KEYCORP 
By CLEVELAND, Jan. 23, 2014 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced fourth quarter net income from continuing operations attributable to Key common shareholders of $229 million, or $.26 per common share, compared to $229 million, or $.25 per common share for the third quarter of 2013, and $190 million, or $.20 per common share for the fourth quarter of 2012. During the fourth quarter of 2013, Key incurred $24 million, or $.02 per common share of costs related to both its previously announced efficiency initiative and a pension settlement charge.
For the twelve months ended December 31, 2013, net income from continuing operations attributable to Key common shareholders was $847 million, or $.93 per common share, compared to $813 million, or $.86 per common share for the same period one year ago. During 2013, Key incurred $117 million, or $.08 per common share of costs related to both its efficiency initiative and pension settlement charge.
"2013 was a significant year for Key," said Chairman and Chief Executive Officer Beth Mooney. "We executed our strategy, acquired relationships, successfully invested in our businesses and returned peer-leading capital to shareholders."
"Reflecting the success of our distinctive business model, average loans were up 5% in 2013 compared to the prior year, driven by a 12% increase in commercial, financial and agricultural loans, and our credit quality improved to levels not seen since 2007," Mooney added. "Both commercial and consumer loans grew relative to the full year and fourth quarter of 2012. Fee income benefitted from the investments we have made in several of our businesses. Cards and payments income was up 20% from 2012, and mortgage servicing fees more than doubled. We also had a record year for investment banking and debt placement fees, with five consecutive years of growth. We achieved the goal we set in June 2012, by implementing annualized cost savings of $241 million. With increased cost discipline embedded in our culture, we are poised to drive further improvements in efficiency and productivity."
"We have also maintained our disciplined approach to capital management by investing in our businesses and returning 76% of our net income to our shareholders through dividends and common share repurchases in 2013. At year end our capital remained in the top tier of our peer group, positioning us well for the future," continued Mooney.
FOURTH QUARTER 2013 FINANCIAL RESULTS, from continuing operations
Compared with Fourth Quarter of 2012
-- Average loans up 3.4% (5% excluding impact of exit portfolios), driven
by growth in commercial, financial and agricultural loans; period ending
loans up 3.1%
-- Average deposits up 7.5% due to commercial mortgage servicing
acquisition and growth in commercial and consumer deposits
-- Net interest income (taxable-equivalent) down $18 million, primarily due
to yield pressure on new loans and reinvestment yields on securities
-- Noninterest income up $14 million, reflecting higher principal investing
gains and benefits from investments in payments and commercial mortgage
servicing
-- Noninterest expense down $22 million, reflecting successful execution of
efficiency initiative
-- Asset quality improved, with net loan charge-offs to average loans
declining from .44% to .27%
-- Disciplined capital management, with total shareholder payout of 76% of
net income attributable to Key common shareholders in 2013, including
the repurchase of $474 million of common shares for the year
Compared with Third Quarter of 2013
-- Average loans up .6%, driven by growth in commercial, financial and
agricultural loans; period ending loans up 1.6%
-- Average deposits up 3.7% due to growth in commercial mortgage escrow
deposits and continued client inflows
-- Net interest income (taxable-equivalent) up $5 million, with growth in
average earning assets and lower net interest margin
-- Noninterest income down $6 million, including decline of $19 million in
gains related to leveraged lease terminations
-- Noninterest expense down $4 million, which included higher
efficiency-related charges, a lower pension settlement adjustment and
higher expenses from incentives and business services and professional
fees
-- Asset quality remains strong and stable with net loan charge-offs to
average loans of .27%
-- Disciplined capital management, repurchasing $99 million of common
shares during the fourth quarter of 2013 and maintaining top tier
capital position with Tier 1 common equity of 11.23%
Selected Financial Highlights
dollars in millions, except per share data Change 4Q13 vs.
4Q13 3Q13 4Q12 3Q13 4Q12
---- ---- ---- ---- ----
Income (loss) from continuing operations attributable to Key common shareholders $229 $229 $190 - 20.5%
Income (loss) from continuing operations attributable to Key common shareholders per .26 .25 .20 4.0% 30.0
common share - assuming dilution
Return on average total assets from continuing operations 1.08% 1.12% .96% N/A N/A
Tier 1 common equity (a) 11.23 11.17 11.36 N/A N/A
Book value at period end $11.25 $11.05 $10.78 1.8% 4.4%
Net interest margin (TE) from continuing operations 3.01% 3.11% 3.37% N/A N/A
(a) The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "Tier 1 common equity." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.
TE = Taxable Equivalent, N/A = Not Applicable
INCOME STATEMENT HIGHLIGHTS
Revenue
dollars in millions Change 4Q13 vs.
4Q13 3Q13 4Q12 3Q13 4Q12
---- ---- ---- ---- ----
Net interest income (TE) $589 $584 $607 .9% (3.0)%
Noninterest income 453 459 439 (1.3) 3.2
--- --- --- ---- ---
Total revenue $1,042 $1,043 $1,046 (.1)% (.4)%
===
TE = Taxable Equivalent
Taxable-equivalent net interest income was $589 million for the fourth quarter of 2013, and the net interest margin was 3.01%. These results compare to taxable-equivalent net interest income of $607 million and a net interest margin of 3.37% for the fourth quarter of 2012. The decrease in net interest income and net interest margin is attributable to the impact of lower interest rates on asset yields combined with a significant increase in liquidity levels resulting from strong deposit inflows. The decreases were partially offset by the maturity of higher-rate certificates of deposit and a more favorable mix of lower-cost deposits.
Compared to the third quarter of 2013, taxable-equivalent net interest income increased by $5 million, and the net interest margin declined by 10 basis points. The increase in net interest income was primarily due to $5 million less of amortized lease origination costs recognized in the fourth quarter of 2013 compared to the third quarter of 2013 in connection with the early termination of leveraged leases. The decrease in the net interest margin was largely attributable to higher levels of liquidity, which were deployed in lower-yielding short-term investments.
Noninterest Income
dollars in millions Change 4Q13 vs.
4Q13 3Q13 4Q12 3Q13 4Q12
---- ---- ---- ---- ----
Trust and investment services income $98 $100 $95 (2.0)% 3.2%
Investment banking and debt placement fees 84 86 110 (2.3) (23.6)
Service charges on deposit accounts 68 73 75 (6.8) (9.3)
Operating lease income and other leasing gains 23 43 19 (46.5) 21.1
Corporate services income 40 44 41 (9.1) (2.4)
Cards and payments income 40 43 38 (7.0) 5.3
Corporate-owned life insurance income 33 26 36 26.9 (8.3)
Consumer mortgage income 3 3 11 - (72.7)
Mortgage servicing fees 22 15 7 46.7 214.3
Net gains (losses) from principal investing 20 17 2 17.6 900.0
Other income 22 9 5 144.4 340.0
--- --- --- ----- -----
Total noninterest income $453 $459 $439 (1.3)% 3.2%
Key's noninterest income was $453 million for the fourth quarter of 2013, compared to $439 million for the year-ago quarter. The fourth quarter reflects the benefits from Key's recent investments in payments and commercial mortgage servicing, with cards and payments income up $2 million and mortgage servicing fees up $15 million. In addition, net gains from principal investing increased $18 million. These increases were partially offset by decreases in investment banking and debt placement fees of $26 million and consumer mortgage income of $8 million.
Compared to the third quarter of 2013, noninterest income decreased by $6 million. Operating lease income and other leasing gains decreased $20 million primarily due to a $19 million decrease in gains on the early termination of leveraged leases. This decrease was partially offset by increases in other income of $13 million and mortgage servicing fees of $7 million primarily due to higher special servicing fees.
Noninterest Expense
dollars in millions Change 4Q13 vs.
4Q13 3Q13 4Q12 3Q13 4Q12
---- ---- ---- ---- ----
Personnel expense $398 $414 $422 (3.9)% (5.7)%
Nonpersonnel expense 314 302 312 4.0 .6
--- --- --- --- ---
Total noninterest expense $712 $716 $734 (.6)% (3.0)%
Key's noninterest expense was $712 million for the fourth quarter of 2013, compared to $734 million for the same period last year. Excluding the $22 million in expenses related to Key's efficiency initiative and the pension settlement charge of $2 million in the fourth quarter of 2013 and the $16 million in efficiency initiative expenses one year ago, noninterest expense was down $30 million from the prior year. Personnel expense decreased $24 million, due to the realization of expense efficiencies. Nonpersonnel expense increased $2 million. The provision (credit) for losses on lending-related commitments increased $11 million, offset by a $12 million decrease in business services and professional fees.
Compared to the third quarter of 2013, noninterest expense decreased by $4 million. The reduction in expenses reflected $17 million in lower expenses related to Key's efficiency initiative and pension settlement charges. This reduction was partially offset by increases in incentive compensation of $6 million and business services and professional fees of $5 million.
BALANCE SHEET HIGHLIGHTS
As of December 31, 2013, Key had total assets of $92.9 billion compared to $90.7 billion at September 30, 2013, and $89.2 billion at December 31, 2012.
Average Loans
dollars in millions Change 12-31-13 vs.
12-31-13 9-30-13 12-31-12 9-30-13 12-31-12
-------- ------- -------- ------- --------
Commercial, financial and agricultural (a) $24,218 $23,864 $22,436 1.5% 7.9%
Other commercial loans 13,266 13,281 13,494 (.1) (1.7)
Total home equity loans 10,653 10,611 10,218 .4 4.3
Other consumer loans 5,471 5,515 5,711 (.8) (4.2)
----- ----- ----- --- ----
Total loans $53,608 $53,271 $51,859 .6% 3.4%
(a) Commercial, financial and agricultural average balance for the three months ended December 31, 2013, September 30, 2013, and December 31, 2012, includes $97 million, $96 million, and $90 million, respectively, of assets from commercial credit cards.
Average loans were $53.6 billion for the fourth quarter of 2013, an increase of $1.7 billion compared to the fourth quarter of 2012. Total commercial loans increased $1.6 billion, mostly due to commercial, financial and agricultural loan growth across Key's business lending segments, which was modestly offset by leveraged lease terminations occurring in 2013. Consumer loans grew modestly, as growth in Key's home equity portfolio was partially offset by exit portfolio run-off.
Compared to the third quarter of 2013, average loans increased by $337 million. The loan growth occurred primarily in commercial lending within our commercial, financial and agricultural and commercial mortgage portfolios. Much of the growth occurred toward the latter part of the fourth quarter, resulting in a larger increase in period end loans than average loans. Consumer loans remained relatively unchanged for the fourth quarter.
Average Deposits
dollars in millions Change 12-31-13 vs.
12-31-13 9-30-13 12-31-12 9-30-13 12-31-12
-------- ------- -------- ------- --------
Non-time deposits (a) $61,394 $58,620 $55,355 4.7% 10.9%
Certificates of deposits ($100,000 or more) 2,649 2,785 2,992 (4.9) (11.5)
Other time deposits 3,736 3,957 4,714 (5.6) (20.7)
----- ----- ----- ---- -----
Total deposits $67,779 $65,362 $63,061 3.7% 7.5%
Cost of total deposits (a) .20% .22% .31% N/A N/A
(a) Excludes deposits in foreign office.
N/A = Not Applicable
Average deposits, excluding deposits in foreign office, totaled $67.8 billion for the fourth quarter of 2013, an increase of $4.7 billion compared to the year-ago quarter. The growth was driven by corporate clients and the addition of escrow demand deposits from the commercial mortgage servicing acquisition completed earlier in 2013. Demand deposits were up $3.2 billion, and interest-bearing non-time deposits were up $2.9 billion. This deposit growth was partially offset by $1.3 billion of run-off of certificates of deposit and other time deposits.
Compared to the third quarter of 2013, average deposits, excluding deposits in foreign office, increased by $2.4 billion. Demand deposits increased by $1.7 billion mostly due to average escrow deposits and interest-bearing non-time deposits growth of $1.1 billion associated with deposits from business and public sector clients. This growth was partially offset by run-off in certificates of deposit.
ASSET QUALITY
dollars in millions Change 4Q13 vs.
4Q13 3Q13 4Q12 3Q13 4Q12
---- ---- ---- ---- ----
Net loan charge-offs $37 $37 $58 - (36.2)%
Net loan charge-offs to average total loans .27% .28% .44% N/A N/A
Nonperforming loans at period end (a) $508 $541 $674 (6.1)% (24.6)
Nonperforming assets at period end 531 579 735 (8.3) (27.8)
Allowance for loan and lease losses 848 868 888 (2.3) (4.5)
Allowance for loan and lease losses to nonperforming loans 166.9% 160.4% 131.8% N/A N/A
Provision (credit) for loan and lease losses $19 $28 $57 (32.1)% (66.7)%
(a) December 31, 2013, September 30, 2013, and December 31, 2012 amounts exclude $16 million, $18 million, and $23 million, respectively, of purchased credit impaired loans acquired in July 2012.
N/A = Not Applicable
Key's provision for loan and lease losses was $19 million for the fourth quarter of 2013, compared to $28 million for the third quarter of 2013 and $57 million for the year-ago quarter. Key's allowance for loan and lease losses was $848 million, or 1.56% of total period-end loans at December 31, 2013, compared to 1.62% at September 30, 2013, and 1.68% at December 31, 2012.
Net loan charge-offs for the fourth quarter of 2013 totaled $37 million, or .27% of average total loans. These results compare to $37 million, or .28% for the third quarter of 2013, and $58 million, or .44% for the same period last year.
At December 31, 2013, Key's nonperforming loans totaled $508 million and represented .93% of period-end portfolio loans, compared to 1.01% at September 30, 2013, and 1.28% at December 31, 2012. Nonperforming assets at December 31, 2013 totaled $531 million and represented .97% of period-end portfolio loans and OREO and other nonperforming assets, compared to 1.08% at September 30, 2013, and 1.39% at December 31, 2012.
CAPITAL
Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at December 31, 2013.
Capital Ratios
12-31-13 9-30-13 12-31-12
-------- ------- --------
Tier 1 common equity (a),
(b) 11.23% 11.17% 11.36%
Tier 1 risk-based
capital (a) 11.97 11.92 12.15
Total risk based capital
(a) 14.34 14.37 15.13
Tangible common equity to
tangible assets (b) 9.80 9.93 10.15
Leverage (a) 11.09 11.33 11.41
(a) 12-31-13 ratio is estimated.
(b) The table entitled "GAAP to Non-
GAAP Reconciliations" in the attached
financial supplement presents the
computations of certain financial
measures related to "tangible common
equity" and "Tier 1 common equity."
The table reconciles the GAAP
performance measures to the
corresponding non-GAAP measures,
which provides a basis for period-
to-period comparisons.
As shown in the preceding table, at December 31, 2013, Key's estimated Tier 1 common equity and Tier 1 risk-based capital ratios stood at 11.23% and 11.97%, respectively. In addition, the tangible common equity ratio was 9.80% at December 31, 2013.
In July 2013, the Federal banking regulators approved the final Basel III capital framework for U.S. banking organizations (the "Regulatory Capital Rules"). While the Regulatory Capital Rules are effective January 1, 2014, the mandatory compliance date for Key as a "standardized approach" banking organization begins on January 1, 2015, and is subject to transitional provisions extending to January 1, 2019. Key's estimated Tier 1 common equity as calculated under the Regulatory Capital Rules was 10.63% at December 31, 2013. This exceeds the fully phased-in required minimum Tier 1 common equity (including capital conservation buffer) of 7.00%.
Summary of Changes in Common Shares Outstanding
in thousands Change 4Q13 vs.
4Q13 3Q13 4Q12 3Q13 4Q12
---- ---- ---- ---- ----
Shares outstanding at beginning of period 897,821 912,883 936,195 (1.6)% (4.1)%
Common shares repurchased (7,659) (16,364) (10,530) (53.2) (27.3)
Shares reissued (returned) under employee benefit plans 562 1,302 104 (56.8) 440.4
--- ----- --- ----- -----
Shares outstanding at end of period 890,724 897,821 925,769 (.8)% (3.8)%
Key completed $474 million of common share repurchases during calendar year 2013, including $99 million of repurchases in the fourth quarter of 2013. Common share repurchases under Key's 2013 CCAR capital plan are expected to be executed through the first quarter of 2014.
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 4Q13 vs.
4Q13 3Q13 4Q12 3Q13 4Q12
---- ---- ---- ---- ----
Revenue from continuing operations (TE)
--------------------------------------
Key Community Bank $534 $551 $580 (3.1)% (7.9)%
Key Corporate Bank 407 377 402 8.0 1.2
Other Segments 103 114 69 (9.6) 49.3
--- --- --- ---- ----
Total segments 1,044 1,042 1,051 .2 (.7)
Reconciling Items (2) 1 (5) N/M N/M
--- --- --- --- ---
Total $1,042 $1,043 $1,046 (.1)% (.4)%
Income (loss) from continuing operations attributable to Key
------------------------------------------------------------
Key Community Bank $28 $54 $33 (48.1)% (15.2)%
Key Corporate Bank 127 96 115 32.3 10.4
Other Segments 84 92 53 (8.7) 58.5
--- --- --- ---- ----
Total segments 239 242 201 (1.2)% 18.9
Reconciling Items (4) (7) (5) N/M N/M
--- --- --- --- ---
Total $235 $235 $196 - 19.9%
TE = Taxable equivalent, N/M = Not Meaningful
Key Community Bank
dollars in millions Change 4Q13 vs.
4Q13 3Q13 4Q12 3Q13 4Q12
---- ---- ---- ---- ----
Summary of operations
Net interest income (TE) $350 $357 $383 (2.0)% (8.6)%
Noninterest income 184 194 197 (5.2) (6.6)
--- --- --- ---- ----
Total revenue (TE) 534 551 580 (3.1) (7.9)
Provision (credit) for loan and lease losses 33 24 26 37.5 26.9
Noninterest expense 456 441 502 3.4 (9.2)
--- --- --- --- ----
Income (loss) before income taxes (TE) 45 86 52 (47.7) (13.5)
Allocated income taxes (benefit) and TE
adjustments 17 32 19 (46.9) (10.5)
--- --- --- ----- -----
Net income (loss) attributable to Key $28 $54 $33 (48.1)% (15.2)%
Average balances
Loans and leases $29,596 $29,495 $28,629 .3% 3.4%
Total assets 31,784 31,679 31,224 .3 1.8
Deposits 50,409 49,652 49,839 1.5 1.1
Assets under management at period end $26,664 $25,574 $23,638 4.3% 12.8%
TE = Taxable Equivalent
Additional Key Community Bank Data
dollars in millions Change 4Q13 vs.
4Q13 3Q13 4Q12 3Q13 4Q12
---- ---- ---- ---- ----
Noninterest income
Trust and investment services income $67 $68 $66 (1.5)% 1.5%
Service charges on deposit accounts 58 61 61 (4.9) (4.9)
Cards and payments income 37 36 34 2.8 8.8
Other noninterest income 22 29 36 (24.1) (38.9)
--- --- --- ----- -----
Total noninterest income $184 $194 $197 (5.2)% (6.6)%
Average deposit balances
NOW and money market deposit accounts $27,438 $26,564 $25,697 3.3% 6.8%
Savings deposits 2,472 2,510 2,399 (1.5) 3.0
Certificates of deposit ($100,000 or more) 2,124 2,264 2,619 (6.2) (18.9)
Other time deposits 3,731 3,949 4,702 (5.5) (20.7)
Deposits in foreign office 285 278 287 2.5 (.7)
Noninterest-bearing deposits 14,359 14,087 14,135 1.9 1.6
------ ------ ------ --- ---
Total deposits $50,409 $49,652 $49,839 1.5% 1.1%
Home equity loans
Average balance $10,310 $10,247 $9,807
Weighted-average loan-to-value ratio (at date of origination) 71% 71% 70%
Percent first lien positions 58 58 55
Other data
Branches 1,028 1,044 1,088
Automated teller machines 1,335 1,350 1,611
Key Community Bank Summary of Operations
-- Successfully completed integrations of credit card and Western New York
branches
-- Loan growth of $967 million, or 3.4% from prior year
-- Core deposits up $2.0 billion, or 4.8% from the prior year
Key Community Bank recorded net income attributable to Key of $28 million for the fourth quarter of 2013, compared to net income attributable to Key of $33 million for the year-ago quarter.
Taxable-equivalent net interest income decreased by $33 million, or 8.6% from the fourth quarter of 2012 due to declines in the deposit spread in the current period as a result of the continued low-rate environment. Average loans and leases grew 3.4% while average deposits increased 1.1% from one year ago.
Noninterest income declined by $13 million, or 6.6% from the year-ago quarter. Consumer mortgage income decreased $8 million, service charges on deposit accounts declined $3 million, and other income declined by $4 million. These decreases were partially offset by increases in cards and payments income of $3 million.
The provision for loan and lease losses increased by $7 million, or 26.9% from the fourth quarter of 2012. Net loan charge-offs increased $20 million from the same period one year ago.
Noninterest expense declined by $46 million, or 9.2 % from the year-ago quarter as a result of Key's efficiency initiative. Personnel expense decreased $15 million primarily due to declines in salaries and employee benefits. Nonpersonnel expense declined $31 million primarily due to declines in business services and professional fees, computer processing, and other support costs.
Key Corporate Bank
dollars in millions Change 4Q13 vs.
4Q13 3Q13 4Q12 3Q13 4Q12
---- ---- ---- ---- ----
Summary of operations
Net interest income (TE) $192 $188 $195 2.1% (1.5)%
Noninterest income 215 189 207 13.8 3.9
--- --- --- ---- ---
Total revenue (TE) 407 377 402 8.0 1.2
Provision (credit) for loan and lease losses (13) 13 11 N/M N/M
Noninterest expense 225 217 207 3.7 8.7
--- --- --- --- ---
Income (loss) before income taxes (TE) 195 147 184 32.7 6.0
Allocated income taxes and TE adjustments 68 51 69 33.3 (1.4)
--- --- --- ---- ----
Net income (loss) attributable to Key $127 $96 $115 32.3% 10.4%
Average balances
Loans and leases $21,013 $20,586 $19,481 2.1% 7.9%
Loans held for sale 668 422 538 58.3 24.2
Total assets 25,114 24,487 23,450 2.6 7.1
Deposits 17,372 16,125 13,681 7.7 27.0
Assets under management at period end $10,241 $10,536 $11,106 (2.8)% (7.8)%
TE = Taxable Equivalent, N/M = Not Meaningful
Additional Key Corporate Bank Data
dollars in millions Change 4Q13 vs.
4Q13 3Q13 4Q12 3Q13 4Q12
---- ---- ---- ---- ----
Noninterest income
Trust and investment services income $32 $31 $30 3.2% 6.7%
Investment banking and debt placement fees 84 85 109 (1.2) (22.9)
Operating lease income and other leasing gains 19 14 18 35.7 5.6
Corporate services income 30 34 31 (11.8) (3.2)
Service charges on deposit accounts 11 11 14 - (21.4)
Cards and payments income 3 6 4 (50.0) (25.0)
--- --- --- ----- -----
Payments and services income 44 51 49 (13.7) (10.2)
Mortgage servicing fees 21 16 7 31.3 200.0
Other noninterest income 15 (8) (6) N/M N/M
--- --- --- --- ---
Total noninterest income $215 $189 $207 13.8% 3.9%
N/M = Not Meaningful
Key Corporate Bank Summary of Operations
-- Average loan balances up 7.9% from the prior year
-- Average deposits up 27% from the prior year
-- Total revenue increased 1.2% from prior year
-- Investment banking and debt placement fees declined 22.9% from the prior
year, but increased 3.1% for the full year
Key Corporate Bank recorded net income attributable to Key of $127 million for the fourth quarter of 2013, compared to $115 million for the same period one year ago.
Taxable-equivalent net interest income decreased by $3 million, or 1.5% compared to the fourth quarter of 2012. Average earning assets increased $1.9 billion, or 9% from the year-ago quarter, driving an $8 million increase in earning asset spread. Average deposit balances increased $3.7 billion, or 27% from the year-ago quarter, driven by the commercial mortgage servicing acquisition and increases in other business flows. However, these increases in balances were offset by declines in the deposit spread as a result of the continued low-rate environment.
Noninterest income increased by $8 million, or 3.9% from the fourth quarter of 2012. Mortgage servicing fees increased $14 million due to higher levels of core servicing fees, special servicing fees, and the impact of the previously announced acquisition of a commercial mortgage servicing portfolio. Other noninterest income increased $21 million mostly driven by gains related to the disposition of certain investments held by the Real Estate Capital line of business. Offsetting these increases was a $25 million decrease in investment banking and debt placement fees from the fourth quarter of 2012 as a result of a business mix shift in Key's real estate business.
The provision for loan and lease losses decreased $24 million compared to the fourth quarter of 2012 due to improved credit quality within the portfolio.
Noninterest expense increased by $18 million, or 8.7% from the fourth quarter of 2012, mostly due to an increase of $14 million in the provision (credit) for losses on lending-related commitments. There was a credit of $2 million in the provision (credit) for losses on lending-related commitments in the fourth quarter of 2013 compared to a credit of $16 million for the fourth quarter of 2012.
Other Segments
Other Segments consist of Corporate Treasury, Community Development, Key's Principal Investing unit, and various exit portfolios. Other Segments generated net income attributable to Key of $84 million for the fourth quarter of 2013, compared to net income attributable to Key of $53 million for the same period last year. These results were primarily attributable to an increase in net gains (losses) from principal investing of $18 million, and an increase in net interest income of $17 million.
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 $92.9 billion at December 31, 2013.
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.
INVESTOR RELATIONS: www.key.com/ir
KEY MEDIA NEWSROOM: www.key.com/newsroom
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Key's financial condition, results of operations, and profitability. Forward-looking statements can be identified by words such as "expect," "believe," and "anticipate," and other similar references to future periods. Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events, many of which, by their nature, are inherently uncertain and outside of Key's control. Key's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Factors that could cause Key's actual results to differ materially from those described in the forward-looking statements can be found in KeyCorp's Form 10-K for the year ended December 31, 2012, and its Quarterly Reports on Form 10-Q for the periods ended March 31, 2013, June 30, 2013, and September 30, 2013, each of which has been filed with the Securities and Exchange Commission and is available on Key's website (www.key.com/ir) and on the Securities and Exchange Commission's website (www.sec.gov). These factors may include, among others: economic, political or other shocks to financial markets in the United States and abroad; current reform initiatives in the U.S., including the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended, subjecting us to a variety of new and more stringent legal and regulatory requirements and increased scrutiny from our regulators; adverse behaviors in securities, public debt, and capital markets, including changes in market liquidity and volatility; and our ability to timely and effectively implement our strategic initiatives. Forward-looking statements are not guarantees of future performance and should not be relied upon as representing management's views as of any subsequent date. Key does not undertake any obligation to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.
Notes to Editors:
A live Internet broadcast of KeyCorp's conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on Thursday, January 23, 2014. An audio replay of the call will be available through January 30, 2014.
For up-to-date company information, media contacts, and facts and figures about Key's lines of business, visit our Media Newsroom at https://www.key.com/newsroom.
*****
KeyCorp
Fourth Quarter 2013
Financial Supplement
Page
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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 Nonperforming
Loans Held for Sale From Continuing
Operations
27 Summary of Changes in Other Real
Estate Owned, Net of Allowance,
From Continuing Operations
28 Line of Business Results
Financial Highlights
(dollars in millions, except per share amounts)
Three months ended
------------------
12-31-13 9-30-13 12-31-12
Summary of operations
Net interest income (TE) $589 $584 $607
Noninterest income 453 459 439
Total revenue (TE) 1,042 1,043 1,046
Provision (credit) for loan and lease losses 19 28 57
Noninterest expense 712 716 734
Income (loss) from continuing operations
attributable to Key 235 235 196
Income (loss) from discontinued operations,
net of taxes (a) (5) 37 7
Net income (loss) attributable to Key 230 272 203
Income (loss) from continuing operations
attributable to Key common shareholders $229 $229 $190
Income (loss) from discontinued operations,
net of taxes (a) (5) 37 7
Net income (loss) attributable to Key common
shareholders 224 266 197
Per common share
Income (loss) from continuing operations
attributable to Key common shareholders $.26 $.25 $.21
Income (loss) from discontinued operations,
net of taxes (a) (.01) .04 .01
Net income (loss) attributable to Key common
shareholders (b) .25 .29 .21
Income (loss) from continuing operations
attributable to Key common shareholders -
assuming dilution .26 .25 .20
Income (loss) from discontinued operations,
net of taxes -assuming dilution (a) (.01) .04 .01
Net income (loss) attributable to Key common
shareholders -assuming dilution (b) .25 .29 .21
Cash dividends paid .055 .055 .05
Book value at period end 11.25 11.05 10.78
Tangible book value at period end 10.11 9.92 9.67
Market price at period end 13.42 11.40 8.42
Performance ratios
From continuing operations:
Return on average total assets 1.08% 1.12% .96%
Return on average common equity 9.10 9.13 7.58
Return on average tangible common equity (c) 10.13 10.18 8.45
Net interest margin (TE) 3.01 3.11 3.37
Cash efficiency ratio (c) 67.4 67.5 69.0
From consolidated operations:
Return on average total assets 1.00% 1.22% .93%
Return on average common equity 8.90 10.61 7.86
Return on average tangible common equity (c) 9.91 11.82 8.77
Net interest margin (TE) 2.91 3.06 3.29
Loan to deposit (d) 83.8 83.8 85.8
Capital ratios at period end
Key shareholders' equity to assets 11.09% 11.25% 11.51%
Key common shareholders' equity to assets 10.78 10.94 11.18
Tangible common equity to tangible assets
(c) 9.80 9.93 10.15
Tier 1 common equity (c), (e) 11.23 11.17 11.36
Tier 1 risk-based capital (e) 11.97 11.92 12.15
Total risk-based capital (e) 14.34 14.37 15.13
Leverage (e) 11.09 11.33 11.41
Asset quality - from continuing operations
Net loan charge-offs $37 $37 $58
Net loan charge-offs to average loans .27% .28% .44%
Allowance for loan and lease losses $848 $868 $888
Allowance for credit losses 885 908 917
Allowance for loan and lease losses to
period-end loans 1.56% 1.62% 1.68%
Allowance for credit losses to period-end
loans 1.63 1.69 1.74
Allowance for loan and lease losses to
nonperforming loans 166.9 160.4 131.8
Allowance for credit losses to nonperforming
loans 174.2 167.8 136.1
Nonperforming loans at period end (f) $508 $541 $674
Nonperforming assets at period end 531 579 735
Nonperforming loans to period-end portfolio
loans .93% 1.01% 1.28%
Nonperforming assets to period-end portfolio
loans plus OREO and other nonperforming
assets .97 1.08 1.39
Trust and brokerage assets
Assets under management $36,905 $36,110 $34,744
Nonmanaged and brokerage assets 47,418 38,525 35,550
Other data
Average full-time equivalent employees 14,197 14,555 15,589
Branches 1,028 1,044 1,088
Taxable-equivalent adjustment $6 $6 $6
Financial Highlights (continued)
(dollars in millions, except per share amounts)
Twelve months ended
12-31-13 12-31-12
-------- --------
Summary of operations
Net interest
income (TE) $2,348 $2,288
Noninterest
income 1,766 1,856
Total revenue (TE) 4,114 4,144
Provision
(credit) for
loan and
lease losses 130 229
Noninterest
expense 2,820 2,818
Income (loss)
from
continuing
operations
attributable
to Key 870 835
Income (loss)
from
discontinued
operations,
net of taxes
(a) 40 23
Net income
(loss)
attributable
to Key 910 858
Income (loss)
from
continuing
operations
attributable
to Key common
shareholders $847 $813
Income (loss)
from
discontinued
operations,
net of taxes
(a) 40 23
Net income
(loss)
attributable
to Key common
shareholders 887 836
Per common share
Income (loss)
from
continuing
operations
attributable
to Key common
shareholders $.93 $.87
Income (loss)
from
discontinued
operations,
net of taxes
(a) .04 .02
Net income
(loss)
attributable
to Key common
shareholders
(b) .98 .89
Income (loss)
from
continuing
operations
attributable
to Key common
shareholders
-assuming
dilution .93 .86
Income (loss)
from
discontinued
operations,
net of taxes
-assuming
dilution (a) .04 .02
Net income
(loss)
attributable
to Key common
shareholders
-assuming
dilution
(b) .97 .89
Cash dividends
paid .215 .18
Performance ratios
From
continuing
operations:
Return on
average total
assets 1.03% 1.03%
Return on
average
common equity 8.48 8.25
Return on
average
tangible
common equity
(c) 9.45 9.16
Net interest
margin (TE) 3.12 3.21
Cash
efficiency
ratio (c) 67.5 67.4
From
consolidated
operations:
Return on
average total
assets 1.02% .99%
Return on
average
common equity 8.88 8.48
Return on
average
tangible
common equity
(c) 9.90 9.42
Net interest
margin (TE) 3.02 3.13
Asset quality - from continuing operations
Net loan
charge-offs $168 $345
Net loan
charge-offs
to average
total loans .32% .69%
Other data
Average full-
time
equivalent
employees 14,783 15,589
Taxable-equivalent adjustment $23 $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," "Tier 1
common equity," and "cash
efficiency." The table reconciles
the GAAP performance measures to the
corresponding non-GAAP measures,
which provides a basis for period-
to-period comparisons.
(d) Represents period-end
consolidated total loans and loans
held for sale (excluding education
loans in the securitization trusts)
divided by period-end consolidated
total deposits (excluding deposits in
foreign office).
(e) 12-31-13 ratio is estimated.
(f) December 31, 2013, September 30,
2013, and December 31, 2012 amounts
exclude $16 million, $18 million, and
$23 million, respectively, of
purchased credit impaired loans
acquired in July 2012.
TE = Taxable Equivalent, GAAP = U.S.
generally accepted accounting
principles
GAAP to Non-GAAP Reconciliations
(dollars in millions)
The table below presents certain non-GAAP financial measures related to "tangible common equity," "return on tangible common equity," "Tier 1 common equity," "pre-provision net revenue," "cash efficiency ratio," and "adjusted cash efficiency ratio."
The tangible common equity ratio and the return on tangible common equity ratio have been a focus for some investors, and management believes these ratios may assist investors in analyzing Key's capital position without regard to the effects of intangible assets and preferred stock. Traditionally, the banking regulators have assessed bank and bank holding company capital adequacy based on both the amount and the composition of capital, the calculation of which is prescribed in federal banking regulations. Since the commencement of the Comprehensive Capital Analysis and Review process in early 2009, the Federal Reserve has focused its assessment of capital adequacy on a component of Tier 1 risk-based capital known as Tier 1 common equity, a non-GAAP financial measure. Because the Federal Reserve has long indicated that voting common shareholders' equity (essentially Tier 1 risk-based capital less preferred stock, qualifying capital securities and noncontrolling interests in subsidiaries) generally should be the dominant element in Tier 1 risk-based capital, this focus on Tier 1 common equity is consistent with existing capital adequacy categories.
Tier 1 common equity is neither formally defined by GAAP nor prescribed in amount by federal banking regulations; this measure is considered to be a non-GAAP financial measure. Since analysts and banking regulators may assess Key's capital adequacy using tangible common equity and Tier 1 common equity, management believes it is useful to enable investors to assess Key's capital adequacy on these same bases. The table also reconciles the GAAP performance measures to the corresponding non-GAAP measures.
The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of the provision for loan and lease losses makes it easier to analyze the results by presenting them on a more comparable basis.
The cash efficiency ratio and the adjusted cash efficiency ratio are ratios of two non-GAAP performance measures. As such, there are no directly comparable GAAP performance measures. The cash efficiency ratio performance measure removes the impact of Key's intangible asset amortization from the calculation. The adjusted cash efficiency ratio further removes the impact of the efficiency initiative charges. Management believes these ratios provide greater consistency and comparability between Key's results and those of its peer banks. Additionally, these ratios are used by analysts and investors as they develop earnings forecasts and peer bank analysis.
Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.
Three months ended
12-31-13 9-30-13 12-31-12
-------- ------- --------
Tangible common equity to tangible assets at period end
Key shareholders' equity (GAAP) $10,303 $10,206 $10,271
Less: Intangible assets (a) 1,014 1,017 1,027
Preferred Stock, Series A (b) 282 282 291
--- --- ---
Tangible common equity (non-GAAP) $9,007 $8,907 $8,953
====== ====== ======
Total assets (GAAP) $92,934 $90,708 $89,236
Less: Intangible assets (a) 1,014 1,017 1,027
Tangible assets (non-GAAP) $91,920 $89,691 $88,209
======= ======= =======
Tangible common equity to tangible assets ratio
(non-GAAP) 9.80% 9.93% 10.15%
Tier 1 common equity at period end
Key shareholders' equity (GAAP) $10,303 $10,206 $10,271
Qualifying capital securities 339 340 339
Less: Goodwill 979 979 979
Accumulated other comprehensive income (loss) (c) (394) (409) (172)
Other assets (d) 91 96 114
--- --- ---
Total Tier 1 capital (regulatory) 9,966 9,880 9,689
Less: Qualifying capital securities 339 340 339
Preferred Stock, Series A (b) 282 282 291
--- --- ---
Total Tier 1 common equity (non-GAAP) $9,345 $9,258 $9,059
====== ====== ======
Net risk-weighted assets (regulatory) (d), (e) $83,251 $82,913 $79,734
Tier 1 common equity ratio (non-GAAP) (e) 11.23% 11.17% 11.36%
Pre-provision net revenue
Net interest income (GAAP) $583 $578 $601
Plus: Taxable-equivalent adjustment 6 6 6
Noninterest income (GAAP) 453 459 439
Less: Noninterest expense (GAAP) 712 716 734
Pre-provision net revenue from continuing
operations (non-GAAP) $330 $327 $312
===
GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
Three months ended
------------------
12-31-13 9-30-13 12-31-12
-------- ------- --------
Average tangible common equity
Average Key shareholders' equity (GAAP) $10,272 $10,237 $10,261
Less: Intangible assets (average) (f) 1,016 1,019 1,030
Preferred Stock, Series A (average) 291 291 291
--- --- ---
Average tangible common equity (non-GAAP) $8,965 $8,927 $8,940
====== ====== ======
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to
Key common shareholders (GAAP) $229 $229 $190
Average tangible common equity (non-GAAP) 8,965 8,927 8,940
Return on average tangible common equity from continuing
operations (non-GAAP) 10.13% 10.18% 8.45%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders
(GAAP) $224 $266 $197
Average tangible common equity (non-GAAP) 8,965 8,927 8,940
Return on average tangible common equity consolidated (non-
GAAP) 9.91% 11.82% 8.77%
Cash efficiency ratio
Noninterest expense (GAAP) $712 $716 $734
Less: Intangible asset amortization on credit cards (GAAP) 7 8 8
Other intangible asset amortization (GAAP) 3 4 4
--- --- ---
Adjusted noninterest expense (non-GAAP) $702 $704 $722
==== ==== ====
Net interest income (GAAP) $583 $578 $601
Plus: Taxable-equivalent adjustment 6 6 6
Noninterest income (GAAP) 453 459 439
--- --- ---
Total taxable-equivalent revenue (non-GAAP) $1,042 $1,043 $1,046
====== ====== ======
Cash efficiency ratio (non-GAAP) 67.4% 67.5% 69.0%
Adjusted cash efficiency ratio net of efficiency initiative charges
Adjusted noninterest expense (non-GAAP) $702 $704 $722
Less: Efficiency initiative and pension settlement charges (non-GAAP) 24 41 16
Net adjusted noninterest expense (non-GAAP) $678 $663 $706
==== ==== ====
Total taxable-equivalent revenue (non-GAAP) $1,042 $1,043 $1,046
Adjusted cash efficiency ratio net of efficiency initiative
charges (non-GAAP) 65.1% 63.6% 67.5%
Three months ended
------------------
12-31-13 9-30-13
-------- -------
Tier 1 common equity under the Regulatory Capital Rules (estimates)
Tier 1 common equity under current regulatory rules $9,345 $9,258
Adjustments from current regulatory rules to the Regulatory
Capital Rules:
Deferred tax assets and other (g) (130) (140)
---- ----
Tier 1 common equity anticipated under the Regulatory Capital Rules (h) $9,215 $9,118
====== ======
Net risk-weighted assets under current regulatory rules $83,251 $82,913
Adjustments from current regulatory rules to the Regulatory
Capital Rules:
Loan commitments less than one year 891 496
Past due loans 206 244
Mortgage servicing assets (i) 576 576
Deferred tax assets (i) 240 240
Other 1,490 1,451
----- -----
Total risk-weighted assets anticipated under the Regulatory Capital Rules $86,654 $85,920
======= =======
Tier 1 common equity ratio under the Regulatory Capital Rules
(h) 10.63% 10.61%
GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
Twelve months ended
-------------------
12-31-13 12-31-12
-------- --------
Pre-provision net revenue
Net interest income (GAAP) $2,325 $2,264
Plus: Taxable-equivalent adjustment 23 24
Noninterest income (GAAP) 1,766 1,856
Less: Noninterest expense (GAAP) 2,820 2,818
Pre-provision net revenue from continuing operations (non-
GAAP) $1,294 $1,326
Average tangible common equity
Average Key shareholders' equity (GAAP) $10,276 $10,144
Less: Intangible assets (average) (j) 1,021 978
Preferred Stock, Series A (average) 291 291
--- ---
Average tangible common equity (non-GAAP) $8,964 $8,875
====== ======
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to
Key common shareholders (GAAP) $847 $813
Average tangible common equity (non-GAAP) 8,964 8,875
Return on average tangible common equity from continuing
operations (non-GAAP) 9.45% 9.16%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders
(GAAP) $887 $836
Average tangible common equity (non-GAAP) 8,964 8,875
Return on average tangible common equity consolidated (non-
GAAP) 9.90% 9.42%
Cash efficiency ratio
Noninterest expense (GAAP) $2,820 $2,818
Less: Intangible asset amortization on credit cards (GAAP) 30 14
Other intangible asset amortization (GAAP) 14 9
--- ---
Adjusted noninterest expense (non-GAAP) $2,776 $2,795
====== ======
Net interest income (GAAP) $2,325 $2,264
Plus: Taxable-equivalent adjustment 23 24
Noninterest income (GAAP) 1,766 1,856
----- -----
Total taxable-equivalent revenue (non-GAAP) $4,114 $4,144
====== ======
Cash efficiency ratio (non-GAAP) 67.5% 67.4%
Adjusted cash efficiency ratio net of efficiency initiative charges
Adjusted noninterest expense (non-GAAP) $2,776 $2,795
Less: Efficiency initiative and pension settlement charges (non-GAAP) 117 25
Net adjusted noninterest expense (non-GAAP) $2,659 $2,770
====== ======
Total taxable-equivalent revenue (non-GAAP) $4,114 $4,144
Adjusted cash efficiency ratio net of efficiency initiative
charges (non-GAAP) 64.6% 66.8%
(a) Three months ended December 31,
2013, September 30, 2013, and
December 31, 2012 exclude $92
million, $99 million, and $123
million, respectively, of period end
purchased credit card receivable
intangible assets.
(b) Net of capital surplus for the
three months ended December 31, 2013
and September 30, 2013.
(c) Includes net unrealized gains
or losses on securities available
for sale (except for net unrealized
losses on marketable equity
securities), net gains or losses on
cash flow hedges, and amounts
resulting from the application of
the applicable accounting guidance
for defined benefit and other
postretirement plans.
(d) Other assets deducted from Tier
1 capital and net risk-weighted
assets consist of disallowed
intangible assets (excluding
goodwill) and deductible portions of
nonfinancial equity investments.
There were no disallowed deferred
tax assets at December 31, 2013,
September 30, 2013, and December 31,
2012.
(e) 12-31-13 amount is estimated.
(f) Three months ended December 31,
2013, September 30, 2013, and
December 31, 2012 exclude $96
million, $103 million, and $126
million, respectively, of average
ending purchased credit card
receivable intangible assets.
(g) Includes the deferred tax asset
subject to future taxable income for
realization, primarily tax credit
carryforwards, as well as the
deductible potion of purchased
credit card receivables.
(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) Twelve months ended December
31, 2013 and December 31, 2012
exclude $107 million and $55
million, respectively, of average
ending purchased credit card
receivable intangible assets.
GAAP = U.S. generally accepted
accounting principles
Consolidated Balance Sheets
(dollars in millions)
12-31-13 9-30-13 12-31-12
-------- ------- --------
Assets
Loans $54,457 $53,597 $52,822
Loans held for sale 611 699 599
Securities available for sale 12,346 12,606 12,094
Held-to-maturity securities 4,756 4,835 3,931
Trading account assets 738 806 605
Short-term investments 5,590 3,535 3,940
Other investments 969 1,007 1,064
Total earning assets 79,467 77,085 75,055
Allowance for loan and lease losses (848) (868) (888)
Cash and due from banks 617 748 584
Premises and equipment 885 890 965
Operating lease assets 305 293 288
Goodwill 979 979 979
Other intangible assets 127 137 171
Corporate-owned life insurance 3,408 3,384 3,333
Derivative assets 407 475 693
Accrued income and other assets 3,015 2,747 2,774
Discontinued assets 4,572 4,838 5,282
Total assets $92,934 $90,708 $89,236
======= ======= =======
Liabilities
Deposits in domestic offices:
NOW and money market deposit accounts $33,952 $33,132 $32,380
Savings deposits 2,472 2,489 2,433
Certificates of deposit ($100,000 or more) 2,631 2,698 2,879
Other time deposits 3,648 3,833 4,575
----- ----- -----
Total interest-bearing deposits 42,703 42,152 42,267
Noninterest-bearing deposits 26,001 25,778 23,319
Deposits in foreign office - interest-
bearing 558 605 407
Total deposits 69,262 68,535 65,993
Federal funds purchased and securities 1,534 1,455 1,609
sold under repurchase agreements
Bank notes and other short-term borrowings 343 466 287
Derivative liabilities 414 450 584
Accrued expense and other liabilities 1,557 1,375 1,387
Long-term debt 7,650 6,154 6,847
Discontinued liabilities 1,854 2,037 2,220
Total liabilities 82,614 80,472 78,927
Equity
Preferred stock, Series A 291 291 291
Common shares 1,017 1,017 1,017
Capital surplus 4,022 4,029 4,126
Retained earnings 7,606 7,431 6,913
Treasury stock, at cost (2,281) (2,193) (1,952)
Accumulated other comprehensive income
(loss) (352) (369) (124)
Key shareholders' equity 10,303 10,206 10,271
Noncontrolling interests 17 30 38
Total equity 10,320 10,236 10,309
------ ------ ------
Total liabilities and equity $92,934 $90,708 $89,236
======= ======= =======
Common shares outstanding (000) 890,724 897,821 925,769
Consolidated Statements of Income
(dollars in millions, except per share amounts)
Three months ended Twelve months ended
------------------ -------------------
12-31-13 9-30-13 12-31-12 12-31-13 12-31-12
-------- ------- -------- -------- --------
Interest income
Loans $532 $532 $563 $2,151 $2,155
Loans held for sale 6 5 5 20 20
Securities available for sale 75 76 85 311 399
Held-to-maturity securities 22 22 19 82 69
Trading account assets 6 5 3 21 18
Short-term investments 2 1 2 6 6
Other investments 6 6 11 29 38
Total interest income 649 647 688 2,620 2,705
Interest expense
Deposits 34 37 49 158 257
Federal funds purchased and
securities sold under
repurchase agreements - 1 1 2 4
Bank notes and other short-term
borrowings 3 2 2 8 7
Long-term debt 29 29 35 127 173
Total interest expense 66 69 87 295 441
Net interest income 583 578 601 2,325 2,264
Provision (credit) for loan and lease losses 19 28 57 130 229
--- --- --- --- ---
Net interest income (expense) after provision for loan and lease losses 564 550 544 2,195 2,035
Noninterest income
Trust and investment services
income 98 100 95 393 375
Investment banking and debt
placement fees 84 86 110 333 327
Service charges on deposit
accounts 68 73 75 281 287
Operating lease income and other
leasing gains 23 43 19 108 195
Corporate services income 40 44 41 172 168
Cards and payments income 40 43 38 162 135
Corporate-owned life insurance
income 33 26 36 120 122
Consumer mortgage income 3 3 11 19 40
Mortgage servicing fees 22 15 7 58 24
Net gains (losses) from
principal investing 20 17 2 52 72
Other income (a) 22 9 5 68 111
Total noninterest income 453 459 439 1,766 1,856
Noninterest expense
Personnel 398 414 422 1,609 1,570
Net occupancy 73 66 69 275 260
Computer processing 40 38 38 156 164
Business services and
professional fees 42 37 54 151 190
Equipment 26 25 27 104 107
Operating lease expense 10 14 12 47 57
Marketing 18 16 20 51 68
FDIC assessment 7 7 8 30 31
Intangible asset amortization on
credit cards 7 8 8 30 14
Other intangible asset
amortization 3 4 4 14 9
Provision (credit) for losses on
lending-related commitments (3) 3 (14) 8 (16)
OREO expense, net 2 1 1 7 15
Other expense 89 83 85 338 349
Total noninterest expense 712 716 734 2,820 2,818
--- --- --- ----- -----
Income (loss) from continuing operations before income taxes 305 293 249 1,141 1,073
Income taxes 70 59 53 271 231
Income (loss) from continuing operations 235 234 196 870 842
Income (loss) from discontinued
operations, net of taxes (5) 37 7 40 23
Net income (loss) 230 271 203 910 865
Less: Net income (loss)
attributable to noncontrolling
interests - (1) - - 7
Net income (loss) attributable to Key $230 $272 $203 $910 $858
==== ==== ==== ==== ====
Income (loss) from continuing operations attributable to Key common shareholders $229 $229 $190 $847 $813
Net income (loss) attributable to Key common shareholders 224 266 197 887 836
Per common share
----------------
Income (loss) from continuing operations attributable to Key common shareholders $.26 $.25 $.21 $.93 $.87
Income (loss) from discontinued operations, net of taxes (.01) .04 .01 .04 .02
Net income (loss) attributable to Key common shareholders (b) .25 .29 .21 .98 .89
Per common share - assuming dilution
------------------------------------
Income (loss) from continuing operations attributable to Key common shareholders $.26 $.25 $.20 $.93 $.86
Income (loss) from discontinued operations, net of taxes (.01) .04 .01 .04 .02
Net income (loss) attributable to Key common shareholders (b) .25 .29 .21 .97 .89
Cash dividends declared per common share $.055 $.055 $.05 $.215 $.18
Weighted-average common shares outstanding (000) 890,516 901,904 925,725 906,524 938,941
Weighted-average common shares and potential common shares outstanding (000) (c) 897,712 928,854 930,382 912,571 943,259
(a) For the three months ended December 31, 2013, September 30, 2013, and December 31, 2012, Key did not have any impairment losses related to securities.
(b) Earnings per share may not foot due to rounding.
(c) Assumes conversion of stock options and/or Preferred Series A shares, as applicable.
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)
Fourth Quarter 2013 Third Quarter 2013 Fourth Quarter 2012
Average Average Average
Balance Interest (a) Yield/Rate (a) Balance Interest (a) Yield/Rate (a) Balance Interest (a) Yield/Rate (a)
Assets
Loans: (b), (c)
Commercial, financial and agricultural
(d) $24,218 $212 3.47% $23,864 $213 3.54% $22,436 $213 3.77%
Real estate - commercial mortgage 7,678 78 4.01 7,575 77 4.06 7,555 82 4.35
Real estate - construction 1,075 11 4.21 1,073 12 4.24 1,070 14 4.94
Commercial lease financing 4,513 41 3.62 4,633 36 3.14 4,869 49 4.01
Total commercial loans 37,484 342 3.62 37,145 338 3.61 35,930 358 3.96
Real estate - residential mortgage 2,199 24 4.43 2,193 25 4.43 2,164 26 4.70
Home equity:
Key Community Bank 10,310 102 3.92 10,247 101 3.92 9,807 98 3.99
Other 343 7 7.72 364 7 7.72 411 9 8.23
--- --- ---- --- --- ---- --- --- ----
Total home equity loans 10,653 109 4.04 10,611 108 4.05 10,218 107 4.16
Consumer other - Key Community Bank 1,446 26 7.18 1,435 26 7.24 1,339 32 9.63
Credit cards 701 20 11.17 700 21 11.77 714 23 13.15
Consumer other:
Marine 1,056 17 6.24 1,120 17 6.26 1,403 22 6.16
Other 69 1 8.03 67 2 8.72 91 1 8.25
--- --- ---- --- --- ---- --- --- ----
Total consumer other 1,125 18 6.35 1,187 19 6.40 1,494 23 6.29
----- --- ---- ----- --- ---- ----- --- ----
Total consumer loans 16,124 197 4.88 16,126 199 4.93 15,929 211 5.30
------ --- ---- ------ --- ---- ------ --- ----
Total loans 53,608 539 3.98 53,271 537 4.00 51,859 569 4.37
Loans held for sale 688 6 3.65 456 5 4.06 618 5 3.47
Securities available for sale (b), (e) 12,464 74 2.40 12,926 77 2.37 11,980 84 2.95
Held-to-maturity securities (b) 4,775 22 1.85 4,796 22 1.84 4,036 19 1.94
Trading account assets 819 6 2.90 747 5 2.52 606 3 1.91
Short-term investments 4,455 2 .18 1,615 1 .20 2,090 2 .27
Other investments (e) 983 6 2.47 1,022 6 2.67 1,088 12 4.05
Total earning assets 77,792 655 3.37 74,833 653 3.49 72,277 694 3.85
Allowance for loan and lease losses (859) (873) (898)
Accrued income and other assets 9,467 9,549 9,878
Discontinued assets 4,777 5,061 5,350
Total assets $91,177 $88,570 $86,607
======= ======= =======
Liabilities
NOW and money market deposit accounts $33,834 12 .15 $32,736 13 .15 $31,058 14 .18
Savings deposits 2,483 - .03 2,520 - .04 2,408 - .06
Certificates of deposit ($100,000 or
more) (f) 2,649 11 1.57 2,785 12 1.67 2,992 16 2.15
Other time deposits 3,736 11 1.16 3,957 12 1.24 4,714 18 1.52
Deposits in foreign office 615 - .21 621 - .20 874 1 .21
Total interest-bearing deposits 43,317 34 .32 42,619 37 .35 42,046 49 .47
Federal funds purchased and securities 1,618 - .15 1,837 1 .08 1,702 1 .16
sold under repurchase agreements
Bank notes and other short-term
borrowings 438 3 1.96 383 2 1.98 306 2 1.97
Long-term debt (f), (g) 4,174 29 2.94 3,504 29 3.41 3,301 35 4.84
Total interest-bearing liabilities 49,547 66 .53 48,343 69 .56 47,355 87 .73
------ --- --- ------ --- --- ------ --- ---
Noninterest-bearing deposits 25,077 23,364 21,889
Accrued expense and other liabilities 1,548 1,626 1,747
Discontinued liabilities (g) 4,717 4,968 5,321
Total liabilities 80,889 78,301 76,312
Equity
Key shareholders' equity 10,272 10,237 10,261
Noncontrolling interests 16 32 34
Total equity 10,288 10,269 10,295
Total liabilities and equity $91,177 $88,570 $86,607
======= ======= =======
Interest rate spread (TE) 2.84% 2.93% 3.12%
==== ==== ====
Net interest income (TE) and net interest margin (TE) 589 3.01% 584 3.11% 607 3.37%
==== ==== ====
TE adjustment (b) 6 6 6
--- --- ---
Net interest income, GAAP basis $583 $578 $601
(a) Results are from continuing
operations. Interest excludes the
interest associated with the
liabilities referred
to in (g) below, calculated using a
matched funds transfer pricing
methodology.
(b) Interest income on tax-exempt
securities and loans has been adjusted
to a taxable-equivalent basis using
the statutory federal income tax rate
of 35%.
(c) For purposes of these
computations, nonaccrual loans are
included in average loan balances.
(d) Commercial, financial and
agricultural average balance for the
three months ended December 31, 2013,
September 30, 2013, and December 31,
2012 includes $97 million, $96
million, and $90 million,
respectively, of assets from
commercial credit cards.
(e) Yield is calculated on the basis
of amortized cost.
(f) Rate calculation excludes basis
adjustments related to fair value
hedges.
(g) A portion of long-term debt and
the related interest expense is
allocated to discontinued liabilities
as a result of applying our matched
funds transfer pricing methodology to
discontinued operations.
TE = Taxable Equivalent, GAAP = U.S.
generally accepted accounting
principles
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)
Twelve months ended December 31, 2013 Twelve months ended December 31, 2012
------------------------------------- -------------------------------------
Average Average
Balance Interest (a) Yield/Rate (a) Balance Interest (a) Yield/Rate (a)
------- -------- ---------- ------- -------- ----------
Assets
Loans: (b), (c)
Commercial, financial and agricultural
(d) $23,723 $855 3.60% $21,141 $810 3.83%
Real estate - commercial mortgage 7,591 312 4.11 7,656 339 4.43
Real estate - construction 1,058 45 4.25 1,171 56 4.74
Commercial lease financing 4,683 172 3.67 5,142 187 3.64
Total commercial loans 37,055 1,384 3.73 35,110 1,392 3.96
Real estate - residential mortgage 2,185 98 4.49 2,049 100 4.86
Home equity:
Key Community Bank 10,086 397 3.93 9,520 384 4.03
Other 377 29 7.70 473 37 7.81
--- --- ---- --- --- ----
Total home equity loans 10,463 426 4.07 9,993 421 4.21
Consumer other - Key Community Bank 1,404 103 7.33 1,269 121 9.53
Credit cards 701 83 11.86 288 40 13.99
Consumer other:
Marine 1,172 74 6.26 1,551 97 6.26
Other 74 6 8.32 102 8 8.14
--- --- ---- --- --- ----
Total consumer other 1,246 80 6.38 1,653 105 6.38
----- --- ---- ----- --- ----
Total consumer loans 15,999 790 4.94 15,252 787 5.16
Total loans 53,054 2,174 4.10 50,362 2,179 4.33
Loans held for sale 532 20 3.72 579 20 3.45
Securities available for sale (b), (e) 12,689 311 2.49 13,422 399 3.08
Held-to-maturity securities (b) 4,387 82 1.87 3,511 69 1.97
Trading account assets 756 21 2.78 718 18 2.48
Short-term investments 2,948 6 .20 2,116 6 .27
Other investments (e) 1,028 29 2.84 1,141 38 3.27
Total earning assets 75,394 2,643 3.51 71,849 2,729 3.82
Allowance for loan and lease losses (879) (919)
Accrued income and other assets 9,662 9,912
Discontinued assets 5,036 5,573
Total assets $89,213 $86,415
==========
Liabilities
NOW and money market deposit accounts $32,846 53 .16 $29,673 56 .19
Savings deposits 2,505 1 .04 2,218 1 .05
Certificates of deposit ($100,000 or
more) (f) 2,829 50 1.76 3,574 94 2.64
Other time deposits 4,084 53 1.30 5,386 104 1.92
Deposits in foreign office 567 1 .23 767 2 .23
Total interest-bearing deposits 42,831 158 .37 41,618 257 .62
Federal funds purchased and securities 1,802 2 .13 1,814 4 .19
sold under repurchase agreements
Bank notes and other short-term
borrowings 394 8 1.89 413 7 1.69
Long-term debt (f), (g) 4,184 127 3.28 4,673 173 4.10
Total interest-bearing liabilities 49,211 295 .60 48,518 441 .92
------ --- --- ------ --- ---
Noninterest-bearing deposits 23,046 20,217
Accrued expense and other liabilities 1,656 1,958
Discontinued liabilities (g) 4,995 5,555
Total liabilities 78,908 76,248
Equity
Key shareholders' equity 10,276 10,144
Noncontrolling interests 29 23
Total equity 10,305 10,167
Total liabilities and equity $89,213 $86,415
==========
Interest rate spread (TE) 2.91% 2.90%
==== ====
Net interest income (TE) and net interest margin (TE) 2,348 3.12% 2,288 3.21%
==== ====
TE adjustment (b) 23 24
--- ---
Net interest income, GAAP basis $2,325 $2,264
(a) Results are from continuing
operations. Interest excludes the
interest associated with the
liabilities referred
to in (g) below, calculated using a
matched funds transfer pricing
methodology.
(b) Interest income on tax-exempt
securities and loans has been adjusted
to a taxable-equivalent basis using
the statutory federal income tax rate
of 35%.
(c) For purposes of these
computations, nonaccrual loans are
included in average loan balances.
(d) Commercial, financial and
agricultural average balance for the
twelve months ended December 31, 2013
and December 31, 2012 includes $95
million and $36 million, respectively,
of assets from commercial credit
cards.
(e) Yield is calculated on the basis
of amortized cost.
(f) Rate calculation excludes basis
adjustments related to fair value
hedges.
(g) A portion of long-term debt and
the related interest expense is
allocated to discontinued liabilities
as a result of applying our matched
funds transfer pricing methodology to
discontinued operations.
TE = Taxable Equivalent, GAAP = U.S.
generally accepted accounting
principles
Noninterest Expense
(dollars in millions)
Three months ended Twelve months ended
12-31-13 9-30-13 12-31-12 12-31-13 12-31-12
Personnel (a) $398 $414 $422 $1,609 $1,570
Net occupancy 73 66 69 275 260
Computer processing 40 38 38 156 164
Business services and professional fees 42 37 54 151 190
Equipment 26 25 27 104 107
Operating lease expense 10 14 12 47 57
Marketing 18 16 20 51 68
FDIC assessment 7 7 8 30 31
Intangible asset amortization on credit cards 7 8 8 30 14
Other intangible asset amortization 3 4 4 14 9
Provision (credit) for losses on lending-related commitments (3) 3 (14) 8 (16)
OREO expense, net 2 1 1 7 15
Other expense 89 83 85 338 349
--- --- --- --- ---
Total noninterest expense $712 $716 $734 $2,820 $2,818
==== ==== ==== ====== ======
Average full-time equivalent employees (b) 14,197 14,555 15,589 14,783 15,589
(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
12-31-13 9-30-13 12-31-12 12-31-13 12-31-12
Salaries $226 $222 $228 $897 $902
Technology contract labor, net 16 19 24 72 69
Incentive compensation 87 81 81 318 290
Employee benefits 56 78 65 249 237
Stock-based compensation 8 8 13 35 49
Severance 5 6 11 38 23
--- --- --- --- ---
Total personnel expense $398 $414 $422 $1,609 $1,570
==== ==== ==== ====== ======
Loan Composition
(dollars in millions)
Percent change 12-31-13 vs.
12-31-13 9-30-13 12-31-12 9-30-13 12-31-12
-------- ------- -------- ------- --------
Commercial, financial and agricultural (a) $24,963 $24,317 $23,242 2.7% 7.4%
Commercial real estate:
Commercial mortgage 7,720 7,544 7,720 2.3 -
Construction 1,093 1,058 1,003 3.3 9.0
Total commercial real estate
loans 8,813 8,602 8,723 2.5 1.0
Commercial lease financing 4,551 4,550 4,915 - (7.4)
----- ----- ----- --- ----
Total commercial loans 38,327 37,469 36,880 2.3 3.9
Residential - prime loans:
Real estate -residential
mortgage 2,187 2,198 2,174 (.5) .6
Home equity:
Key Community Bank 10,340 10,285 9,816 .5 5.3
Other 334 353 423 (5.4) (21.0)
--- --- --- ---- -----
Total home equity loans 10,674 10,638 10,239 .3 4.2
Total residential - prime loans 12,861 12,836 12,413 .2 3.6
Consumer other - Key Community Bank 1,449 1,440 1,349 .6 7.4
Credit cards 722 698 729 3.4 (1.0)
Consumer other:
Marine 1,028 1,083 1,358 (5.1) (24.3)
Other 70 71 93 (1.4) (24.7)
Total consumer other 1,098 1,154 1,451 (4.9) (24.3)
Total consumer loans 16,130 16,128 15,942 - 1.2
Total loans (b), (c) $54,457 $53,597 $52,822 1.6% 3.1%
==========
Loans Held for Sale Composition
(dollars in millions)
Percent change 12-31-13 vs.
12-31-13 9-30-13 12-31-12 9-30-13 12-31-12
-------- ------- -------- ------- --------
Commercial, financial and agricultural $278 $68 $29 308.8% 858.6%
Real estate - commercial mortgage 307 608 477 (49.5) (35.6)
Commercial lease financing 9 - 8 N/M 12.5
Real estate - residential mortgage 17 23 85 (26.1) (80.0)
--- --- --- ----- -----
Total loans held for sale $611 $699 $599 (12.6)% 2.0%
==========
Summary of Changes in Loans Held for Sale
(dollars in millions)
4Q13 3Q13 2Q13 1Q13 4Q12
---- ---- ---- ---- ----
Balance at beginning of period $699 $402 $434 $599 $628
New originations 1,669 1,467 1,241 1,075 1,686
Transfers from held to maturity,
net 1 15 17 19 38
Loan sales (1,750) (1,181) (1,292) (1,257) (1,747)
Loan draws (payments), net (8) (4) - - (4)
Transfers to OREO /valuation
adjustments - - 2 (2) (2)
Balance at end of period $611 $699 $402 $434 $599
==== ==== ==== ==== ====
(a) December 31, 2013, September
30, 2013, and December 31, 2012
loan balances include $94 million,
$96 million, and $90 million,
respectively, of commercial credit
card balances.
(b) Excluded at December 31, 2013,
September 30, 2013, and December
31, 2012 are loans in the amount
of $4.5 billion, $4.7 billion, and
$5.2 billion, respectively,
related to the discontinued
operations of the education
lending business.
(c) December 31, 2013 loan balance
includes purchased loans of $166
million of which $16 million were
purchased credit impaired.
September 30, 2013 loan balance
includes purchased loans of $176
million of which $18 million were
purchased credit impaired.
December 31, 2012 loan balance
includes purchased loans of $217
million of which $23 million were
purchased credit impaired.
N/M = Not Meaningful
Exit Loan Portfolio From Continuing Operations
(dollars in millions)
Balance Change Net Loan Balance on
Outstanding 12-31-13 vs. Charge-offs Nonperforming Status
----------- ----------- --------------------
12-31-13 9-30-13 9-30-13 4Q13 (c) 3Q13 (c) 12-31-13 9-30-13
-------- ------- ------- ---- --- ---- --- -------- -------
Residential properties - homebuilder $20 $26 $(6) - - $7 $8
Marine and RV floor plan 24 25 (1) - - 6 6
Commercial lease financing (a) 782 796 (14) $(2) $(2) - 1
--- --- --- --- --- --- ---
Total commercial loans 826 847 (21) (2) (2) 13 15
Home equity - Other 334 353 (19) 3 2 16 14
Marine 1,028 1,083 (55) 5 1 26 25
RV and other consumer 70 71 (1) 1 - 1 2
--- --- --- --- --- --- ---
Total consumer loans 1,432 1,507 (75) 9 3 43 41
----- ----- --- --- --- --- ---
Total exit loans in loan portfolio $2,258 $2,354 $(96) $7 $1 $56 $56
====== ====== ==== === === === ===
Discontinued operations - education $4,497 $4,738 $(241) $9 $9 $25 $23
lending business (not included in exit loans above) (b)
(a) Includes (1) the business
aviation, commercial vehicle,
office products, construction
and industrial leases; (2)
Canadian lease financing
portfolios; and (3) all
remaining balances related to
lease in, lease out; sale in,
lease out; service contract
leases; and qualified
technological equipment leases.
(b) Includes loans in Key's
consolidated education loan
securitization trusts.
(c) Credit amounts indicate
recoveries exceeded charge-
offs.
Asset Quality Statistics From Continuing Operations
(dollars in millions)
4Q13 3Q13 2Q13 1Q13 4Q12
---- ---- ---- ---- ----
Net loan charge-offs $37 $37 $45 $49 $58
Net loan charge-offs to average total loans .27% .28% .34% .38% .44%
Allowance for loan and lease losses $848 $868 $876 $893 $888
Allowance for credit losses (a) 885 908 913 925 917
Allowance for loan and lease losses to period-end loans 1.56% 1.62% 1.65% 1.70% 1.68%
Allowance for credit losses to period-end loans 1.63 1.69 1.72 1.76 1.74
Allowance for loan and lease losses to nonperforming loans 166.9 160.4 134.4 137.4 131.8
Allowance for credit losses to nonperforming loans 174.2 167.8 140.0 142.3 136.1
Nonperforming loans at period end (b) $508 $541 $652 $650 $674
Nonperforming assets at period end 531 579 693 705 735
Nonperforming loans to period-end portfolio loans .93% 1.01% 1.23% 1.24% 1.28%
Nonperforming assets to period-end portfolio loans plus .97 1.08 1.30 1.34 1.39
OREO and other nonperforming assets
(a) Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related commitments.
(b) December 31, 2013, September 30, 2013, June 30, 2013, March 31, 2013, and December 31, 2012 amounts exclude $16 million, $18 million, $19 million, $22 million, and $23 million, respectively, of purchased credit impaired loans acquired in July 2012.
Summary of Loan and Lease Loss Experience From Continuing Operations
(dollars in millions)
Three months ended Twelve months ended
-------------------
12-31-13 9-30-13 12-31-12 12-31-13 12-31-12
-------- ------- -------- -------- --------
Average loans outstanding $53,608 $53,271 $51,859 $53,054 $50,362
======= ======= ======= ======= =======
Allowance for loan and lease losses at beginning of period $868 $876 $888 $888 $1,004
Loans charged off:
Commercial, financial and agricultural 18 15 15 62 80
Real estate - commercial mortgage 2 2 33 20 102
Real estate - construction 1 - 5 3 24
--- --- --- --- ---
Total commercial real estate loans 3 2 38 23 126
Commercial lease financing 2 17 7 27 27
--- --- --- --- ---
Total commercial loans 23 34 60 112 233
Real estate - residential mortgage (a) 7 3 8 20 27
Home equity:
Key Community Bank (a) 12 14 (14) 62 99
Other (a) 4 4 12 20 35
--- --- --- --- ---
Total home equity loans 16 18 (2) 82 134
Consumer other - Key Community Bank 7 8 9 31 38
Credit cards 5 9 9 30 11
Consumer other:
Marine (a) 7 5 18 29 59
Other (a) 1 1 2 4 6
--- --- --- --- ---
Total consumer other 8 6 20 33 65
--- --- --- --- ---
Total consumer loans 43 44 44 196 275
--- --- --- --- ---
Total loans charged off 66 78 104 308 508
Recoveries:
Commercial, financial and agricultural 9 11 23 39 63
Real estate - commercial mortgage 7 10 5 27 23
Real estate - construction - 6 2 14 5
--- --- --- --- ---
Total commercial real estate loans 7 16 7 41 28
Commercial lease financing 5 2 4 15 22
--- --- --- --- ---
Total commercial loans 21 29 34 95 113
Real estate - residential mortgage 1 1 1 2 3
Home equity:
Key Community Bank 2 2 4 10 11
Other 1 2 1 6 5
--- --- --- --- ---
Total home equity loans 3 4 5 16 16
Consumer other - Key Community Bank 2 1 1 7 6
Credit cards - 1 - 3 -
Consumer other:
Marine 2 4 4 15 22
Other - 1 1 2 3
--- --- --- --- ---
Total consumer other 2 5 5 17 25
--- --- --- --- ---
Total consumer loans 8 12 12 45 50
--- --- --- --- ---
Total recoveries 29 41 46 140 163
--- --- --- --- ---
Net loan charge-offs (37) (37) (58) (168) (345)
Provision (credit) for loan and lease losses 19 28 57 130 229
Foreign currency translation adjustment (2) 1 1 (2) -
--- --- --- --- ---
Allowance for loan and lease losses at end of period $848 $868 $888 $848 $888
==== ==== ==== ==== ====
Liability for credit losses on lending-related commitments at beginning of period $40 $37 $43 $29 $45
Provision (credit) for losses on lending-related commitments (3) 3 (14) 8 (16)
--- --- --- --- ---
Liability for credit losses on lending-related commitments at end of period (b) $37 $40 $29 $37 $29
=== === === === ===
Total allowance for credit losses at end of period $885 $908 $917 $885 $917
==== ==== ==== ==== ====
Net loan charge-offs to average total loans .27% .28% .44% .32% .69%
Allowance for loan and lease losses to period-end loans 1.56 1.62 1.68 1.56 1.68
Allowance for credit losses to period-end loans 1.63 1.69 1.74 1.63 1.74
Allowance for loan and lease losses to nonperforming loans 166.9 160.4 131.8 166.9 131.8
Allowance for credit losses to nonperforming loans 174.2 167.8 136.1 174.2 136.1
Discontinued operations - education lending business:
Loans charged off $13 $14 $19 $55 $75
Recoveries 4 5 4 18 17
--- --- --- --- ---
Net loan charge-offs $(9) $(9) $(15) $(37) $(58)
=== === ==== ==== ====
(a) Further review of the loans subject to updated regulatory guidance in the third quarter of 2012 was performing during the fourth quarter of 2012. This review resulted in a partial home equity loan charge-off reversal and reallocation of the updated charge-off amounts to other consumer
loan portfolios. Home equity - Key Community Bank charge-offs were $18 million prior to adjustments made from this review. Prior to reallocation, Real estate - residential mortgage, Home equity - Other, Consumer other - Marine, and Consumer other - Other charge-offs were $3 million, $6
million, $11 million, and $1 million, respectively.
(b) Included in "accrued expense and other liabilities" on the balance sheet.
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
(dollars in millions)
12-31-13 9-30-13 6-30-13 3-31-13 12-31-12
Commercial, financial and agricultural $77 $102 $146 $142 $99
Real estate - commercial mortgage 37 58 106 114 120
Real estate - construction 14 17 26 27 56
--- --- --- --- ---
Total commercial real estate loans 51 75 132 141 176
Commercial lease financing 19 22 14 12 16
--- --- --- --- ---
Total commercial loans 147 199 292 295 291
Real estate - residential mortgage 107 98 94 96 103
Home equity:
Key Community Bank 205 198 205 199 210
Other 15 13 16 18 21
--- --- --- --- ---
Total home equity loans 220 211 221 217 231
Consumer other - Key Community Bank 3 2 3 3 2
Credit cards 4 4 11 13 11
Consumer other:
Marine 26 25 30 25 34
Other 1 2 1 1 2
--- --- --- --- ---
Total consumer other 27 27 31 26 36
--- --- --- --- ---
Total consumer loans 361 342 360 355 383
--- --- --- --- ---
Total nonperforming loans (a) 508 541 652 650 674
Nonperforming loans held for sale 1 13 14 23 25
OREO 15 15 18 21 22
Other nonperforming assets 7 10 9 11 14
--- --- --- --- ---
Total nonperforming assets $531 $579 $693 $705 $735
==== ==== ==== ==== ====
Accruing loans past due 90 days or more $71 $90 $80 $83 $78
Accruing loans past due 30 through 89 days 318 288 251 368 424
Restructured loans - accruing and nonaccruing (b) 338 349 311 294 320
Restructured loans included in nonperforming loans (b) 214 228 195 178 249
Nonperforming assets from discontinued operations - 25 23 19 15 20
education lending business
Nonperforming loans to period-end portfolio loans .93% 1.01% 1.23% 1.24% 1.28%
Nonperforming assets to period-end portfolio loans .97 1.08 1.30 1.34 1.39
plus OREO and other nonperforming assets
(a) December 31, 2013, September
30, 2013, June 30, 2013, March 31,
2013, and December 31, 2012 amounts
exclude $16 million, $18 million,
$19 million, $22 million, and $23
million, respectively, of purchased
credit impaired loans acquired in
July 2012.
(b) Restructured loans (i.e.,
troubled debt restructurings) are
those for which Key, for reasons
related to a borrower's financial
difficulties, grants a concession
to the borrower that it would not
otherwise consider. These
concessions are made to improve the
collectability of the loan and
generally take the form of a
reduction of the interest rate,
extension of the maturity date or
reduction in the principal balance.
Summary of Changes in Nonperforming Loans From Continuing Operations
(in millions)
4Q13 3Q13 2Q13 1Q13 4Q12
---- ---- ---- ---- ----
Balance at beginning of period $541 $652 $650 $674 $653
Loans placed on nonaccrual status 129 161 160 278 288
Charge-offs (66) (78) (74) (91) (104)
Loans sold (19) (61) (5) (42) (44)
Payments (46) (43) (36) (83) (78)
Transfers to OREO (5) (2) (7) (7) (7)
Transfers to nonperforming loans held for sale - - - - (8)
Transfers to other nonperforming assets - - - - (1)
Loans returned to accrual status (26) (88) (36) (79) (25)
--- --- --- --- ---
Balance at end of period (a) $508 $541 $652 $650 $674
==== ==== ==== ==== ====
(a) December 31, 2013, September 30, 2013, June 30, 2013, March 31, 2013, and December 31, 2012 amounts exclude $16 million, $18 million, $19 million, $22 million, and $23 million, respectively, of purchased credit impaired loans acquired in July 2012.
Summary of Changes in Nonperforming Loans Held For Sale From Continuing Operations
(in millions)
4Q13 3Q13 2Q13 1Q13 4Q12
---- ---- ---- ---- ----
Balance at beginning of period $13 $14 $23 $25 $19
Transfers in - - - - 8
Net advances / (payments) (1) (1) (1) - (1)
Loans sold (11) - (8) - (1)
Valuation adjustments - - - (2) -
Balance at end of period $1 $13 $14 $23 $25
=== === === === ===
Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations
(in millions)
4Q13 3Q13 2Q13 1Q13 4Q12
---- ---- ---- ---- ----
Balance at beginning of period $15 $18 $21 $22 $29
Properties acquired - nonperforming loans 5 2 7 7 7
Valuation adjustments (1) (1) (2) (3) (2)
Properties sold (5) (4) (8) (5) (12)
--- --- --- --- ---
Balance at end of period $14 $15 $18 $21 $22
=== === === === ===
Line of Business Results
(dollars in millions)
Percent change 4Q13 vs.
4Q13 3Q13 2Q13 1Q13 4Q12 3Q13 4Q12
---- ---- ---- ---- ---- ---- ----
Key Community Bank
Summary of operations
Total revenue (TE) $534 $551 $556 $549 $580 (3.1)% (7.9)%
Provision (credit) for loan and lease losses 33 24 41 59 26 37.5 26.9
Noninterest expense 456 441 456 439 502 3.4 (9.2)
Net income (loss) attributable to Key 28 54 37 32 33 (48.1) (15.2)
Average loans and leases 29,596 29,495 29,161 28,977 28,629 .3 3.4
Average deposits 50,409 49,652 49,473 49,349 49,839 1.5 1.1
Net loan charge-offs 31 27 42 47 12 14.8 158.3
Net loan charge-offs to average total loans .42% .36% .58% .66% .17% N/A N/A
Nonperforming assets at period end $396 $383 $476 $481 $444 3.4 (10.8)
Return on average allocated equity 3.97% 7.49% 5.16% 4.53% 4.56% N/A N/A
Average full-time equivalent employees 7,805 7,990 8,316 8,709 8,869 (2.3) (12.0)
Key Corporate Bank
Summary of operations
Total revenue (TE) $407 $377 $375 $379 $402 8.0% 1.2%
Provision (credit) for loan and lease losses (13) 13 (10) 4 11 N/M N/M
Noninterest expense 225 217 202 210 207 3.7 8.7
Net income (loss) attributable to Key 127 96 116 105 115 32.3 10.4
Average loans and leases 21,013 20,586 20,133 20,044 19,481 2.1 7.9
Average loans held for sale 668 422 466 409 538 58.3 24.2
Average deposits 17,372 16,125 15,606 13,968 13,681 7.7 27.0
Net loan charge-offs 1 7 (6) (1) 21 (85.7) (95.2)
Net loan charge-offs to average total loans .02% .13% (.12)% (.02)% .43% N/A N/A
Nonperforming assets at period end $59 $119 $136 $136 $174 (50.4) (66.1)
Return on average allocated equity 31.35% 23.32% 28.58% 26.37% 28.02% N/A N/A
Average full-time equivalent employees 1,968 2,018 1,955 1,930 1,920 (2.5) 2.5
TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful
SOURCE KeyCorp
