KEY
$18.28
Keycorp
($.18)
(.98%)
Earnings Details
3rd Quarter September 2017
Thursday, October 19, 2017 6:30:00 AM
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Summary

Keycorp Misses

Keycorp (KEY) reported 3rd Quarter September 2017 earnings of $0.35 per share on revenue of $1.7 billion. The consensus earnings estimate was $0.35 per share on revenue of $1.6 billion. The Earnings Whisper number was $0.36 per share. Revenue grew 18.2% on a year-over-year basis.

KeyCorp is a bank holding company. The Company through its subsidiaries, provides retail and commercial banking, commercial leasing, investment management, consumer finance and investment banking products and services to its clients.

Results
Reported Earnings
$0.35
Earnings Whisper
$0.36
Consensus Estimate
$0.35
Reported Revenue
$1.70 Bil
Revenue Estimate
$1.56 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

KeyCorp Reports Third Quarter 2017 Net Income Of $349 Million, Or $.32 Per Common Share

Earnings Per Share Cash Efficiency(a) Return on Tangible
Common Equity(a)
Reported
$.32
62.2%
12.2%
Adjusted (Non-GAAP)(b) $.35
59.7%
13.2%
(a) Non-GAAP measure; see pages 15-17 for reconciliation
(b) Excludes notable items; see page 15 for detail

KeyCorp (KEY) today announced third quarter net income from continuing operations attributable to Key common shareholders of $349 million, or $.32 per common share, compared to $393 million or $.36 per common share, for the second quarter of 2017 and $165 million, or $.16 per common share, for the third quarter of 2016. During the third quarter of 2017, Key’s results included $36 million of merger-related charges and a $5 million merchant services gain adjustment, resulting in a pre-tax net impact of $41 million, or $.03 per common share.

"Third quarter results reflect strong returns and the seventh consecutive quarter of positive operating leverage compared to the prior year, as we continue to execute on our strategic priorities, grow our businesses, and deliver on the commitments we have made. Key’s return on average tangible common equity, excluding notable items, was 13.2% for the quarter."

"We continue to have momentum in our fee-based businesses, including investment banking and debt placement fees, which were up 4% from the second quarter, and cards and payments income, which grew 7% on a linked-quarter basis. The cash efficiency ratio for the third quarter, excluding notable items, was 59.7%."

"We continue to invest for growth in support of our relationship strategy, including the recent HelloWallet and merchant services acquisitions, as well as Cain Brothers, which closed early in the fourth quarter. These investments enhance our focus on organic growth by investing in our people, products and capabilities to continue to drive positive operating leverage and future growth."

Beth Mooney, Chairman and CEO

Selected Financial Highlights dollars in millions, except per share data Change 3Q17 vs. 3Q17 2Q17 3Q16 2Q17 3Q16 Income (loss) from continuing operations attributable to Key common shareholders $ 349 $ 393 $ 165 (11.2)% 111.5% Income (loss) from continuing operations attributable to Key common shareholders per common share -- assuming dilution .32 .36 .16 (11.1) 100.0 Return on average total assets from continuing operations 1.07% 1.23% .55% N/A N/A Common Equity Tier 1 ratio (a) 10.26 9.91 9.56 N/A N/A Book value at period end $ 13.18 $ 13.02 $ 12.78 1.2% 3.1% Net interest margin (TE) from continuing operations 3.15% 3.30% 2.85% N/A N/A (a)

9/30/2017 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable

INCOME STATEMENT HIGHLIGHTS
Revenue
dollars in millions
Change 3Q17 vs.
3Q17
2Q17
3Q16
2Q17
3Q16
Net interest income (TE)
$ 962
$ 987
$ 788
(2.5)% 22.1%
Noninterest income
592
653
549
(9.3)
7.8
Total revenue
$ 1,554
$ 1,640
$ 1,337
(5.2)% 16.2%
TE = Taxable Equivalent; N/M = Not Meaningful

Third quarter 2017 net interest income included $48 million of purchase accounting accretion related to the acquisition of First Niagara.

Taxable-equivalent net interest income was $962 million for the third quarter of 2017, and the net interest margin was 3.15%, compared to taxable-equivalent net interest income of $788 million and a net interest margin of 2.85% for the third quarter of 2016, reflecting the benefit from the First Niagara acquisition, including purchase accounting accretion, as well as higher earning asset yields and balances.

Compared to the second quarter of 2017, taxable-equivalent net interest income decreased by $25 million, and the net interest margin decreased by 15 basis points. The decrease in net interest income and the net interest margin reflects a decline in purchase accounting accretion of $52 million, including $42 million from the finalization of previous estimates recognized in the second quarter. Lower purchase accounting accretion was partially offset by higher earning asset yields and balances.

Excluding purchase accounting accretion, taxable-equivalent net interest income increased $145 million from the third quarter of 2016 and $27 million from the second quarter of 2017.

Noninterest Income
dollars in millions
Change 3Q17 vs.
3Q17
2Q17
3Q16
2Q17
3Q16
Trust and investment services income
$ 135
$ 134
$ 122
.7%
10.7%
Investment banking and debt placement fees
141
135
156
4.4
(9.6)
Service charges on deposit accounts
91
90
85
1.1
7.1
Operating lease income and other leasing gains 16
30
6
(46.7) 166.7
Corporate services income
54
55
51
(1.8)
5.9
Cards and payments income
75
70
66
7.1
13.6
Corporate-owned life insurance income
31
33
29
(6.1)
6.9
Consumer mortgage income
7
6
6
16.7
16.7
Mortgage servicing fees
21
15
15
40.0
40.0
Net gains (losses) from principal investing
3
--
5
N/M
(40.0)
Other income
18
85
8
(78.8) 125.0
Total noninterest income
$ 592
$ 653
$ 549
(9.3)% 7.8%
N/M = Not Meaningful

Key’s noninterest income was $592 million for the third quarter of 2017, compared to $549 million for the year-ago quarter. Growth was largely driven by a full-quarter impact of the First Niagara acquisition, as well as ongoing momentum in Key’s core businesses. Broad-based growth across many fee income categories more than offset a decline in investment banking and debt placement fees, related to strong market conditions in the year-ago period.

Compared to the second quarter of 2017, noninterest income decreased by $61 million. The largest driver of this decrease was a $64 million one-time gain related to Key’s merchant services business in the second quarter of 2017, recognized in other income. Excluding the one-time merchant services gain, noninterest income grew on a linked-quarter basis, driven by momentum in fee-based businesses, including growth in investment banking and debt placement fees, mortgage servicing fees, and cards and payments income, which also benefited from the recent merchant services acquisition. Operating lease income and other leasing gains decreased $14 million, related to lease residual losses in the third quarter of 2017.

Noninterest Expense
dollars in millions
Change 3Q17 vs.
3Q17
2Q17
3Q16
2Q17
3Q16
Personnel expense
$ 558
$ 551
$ 594
1.3%
(6.1)%
Non-personnel expense
434
444
488
(2.3)
(11.1)
Total noninterest expense
$ 992
$ 995
$ 1,082
(.3)
(8.3)
Merger-related charges
36
44
189
(18.2) (81.0)
Total noninterest expense excluding merger-related charges $ 956
$ 951
$ 893
.5%
7.1%

Key’s noninterest expense was $992 million for the third quarter of 2017, and included $36 million of merger-related charges. Merger-related charges for the quarter were made up of $25 million of personnel expense and $11 million of non-personnel expense, mostly reflected in marketing and computer processing expense.

Excluding merger-related charges, noninterest expense was $63 million higher than the third quarter of last year. The increase from the prior year, reflected in both personnel and non-personnel expense, was primarily driven by a full-quarter impact of the First Niagara acquisition, as well as ongoing business investments and recent acquisitions, partially offset by merger cost savings.

Excluding merger-related charges, noninterest expense increased $5 million from the second quarter of 2017. Key incurred a number of notable items in the second quarter of 2017, including a $20 million charitable contribution and a $4 million credit related to purchase accounting finalization. Excluding these notable items as well as merger-related charges, noninterest expense increased $21 million from the second quarter of 2017. The increase represents recent business acquisitions, including HelloWallet and merchant services, as well as seasonal trends in marketing and personnel. Business services and professional fees were also higher in the third quarter, related to short-term initiatives.

BALANCE SHEET HIGHLIGHTS

Average Loans
dollars in millions
Change 3Q17 vs.
3Q17
2Q17
3Q16
2Q17 3Q16
Commercial and industrial (a) $
41,416
$
40,666
$
37,318
1.8% 11.0%
Other commercial loans
21,598
21,990
19,110
(1.8)13.0
Home equity loans
12,314
12,473
11,968
(1.3)2.9
Other consumer loans
11,486
11,373
9,301
1.0
23.5
Total loans
$
86,814
$
86,502
$
77,697
.4%
11.7%
(a) Commercial and industrial average loan balances include $117 million, $117 million, and $107 million of assets from commercial credit cards at September 30, 2017, June 30, 2017, and September 30, 2016, respectively.

Average loans were $86.8 billion for the third quarter of 2017, an increase of $9.1 billion compared to the third quarter of 2016, primarily reflecting a full-quarter impact of the First Niagara acquisition, as well as growth in commercial and industrial loans, which was broad-based and spread across Key’s commercial lines of business.

Compared to the second quarter of 2017, average loans increased by $312 million, driven primarily by growth in commercial and industrial loans. Commercial real estate loans declined as a result of paydowns and clients taking advantage of attractive capital markets alternatives. Consumer loans were relatively stable, as the home equity portfolio continued to decline, largely the result of paydowns.

At September 30, 2017, the remaining fair value discount on the First Niagara acquired loan portfolio was $302 million, compared to $345 million at June 30, 2017.

Average Deposits
dollars in millions
Change 3Q17 vs.
3Q17
2Q17
3Q16
2Q17 3Q16
Non-time deposits
$
92,039
$
92,018
$
85,683
--
7.4%
Certificates of deposit ($100,000 or more) 6,402
6,111
4,204
4.8% 52.3
Other time deposits
4,664
4,650
5,031
.3
(7.3)
Total deposits
$
103,105
$
102,779
$
94,918
.3%
8.6%
Cost of total deposits
.28%
.26%
.21%
N/A
N/A
N/A = Not Applicable

Average deposits totaled $103.1 billion for the third quarter of 2017, an increase of $8.2 billion compared to the year-ago quarter, primarily reflecting a full-quarter impact of the First Niagara acquisition, and core retail and commercial deposit growth.

Compared to the second quarter of 2017, average deposits increased by $326 million, driven by growth in noninterest-bearing deposits from commercial deposit inflows and short-term escrows. Certificates of deposit balances also grew and helped offset the managed exit of certain public sector relationships.

ASSET QUALITY
dollars in millions
Change 3Q17 vs.
3Q17
2Q17
3Q16
2Q17
3Q16
Net loan charge-offs
$
32
$
66
$
44
(51.5)% (27.3)%
Net loan charge-offs to average total loans
.15%
.31%
.23%
N/A
N/A
Nonperforming loans at period end (a)
$
517 $
507 $
723
2.0
(28.5)
Nonperforming assets at period end (a)
556
556
760
--
(26.8)
Allowance for loan and lease losses
880
870
865
1.1
1.7
Allowance for loan and lease losses to nonperforming loans (a) 170.2% 171.6% 119.6%
N/A
N/A
Provision for credit losses
$
51
$
66
$
59
(22.7)% (13.6)%
(a)
Nonperforming loan balances exclude $783 million, $835 million, and $959 million of purchased credit impaired loans at September 30, 2017, June 30, 2017, and September 30, 2016, respectively.
N/A = Not Applicable

Key’s provision for credit losses was $51 million for the third quarter of 2017, compared to $59 million for the third quarter of 2016 and $66 million for the second quarter of 2017. The third quarter 2017 provision reflects a large recovery in the commercial and industrial portfolio. Key’s allowance for loan and lease losses was $880 million, or 1.02% of total period-end loans, at September 30, 2017, compared to 1.01% at September 30, 2016, and 1.01% at June 30, 2017.

Net loan charge-offs for the third quarter of 2017 totaled $32 million, or .15% of average total loans, reflecting a large recovery in the commercial and industrial portfolio. These results compare to $44 million, or .23%, for the third quarter of 2016, and $66 million, or .31%, for the second quarter of 2017.

At September 30, 2017, Key’s nonperforming loans totaled $517 million, which represented .60% of period-end portfolio loans. These results compare to .85% at September 30, 2016, and .59% at June 30, 2017. Nonperforming assets at September 30, 2017, totaled $556 million, and represented .64% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .89% at September 30, 2016, and .64% at June 30, 2017.

CAPITAL

Key’s estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at September 30, 2017.

Capital Ratios
9/30/2017 6/30/2017 9/30/2016
Common Equity Tier 1 (a)
10.26%
9.91%
9.56%
Tier 1 risk-based capital (a)
11.11
10.73
10.53
Total risk based capital (a)
13.09
12.64
12.63
Tangible common equity to tangible assets (b) 8.49
8.56
8.27
Leverage (a)
9.83
9.95
10.22
(a) 9/30/2017 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 throughout the third quarter. As shown in the preceding table, at September 30, 2017, Key’s estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.26% and 11.11%, respectively. The increase in these ratios was primarily driven by a change in methodology for multipurpose facilities. Key’s tangible common equity ratio was 8.49% at September 30, 2017.

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 10.15% at September 30, 2017. 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 3Q17 vs.
3Q17
2Q17
3Q16
2Q17
3Q16
Shares outstanding at beginning of period
1,092,739
1,097,479
842,703
(.4)%
29.7%
Open market repurchases and return of shares under employee
(15,298)
(5,072)
(5,240)
201.6
191.9
compensation plans
Shares issued under employee compensation plans (net of cancellations) 1,598
332
4,857
381.3
(67.1)
Common shares issued to acquire First Niagara
--
--
239,735
N/M
NM
Shares outstanding at end of period
1,079,039
1,092,739
1,082,055
(1.3)%
(.3)%
N/M = Not Meaningful

Consistent with Key’s 2017 Capital Plan, during the third quarter of 2017, Key declared a dividend of $.095 per common share. Key also completed $277 million of common share repurchases during the quarter, including $271 million of common share repurchases in the open market and $6 million of share repurchases related to employee equity compensation programs.

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 3Q17 vs.
3Q17
2Q17
3Q16
2Q17
3Q16
Revenue from continuing operations (TE)
Key Community Bank
$
959
$
1,010
$
783
(5.0)%
22.5%
Key Corporate Bank
560
596
556
(6.0)
.7
Other Segments
30
35
16
(14.3)
87.5
Total segments
1,549
1,641
1,355
(5.6)
14.3
Reconciling Items
5
(1)
(18)
N/M
N/M
Total
$
1,554
$
1,640
$
1,337
(5.2)%
16.2%
Income (loss) from continuing operations attributable to Key
Key Community Bank
$
161
$
196
$
97
(17.9)%
66.0%
Key Corporate Bank
190
222
160
(14.4)
18.8
Other Segments
23
28
16
(17.9)
43.8
Total segments
374
446
273
(16.1)
37.0
Reconciling Items (a)
(11)
(39)
(102)
N/M
N/M
Total
$
363
$
407
$
171
(10.8)%
112.3%
(a)
Reconciling items consists primarily of the unallocated portion of merger-related charges and items not allocated to the business segments because they do not reflect their normal operations.
TE = Taxable Equivalent, N/M = Not Meaningful
Key Community Bank
dollars in millions
Change 3Q17 vs.
3Q17
2Q17
3Q16
2Q17
3Q16
Summary of operations
Net interest income (TE)
$
670
$
674
$
533
(.6)%
25.7%
Noninterest income
289
336
250
(14.0)
15.6
Total revenue (TE)
959
1,010
783
(5.0)
22.5
Provision for credit losses
59
47
39
25.5
51.3
Noninterest expense
643
651
590
(1.2)
9.0
Income (loss) before income taxes (TE) 257
312
154
(17.6)
66.9
Allocated income taxes (benefit) and TE adjustments
96
116
57
(17.2)
68.4
Net income (loss) attributable to Key
$
161
$
196
$
97
(17.9)%
66.0%
Average balances
Loans and leases
$
47,595
$
47,461
$
41,548
.3%
14.6%
Total assets
51,708
51,502
44,218
.4
16.9
Deposits
79,563
79,601
69,397
--
14.6
Assets under management at period end
$
38,660
$
37,613
$
36,752
2.8%
5.2%
TE = Taxable Equivalent
Additional Key Community Bank Data
dollars in millions
Change 3Q17 vs.
3Q17
2Q17
3Q16
2Q17
3Q16
Noninterest income
Trust and investment services income
$
101
$
99
$
86
2.0%
17.4%
Service charges on deposit accounts
78
77
70
1.3
11.4
Cards and payments income
65
60
54
8.3
20.4
Other noninterest income
45
100
40
(55.0)
12.5
Total noninterest income
$
289
$
336
$
250
(14.0)%
15.6%
Average deposit balances
NOW and money market deposit accounts
$
44,481
$
45,127
$
38,417
(1.4)%
15.8%
Savings deposits
5,165
5,293
4,369
(2.4)
18.2
Certificates of deposit ($100,000 or more)
4,195
4,016
2,606
4.5
61.0
Other time deposits
4,657
4,640
4,944
.4
(5.8)
Noninterest-bearing deposits
21,065
20,525
19,061
2.6%
10.5
Total deposits
$
79,563
$
79,601
$
69,397
--
14.6%
Home equity loans
Average balance
$
12,182
$
12,330
$
11,703
Combined weighted-average loan-to-value ratio (at date of origination) 69%
71%
70%
Percent first lien positions
60
60
55
Other data
Branches
1,208
1,210
1,322
Automated teller machines
1,588
1,589
1,701

Key Community Bank Summary of Operations (3Q17 vs. 3Q16)

-- Positive operating leverage compared to prior year

-- Net income increased $64 million, or 66%, from prior year

Average commercial and industrial loans increased $2.7 billion, or 17.2%, from the prior year

-- Average deposits increased $10.2 billion, or 14.6%, from the prior year

Key Community Bank recorded net income attributable to Key of $161 million for the third quarter of 2017, compared to $97 million for the year-ago quarter, benefiting from momentum in Key’s core businesses, as well as the full-quarter impact of the First Niagara acquisition.

Taxable-equivalent net interest income increased by $137 million, or 25.7%, from the third quarter of 2016. The increase was primarily attributable to the full-quarter impact of the First Niagara acquisition, as well as the benefit from higher interest rates. Average loans and leases increased $6 billion, or 14.6%, largely driven by a $2.7 billion, or 17.2%, increase in commercial and industrial loans. Additionally, average deposits increased $10.2 billion, or 14.6%, from one year ago.

Noninterest income was up $39 million, or 15.6%, from the year-ago quarter, driven by the full quarter impact of the First Niagara acquisition, including the addition of Key Insurance and Benefits Services. Strength in cards and payments, which includes the full-quarter impact of Key’s merchant services acquisition in the second quarter of 2017, and higher assets under management from market growth also contributed to the increase.

The provision for credit losses increased by $20 million, or 51.3%, and net loan charge-offs increased $10 million from the third quarter of 2016, primarily related to the acquisition of First Niagara.

Noninterest expense increased by $53 million, or 9%, from the year-ago quarter, largely driven by the full-quarter impact of the First Niagara acquisition, as well as core business activity, ongoing investments, recent acquisitions and seasonal trends. Personnel expense increased $29 million, while non-personnel expense increased by $24 million, including higher marketing expense and higher intangible amortization expense.

Key Corporate Bank
dollars in millions
Change 3Q17 vs.
3Q17
2Q17
3Q16
2Q17
3Q16
Summary of operations
Net interest income (TE)
$
291
$
312
$
278
(6.7)%
4.7%
Noninterest income
269
284
278
(5.3)
(3.2)
Total revenue (TE)
560
596
556
(6.0)
.7
Provision for credit losses
(11)
19
23
(157.9)
(147.8)
Noninterest expense
303
299
310
1.3
(2.3)
Income (loss) before income taxes (TE) 268
278
223
(3.6)
20.2
Allocated income taxes and TE adjustments
78
56
63
39.3
23.8
Net income (loss)
190
222
160
(14.4)
18.8
Less: Net income (loss) attributable to noncontrolling interests
--
--
--
N/M
N/M
Net income (loss) attributable to Key
$
190
$
222
$
160
(14.4)%
18.8%
Average balances
Loans and leases
$
38,040
$
37,721
$
34,561
.8%
10.1%
Loans held for sale
1,521
1,000
1,103
52.1
37.9
Total assets
45,276
44,148
40,584
2.6
11.6
Deposits
21,559
21,145
22,708
2.0%
(5.1)%
TE = Taxable Equivalent, N/M = Not Meaningful
Additional Key Corporate Bank Data
dollars in millions
Change 3Q17 vs.
3Q17
2Q17
3Q16
2Q17
3Q16
Noninterest income
Trust and investment services income
$ 34
$ 35
$ 36
(2.9)%
(5.6)%
Investment banking and debt placement fees
137
134
153
2.2
(10.5)
Operating lease income and other leasing gains
13
22
10
(40.9)
30.0
Corporate services income
41
38
36
7.9
13.9
Service charges on deposit accounts
13
13
15
--
(13.3)
Cards and payments income
10
10
10
--
--
Payments and services income 64
61
61
4.9
4.9
Mortgage servicing fees
18
12
13
50.0
38.5
Other noninterest income
3
20
5
(85.0)
(40.0)
Total noninterest income
$ 269
$ 284
$ 278
(5.3)%
(3.2)%

Key Corporate Bank Summary of Operations (3Q17 vs. 3Q16)

-- Positive operating leverage compared to prior year

-- Net income up $30 million, or 18.8%, from prior year

-- Average loan and lease balances up $3.5 billion, or 10.1%, from the prior year

Key Corporate Bank recorded net income attributable to Key of $190 million for the third quarter of 2017, compared to $160 million for the same period one year ago.

Taxable-equivalent net interest income increased by $13 million, or 4.7%, compared to the third quarter of 2016. Average loan and lease balances increased $3.5 billion, or 10.1%, from the year-ago quarter, driven by growth in commercial and industrial and commercial mortgage loans. Average deposit balances decreased $1.1 billion, or 5.1%, from the year-ago quarter, driven by the managed exit of higher cost corporate and public sector deposits.

Noninterest income was down $9 million, or 3.2%, from the prior year. This decline was mostly due to lower investment banking and debt placement fees, resulting from strong market conditions and activity in the third quarter of 2016. This decrease was partially offset by growth in mortgage servicing fees and corporate services income compared to the prior year.

During the third quarter of 2017, Key Corporate Bank benefited from a large recovery in the commercial and industrial portfolio, as well as improving credit quality in the overall portfolio. Accordingly, the provision for credit losses decreased $34 million, or 147.8%, compared to the third quarter of 2016, with $21 million less of net loan charge-offs.

Noninterest expense decreased by $7 million, or 2.3%, from the third quarter of 2016. The decrease from the prior year was largely driven by lower performance-based compensation. Slightly offsetting this decrease were higher levels of operating lease expense, business services and professional fees, and cards and payments expense.

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 third quarter of 2017, compared to $16 million for the same period last year, driven by increases in operating lease income and other leasing gains and corporate-owned life insurance income.

*****

KeyCorp’s roots trace back 190 years to Albany, New York. Headquartered in Cleveland, Ohio, Key is one of the nation’s largest bank-based financial services companies, with assets of approximately $136.7 billion at September 30, 2017.

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

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements do not relate strictly to historical or current facts.
Forward-looking statements usually can be identified by the use of words such as "goal," "objective," "plan," "expect," "assume," "anticipate," "intend," "project," "believe," "estimate," or other words of similar meaning. Forward-looking statements provide our current expectations or forecasts of future events, circumstances, results, or aspirations. Forward-looking statements, by their nature, are subject to assumptions, risks and uncertainties, many of which are outside of our control. Our actual results may differ materially from those set forth in our forward-looking statements. There is no assurance that any list of risks and uncertainties or risk factors is complete.
Factors that could cause Key’s actual results to differ from those described in the forward-looking statements can be found in KeyCorp’s Form 10-K for the year ended December 31, 2016, as well as in KeyCorp’s subsequent SEC filings, all of which have been filed with the Securities and Exchange Commission (the "SEC") and are available on Key’s website (www.key.com/ir) and on the SEC’s website (www.sec.gov).
These factors may include, among others: deterioration of commercial real estate market fundamentals, adverse changes in credit quality trends, declining asset prices, a reversal of the U.S. economic recovery due to financial, political, or other shocks, and the extensive and increasing regulation of the U.S. financial services industry. Any forward-looking statements made by us or on our behalf speak only as of the date they are made and we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances.

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

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

*****

Financial Highlights
(dollars in millions, except per share amounts)
Three months ended
9/30/2017
6/30/2017
9/30/2016
Summary of operations
Net interest income (TE)
$
962
$
987
$
788
Noninterest income
592
653
549
Total revenue (TE)
1,554
1,640
1,337
Provision for credit losses
51
66
59
Noninterest expense
992
995
1,082
Income (loss) from continuing operations attributable to Key
363
407
171
Income (loss) from discontinued operations, net of taxes (a)
1
5
1
Net income (loss) attributable to Key
364
412
172
Income (loss) from continuing operations attributable to Key common shareholders
349
393
165
Income (loss) from discontinued operations, net of taxes (a)
1
5
1
Net income (loss) attributable to Key common shareholders
350
398
166
Per common share
Income (loss) from continuing operations attributable to Key common shareholders
$
.32
$
.36
$
.17
Income (loss) from discontinued operations, net of taxes (a)
--
--
--
Net income (loss) attributable to Key common shareholders (b)
.32
.37
.17
Income (loss) from continuing operations attributable to Key common shareholders -- assuming dilution .32
.36
.16
Income (loss) from discontinued operations, net of taxes -- assuming dilution (a)
--
--
--
Net income (loss) attributable to Key common shareholders -- assuming dilution (b)
.32
.36
.17
Cash dividends declared
.095
.095
.085
Book value at period end
13.18
13.02
12.78
Tangible book value at period end
10.52
10.40
10.14
Market price at period end
18.82
18.74
12.17
Performance ratios
From continuing operations:
Return on average total assets
1.07
%
1.23
%
.55
%
Return on average common equity
9.74
11.12
5.09
Return on average tangible common equity (c)
12.21
13.80
6.16
Net interest margin (TE)
3.15
3.30
2.85
Cash efficiency ratio (c)
62.2
59.3
80.0
From consolidated operations:
Return on average total assets
1.06
%
1.23
%
.55
%
Return on average common equity
9.77
11.26
5.12
Return on average tangible common equity (c)
12.25
13.98
6.20
Net interest margin (TE)
3.13
3.28
2.83
Loan to deposit (d)
86.2
87.2
84.7
Capital ratios at period end
Key shareholders’ equity to assets
11.15
%
11.23
%
11.04
%
Key common shareholders’ equity to assets
10.40
10.48
10.18
Tangible common equity to tangible assets (c)
8.49
8.56
8.27
Common Equity Tier 1 (e)
10.26
9.91
9.56
Tier 1 risk-based capital (e)
11.11
10.73
10.53
Total risk-based capital (e)
13.09
12.64
12.63
Leverage (e)
9.83
9.95
10.22
Asset quality -- from continuing operations
Net loan charge-offs
$
32
$
66
$
44
Net loan charge-offs to average loans
.15
%
.31
%
.23
%
Allowance for loan and lease losses
$
880
$
870
$
865
Allowance for credit losses
937
918
918
Allowance for loan and lease losses to period-end loans
1.02
%
1.01
%
1.01
%
Allowance for credit losses to period-end loans
1.08
1.06
1.07
Allowance for loan and lease losses to nonperforming loans (f)
170.2
171.6
119.6
Allowance for credit losses to nonperforming loans (f)
181.2
181.1
127.0
Nonperforming loans at period-end (f)
$
517
$
507
$
723
Nonperforming assets at period-end (f)
556
556
760
Nonperforming loans to period-end portfolio loans (f)
.60
%
.59
%
.85
%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (f)
.64
.64
.89
Trust assets
Assets under management
$
38,660
$
37,613
$
36,752
Other data
Average full-time equivalent employees
18,548
18,344
17,079
Branches
1,208
1,210
1,322
Taxable-equivalent adjustment
$
14
$
14
$
8
Financial Highlights (continued)
(dollars in millions, except per share amounts)
Nine months ended
9/30/2017
9/30/2016
Summary of operations
Net interest income (TE)
$
2,878
$
2,005
Noninterest income
1,822
1,453
Total revenue (TE)
4,700
3,458
Provision for credit losses
180
200
Noninterest expense
3,000
2,536
Income (loss) from continuing operations attributable to Key
1,094
557
Income (loss) from discontinued operations, net of taxes (a)
6
5
Net income (loss) attributable to Key
1,100
562
Income (loss) from continuing operations attributable to Key common shareholders
$
1,038
$
540
Income (loss) from discontinued operations, net of taxes (a)
6
5
Net income (loss) attributable to Key common shareholders
1,044
545
Per common share
Income (loss) from continuing operations attributable to Key common shareholders
$
.96
$
.61
Income (loss) from discontinued operations, net of taxes (a)
.01
.01
Net income (loss) attributable to Key common shareholders (b)
.97
.62
Income (loss) from continuing operations attributable to Key common shareholders -- assuming dilution .95
.60
Income (loss) from discontinued operations, net of taxes -- assuming dilution (a)
.01
.01
Net income (loss) attributable to Key common shareholders -- assuming dilution (b)
.96
.61
Cash dividends paid
.275
.245
Performance ratios
From continuing operations:
Return on average total assets
1.10
%
.71
%
Return on average common equity
9.89
6.28
Return on average tangible common equity (c)
12.36
7.21
Net interest margin (TE)
3.19
2.84
Cash efficiency ratio (c)
62.4
72.5
From consolidated operations:
Return on average total assets
1.09
%
.70
%
Return on average common equity
9.95
6.34
Return on average tangible common equity (c)
12.43
7.27
Net interest margin (TE)
3.17
2.81
Asset quality -- from continuing operations
Net loan charge-offs
156
133
Net loan charge-offs to average total loans
.24
%
.27
%
Other data
Average full-time equivalent employees
18,427
14,642
Taxable-equivalent adjustment
39
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.
(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)
September 30, 2017, ratio is estimated.
(f)
Nonperforming loan balances exclude $783 million, $835 million, and $959 million of purchased credit impaired loans at September 30, 2017, June 30, 2017, and September 30, 2016, respectively.
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

GAAP to Non-GAAP Reconciliations (dollars in millions)

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

Notable items include certain revenue or expense items that may occur in a reporting period which management does not consider indicative of ongoing financial performance. Management believes it is useful to consider certain financial metrics with and without merger-related charges and/or other notable items in order to enable a better understanding of Company results, increase comparability of period-to-period results, and to evaluate and forecast those results.

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.

As previously disclosed, Key completed its purchase of First Niagara on August 1, 2016. The definitive agreement and plan of merger to acquire First Niagara was originally announced on October 30, 2015. As a result of this transaction, Key has recognized merger-related charges. For the second and third quarters of 2017, merger-related charges are included in the total for "notable items." The table below shows the computation of earnings per share excluding notable items, return on average tangible common equity excluding notable items, return on average assets from continuing operations excluding notable items, cash efficiency ratio excluding notable items, and pre-provision net revenue excluding notable items. Management believes that eliminating the effects of the merger-related charges and other notable items makes it easier to analyze the results by presenting them on a more comparable basis.

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

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

Three months ended
Nine months ended
9/30/2017
6/30/2017
9/30/2016
9/30/2017
9/30/2016
Tangible common equity to tangible assets at period-end
Key shareholders’ equity (GAAP)
$
15,249
$
15,253
$
14,996
Less: Intangible assets (a)
2,870
2,866
2,855
Preferred Stock (b)
1,009
1,009
1,150
Tangible common equity (non-GAAP)
$
11,370
$
11,378
$
10,991
Total assets (GAAP)
$
136,733
$
135,824
$
135,805
Less: Intangible assets (a)
2,870
2,866
2,855
Tangible assets (non-GAAP)
$
133,863
$
132,958
$
132,950
Tangible common equity to tangible assets ratio (non-GAAP)
8.49
%
8.56
%
8.27
%
Earnings per common share (EPS) excluding notable items
EPS from continuing operations attributable to Key common shareholders
-- assuming $
.32
$
.36
$
.16
dilution
Plus: EPS impact of notable items
.03
(.02)
.14
EPS from continuing operations attributable to Key common shareholders excluding
$
.35
$
.34
$
.30
notable items (non-GAAP)
Notable items
Merger-related charges
$
(36)
$
(44)
$
(207)
$
(161)
$
(276)
Merchant services gain
(5)
64
--
59
--
Purchase accounting finalization, net
--
43
--
43
--
Charitable contribution
--
(20)
--
(20)
--
Total notable items
$
(41)
$
43
$
(207)
$
(79)
$
(276)
Income taxes
(13)
16
(75)
(27)
(101)
Total notable items after tax
$
(28)
$
27
$
(132)
$
(52)
$
(175)
GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
Three months ended
Nine months ended
9/30/2017
6/30/2017
9/30/2016
9/30/2017
9/30/2016
Pre-provision net revenue
Net interest income (GAAP)
$
948
$
973
$
780
$
2,839
$
1,981
Plus:
Taxable-equivalent adjustment
14
14
8
39
24
Noninterest income
592
653
549
1,822
1,453
Less:
Noninterest expense
992
995
1,082
3,000
2,536
Pre-provision net revenue from continuing operations (non-GAAP)
$
562
$
645
$
255
$
1,700
$
922
Plus:
Notable items
41
(43)
207
79
276
Pre-provision net revenue from continuing operations excluding notable items (non-GAAP) $
603
$
602
$
462
$
1,779
$
1,198
Average tangible common equity
Average Key shareholders’ equity (GAAP)
$
15,241
$
15,200
$
13,552
$
15,208
$
11,890
Less:
Intangible assets (average) (c)
2,878
2,756
2,255
2,802
1,473
Preferred Stock (average)
1,025
1,025
648
1,175
410
Average tangible common equity (non-GAAP)
$
11,338
$
11,419
$
10,649
$
11,231
$
10,007
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to Key common shareholders
$
349
$
393
$
165
$
1,038
$
540
(GAAP)
Plus:
Notable items, after tax
28
(27)
132
52
175
Net income (loss) from continuing operations attributable to Key common shareholders
excluding notable items (non-GAAP)
$
377
$
366
$
297
$
1,090
$
715
Average tangible common equity (non-GAAP)
11,338
11,419
10,649
11,231
10,007
Return on average tangible common equity from continuing operations (non-GAAP)
12.21
%
13.80
%
6.16
%
12.36
%
7.21
%
Return on average tangible common equity from continuing operations excluding notable
13.19
12.86
11.10
12.98
9.54
items (non-GAAP)
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)
$
350
$
398
$
166
$
1,044
$
545
Average tangible common equity (non-GAAP)
11,338
11,419
10,649
11,231
10,007
Return on average tangible common equity consolidated (non-GAAP)
12.25
%
13.98
%
6.20
%
12.43
%
7.27
%
Cash efficiency ratio
Noninterest expense (GAAP)
$
992
$
995
$
1,082
$
3,000
$
2,536
Less:
Intangible asset amortization
25
22
13
69
28
Adjusted noninterest expense (non-GAAP)
967
973
1,069
2,931
2,508
Less:
Notable items (d)
36
60
189
177
258
Adjusted noninterest expense excluding notable items (non-GAAP)
$
931
$
913
$
880
$
2,754
$
2,250
Net interest income (GAAP)
$
948
$
973
$
780
$
2,839
$
1,981
Plus:
Taxable-equivalent adjustment
14
14
8
39
24
Noninterest income
592
653
549
1,822
1,453
Total taxable-equivalent revenue (non-GAAP)
1,554
1,640
1,337
4,700
3,458
Plus:
Notable items (e)
5
(103)
18
(98)
18
Adjusted total taxable-equivalent revenue excluding notable items (non-GAAP)
$
1,559
$
1,537
$
1,355
$
4,602
$
3,476
Cash efficiency ratio (non-GAAP)
62.2
%
59.3
%
80.0
%
62.4
%
72.5
%
Cash efficiency ratio excluding notable items (non-GAAP)
59.7
59.4
64.9
59.8
64.7
Return on average total assets from continuing operations excluding notable items
Income from continuing operations attributable to Key (GAAP)
$
363
$
407
$
171
$
1,094
$
557
Plus:
Notable items, after tax
28
(27)
132
52
175
Income from continuing operations attributable to Key excluding notable items,
$
391
$
380
$
303
$
1,146
$
732
after tax (non-GAAP)
Average total assets from continuing operations (GAAP)
$
134,356
$
132,491
$
123,469
$
133,202
$
105,187
Return on average total assets from continuing operations excluding notable items (non-
1.15
%
1.15
%
.98
%
1.15
%
.93
%
GAAP)
GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
Three
months
ended
9/30/2017
Common Equity Tier 1 under the Regulatory Capital Rules ("RCR") (estimates)
Common Equity Tier 1 under current RCR
$
12,105
Adjustments from current RCR to the fully phased-in RCR:
Deferred tax assets and other intangible assets (f)
(60)
Common Equity Tier 1 anticipated under the fully phased-in RCR (g)
$
12,045
Net risk-weighted assets under current RCR
$
118,013
Adjustments from current RCR to the fully phased-in RCR:
Mortgage servicing assets (h)
622
All other assets
(12)
Total risk-weighted assets anticipated under the fully phased-in RCR (g) $
118,623
Common Equity Tier 1 ratio under the fully phased-in RCR (g)
10.15
%
(a)
For the three months ended September 30, 2017, June 30, 2017, and September 30, 2016, intangible assets exclude $30 million, $33 million, and $51 million, respectively, of period-end purchased credit card receivables.
(b)
Net of capital surplus.
(c)
For the three months ended September 30, 2017, June 30, 2017, and September 30, 2016, average intangible assets exclude $32 million, $36 million, and $47 million, respectively, of average purchased credit card receivables. For the nine months ended September 30, 2017, and September 30, 2016, average intangible assets exclude $36 million and $42 million, respectively, of average purchased credit card receivables.
(d)
Notable items for the three months ended September 30, 2017, includes $36 million of merger-related expense.
(e)
Notable items for the three months ended September 30, 2017, includes a $5 million adjustment related to the merchant services acquisition gain.
(f)
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.
(g)
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."
(h)
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)
9/30/2017
6/30/2017
9/30/2016
Assets
Loans
$
86,492
$
86,503
$
85,528
Loans held for sale
1,341
1,743
1,137
Securities available for sale
19,012
18,024
20,540
Held-to-maturity securities
10,276
10,638
8,995
Trading account assets
783
1,081
926
Short-term investments
3,993
2,522
3,216
Other investments
728
732
747
Total earning assets
122,625
121,243
121,089
Allowance for loan and lease losses
(880)
(870)
(865)
Cash and due from banks
562
601
749
Premises and equipment
916
919
1,023
Operating lease assets
736
691
430
Goodwill
2,487
2,464
2,480
Other intangible assets
412
435
426
Corporate-owned life insurance
4,113
4,100
4,035
Derivative assets
622
636
1,304
Accrued income and other assets
3,744
4,147
3,480
Discontinued assets
1,396
1,458
1,654
Total assets
$
136,733
$
135,824
$
135,805
Liabilities
Deposits in domestic offices:
NOW and money market deposit accounts
$
53,734
$
53,342
$
56,432
Savings deposits
6,366
7,056
5,335
Certificates of deposit ($100,000 or more) 6,519
6,286
4,601
Other time deposits
4,720
4,605
5,793
Total interest-bearing deposits
71,339
71,289
72,161
Noninterest-bearing deposits
32,107
31,532
32,024
Total deposits
103,446
102,821
104,185
Federal funds purchased and securities sold under repurchase agreements
372
1,780
602
Bank notes and other short-term borrowings
616
924
809
Derivative liabilities
232
308
850
Accrued expense and other liabilities
1,717
1,475
1,739
Long-term debt
15,100
13,261
12,622
Total liabilities
121,483
120,569
120,807
Equity
Preferred stock
1,025
1,025
1,165
Common shares
1,257
1,257
1,257
Capital surplus
6,310
6,310
6,359
Retained earnings
10,125
9,878
9,260
Treasury stock, at cost
(2,962)
(2,711)
(2,863)
Accumulated other comprehensive income (loss)
(506)
(506)
(182)
Key shareholders’ equity
15,249
15,253
14,996
Noncontrolling interests
1
2
2
Total equity
15,250
15,255
14,998
Total liabilities and equity
$
136,733
$
135,824
$
135,805
Common shares outstanding (000)
1,079,039
1,092,739
1,082,055
Consolidated Statements of Income
(dollars in millions, except per share amounts)
Three months ended
Nine months ended
9/30/2017
6/30/2017
9/30/2016
9/30/2017
9/30/2016
Interest income
Loans
$
928
$
948
$
746
$
2,753
$
1,875
Loans held for sale
17
9
10
39
23
Securities available for sale
91
90
88
276
237
Held-to-maturity securities
55
55
30
161
78
Trading account assets
7
7
4
21
17
Short-term investments
6
5
7
14
17
Other investments
5
3
5
12
10
Total interest income
1,109
1,117
890
3,276
2,257
Interest expense
Deposits
72
66
49
196
114
Federal funds purchased and securities sold under repurchase agreements --
--
--
1
--
Bank notes and other short-term borrowings
3
4
2
12
7
Long-term debt
86
74
59
228
155
Total interest expense
161
144
110
437
276
Net interest income
948
973
780
2,839
1,981
Provision for credit losses
51
66
59
180
200
Net interest income after provision for credit losses
897
907
721
2,659
1,781
Noninterest income
Trust and investment services income
135
134
122
404
341
Investment banking and debt placement fees
141
135
156
403
325
Service charges on deposit accounts
91
90
85
268
218
Operating lease income and other leasing gains
16
30
6
69
41
Corporate services income
54
55
51
163
154
Cards and payments income
75
70
66
210
164
Corporate-owned life insurance income
31
33
29
94
85
Consumer mortgage income
7
6
6
19
11
Mortgage servicing fees
21
15
15
54
37
Net gains (losses) from principal investing
3
--
5
4
16
Other income (a)
18
85
8
134
61
Total noninterest income
592
653
549
1,822
1,453
Noninterest expense
Personnel
558
551
594
1,665
1,425
Net occupancy
74
78
73
239
193
Computer processing
56
55
70
171
158
Business services and professional fees
49
45
76
140
157
Equipment
29
27
26
83
68
Operating lease expense
24
21
15
64
42
Marketing
34
30
32
85
66
FDIC assessment
21
21
21
62
38
Intangible asset amortization
25
22
13
69
28
OREO expense, net
3
3
3
8
6
Other expense
119
142
159
414
355
Total noninterest expense
992
995
1,082
3,000
2,536
Income (loss) from continuing operations before income taxes
497
565
188
1,481
698
Income taxes
134
158
16
386
141
Income (loss) from continuing operations
363
407
172
1,095
557
Income (loss) from discontinued operations, net of taxes
1
5
1
6
5
Net income (loss)
364
412
173
1,101
562
Less:
Net income (loss) attributable to noncontrolling interests
--
--
1
1
--
Net income (loss) attributable to Key
$
364
$
412
$
172
$
1,100
$
562
Income (loss) from continuing operations attributable to Key common shareholders
$
349
$
393
$
165
$
1,038
$
540
Net income (loss) attributable to Key common shareholders
350
398
166
1,044
545
Per common share
Income (loss) from continuing operations attributable to Key common shareholders
$
.32
$
.36
$
.17
$
.96
$
.61
Income (loss) from discontinued operations, net of taxes
--
--
--
.01
.01
Net income (loss) attributable to Key common shareholders (b)
.32
.37
.17
.97
.62
Per common share -- assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders
$
.32
$
.36
$
.16
$
.95
$
.6
Income (loss) from discontinued operations, net of taxes
--
--
--
.01
.01
Net income (loss) attributable to Key common shareholders (b)
.32
.36
.17
.96
.61
Cash dividends declared per common share
$
.095
$
.095
$
.085
$
.275
$
.245
Weighted-average common shares outstanding (000)
1,073,390
1,076,203
982,080
1,075,296
880,824
Effect of common share options and other stock awards
15,451
16,836
12,580
16,359
8,965
Weighted-average common shares and potential common shares outstanding (000) (c)
1,088,841
1,093,039
994,660
1,091,655
889,789
(a) For the three months ended September 30, 2017, net securities gains (losses) totaled less than $1 million. For the three months ended June 30, 2017, net securities gains (losses) totaled $1 million. For the three months ended September 30, 2016, net securities gains (losses) totaled less than $1 million. For the three months ended September 30, 2017, June 30, 2017, and September 30, 2016, 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 and/or convertible preferred stock, as applicable.
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)
Third Quarter 2017
Second Quarter 2017
Third Quarter 2016
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)
$
41,416
$
414
3.97
%
$
40,666
$
409
4.04
%
$
37,318
$
317
3.38
%
Real estate -- commercial mortgage
14,850
169
4.51
15,096
187
4.97
12,879
126
3.91
Real estate -- construction
2,054
23
4.51
2,204
31
5.51
1,723
21
4.67
Commercial lease financing
4,694
46
3.89
4,690
50
4.33
4,508
38
3.33
Total commercial loans
63,014
652
4.11
62,656
677
4.34
56,428
502
3.54
Real estate -- residential mortgage
5,493
54
3.92
5,509
52
3.77
4,453
45
3.96
Home equity loans
12,314
136
4.41
12,473
135
4.31
11,968
122
4.07
Consumer direct loans
1,774
33
7.26
1,743
31
7.07
1,666
30
7.20
Credit cards
1,049
30
11.34
1,044
29
11.04
996
27
10.80
Consumer indirect loans
3,170
37
4.64
3,077
38
5.02
2,186
28
5.23
Total consumer loans
23,800
290
4.85
23,846
285
4.77
21,269
252
4.73
Total loans
86,814
942
4.31
86,502
962
4.46
77,697
754
3.86
Loans held for sale
1,607
17
4.13
1,082
9
3.58
1,152
10
3.48
Securities available for sale (b), (e)
18,574
91
1.96
17,997
90
1.97
17,972
88
1.99
Held-to-maturity securities (b)
10,469
55
2.12
10,469
55
2.09
6,250
30
1.86
Trading account assets
889
7
2.74
1,042
7
3.00
860
4
2.12
Short-term investments
2,166
6
1.21
1,970
5
.96
5,911
7
.48
Other investments (e)
728
5
2.46
687
3
1.87
717
5
2.74
Total earning assets
121,247
1,123
3.68
119,749
1,131
3.78
110,559
898
3.24
Allowance for loan and lease losses
(868)
(864)
(847)
Accrued income and other assets
13,977
13,606
13,757
Discontinued assets
1,417
1,477
1,676
Total assets
$
135,773
$
133,968
$
125,145
Liabilities
NOW and money market deposit accounts
$
53,826
37
.27
$
54,416
34
.25
$
51,318
25
.20
Savings deposits
6,697
5
.25
6,854
4
.21
4,521
1
.07
Certificates of deposit ($100,000 or more) 6,402
21
1.31
6,111
19
1.23
4,204
12
1.15
Other time deposits
4,664
9
.81
4,650
9
.77
5,031
11
.85
Total interest-bearing deposits
71,589
72
.40
72,031
66
.36
65,074
49
.30
Federal funds purchased and securities
456
--
.23
466
--
.23
578
--
.16
sold under repurchase agreements
Bank notes and other short-term borrowings 865
3
1.49
1,216
4
1.43
1,186
2
.91
Long-term debt (f), (g)
12,631
86
2.75
11,046
74
2.68
10,415
59
2.31
Total interest-bearing liabilities
85,541
161
.75
84,759
144
.68
77,253
110
.57
Noninterest-bearing deposits
31,516
30,748
29,844
Accrued expense and other liabilities
2,057
1,782
2,818
Discontinued liabilities (g)
1,417
1,477
1,676
Total liabilities
120,531
118,766
111,591
Equity
Key shareholders’ equity
15,241
15,200
13,552
Noncontrolling interests
1
2
2
Total equity
15,242
15,202
13,554
Total liabilities and equity
$
135,773
$
133,968
$
125,145
Interest rate spread (TE)
2.93
%
3.10
%
2.67
%
Net interest income (TE) and net interest margin (TE)
962
3.15
%
987
3.30
%
788
2.85
%
TE adjustment (b)
14
14
8
Net interest income, GAAP basis
$
948
$
973
$
780
(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 and industrial average balances include $117 million, $117 million, and $107 million of assets from commercial credit cards for the three months ended September 30, 2017, June 30, 2017, and September 30, 2016, 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)
Nine months ended September 30, 2017
Nine months ended September 30, 2016
Average
Average
Balance
Interest (a) Yield/Rate (a)
Balance
Interest (a) Yield/ Rate (a)
Assets
Loans: (b), (c)
Commercial and industrial (d)
$
40,700
$
1,196
3.93
%
$
33,859
$
850
3.35
%
Real estate -- commercial mortgage
15,043
520
4.62
9,818
283
3.85
Real estate -- construction
2,203
80
4.86
1,205
39
4.30
Commercial lease financing
4,673
140
3.99
4,139
111
3.57
Total commercial loans
62,619
1,936
4.13
49,021
1,283
3.50
Real estate -- residential mortgage
5,507
160
3.88
2,986
91
4.05
Home equity loans
12,465
402
4.32
10,773
327
4.06
Consumer direct loans
1,760
94
7.10
1,619
82
6.77
Credit cards
1,053
88
11.15
858
69
10.71
Consumer indirect loans
3,081
112
4.85
1,118
47
5.67
Total consumer loans
23,866
856
4.79
17,354
616
4.74
Total loans
86,485
2,792
4.31
66,375
1,899
3.82
Loans held for sale
1,293
39
4.01
864
23
3.58
Securities available for sale (b), (e)
18,582
276
1.96
15,492
237
2.06
Held-to-maturity securities (b)
10,311
161
2.08
5,320
78
1.94
Trading account assets
966
21
2.84
881
17
2.60
Short-term investments
1,918
14
1.00
4,971
17
.46
Other investments (e)
708
12
2.20
658
10
2.05
Total earning assets
120,263
3,315
3.68
94,561
2,281
3.23
Allowance for loan and lease losses
(862)
(828)
Accrued income and other assets
13,801
11,454
Discontinued assets
1,477
1,739
Total assets
$
134,679
$
106,926
Liabilities
NOW and money market deposit accounts
$
54,178
103
.25
$
42,935
56
.18
Savings deposits
6,635
10
.19
3,087
1
.04
Certificates of deposit ($100,000 or more)
6,050
56
1.24
3,402
33
1.28
Other time deposits
4,673
27
.78
3,832
24
.83
Total interest-bearing deposits
71,536
196
.37
53,256
114
.29
Federal funds purchased and securities sold under repurchase agreements 570
1
.27
451
--
.09
Bank notes and other short-term borrowings
1,291
12
1.27
825
7
1.21
Long-term debt (f), (g)
11,510
228
2.66
9,429
155
2.25
Total interest-bearing liabilities
84,907
437
.69
63,961
276
.58
Noninterest-bearing deposits
31,123
26,938
Accrued expense and other liabilities
1,962
2,392
Discontinued liabilities (g)
1,478
1,739
Total liabilities
119,470
95,030
Equity
Key shareholders’ equity
15,208
11,890
Noncontrolling interests
1
6
Total equity
15,209
11,896
Total liabilities and equity
$
134,679
$
106,926
Interest rate spread (TE)
2.99
%
2.65
%
Net interest income (TE) and net interest margin (TE)
2,878
3.19
%
2,005
2.84
%
TE adjustment (b)
39
24
Net interest income, GAAP basis
$
2,839
$
1,981
(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 and industrial average balances include $116 million and $93 million of assets from commercial credit cards for the nine months ended September 30, 2017, and September 30, 2016, 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
Nine months ended
9/30/2017 6/30/2017 9/30/2016
9/30/2017
9/30/2016
Personnel (a)
$
558
$
551
$
594
$
1,665
$
1,425
Net occupancy
74
78
73
239
193
Computer processing
56
55
70
171
158
Business services and professional fees
49
45
76
140
157
Equipment
29
27
26
83
68
Operating lease expense
24
21
15
64
42
Marketing
34
30
32
85
66
FDIC assessment
21
21
21
62
38
Intangible asset amortization
25
22
13
69
28
OREO expense, net
3
3
3
8
6
Other expense
119
142
159
414
355
Total noninterest expense
$
992
$
995
$
1,082
$
3,000
$
2,536
Merger-related charges (b)
36
44
189
161
258
Total noninterest expense excluding merger-related charges $
956
$
951
$
893
$
2,839
$
2,278
Average full-time equivalent employees (c)
18,548
18,344
17,079
18,427
14,642
(a) Additional detail provided in Personnel Expense table below.
(b) Additional detail provide in Merger-Related Charges table below.
(c) The number of average full-time equivalent employees has not been adjusted for discontinued operations.
Personnel Expense
(in millions)
Three months ended
Nine months ended
9/30/2017 6/30/2017 9/30/2016 9/30/2017
9/30/2016
Salaries and contract labor
$
339
$
332
$
329
$
995
$
839
Incentive and stock-based compensation
134
137
162
398
352
Employee benefits
80
76
73
252
199
Severance
5
6
30
20
35
Total personnel expense
$
558
$
551
$
594
$
1,665
$
1,425
Merger-related charges
25
31
97
86
148
Total personnel expense excluding merger-related charges $
533
$
520
$
497
$
1,579
$
1,277
Merger-Related Charges
(in millions)
Three months ended
Nine months ended
9/30/2017 6/30/2017 9/30/2016 9/30/2017
9/30/2016
Net interest income
--
--
(6)
--
(6)
Operating lease income and other leasing gains
--
--
(2)
--
(2)
Other income
--
--
(10)
--
(10)
Noninterest income
--
--
(12)
--
(12)
Personnel
$
25
$
31
$
97
86
$
148
Net occupancy
(2)
(1)
--
2
--
Business services and professional fees
2
6
32
13
44
Computer processing
4
2
15
11
15
Marketing
5
6
9
17
13
Other non-personnel expense
2
--
36
32
38
Noninterest expense
36
44
189
161
258
Total merger-related charges
$
36
$
44
$
207
$
161
$
276
Loan Composition
(dollars in millions)
Percent change 9/30/2017
vs.
9/30/2017
6/30/2017
9/30/2016
6/30/20179/30/2016
Commercial and industrial (a)
$
41,147
$
40,914
$
39,433
.6
% 4.3
%
Commercial real estate:
Commercial mortgage
14,929
14,813
14,979
.8
(.3)
Construction
1,954
2,168
2,189
(9.9)
(10.7)
Total commercial real estate loans
16,883
16,981
17,168
(.6)
(1.7)
Commercial lease financing (b)
4,716
4,737
4,783
(.4)
(1.4)
Total commercial loans
62,746
62,632
61,384
.2
2.2
Residential -- prime loans:
Real estate -- residential mortgage 5,476
5,517
5,509
(.7)
(.6)
Home equity loans
12,238
12,405
12,757
(1.3)
(4.1)
Total residential -- prime loans
17,714
17,922
18,266
(1.2)
(3.0)
Consumer direct loans
1,789
1,755
1,764
1.9
1.4
Credit cards
1,045
1,049
1,084
(.4)
(3.6)
Consumer indirect loans
3,198
3,145
3,030
1.7
5.5
Total consumer loans
23,746
23,871
24,144
(.5)
(1.6)
Total loans (c), (d)
$
86,492
$
86,503
$
85,528
.0
% 1.1
%
(a) Loan balances include $118 million, $118 million, and $117 million of commercial credit card balances at September 30, 2017, June 30, 2017, and September 30, 2016, respectively.
(b) Commercial lease financing includes receivables held as collateral for a secured borrowing of $31 million, $47 million, and $76 million at September 30, 2017, June 30, 2017, and September 30, 2016, respectively. Principal reductions are based on the cash payments received from these related receivables.
(c) At September 30, 2017, total loans include purchased loans of $16.7 billion, of which $783 million were purchased credit impaired. At June 30, 2017, total loans include purchased loans of $17.8 billion, of which $835 million were purchased credit impaired. At September 30, 2016, total loans include purchased loans of $22.4 billion, of which $959 million were purchased credit impaired.
(d) Total loans exclude loans of $1.4 billion at September 30, 2017, $1.4 billion at June 30, 2017, and $1.6 billion at September 30, 2016, related to the discontinued operations of the education lending business.
Loans Held for Sale Composition
(dollars in millions)
Percent change 9/30/2017
vs.
9/30/2017
6/30/2017
9/30/2016
6/30/20179/30/2016
Commercial and industrial
$
34
$
338
$
56
(89.9) % (39.3) %
Real estate -- commercial mortgage
1,246
1,332
1,016
(6.5)
22.6
Commercial lease financing
1
10
3
(90.0)
(66.7)
Real estate -- residential mortgage 60
63
62
(4.8)
(3.2)
Total loans held for sale (a)
$
1,341
$
1,743
$
1,137
(23.1) % 17.9
%
(a) Total loans held for sale include Real estate -- residential mortgage loans held for sale at fair value of $60 million at
September 30, 2017, $63 million at June 30, 2017, and $62 million at September 30, 2016.
Summary of Changes in Loans Held for Sale
(in millions)
3Q17
2Q17
1Q17
4Q16
3Q16
Balance at beginning of period
$
1,743
$
1,384
$
1,104
$
1,137
$
442
Purchases
--
--
--
--
48
New originations
2,855
2,876
2,563
2,846
2,857
Transfers from (to) held to maturity, net (63)
(7)
17
11
2
Loan sales
(3,191)
(2,507)
(2,299)
(2,889)
(2,180)
Loan draws (payments), net
(3)
(3)
(1)
(1)
(32)
Balance at end of period (a)
$
1,341
$
1,743
$
1,384
$
1,104
$
1,137
(a) Total loans held for sale include Real estate -- residential mortgage loans held for sale at fair value of $60 million at
September 30, 2017, $63 million at June 30, 2017, and $62 million at March 31, 2017, December 31, 2016, and
September 30, 2016.
Summary of Loan and Lease Loss Experience From Continuing Operations
(dollars in millions)
Three months ended
Nine months ended
9/30/2017
6/30/2017
9/30/2016
9/30/2017
9/30/2016
Average loans outstanding
$
86,814
$
86,502
$
77,697
$
86,485
$
66,375
Allowance for loan and lease losses at beginning of period
$
870
$
870
$
854
$
858
$
796
Loans charged off:
Commercial and industrial
29
40
17
101
78
Real estate -- commercial mortgage
6
3
--
9
3
Real estate -- construction
2
--
9
2
9
Total commercial real estate loans
8
3
9
11
12
Commercial lease financing
1
1
5
9
11
Total commercial loans
38
44
31
121
101
Real estate -- residential mortgage
--
4
1
2
4
Home equity loans
6
9
5
23
22
Consumer direct loans
8
8
6
26
18
Credit cards
11
12
9
34
25
Consumer indirect loans
8
5
3
24
9
Total consumer loans
33
38
24
109
78
Total loans charged off
71
82
55
230
179
Recoveries:
Commercial and industrial
25
2
2
32
8
Real estate -- commercial mortgage
1
--
1
1
9
Real estate -- construction
--
--
1
1
2
Total commercial real estate loans
1
--
2
2
11
Commercial lease financing
3
--
--
5
2
Total commercial loans
29
2
4
39
21
Real estate -- residential mortgage
1
1
1
4
3
Home equity loans
4
5
3
12
10
Consumer direct loans
1
2
1
4
4
Credit cards
1
2
1
4
3
Consumer indirect loans
3
4
1
11
5
Total consumer loans
10
14
7
35
25
Total recoveries
39
16
11
74
46
Net loan charge-offs
(32)
(66)
(44)
(156)
(133)
Provision (credit) for loan and lease losses
42
66
56
178
203
Foreign currency translation adjustment
--
--
(1)
--
(1)
Allowance for loan and lease losses at end of period
$
880
$
870
$
865
$
880
$
865
Liability for credit losses on lending-related commitments at beginning of period $
48
$
48
$
50
$
55
$
56
Provision (credit) for losses on lending-related commitments
9
--
3
2
(3)
Liability for credit losses on lending-related commitments at end of period (a)
$
57
$
48
$
53
$
57
$
53
Total allowance for credit losses at end of period
$
937
$
918
$
918
$
937
$
918
Net loan charge-offs to average total loans
.15
%
.31
%
.23
%
.24
%
.27
%
Allowance for loan and lease losses to period-end loans
1.02
1.01
1.01
1.02
1.01
Allowance for credit losses to period-end loans
1.08
1.06
1.07
1.08
1.07
Allowance for loan and lease losses to nonperforming loans
170.2
171.6
119.6
170.2
119.6
Allowance for credit losses to nonperforming loans
181.2
181.1
127.0
181.2
127.0
Discontinued operations -- education lending business:
Loans charged off
$
10
$
4
$
6
$
20
$
21
Recoveries
2
2
3
6
8
Net loan charge-offs
$
(8)
$
(2)
$
(3)
$
(14)
$
(13)
(a) Included in "Accrued expense and other liabilities" on the balance sheet.
Asset Quality Statistics From Continuing Operations
(dollars in millions)
3Q17
2Q17
1Q17
4Q16
3Q16
Net loan charge-offs
$
32
$
66
$
58
$
72
$
44
Net loan charge-offs to average total loans
.15
%
.31
%
.27
%
.34
%
.23
%
Allowance for loan and lease losses
$
880
$
870
$
870
$
858
$
865
Allowance for credit losses (a)
937
918
918
913
918
Allowance for loan and lease losses to period-end loans
1.02
%
1.01
%
1.01
%
1.00
%
1.01
%
Allowance for credit losses to period-end loans
1.08
1.06
1.07
1.06
1.07
Allowance for loan and lease losses to nonperforming loans (b)
170.2
171.6
151.8
137.3
119.6
Allowance for credit losses to nonperforming loans (b)
181.2
181.1
160.2
146.1
127.0
Nonperforming loans at period end (b)
$
517
$
507
$
573
$
625
$
723
Nonperforming assets at period end (b)
556
556
623
676
760
Nonperforming loans to period-end portfolio loans (b)
.60
%
.59
%
.67
%
.73
%
.85
%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (b) .64
.64
.72
.79
.89
(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 $783 million, $835 million, $812 million, $865 million, and $959 million of purchased credit impaired loans at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016, and September 30, 2016, respectively.
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
(dollars in millions)
9/30/2017
6/30/2017
3/31/2017
12/31/2016
9/30/2016
Commercial and industrial
$
169
$
178
$
258
$
297
$
335
Real estate -- commercial mortgage
30
34
32
26
32
Real estate -- construction
2
4
2
3
17
Total commercial real estate loans
32
38
34
29
49
Commercial lease financing
11
11
5
8
13
Total commercial loans
212
227
297
334
397
Real estate -- residential mortgage
57
58
54
56
72
Home equity loans
227
208
207
223
225
Consumer direct loans
3
2
3
6
2
Credit cards
2
2
3
2
3
Consumer indirect loans
16
10
9
4
24
Total consumer loans
305
280
276
291
326
Total nonperforming loans (a)
517
507
573
625
723
OREO
39
48
49
51
35
Other nonperforming assets
--
1
1
--
2
Total nonperforming assets (a)
$
556
$
556
$
623
$
676
$
760
Accruing loans past due 90 days or more
$
86
$
85
$
79
$
87
$
49
Accruing loans past due 30 through 89 days
329
340
312
404
317
Restructured loans -- accruing and nonaccruing (b)
315
333
302
280
304
Restructured loans included in nonperforming loans (b)
187
193
161
141
149
Nonperforming assets from discontinued operations -- education lending business
8
5
4
5
5
Nonperforming loans to period-end portfolio loans (a)
.60
%
.59
%
.67
%
.73
%
.85
%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming .64
.64
.72
.79
.89
assets (a)
(a) Nonperforming loan balances exclude $783 million, $835 million, $812 million, $865 million, and $959 million, of purchased credit impaired loans at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016, and September 30, 2016, 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)
3Q17
2Q17
1Q17
4Q16
3Q16
Balance at beginning of period
$
507
$
573
$
625
$
723
$
619
Loans placed on nonaccrual status
181
143
218
170
78
Nonperforming loans acquired from First Niagara (a) --
--
--
(31)
150
Charge-offs
(71)
(82)
(77)
(81)
(53)
Loans sold
(1)
--
(8)
(9)
--
Payments
(32)
(84)
(59)
(30)
(32)
Transfers to OREO
(10)
(8)
(11)
(21)
(5)
Transfers to other nonperforming assets
--
--
--
--
--
Loans returned to accrual status
(57)
(35)
(115)
(96)
(34)
Balance at end of period (b)
$
517
$
507
$
573
$
625
$
723
(a) During the fourth quarter of 2016, Key adjusted the estimated fair value of the First Niagara acquired loan portfolio recorded during the third quarter of 2016, resulting in a $31 million decrease in the balance of acquired nonperforming loans.
(b) Nonperforming loan balances exclude $783 million, $835 million, $812 million, $865 million, and $959 million of purchased credit impaired loans at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016, and September 30, 2016, respectively.
Line of Business Results
(dollars in millions)
Percent change 3Q17 vs.
3Q17
2Q17
1Q17
4Q16
3Q16
2Q17
3Q16
Key Community Bank
Summary of operations
Total revenue (TE)
$
959
$
1,010
$
905
$
902
$
783
(5.0)%
22.5
%
Provision for credit losses
59
47
46
51
39
25.5
51.3
Noninterest expense
643
651
627
682
590
(1.2)
9.0
Net income (loss) attributable to Key
161
196
146
106
97
(17.9)
66.0
Average loans and leases
47,595
47,461
47,068
47,059
41,548
.3
14.6
Average deposits
79,563
79,601
79,148
79,266
69,397
--
14.6
Net loan charge-offs
41
47
43
42
31
(12.8)
32.3
Net loan charge-offs to average total loans .34
% .40
% .37
% .36
% .30
%
N/A
N/A
Nonperforming assets at period end
$
427
$
406
$
395
$
412
$
429
5.2
(.5)
Return on average allocated equity
13.27
% 16.51
% 12.58
% 8.87
% 10.84
%
N/A
N/A
Average full-time equivalent employees
11,032
10,899
10,804
11,198
9,805
1.2
12.5
Key Corporate Bank
Summary of operations
Total revenue (TE)
$
560
$
596
$
578
$
630
$
556
(6.0)%
.7
%
Provision for credit losses
(11)
19
18
17
23
(157.9)
(147.8)
Noninterest expense
303
299
302
326
310
1.3
(2.3)
Net income (loss) attributable to Key
190
222
181
224
160
(14.4)
18.8
Average loans and leases
38,040
37,721
37,705
36,746
34,561
.8
10.1
Average loans held for sale
1,521
1,000
1,097
1,223
1,103
52.1
37.9
Average deposits
21,559
21,145
21,002
23,171
22,708
2.0
(5.1)
Net loan charge-offs
(9)
19
14
26
12
(147.4)
(175.0)
Net loan charge-offs to average total loans (.09)
% .2
% .15
% .28
% .14
%
N/A
N/A
Nonperforming assets at period end
$
106
$
119
$
197
$
244
$
318
(10.9)
(66.7)
Return on average allocated equity
26.92
% 31.25
% 24.97
% 31.17
% 26.89
%
N/A
N/A
Average full-time equivalent employees
2,460
2,364
2,384
2,380
2,330
4.1
5.6
TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful

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SOURCE KeyCorp

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