Toggle SGML Header (+)


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): January 18, 2018
391804562_keylogoa05.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 January 18, 2018, KeyCorp issued a press release announcing its financial results for the three- and twelve-month periods ended December 31, 2017 (the “Press Release”), and posted on its website its fourth 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 January 18, 2018 announcing financial results for the three- and twelve-month periods ended December 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: January 18, 2018
 
/s/ Douglas M. Schosser
 
 
By: Douglas M. Schosser
 
 
Chief Accounting Officer
 
 
 



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


391804562_keylogosmaller.jpg


KEYCORP REPORTS FOURTH QUARTER 2017 NET INCOME OF $181 MILLION,
OR $.17 PER COMMON SHARE

Earnings per common share of $.36, excluding $.19 per common share from notable items: merger-related charges and the estimated impact of tax reform and related actions

                         Return on Tangible
Earnings Per Share     Cash Efficiency(a)     Common Equity(a)
391804562_a4qearnings1a05.jpg
(a) Non-GAAP measure; see pages 15-17 for reconciliation
(b) Excludes notable items; see page 15 for detail

CLEVELAND, January 18, 2018 - KeyCorp (NYSE: KEY) today announced fourth quarter net income from continuing operations attributable to Key common shareholders of $181 million, or $.17 per common share, compared to $349 million or $.32 per common share, for the third quarter of 2017 and $213 million, or $.20 per common share, for the fourth quarter of 2016. During the fourth quarter of 2017, Key’s results included a number of notable items resulting in a net impact of $.19 per common share, including merger-related charges and the estimated impact of tax reform and related actions. Notable items had a net impact of $.03 per common share in the third quarter of 2017 and $.11 per common share in the fourth quarter of 2016. Excluding notable items, earnings per common share were $.36 for the fourth quarter of 2017, compared to $.35 for the third quarter of 2017 and $.31 for the fourth quarter of 2016.

For the year ended December 31, 2017, net income from continuing operations attributable to Key common shareholders was $1.2 billion, or $1.12 per common share, compared to $753 million, or $.80 per common share, for the same period one year ago.

391804562_a4qquote1a08.jpg




KeyCorp Reports Fourth Quarter 2017 Profit     
January 18, 2018
Page 2


Estimated Impact of Tax Reform and Related Actions

As a result of the recent passage of the Tax Cuts and Jobs Act on December 22, 2017, Key took a number of actions, including the revaluation of deferred tax assets and liabilities, as well as certain tax-advantaged assets. This revaluation resulted in an estimated tax expense of $147 million recognized in the fourth quarter of 2017. Noninterest expense increased by $29 million in the quarter related to the impairment of certain tax-advantaged assets and an additional contribution to employee retirement accounts. The total impact of tax reform and related actions was $.16 per common share in the fourth quarter of 2017. The changes resulting from recent tax legislation are reasonable estimates as of December 31, 2017, and may be refined in future periods.

Beginning January 1, 2018, the new tax law will lower Key's marginal federal corporate income tax rate from 35% to 21%. Key's effective tax rate will also continue to benefit from the company's investments in certain tax-advantaged assets. Key will be sharing the expected tax benefits with its employees by increasing its minimum wage and making the additional retirement plan contribution referenced above. These actions will benefit over 80% of our workforce and allow us to reward and invest in the financial wellness of our employees.

Selected Financial Highlights
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions, except per share data
 
 
 
 
Change 4Q17 vs.
 
 
4Q17
3Q17
4Q16
 
3Q17
4Q16
Income (loss) from continuing operations attributable to Key common shareholders
$
181

$
349

$
213

 
(48.1
)%
(15.0
)%
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution
.17

.32

.20

 
(46.9
)
(15.0
)
Return on average total assets from continuing operations
.57
%
1.07
%
.69
%
 
N/A

N/A

Common Equity Tier 1 ratio (a)
10.08

10.26

9.54

 
N/A

N/A

Book value at period end
$
13.09

$
13.18

$
12.58

 
(.7
)%
4.1
 %
Net interest margin (TE) from continuing operations
3.09
%
3.15
%
3.12
%
 
N/A

N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
12/31/2017 ratio is estimated.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TE = Taxable Equivalent, N/A = Not Applicable
 
 
 
 
 
 

INCOME STATEMENT HIGHLIGHTS
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q17 vs.
 
4Q17
3Q17
4Q16
 
3Q17
4Q16
Net interest income (TE)
$
952

$
962

$
948

 
(1.0
)%
.4
%
Noninterest income
656

592

618

 
10.8

6.1

Total revenue
$
1,608

$
1,554

$
1,566

 
3.5
 %
2.7
%
 
 
 
 
 
 
 
TE = Taxable Equivalent
    
Taxable-equivalent net interest income was $952 million for the fourth quarter of 2017, and the net interest margin was 3.09%, compared to taxable-equivalent net interest income of $948 million and a net interest margin of 3.12% for the fourth quarter of 2016, reflecting the benefit from higher interest rates and low deposit betas, partly offset by a shift in funding mix into certificates of deposit. Fourth quarter 2017 net interest income included $38 million of purchase accounting accretion related to the acquisition of First Niagara, a decline of $54 million from the fourth quarter of 2016, which included $34 million related to the refinement of third quarter 2016 purchase accounting estimates.




KeyCorp Reports Fourth Quarter 2017 Profit     
January 18, 2018
Page 3


Compared to the third quarter of 2017, taxable-equivalent net interest income declined by $10 million, and the net interest margin decreased by six basis points. The decrease in net interest income and the net interest margin reflects a decline in purchase accounting accretion of $10 million. Additionally, higher interest rates and relatively low deposit betas partially offset a decline in average loan balances, resulting from paydowns and clients continuing to take advantage of attractive capital markets alternatives in the fourth quarter of 2017.

Excluding purchase accounting accretion, taxable-equivalent net interest income increased $58 million from the fourth quarter of 2016 and was stable compared to the third quarter of 2017.

Noninterest Income
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q17 vs.
 
4Q17
3Q17
4Q16
 
3Q17
4Q16
Trust and investment services income
$
131

$
135

$
123

 
(3.0
)%
6.5
 %
Investment banking and debt placement fees
200

141

157

 
41.8

27.4

Service charges on deposit accounts
89

91

84

 
(2.2
)
6.0

Operating lease income and other leasing gains
27

16

21

 
68.8

28.6

Corporate services income
56

54

61

 
3.7

(8.2
)
Cards and payments income
77

75

69

 
2.7

11.6

Corporate-owned life insurance income
37

31

40

 
19.4

(7.5
)
Consumer mortgage income
7

7

6

 

16.7

Mortgage servicing fees
17

21

20

 
(19.0
)
(15.0
)
Net gains (losses) from principal investing
3

3

4

 

(25.0
)
Other income
12

18

33

 
(33.3
)
(63.6
)
Total noninterest income
$
656

$
592

$
618

 
10.8
 %
6.1
 %
 
 
 
 
 
 
 

Key’s noninterest income was $656 million for the fourth quarter of 2017, compared to $618 million for the year-ago quarter. Growth was largely driven by another record quarter of investment banking and debt placement fees, up $43 million from the year-ago period, related to the recent acquisition of Cain Brothers, as well as ongoing growth in the core Key franchise, including strength in commercial mortgage banking. Momentum continued in many fee-based businesses, as cards and payments income and trust and investment services income each grew $8 million from the year-ago period, as a result of higher credit card and merchant fees and strength in the equity markets, respectively. These increases were partially offset by a



KeyCorp Reports Fourth Quarter 2017 Profit     
January 18, 2018
Page 4


decline in other income, including $7 million of impairments of certain tax-advantaged assets, which were offset by a reduction of related income tax expense.

Compared to the third quarter of 2017, noninterest income increased by $64 million. The increase is largely driven by broad-based growth in investment banking and debt placement fees, which grew $59 million from the prior quarter. Operating lease income and other leasing gains increased $11 million, related to lease residual losses in the prior quarter. Slightly offsetting these increases was a decline in other income.

Noninterest Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q17 vs.
 
4Q17
3Q17
4Q16
 
3Q17
4Q16
Personnel expense
$
608

$
558

$
648

 
9.0
%
(6.2
)%
Non-personnel expense
490

434

572

 
12.9

(14.3
)
Total noninterest expense
$
1,098

$
992

$
1,220

 
10.7

(10.0
)
 
 
 
 
 


 
Notable items (a)
85

36

207

 
136.1

(58.9
)
Total noninterest expense excluding notable items
$
1,013

$
956

$
1,013

 
6.0
%

 
 
 
 
 
 
 
(a)
Notable items for the fourth quarter of 2017 includes $56 million of merger-related charges and $29 million of estimated impacts of tax reform and related actions. For the third quarter of 2017 and fourth quarter of 2016, notable items includes $36 million and $207 million of merger-related charges, respectively. See the table entitled “GAAP to Non-GAAP Reconciliations” in the attached financial supplement which presents the computations of certain financial measures related to “notable items.”
 
Key’s noninterest expense was $1.098 billion for the fourth quarter of 2017, and included a number of notable items, including merger-related charges and the estimated impact of tax reform and related actions. Merger-related charges included $26 million of personnel expense and $30 million of non-personnel expense, mostly reflected in net occupancy, marketing and other expense. The fourth quarter of 2017 was the last quarter that merger charges related to the First Niagara acquisition will be reported. The estimated impact of tax reform and other related actions had an impact of $29 million on expenses in the fourth quarter of 2017, including the impairment of certain tax-advantaged assets, as well as a one-time additional contribution to employee retirement accounts.

Excluding notable items, noninterest expense was unchanged from the year-ago period. Expenses related to acquisitions and investments, including Cain Brothers, as well as higher operating lease expense were offset by the realization of First Niagara cost savings.

Excluding notable items, noninterest expense increased $57 million from the third quarter of 2017. The increase in personnel expense was largely the result of the acquisition of Cain Brothers early in the fourth quarter, which added $36 million of noninterest expense, as well as increased incentive compensation related to a strong capital markets performance. The increase in nonpersonnel expense was primarily related to higher other expense, as well as increases in net occupancy and operating lease expense.

BALANCE SHEET HIGHLIGHTS

Average Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q17 vs.
 
4Q17
3Q17
4Q16
 
3Q17
4Q16
Commercial and industrial (a)
$
41,289

$
41,416

$
39,495

 
(.3
)%
4.5
 %
Other commercial loans
21,040

21,598

21,617

 
(2.6
)
(2.7
)
Home equity loans
12,128

12,314

12,812

 
(1.5
)
(5.3
)
Other consumer loans
11,549

11,486

11,436

 
.5

1.0

Total loans
$
86,006

$
86,814

$
85,360

 
(.9
)%
.8
 %
 
 
 
 
 
 
 

(a)
Commercial and industrial average loan balances include $119 million, $117 million, and $119 million of assets from commercial credit cards at December 31, 2017, September 30, 2017, and December 31, 2016, respectively.

    
Average loans were $86.0 billion for the fourth quarter of 2017, an increase of $646 million compared to the fourth quarter of 2016, reflecting growth in commercial and industrial loans and indirect auto lending.

Compared to the third quarter of 2017, average loans decreased by $808 million. Reductions in commercial real estate loans reflected significantly higher debt placements and paydowns throughout the quarter. Additionally, commercial loan balances declined due to lower line utilization in the fourth quarter of 2017. On a period-end basis, commercial and industrial loans increased $712 million, with growth very late in the quarter, therefore having a limited impact on average balances for the quarter.

At December 31, 2017, the remaining fair value discount on the First Niagara acquired loan portfolio was $266 million, compared to $302 million at September 30, 2017.




KeyCorp Reports Fourth Quarter 2017 Profit     
January 18, 2018
Page 5


Average Deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q17 vs.
 
4Q17
3Q17
4Q16
 
3Q17
4Q16
Non-time deposits
$
92,251

$
92,039

$
94,414

 
.2
%
(2.3
)%
Certificates of deposit ($100,000 or more)
6,776

6,402

5,428

 
5.8

24.8

Other time deposits
4,771

4,664

4,849

 
2.3

(1.6
)
Total deposits
$
103,798

$
103,105

$
104,691

 
.7
%
(.9
)%
 
 
 
 
 
 
 
Cost of total deposits
.31
%
.28
%
.22
%
 
N/A

N/A

 
 
 
 
 
 
 

N/A = Not Applicable

Average deposits totaled $103.8 billion for the fourth quarter of 2017, a decrease of $893 million compared to the year-ago quarter. NOW and money-market deposit accounts declined $1.8 billion, largely the result of lower escrow deposits and higher short-term commercial deposits in the fourth quarter of 2016. Certificates of deposits increased $1.3 billion, reflecting strength in Key’s retail banking franchise and core growth from commercial clients.

Compared to the third quarter of 2017, average deposits increased by $693 million. Noninterest-bearing deposits increased by $762 million from seasonal deposit inflows, and certificates of deposits and other time deposits increased $481 million, reflecting growth in core retail deposits. This growth was partly offset by declines in NOW and money market deposit accounts and savings deposits.

ASSET QUALITY
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q17 vs.
 
4Q17
3Q17
4Q16
 
3Q17
4Q16
Net loan charge-offs
$
52

$
32

$
72

 
62.5
 %
(27.8
)%
Net loan charge-offs to average total loans
.24
%
.15
%
.34
%
 
N/A

N/A

Nonperforming loans at period end (a)
$
503

$
517

$
625

 
(2.7
)
(19.5
)
Nonperforming assets at period end (a)
534

556

676

 
(4.0
)
(21.0
)
Allowance for loan and lease losses
877

880

858

 
(.3
)
2.2

Allowance for loan and lease losses to nonperforming loans (a)
174.4
%
170.2
%
137.3
%
 
N/A

N/A

Provision for credit losses
$
49

$
51

$
66

 
(3.9
)%
(25.8
)%
 
 
 
 
 
 
 
(a)
Nonperforming loan balances exclude $738 million, $783 million, and $865 million of purchased credit impaired loans at December 31, 2017, September 30, 2017, and December 31, 2016, respectively.

N/A = Not Applicable

Key’s provision for credit losses was $49 million for the fourth quarter of 2017, compared to $66 million for the fourth quarter of 2016 and $51 million for the third quarter of 2017. Key’s allowance for loan and lease losses was $877 million, or 1.01% of total period-end loans, at December 31, 2017, compared to 1.00% at December 31, 2016, and 1.02% at September 30, 2017.

Net loan charge-offs for the fourth quarter of 2017 totaled $52 million, or .24% of average total loans. These results compare to $72 million, or .34%, for the fourth quarter of 2016, and $32 million, or .15%, for the third quarter of 2017.

At December 31, 2017, Key’s nonperforming loans totaled $503 million, which represented .58% of period-end portfolio loans. These results compare to .73% at December 31, 2016, and .60% at September 30, 2017. Nonperforming assets at December 31, 2017, totaled $534 million, and represented .62% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .79% at December 31, 2016, and .64% at September 30, 2017.
 
CAPITAL

Key’s estimated risk-based capital ratios included in the following table continued to exceed all “well-capitalized” regulatory benchmarks at December 31, 2017.
 
Capital Ratios
 
 
 
 
 
 
 
 
12/31/2017
9/30/2017
12/31/2016
Common Equity Tier 1 (a)
10.08
%
10.26
%
9.54
%
Tier 1 risk-based capital (a)
10.93

11.11

10.89

Total risk based capital (a)
12.84

13.09

12.85

Tangible common equity to tangible assets (b)
8.23

8.49

8.09

Leverage (a)
9.64

9.83

9.90

 
 
 
 
(a)
12/31/2017 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.” 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 in the fourth quarter. As shown in the preceding table, at December 31, 2017, Key’s estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.08% and 10.93%, respectively. The decline in Key's capital ratios in the fourth quarter of 2017 was largely



KeyCorp Reports Fourth Quarter 2017 Profit     
January 18, 2018
Page 6


due to the estimated impact of recent tax reform. This does not change Key's previously announced capital actions. Key's tangible common equity ratio was 8.23% at December 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 9.97% at December 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 4Q17 vs.
 
 
4Q17
3Q17
4Q16
 
3Q17
4Q16
Shares outstanding at beginning of period
1,079,039

1,092,739

1,082,055

 
(1.3
)%
(.3
)%
Open market repurchases and return of shares under employee compensation plans
(10,617
)
(15,298
)
(4,380
)
 
(30.6
)
142.4

Shares issued under employee compensation plans (net of cancellations)
662

1,598

1,642

 
(58.6
)
(59.7
)
Common shares issued to acquire First Niagara



(3
)
 
N/M

N/M

 
Shares outstanding at end of period
1,069,084

1,079,039

1,079,314

 
(.9
)%
(.9
)%
 
 
 
 
 
 
 
 
N/M = Not Meaningful

Consistent with Key's 2017 Capital Plan, during the fourth quarter of 2017, Key declared a dividend of $.105 per common share, an 11% increase from the prior quarter, and the second common share dividend increase of 2017. Key also completed $199 million of common share repurchases during the quarter, including $198 million of common share repurchases in the open market and $1 million of share repurchases related to employee equity compensation programs.

LINE OF BUSINESS RESULTS

The following table shows the contribution made by each major business segment to Key’s taxable-equivalent revenue from continuing operations and income (loss) from continuing operations attributable to Key for the periods presented. For more detailed financial information pertaining to each business segment, see the tables at the end of this release.
  
Major Business Segments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q17 vs.
 
 
4Q17
3Q17
4Q16
 
3Q17
4Q16
Revenue from continuing operations (TE)
 
 
 
 
 
 
Key Community Bank
$
969

$
959

$
902

 
1.0
 %
7.4
 %
Key Corporate Bank
603

560

630

 
7.7

(4.3
)
Other Segments
35

30

38

 
16.7

(7.9
)
 
Total segments
1,607

1,549

1,570


3.7

2.4

Reconciling Items
1

5

(4
)
 
(80.0
)
N/M

 
Total
$
1,608

$
1,554

$
1,566

 
3.5
 %
2.7
 %
 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key
 
 
 
 
 
 
Key Community Bank
$
146

$
162

$
106

 
(9.9
)%
37.7
 %
Key Corporate Bank
221

190

224

 
16.3

(1.3
)
Other Segments
53

23

34

 
130.4

55.9

 
Total segments
420

375

364

 
12.0

15.4

Reconciling Items (a)
(225
)
(12
)
(131
)
 
N/M

N/M

 
Total
$
195

$
363

$
233

 
(46.3
)%
(16.3
)%
 
 
 
 
 
 
 
 
(a)
Reconciling items consists primarily of the unallocated portion of merger-related charges, certain estimated impacts of tax reform, and items not allocated to the business segments because they do not reflect their normal operations.

TE = Taxable Equivalent, N/M = Not Meaningful



KeyCorp Reports Fourth Quarter 2017 Profit     
January 18, 2018
Page 7




Key Community Bank
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q17 vs.
 
4Q17
3Q17
4Q16
 
3Q17
4Q16
Summary of operations
 
 
 
 
 
 
Net interest income (TE)
$
671

$
670

$
629

 
.1
 %
6.7
%
Noninterest income
298

289

273

 
3.1

9.2

Total revenue (TE)
969

959

902

 
1.0

7.4

Provision for credit losses
57

59

51

 
(3.4
)
11.8

Noninterest expense
682

643

682

 
6.1


Income (loss) before income taxes (TE)
230

257

169

 
(10.5
)
36.1

Allocated income taxes (benefit) and TE adjustments
84

95

63

 
(11.6
)
33.3

Net income (loss) attributable to Key
$
146

$
162

$
106

 
(9.9
)%
37.7
%
 
 
 
 
 
 
 
Average balances
 
 
 
 
 
 
Loans and leases
$
47,403

$
47,595

$
47,059

 
(.4
)%
.7
%
Total assets
51,469

51,708

51,002

 
(.5
)
.9

Deposits
80,352

79,563

79,266

 
1.0

1.4

 
 
 
 
 




Assets under management at period end
$
39,588

$
38,660

$
36,592

 
2.4
 %
8.2
%
 
 
 
 
 
 
 
TE = Taxable Equivalent


Additional Key Community Bank Data
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q17 vs.
 
4Q17
3Q17
4Q16
 
3Q17
4Q16
Noninterest income
 
 
 
 
 
 
Trust and investment services income
$
98

$
101

$
88

 
(3.0
)%
11.4
 %
Service charges on deposit accounts
77

78

71

 
(1.3
)
8.5

Cards and payments income
67

65

59

 
3.1

13.6

Other noninterest income
56

45

55

 
24.4

1.8

Total noninterest income
$
298

$
289

$
273

 
3.1
 %
9.2
 %
 
 
 
 
 




Average deposit balances
 
 
 
 




NOW and money market deposit accounts
$
44,415

$
44,481

$
44,276

 
(.1
)%
.3
 %
Savings deposits
5,090

5,165

5,326

 
(1.5
)
(4.4
)
Certificates of deposit ($100,000 or more)
4,628

4,195

3,658

 
10.3

26.5

Other time deposits
4,765

4,657

4,836

 
2.3

(1.5
)
Noninterest-bearing deposits
21,454

21,065

21,170

 
1.8

1.3

Total deposits
$
80,352

$
79,563

$
79,266

 
1.0
 %
1.4
 %
 
 
 
 
 
 
 
Home equity loans
 
 
 
 
 
 
Average balance
$
12,005

$
12,182

$
12,560

 
 
 
Combined weighted-average loan-to-value ratio (at date of origination)
70
%
69
%
71
%
 
 
 
Percent first lien positions
60

60

57

 
 
 
 
 
 
 
 
 
 
Other data
 
 
 
 
 
 
Branches
1,197

1,208

1,217

 
 
 
Automated teller machines
1,572

1,588

1,593

 
 
 
 
 
 
 
 
 
 

Key Community Bank Summary of Operations (4Q17 vs. 4Q16)

Positive operating leverage compared to prior year
Net income increased $40 million, or 37.7%, from prior year
Average commercial and industrial loans increased $1.0 billion, or 6.0%, from the prior year




KeyCorp Reports Fourth Quarter 2017 Profit     
January 18, 2018
Page 8


Key Community Bank recorded net income attributable to Key of $146 million for the fourth quarter of 2017, compared to $106 million for the year-ago quarter, benefiting from momentum in Key's core businesses, as well as First Niagara-related synergies.
Taxable-equivalent net interest income increased by $42 million, or 6.7%, from the fourth quarter of 2016. The increase was primarily attributable to the benefit from higher interest rates and a larger balance sheet. Average loans and leases increased $344 million, or .7%, largely driven by a $1.0 billion, or 6.0%, increase in commercial and industrial loans. Additionally, average deposits increased $1.1 billion, or 1.4%, from one year ago.
Noninterest income was up $25 million, or 9.2%, from the year-ago quarter, driven by strength in cards and payments, which includes the impact of Key’s merchant services acquisition in the second quarter of 2017, higher assets under management from market growth, and higher deposit service charges driven by investments in commercial payments.
The provision for credit losses increased by $6 million, or 11.8%, from the fourth quarter of 2016. Net loan charge-offs decreased $7 million from the fourth quarter of 2016, primarily related to lower losses on consumer loans.
Noninterest expense was flat from the year-ago quarter. Personnel expense increased $14 million driven by on-going investments and business acquisitions, including HelloWallet. Nonpersonnel expense decreased by $14 million benefiting from First Niagara related expense synergies and includes the impact of business acquisitions of HelloWallet and Key’s merchant services acquisition.

Key Corporate Bank
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q17 vs.
 
4Q17
3Q17
4Q16
 
3Q17
4Q16
Summary of operations
 
 
 
 
 
 
Net interest income (TE)
$
283

$
291

$
332

 
(2.7
)%
(14.8
)%
Noninterest income
320

269

298

 
19.0

7.4

Total revenue (TE)
603

560

630

 
7.7

(4.3
)
Provision for credit losses
(6
)
(11
)
17

 
N/M

N/M

Noninterest expense
353

303

326

 
16.5

8.3

Income (loss) before income taxes (TE)
256

268

287

 
(4.5
)
(10.8
)
Allocated income taxes and TE adjustments
34

78

64

 
N/M

N/M

Net income (loss)
222

190

223

 
16.8

(.4
)
Less: Net income (loss) attributable to noncontrolling interests
1


(1
)
 
N/M

N/M

Net income (loss) attributable to Key
$
221

$
190

$
224

 
16.3
 %
(1.3
)%
 
 
 
 
 
 
 
Average balances
 
 
 
 
 
 
Loans and leases
$
37,462

$
38,040

$
36,746

 
(1.5
)%
1.9
 %
Loans held for sale
1,345

1,521

1,223

 
(11.6
)
10.0

Total assets
44,506

45,276

43,215

 
(1.7
)
3.0

Deposits
21,558

21,559

23,171

 

(7.0
)
 
 
 
 
 
 
 
TE = Taxable Equivalent, N/M = Not Meaningful




KeyCorp Reports Fourth Quarter 2017 Profit     
January 18, 2018
Page 9


Additional Key Corporate Bank Data
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q17 vs.
 
4Q17
3Q17
4Q16
 
3Q17
4Q16
Noninterest income
 
 
 
 
 
 
Trust and investment services income
$
33

$
34

$
35

 
(2.9
)%
(5.7
)%
Investment banking and debt placement fees
195

137

154

 
42.3

26.6

Operating lease income and other leasing gains
24

13

18

 
84.6

33.3

 
 
 
 
 
 
 
Corporate services income
40

40

43

 

(7.0
)
Service charges on deposit accounts
12

13

12

 
(7.7
)

Cards and payments income
10

10

10

 


Payments and services income
62

63

65

 
(1.6
)
(4.6
)
 
 
 
 
 
 
 
Mortgage servicing fees
14

18

18

 
(22.2
)
(22.2
)
Other noninterest income
(8
)
4

8

 
N/M

N/M

Total noninterest income
$
320

$
269

$
298

 
19.0
 %
7.4
 %
 
 
 
 
 
 
 
N/M = Not Meaningful
Key Corporate Bank Summary of Operations (4Q17 vs. 4Q16)

Record quarter and year for investment banking and debt placement fees
Positive operating leverage compared to prior year
   Net income down $3 million, or 1.3%, from prior year

            Key Corporate Bank recorded net income attributable to Key of $221 million for the fourth quarter of 2017, compared to $224 million for the same period one year ago.

            Taxable-equivalent net interest income decreased by $49 million, or 14.8%, compared to the fourth quarter of 2016, largely related to lower accretion of purchase accounting. Average loan and lease balances increased $716 million, or 1.9%, from the year-ago quarter, driven by growth in commercial and industrial loans. Average deposit balances decreased $1.6 billion, or 7.0%, from the year-ago quarter, driven by the managed exit of higher cost corporate and public sector deposits.

            Noninterest income was up $22 million, or 7.4%, from the prior year. This increase was largely due to higher investment banking and debt placement fees, which were up $41 million, related to the recent acquisition of Cain Brothers, as well as continued growth in the core Key franchise. This increase was partially offset by a decline in other noninterest income of $16 million, including impairments of certain tax-advantaged assets, as well as a decline in mortgage fees of $4 million.

            During the fourth quarter of 2017, the provision for credit losses decreased $23 million, or 135.3%, and net loan charge-offs declined $10 million, compared to the fourth quarter of 2016, related to improving credit quality in the overall portfolio.

            Noninterest expense increased by $27 million, or 8.3%, from the fourth quarter of 2016. The increase from the prior year was largely driven by the recent acquisition of Cain Brothers as well as impairments to certain tax-advantaged assets related to tax reform.


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 $53 million for the fourth quarter of 2017, compared to $34 million for the same period last year.

*****

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 $137.7 billion at December 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 approximately 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 Fourth Quarter 2017 Profit     
January 18, 2018
Page 10



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
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, January 18, 2018. An audio replay of the call will be available through January 28, 2018.
 
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 Fourth Quarter 2017 Profit     
January 18, 2018
Page 11





KeyCorp
Fourth 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 Fourth Quarter 2017 Profit     
January 18, 2018
Page 12


Financial Highlights
(dollars in millions, except per share amounts)
 
 
 
Three months ended
 
 
 
12/31/2017
9/30/2017
12/31/2016
Summary of operations
 
 
 
 
Net interest income (TE)
$
952

$
962

$
948

 
Noninterest income
656

592

618

 
 
Total revenue (TE)
1,608

1,554

1,566

 
Provision for credit losses
49

51

66

 
Noninterest expense
1,098

992

1,220

 
Income (loss) from continuing operations attributable to Key
195

363

233

 
Income (loss) from discontinued operations, net of taxes (a)
1

1

(4
)
 
Net income (loss) attributable to Key
196

364

229

 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
181

349

213

 
Income (loss) from discontinued operations, net of taxes (a)
1

1

(4
)
 
Net income (loss) attributable to Key common shareholders
182

350

209

 
 
 
 
 
 
Per common share
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
$
.17

$
.32

$
.20

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



 
Net income (loss) attributable to Key common shareholders (b)
.17

.32

.20

 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution
.17

.32

.20

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



 
Net income (loss) attributable to Key common shareholders — assuming dilution (b)
.17

.32

.19

 
 
 
 
 
 
 
Cash dividends declared
.105

.095

.085

 
Book value at period end
13.09

13.18

12.58

 
Tangible book value at period end
10.35

10.52

9.99

 
Market price at period end
20.17

18.82

18.27

 
 
 
 
 
 
Performance ratios
 
 
 
 
From continuing operations:
 
 
 
 
Return on average total assets
.57
%
1.07
%
.69
%
 
Return on average common equity
5.04

9.74

6.22

 
Return on average tangible common equity (c)
6.35

12.21

7.88

 
Net interest margin (TE)
3.09

3.15

3.12

 
Cash efficiency ratio (c)
66.7

62.2

76.2

 
 
 
 
 
 
 
From consolidated operations:
 
 
 
 
Return on average total assets
.57
%
1.06
%
.67
%
 
Return on average common equity
5.07

9.77

6.10

 
Return on average tangible common equity (c)
6.39

12.25

7.73

 
Net interest margin (TE)
3.07

3.13

3.09

 
Loan to deposit (d)
84.4

86.2

85.2

 
 
 
 
 
 
Capital ratios at period end
 
 
 
 
Key shareholders’ equity to assets
10.91
%
11.15
%
11.17
%
 
Key common shareholders’ equity to assets
10.17

10.40

9.95

 
Tangible common equity to tangible assets (c)
8.23

8.49

8.09

 
Common Equity Tier 1 (e)
10.08

10.26

9.54

 
Tier 1 risk-based capital (e)
10.93

11.11

10.89

 
Total risk-based capital (e)
12.84

13.09

12.85

 
Leverage (e)
9.64

9.83

9.90

 
 
 
 
 
 
Asset quality — from continuing operations
 
 
 
 
Net loan charge-offs
$
52

$
32

$
72

 
Net loan charge-offs to average loans
.24
%
.15
%
.34
%
 
Allowance for loan and lease losses
$
877

$
880

$
858

 
Allowance for credit losses
934

937

913

 
Allowance for loan and lease losses to period-end loans
1.01
%
1.02
%
1.00
%
 
Allowance for credit losses to period-end loans
1.08

1.08

1.06

 
Allowance for loan and lease losses to nonperforming loans (f)
174.4

170.2

137.3

 
Allowance for credit losses to nonperforming loans (f)
185.7

181.2

146.1

 
Nonperforming loans at period-end (f)
$
503

$
517

$
625

 
Nonperforming assets at period-end (f)
534

556

676

 
Nonperforming loans to period-end portfolio loans (f)
.58
%
.60
%
.73
%
 
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (f)
.62

.64

.79

 
 
 
 
 
 
Trust assets
 
 
 
 
Assets under management
$
39,588

$
38,660

$
36,592

 
 
 
 
 
 
Other data
 
 
 
 
Average full-time equivalent employees
18,379

18,548

18,849

 
Branches
1,197

1,208

1,217

 
 
 
 
 
 
Taxable-equivalent adjustment
$
14

$
14

$
10




KeyCorp Reports Fourth Quarter 2017 Profit     
January 18, 2018
Page 13



 
 
 
 
 
Financial Highlights (continued)
(dollars in millions, except per share amounts)
 
 
Twelve months ended
 
 
12/31/2017
 
12/31/2016
Summary of operations
 
 
 
 
Net interest income (TE)
$
3,830

 
$
2,953

 
Noninterest income
2,478

 
2,071

 
Total revenue (TE)
6,308

 
5,024

 
Provision for credit losses
229

 
266

 
Noninterest expense
4,098

 
3,756

 
Income (loss) from continuing operations attributable to Key
1,289

 
790

 
Income (loss) from discontinued operations, net of taxes (a)
7

 
1

 
Net income (loss) attributable to Key
1,296

 
791

 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
$
1,219

 
$
753

 
Income (loss) from discontinued operations, net of taxes (a)
7

 
1

 
Net income (loss) attributable to Key common shareholders
1,226

 
754

 
 
 
 
 
Per common share
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
$
1.13

 
$
.81

 
Income (loss) from discontinued operations, net of taxes (a)
.01

 

 
Net income (loss) attributable to Key common shareholders (b)
1.14

 
.81

 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution
1.12

 
.80

 
Income (loss) from discontinued operations, net of taxes — assuming dilution (a)
.01

 

 
Net income (loss) attributable to Key common shareholders — assuming dilution (b)
1.13

 
.80

 
 
 
 
 
 
Cash dividends paid
.38

 
.33

 
 
 
 
 
Performance ratios
 
 
 
 
From continuing operations:
 
 
 
 
Return on average total assets
.96
%
 
.70
%
 
Return on average common equity
8.65

 
6.26

 
Return on average tangible common equity (c)
10.84

 
7.39

 
Net interest margin (TE)
3.17

 
2.92

 
Cash efficiency ratio (c)
63.5

 
73.7

 
 
 
 
 
 
From consolidated operations:
 
 
 
 
Return on average total assets
.96
%
 
.69
%
 
Return on average common equity
8.70

 
6.27

 
Return on average tangible common equity (c)
10.90

 
7.40

 
Net interest margin (TE)
3.15

 
2.91

 
 
 
 
 
Asset quality — from continuing operations
 
 
 
 
Net loan charge-offs
208

 
205

 
Net loan charge-offs to average total loans
.24
%
 
.29
%
 
 
 
 
 
Other data
 
 
 
 
Average full-time equivalent employees
18,415

 
15,700

 
 
 
 
 
Taxable-equivalent adjustment
53

 
34

(a)
In April 2009, management decided to wind down the operations of Austin Capital Management, Ltd., a subsidiary that specialized in managing hedge fund investments for institutional customers. In September 2009, management decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank National Association.
(b)
Earnings per share may not foot due to rounding.
(c)
The following table entitled “GAAP to Non-GAAP Reconciliations” presents the computations of certain financial measures related to “tangible common equity” and “cash efficiency.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. For further information on the Regulatory Capital Rules, see the “Capital” section of this release.
(d)
Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits.
(e)
December 31, 2017, ratio is estimated.
(f)
Nonperforming loan balances exclude $738 million, $783 million, and $865 million of purchased credit impaired loans at December 31, 2017, September 30, 2017, and December 31, 2016, respectively.
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles
 
 
 
 
 
 



KeyCorp Reports Fourth Quarter 2017 Profit     
January 18, 2018
Page 14


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, including the impact of tax reform and related actions, in order to enable a better understanding of Company results, increase comparability of period-to-period results, and to evaluate and forecast those results.

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

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

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

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

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.
 
Three months ended
 
Twelve months ended
 
12/31/2017
9/30/2017
12/31/2016
 
12/31/2017
12/31/2016
Tangible common equity to tangible assets at period-end
 
 
 
 
 
 
Key shareholders’ equity (GAAP)
$
15,023

$
15,249

$
15,240

 
 
 
Less: Intangible assets (a)
2,928

2,870

2,788

 
 
 
Preferred Stock (b)
1,009

1,009

1,640

 
 
 
Tangible common equity (non-GAAP)
$
11,086

$
11,370

$
10,812

 
 
 
Total assets (GAAP)
$
137,698

$
136,733

$
136,453

 
 
 
Less: Intangible assets (a)
2,928

2,870

2,788

 
 
 
Tangible assets (non-GAAP)
$
134,770

$
133,863

$
133,665

 
 
 
Tangible common equity to tangible assets ratio (non-GAAP)
8.23
%
8.49
%
8.09
%
 
 
 
Earnings per common share (EPS) excluding notable items
 
 
 
 
 
 
EPS from continuing operations attributable to Key common shareholders — assuming dilution
$
.17

$
.32

$
.20

 
 
 
Plus: EPS impact of notable items
.19

.03

.11

 
 
 
EPS from continuing operations attributable to Key common shareholders excluding notable items (non-GAAP)
$
.36

$
.35

$
.31

 
 
 
Notable items
 
 
 
 
 
 
Merger-related charges
$
(56
)
$
(36
)
$
(198
)
 
$
(217
)
$
(474
)
Estimated impacts of tax reform and related actions
(30
)


 
(30
)

Merchant services gain

(5
)

 
59


Purchase accounting finalization, net



 
43


Charitable contribution



 
(20
)

Total notable items
$
(86
)
$
(41
)
$
(198
)
 
$
(165
)
$
(474
)
Income taxes
(26
)
(13
)
(74
)
 
(53
)
(175
)
Reevaluation of certain tax related assets
147



 
147


Total notable items, after tax
$
(207
)
$
(28
)
$
(124
)
 
$
(259
)
$
(299
)



KeyCorp Reports Fourth Quarter 2017 Profit     
January 18, 2018
Page 15


GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
 
 
 
Three months ended
 
Twelve months ended
 
 
 
12/31/2017
9/30/2017
12/31/2016
 
12/31/2017
12/31/2016
Pre-provision net revenue
 
 
 
 
 
 
Net interest income (GAAP)
$
938

$
948

$
938

 
$
3,777

$
2,919

 
Plus:
Taxable-equivalent adjustment
14

14

10

 
53

34

 
 
Noninterest income
656

592

618

 
2,478

2,071

 
Less:
Noninterest expense
1,098

992

1,220

 
4,098

3,756

 
 
Pre-provision net revenue from continuing operations (non-GAAP)
$
510

$
562

$
346

 
$
2,210

$
1,268

 
Plus:
Notable items
86

41

198

 
165

474

 
 
Pre-provision net revenue from continuing operations excluding notable items (non-GAAP)
$
596

$
603

$
544

 
$
2,375

$
1,742

Average tangible common equity
 
 
 
 
 
 
 
Average Key shareholders’ equity (GAAP)
$
15,268

$
15,241

$
14,901

 
$
15,224

$
12,647

 
Less:
Intangible assets (average) (c)
2,939

2,878

2,874

 
2,837

1,825

 
 
Preferred Stock (average)
1,025

1,025

1,274

 
1,137

627

 
 
Average tangible common equity (non-GAAP)
$
11,304

$
11,338

$
10,753

 
$
11,250

$
10,195

Return on average tangible common equity from continuing operations
 
 
 
 
 
 
 
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)
$
181

$
349

$
213

 
$
1,219

$
753

 
Plus:
Notable items, after tax
207

28

124

 
259

299

 
Net income (loss) from continuing operations attributable to Key common shareholders excluding notable items (non-GAAP)
$
388

$
377

$
337

 
$
1,478

$
1,052

 
Average tangible common equity (non-GAAP)
11,304

11,338

10,753

 
11,250

10,195

 
 
 
 
 
 
 
 
 
 
Return on average tangible common equity from continuing operations (non-GAAP)
6.35
%
12.21
%
7.88
%
 
10.84
%
7.39
%
 
Return on average tangible common equity from continuing operations excluding notable items (non-GAAP)
13.62

13.19

12.47

 
13.14

10.32

Return on average tangible common equity consolidated
 
 
 
 
 
 
 
Net income (loss) attributable to Key common shareholders (GAAP)
$
182

$
350

$
209

 
$
1,226

$
754

 
Average tangible common equity (non-GAAP)
11,304

11,338

10,753

 
11,250

10,195

 
 
 
 
 
 
 
 
 
 
Return on average tangible common equity consolidated (non-GAAP)
6.39
%
12.25
%
7.73
%
 
10.90
%
7.40
%
Cash efficiency ratio
 
 
 
 
 
 
 
Noninterest expense (GAAP)
$
1,098

$
992

$
1,220

 
$
4,098

$
3,756

 
Less:
Intangible asset amortization
26

25

27

 
95

55

 
 
Adjusted noninterest expense (non-GAAP)