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Section 1: 8-K (8-K)

Document


UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): April 20, 2017
2000175362_keylogoa03.jpg
 
(Exact name of registrant as specified in charter)
 
 
 
 
 
 
Ohio
 
001-11302
 
34-6542451
(State or other jurisdiction of incorporation)
 
Commission File Number
 
(I.R.S. Employer Identification No.)
 
 
 
127 Public Square, Cleveland, Ohio
 
44114-1306
(Address of principal executive offices)
 
(Zip Code)
 
(216) 689-3000
Registrant’s telephone number, including area code
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐





Item 2.02
Results of Operations and Financial Condition.

On April 20, 2017, KeyCorp issued a press release announcing its financial results for the three-month period ended March 31, 2017 (the “Press Release”), and posted on its website its first quarter 2017 Supplemental Information Package (the “Supplemental Information Package”). The Press Release and Supplemental Information Package are being furnished as Exhibit 99.1 and Exhibit 99.2, respectively.

The information in the preceding paragraph, as well as Exhibit 99.1 and Exhibit 99.2 referenced therein, shall not be deemed “filed” for purposes of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”).

KeyCorp’s Consolidated Balance Sheets and Consolidated Statements of Income (collectively, the “Financial Statements”), included as part of the Press Release, are filed as Exhibit 99.3 to this report. Exhibit 99.3 is deemed “filed” for purposes of Section 18 of the Exchange Act and, therefore, may be incorporated by reference in filings under the Securities Act.

Item 9.01
Financial Statements and Exhibits.

(d)
Exhibits

The following exhibits are furnished, or filed in the case of Exhibit 99.3, herewith:

99.1
Press Release, dated April 20, 2017, announcing financial results for the three-month period ended March 31, 2017.

99.2
Supplemental Information Package reviewed during the conference call and webcast.

99.3
Financial Statements.






SIGNATURE
 
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
 
KEYCORP
 
 
(Registrant)
 
 
 
 
 
 
Date: April 20, 2017
 
/s/ Douglas M. Schosser
 
 
By: Douglas M. Schosser
 
 
Chief Accounting Officer
 
 
 



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
2000175362_a2q16keycorper1a03.jpgNEWS
FOR IMMEDIATE RELEASE

KEYCORP REPORTS FIRST QUARTER 2017
NET INCOME OF $296 MILLION, OR $.27 PER COMMON SHARE; EARNINGS PER COMMON SHARE OF $.32, EXCLUDING $.05 OF MERGER-RELATED CHARGES

Positive operating leverage compared to the prior year and prior quarter

Noninterest expense, excluding merger-related charges, down 8% from 4Q16, resulting in a cash efficiency ratio of 60.4% in 1Q17

Significant progress on merger synergies; expect to achieve $450 million in acquisition
cost savings by early 2018

Return on average tangible common equity, excluding merger-related charges, of 12.9% for 1Q17

CLEVELAND, April 20, 2017 – KeyCorp (NYSE: KEY) today announced first quarter net income from continuing operations attributable to Key common shareholders of $296 million, or $.27 per common share, compared to $213 million or $.20 per common share, for the fourth quarter of 2016, and $182 million, or $.22 per common share, for the first quarter of 2016. During the first quarter of 2017, Key incurred merger-related charges totaling $81 million, or $.05 per common share, compared to $198 million, or $.11 per common share, in the fourth quarter of 2016, and $24 million, or $.02 per common share, in the first quarter of 2016. Excluding merger-related charges, earnings per common share were $.32 for the first quarter of 2017, $.31 for the fourth quarter of 2016, and $.24 for the first quarter of 2016.

"Key’s strong first quarter results reflect continued business momentum and our success in realizing value from our First Niagara acquisition,” said Chairman and Chief Executive Officer Beth Mooney. “We generated positive operating leverage compared to both the prior year and previous quarter. Revenue relative to the year-ago period benefited from higher net interest income, positive momentum in our fee-based businesses and the addition of over one million newly acquired consumer and business clients. We have been successfully growing and expanding client relationships in both our Community Bank and Corporate Bank, and we remain on a path to deliver revenue synergies from our acquisition.”

“Expenses reflect our continued focus on managing costs throughout the Key franchise, as well as realizing the targeted savings from First Niagara,” Mooney continued. “We remain on track to achieve our initial $400 million cost savings target by the end of the second quarter and expect to reach $450 million by early 2018. In the first quarter, our cash efficiency ratio, excluding merger-related charges, improved to 60.4%.”

“Our capital position remains strong, and this quarter, we generated a return on average tangible common equity of 12.9%, excluding merger-related charges,” Mooney added.



KeyCorp Reports First Quarter 2017 Profit     
April 20, 2017
Page 2


Selected Financial Highlights
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions, except per share data
 
 
 
 
Change 1Q17 vs.
 
 
1Q17
4Q16
1Q16
 
4Q16
1Q16
Income (loss) from continuing operations attributable to Key common shareholders
$
296

$
213

$
182

 
39.0
%
62.6
 %
 Income (loss) from continuing operations attributable to Key common shareholders per
common share — assuming dilution
.27

.20

.22

 
35.0

22.7

Return on average total assets from continuing operations
.99
%
.69
%
.80
%
 
N/A

N/A

 Common Equity Tier 1 ratio (non-GAAP) (a), (b)
9.87

9.54

11.07

 
N/A

N/A

Book value at period end
$
12.71

$
12.58

$
12.79

 
1.0
%
(.6
)%
Net interest margin (TE) from continuing operations
3.13
%
3.12
%
2.89
%
 
N/A

N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
The table entitled “GAAP to Non-GAAP Reconciliations” in the attached financial supplement presents the computations of certain financial measures related to “Common Equity Tier 1.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. For further information on the Regulatory Capital Rules, see the “Capital” section of this release.
(b)
3/31/2017 ratio is estimated.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TE = Taxable Equivalent, N/A = Not Applicable
 
 
 
 
 
 

INCOME STATEMENT HIGHLIGHTS
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q17 vs.
 
1Q17
4Q16
1Q16
 
4Q16
1Q16
Net interest income (TE)
$
929

$
948

$
612

 
(2.0
)%
51.8
%
Noninterest income
577

618

431

 
(6.6
)%
33.9
%
Total revenue
$
1,506

$
1,566

$
1,043

 
(3.8
)%
44.4
%
 
 
 
 
 
 
 

TE = Taxable Equivalent

First quarter 2017 net interest income included $53 million of purchase accounting accretion related to the acquisition of First Niagara. This compares to $92 million of purchase accounting accretion in the fourth quarter of 2016, which included $34 million related to the refinement of third quarter 2016 purchase accounting estimates.

Taxable-equivalent net interest income was $929 million for the first quarter of 2017, and the net interest margin was 3.13%, compared to taxable-equivalent net interest income of $612 million and a net interest margin of 2.89% for the first 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 fourth quarter of 2016, taxable-equivalent net interest income decreased by $19 million, and the net interest margin increased by one basis point. The decline in net interest income reflects a decline in purchase accounting accretion and two fewer days in the quarter, partly offset by higher earning asset yields. The net interest margin benefited from higher earning asset yields and lower levels of liquidity, offset by a decline in purchase accounting accretion.

Excluding purchase accounting accretion, taxable-equivalent net interest income increased $20 million from the fourth quarter of 2016 and $264 million from the first quarter of 2016.




KeyCorp Reports First Quarter 2017 Profit     
April 20, 2017
Page 3


Noninterest Income
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q17 vs.
 
1Q17
4Q16
1Q16
 
4Q16
1Q16
Trust and investment services income
$
135

$
123

$
109

 
9.8
 %
23.9
%
Investment banking and debt placement fees
127

157

71

 
(19.1
)
78.9

Service charges on deposit accounts
87

84

65

 
3.6

33.8

Operating lease income and other leasing gains
23

21

17

 
9.5

35.3

Corporate services income
54

61

50

 
(11.5
)
8.0

Cards and payments income
65

69

46

 
(5.8
)
41.3

Corporate-owned life insurance income
30

40

28

 
(25.0
)
7.1

Consumer mortgage income
6

6

2

 

200.0

Mortgage servicing fees
18

20

12

 
(10.0
)
50.0

Net gains (losses) from principal investing
1

4


 
(75.0
)
N/M

Other income
31

33

31

 
(6.1
)

Total noninterest income
$
577

$
618

$
431

 
(6.6
)%
33.9
%
Merger-related charges

9


 
N/M

N/M

Total noninterest income excluding merger-related charges
$
577

$
609

$
431

 
(5.3
)%
33.9
%
 
 
 
 
 
 
 

N/M = Not Meaningful


Key’s noninterest income was $577 million for the first quarter of 2017, compared to $431 million for the year-ago quarter. The most notable increase was in investment banking and debt placement fees, which increased $56 million, related to improved capital markets conditions and activity from the year-ago period. Trust and investment services income, cards and payments income, and service charges on deposit accounts also contributed to the growth, largely related to the First Niagara acquisition.

Compared to the fourth quarter of 2016, noninterest income decreased by $41 million. The decrease was primarily attributable to lower investment banking and debt placement fees, as well as a decline in corporate-owned life insurance income, which is seasonally lower in the first quarter. Corporate services income also decreased $7 million related to lower loan and derivative trading income. An increase of $12 million in trust and investment services income related to higher insurance revenue and fixed income trading volume slightly offset these declines.

Noninterest Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q17 vs.
 
1Q17
4Q16
1Q16
 
4Q16
1Q16
Personnel expense
$
556

$
648

$
404

 
(14.2
)%
37.6
%
Nonpersonnel expense
457

572

299

 
(20.1
)
52.8

     Total noninterest expense
$
1,013

$
1,220

$
703

 
(17.0
)
44.1

 
 
 
 
 


 
Merger-related charges
81

207

24

 
(60.9
)
237.5

     Total noninterest expense excluding merger-related charges
$
932

$
1,013

$
679

 
(8.0
)%
37.3
%
 
 
 
 
 
 
 

N/M = Not Meaningful


Key’s noninterest expense was $1.0 billion for the first quarter of 2017, which included $81 million of merger-related charges. The merger-related charges were primarily made up of $51 million of nonpersonnel expense, largely recognized in marketing, net occupancy, business services and professional fees, and other expense reflecting a $20 million philanthropic contribution related to First Niagara. The remaining $30 million was personnel expense, related to ongoing integration activities. In the fourth quarter of 2016, noninterest expense included $207 million of merger-related charges, while $24 million of merger-related charges were incurred in the first quarter of 2016.



KeyCorp Reports First Quarter 2017 Profit     
April 20, 2017
Page 4



Excluding merger-related charges, noninterest expense was $253 million higher than the first quarter of last year. The increase from the prior year, reflected in both personnel and nonpersonnel expense, was primarily driven by the acquisition of First Niagara. Higher incentive compensation related to stronger capital markets performance also contributed to the year-over-year increase.

Compared to the fourth quarter of 2016, noninterest expense, excluding merger-related charges, decreased by $81 million. The decrease primarily reflects cost savings related to the First Niagara acquisition, reflected in both personnel and nonpersonnel expense. Lower incentive and stock-based compensation and the absence of a pension settlement charge also contributed to the decline. These decreases were partially offset by seasonally higher employee benefits expenses.

BALANCE SHEET HIGHLIGHTS

Average Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q17 vs.
 
1Q17
4Q16
1Q16
 
4Q16
1Q16
Commercial and industrial (a)
$
40,002

$
39,495

$
31,590

 
1.3
 %
26.6
%
Other commercial loans
22,175

21,617

13,111

 
2.6

69.1

Home equity loans
12,611

12,812

10,240

 
(1.6
)
23.2

Other consumer loans
11,345

11,436

5,215

 
(.8
)
117.5

Total loans
$
86,133

$
85,360

$
60,156

 
.9
 %
43.2
%
 
 
 
 
 
 
 

(a)
Commercial and industrial average loan balances include $114 million, $119 million, and $85 million of assets from commercial credit cards at March 31, 2017, December 31, 2016, and March 31, 2016, respectively.


Average loans were $86.1 billion for the first quarter of 2017, an increase of $26 billion compared to the first quarter of 2016, primarily reflecting the impact of the First Niagara acquisition and growth in commercial and industrial loans.

Compared to the fourth quarter of 2016, average loans increased by $773 million, driven by a $507 million increase in commercial and industrial loans, and a $416 million increase in commercial mortgage loans. The growth reflects overall business activity and lower payoffs in Key’s Commercial Real Estate line of business. Consumer loans decreased $292 million, mostly related to continued decline in the home equity loan portfolio, largely the result of paydowns on home equity lines of credit.
 
Average Deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q17 vs.
 
 
1Q17
4Q16
1Q16
 
4Q16
1Q16
Non-time deposits
$
91,745

$
94,414

$
65,637

 
(2.8
)%
39.8
%
Certificates of deposit ($100,000 or more)
5,627

5,428

2,761

 
3.7

103.8

Other time deposits
4,706

4,849

3,200

 
(2.9
)
47.1

 
Total deposits
$
102,078

$
104,691

$
71,598

 
(2.5
)%
42.6
%
 
 
 
 
 
 
 
 
Cost of total deposits
.23
%
.22
%
.17
%
 
N/A

N/A

 
 
 
 
 
 
 
 

N/A = Not Applicable

Average deposits totaled $102.1 billion for the first quarter of 2017, an increase of $30.5 billion compared to the year-ago quarter, primarily reflecting the acquisition of First Niagara and core deposit growth in Key’s retail banking franchise.




KeyCorp Reports First Quarter 2017 Profit     
April 20, 2017
Page 5


Compared to the fourth quarter of 2016, average deposits decreased by $2.6 billion, largely driven by a decline in escrow deposits and a targeted reduction in certain short-term commercial deposits. On a period-end basis, total deposits decreased $105 million compared to the linked-quarter, as core deposit growth in Key’s retail banking franchise largely offset the decline in escrow deposits.

ASSET QUALITY
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q17 vs.
 
1Q17
4Q16
1Q16
 
4Q16
1Q16
Net loan charge-offs
$
58

$
72

$
46

 
(19.4
)%
26.1
 %
Net loan charge-offs to average total loans
.27
%
.34
%
.31
%
 
N/A

N/A

Nonperforming loans at period end (a)
$
573

$
625

$
676

 
(8.3
)
(15.2
)
Nonperforming assets at period end (a)
623

676

692

 
(7.8
)
(10.0
)
Allowance for loan and lease losses
870

858

826

 
1.4

5.3

Allowance for loan and lease losses to nonperforming loans (a)
151.8
%
137.3
%
122.2
%
 
N/A

N/A

Provision for credit losses
$
63

$
66

$
89

 
(4.5
)%
(29.2
)%
 
 
 
 
 
 
 
(a)
Nonperforming loan balances exclude $812 million, $865 million, and $11 million of purchased credit impaired loans at March 31, 2017, December 31, 2016, and March 31, 2016, respectively.

N/A = Not Applicable

Key’s provision for credit losses was $63 million for the first quarter of 2017, compared to $89 million for the first quarter of 2016 and $66 million for the fourth quarter of 2016. Key’s allowance for loan and lease losses was $870 million, or 1.01% of total period-end loans, at March 31, 2017, compared to 1.37% at March 31, 2016, and 1.00% at December 31, 2016.

Net loan charge-offs for the first quarter of 2017 totaled $58 million, or .27% of average total loans. These results compare to $46 million, or .31%, for the first quarter of 2016, and $72 million, or .34%, for the fourth quarter of 2016.

At March 31, 2017, Key’s nonperforming loans totaled $573 million, which represented .67% of period-end portfolio loans. These results compare to 1.12% at March 31, 2016, and .73% at December 31, 2016. Nonperforming assets at March 31, 2017, totaled $623 million, and represented .72% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to 1.14% at March 31, 2016, and .79% at December 31, 2016.
 
CAPITAL

Key’s estimated risk-based capital ratios included in the following table continued to exceed all “well-capitalized” regulatory benchmarks at March 31, 2017.

Capital Ratios
 
 
 
 
 
 
 
 
3/31/2017
12/31/2016
3/31/2016
Common Equity Tier 1 (a), (b)
9.87
%
9.54
%
11.07
%
Tier 1 risk-based capital (a)
10.70

10.89

11.38

Total risk based capital (a)
12.64

12.85

13.12

Tangible common equity to tangible assets (b)
8.51

8.09

9.97

Leverage (a)
9.81

9.90

10.73

 
 
 
 
(a)
3/31/2017 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” and “Common Equity Tier 1.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. See below for further information on the Regulatory Capital Rules.





KeyCorp Reports First Quarter 2017 Profit     
April 20, 2017
Page 6


Key's capital position remained strong throughout the first quarter. As shown in the preceding table, at March 31, 2017, Key’s estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.87% and 10.70%, respectively. In addition, the tangible common equity ratio was 8.51% at March 31, 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 9.80% at March 31, 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 1Q17 vs.
 
 
1Q17
4Q16
1Q16
 
4Q16
1Q16
Shares outstanding at beginning of period
1,079,314

1,082,055

835,751

 
(.3
)%
29.1
 %
Open market repurchases and return of shares under employee compensation plans
(8,673
)
(4,380
)

 
98.0

N/M

Shares issued under employee compensation plans (net of cancellations)
6,270

1,642

6,539

 
281.9

(4.1
)
Common shares exchanged for Series A Preferred Stock
20,568



 
N/M

N/M

Common shares issued to acquire First Niagara

(3
)

 
N/M

N/M

 
Shares outstanding at end of period
1,097,479

1,079,314

842,290

 
1.7
 %
30.3
 %
 
 
 
 
 
 
 
 
N/M = Not Meaningful

On March 20, 2017, Key converted all outstanding shares of its outstanding 7.75% Non-Cumulative Perpetual Convertible Preferred Stock, Series A (NYSE: KEY.G) shares into common shares, adding approximately 21 million common shares outstanding.

Consistent with Key's 2016 Capital Plan, during the first quarter of 2017, Key declared a dividend of $.085 per common share and completed $160 million of common share repurchases, including $107 million of common share repurchases in the open market and $53 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.




KeyCorp Reports First Quarter 2017 Profit     
April 20, 2017
Page 7


Major Business Segments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q17 vs.
 
 
1Q17
4Q16
1Q16
 
4Q16
1Q16
Revenue from continuing operations (TE)
 
 
 
 
 
 
Key Community Bank
$
908

$
902

$
595

 
.7
 %
52.6
%
Key Corporate Bank
579

630

425

 
(8.1
)
36.2

Other Segments
28

38

21

 
(26.3
)
33.3

 
Total segments
1,515

1,570

1,041


(3.5
)
45.5

Reconciling Items
(9
)
(4
)
2

 
N/M

N/M

 
Total
$
1,506

$
1,566

$
1,043

 
(3.8
)%
44.4
%
 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key
 
 
 
 
 
 
Key Community Bank
$
147

$
108

$
74

 
36.1
 %
98.6
%
Key Corporate Bank
181

222

118

 
(18.5
)
53.4

Other Segments
21

34

15

 
(38.2
)
40.0

 
Total segments
349

364

207

 
(4.1
)
68.6

Reconciling Items (a)
(25
)
(131
)
(20
)
 
N/M

N/M

 
Total
$
324

$
233

$
187

 
39.1
 %
73.3
%
 
 
 
 
 
 
 
 
(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 1Q17 vs.
 
 
1Q17
4Q16
1Q16
 
4Q16
1Q16
Summary of operations
 
 
 
 
 
 
Net interest income (TE)
$
631

$
629

$
399

 
.3
 %
58.1
%
Noninterest income
277

273

196

 
1.5

41.3

 
Total revenue (TE)
908

902

595

 
.7

52.6

Provision for credit losses
47

48

42

 
(2.1
)
11.9

Noninterest expense
627

682

436

 
(8.1
)
43.8

 
Income (loss) before income taxes (TE)
234

172

117

 
36.0

100.0

Allocated income taxes (benefit) and TE adjustments
87

64

43

 
35.9

102.3

 
Net income (loss) attributable to Key
$
147

$
108

$
74

 
36.1
 %
98.6
%
 
 
 
 
 
 
 
 
Average balances
 
 
 
 
 
 
Loans and leases
$
47,036

$
47,031

$
30,789

 

52.8
%
Total assets
50,962

50,939

32,856

 

55.1

Deposits
79,393

79,358

52,803

 

50.4

 
 
 
 
 
 




Assets under management at period end
$
37,417

$
36,592

$
34,107

 
2.3
 %
9.7
%
 
 
 
 
 
 
 
 
TE = Taxable Equivalent





KeyCorp Reports First Quarter 2017 Profit     
April 20, 2017
Page 8


Additional Key Community Bank Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q17 vs.
 
 
1Q17
4Q16
1Q16
 
4Q16
1Q16
Noninterest income
 
 
 
 
 
 
Trust and investment services income
$
98

$
88

$
73

 
11.4
 %
34.2
%
Service charges on deposit accounts
75

71

54

 
5.6

38.9

Cards and payments income
55

59

43

 
(6.8
)
27.9

Other noninterest income
49

55

26

 
(10.9
)
88.5

 
Total noninterest income
$
277

$
273

$
196

 
1.5
 %
41.3
%
 
 
 
 
 
 




Average deposit balances
 
 
 
 




NOW and money market deposit accounts
$
45,027

$
44,368

$
29,432

 
1.5
 %
53.0
%
Savings deposits
5,268

5,326

2,340

 
(1.1
)
125.1

Certificates of deposit ($100,000 or more)
3,878

3,659

2,120

 
6.0

82.9

Other time deposits
4,692

4,836

3,197

 
(3.0
)
46.8

Noninterest-bearing deposits
20,528

21,169

15,714

 
(3.0
)%
30.6

 
Total deposits
$
79,393

$
79,358

$
52,803

 

50.4
%
 
 
 
 
 
 
 
 
Home equity loans
 
 
 
 
 
 
Average balance
$
12,456

$
12,560

$
10,037

 
 
 
Combined weighted-average loan-to-value ratio (at date of origination)
70
%
71
%
71
%
 
 
 
Percent first lien positions
60

57

61

 
 
 
 
 
 
 
 
 
 
 
Other data
 
 
 
 
 
 
Branches
1,216

1,217

961

 
 
 
Automated teller machines
1,594

1,593

1,249

 
 
 
 
 
 
 
 
 
 
 

Key Community Bank Summary of Operations (1Q17 vs. 1Q16)

Positive operating leverage compared to prior year
Net income increased $73 million, or 98.6%, from prior year
Average commercial and industrial loans increased $5.1 billion, or 39.3%, from the prior year
Average deposits increased $26.6 billion, or 50.4%, from the prior year

Key Community Bank recorded net income attributable to Key of $147 million for the first quarter of 2017, compared to $74 million for the year-ago quarter, benefiting from momentum in Key's core businesses, as well as the impact of the First Niagara acquisition.
Taxable-equivalent net interest income increased by $232 million, or 58.1%, from the first quarter of 2016. The increase was primarily attributable to the acquisition of First Niagara, as well as the benefit from the Federal Reserve rate increase. Average loans and leases increased $16.2 billion, or 52.8%, largely driven by a $5.1 billion, or 39.3%, increase in commercial and industrial loans. Additionally, average deposits increased $26.6 billion, or 50.4% from one year ago.
Noninterest income was up $81 million, or 41.3%, from the year-ago quarter, driven by the acquisition of First Niagara, including the addition of Key Insurance and Benefits Services. Strength in derivatives and higher assets under management balances from market growth also contributed to the increase.
The provision for credit losses increased by $5 million, or 11.9%, and net loan charge-offs increased $20 million, from the first quarter of 2016, primarily related to the acquisition of First Niagara.
Noninterest expense increased by $191 million, or 43.8%, from the year-ago quarter, largely driven by the acquisition of First Niagara, as well as core business activity and investments. Personnel expense increased $75 million, while non-personnel expense increased by $116 million, including higher intangible amortization expense and higher FDIC assessment expense.



KeyCorp Reports First Quarter 2017 Profit     
April 20, 2017
Page 9



Key Corporate Bank
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q17 vs.
 
 
1Q17
4Q16
1Q16
 
4Q16
1Q16
Summary of operations
 
 
 
 
 
 
Net interest income (TE)
$
304

$
333

$
218

 
(8.7
)%
39.4
 %
Noninterest income
275

297

207

 
(7.4
)
32.9

 
Total revenue (TE)
579

630

425

 
(8.1
)
36.2

Provision for credit losses
17

20

43

 
(15.0
)
(60.5
)
Noninterest expense
303

326

237

 
(7.1
)
27.8

 
Income (loss) before income taxes (TE)
259

284

145

 
(8.8
)
78.6

Allocated income taxes and TE adjustments
78

63

27

 
23.8

188.9

 
Net income (loss)
181

221

118

 
(18.1
)
53.4

Less: Net income (loss) attributable to noncontrolling interests

(1
)

 
N/M

N/M

 
Net income (loss) attributable to Key
$
181

$
222

$
118

 
(18.5
)%
53.4
 %
 
 
 
 
 
 
 
 
Average balances
 
 
 
 
 
 
Loans and leases
$
37,737

$
36,770

$
27,722

 
2.6
 %
36.1
 %
Loans held for sale
1,097

1,223

811

 
(10.3
)
35.3

Total assets
44,167

43,210

33,413

 
2.2

32.2

Deposits
21,003

23,172

18,074

 
(9.4
)%
16.2
 %
 
 
 
 
 
 
 
 
TE = Taxable Equivalent, N/M = Not Meaningful

Additional Key Corporate Bank Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q17 vs.
 
 
1Q17
4Q16
1Q16
 
4Q16
1Q16
Noninterest income
 
 
 
 
 
 
Trust and investment services income
$
37

$
35

$
36

 
5.7
 %
2.8
 %
Investment banking and debt placement fees
124

154

70

 
(19.5
)
77.1

Operating lease income and other leasing gains
21

18

13

 
16.7

61.5

 
 
 
 
 
 
 
 
Corporate services income
38

43

38

 
(11.6
)

Service charges on deposit accounts
12

12

11

 

9.1

Cards and payments income
10

9

3

 
11.1

233.3

 
Payments and services income
60

64

52

 
(6.3
)
15.4

 
 
 
 
 
 
 
 
Mortgage servicing fees
16

18

12

 
(11.1
)
33.3

Other noninterest income
17

8

24

 
112.5

(29.2
)
 
Total noninterest income
$
275

$
297

$
207

 
(7.4
)%
32.9
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Key Corporate Bank Summary of Operations (1Q17 vs. 1Q16)

Average loan and lease balances up $10 billion, or 36.1%, from the prior year
Revenue up $154 million, or 36.2%, from the prior year
Noninterest income up $68 million, or 32.9%, from the prior year

Key Corporate Bank recorded net income attributable to Key of $181 million for the first quarter of 2017, compared to $118 million for the same period one year ago.

Taxable-equivalent net interest income increased by $86 million, or 39.4%, compared to the first quarter of 2016. Average loan and lease balances increased $10 billion, or 36.1%, from the year-ago quarter, primarily driven by the First Niagara acquisition as well as growth in commercial and industrial loans.



KeyCorp Reports First Quarter 2017 Profit     
April 20, 2017
Page 10


Average deposit balances increased $2.9 billion, or 16.2%, from the year-ago quarter, mostly driven by the First Niagara acquisition.

Noninterest income was up $68 million, or 32.9%, from the prior year. This growth was mostly due to $54 million of higher investment banking and debt placement fees related to improved capital markets conditions and activity from the year-ago period, as well as an increase of $8 million in operating lease income and other leasing gains related to higher originations. Additional increases of $7 million in cards and payments income and $4 million in mortgage servicing fees were partially offset by a $7 million decrease in other noninterest income.

The provision for credit losses decreased $26 million, or 60.5%, compared to the first quarter of 2016 due to $4 million of lower net loan charge-offs and improvement in the oil and gas portfolio.

Noninterest expense increased by $66 million, or 27.8%, from the first quarter of 2016. The increase from the prior year, reflected in both personnel and nonpersonnel expense, was largely driven by the acquisition of First Niagara, higher performance-based compensation and various other items, including operating lease and cards and payments expenses.


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 $21 million for the first quarter of 2017, compared to $15 million for the same period last year, driven by increases in corporate-owned life insurance income, net gains on principal investing, and other 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 $134.5 billion at March 31, 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.




KeyCorp Reports First Quarter 2017 Profit     
April 20, 2017
Page 11


CONTACTS:
 
 
 
ANALYSTS
MEDIA
Vernon L. Patterson
Jack Sparks
216.689.0520
720.904.4554
Vernon_Patterson@KeyBank.com
Jack_Sparks@KeyBank.com
 
 Twitter: @keybank_news
Kelly L. Dillon
 
216.689.3133
 
Kelly_L_Dillon@KeyBank.com
 
 
 
Melanie S. Misconish
 
216.689.4545
 
Melanie_S_Misconish@KeyBank.com
 
 
 
INVESTOR
KEY MEDIA
RELATIONS: www.key.com/ir
NEWSROOM: www.key.com/newsroom
  
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, April 20, 2017. An audio replay of the call will be available through April 30, 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.

*****




KeyCorp Reports First Quarter 2017 Profit     
April 20, 2017
Page 12





KeyCorp
First Quarter 2017
Financial Supplement


    
Page
 
Financial Highlights
GAAP to Non-GAAP Reconciliation
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
Noninterest Expense
Personnel Expense
Loan Composition
Loans Held for Sale Composition
Summary of Changes in Loans Held for Sale
Asset Quality Statistics From Continuing Operations
Summary of Loan and Lease Loss Experience From Continuing Operations
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
Summary of Changes in Nonperforming Loans From Continuing Operations
Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations
Line of Business Results



KeyCorp Reports First Quarter 2017 Profit     
April 20, 2017
Page 13


Financial Highlights
(dollars in millions, except per share amounts)
 
 
 
Three months ended
 
 
 
3/31/2017
 
12/31/2016
 
3/31/2016
Summary of operations
 
 
 
 
 
 
Net interest income (TE)
$
929

 
$
948

 
$
612

 
Noninterest income
577

 
618

 
431

 
 
Total revenue (TE)
1,506

 
1,566

 
1,043

 
Provision for credit losses
63

 
66

 
89

 
Noninterest expense
1,013

 
1,220

 
703

 
Income (loss) from continuing operations attributable to Key
324

 
233

 
187

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

 
(4
)
 
1

 
Net income (loss) attributable to Key
324

 
229

 
188

 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
296

 
213

 
182

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

 
(4
)
 
1

 
Net income (loss) attributable to Key common shareholders
296

 
209

 
183

 
 
 
 
 
 
 
 
Per common share
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
$
.28

 
$
.20

 
$
.22

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

 

 

 
Net income (loss) attributable to Key common shareholders (b)
.28

 
.20

 
.22

 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution
.27

 
.20

 
.22

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

 

 

 
Net income (loss) attributable to Key common shareholders — assuming dilution (b)
.27

 
.19

 
.22

 
 
 
 
 
 
 
 
 
Cash dividends declared per common share
.085

 
.085

 
.075

 
Book value at period end
12.71

 
12.58

 
12.79

 
Tangible book value at period end
10.21

 
9.99

 
11.52

 
Market price at period end
17.78

 
18.27

 
11.04

 
 
 
 
 
 
 
 
Performance ratios
 
 
 
 
 
 
From continuing operations:
 
 
 
 
 
 
Return on average total assets
.99
%
 
.69
%
 
.80
%
 
Return on average common equity
8.76

 
6.22

 
6.86

 
Return on average tangible common equity (c)
10.98

 
7.88

 
7.64

 
Net interest margin (TE)
3.13

 
3.12

 
2.89

 
Cash efficiency ratio (c)
65.8

 
76.2

 
66.6

 
 
 
 
 
 
 
 
 
From consolidated operations:
 
 
 
 
 
 
Return on average total assets
.98
%
 
.67
%
 
.79
%
 
Return on average common equity
8.76

 
6.10

 
6.90

 
Return on average tangible common equity (c)
10.98

 
7.73

 
7.68

 
Net interest margin (TE)
3.11

 
3.09

 
2.83

 
Loan to deposit (d)
85.6

 
85.2

 
85.7

 
 
 
 
 
 
 
 
Capital ratios at period end
 
 
 
 
 
 
Key shareholders’ equity to assets
11.14
%
 
11.17
%
 
11.25
%
 
Key common shareholders’ equity to assets
10.37

 
9.95

 
10.95

 
Tangible common equity to tangible assets (c)
8.51

 
8.09

 
9.97

 
Common Equity Tier 1 (c), (e)
9.87

 
9.54

 
11.07

 
Tier 1 risk-based capital (e)
10.70

 
10.89

 
11.38

 
Total risk-based capital (e)
12.64

 
12.85

 
13.12

 
Leverage (e)
9.81

 
9.90

 
10.73

 
 
 
 
 
 
 
 



KeyCorp Reports First Quarter 2017 Profit     
April 20, 2017
Page 14


 
 
 
 
 
 
Financial Highlights (continued)
(dollars in millions)
 
 
 
Three months ended
 
 
 
3/31/2017
 
12/31/2016
 
3/31/2016
Asset quality — from continuing operations
 
 
 
 
 
 
Net loan charge-offs
$
58

 
$
72

 
$
46

 
Net loan charge-offs to average loans
.27
%
 
.34
%
 
.31
%
 
Allowance for loan and lease losses
$
870

 
$
858

 
$
826

 
Allowance for credit losses
918

 
913

 
895

 
Allowance for loan and lease losses to period-end loans
1.01
%
 
1.00
%
 
1.37
%
 
Allowance for credit losses to period-end loans
1.07

 
1.06

 
1.48

 
Allowance for loan and lease losses to nonperforming loans (f)
151.8

 
137.3

 
122.2

 
Allowance for credit losses to nonperforming loans (f)
160.2

 
146.1

 
132.4

 
Nonperforming loans at period end (f)
$
573

 
$
625

 
$
676

 
Nonperforming assets at period end (f)
623

 
676

 
692

 
Nonperforming loans to period-end portfolio loans (f)
.67
%
 
.73
%
 
1.12
%
 
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (f)
.72

 
.79

 
1.14

 
 
 
 
 
 
 
 
Trust assets
 
 
 
 
 
 
Assets under management
$
37,417

 
$
36,592

 
$
34,107

 
 
 
 
 
 
 
 
Other data
 
 
 
 
 
 
Average full-time equivalent employees
18,386

 
18,849

 
13,403

 
Branches
1,216

 
1,217

 
961

 
 
 
 
 
 
 
 
Taxable-equivalent adjustment
$
11

 
$
10

 
$
8


(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,” “Common Equity Tier 1,” and “cash efficiency.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. For further information on the Regulatory Capital Rules, see the “Capital” section of this release.

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

(e)
3/31/2017 ratio is estimated.

(f)
Nonperforming loan balances exclude $812 million, $865 million, and $11 million of purchased credit impaired loans at March 31, 2017, December 31, 2016, and March 31, 2016, respectively.

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



KeyCorp Reports First Quarter 2017 Profit     
April 20, 2017
Page 15


GAAP to Non-GAAP Reconciliations
(dollars in millions)

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

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

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

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

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

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

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.
 
 
 
 
Three months ended
 
 
 
 
3/31/2017
12/31/2016
3/31/2016
Tangible common equity to tangible assets at period end
 
 
 
 
Key shareholders’ equity (GAAP)
$
14,976

$
15,240

$
11,066

 
Less:
Intangible assets (a)
2,751

2,788

1,077

 
 
Preferred Stock (b)
1,009

1,640

281

 
 
Tangible common equity (non-GAAP)
$
11,216

$
10,812

$
9,708

 
 
 
 
 
 
 
 
Total assets (GAAP)
$
134,476

$
136,453

$
98,402

 
Less:
Intangible assets (a)
2,751

2,788

1,077

 
 
Tangible assets (non-GAAP)
$
131,725

$
133,665

$
97,325

 
 
 
 
 
 
 
 
Tangible common equity to tangible assets ratio (non-GAAP)
8.51
%
8.09
%
9.97
%
 
 
 
 
 
 
 
Common Equity Tier 1 at period end
 
 
 
 
Key shareholders’ equity (GAAP)
$
14,976

$
15,240

$
11,066

 
Less:
Preferred Stock (b)
1,009

1,640

281

 
 
Common Equity Tier 1 capital before adjustments and deductions
13,967

13,600

10,785

 
Less:
Goodwill, net of deferred taxes
2,386

2,405

1,033

 
 
Intangible assets, net of deferred taxes
189

155

35

 
 
Deferred tax assets
6

4

1

 
 
Net unrealized gains (losses) on available-for-sale securities, net of deferred taxes
(179
)
(185
)
70

 
 
Accumulated gains (losses) on cash flow hedges, net of deferred taxes
(75
)
(52
)
46

 
 
Amounts in accumulated other comprehensive income (loss) attributed to
 
 
 
 
 
 
pension and postretirement benefit costs, net of deferred taxes
(336
)
(339
)
(365
)
 
 
Total Common Equity Tier 1 capital (c)
$
11,976

$
11,612

$
9,965

 
 
 
 
 
 
 
 
Net risk-weighted assets (regulatory) (c)
$
121,305

$
121,671

$
90,014

 
 
 
 
 
 
 
 
Common Equity Tier 1 ratio (non-GAAP) (c)
9.87
%
9.54
%
11.07
%
 
 
 
 
 
 
 
Pre-provision net revenue
 
 
 
 
Net interest income (GAAP)
$
918

$
938

$
604

 
Plus:
Taxable-equivalent adjustment
11

10

8

 
 
Noninterest income
577

618

431

 
Less:
Noninterest expense
1,013

1,220

703

 
 
Pre-provision net revenue from continuing operations (non-GAAP)
$
493

$
346

$
340

 
Plus:
Merger-related charges
81

198

24

 
 
Pre-provision net revenue from continuing operations excluding merger-related charges (non-GAAP)
$
574

$
544

$
364




KeyCorp Reports First Quarter 2017 Profit     
April 20, 2017
Page 16


GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
 
 
 
Three months ended
 
 
 
3/31/2017
12/31/2016
3/31/2016
Average tangible common equity
 
 
 
 
Average Key shareholders’ equity (GAAP)
$
15,184

$
14,901

$
10,953

 
Less:
Intangible assets (average) (d)
2,772

2,874

1,079

 
 
Preferred Stock (average)
1,480

1,274

290

 
 
Average tangible common equity (non-GAAP)
$
10,932

$
10,753

$
9,584

 
 
 
 
 
 
Return on average tangible common equity from continuing operations
 
 
 
 
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)
$
296

$
213

$
182

 
Add:
Merger-related charges, after tax
51

124

15

 
Net income (loss) from continuing operations attributable to Key common shareholders excluding
 
 
 
 
 
merger-related charges (non-GAAP)
$
347

$
337

$
197

 
 
 
 
 
 
 
Average tangible common equity (non-GAAP)
10,932

10,753

9,584

 
 
 
 
 
 
 
Return on average tangible common equity from continuing operations (non-GAAP)
10.98
%
7.88
%
7.64
%
 
 
 
 
 
 
 
Return on average tangible common equity from continuing operations excluding merger-related charges (non-GAAP)
12.87
%
12.47
%
8.27
%
 
 
 
 
 
 
Return on average tangible common equity consolidated
 
 
 
 
Net income (loss) attributable to Key common shareholders (GAAP)
$
296

$
209

$
183

 
Average tangible common equity (non-GAAP)
10,932

10,753

9,584

 
 
 
 
 
 
 
Return on average tangible common equity consolidated (non-GAAP)
10.98
%
7.73
%
7.68
%
 
 
 
 
 
 
Noninterest expense excluding merger-related charges
 
 
 
 
Noninterest expense (GAAP)
$
1,013

$
1,220

$
703

 
Less:
Merger-related charges
81

207

24

 
 
Noninterest expense excluding merger-related charges (non-GAAP)
$
932

$
1,013

$
679

 
 
 
 
 
 
Earnings per common share (EPS) excluding merger-related charges
 
 
 
 
EPS from continuing operations attributable to Key common shareholders — assuming dilution
$
.27

$
.20

$
.22

 
Add:
EPS impact of merger-related charges
.05

.11

.02

 
 
EPS from continuing operations attributable to Key common shareholders
 
 
 
 
 
excluding merger-related charges (non-GAAP)
$
.32

$
.31

$
.24

 
 
 
 
 
 
Cash efficiency ratio
 
 
 
 
Noninterest expense (GAAP)
$
1,013

$
1,220

$
703

 
Less:
Intangible asset amortization
22

27

8

 
 
Adjusted noninterest expense (non-GAAP)
991

1,193

695

 
Less:
Merger-related charges
81

207

24

 
 
Adjusted noninterest expense excluding merger-related charges (non-GAAP)
$
910

$
986

$
671

 
 
 
 
 
 
 
Net interest income (GAAP)
$
918

$
938

$
604

 
Plus:
Taxable-equivalent adjustment
11

10

8

 
 
Noninterest income
577

618

431

 
 
Total taxable-equivalent revenue (non-GAAP)
1,506

1,566

1,043

 
Add:
Merger-related charges

(9
)

 
 
Adjusted total taxable-equivalent revenue excluding merger-related charges (non-GAAP)
$
1,506

$
1,557

$
1,043

 
 
 
 
 
 
 
Cash efficiency ratio (non-GAAP)
65.8
%
76.2
%
66.6
%
 
 
 
 
 
 
 
Cash efficiency ratio excluding merger-related charges (non-GAAP)
60.4
%
63.3
%
64.3
%
 
 
 
 
 
 
Return on average total assets from continuing operations excluding merger-related charges
 
 
 
 
Income from continuing operations attributable to Key (GAAP)
$
324

$
233

$
187

 
Add:
Merger-related charges, after tax
51

124

15

 
 
Income from continuing operations attributable to Key excluding merger-related
 
 
 
 
 
charges, after tax (non-GAAP)
$
375

$
357

$
202

 
 
 
 
 
 
 
Average total assets from continuing operations (GAAP)
$
132,741