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Section 1: 8-K (8-K)

Document


UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): April 19, 2018
393086736_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 April 19, 2018, KeyCorp issued a press release announcing its financial results for the three-month period ended March 31, 2018 (the “Press Release”), and posted on its website its first quarter 2018 Supplemental Information Package (the “Supplemental Information Package”). The Press Release and Supplemental Information Package are being furnished as Exhibit 99.1 and Exhibit 99.2, respectively.

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

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

Item 9.01
Financial Statements and Exhibits.

(d)
Exhibits

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

99.1
Press Release, dated April 19, 2018 announcing financial results for the three-month period ended March 31, 2018.

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

99.3
Financial Statements.






SIGNATURE
 
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
 
KEYCORP
 
 
(Registrant)
 
 
 
 
 
 
Date: April 19, 2018
 
/s/ Douglas M. Schosser
 
 
By: Douglas M. Schosser
 
 
Chief Accounting Officer
 
 
 



(Back To Top)

Section 2: EX-99.1

Exhibit




393086736_keylogosmaller.jpg



KEYCORP REPORTS FIRST QUARTER 2018 NET INCOME OF $402 MILLION,
OR $.38 PER COMMON SHARE

First quarter results reflect solid underlying trends in core businesses and ongoing benefits from recent investments


CLEVELAND, April 19, 2018 - KeyCorp (NYSE: KEY) today announced first quarter net income from continuing operations attributable to Key common shareholders of $402 million, or $.38 per common share, compared to $181 million, or $.17 per common share, for the fourth quarter of 2017 and $296 million, or $.27 per common share, for the first quarter of 2017. Key's reported results in the fourth quarter of 2017 included merger-related charges and the estimated impact of tax reform and related actions, resulting in a net impact of $.19 per common share. Key's results in the first quarter of 2017 included merger-related charges, resulting in an impact of $.05 per common share.

393086736_a1q18bemquotea06.jpg
Selected Financial Highlights
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions, except per share data
 
 
 
 
Change 1Q18 vs.
 
 
1Q18
4Q17
1Q17
 
4Q17
1Q17
Income (loss) from continuing operations attributable to Key common shareholders
$
402

$
181

$
296

 
122.1
 %
35.8
%
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution
.38

.17

.27

 
123.5

40.7

Return on average tangible common equity from continuing operations (a)
14.89
%
6.35
%
10.98
%
 
N/A

N/A

Return on average total assets from continuing operations
1.25

.57

.99

 
N/A

N/A

Common Equity Tier 1 ratio (b)
10.03

10.16

9.91

 
N/A

N/A

Book value at period end
$
13.07

$
13.09

$
12.71

 
(.2
)%
2.8
%
Net interest margin (TE) from continuing operations
3.15
%
3.09
%
3.13
%
 
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 “Return on average tangible common equity from continuing operations.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.
(b)
3/31/2018 ratio is estimated.
TE = Taxable Equivalent, N/A = Not Applicable




KeyCorp Reports First Quarter 2018 Profit     
April 19, 2018
Page 2


INCOME STATEMENT HIGHLIGHTS
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q18 vs.
 
1Q18
4Q17
1Q17
 
4Q17
1Q17
Net interest income (TE)
$
952

$
952

$
929

 

2.5
%
Noninterest income
601

656

577

 
(8.4
)%
4.2

Total revenue
$
1,553

$
1,608

$
1,506

 
(3.4
)%
3.1
%
 
 
 
 
 
 
 
TE = Taxable Equivalent
    
Taxable-equivalent net interest income was $952 million for the first quarter of 2018, and the net interest margin was 3.15%, compared to taxable-equivalent net interest income of $929 million and a net interest margin of 3.13% for the first quarter of 2017, reflecting the benefit from higher interest rates and low deposit betas. First quarter 2018 net interest income included $33 million of purchase accounting accretion, a decline of $20 million from the first quarter of 2017.

Compared to the fourth quarter of 2017, taxable-equivalent net interest income was stable, and the net interest margin increased by six basis points. Both net interest income and the net interest margin benefited from higher interest rates and Key’s asset sensitive balance sheet position, as well as an expected reduction from elevated liquidity levels in the fourth quarter. These benefits were offset by two fewer days in the first quarter of 2018, a lower taxable-equivalent adjustment resulting from the Tax Cuts and Jobs Act, and a decline in purchase accounting accretion.

Excluding purchase accounting accretion, taxable-equivalent net interest income increased $43 million from the first quarter of 2017 and increased $5 million compared to the fourth quarter of 2017.

Noninterest Income
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q18 vs.
 
1Q18
4Q17
1Q17
 
4Q17
1Q17
Trust and investment services income
$
133

$
131

$
135

 
1.5
 %
(1.5
)%
Investment banking and debt placement fees
143

200

127

 
(28.5
)
12.6

Service charges on deposit accounts
89

89

87

 

2.3

Operating lease income and other leasing gains
32

27

23

 
18.5

39.1

Corporate services income
62

56

54

 
10.7

14.8

Cards and payments income
62

77

65

 
(19.5
)
(4.6
)
Corporate-owned life insurance income
32

37

30

 
(13.5
)
6.7

Consumer mortgage income
7

7

6

 

16.7

Mortgage servicing fees
20

17

18

 
17.6

11.1

Other income
21

15

32

 
40.0

(34.4
)
Total noninterest income
$
601

$
656

$
577

 
(8.4
)%
4.2
 %
 
 
 
 
 
 
 
N/M = Not meaningful

Key’s noninterest income was $601 million for the first quarter of 2018, compared to $577 million for the year-ago quarter. In the first quarter of 2018, Key benefited from investments in several fee-based businesses. The largest driver year-over-year was an increase in investment banking and debt placement fees, related to the Cain Brothers acquisition, as well as strength across the company's capital markets platform. In the first quarter of 2018, commercial mortgage banking and mergers and acquisitions advisory fees contributed to the strong performance. Operating lease income and other leasing gains also contributed to the increase, up $9 million from the year-ago period, driven by higher originations, and corporate services income grew $8 million related to higher loan and derivative trading income. These increases were partially offset by a decline in other income.

Compared to the fourth quarter of 2017, noninterest income decreased by $55 million. The decline was largely due to seasonal impacts in several fee income categories, including investment banking and debt



KeyCorp Reports First Quarter 2018 Profit     
April 19, 2018
Page 3


placement fees, cards and payments income, and corporate-owned life insurance. Investment banking and debt placement fees declined from record results in the fourth quarter of 2017, though still reported a record first quarter for the business. These declines were partially offset by increases in other income, as well as operating lease income and other leasing gains related to higher originations.

Noninterest Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q18 vs.
 
1Q18
4Q17
1Q17
 
4Q17
1Q17
Personnel expense
$
594

$
608

$
556

 
(2.3
)%
6.8
 %
Nonpersonnel expense
412

490

457

 
(15.9
)
(9.8
)
Total noninterest expense
$
1,006

$
1,098

$
1,013

 
(8.4
)
(.7
)
 
 
 
 
 


 
Notable items (a)

85

81

 
N/M

N/M

Total noninterest expense excluding notable items
$
1,006

$
1,013

$
932

 
(.7
)%
7.9
 %
 
 
 
 
 
 
 
N/M = Not meaningful
(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. Notable items for the first quarter of 2017 includes $81 million of merger-related charges. 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 billion for the first quarter of 2018, compared to $932 million, excluding notable items in the year-ago period. The year-over-year increase was primarily related to higher personnel costs, largely due to recent acquisitions, as well as accelerated technology investments and higher performance-based compensation. Higher marketing expense, operating lease expense, and intangible amortization expense drove the increase in nonpersonnel expense, but was partially offset by lower occupancy and other expense.

Noninterest expense decreased $7 million from the fourth quarter of 2017, excluding notable items in the prior period. Personnel expense reflected seasonally high employee benefits expense, as well as the aforementioned accelerated technology investments. These increases were more than offset by lower incentive compensation compared to the prior quarter, as well as lower nonpersonnel expense related to lower business services and professional fees, a seasonal decline in marketing expense, and a continued reduction in net occupancy expense.

BALANCE SHEET HIGHLIGHTS

Average Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q18 vs.
 
1Q18
4Q17
1Q17
 
4Q17
1Q17
Commercial and industrial (a)
$
42,733

$
41,289

$
40,002

 
3.5
 %
6.8
 %
Other commercial loans
20,705

21,040

22,175

 
(1.6
)
(6.6
)
Home equity loans
11,877

12,128

12,611

 
(2.1
)
(5.8
)
Other consumer loans
11,612

11,549

11,345

 
.5

2.4

Total loans
$
86,927

$
86,006

$
86,133

 
1.1
 %
.9
 %
 
 
 
 
 
 
 
(a)
Commercial and industrial average loan balances include $120 million, $119 million, and $114 million of assets from commercial credit cards at March 31, 2018, December 31, 2017, and March 31, 2017, respectively.

    
Average loans were $86.9 billion for the first quarter of 2018, an increase of $794 million compared to the first quarter of 2017, reflecting broad-based growth in commercial and industrial loans with middle-market clients, as well as strength in auto lending, as the company expands into existing geographies and dealer relationships. In addition, reductions in commercial real estate loans over the past year reflect significantly higher debt placements and paydowns.

Compared to the fourth quarter of 2017, average loans increased by $921 million, largely the result of growth in commercial and industrial loans. Key realized growth across commercial client segments, with commercial and industrial loans up 2% in the Community Bank and 5% in the Corporate Bank, unannualized.



KeyCorp Reports First Quarter 2018 Profit     
April 19, 2018
Page 4



Average Deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q18 vs.
 
1Q18
4Q17
1Q17
 
4Q17
1Q17
Non-time deposits
$
90,719

$
92,251

$
91,745

 
(1.7
)%
(1.1
)%
Certificates of deposit ($100,000 or more)
6,972

6,776

5,627

 
2.9

23.9

Other time deposits
4,865

4,771

4,706

 
2.0

3.4

Total deposits
$
102,556

$
103,798

$
102,078

 
(1.2
)%
.5
 %
 
 
 
 
 
 
 
Cost of total deposits
.36
%
.31
%
.23
%
 
N/A

N/A

 
 
 
 
 
 
 
N/A = Not Applicable

Average deposits totaled $102.6 billion for the first quarter of 2018, an increase of $478 million compared to the year-ago quarter. Certificates of deposits and other time deposits increased $1.5 billion, reflecting strength in Key’s retail banking franchise and growth from commercial relationships. Additionally, consumer noninterest-bearing balances grew 10% from the prior year. NOW and money-market deposit accounts declined $792 million, partially driven by a shift to higher-yielding deposit products and the managed exit of certain higher cost corporate and public sector deposits.

Compared to the fourth quarter of 2018, average deposits decreased by $1.2 billion, driven by a decline in noninterest-bearing deposits, which were elevated during the fourth quarter of 2017 due to short-term escrows and seasonal deposit inflows. This decline was partially offset by growth in consumer noninterest-bearing deposits.

ASSET QUALITY
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q18 vs.
 
1Q18
4Q17
1Q17
 
4Q17
1Q17
Net loan charge-offs
$
54

$
52

$
58

 
3.8
%
(6.9
)%
Net loan charge-offs to average total loans
.25
%
.24
%
.27
%
 
N/A

N/A

Nonperforming loans at period end (a)
$
541

$
503

$
573

 
7.6

(5.6
)
Nonperforming assets at period end (a)
569

534

623

 
6.6

(8.7
)
Allowance for loan and lease losses
881

877

870

 
.5

1.3

Allowance for loan and lease losses to nonperforming loans (a)
162.8
%
174.4
%
151.8
%
 
N/A

N/A

Provision for credit losses
$
61

$
49

$
63

 
24.5
%
(3.2
)%
 
 
 
 
 
 
 
(a)
Nonperforming loan balances exclude $690 million, $738 million, and $812 million of purchased credit impaired loans at March 31, 2018, December 31, 2017, and March 31, 2017, respectively.
N/A = Not Applicable

Key’s provision for credit losses was $61 million for the first quarter of 2018, compared to $63 million for the first quarter of 2017 and $49 million for the fourth quarter of 2017. Key’s allowance for loan and lease losses was $881 million, or 1.00% of total period-end loans, at March 31, 2018, compared to 1.01% at March 31, 2017, and 1.01% at December 31, 2017.

Net loan charge-offs for the first quarter of 2018 totaled $54 million, or .25% of average total loans. These results compare to $58 million, or .27%, for the first quarter of 2017, and $52 million, or .24%, for the fourth quarter of 2018.

At March 31, 2018, Key’s nonperforming loans totaled $541 million, which represented .61% of period-end portfolio loans. These results compare to .67% at March 31, 2017, and .58% at December 31, 2017. Nonperforming assets at March 31, 2018, totaled $569 million, and represented .65% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .72% at March 31, 2017, and .62% at December 31, 2017.
 



KeyCorp Reports First Quarter 2018 Profit     
April 19, 2018
Page 5


CAPITAL

Key’s estimated risk-based capital ratios included in the following table continued to exceed all “well-capitalized” regulatory benchmarks at March 31, 2018.
 
Capital Ratios
 
 
 
 
 
 
 
 
3/31/2018
12/31/2017
3/31/2017
Common Equity Tier 1 (a)
10.03
%
10.16
%
9.91
%
Tier 1 risk-based capital (a)
10.84

11.01

10.74

Total risk based capital (a)
12.75

12.92

12.69

Tangible common equity to tangible assets (b)
8.22

8.23

8.51

Leverage (a)
9.84

9.73

9.81

 
 
 
 
(a)
3/31/2018 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 first quarter. As shown in the preceding table, at March 31, 2018, Key’s estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.03% and 10.84%, respectively. Key's tangible common equity ratio was 8.22% at March 31, 2018.

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 9.88% at March 31, 2018. 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 1Q18 vs.
 
 
1Q18
4Q17
1Q17
 
4Q17
1Q17
Shares outstanding at beginning of period
1,069,084

1,079,039

1,079,314

 
(.9
)%
(.9
)%
Open market repurchases and return of shares under employee compensation plans
(9,399
)
(10,617
)
(8,673
)
 
(11.5
)
8.4

Shares issued under employee compensation plans (net of cancellations)
5,254

662

6,270

 
693.7

(16.2
)
Common Shares exchanged for Series A Preferred Stock


20,568

 
N/M

N/M

 
Shares outstanding at end of period
1,064,939

1,069,084

1,097,479

 
(.4
)%
(3.0
)%
 
 
 
 
 
 
 
 
N/M = Not Meaningful

Consistent with Key's 2017 Capital Plan, during the first quarter of 2018, Key declared a dividend of $.105 per common share, and completed $199 million of common share repurchases during the quarter. These repurchases included $156 million of common share repurchases in the open market and $43 million of share repurchases related to employee equity compensation programs.

LINE OF BUSINESS RESULTS

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



KeyCorp Reports First Quarter 2018 Profit     
April 19, 2018
Page 6


Major Business Segments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q18 vs.
 
 
1Q18
4Q17
1Q17
 
4Q17
1Q17
Revenue from continuing operations (TE)
 
 
 
 
 
 
Key Community Bank
$
973

$
972

$
905

 
.1
 %
7.5
 %
Key Corporate Bank
559

605

578

 
(7.6
)
(3.3
)
Other Segments
22

30

29

 
(26.7
)
(24.1
)
 
Total segments
1,554

1,607

1,512


(3.3
)
2.8

Reconciling Items
(1
)
1

(6
)
 
N/M

N/M

 
Total
$
1,553

$
1,608

$
1,506

 
(3.4
)%
3.1
 %
 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key
 
 
 
 
 
 
Key Community Bank
$
196

$
151

$
147

 
29.8
 %
33.3
 %
Key Corporate Bank
207

222

180

 
(6.8
)
15.0

Other Segments
19

50

21

 
(62.0
)
(9.5
)
 
Total segments
422

423

348

 
(.2
)
21.3

Reconciling Items (a)
(6
)
(228
)
(24
)
 
N/M

N/M

 
Total
$
416

$
195

$
324

 
113.3
 %
28.4
 %
 
 
 
 
 
 
 
 
(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


Key Community Bank
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q18 vs.
 
1Q18
4Q17
1Q17
 
4Q17
1Q17
Summary of operations
 
 
 
 
 
 
Net interest income (TE)
$
688

$
674

$
628

 
2.1
 %
9.6
 %
Noninterest income
285

298

277

 
(4.4
)
2.9

Total revenue (TE)
973

972

905

 
.1

7.5

Provision for credit losses
48

57

46

 
(15.8
)
4.3

Noninterest expense
668

677

625

 
(1.3
)
6.9

Income (loss) before income taxes (TE)
257

238

234

 
8.0

9.8

Allocated income taxes (benefit) and TE adjustments
61

87

87

 
(29.9
)
(29.9
)
Net income (loss) attributable to Key
$
196

$
151

$
147

 
29.8
 %
33.3
 %
 
 
 
 
 
 
 
Average balances
 
 
 
 
 
 
Loans and leases
$
47,680

$
47,405

$
47,085

 
.6
 %
1.3
 %
Total assets
51,681

51,471

51,063

 
.4

1.2

Deposits
79,945

80,352

79,148

 
(.5
)
1.0

 
 
 
 
 




Assets under management at period end
$
39,003

$
39,588

$
37,417

 
(1.5
)%
4.2
 %
 
 
 
 
 
 
 
TE = Taxable Equivalent





KeyCorp Reports First Quarter 2018 Profit     
April 19, 2018
Page 7


Additional Key Community Bank Data
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q18 vs.
 
1Q18
4Q17
1Q17
 
4Q17
1Q17
Noninterest income
 
 
 
 
 
 
Trust and investment services income
$
104

$
98

$
98

 
6.1
 %
6.1
 %
Service charges on deposit accounts
76

76

75

 

1.3

Cards and payments income
51

67

55

 
(23.9
)
(7.3
)
Other noninterest income
54

57

49

 
(5.3
)
10.2

Total noninterest income
$
285

$
298

$
277

 
(4.4
)%
2.9
 %
 
 
 
 
 




Average deposit balances
 
 
 
 




NOW and money market deposit accounts
$
44,291

$
44,415

$
44,780

 
(.3
)%
(1.1
)%
Savings deposits
5,056

5,090

5,268

 
(.7
)
(4.0
)
Certificates of deposit ($100,000 or more)
4,961

4,628

3,879

 
7.2

27.9

Other time deposits
4,856

4,765

4,692

 
1.9

3.5

Noninterest-bearing deposits
20,781

21,454

20,529

 
(3.1
)
1.2

Total deposits
$
79,945

$
80,352

$
79,148

 
(.5
)%
1.0
 %
 
 
 
 
 
 
 
Home equity loans
 
 
 
 
 
 
Average balance
$
11,763

$
12,005

$
12,456

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

60

60

 
 
 
 
 
 
 
 
 
 
Other data
 
 
 
 
 
 
Branches
1,192

1,197

1,216

 
 
 
Automated teller machines
1,569

1,572

1,594

 
 
 
 
 
 
 
 
 
 

Key Community Bank Summary of Operations (1Q18 vs. 1Q17)

Positive operating leverage compared to prior year
Net income increased $49 million, or 33.3%, from prior year
Average commercial and industrial loans increased $1.1 billion, or 6.1%, from the prior year

Key Community Bank recorded net income attributable to Key of $196 million for the first quarter of 2018, compared to $147 million for the year-ago quarter, benefiting from momentum in Key's core businesses, First Niagara related synergies, and a lower tax rate as a result of tax reform.

Taxable-equivalent net interest income increased by $60 million, or 9.6%, from the first quarter of 2017. The increase was primarily attributable to the benefit from higher interest rates and growth in loans. Average loans and leases increased $595 million, or 1.3%, largely driven by a $1.1 billion, or 6.1%, increase in commercial and industrial loans. Additionally, average deposits increased $797 million, or 1.0%, from one year ago.
    
Noninterest income increased $8 million, or 2.9%, from the year-ago quarter, driven by higher assets under management from market growth, as well as increases across several fee categories.
    
The provision for credit losses increased by $2 million, or 4.3%, from the first quarter of 2017. Net loan charge-offs were flat from the first quarter of 2017, as overall credit quality was stable.
    
Noninterest expense increased $43 million, or 6.9%, from the year-ago quarter. Personnel expense increased $17 million, primarily driven by recent acquisitions and ongoing investments, including residential mortgage and HelloWallet. Nonpersonnel expense increased by $26 million, driven by technology development costs, marketing expenses, higher volume-related expenses, and the impact of recent acquisitions, including HelloWallet and merchant services.





KeyCorp Reports First Quarter 2018 Profit     
April 19, 2018
Page 8


Key Corporate Bank
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q18 vs.
 
1Q18
4Q17
1Q17
 
4Q17
1Q17
Summary of operations
 
 
 
 
 
 
Net interest income (TE)
$
272

$
284

$
304

 
(4.2
)%
(10.5
)%
Noninterest income
287

321

274

 
(10.6
)
4.7

Total revenue (TE)
559

605

578

 
(7.6
)
(3.3
)
Provision for credit losses
14

(6
)
18

 
N/M

(22.2
)
Noninterest expense
314

354

304

 
(11.3
)
3.3

Income (loss) before income taxes (TE)
231

257

256

 
(10.1
)
(9.8
)
Allocated income taxes and TE adjustments
24

35

76

 
(31.4
)
(68.4
)
Net income (loss) attributable to Key
$
207

$
222

$
180

 
(6.8
)%
15.0
 %
 
 
 
 
 
 
 
Average balances
 
 
 
 
 
 
Loans and leases
$
38,260

$
37,460

$
37,688

 
2.1
 %
1.5
 %
Loans held for sale
1,118

1,345

1,097

 
(16.9
)
1.9

Total assets
45,549

44,504

44,124

 
2.3

3.2

Deposits
20,815

21,558

21,002

 
(3.4
)
(.9
)
 
 
 
 
 
 
 
TE = Taxable Equivalent, N/M = Not Meaningful

Additional Key Corporate Bank Data
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 1Q18 vs.
 
1Q18
4Q17
1Q17
 
4Q17
1Q17
Noninterest income
 
 
 
 
 
 
Trust and investment services income
$
29

$
33

$
37

 
(12.1
)%
(21.6
)%
Investment banking and debt placement fees
141

195

124

 
(27.7
)
13.7

Operating lease income and other leasing gains
27

25

21

 
8.0

28.6

 
 
 
 
 
 
 
Corporate services income
43

40

38

 
7.5

13.2

Service charges on deposit accounts
13

13

12

 

8.3

Cards and payments income
11

10

9

 
10.0

22.2

Payments and services income
67

63

59

 
6.3

13.6

 
 
 
 
 
 
 
Mortgage servicing fees
17

14

16

 
21.4

6.3

Other noninterest income
6

(9
)
17

 
N/M

(64.7
)
Total noninterest income
$
287

$
321

$
274

 
(10.6
)%
4.7
 %
 
 
 
 
 
 
 
N/M = Not Meaningful
Key Corporate Bank Summary of Operations (1Q18 vs. 1Q17)

Commercial and industrial loans up $1.7 billion, or 7.9%, from prior year
Investment banking and debt placement fees up $17 million, or 14%, from prior year
   Net income up $27 million, or 15.0%, from prior year

            Key Corporate Bank recorded net income attributable to Key of $207 million for the first quarter of 2018, compared to $180 million for the same period one year ago.

            Taxable-equivalent net interest income decreased by $32 million, or 10.5%, compared to the first quarter of 2017, $7 million of which was related to lower purchase accounting accretion, with the remaining due to lower spreads on earning assets. Average loan and lease balances increased $572 million, or 1.5%, from the year-ago quarter, driven by growth in commercial and industrial loans. Average deposit balances decreased $187 million, or .9%, from the year-ago quarter, driven by the managed exit of higher cost corporate and public sector deposits.

            Noninterest income was up $13 million, or 4.7%, from the prior year. This increase was largely due to higher investment banking and debt placement fees, which were up $17 million, related to the acquisition of Cain Brothers, as well as continued growth in the core Key franchise. Operating lease income and other



KeyCorp Reports First Quarter 2018 Profit     
April 19, 2018
Page 9


leasing gains increased $6 million due higher originations, and corporate services income increased $5 million, mostly due to higher derivatives revenue. These increases were partially offset by a decline in other noninterest income of $11 million, related to lower gains from certain real estate investments.

            During the first quarter of 2018, the provision for credit losses decreased $4 million, or 22.2%, and net loan charge-offs declined $3 million, compared to the first quarter of 2017, related to improving credit quality in the overall portfolio.

            Noninterest expense increased by $10 million, or 3.3%, from the first quarter of 2017. The increase from the prior year was largely driven by higher operating lease expense and intangible asset amortization.


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 $19 million for the first quarter of 2018, compared to $21 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 $137.0 billion at March 31, 2018.

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 First Quarter 2018 Profit     
April 19, 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
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, 2017, 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 regulation of the U.S. financial services industry. Any forward-looking statements made by us or on our behalf speak only as of the date they are made and we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances.

Notes to Editors:
A live Internet broadcast of KeyCorp’s conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts’ questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on Thursday, April 19, 2018. An audio replay of the call will be available through April 29, 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 First Quarter 2018 Profit     
April 19, 2018
Page 11





KeyCorp
First Quarter 2018
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 First Quarter 2018 Profit     
April 19, 2018
Page 12


Financial Highlights
(dollars in millions, except per share amounts)
 
 
 
Three months ended
 
 
 
3/31/2018
12/31/2017
3/31/2017
Summary of operations
 
 
 
 
Net interest income (TE)
$
952

$
952

$
929

 
Noninterest income
601

656

577

 
 
Total revenue (TE)
1,553

1,608

1,506

 
Provision for credit losses
61

49

63

 
Noninterest expense
1,006

1,098

1,013

 
Income (loss) from continuing operations attributable to Key
416

195

324

 
Income (loss) from discontinued operations, net of taxes (a)
2

1


 
Net income (loss) attributable to Key
418

196

324

 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
402

181

296

 
Income (loss) from discontinued operations, net of taxes (a)
2

1


 
Net income (loss) attributable to Key common shareholders
404

182

296

 
 
 
 
 
 
Per common share
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
$
.38

$
.17

$
.28

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



 
Net income (loss) attributable to Key common shareholders (b)
.38

.17

.28

 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution
.38

.17

.27

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



 
Net income (loss) attributable to Key common shareholders — assuming dilution (b)
.38

.17

.27

 
 
 
 
 
 
 
Cash dividends declared
.105

.105

.085

 
Book value at period end
13.07

13.09

12.71

 
Tangible book value at period end
10.35

10.35

10.21

 
Market price at period end
19.55

20.17

17.78

 
 
 
 
 
 
Performance ratios
 
 
 
 
From continuing operations:
 
 
 
 
Return on average total assets
1.25
%
.57
%
.99
%
 
Return on average common equity
11.76

5.04

8.76

 
Return on average tangible common equity (c)
14.89

6.35

10.98

 
Net interest margin (TE)
3.15

3.09

3.13

 
Cash efficiency ratio (c)
62.9

66.7

65.8

 
 
 
 
 
 
 
From consolidated operations:
 
 
 
 
Return on average total assets
1.24
%
.57
%
.98
%
 
Return on average common equity
11.82

5.07

8.76

 
Return on average tangible common equity (c)
14.97

6.39

10.98

 
Net interest margin (TE)
3.13

3.07

3.11

 
Loan to deposit (d)
86.9

84.4

85.6

 
 
 
 
 
 
Capital ratios at period end
 
 
 
 
Key shareholders’ equity to assets
10.90
%
10.91
%
11.14
%
 
Key common shareholders’ equity to assets
10.16

10.17

10.37

 
Tangible common equity to tangible assets (c)
8.22

8.23

8.51

 
Common Equity Tier 1 (e)
10.03

10.16

9.91

 
Tier 1 risk-based capital (e)
10.84

11.01

10.74

 
Total risk-based capital (e)
12.75

12.92

12.69

 
Leverage (e)
9.84

9.73

9.81

 
 
 
 
 
 
 
 
 
 
 




KeyCorp Reports First Quarter 2018 Profit     
April 19, 2018
Page 13


 
 
 
 
 
 
Financial Highlights (continued)
(dollars in millions)
 
 
 
Three months ended
 
 
 
3/31/2018
12/31/2017
3/31/2017
Asset quality — from continuing operations
 
 
 
 
Net loan charge-offs
$
54

$
52

$
58

 
Net loan charge-offs to average loans
.25
%
.24
%
.27
%
 
Allowance for loan and lease losses
$
881

$
877

$
870

 
Allowance for credit losses
941

934

918

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

1.08

1.07

 
Allowance for loan and lease losses to nonperforming loans (f)
162.8

174.4

151.8

 
Allowance for credit losses to nonperforming loans (f)
173.9

185.7

160.2

 
Nonperforming loans at period end (f)
$
541

$
503

$
573

 
Nonperforming assets at period end (f)
569

534

623

 
Nonperforming loans to period-end portfolio loans (f)
.61
%
.58
%
.67
%
 
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (f)
.65

.62

.72

 
 
 
 
 
 
Trust assets
 
 
 
 
Assets under management
$
39,003

$
39,588

$
37,417

 
 
 
 
 
 
Other data
 
 
 
 
Average full-time equivalent employees
18,540

18,379

18,386

 
Branches
1,192

1,197

1,216

 
 
 
 
 
 
Taxable-equivalent adjustment
$
8

$
14

$
11

(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)
March 31, 2018, ratio is estimated.
(f)
Nonperforming loan balances exclude $690 million, $738 million, and $812 million of purchased credit impaired loans at March 31, 2018, December 31, 2017, and March 31, 2017, respectively.




KeyCorp Reports First Quarter 2018 Profit     
April 19, 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, we no longer recognize merger-related charges beginning in the first quarter of 2018. Prior to that, Key recognized merger-related charges as a result of 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 had recognized merger-related charges. For the first and fourth quarters of 2017, merger-related charges were included in the total for "notable items." The table below shows the computation of earnings per share excluding notable items, pre-provision net revenue excluding notable items, return on average tangible common equity excluding notable items, cash efficiency ratio excluding notable items, and return on average assets from continuing operations 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
 
3/31/2018
12/31/2017
3/31/2017
Tangible common equity to tangible assets at period-end
 
 
 
Key shareholders’ equity (GAAP)
$
14,944

$
15,023

$
14,976

Less: Intangible assets (a)
2,902

2,928

2,751

Preferred Stock (b)
1,009

1,009

1,009

Tangible common equity (non-GAAP)
$
11,033

$
11,086

$
11,216

Total assets (GAAP)
$
137,049

$
137,698

$
134,476

Less: Intangible assets (a)
2,902

2,928

2,751

Tangible assets (non-GAAP)
$
134,147

$
134,770

$
131,725

Tangible common equity to tangible assets ratio (non-GAAP)
8.22
%
8.23
%
8.51
%
Earnings per common share (EPS) excluding notable items
 
 
 
EPS from continuing operations attributable to Key common shareholders — assuming dilution
$
.38

$
.17

$
.27

Plus: EPS impact of notable items

.19

.05

EPS from continuing operations attributable to Key common shareholders excluding notable items (non-GAAP)
$
.38

$
.36

$
.32

Notable items
 
 
 
Merger-related charges

$
(56
)
$
(81
)
Estimated impacts of tax reform and related actions

(30
)

Total notable items

$
(86
)
$
(81
)
Income taxes

(26
)
(30
)
Reevaluation of certain tax related assets

147


Total notable items, after tax

$
(207
)
$
(51
)



KeyCorp Reports First Quarter 2018 Profit     
April 19, 2018
Page 15


GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
 
 
 
Three months ended
 
 
 
3/31/2018
12/31/2017
3/31/2017
Pre-provision net revenue
 
 
 
Net interest income (GAAP)
$
944

$
938

$
918

 
Plus:
Taxable-equivalent adjustment
8

14

11

 
 
Noninterest income
601

656

577

 
Less:
Noninterest expense
1,006

1,098

1,013

 
 
Pre-provision net revenue from continuing operations (non-GAAP)
$
547

$
510

$
493

 
Plus:
Notable items

86

81

 
 
Pre-provision net revenue from continuing operations excluding notable items (non-GAAP)
$
547

$
596

$
574

Average tangible common equity
 
 
 
 
Average Key shareholders’ equity (GAAP)
$
14,889

$
15,268

$
15,184

 
Less:
Intangible assets (average) (c)
2,916

2,939

2,772

 
 
Preferred Stock (average)
1,025

1,025

1,480

 
 
Average tangible common equity (non-GAAP)
$
10,948

$
11,304

$
10,932

Return on average tangible common equity from continuing operations
 
 
 
 
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)
$
402

$
181

$
296

 
Plus:
Notable items, after tax

207

51

 
Net income (loss) from continuing operations attributable to Key common shareholders excluding notable items (non-GAAP)
$
402

$
388

$
347

 
Average tangible common equity (non-GAAP)
10,948

11,304

10,932

 
 
 
 
 
 
 
Return on average tangible common equity from continuing operations (non-GAAP)
14.89
%
6.35
%
10.98
%
 
Return on average tangible common equity from continuing operations excluding notable items (non-GAAP)
14.89

13.62

12.87

Return on average tangible common equity consolidated
 
 
 
 
Net income (loss) attributable to Key common shareholders (GAAP)
$
404

$
182

$
296

 
Average tangible common equity (non-GAAP)
10,948

11,304

10,932

 
 
 
 
 
 
 
Return on average tangible common equity consolidated (non-GAAP)
14.97
%
6.39
%
10.98
%
Cash efficiency ratio
 
 
 
 
Noninterest expense (GAAP)
$
1,006

$
1,098

$
1,013

 
Less:
Intangible asset amortization
29

26

22

 
 
Adjusted noninterest expense (non-GAAP)
977

1,072

991

 
Less:
Notable items

85

81

 
 
Adjusted noninterest expense excluding notable items (non-GAAP)
$
977

$
987

$
910

 
Net interest income (GAAP)
$
944

$
938

$
918

 
Plus:
Taxable-equivalent adjustment
8

14

11

 
 
Noninterest income
601

656

577

 
 
Total taxable-equivalent revenue (non-GAAP)
1,553

1,608

1,506

 
Plus:
Notable items

1


 
 
Adjusted total taxable-equivalent revenue excluding notable items (non-GAAP)
$
1,553

$
1,609

$
1,506

 
 
 
 
 
 
 
Cash efficiency ratio (non-GAAP)
62.9
%
66.7
%
65.8
%
 
Cash efficiency ratio excluding notable items (non-GAAP)
62.9

61.3

60.4

Return on average total assets from continuing operations excluding notable items
 
 
 
 
Income from continuing operations attributable to Key (GAAP)
$
416

$
195

$
324

 
Plus:
Notable items, after tax

207

51

 
 
Income from continuing operations attributable to Key excluding notable items, after tax (non-GAAP)
$
416

$
402

$
375

 
 
 
 
 
 
 
Average total assets from continuing operations (GAAP)
$
134,915

$
135,255

$
132,741

 
 
 
 
 
 
 
Return on average total assets from continuing operations excluding notable items (non-GAAP)
1.25
%
1.18
%
1.15
%








KeyCorp Reports First Quarter 2018 Profit     
April 19, 2018
Page 16


GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
 
 
 
 
 
Three months ended
 
 
 
 
 
3/31/2018
Common Equity Tier 1 under the Regulatory Capital Rules (“RCR”) (estimates)
 
 
 
 
Common Equity Tier 1 under current RCR
 
 
$
12,165

 
Adjustments from current RCR to the fully phased-in RCR:
 
 
 
 
 
Deferred tax assets and other intangible assets (d)
 
 
(78
)
 
 
Common Equity Tier 1 anticipated under the fully phased-in RCR (e)
 
 
$
12,087

 
 
 
 
 
 
 
Net risk-weighted assets under current RCR
 
 
$
121,343

 
Adjustments from current RCR to the fully phased-in RCR:
 
 
 
 
 
Mortgage servicing assets (f)
 
 
700

 
 
Deferred tax assets
 
 
318

 
 
All other assets
 
 
(77
)
 
 
Total risk-weighted assets anticipated under the fully phased-in RCR (e)
 
 
$
122,284

 
 
 
 
 
 
 
Common Equity Tier 1 ratio under the fully phased-in RCR (e)
 
 
9.88
%

(a)
For the three months ended March 31, 2018, December 31, 2017, and March 31, 2017, intangible assets exclude $23 million, $26 million, and $38 million, respectively, of period-end purchased credit card receivables.
(b)
Net of capital surplus.
(c)
For the three months ended March 31, 2018, December 31, 2017, and March 31, 2017, average intangible assets exclude $24 million, $28 million, and $40 million, respectively, of average purchased credit card receivables.
(d)
Includes the deferred tax assets subject to future taxable income for realization, primarily tax credit carryforwards, as well as intangible assets (other than goodwill and mortgage servicing assets) subject to the transition provisions of the final rule.
(e)
The anticipated amount of regulatory capital and risk-weighted assets is based upon the federal banking agencies’ Regulatory Capital Rules (as fully phased-in on January 1, 2019); Key is subject to the Regulatory Capital Rules under the “standardized approach.”
(f)
Item is included in the 10%/15% exceptions bucket calculation and is risk-weighted at 250%.
GAAP = U.S. generally accepted accounting principles



KeyCorp Reports First Quarter 2018 Profit     
April 19, 2018
Page 17


Consolidated Balance Sheets
(dollars in millions)
 
 
 
 
 
 
 
 
 
3/31/2018

12/31/2017

3/31/2017

Assets
 
 
 
 
Loans
$
88,089

$
86,405

$
86,125

 
Loans held for sale
1,667

1,107

1,384

 
Securities available for sale
17,888

18,139

18,431

 
Held-to-maturity securities
12,189

11,830

10,186

 
Trading account assets
769

836

921

 
Short-term investments
1,644

4,447

2,525

 
Other investments
715

726

689

 
 
Total earning assets
122,961

123,490

120,261

 
Allowance for loan and lease losses
(881
)
(877
)
(870
)
 
Cash and due from banks
643

671

549

 
Premises and equipment
916

930

935

 
Operating lease assets
838

821

563

 
Goodwill
2,538

2,538

2,427

 
Other intangible assets
387

416

362

 
Corporate-owned life insurance
4,142

4,132

4,087

 
Accrued income and other assets
4,216

4,237

4,642

 
Discontinued assets
1,289

1,340

1,520

 
 
Total assets
$
137,049

$
137,698

$
134,476

 
 
 
 
 
 
Liabilities
 
 
 
 
Deposits in domestic offices:
 
 
 
 
 
NOW and money market deposit accounts
$
54,606

$
53,627

$
55,095

 
 
Savings deposits
6,321

6,296

6,306

 
 
Certificates of deposit ($100,000 or more)
7,295

6,849

5,859

 
 
Other time deposits
4,928

4,798

4,694

 
 
Total interest-bearing deposits
73,150

71,570

71,954

 
 
Noninterest-bearing deposits
31,601

33,665

32,028

 
 
Total deposits
104,751

105,235

103,982

 
Federal funds purchased and securities sold under repurchase agreements 
616

377

442

 
Bank notes and other short-term borrowings
1,133

634

943

 
Accrued expense and other liabilities
1,854

2,094

1,807

 
Long-term debt
13,749

14,333

12,324

 
 
Total liabilities
122,103

122,673

119,498

 
 
 
 
 
 
Equity
 
 
 
 
Preferred stock
1,025

1,025

1,025