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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): July 20, 2017
389531382_keylogoa04.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, indicate 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 July 20, 2017, KeyCorp issued a press release announcing its financial results for the three- and six-month periods ended June 30, 2017 (the “Press Release”), and posted on its website its second 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 July 20, 2017, announcing financial results for the three- and six-month periods ended June 30, 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: July 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
389531382_a2q16keycorper1a05.jpgNEWS
FOR IMMEDIATE RELEASE

KEYCORP REPORTS SECOND QUARTER 2017 NET INCOME OF $393 MILLION,
OR $.36 PER COMMON SHARE

2Q17 included a net benefit of $.02 per common share from notable items: merchant services gain, purchase accounting finalization, merger-related charges, and charitable contribution

Positive operating leverage of 10% compared to the prior year and 2% compared to the prior quarter, excluding notable items

Achieved annualized cost savings of $400 million; expect to reach $450 million by early 2018

Cash efficiency ratio improved to 59.3%, in 2Q17, or 59.4%, excluding notable items

Return on average tangible common equity of 13.8% for 2Q17, or 12.9%, excluding notable items


CLEVELAND, July 20, 2017 – KeyCorp (NYSE: KEY) today announced second quarter net income from continuing operations attributable to Key common shareholders of $393 million, or $.36 per common share, compared to $296 million or $.27 per common share, for the first quarter of 2017 and $193 million, or $.23 per common share, for the second quarter of 2016. During the second quarter of 2017, Key’s results included a number of notable items, including a gain related to our merchant services business, the finalization of purchase accounting, merger-related charges, and a charitable contribution. These notable items had a pre-tax net benefit of $43 million, or $.02 per common share for the second quarter of 2017.

“We were pleased with the strength and quality of our second quarter results, which reflect Key's continued business momentum and realization of value from the First Niagara acquisition,” said Chairman and Chief Executive Officer Beth Mooney. “We also made investments for growth across our franchise, including the repositioning of our merchant services business and the recent acquisition of HelloWallet.”

“We continued to generate positive operating leverage versus the prior year and prior quarter, and our cash efficiency ratio improved to 59.3%, or 59.4%, excluding notable items,” Mooney continued. “Revenue growth was driven by both net interest income and fee-based businesses, and importantly, we achieved $400 million in annualized cost savings from First Niagara. We remain on track to achieve an incremental $50 million in savings by early 2018, and remain confident in our ability to achieve our targets and continue to deliver value for our shareholders.”

“Our risk and capital positions remained strong in the second quarter,” added Mooney. “We increased our common share dividend by 12% while also repurchasing $94 million of common shares. We were pleased to receive no objection from the Federal Reserve on our 2017 Capital Plan, which includes two additional dividend increases, subject to Board approval, and an increased common share repurchase authorization.”




KeyCorp Reports Second Quarter 2017 Profit     
July 20, 2017
Page 2


Selected Financial Highlights
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions, except per share data
 
 
 
 
Change 2Q17 vs.
 
 
2Q17
1Q17
2Q16
 
1Q17
2Q16
Income (loss) from continuing operations attributable to Key common shareholders
$
393

$
296

$
193

 
32.8
%
103.6
 %
 Income (loss) from continuing operations attributable to Key common shareholders per
common share — assuming dilution
.36

.27

.23

 
33.3

56.5

Return on average total assets from continuing operations
1.23
%
.99
%
.82
%
 
N/A

N/A

 Common Equity Tier 1 ratio (non-GAAP) (a), (b)
9.97

9.91

11.10

 
N/A

N/A

Book value at period end
$
13.02

$
12.71

$
13.08

 
2.4
%
(.5
)%
Net interest margin (TE) from continuing operations
3.30
%
3.13
%
2.76
%
 
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)
6/30/2017 ratio is estimated.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TE = Taxable Equivalent, N/A = Not Applicable
 
 
 
 
 
 

INCOME STATEMENT HIGHLIGHTS
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 2Q17 vs.
 
2Q17
1Q17
2Q16
 
1Q17
2Q16
Net interest income (TE)
$
987

$
929

$
605

 
6.2
%
63.1
%
Noninterest income
653

577

473

 
13.2
%
38.1
%
Total revenue
$
1,640

$
1,506

$
1,078

 
8.9
%
52.1
%
 
 
 
 
 
 
 
TE = Taxable Equivalent; N/M = Not Meaningful


Second quarter 2017 net interest income included $100 million of purchase accounting accretion related to the acquisition of First Niagara, including $42 million related to the finalization of previous purchase accounting estimates. First quarter 2017 results included $53 million of purchase accounting accretion.

Taxable-equivalent net interest income was $987 million for the second quarter of 2017, and the net interest margin was 3.30%, compared to taxable-equivalent net interest income of $605 million and a net interest margin of 2.76% for the second quarter of 2016, reflecting benefit from the First Niagara
acquisition, including purchase accounting accretion, as well as higher earning asset yields and balances.

Compared to the first quarter of 2017, taxable-equivalent net interest income increased by $58
million, and the net interest margin increased by 17 basis points. The increase in net interest income and the net interest margin reflects an increase in purchase accounting accretion and higher earning asset yields, partly offset by a decline in loan fees and higher interest-bearing deposit costs, largely the result of an increase in commercial deposit rates and growth in higher-yielding deposit products. Net interest income also benefited from one additional day in the second quarter of 2017.

Excluding purchase accounting accretion, taxable-equivalent net interest income increased $282 million from the second quarter of 2016 and $11 million from the first quarter of 2017.




KeyCorp Reports Second Quarter 2017 Profit     
July 20, 2017
Page 3


Noninterest Income
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 2Q17 vs.
 
2Q17
1Q17
2Q16
 
1Q17
2Q16
Trust and investment services income
$
134

$
135

$
110

 
(.7
)%
21.8
%
Investment banking and debt placement fees
135

127

98

 
6.3

37.8

Service charges on deposit accounts
90

87

68

 
3.4

32.4

Operating lease income and other leasing gains
30

23

18

 
30.4

66.7

Corporate services income
55

54

53

 
1.9

3.8

Cards and payments income
70

65

52

 
7.7

34.6

Corporate-owned life insurance income
33

30

28

 
10.0

17.9

Consumer mortgage income
6

6

3

 

100.0

Mortgage servicing fees
15

18

10

 
(16.7
)
50.0

Net gains (losses) from principal investing

1

11

 
N/M

N/M

Other income
85

31

22

 
174.2

286.4

Total noninterest income
$
653

$
577

$
473

 
13.2
 %
38.1
%
 
 
 
 
 
 
 
N/M = Not Meaningful


Key’s noninterest income was $653 million for the second quarter of 2017, compared to $473 million for the year-ago quarter. Growth was largely driven by the acquisition of First Niagara, as well as core business momentum and a $64 million one-time gain from acquiring the remaining ownership interest in a merchant services joint venture. Investment banking and debt placement fees grew $37 million, related to strong commercial mortgage banking, underwriting, and advisory fees.

Compared to the first quarter of 2017, noninterest income increased by $76 million. The largest driver of the increase was a $64 million one-time gain related to Key’s merchant services business, realized in other income. Investment banking and debt placement fees continue to be a source of growth, up $8 million from the prior quarter, related to strong advisory fees. Operating lease income and other leasing gains grew $7 million, and cards and payments income increased $5 million.

Noninterest Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 2Q17 vs.
 
2Q17
1Q17
2Q16
 
1Q17
2Q16
Personnel expense
$
551

$
556

$
427

 
(.9
)%
29.0
 %
Non-personnel expense
444

457

324

 
(2.8
)
37.0

     Total noninterest expense
$
995

$
1,013

$
751

 
(1.8
)
32.5

 
 
 
 
 


 
Merger-related charges
44

81

45

 
(45.7
)
(2.2
)
     Total noninterest expense excluding merger-related charges
$
951

$
932

$
706

 
2.0
 %
34.7
 %
 
 
 
 
 
 
 

 
Key’s noninterest expense was $995 million for the second quarter of 2017, and included $44 million of merger-related charges. Merger-related charges for the quarter were made up of $31 million of personnel expense and $13 million of non-personnel expense, largely reflected in business services and professional fees and marketing expense.

Excluding merger-related charges, noninterest expense was $245 million higher than the second quarter of last year. The increase from the prior year, reflected in both personnel and non-personnel 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.

Excluding merger-related charges, noninterest expense was $19 million higher than the first quarter of 2017, mostly related to seasonal trends, including higher marketing expense. Incentive and stock-based



KeyCorp Reports Second Quarter 2017 Profit     
July 20, 2017
Page 4


compensation and salaries expense increased but were more than offset by lower employee benefits expense. Other notable items which impacted the second quarter included a $20 million charitable contribution and $4 million benefit from purchase accounting finalization, both of which are reflected in other expense.

BALANCE SHEET HIGHLIGHTS

Average Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 2Q17 vs.
 
2Q17
1Q17
2Q16
 
1Q17
2Q16
Commercial and industrial (a)
$
40,666

$
40,002

$
32,630

 
1.7
 %
24.6
%
Other commercial loans
21,990

22,175

13,222

 
(.8
)
66.3

Home equity loans
12,473

12,611

10,098

 
(1.1
)
23.5

Other consumer loans
11,373

11,345

5,198

 
.2

118.8

Total loans
$
86,502

$
86,133

$
61,148

 
.4
 %
41.5
%
 
 
 
 
 
 
 

(a)
Commercial and industrial average loan balances include $117 million, $114 million, and $87 million of assets from commercial credit cards at June 30, 2017, March 31, 2017, and June 30, 2016, respectively.

During the second quarter of 2017, Key finalized the fair value of the First Niagara acquired loan portfolio, adjusting the discount from $548 million to $603 million. At June 30, 2017, $345 million of the fair value discount remained.

Average loans were $86.5 billion for the second quarter of 2017, an increase of $25.4 billion compared to the second quarter of 2016, primarily reflecting the impact of the First Niagara acquisition, as well as growth in commercial and industrial loans which was broad-based and spread across Key's commercial lines of business.

Compared to the first quarter of 2017, average loans increased by $369 million. Commercial and industrial loans increased $664 million, with strength in middle market lending. Consumer loans decreased $110 million, mostly from continued declines in the home equity loan portfolio, largely the result of paydowns on home equity lines of credit.
 
Average Deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 2Q17 vs.
 
 
2Q17
1Q17
2Q16
 
1Q17
2Q16
Non-time deposits
$
92,018

$
91,745

$
67,419

 
.3
 %
36.5
%
Certificates of deposit ($100,000 or more)
6,111

5,627

3,233

 
8.6

89.0

Other time deposits
4,650

4,706

3,252

 
(1.2
)
43.0

 
Total deposits
$
102,779

$
102,078

$
73,904

 
.7
 %
39.1
%
 
 
 
 
 
 
 
 
Cost of total deposits
.26
%
.23
%
.19
%
 
N/A

N/A

 
 
 
 
 
 
 
 

N/A = Not Applicable

Average deposits totaled $102.8 billion for the second quarter of 2017, an increase of $28.9 billion compared to the year-ago quarter, primarily reflecting the acquisition of First Niagara and core retail and commercial deposit growth.

Compared to the first quarter of 2017, average deposits increased by $701 million, driven by growth in certificates of deposits and NOW and money market deposit accounts, partly offset by a decline in escrow deposits. During the quarter, Key also experienced a shift in deposit mix from noninterest-bearing and low-cost interest-bearing deposits to higher-yielding deposit products. On a period-end basis, total deposits



KeyCorp Reports Second Quarter 2017 Profit     
July 20, 2017
Page 5


decreased $1.1 billion compared to the linked-quarter, largely the result of seasonal deposit growth that occurred in the first quarter of 2017.

ASSET QUALITY
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 2Q17 vs.
 
2Q17
1Q17
2Q16
 
1Q17
2Q16
Net loan charge-offs
$
66

$
58

$
43

 
13.8
 %
53.5
 %
Net loan charge-offs to average total loans
.31
%
.27
%
.28
%
 
N/A

N/A

Nonperforming loans at period end (a)
$
507

$
573

$
619

 
(11.5
)
(18.1
)
Nonperforming assets at period end (a)
556

623

637

 
(10.8
)
(12.7
)
Allowance for loan and lease losses
870

870

854

 
.0

1.9

Allowance for loan and lease losses to nonperforming loans (a)
171.6
%
151.8
%
138.0
%
 
N/A

N/A

Provision for credit losses
$
66

$
63

$
52

 
4.8
 %
26.9
 %
 
 
 
 
 
 
 
(a)
Nonperforming loan balances exclude $835 million, $812 million, and $11 million of purchased credit impaired loans at June 30, 2017, March 31, 2017, and June 30, 2016, respectively.

N/A = Not Applicable

Key’s provision for credit losses was $66 million for the second quarter of 2017, compared to $52 million for the second quarter of 2016 and $63 million for the first quarter of 2017. Key’s allowance for loan and lease losses was $870 million, or 1.01% of total period-end loans, at June 30, 2017, compared to 1.38% at June 30, 2016, and 1.01% at March 31, 2017.

Net loan charge-offs for the second quarter of 2017 totaled $66 million, or .31% of average total loans. These results compare to $43 million, or .28%, for the second quarter of 2016, and $58 million, or .27%, for the first quarter of 2017.

At June 30, 2017, Key’s nonperforming loans totaled $507 million, which represented .59% of period-end portfolio loans. These results compare to 1.00% at June 30, 2016, and .67% at March 31, 2017. Nonperforming assets at June 30, 2017, totaled $556 million, and represented .64% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to 1.03% at June 30, 2016, and .72% at March 31, 2017.
 
CAPITAL

Key’s estimated risk-based capital ratios included in the following table continued to exceed all “well-capitalized” regulatory benchmarks at June 30, 2017.
 
Capital Ratios
 
 
 
 
 
 
 
 
6/30/2017
3/31/2017
6/30/2016
Common Equity Tier 1 (a), (b)
9.97
%
9.91
%
11.10
%
Tier 1 risk-based capital (a)
10.79

10.74

11.41

Total risk based capital (a)
12.71

12.69

13.63

Tangible common equity to tangible assets (b)
8.56

8.51

9.95

Leverage (a)
9.96

9.81

10.59

 
 
 
 
(a)
6/30/2017 ratio is estimated.
(b)
The table entitled “GAAP to Non-GAAP Reconciliations” in the attached financial supplement presents the computations of certain financial measures related to “tangible common equity” 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.

Key's capital position remained strong throughout the first quarter. As shown in the preceding table, at June 30, 2017, Key’s estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.97% and 10.79%, respectively. In addition, the tangible common equity ratio was 8.56% at June 30, 2017.




KeyCorp Reports Second Quarter 2017 Profit     
July 20, 2017
Page 6


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 9.87% at June 30, 2017. This estimate exceeds the fully phased-in required minimum Common Equity Tier 1 and Capital Conservation Buffer of 7.00%.

Summary of Changes in Common Shares Outstanding
 
 
 
 
 
 
 
 
 
 
 
 
in thousands
 
 
 
 
Change 2Q17 vs.
 
 
2Q17
1Q17
2Q16
 
1Q17
2Q16
Shares outstanding at beginning of period
1,097,479

1,079,314

842,290

 
1.7
 %
30.3
 %
Open market repurchases and return of shares under employee compensation plans
(5,072
)
(8,673
)

 
(41.5
)
N/M

Shares issued under employee compensation plans (net of cancellations)
332

6,270

413

 
(94.7
)
(19.6
)
Common shares exchanged for Series A Preferred Stock

20,568


 
N/M

N/M

 
Shares outstanding at end of period
1,092,739

1,097,479

842,703

 
(.4
)%
29.7
 %
 
 
 
 
 
 
 
 
N/M = Not Meaningful

Consistent with Key's 2016 Capital Plan, during the second quarter of 2017, Key declared an increased dividend of $.095 per common share, representing a 12% increase compared to the first quarter of 2017. Key also completed $94 million of common share repurchases during the quarter, including $88 million of common share repurchases in the open market and $6 million of share repurchases related to employee equity compensation programs.

Key's 2017 Capital Plan, which received no objection from the Federal Reserve, includes two common share dividend increases (subject to Board approval), as well as a common share repurchase program of up to $800 million. This authorization includes repurchases to offset issuances of common shares under our employee compensation plans. Repurchases are expected to be executed over the next four quarters.

LINE OF BUSINESS RESULTS

The following table shows the contribution made by each major business segment to Key’s taxable-equivalent revenue from continuing operations and income (loss) from continuing operations attributable to Key for the periods presented. For more detailed financial information pertaining to each business segment, see the tables at the end of this release.



KeyCorp Reports Second Quarter 2017 Profit     
July 20, 2017
Page 7


Major Business Segments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 2Q17 vs.
 
 
2Q17
1Q17
2Q16
 
1Q17
2Q16
Revenue from continuing operations (TE)
 
 
 
 
 
 
Key Community Bank
$
1,012

$
907

$
598

 
11.6
%
69.2
%
Key Corporate Bank
596

579

451

 
2.9

32.2

Other Segments
35

29

31

 
20.7

12.9

 
Total segments
1,643

1,515

1,080


8.4

52.1

Reconciling Items
(3
)
(9
)
(2
)
 
N/M

N/M

 
Total
$
1,640

$
1,506

$
1,078

 
8.9
%
52.1
%
 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key
 
 
 
 
 
 
Key Community Bank
$
197

$
146

$
80

 
34.9
%
146.3
%
Key Corporate Bank
222

182

135

 
22.0

64.4

Other Segments
28

21

25

 
33.3

12.0

 
Total segments
447

349

240

 
28.1

86.3

Reconciling Items (a)
(40
)
(25
)
(41
)
 
N/M

N/M

 
Total
$
407

$
324

$
199

 
25.6
%
104.5
%
 
 
 
 
 
 
 
 
(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 2Q17 vs.
 
 
2Q17
1Q17
2Q16
 
1Q17
2Q16
Summary of operations
 
 
 
 
 
 
Net interest income (TE)
$
676

$
630

$
392

 
7.3
%
72.4
%
Noninterest income
336

277

206

 
21.3

63.1

 
Total revenue (TE)
1,012

907

598

 
11.6

69.2

Provision for credit losses
47

47

25

 

88.0

Noninterest expense
652

628

445

 
3.8

46.5

 
Income (loss) before income taxes (TE)
313

232

128

 
34.9

144.5

Allocated income taxes (benefit) and TE adjustments
116

86

48

 
34.9

141.7

 
Net income (loss) attributable to Key
$
197

$
146

$
80

 
34.9
%
146.3
%
 
 
 
 
 
 
 
 
Average balances
 
 
 
 
 
 
Loans and leases
$
47,431

$
47,036

$
30,936

 
.8
%
53.3
%
Total assets
51,419

50,963

32,963

 
.9

56.0

Deposits
79,716

79,393

53,794

 
.4

48.2

 
 
 
 
 
 




Assets under management at period end
$
37,613

$
37,417

$
34,535

 
.5
%
8.9
%
 
 
 
 
 
 
 
 
TE = Taxable Equivalent





KeyCorp Reports Second Quarter 2017 Profit     
July 20, 2017
Page 8


Additional Key Community Bank Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 2Q17 vs.
 
 
2Q17
1Q17
2Q16
 
1Q17
2Q16
Noninterest income
 
 
 
 
 
 
Trust and investment services income
$
99

$
98

$
73

 
1.0
 %
35.6
%
Service charges on deposit accounts
77

75

56

 
2.7

37.5

Cards and payments income
60

55

46

 
9.1

30.4

Other noninterest income
100

49

31

 
104.1

222.6

 
Total noninterest income
$
336

$
277

$
206

 
21.3
 %
63.1
%
 
 
 
 
 
 




Average deposit balances
 
 
 
 




NOW and money market deposit accounts
$
45,243

$
45,027

$
30,144

 
.5
 %
50.1
%
Savings deposits
5,293

5,268

2,365

 
.5

123.8

Certificates of deposit ($100,000 or more)
4,016

3,878

2,383

 
3.6

68.5

Other time deposits
4,640

4,692

3,245

 
(1.1
)
43.0

Noninterest-bearing deposits
20,524

20,528

15,657

 

31.1

 
Total deposits
$
79,716

$
79,393

$
53,794

 
.4
 %
48.2
%
 
 
 
 
 
 
 
 
Home equity loans
 
 
 
 
 
 
Average balance
$
12,330

$
12,456

$
9,908

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

60

61

 
 
 
 
 
 
 
 
 
 
 
Other data
 
 
 
 
 
 
Branches
1,210

1,216

949

 
 
 
Automated teller machines
1,589

1,594

1,236

 
 
 
 
 
 
 
 
 
 
 

Key Community Bank Summary of Operations (2Q17 vs. 2Q16)

Positive operating leverage compared to prior year
Net income increased $117 million, or 146.3%, from prior year
Average commercial and industrial loans increased $5.4 billion, or 41.2%, from the prior year
Average deposits increased $25.9 billion, or 48.2%, from the prior year

Key Community Bank recorded net income attributable to Key of $197 million for the second quarter of 2017, compared to $80 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 $284 million, or 72.4%, from the second quarter of 2016. The increase was primarily attributable to the acquisition of First Niagara, as well as the benefit from higher interest rates. Average loans and leases increased $16.5 billion, or 53.3%, largely driven by a $5.4 billion, or 41.2%, increase in commercial and industrial loans. Additionally, average deposits increased $25.9 billion, or 48.2%, from one year ago.
Noninterest income was up $130 million, or 63.1%, from the year-ago quarter, driven by the acquisition of First Niagara, including the addition of Key Insurance and Benefits Services. Strength in cards and payments and higher assets under management from market growth also contributed to the increase. The increase in other noninterest income was largely driven by the one-time gain related to Key’s merchant services business.
The provision for credit losses increased by $22 million, or 88.0%, and net loan charge-offs increased $30 million from the second quarter of 2016, primarily related to the acquisition of First Niagara.
Noninterest expense increased by $207 million, or 46.5%, from the year-ago quarter, largely driven by the acquisition of First Niagara, as well as core business activity and investments. Personnel expense



KeyCorp Reports Second Quarter 2017 Profit     
July 20, 2017
Page 9


increased $76 million, while non-personnel expense increased by $131 million, including higher intangible amortization expense and higher FDIC assessment expense.


Key Corporate Bank
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 2Q17 vs.
 
 
2Q17
1Q17
2Q16
 
1Q17
2Q16
Summary of operations
 
 
 
 
 
 
Net interest income (TE)
$
312

$
304

$
221

 
2.6
 %
41.2
 %
Noninterest income
284

275

230

 
3.3

23.5

 
Total revenue (TE)
596

579

451

 
2.9

32.2

Provision for credit losses
19

17

30

 
11.8

(36.7
)
Noninterest expense
299

303

259

 
(1.3
)
15.4

 
Income (loss) before income taxes (TE)
278

259

162

 
7.3

71.6

Allocated income taxes and TE adjustments
56

77

29

 
(27.3
)
93.1

 
Net income (loss)
222

182

133

 
22.0

66.9

Less: Net income (loss) attributable to noncontrolling interests


(2
)
 
N/M

N/M

 
Net income (loss) attributable to Key
$
222

$
182

$
135

 
22.0
 %
64.4
 %
 
 
 
 
 
 
 
 
Average balances
 
 
 
 
 
 
Loans and leases
$
37,750

$
37,737

$
28,607

 

32.0
 %
Loans held for sale
1,000

1,097

591

 
(8.8
)%
69.2

Total assets
44,177

44,173

33,908

 

30.3

Deposits
21,146

21,003

19,129

 
.7
 %
10.5
 %
 
 
 
 
 
 
 
 
TE = Taxable Equivalent, N/M = Not Meaningful

Additional Key Corporate Bank Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 2Q17 vs.
 
 
2Q17
1Q17
2Q16
 
1Q17
2Q16
Noninterest income
 
 
 
 
 
 
Trust and investment services income
$
35

$
37

$
37

 
(5.4
)%
(5.4
)%
Investment banking and debt placement fees
134

124

94

 
8.1

42.6

Operating lease income and other leasing gains
22

21

15

 
4.8

46.7

 
 
 
 
 
 
 
 
Corporate services income
38

38

40

 

(5.0
)
Service charges on deposit accounts
13

12

12

 
8.3

8.3

Cards and payments income
10

10

6

 

66.7

 
Payments and services income
61

60

58

 
1.7

5.2

 
 
 
 
 
 
 
 
Mortgage servicing fees
12

16

10

 
(25.0
)
20.0

Other noninterest income
20

17

16

 
17.6

25.0

 
Total noninterest income
$
284

$
275

$
230

 
3.3
 %
23.5
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Key Corporate Bank Summary of Operations (2Q17 vs. 2Q16)

Positive operating leverage compared to prior year
Average loan and lease balances up $9.1 billion, or 32%, from the prior year
Revenue up $145 million, or 32.2%, from the prior year
Investment banking and debt placement fees up $40 million, or 42.6%, from the prior year

Key Corporate Bank recorded net income attributable to Key of $222 million for the second quarter of 2017, compared to $135 million for the same period one year ago.




KeyCorp Reports Second Quarter 2017 Profit     
July 20, 2017
Page 10


Taxable-equivalent net interest income increased by $91 million, or 41.2%, compared to the second quarter of 2016 driven by higher earning asset yields and balances. Average loan and lease balances increased $9.1 billion, or 32%, from the year-ago quarter, primarily driven by the First Niagara acquisition as well as growth in commercial and industrial loans. Average deposit balances increased $2 billion, or 10.5%, from the year-ago quarter, mostly driven by the First Niagara acquisition.

Noninterest income was up $54 million, or 23.5%, from the prior year. This growth was mostly due to
$40 million of higher investment banking and debt placement fees related to stronger commercial mortgage banking, underwriting, and advisory fees, as well as an increase of $7 million in operating lease income and other leasing gains related to higher originations. Additional increases of $4 million in both cards and payments income and other noninterest income were partially offset by a $2 million decrease in trust and investment services income.

The provision for credit losses decreased $11 million, or 36.7%, compared to the second quarter of 2016 due to $8 million of lower net loan charge-offs and improvement in the oil and gas portfolio.

Noninterest expense increased by $40 million, or 15.4%, from the second quarter of 2016. The increase from the prior year, reflected in both personnel and non-personnel expense, was largely driven by the acquisition of First Niagara, higher performance-based compensation and various other items, including operating lease, FDIC, 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 $28 million for the second quarter of 2017, compared to $25 million for the same period last year, driven by increases in operating lease income and other leasing gains and corporate-owned life insurance income.

*****

KeyCorp's roots trace back 190 years to Albany, New York. Headquartered in Cleveland, Ohio, Key is one of the nation’s largest bank-based financial services companies, with assets of approximately $135.8 billion at June 30, 2017.

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



KeyCorp Reports Second Quarter 2017 Profit     
July 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, July 20, 2017. An audio replay of the call will be available through July 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 Second Quarter 2017 Profit     
July 20, 2017
Page 12





KeyCorp
Second 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
Summary of Loan and Lease Loss Experience From Continuing Operations
Asset Quality Statistics From Continuing Operations
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
Summary of Changes in Nonperforming Loans From Continuing Operations
Line of Business Results



KeyCorp Reports Second Quarter 2017 Profit     
July 20, 2017
Page 13


Financial Highlights
(dollars in millions, except per share amounts)
 
 
 
Three months ended
 
 
 
6/30/2017
3/31/2017
6/30/2016
Summary of operations
 
 
 
 
Net interest income (TE)
$
987

$
929

$
605

 
Noninterest income
653

577

473

 
 
Total revenue (TE)
1,640

1,506

1,078

 
Provision for credit losses
66

63

52

 
Noninterest expense
995

1,013

751

 
Income (loss) from continuing operations attributable to Key
407

324

199

 
Income (loss) from discontinued operations, net of taxes (a)
5


3

 
Net income (loss) attributable to Key
412

324

202

 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
393

296

193

 
Income (loss) from discontinued operations, net of taxes (a)
5


3

 
Net income (loss) attributable to Key common shareholders
398

296

196

 
 
 
 
 
 
Per common share
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
$
.36

$
.28

$
.23

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



 
Net income (loss) attributable to Key common shareholders (b)
.37

.28

.23

 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution
.36

.27

.23

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



 
Net income (loss) attributable to Key common shareholders — assuming dilution (b)
.36

.27

.23

 
 
 
 
 
 
 
Cash dividends declared
.095

.085

.085

 
Book value at period end
13.02

12.71

13.08

 
Tangible book value at period end
10.40

10.21

11.81

 
Market price at period end
18.74

17.78

11.05

 
 
 
 
 
 
Performance ratios
 
 
 
 
From continuing operations:
 
 
 
 
Return on average total assets
1.23
%
.99
%
.82
%
 
Return on average common equity
11.12

8.76

7.15

 
Return on average tangible common equity (c)
13.80

10.98

7.94

 
Net interest margin (TE)
3.30

3.13

2.76

 
Cash efficiency ratio (c)
59.3

65.8

69.0

 
 
 
 
 
 
 
From consolidated operations:
 
 
 
 
Return on average total assets
1.23
%
.98
%
.82
%
 
Return on average common equity
11.26

8.76

7.26

 
Return on average tangible common equity (c)
13.98

10.98

8.06

 
Net interest margin (TE)
3.28

3.11

2.74

 
Loan to deposit (d)
87.2

85.6

85.3

 
 
 
 
 
 
Capital ratios at period end
 
 
 
 
Key shareholders’ equity to assets
11.23
%
11.14
%
11.18
%
 
Key common shareholders’ equity to assets
10.48

10.37

10.90

 
Tangible common equity to tangible assets (c)
8.56

8.51

9.95

 
Common Equity Tier 1 (c), (e)
9.97

9.91

11.10

 
Tier 1 risk-based capital (e)
10.79

10.74

11.41

 
Total risk-based capital (e)
12.71

12.69

13.63

 
Leverage (e)
9.96

9.81

10.59

 
 
 
 
 
 
Asset quality — from continuing operations
 
 
 
 
Net loan charge-offs
$
66

$
58

$
43

 
Net loan charge-offs to average loans
.31
%
.27
%
.28
%
 
Allowance for loan and lease losses
$
870

$
870

$
854

 
Allowance for credit losses
918

918

904

 
Allowance for loan and lease losses to period-end loans
1.01
%
1.01
%
1.38
%
 
Allowance for credit losses to period-end loans
1.06

1.07

1.46

 
Allowance for loan and lease losses to nonperforming loans (f)
171.6

151.8

138.0

 
Allowance for credit losses to nonperforming loans (f)
181.1

160.2

146.0

 
Nonperforming loans at period-end (f)
$
507

$
573

$
619

 
Nonperforming assets at period-end (f)
556

623

637

 
Nonperforming loans to period-end portfolio loans (f)
.59
%
.67
%
1.00
%
 
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (f)
.64

.72

1.03

 
 
 
 
 
 
Trust assets
 
 
 
 
Assets under management
$
37,613

$
37,417

$
34,535

 
 
 
 
 
 
Other data
 
 
 
 
Average full-time equivalent employees
18,344

18,386

13,419

 
Branches
1,210

1,216

949

 
 
 
 
 
 
Taxable-equivalent adjustment
$
14

$
11

$
8




KeyCorp Reports Second Quarter 2017 Profit     
July 20, 2017
Page 14



 
 
 
 
 
Financial Highlights (continued)
(dollars in millions, except per share amounts)
 
 
Six months ended
 
 
6/30/2017
 
6/30/2016
Summary of operations
 
 
 
 
Net interest income (TE)
$
1,916

 
$
1,217

 
Noninterest income
1,230

 
904

 
Total revenue (TE)
3,146

 
2,121

 
Provision for credit losses
129

 
141

 
Noninterest expense
2,008

 
1,454

 
Income (loss) from continuing operations attributable to Key
731

 
386

 
Income (loss) from discontinued operations, net of taxes (a)
5

 
4

 
Net income (loss) attributable to Key
736

 
390

 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
$
689

 
$
375

 
Income (loss) from discontinued operations, net of taxes (a)
5

 
4

 
Net income (loss) attributable to Key common shareholders
694

 
379

 
 
 
 
 
Per common share
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
$
.64

 
$
.45

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

 

 
Net income (loss) attributable to Key common shareholders (b)
.64

 
.45

 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution
.63

 
.44

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

 

 
Net income (loss) attributable to Key common shareholders — assuming dilution (b)
.63

 
.45

 
 
 
 
 
 
Cash dividends paid
.18

 
.16

 
 
 
 
 
Performance ratios
 
 
 
 
From continuing operations:
 
 
 
 
Return on average total assets
1.11
%
 
.81
%
 
Return on average common equity
9.97

 
7.01

 
Return on average tangible common equity (c)
12.43

 
7.79

 
Net interest margin (TE)
3.21

 
2.83

 
Cash efficiency ratio (c)
62.4

 
67.8

 
 
 
 
 
 
From consolidated operations:
 
 
 
 
Return on average total assets
1.11
%
 
.80
%
 
Return on average common equity
10.04

 
7.08

 
Return on average tangible common equity (c)
12.52

 
7.87

 
Net interest margin (TE)
3.19

 
2.80

 
 
 
 
 
Asset quality — from continuing operations
 
 
 
 
Net loan charge-offs
124

 
89

 
Net loan charge-offs to average total loans
.29
%
 
.30
%
 
 
 
 
 
Other data
 
 
 
 
Average full-time equivalent employees
18,365

 
13,411

 
 
 
 
 
Taxable-equivalent adjustment
25

 
16

(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)
June 30, 2017, ratio is estimated.
(f)
Nonperforming loan balances exclude $835 million, $812 million, and $11 million of purchased credit impaired loans at June 30, 2017, March 31, 2017, and June 30, 2016, respectively.
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles
 
 
 
 
 
 
 
 



KeyCorp Reports Second Quarter 2017 Profit     
July 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/or other notable items, and “cash efficiency ratio.”

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

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

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, 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. For the second quarter of 2017, merger-related charges are included in the total for "notable items," the detail of which is provided below. Management believes that eliminating the effects of the merger-related charges and other notable items makes it easier to analyze the results by presenting them on a more comparable basis.

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

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.
 
 
 
 
Three months ended
 
Six months ended
 
 
 
 
6/30/2017
3/31/2017
6/30/2016
 
6/30/2017
6/30/2016
Tangible common equity to tangible assets at period-end
 
 
 
 
 
 
 
Key shareholders’ equity (GAAP)
$
15,253

$
14,976

$
11,313

 
 
 
 
Less:
Intangible assets (a)
2,866

2,751

1,074

 
 
 
 
 
Preferred Stock (b)
1,009

1,009

281

 
 
 
 
 
Tangible common equity (non-GAAP)
$
11,378

$
11,216

$
9,958

 
 
 
 
Total assets (GAAP)
$
135,824

$
134,476

$
101,150

 
 
 
 
Less:
Intangible assets (a)
2,866

2,751

1,074

 
 
 
 
 
Tangible assets (non-GAAP)
$
132,958

$
131,725

$
100,076

 
 
 
 
Tangible common equity to tangible assets ratio (non-GAAP)
8.56
%
8.51
%
9.95
%
 
 
 
Common Equity Tier 1 at period-end
 
 
 
 
 
 
 
Key shareholders’ equity (GAAP)
$
15,253

$
14,976

$
11,313

 
 
 
 
Less:
Preferred Stock (b)
1,009

1,009

281

 
 
 
 
 
Common Equity Tier 1 capital before adjustments and deductions
14,244

13,967

11,032

 
 
 
 
Less:
Goodwill, net of deferred taxes
2,417

2,379

1,031

 
 
 
 
 
Intangible assets, net of deferred taxes
252

194

30

 
 
 
 
 
Deferred tax assets
11

11

1

 
 
 
 
 
Net unrealized gains (losses) on available-for-sale securities, net of deferred taxes
(144
)
(179
)
129

 
 
 
 
 
Accumulated gains (losses) on cash flow hedges, net of deferred taxes
(64
)
(76
)
77

 
 
 
 
 
Amounts in accumulated other comprehensive income (loss) attributed to
 
 
 
 
 
 
 
 
 
pension and postretirement benefit costs, net of deferred taxes
(334
)
(335
)
(362
)
 
 
 
 
 
Total Common Equity Tier 1 capital (c)
$
12,106

$
11,973

$
10,126

 
 
 
 
Net risk-weighted assets (regulatory) (c)
$
121,484

$
120,852

$
91,195

 
 
 
 
Common Equity Tier 1 ratio (non-GAAP) (c)
9.97
%
9.91
%
11.10
%
 
 
 
Notable items
 
 
 
 
 
 
 
Merger-related charges
$
(44
)
$
(81
)
$
(45
)
 
$
(125
)
$
(69
)
 
Merchant services gain
64



 
64


 
Purchase accounting finalization, net
43



 
43


 
Charitable contribution
(20
)


 
(20
)

 
 
Total notable items
$
43

$
(81
)
$
(45
)
 
$
(38
)
$
(69
)
 
Income taxes
16

(30
)
(17
)
 
(14
)
(26
)
 
 
Total notable items after tax
$
27

$
(51
)
$
(28
)
 
$
(24
)
$
(43
)



KeyCorp Reports Second Quarter 2017 Profit     
July 20, 2017
Page 16


GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
 
 
 
Three months ended
 
Six months ended
 
 
 
6/30/2017
3/31/2017
6/30/2016
 
6/30/2017
6/30/2016
Pre-provision net revenue
 
 
 
 
 
 
Net interest income (GAAP)
$
973

$
918

$
597

 
$
1,891

$
1,201

 
Plus:
Taxable-equivalent adjustment
14

11

8

 
25

16

 
 
Noninterest income
653

577

473

 
1,230

904

 
Less:
Noninterest expense
995

1,013

751

 
2,008

1,454

 
 
Pre-provision net revenue from continuing operations (non-GAAP)
$
645

$
493

$
327

 
$
1,138

$
667

 
Plus:
Notable items
(43
)
81

45

 
38

69

 
 
Pre-provision net revenue from continuing operations excluding notable items (non-GAAP)
$
602

$
574

$
372

 
$
1,176

$
736

Average tangible common equity
 
 
 
 
 
 
 
Average Key shareholders’ equity (GAAP)
$
15,200

$
15,184

$
11,147

 
$
15,192

$
11,050

 
Less:
Intangible assets (average) (d)
2,756

2,772

1,076

 
2,764

1,077

 
 
Preferred Stock (average)
1,025

1,480

290

 
1,251

290

 
 
Average tangible common equity (non-GAAP)
$
11,419

$
10,932

$
9,781

 
$
11,177

$
9,683

Return on average tangible common equity from continuing operations
 
 
 
 
 
 
 
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)
$
393

$
296

$
193

 
$
689

$
375

 
Plus:
Notable items, after tax
(27
)
51

28

 
24

43

 
Net income (loss) from continuing operations attributable to Key common shareholders
 
 
 
 
 
 
 
 
excluding notable items (non-GAAP)
$
366

$
347

$
221

 
$
713

$
418

 
Average tangible common equity (non-GAAP)
11,419

10,932

9,781

 
11,177

9,683

 
 
 
 
 
 
 
 
 
 
Return on average tangible common equity from continuing operations (non-GAAP)
13.80
%
10.98
%
7.94
%
 
12.43
%
7.79
%
 
Return on average tangible common equity from continuing operations excluding notable items (non-GAAP)
12.86

12.87

9.09

 
12.86

8.68

Return on average tangible common equity consolidated
 
 
 
 
 
 
 
Net income (loss) attributable to Key common shareholders (GAAP)
$
398

$
296

$
196

 
$
694

$
379

 
Average tangible common equity (non-GAAP)
11,419

10,932

9,781

 
11,177

9,683