (c)			65.9				66.2
From consolidated operations:
Return on average total assets			.97	%			.99	%
Return on average common equity			8.64				8.63
Return on average tangible common equity (c)			9.65				9.61
Net interest margin (TE)			2.85				2.94
Asset quality — from continuing operations
Net loan charge-offs		$	142			$	113
Net loan charge-offs to average total loans			.24	%			.20	%
Other data
Average full-time equivalent employees			13,483				13,853
Taxable-equivalent adjustment		$	28			$	24

 

(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” (compliance date of January 1, 2015, under the Regulatory Capital Rules) “Tier 1 common equity” (prior to January 1, 2015), 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)	12-31-15 ratio is estimated.

(f)	Loan balances exclude $11 million, $12 million, and $13 million of purchased credit impaired loans at December 31, 2015, September 30, 2015, and December 31, 2014, respectively.

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

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KeyCorp Reports Fourth Quarter 2015 Profit

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GAAP to Non-GAAP Reconciliations

(dollars in millions)

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

The tangible common equity ratio and the return on tangible common equity ratio have been a focus for some investors, and management believes these ratios may assist investors in analyzing Key’s capital position without regard to the effects of intangible assets and preferred stock. Traditionally, the banking regulators have assessed bank and bank holding company capital adequacy based on both the amount and the composition of capital, the calculation of which is prescribed in federal banking regulations. 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 introduces 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. Prior to January 1, 2015, the Federal Reserve focused its assessment of capital adequacy on a component of Tier 1 risk-based capital known as Tier 1 common equity, also a non-GAAP financial measure.

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 loan and lease 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 provides 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
		12-31-15				9-30-15				12-31-14
Tangible common equity to tangible assets at period end
Key shareholders’ equity (GAAP)		$	10,746			$	10,705			$	10,530
Less: Intangible assets (a)			1,080				1,084				1,090
Preferred Stock, Series A (b)			281				281				282
Tangible common equity (non-GAAP)		$	9,385			$	9,340			$	9,158
Total assets (GAAP)		$	95,133			$	95,422			$	93,821
Less: Intangible assets (a)			1,080				1,084				1,090
Tangible assets (non-GAAP)		$	94,053			$	94,338			$	92,731
Tangible common equity to tangible assets ratio (non-GAAP)			9.98	%			9.90	%			9.88	%
Common Equity Tier 1 at period end
Key shareholders’ equity (GAAP)		$	10,746			$	10,705				—
Less: Preferred Stock, Series A (b)			281				281				—
Common Equity Tier 1 capital before adjustments and deductions			10,465				10,424				—
Less: Goodwill, net of deferred taxes			1,036				1,036				—
Intangible assets, net of deferred taxes			26				29				—
Deferred tax assets			1				1				—
Net unrealized gains (losses) on available-for-sale securities, net of deferred taxes			(58	)			54				—
Accumulated gains (losses) on cash flow hedges, net of deferred taxes			(20	)			21				—
Amounts in accumulated other comprehensive income (loss) attributed to pension and postretirement benefit costs, net of deferred taxes			(365	)			(385	)			—
Total Common Equity Tier 1 capital (c)		$	9,845			$	9,668				—
Net risk-weighted assets (regulatory) (c)		$	89,889			$	92,307				—
Common Equity Tier 1 ratio (non-GAAP) (c)			10.95	%			10.47	%			—
Tier 1 common equity at period end
Key shareholders’ equity (GAAP)			—				—			$	10,530
Qualifying capital securities			—				—				339
Less: Goodwill			—				—				1,057
Accumulated other comprehensive income (loss) (d)			—				—				(395	)
Other assets (e)			—				—				83
Total Tier 1 capital (regulatory)			—				—				10,124
Less: Qualifying capital securities			—				—				339
Preferred Stock, Series A (b)			—				—				282
Total Tier 1 common equity (non-GAAP)			—				—			$	9,503
Net risk-weighted assets (regulatory)			—				—			$	85,100
Tier 1 common equity ratio (non-GAAP)			—				—				11.17	%

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GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)

 

		Three months ended
		12-31-15				9-30-15				12-31-14
Pre-provision net revenue
Net interest income (GAAP)		$	602			$	591			$	582
Plus: Taxable-equivalent adjustment			8				7				6
Noninterest income (GAAP)			485				470				490
Less: Noninterest expense (GAAP)			736				724				704
Pre-provision net revenue from continuing operations (non-GAAP)		$	359			$	344			$	374
Average tangible common equity
Average Key shareholders’ equity (GAAP)		$	10,731			$	10,614			$	10,562
Less: Intangible assets (average) (f)			1,082				1,083				1,096
Preferred Stock, Series A (average)			290				290				291
Average tangible common equity (non-GAAP)		$	9,359			$	9,241			$	9,175
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)		$	224			$	216			$	246
Average tangible common equity (non-GAAP)			9,359				9,241				9,175
Return on average tangible common equity from continuing operations (non-GAAP)			9.50	%			9.27	%			10.64	%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)		$	220			$	213			$	248
Average tangible common equity (non-GAAP)			9,359				9,241				9,175
Return on average tangible common equity consolidated (non-GAAP)			9.33	%			9.14	%			10.72	%
Cash efficiency ratio
Noninterest expense (GAAP)		$	736			$	724			$	704
Less: Intangible asset amortization (GAAP)			9				9				10
Adjusted noninterest expense (non-GAAP)		$	727			$	715			$	694
Net interest income (GAAP)		$	602			$	591			$	582
Plus: Taxable-equivalent adjustment			8				7				6
Noninterest income (GAAP)			485				470				490
Total taxable-equivalent revenue (non-GAAP)		$	1,095			$	1,068			$	1,078
Cash efficiency ratio (non-GAAP)			66.4	%			66.9	%			64.4	%
		Three months ended
		12-31-15
Common Equity Tier 1 under the Regulatory Capital Rules (“RCR”) (estimates)
Common Equity Tier 1 under current RCR		$	9,845
Adjustments from current RCR to the fully phased-in RCR:
Deferred tax assets and other intangible assets (g)			(41	)
Common Equity Tier 1 anticipated under the fully phased-in RCR (h)		$	9,804
Net risk-weighted assets under current RCR		$	89,889
Adjustments from current RCR to the fully phased-in RCR:
Mortgage servicing assets (i)			479
All other assets (j)			6
Total risk-weighted assets anticipated under the fully phased-in RCR (h)		$	90,374
Common Equity Tier 1 ratio under the fully phased-in RCR (h)			10.85	%

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GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)

 

		Twelve months ended
		12-31-15				12-31-14
Pre-provision net revenue
Net interest income (GAAP)		$	2,348			$	2,293
Plus: Taxable-equivalent adjustment			28				24
Noninterest income (GAAP)			1,880				1,797
Less: Noninterest expense (GAAP)			2,840				2,761
Pre-provision net revenue from continuing operations (non-GAAP)		$	1,416			$	1,353
Average tangible common equity
Average Key shareholders’ equity (GAAP)		$	10,626			$	10,467
Less: Intangible assets (average) (k)			1,085				1,039
Preferred Stock, Series A (average)			290				291
Average tangible common equity (non-GAAP)		$	9,251			$	9,137
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)		$	892			$	917
Average tangible common equity (non-GAAP)			9,251				9,137
Return on average tangible common equity from continuing operations (non-GAAP)			9.64	%			10.04	%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)		$	893			$	878
Average tangible common equity (non-GAAP)			9,251				9,137
Return on average tangible common equity consolidated (non-GAAP)			9.65	%			9.61	%
Cash efficiency ratio
Noninterest expense (GAAP)		$	2,840			$	2,761
Less: Intangible asset amortization (GAAP)			36				39
Adjusted noninterest expense (non-GAAP)		$	2,804			$	2,722
Net interest income (GAAP)		$	2,348			$	2,293
Plus: Taxable-equivalent adjustment			28				24
Noninterest income (GAAP)			1,880				1,797
Total taxable-equivalent revenue (non-GAAP)		$	4,256			$	4,114
Cash efficiency ratio (non-GAAP)			65.9	%			66.2	%

 

(a)	For the three months ended December 31, 2015, September 30, 2015, and December 31, 2014, intangible assets exclude $45 million, $50 million, and $68 million, respectively, of period-end purchased credit card receivables.

(b)	Net of capital surplus.

(c)	12-31-15 amount is estimated.

(d)

Includes net unrealized gains or losses on securities available for sale (except for net unrealized losses on marketable equity securities), net gains or losses on cash flow hedges, and amounts resulting from the application of the applicable accounting guidance for defined benefit and other postretirement plans.

(e)	Other assets deducted from Tier 1 capital and net risk-weighted assets consist of disallowed intangible assets (excluding goodwill) and deductible portions of nonfinancial equity investments. There were no disallowed deferred tax assets at December 31, 2014.

(f)	For the three months ended December 31, 2015, September 30, 2015, and December 31, 2014, average intangible assets exclude $47 million, $52 million, and $69 million, respectively, of average purchased credit card receivables.

(g)	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.

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

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

(j)

Includes the phase-in of deferred tax assets arising from temporary differences at 250% risk-weight. Additionally, under the fully implemented rule, certain deferred tax assets and intangible assets subject to the transition provision are no longer required to be risk-weighted because they are deducted directly from capital.

(k)	For the twelve months ended December 31, 2015, and December 31, 2014, average intangible assets exclude $55 million and $79 million, respectively, of average purchased credit card receivables.

GAAP = U.S. generally accepted accounting principles

---

KeyCorp Reports Fourth Quarter 2015 Profit

January 21, 2016

Page 18

 

Consolidated Balance Sheets

(dollars in millions)

 

		12-31-15				9-30-15				12-31-14
Assets
Loans		$	59,876			$	60,085			$	57,381
Loans held for sale			639				916				734
Securities available for sale			14,218				14,376				13,360
Held-to-maturity securities			4,897				4,936				5,015
Trading account assets			788				811				750
Short-term investments			2,707				1,964				4,269
Other investments			655				691				760
Total earning assets			83,780				83,779				82,269
Allowance for loan and lease losses			(796	)			(790	)			(794	)
Cash and due from banks			607				470				653
Premises and equipment			779				771				841
Operating lease assets			340				315				330
Goodwill			1,060				1,060				1,057
Other intangible assets			65				74				101
Corporate-owned life insurance			3,541				3,516				3,479
Derivative assets			619				793				609
Accrued income and other assets			3,292				3,348				2,952
Discontinued assets			1,846				2,086				2,324
Total assets		$	95,133			$	95,422			$	93,821
Liabilities
Deposits in domestic offices:
NOW and money market deposit accounts		$	37,089			$	37,301			$	34,536
Savings deposits			2,341				2,338				2,371
Certificates of deposit ($100,000 or more)			2,392				2,001				2,040
Other time deposits			3,127				3,020				3,259
Total interest-bearing deposits			44,949				44,660				42,206
Noninterest-bearing deposits			26,097				25,985				29,228
Deposits in foreign office — interest-bearing			—				428				564
Total deposits			71,046				71,073				71,998
Federal funds purchased and securities sold under repurchase agreements			372				407				575
Bank notes and other short-term borrowings			533				677				423
Derivative liabilities			632				676				784
Accrued expense and other liabilities			1,605				1,562				1,621
Long-term debt			10,186				10,310				7,875
Discontinued liabilities			—				—				3
Total liabilities			84,374				84,705				83,279
Equity
Preferred stock, Series A			290				290				291
Common shares			1,017				1,017				1,017
Capital surplus			3,922				3,914				3,986
Retained earnings			8,922				8,764				8,273
Treasury stock, at cost			(3,000	)			(3,008	)			(2,681	)
Accumulated other comprehensive income (loss)			(405	)			(272	)			(356	)
Key shareholders’ equity			10,746				10,705				10,530
Noncontrolling interests			13				12				12
Total equity			10,759				10,717				10,542
Total liabilities and equity		$	95,133			$	95,422			$	93,821
Common shares outstanding (000)			835,751				835,285				859,403

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KeyCorp Reports Fourth Quarter 2015 Profit

January 21, 2016

Page 19

 

Consolidated Statements of Income

(dollars in millions, except per share amounts)

 

		Three months ended												Twelve months ended
		12-31-15				9-30-15				12-31-14				12-31-15				12-31-14
Interest income
Loans		$	552			$	542			$	534			$	2,149			$	2,110
Loans held for sale			8				10				8				37				21
Securities available for sale			76				75				67				293				277
Held-to-maturity securities			24				24				23				96				93
Trading account assets			6				5				6				21				25
Short-term investments			3				1				2				8				6
Other investments			4				4				6				18				22
Total interest income			673				661				646				2,622				2,554
Interest expense
Deposits			26				27				26				105				117
Federal funds purchased and securities sold under repurchase agreements			—				—				—				—				2
Bank notes and other short-term borrowings			3				2				3				9				9
Long-term debt			42				41				35				160				133
Total interest expense			71				70				64				274				261
Net interest income			602				591				582				2,348				2,293
Provision for credit losses			45				45				22				166				57
Net interest income after provision for credit losses			557				546				560				2,182				2,236
Noninterest income
Trust and investment services income			105				108				112				433				403
Investment banking and debt placement fees			127				109				126				445				397
Service charges on deposit accounts			64				68				64				256				261
Operating lease income and other leasing gains			15				15				15				73				96
Corporate services income			55				57				53				198				178
Cards and payments income			47				47				43				183				166
Corporate-owned life insurance income			36				30				38				127				118
Consumer mortgage income			2				3				3				12				10
Mortgage servicing fees			15				11				11				48				46
Net gains (losses) from principal investing			—				11				18				51				78
Other income (a), (b)			19				11				7				54				44
Total noninterest income			485				470				490				1,880				1,797
Noninterest expense
Personnel			429				426				409				1,652				1,591
Net occupancy			64				60				63				255				261
Computer processing			43				41				40				164				158
Business services and professional fees			44				40				38				159				156
Equipment			22				22				23				88				96
Operating lease expense			13				11				11				47				42
Marketing			17				17				16				57				49
FDIC assessment			8				8				9				32				30
Intangible asset amortization			9				9				10				36				39
OREO expense, net			1				2				2				6				5
Other expense			86				88				83				344				334
Total noninterest expense			736				724				704				2,840				2,761
Income (loss) from continuing operations before income taxes			306				292				346				1,222				1,272
Income taxes			73				72				94				303				326
Income (loss) from continuing operations			233				220				252				919				946
Income (loss) from discontinued operations, net of taxes			(4	)			(3	)			2				1				(39	)
Net income (loss)			229				217				254				920				907
Less: Net income (loss) attributable to noncontrolling interests			3				(2	)			1				4				7
Net income (loss) attributable to Key		$	226			$	219			$	253			$	916			$	900
Income (loss) from continuing operations attributable to Key common shareholders		$	224			$	216			$	246			$	892			$	917
Net income (loss) attributable to Key common shareholders			220				213				248				893				878
Per common share
Income (loss) from continuing operations attributable to Key common shareholders		$	.27			$	.26			$	.29			$	1.06			$	1.05
Income (loss) from discontinued operations, net of taxes			(.01	)			—				—				—				(.04	)
Net income (loss) attributable to Key common shareholders (c)			.27				.26				.29				1.06				1.01
Per common share — assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders		$	.27			$	.26			$	.28			$	1.05			$	1.04
Income (loss) from discontinued operations, net of taxes			(.01	)			—				—				—				(.04	)
Net income (loss) attributable to Key common shareholders (c)			.26				.25				.28				1.05				.99
Cash dividends declared per common share		$	.075			$	.075			$	.065			$	.29			$	.25
Weighted-average common shares outstanding (000)			828,206				831,430				858,811				836,846				871,464
Effect of convertible preferred stock			—				—				20,602				—				—
Effect of common share options and other stock awards			7,733				7,450				6,773				7,643				6,735
Weighted-average common shares and potential common shares outstanding (000) (d)			835,939				838,880				886,186				844,489				878,199

 

(a)

For the three months ended December 31, 2015, net securities gains (losses) totaled $1 million. For the three months ended September 30, 2015, and December 31, 2014, net securities gains (losses) totaled less than $1 million. For the three months ended December 31, 2015, September 30, 2015, and December 31, 2014, Key did not have any impairment losses related to securities.

(b)	For the twelve months ended December 31, 2015, and December 31, 2014, net securities gains (losses) totaled less than $1 million. For the twelve months ended December 31, 2015, and December 31, 2014, 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.

---

KeyCorp Reports Fourth Quarter 2015 Profit

January 21, 2016

Page 20

 

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

(dollars in millions)

 

		Fourth Quarter 2015												Third Quarter 2015												Fourth Quarter 2014
		Average Balance				Interest (a)				Yield/Rate (a)				Average Balance				Interest (a)				Yield/Rate (a)				Average Balance				Interest (a)				Yield/Rate (a)
Assets
Loans: (b), (c)
Commercial, financial and agricultural (d)		$	30,884			$	253				3.25	%		$	30,374			$	244				3.19	%		$	27,188			$	223				3.24	%
Real estate — commercial mortgage			8,019				75				3.70				7,988				73				3.65				8,161				77				3.73
Real estate — construction			1,067				10				3.65				1,164				11				3.78				1,077				10				3.90
Commercial lease financing			3,910				36				3.68				3,946				35				3.57				4,119				38				3.67
Total commercial loans			43,880				374				3.38				43,472				363				3.32				40,545				348				3.40
Real estate — residential mortgage			2,252				24				4.18				2,258				24				4.19				2,223				24				4.28
Home equity:
Key Community Bank			10,203				100				3.89				10,281				101				3.88				10,365				103				3.91
Other			215				5				7.87				229				4				7.87				274				5				7.84
Total home equity loans			10,418				105				3.97				10,510				105				3.96				10,639				108				4.01
Consumer other — Key Community Bank			1,605				26				6.48				1,597				26				6.51				1,552				27				6.78
Credit cards			780				21				10.66				759				21				10.74				728				20				11.02
Consumer other:
Marine			600				10				6.40				645				10				6.38				802				13				6.29
Other			41				—				7.16				40				1				8.00				52				—				7.52
Total consumer other			641				10				6.45				685				11				6.47				854				13				6.36
Total consumer loans			15,696				186				4.69				15,809				187				4.69				15,996				192				4.76
Total loans			59,576				560				3.72				59,281				550				3.69				56,541				540				3.79
Loans held for sale			841				8				4.13				939				10				3.96				871				8				3.72
Securities available for sale (b), (e)			14,168				76				2.13				14,247				74				2.11				12,153				67				2.20
Held-to-maturity securities (b)			4,908				24				1.99				4,923				24				1.95				4,947				23				1.91
Trading account assets			822				6				3.31				699				5				2.50				868				6				2.84
Short-term investments			3,483				3				.28				2,257				1				.26				3,520				2				.27
Other investments (e)			674				4				2.71				696				4				2.52				792				6				2.77
Total earning assets			84,472				68	1			3.21				83,042				668				3.21				79,692				652				3.27
Allowance for loan and lease losses			(790	)											(790	)											(798	)
Accrued income and other assets			10,437												10,399												9,868
Discontinued assets			1,947												2,118												2,359
Total assets		$	96,066											$	94,769											$	91,121
Liabilities
NOW and money market deposit accounts		$	37,640				14				.15			$	36,289				15				.16			$	34,811				13				.14
Savings deposits			2,338				—				.02				2,371				—				.02				2,388				—				.02
Certificates of deposit ($100,000 or more) (f)			2,150				7				1.31				1,985				6				1.27				2,277				7				1.25
Other time deposits			3,047				5				.72				3,064				6				.70				3,306				6				.76
Deposits in foreign office			354				—				.24				492				—				.23				543				—				.24
Total interest-bearing deposits			45,529				26				.24				44,201				27				.24				43,325				26				.24
Federal funds purchased and securities sold under repurchase agreements			392				—				.02				859				—				.08				621				—				.02
Bank notes and other short-term borrowings			556				3				1.65				567				2				1.51				772				3				1.17
Long-term debt (f), (g)			8,318				42				2.05				7,895				41				2.19				5,135				35				2.80
Total interest-bearing liabilities			54,795				71				.52				53,522				70				.53				49,853				64				.51
Noninterest-bearing deposits			26,292												26,268												26,342
Accrued expense and other liabilities			2,289												2,236												1,989
Discontinued liabilities (g)			1,947												2,118												2,359
Total liabilities			85,323												84,144												80,543
Equity
Key shareholders’ equity			10,731												10,614												10,562
Noncontrolling interests			12												11												16
Total equity			10,743												10,625												10,578
Total liabilities and equity		$	96,066											$	94,769											$	91,121
Interest rate spread (TE)											2.69	%											2.68	%											2.76	%
Net interest income (TE) and net interest margin (TE)							610				2.87	%							598				2.87	%							588				2.94	%
TE adjustment (b)							8												7												6
Net interest income, GAAP basis						$	602											$	591											$	582

 

(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 $87 million, $88 million, and $90 million of assets from commercial credit cards for the three months ended December 31, 2015, September 30, 2015, and December 31, 2014, 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

---

KeyCorp Reports Fourth Quarter 2015 Profit

January 21, 2016

Page 21

 

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

(dollars in millions)

 

		Twelve months ended December 31, 2015												Twelve months ended December 31, 2014
		Average Balance				Interest (a)				Yield/Rate (a)				Average Balance				Interest (a)				Yield/Rate (a)
Assets
Loans: (b), (c)
Commercial, financial and agricultural (d)		$	29,658			$	953				3.21	%		$	26,375			$	866				3.28	%
Real estate — commercial mortgage			8,020				295				3.68				7,999				303				3.79
Real estate — construction			1,143				43				3.73				1,061				43				4.07
Commercial lease financing			3,976				143				3.60				4,239				156				3.67
Total commercial loans			42,797				1,434				3.35				39,674				1,368				3.45
Real estate — residential mortgage			2,244				95				4.21				2,201				96				4.37
Home equity:
Key Community Bank			10,266				399				3.89				10,340				405				3.91
Other			237				19				7.85				299				23				7.80
Total home equity loans			10,503				418				3.98				10,639				428				4.02
Consumer other — Key Community Bank			1,580				103				6.54				1,501				104				6.92
Credit cards			752				81				10.76				712				78				10.95
Consumer other:
Marine			675				43				6.36				894				56				6.22
Other			43				3				7.56				58				4				7.70
Total consumer other			718				46				6.43				952				60				6.31
Total consumer loans			15,797				743				4.70				16,005				766				4.79
Total loans			58,594				2,177				3.71				55,679				2,134				3.83
Loans held for sale			959				37				3.85				570				21				3.76
Securities available for sale (b), (e)			13,720				293				2.14				12,210				277				2.27
Held-to-maturity securities (b)			4,936				96				1.95				4,949				93				1.88
Trading account assets			761				21				2.80				932				25				2.70
Short-term investments			2,843				8				.27				2,886				6				.21
Other investments (e)			706				18				2.63				865				22				2.53
Total earning assets			82,519				2,650				3.21				78,091				2,578				3.30
Allowance for loan and lease losses			(791	)											(818	)
Accrued income and other assets			10,300												9,806
Discontinued assets			2,132												3,828
Total assets		$	94,160											$	90,907
Liabilities
NOW and money market deposit accounts		$	36,258				56				.15			$	34,283				48				.14
Savings deposits			2,372				—				.02				2,446				1				.02
Certificates of deposit ($100,000 or more) (f)			2,041				26				1.28				2,616				35				1.35
Other time deposits			3,115				22				.71				3,495				32				.91
Deposits in foreign office			489				1				.23				615				1				.23
Total interest-bearing deposits			44,275				105				.24				43,455				117				.27
Federal funds purchased and securities sold under repurchase agreements			632				—				.04				1,182				2				.16
Bank notes and other short-term borrowings			572				9				1.52				597				9				1.49
Long-term debt (f), (g)			7,334				160				2.24				5,161				133				2.68
Total interest-bearing liabilities			52,813				274				.52				50,395				261				.52
Noninterest-bearing deposits			26,355												24,410
Accrued expense and other liabilities			2,222												1,791
Discontinued liabilities (g)			2,132												3,828
Total liabilities			83,522												80,424
Equity
Key shareholders’ equity			10,626												10,467
Noncontrolling interests			12												16
Total equity			10,638												10,483
Total liabilities and equity		$	94,160											$	90,907
Interest rate spread (TE)											2.69	%											2.78	%
Net interest income (TE) and net interest margin (TE)							2,376				2.88	%							2,317				2.97	%
TE adjustment (b)							28												24
Net interest income, GAAP basis						$	2,348											$	2,293

 

(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 $88 million and $93 million of assets from commercial credit cards for the twelve months ended December 31, 2015, and December 31, 2014, 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

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KeyCorp Reports Fourth Quarter 2015 Profit

January 21, 2016

Page 22

 

Noninterest Expense

(dollars in millions)

 

		Three months ended												Twelve months ended
		12-31-15				9-30-15				12-31-14				12-31-15				12-31-14
Personnel (a)		$	429			$	426			$	409			$	1,652			$	1,591
Net occupancy			64				60				63				255				261
Computer processing			43				41				40				164				158
Business services and professional fees			44				40				38				159				156
Equipment			22				22				23				88				96
Operating lease expense			13				11				11				47				42
Marketing			17				17				16				57				49
FDIC assessment			8				8				9				32				30
Intangible asset amortization			9				9				10				36				39
OREO expense, net			1				2				2				6				5
Other expense			86				88				83				344				334
Total noninterest expense		$	736			$	724			$	704			$	2,840			$	2,761
Average full-time equivalent employees (b)			13,359				13,555				13,590				13,483				13,853

 

(a)	Additional detail provided in table below.

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

Personnel Expense 

(in millions)

 

		Three months ended												Twelve months ended
		12-31-15				9-30-15				12-31-14				12-31-15				12-31-14
Salaries		$	231			$	234			$	224			$	912			$	891
Technology contract labor, net			13				13				13				46				56
Incentive and stock-based compensation			115				103				117				410				380
Employee benefits			64				75				53				266				240
Severance			6				1				2				18				24
Total personnel expense		$	429			$	426			$	409			$	1,652			$	1,591

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KeyCorp Reports Fourth Quarter 2015 Profit

January 21, 2016

Page 23

 

Loan Composition

(dollars in millions)

 

														Percent change 12-31-15 vs.
		12-31-15				9-30-15				12-31-14				9-30-15				12-31-14
Commercial, financial and agricultural (a)		$	31,240			$	31,095			$	27,982				.5	%			11.6	%
Commercial real estate:
Commercial mortgage			7,959				8,180				8,047				(2.7	)			(1.1	)
Construction			1,053				1,070				1,100				(1.6	)			(4.3	)
Total commercial real estate loans			9,012				9,250				9,147				(2.6	)			(1.5	)
Commercial lease financing (b)			4,020				3,929				4,252				2.3				(5.5	)
Total commercial loans			44,272				44,274				41,381				—				7.0
Residential — prime loans:
Real estate — residential mortgage			2,242				2,267				2,225				(1.1	)			.8
Home equity:
Key Community Bank			10,127				10,282				10,366				(1.5	)			(2.3	)
Other			208				222				267				(6.3	)			(22.1	)
Total home equity loans			10,335				10,504				10,633				(1.6	)			(2.8	)
Total residential — prime loans			12,577				12,771				12,858				(1.5	)			(2.2	)
Consumer other — Key Community Bank			1,600				1,612				1,560				(.7	)			2.6
Credit cards			806				770				754				4.7				6.9
Consumer other:
Marine			583				620				779				(6.0	)			(25.2	)
Other			38				38				49				—				(22.4	)
Total consumer other			621				658				828				(5.6	)			(25.0	)
Total consumer loans			15,604				15,811				16,000				(1.3	)			(2.5	)
Total loans (c), (d)		$	59,876			$	60,085			$	57,381				(.3	)%			4.3	%
Loans Held for Sale Composition
(dollars in millions)
														Percent change 12-31-15 vs.
		12-31-15				9-30-15				12-31-14				9-30-15				12-31-14
Commercial, financial and agricultural		$	76			$	74			$	63				2.7	%			20.6	%
Real estate — commercial mortgage			532				806				638				(34.0	)			(16.6	)
Commercial lease financing			14				10				15				40.0				(6.7	)
Real estate — residential mortgage			17				26				18				(34.6	)			(5.6	)
Total loans held for sale (e)		$	639			$	916			$	734				(30.2	)%			(12.9	)%
Summary of Changes in Loans Held for Sale
(in millions)
		4Q15				3Q15				2Q15				1Q15				4Q14
Balance at beginning of period		$	916			$	835			$	1,649			$	734			$	784
New originations			1,655				1,673				1,650				2,130				2,465
Transfers from (to) held to maturity, net			22				24				6				10				2
Loan sales			(1,943	)			(1,616	)			(2,466	)			(1,204	)			(2,516	)
Loan draws (payments), net			(11	)			—				(4	)			(21	)			(1	)
Balance at end of period (e)		$	639			$	916			$	835			$	1,649			$	734

 

(a)	Loan balances include $85 million, $88 million, and $88 million of commercial credit card balances at December 31, 2015, September 30, 2015, and December 31, 2014, respectively.

 

(b)

Commercial lease financing includes receivables held as collateral for a secured borrowing of $134 million, $162 million, and $302 million at December 31, 2015, September 30, 2015, and December 31, 2014, respectively. Principal reductions are based on the cash payments received from these related receivables.

(c)

At December 31, 2015, total loans include purchased loans of $114 million, of which $11 million were purchased credit impaired. At September 30, 2015, total loans include purchased loans of $119 million, of which $12 million were purchased credit impaired. At December 31, 2014, total loans include purchased loans of $138 million, of which $13 million were purchased credit impaired.

(d)	Total loans exclude loans of $1.8 billion at December 31, 2015, $1.9 billion at September 30, 2015, and $2.3 billion at December 31, 2014, related to the discontinued operations of the education lending business.

(e)	Total loans held for sale exclude loans held for sale of $169 million at September 30, 2015, and $179 million at June 30, 2015, related to the discontinued operations of the education lending business.

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KeyCorp Reports Fourth Quarter 2015 Profit

January 21, 2016

Page 24

 

Exit Loan Portfolio From Continuing Operations

(in millions)

 

		Balance Outstanding								Change 12-31-15 vs.				Net Loan Charge-offs								Balance on Nonperforming Status
		12-31-15				9-30-15				9-30-15				4Q15				3Q15 (c)				12-31-15				9-30-15
Residential properties — homebuilder		$	6			$	6				—				—				—			$	8			$	5
Marine and RV floor plan			1				1				—				—				—				—				—
Commercial lease financing (a)			765				798			$	(33	)			—			$	(1	)			1				—
Total commercial loans			772				805				(33	)			—				(1	)			9				5
Home equity — Other			208				222				(14	)		$	2				(1	)			8				7
Marine			583				620				(37	)			1				3				6				6
RV and other consumer			41				44				(3	)			—				(1	)			—				1
Total consumer loans			832				886				(54	)			3				1				14				14
Total exit loans in loan portfolio		$	1,604			$	1,691			$	(87	)		$	3				—			$	23			$	19
Discontinued operations — education lending business (not included in exit loans above) (b)		$	1,828			$	1,891			$	(63	)		$	8			$	7			$	7			$	8

 

(a)

Includes (1) the business aviation, commercial vehicle, office products, construction, and industrial leases; (2) Canadian lease financing portfolios; (3) European lease financing portfolios; and (4) all remaining balances related to lease in, lease out; sale in, lease out; service contract leases; and qualified technological equipment leases.

(b)	Excludes loans held for sale of $169 million at September 30, 2015. There were no loans held for sale at December 31, 2015.

(c)	Credit amounts indicate recoveries exceeded charge-offs.

Asset Quality Statistics From Continuing Operations

(dollars in millions)

 

		4Q15				3Q15				2Q15				1Q15				4Q14
Net loan charge-offs		$	37			$	41			$	36			$	28			$	32
Net loan charge-offs to average total loans			.25	%			.27	%			.25	%			.20	%			.22	%
Allowance for loan and lease losses		$	796			$	790			$	796			$	794			$	794
Allowance for credit losses (a)			852				844				841				835				829
Allowance for loan and lease losses to period-end loans			1.33	%			1.31	%			1.37	%			1.37	%			1.38	%
Allowance for credit losses to period-end loans			1.42				1.40				1.44				1.44				1.44
Allowance for loan and lease losses to nonperforming loans			205.7				197.5				190.0				181.7				190.0
Allowance for credit losses to nonperforming loans			220.2				211.0				200.7				191.1				198.3
Nonperforming loans at period end (b)		$	387			$	400			$	419			$	437			$	418
Nonperforming assets at period end			403				417				440				457				436
Nonperforming loans to period-end portfolio loans			.65	%			.67	%			.72	%			.75	%			.73	%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets			.67				.69				.75				.79				.76

 

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

(b)	Loan balances exclude $11 million, $12 million, $12 million, $12 million, and $13 million of purchased credit impaired loans at December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015, and December 31, 2014, respectively.

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KeyCorp Reports Fourth Quarter 2015 Profit

January 21, 2016

Page 25

 

Summary of Loan and Lease Loss Experience From Continuing Operations

(dollars in millions)

 

		Three months ended												Twelve months ended
		12-31-15				9-30-15				12-31-14				12-31-15				12-31-14
Average loans outstanding		$	59,576			$	59,281			$	56,541			$	58,594			$	55,679
Allowance for loan and lease losses at beginning of period		$	790			$	796			$	804			$	794			$	848
Loans charged off:
Commercial, financial and agricultural			18				26				10				77				45
Real estate — commercial mortgage			2				—				3				4				6
Real estate — construction			—				—				1				1				5
Total commercial real estate loans			2				—				4				5				11
Commercial lease financing			6				2				4				11				10
Total commercial loans			26				28				18				93				66
Real estate — residential mortgage			2				1				3				6				10
Home equity:
Key Community Bank			5				6				8				26				37
Other			2				1				1				6				9
Total home equity loans			7				7				9				32				46
Consumer other — Key Community Bank			6				6				7				24				30
Credit cards			7				7				7				30				34
Consumer other:
Marine			3				4				5				17				23
Other			—				—				—				1				2
Total consumer other			3				4				5				18				25
Total consumer loans			25				25				31				110				145
Total loans charged off			51				53				49				203				211
Recoveries:
Commercial, financial and agricultural			3				2				6				16				33
Real estate — commercial mortgage			4				—				—				6				4
Real estate — construction			—				—				1				1				17
Total commercial real estate loans			4				—				1				7				21
Commercial lease financing			—				2				2				7				10
Total commercial loans			7				4				9				30				64
Real estate — residential mortgage			2				—				—				3				2
Home equity:
Key Community Bank			2				2				2				7				9
Other			—				2				1				4				5
Total home equity loans			2				4				3				11				14
Consumer other — Key Community Bank			1				1				2				6				6
Credit cards			—				1				—				2				1
Consumer other:
Marine			2				1				2				8				9
Other			—				1				1				1				2
Total consumer other			2				2				3				9				11
Total consumer loans			7				8				8				31				34
Total recoveries			14				12				17				61				98
Net loan charge-offs			(37	)			(41	)			(32	)			(142	)			(113	)
Provision (credit) for loan and lease losses			43				36				22				145				59
Foreign currency translation adjustment			—				(1	)			—				(1	)			—
Allowance for loan and lease losses at end of period		$	796			$	790			$	794			$	796			$	794
Liability for credit losses on lending-related commitments at beginning of period		$	54			$	45			$	35			$	35			$	37
Provision (credit) for losses on lending-related commitments			2				9				—				21				(2	)
Liability for credit losses on lending-related commitments at end of period (a)		$	56			$	54			$	35			$	56			$	35
Total allowance for credit losses at end of period		$	852			$	844			$	829			$	852			$	829
Net loan charge-offs to average total loans			.25	%			.27	%			.22	%			.24	%			.20	%
Allowance for loan and lease losses to period-end loans			1.33				1.31				1.38				1.33				1.38
Allowance for credit losses to period-end loans			1.42				1.40				1.44				1.42				1.44
Allowance for loan and lease losses to nonperforming loans			205.7				197.5				190.0				205.7				190.0
Allowance for credit losses to nonperforming loans			220.2				211.0				198.3				220.2				198.3
Discontinued operations — education lending business:
Loans charged off		$	10			$	9			$	11			$	35			$	45
Recoveries			2				2				3				12				14
Net loan charge-offs		$	(8	)		$	(7	)		$	(8	)		$	(23	)		$	(31	)

 

(a)	Included in “accrued expense and other liabilities” on the balance sheet.

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KeyCorp Reports Fourth Quarter 2015 Profit

January 21, 2016

Page 26

 

Summary of Nonperforming Assets and Past Due Loans From Continuing Operations

(dollars in millions)

 

		12-31-15				9-30-15				6-30-15				3-31-15				12-31-14
Commercial, financial and agricultural		$	82			$	89			$	100			$	98			$	59
Real estate — commercial mortgage			19				23				26				30				34
Real estate — construction			9				9				12				12				13
Total commercial real estate loans			28				32				38				42				47
Commercial lease financing			13				21				18				20				18
Total commercial loans			123				142				156				160				124
Real estate — residential mortgage			64				67				67				72				79
Home equity:
Key Community Bank			182				174				176				182				185
Other			8				7				8				9				10
Total home equity loans			190				181				184				191				195
Consumer other — Key Community Bank			2				1				1				2				2
Credit cards			2				2				2				2				2
Consumer other:
Marine			6				6				8				9				15
Other			—				1				1				1				1
Total consumer other			6				7				9				10				16
Total consumer loans			264				258				263				277				294
Total nonperforming loans (a)			387				400				419				437				418
OREO			14				17				20				20				18
Other nonperforming assets			2				—				1				—				—
Total nonperforming assets		$	403			$	417			$	440			$	457			$	436
Accruing loans past due 90 days or more		$	72			$	54			$	66			$	111			$	96
Accruing loans past due 30 through 89 days			208				271				181				216				235
Restructured loans — accruing and nonaccruing (b)			280				287				300				268				270
Restructured loans included in nonperforming loans (b)			159				160				170				141				157
Nonperforming assets from discontinued operations — education lending business			7				8				6				8				11
Nonperforming loans to period-end portfolio loans			.65	%			.67	%			.72	%			.75	%			.73	%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets			.67				.69				.75				.79				.76

 

(a)	Loan balances exclude $11 million, $12 million, $12 million, $12 million, and $13 million of purchased credit impaired loans at December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015, and December 31, 2014, 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.

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KeyCorp Reports Fourth Quarter 2015 Profit

January 21, 2016

Page 27

 

Summary of Changes in Nonperforming Loans From Continuing Operations

(in millions)

 

		4Q15				3Q15				2Q15				1Q15				4Q14
Balance at beginning of period		$	400			$	419			$	437			$	418			$	401
Loans placed on nonaccrual status			81				81				92				123				103
Charge-offs			(51	)			(53	)			(52	)			(47	)			(49	)
Loans sold			—				(2	)			—				—				(2	)
Payments			(21	)			(16	)			(25	)			(9	)			(17	)
Transfers to OREO			(4	)			(4	)			(5	)			(7	)			(6	)
Transfers to other nonperforming assets			(1	)			—				—				—				—
Loans returned to accrual status			(17	)			(25	)			(28	)			(41	)			(12	)
Balance at end of period (a)		$	387			$	400			$	419			$	437			$	418

 

(a)	Loan balances exclude $11 million, $12 million, $12 million, $12 million, and $13 million of purchased credit impaired loans at December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015, and December 31, 2014, respectively.

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

(in millions)

 

		4Q15				3Q15				2Q15				1Q15				4Q14
Balance at beginning of period		$	17			$	20			$	20			$	18			$	16
Properties acquired — nonperforming loans			4				4				5				7				6
Valuation adjustments			(2	)			(2	)			(1	)			(1	)			(2	)
Properties sold			(5	)			(5	)			(4	)			(4	)			(2	)
Balance at end of period		$	14			$	17			$	20			$	20			$	18

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KeyCorp Reports Fourth Quarter 2015 Profit

January 21, 2016

Page 28

 

Line of Business Results

(dollars in millions)

 

																						Percent change 4Q15 vs.
		4Q15				3Q15				2Q15				1Q15				4Q14				3Q15				4Q14
Key Community Bank
Summary of operations
Total revenue (TE)		$	588			$	579			$	560			$	549			$	558				1.6	%			5.4	%
Provision for credit losses			20				18				3				30				11				11.1				81.8
Noninterest expense			459				448				450				441				449				2.5				2.2
Net income (loss) attributable to Key			68				71				67				49				62				(4.2	)			9.7
Average loans and leases			30,925				31,039				30,707				30,662				30,478				(.4	)			1.5
Average deposits			52,219				51,234				50,766				50,417				50,851				1.9				2.7
Net loan charge-offs			23				21				20				28				28				9.5				(17.9	)
Net loan charge-offs to average total loans			.30	%			.27	%			.26	%			.37	%			.36	%			N/A				N/A
Nonperforming assets at period end		$	303			$	306			$	305			$	328			$	340				(1.0	)			(10.9	)
Return on average allocated equity			10.11	%			10.49	%			10.05	%			7.27	%			9.15	%			N/A				N/A
Average full-time equivalent employees			7,228				7,326				7,400				7,452				7,414				(1.3	)			(2.5	)
Key Corporate Bank
Summary of operations
Total revenue (TE)		$	479			$	454			$	477			$	401			$	460				5.5	%			4.1	%
Provision for credit losses			26				30				41				6				7				(13.3	)			271.4
Noninterest expense			254				246				252				214				244				3.3				4.1
Net income (loss) attributable to Key			145				138				133				129				149				5.1				(2.7	)
Average loans and leases			26,981				26,425				25,298				24,722				23,798				2.1				13.4
Average loans held for sale			820				918				1,234				775				855				(10.7	)			(4.1	)
Average deposits			19,081				18,809				19,708				18,567				18,355				1.4				4.0
Net loan charge-offs			12				20				12				(4	)			(3	)			(40.0	)			N/M
Net loan charge-offs to average total loans			.18	%			.30	%			.19	%			(.07	)%			(.05	)%			N/A				N/A
Nonperforming assets at period end		$	74			$	85			$	105			$	93			$	50				(12.9	)			48.0
Return on average allocated equity			29.61	%			28.65	%			29.62	%			28.04	%			33.63	%			N/A				N/A
Average full-time equivalent employees			2,113				2,173				2,058				2,057				2,043				(2.8	)			3.4

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