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Section 1: 8-K (8-K)

Document


UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): July 19, 2018
394281232_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 July 19, 2018, KeyCorp issued a press release announcing its financial results for the three- and six-month period ended June 30, 2018 (the “Press Release”), and posted on its website its second 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 July 19, 2018, announcing financial results for the three- and six-month period ended June 30, 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: July 19, 2018
 
/s/ Douglas M. Schosser
 
 
By: Douglas M. Schosser
 
 
Chief Accounting Officer
 
 
 



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


394281232_keylogoicononlyrgba01.jpg


KEYCORP REPORTS SECOND QUARTER 2018 NET INCOME OF $464 MILLION,
OR $.44 PER COMMON SHARE

Strong results driven by loan growth, fee momentum, and expense discipline
Cash efficiency ratio of 58.8%
Return on average tangible common equity of 16.7%


CLEVELAND, July 19, 2018 - KeyCorp (NYSE: KEY) today announced second quarter net income from continuing operations attributable to Key common shareholders of $464 million, or $.44 per common share, compared to $402 million, or $.38 per common share, for the first quarter of 2018 and $393 million, or $.36 per common share, for the second quarter of 2017. Key’s results in the second quarter of 2018 and the second
quarter of 2017 included a number of notable items; additional detail can be found on page 24 of this release.
394281232_a2q18bemquotea04.jpg
Selected Financial Highlights
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions, except per share data
 
 
 
 
Change 2Q18 vs.
 
 
2Q18
1Q18
2Q17
 
1Q18
2Q17
Income (loss) from continuing operations attributable to Key common shareholders
$
464

$
402

$
393

 
15.4
%
18.1
%
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution
.44

.38

.36

 
15.8

22.2

Return on average tangible common equity from continuing operations (a)
16.73
%
14.89
%
13.80
%
 
N/A

N/A

Return on average total assets from continuing operations
1.41

1.25

1.23

 
N/A

N/A

Common Equity Tier 1 ratio (b)
10.12

9.99

9.91

 
N/A

N/A

Book value at period end
$
13.29

$
13.07

$
13.02

 
1.7
%
2.1
%
Net interest margin (TE) from continuing operations
3.19
%
3.15
%
3.30
%
 
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)
6/30/2018 ratio is estimated.
TE = Taxable Equivalent, N/A = Not Applicable




KeyCorp Reports Second Quarter 2018 Profit     
July 19, 2018
Page 2


INCOME STATEMENT HIGHLIGHTS
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 2Q18 vs.
 
2Q18
1Q18
2Q17
 
1Q18
2Q17
Net interest income (TE)
$
987

$
952

$
987

 
3.7
%

Noninterest income
660

601

653

 
9.8

1.1
%
Total revenue
$
1,647

$
1,553

$
1,640

 
6.1
%
.4
%
 
 
 
 
 
 
 
TE = Taxable Equivalent
    
Taxable-equivalent net interest income was $987 million for the second quarter of 2018, and the net interest margin was 3.19%, compared to taxable-equivalent net interest income of $987 million and a net interest margin of 3.30% for the second quarter of 2017. Second quarter 2018 net interest income included $28 million of purchase accounting accretion, a decline of $72 million from the second quarter of 2017. Excluding purchase accounting accretion, taxable-equivalent net interest income increased $72 million from the second quarter of 2017, and the net interest margin increased 13 basis points, reflecting the benefit from higher interest rates and higher earning asset balances.

Compared to the first quarter of 2018, taxable-equivalent net interest income increased by $35 million, and the net interest margin increased by four basis points. Both net interest income and the net interest margin benefited from higher interest rates and strong commercial loan growth. One additional day in the quarter further benefited net interest income. These benefits were partially offset by continued expected declines in purchase accounting accretion. Excluding purchase accounting accretion, taxable-equivalent net interest income increased $40 million from the first quarter of 2018 and the net interest margin increased six basis points.

Noninterest Income
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 2Q18 vs.
 
2Q18
1Q18
2Q17
 
1Q18
2Q17
Trust and investment services income
$
128

$
133

$
134

 
(3.8
)%
(4.5
)%
Investment banking and debt placement fees
155

143

135

 
8.4

14.8

Service charges on deposit accounts
91

89

90

 
2.2

1.1

Operating lease income and other leasing gains
(6
)
32

30

 
N/M

N/M

Corporate services income
61

62

55

 
(1.6
)
10.9

Cards and payments income
71

62

70

 
14.5

1.4

Corporate-owned life insurance income
32

32

33

 

(3.0
)
Consumer mortgage income
7

7

6

 

16.7

Mortgage servicing fees
22

20

15

 
10.0

46.7

Other income
99

21

85

 
371.4

16.5

Total noninterest income
$
660

$
601

$
653

 
9.8
 %
1.1
 %
 
 
 
 
 
 
 
N/M = Not meaningful

Key’s noninterest income was $660 million for the second quarter of 2018, compared to $653 million for the year-ago quarter. Growth was driven by an increase in investment banking and debt placement fees, related to strength in advisory fees, including benefit from the acquisition of Cain Brothers. Mortgage servicing fees also increased, benefiting from portfolio growth and increases in special servicing fees. Other income increased compared to the year-ago quarter, largely due to a gain on the sale of Key Insurance and Benefits Services. These increases were partially offset by a decline in operating lease income and other leasing gains, driven by a $42 million lease residual loss in the second quarter of 2018. Trust and investment services income also declined, impacted by the sale of Key Insurance and Benefits Services.

Compared to the first quarter of 2018, noninterest income increased by $59 million. The primary driver of the quarter-over-quarter increase was a $78 million gain related to the sale of Key Insurance and Benefits Services, reported in other income. Additionally, investment banking and debt placement fees and



KeyCorp Reports Second Quarter 2018 Profit     
July 19, 2018
Page 3


cards and payments income, which increased $12 million and $9 million, respectively, benefited from ongoing investments and momentum across the franchise. These increases were partially offset by a decline in operating lease income related to a lease residual loss, as well as trust and investment services income, which was impacted by the sale of Key Insurance and Benefits Services.

Noninterest Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 2Q18 vs.
 
2Q18
1Q18
2Q17
 
1Q18
2Q17
Personnel expense
$
586

$
594

$
553

 
(1.3
)%
6.0
 %
Nonpersonnel expense
407

412

442

 
(1.2
)
(7.9
)
Total noninterest expense
$
993

$
1,006

$
995

 
(1.3
)
(.2
)
 
 
 
 
 
 
 
N/M = Not meaningful
 
Key’s noninterest expense was $993 million for the second quarter of 2018, compared to $995 million in the year-ago quarter. Growth from acquisitions and investments, including Cain Brothers and HelloWallet, as well as the addition of client-facing bankers and continued investment in our residential mortgage business, contributed to both personnel and nonpersonnel expense in the second quarter of 2018. Efficiency-related expenses of $22 million (largely severance) and $5 million of costs related to the sale of Key Insurance and Benefits Services also impacted the current quarter’s results. The current quarter also benefited from the realization of merger-related cost savings. In the second quarter of 2017, Key incurred $44 million of merger-related charges and a $20 million charitable contribution.

Key’s noninterest expense was $993 million for the second quarter of 2018, compared to $1 billion in the prior quarter. This quarter’s decrease was largely driven by expected seasonal trends, including lower employee benefits expense, which declined $23 million, and lower occupancy and intangible asset amortization. Partially offsetting these declines were $22 million related to efficiency efforts (largely severance) and $5 million related to the sale of Key Insurance and Benefits Services.

BALANCE SHEET HIGHLIGHTS

Average Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 2Q18 vs.
 
2Q18
1Q18
2Q17
 
1Q18
2Q17
Commercial and industrial (a)
$
45,030

$
42,733

$
40,666

 
5.4
 %
10.7
 %
Other commercial loans
20,394

20,705

21,990

 
(1.5
)
(7.3
)
Home equity loans
11,601

11,877

12,473

 
(2.3
)
(7.0
)
Other consumer loans
11,619

11,612

11,373

 
.1

2.2

Total loans
$
88,644

$
86,927

$
86,502

 
2.0
 %
2.5
 %
 
 
 
 
 
 
 
(a)
Commercial and industrial average loan balances include $126 million, $120 million, and $117 million of assets from commercial credit cards at June 30, 2018, March 31, 2018, and June 30, 2017, respectively.

    
Average loans were $88.6 billion for the second quarter of 2018, an increase of $2.1 billion compared to the second quarter of 2017, reflecting broad-based growth in commercial and industrial loans, partially offset by a decline in commercial real estate balances related to higher paydowns.

Compared to the first quarter of 2018, average loans increased by $1.7 billion, largely the result of growth in commercial and industrial loans. Key realized growth across commercial client segments, with commercial and industrial loans up 3% in the Community Bank and 7% in the Corporate Bank, unannualized.




KeyCorp Reports Second Quarter 2018 Profit     
July 19, 2018
Page 4


Average Deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 2Q18 vs.
 
2Q18
1Q18
2Q17
 
1Q18
2Q17
Non-time deposits
$
91,538

$
90,719

$
92,018

 
.9
%
(.5
)%
Certificates of deposit ($100,000 or more)
7,516

6,972

6,111

 
7.8

23.0

Other time deposits
4,949

4,865

4,650

 
1.7

6.4

Total deposits
$
104,003

$
102,556

$
102,779

 
1.4
%
1.2
 %
 
 
 
 
 
 
 
Cost of total deposits
.43
%
.36
%
.26
%
 
N/A

N/A

 
 
 
 
 
 
 
N/A = Not Applicable

Average deposits totaled $104 billion for the second quarter of 2018, an increase of $1.2 billion compared to the year-ago quarter, reflecting a shift to higher-yielding deposit products, as well as strength in Key’s retail banking franchise and growth from commercial relationships. Growth was partially offset by the managed exit of certain higher cost corporate and public sector deposits.

Compared to the first quarter of 2018, average deposits increased by $1.4 billion. NOW and money market deposit accounts increased $1.2 billion and certificates of deposit and other time deposits increased $628 million, partly offset by a $471 million decline in noninterest-bearing deposits, as clients shift to higher-yielding deposit products. The linked quarter deposit growth continues to reflect strong retail deposit growth and growth from commercial relationships.

ASSET QUALITY
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 2Q18 vs.
 
2Q18
1Q18
2Q17
 
1Q18
2Q17
Net loan charge-offs
$
60

$
54

$
66

 
11.1
%
(9.1
)%
Net loan charge-offs to average total loans
.27
%
.25
%
.31
%
 
N/A

N/A

Nonperforming loans at period end (a)
$
545

$
541

$
507

 
.7

7.5

Nonperforming assets at period end (a)
571

569

556

 
.4

2.7

Allowance for loan and lease losses
887

881

870

 
.7

2.0

Allowance for loan and lease losses to nonperforming loans (a)
162.8
%
162.8
%
171.6
%
 
N/A

N/A

Provision for credit losses
$
64

$
61

$
66

 
4.9
%
(3.0
)%
 
 
 
 
 
 
 
(a)
Nonperforming loan balances exclude $629 million, $690 million, and $835 million of purchased credit impaired loans at June 30, 2018, March 31, 2018, and June 30, 2017, respectively.
N/A = Not Applicable

Key’s provision for credit losses was $64 million for the second quarter of 2018, compared to $66 million for the second quarter of 2017 and $61 million for the first quarter of 2018. Key’s allowance for loan and lease losses was $887 million, or 1.01% of total period-end loans, at June 30, 2018, compared to 1.01% at June 30, 2017, and 1.00% at March 31, 2018.

Net loan charge-offs for the second quarter of 2018 totaled $60 million, or .27% of average total loans. These results compare to $66 million, or .31%, for the second quarter of 2017, and $54 million, or .25%, for the first quarter of 2018.

At June 30, 2018, Key’s nonperforming loans totaled $545 million, which represented .62% of period-end portfolio loans. These results compare to .59% at June 30, 2017, and .61% at March 31, 2018. Nonperforming assets at June 30, 2018, totaled $571 million, and represented .65% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .64% at June 30, 2017, and .65% at March 31, 2018.
 
CAPITAL

Key’s estimated risk-based capital ratios included in the following table continued to exceed all “well-capitalized” regulatory benchmarks at June 30, 2018.



KeyCorp Reports Second Quarter 2018 Profit     
July 19, 2018
Page 5


 
Capital Ratios
 
 
 
 
 
 
 
 
6/30/2018
3/31/2018
6/30/2017
Common Equity Tier 1 (a)
10.12
%
9.99
%
9.91
%
Tier 1 risk-based capital (a)
10.94

10.82

10.73

Total risk based capital (a)
12.83

12.73

12.64

Tangible common equity to tangible assets (b)
8.32

8.22

8.56

Leverage (a)
9.91

9.76

9.95

 
 
 
 
(a)
6/30/2018 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 second quarter. As shown in the preceding table, at June 30, 2018, Key’s estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.12% and 10.94%, respectively. Key's tangible common equity ratio was 8.32% at June 30, 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 10.03% at June 30, 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 2Q18 vs.
 
 
2Q18
1Q18
2Q17
 
1Q18
2Q17
Shares outstanding at beginning of period
1,064,939

1,069,084

1,097,479

 
(.4
)%
(3.0
)%
Open market repurchases and return of shares under employee compensation plans
(6,259
)
(9,399
)
(5,072
)
 
(33.4
)
23.4

Shares issued under employee compensation plans (net of cancellations)
264

5,254

332

 
(95.0
)
(20.5
)
 
Shares outstanding at end of period
1,058,944

1,064,939

1,092,739

 
(.6
)%
(3.1
)%
 
 
 
 
 
 
 
 
N/M = Not Meaningful

Consistent with Key's 2017 Capital Plan, during the second quarter of 2018, Key declared a dividend of $.12 per common share, and completed $126 million of common share repurchases during the quarter. These repurchases included $123 million of common share repurchases in the open market and $3 million of share repurchases related to employee equity compensation programs.

Key's 2018 Capital Plan received no objection from the Federal Reserve. The plan includes a 42% increase in the quarterly common share dividend from $0.12 per share to $0.17 per share, which is payable in the third quarter of 2018. Also included in the plan is a common share repurchase program of up to $1.225 billion. This authorization includes repurchases to offset issuances of common shares under our employee compensation plans. Repurchases are expected to be executed over the next four quarters.

LINE OF BUSINESS RESULTS

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



KeyCorp Reports Second Quarter 2018 Profit     
July 19, 2018
Page 6


Major Business Segments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 2Q18 vs.
 
 
2Q18
1Q18
2Q17
 
1Q18
2Q17
Revenue from continuing operations (TE)
 
 
 
 
 
 
Key Community Bank
$
996

$
958

$
998

 
4.0
 %
(.2
)%
Key Corporate Bank
542

559

597

 
(3.0
)
(9.2
)
Other Segments
38

37

46

 
2.7

(17.4
)
 
Total segments
1,576

1,554

1,641


1.4

(4.0
)
Reconciling Items (a)
71

(1
)
(1
)
 
N/M

N/M

 
Total
$
1,647

$
1,553

$
1,640

 
6.1
 %
.4
 %
 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key
 
 
 
 
 
 
Key Community Bank
$
244

$
197

$
198

 
23.9
 %
23.2
 %
Key Corporate Bank
167

207

224

 
(19.3
)
(25.4
)
Other Segments
25

18

24

 
38.9

4.2

 
Total segments
436

422

446

 
3.3

(2.2
)
Reconciling Items (b)
43

(6
)
(39
)
 
N/M

N/M

 
Total
$
479

$
416

$
407

 
15.1
 %
17.7
 %
 
 
 
 
 
 
 
 
(a)
Reconciling items consists primarily of the gain on the sale of Key Insurance and Benefits Services for the second quarter of 2018.
(b)
Reconciling items consists primarily of the gain on the sale of Key Insurance and Benefits Services for the second quarter of 2018, the unallocated portion of merger-related charges for the second quarter of 2017, 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 2Q18 vs.
 
2Q18
1Q18
2Q17
 
1Q18
2Q17
Summary of operations
 
 
 
 
 
 
Net interest income (TE)
$
715

$
688

$
676

 
3.9
 %
5.8
 %
Noninterest income
281

270

322

 
4.1

(12.7
)
Total revenue (TE)
996

958

998

 
4.0

(.2
)
Provision for credit losses
38

48

47

 
(20.8
)
(19.1
)
Noninterest expense
639

652

635

 
(2.0
)
.6

Income (loss) before income taxes (TE)
319

258

316

 
23.6

.9

Allocated income taxes (benefit) and TE adjustments
75

61

118

 
23.0

(36.4
)
Net income (loss) attributable to Key
$
244

$
197

$
198

 
23.9
 %
23.2
 %
 
 
 
 
 
 
 
Average balances
 
 
 
 
 
 
Loans and leases
$
47,984

$
47,680

$
47,477

 
.6
 %
1.1
 %
Total assets
51,866

51,605

51,441

 
.5

.8

Deposits
80,930

79,945

79,601

 
1.2

1.7

 
 
 
 
 




Assets under management at period end
$
39,663

$
39,003

$
37,613

 
1.7
 %
5.5
 %
 
 
 
 
 
 
 
TE = Taxable Equivalent





KeyCorp Reports Second Quarter 2018 Profit     
July 19, 2018
Page 7


Additional Key Community Bank Data
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 2Q18 vs.
 
2Q18
1Q18
2Q17
 
1Q18
2Q17
Noninterest income
 
 
 
 
 
 
Trust and investment services income
$
92

$
89

$
86

 
3.4
 %
7.0
 %
Service charges on deposit accounts
77

76

77

 
1.3


Cards and payments income
59

51

60

 
15.7

(1.7
)
Other noninterest income
53

54

99

 
(1.9
)
(46.5
)
Total noninterest income
$
281

$
270

$
322

 
4.1
 %
(12.7
)%
 
 
 
 
 




Average deposit balances
 
 
 
 




NOW and money market deposit accounts
$
45,112

$
44,291

$
45,127

 
1.9
 %

Savings deposits
5,078

5,056

5,293

 
.4

(4.1
)%
Certificates of deposit ($100,000 or more)
5,232

4,961

4,016

 
5.5

30.3

Other time deposits
4,934

4,856

4,640

 
1.6

6.3

Noninterest-bearing deposits
20,574

20,781

20,525

 
(1.0
)
.2

Total deposits
$
80,930

$
79,945

$
79,601

 
1.2
 %
1.7
 %
 
 
 
 
 
 
 
Home equity loans
 
 
 
 
 
 
Average balance
$
11,496

$
11,763

$
12,330

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

60

60

 
 
 
 
 
 
 
 
 
 
Other data
 
 
 
 
 
 
Branches
1,177

1,192

1,210

 
 
 
Automated teller machines
1,537

1,569

1,589

 
 
 
 
 
 
 
 
 
 

Key Community Bank Summary of Operations (2Q18 vs. 2Q17)

Net income increased $46 million, or 23.2%, from prior year
Average commercial and industrial loans increased $1.1 billion, or 5.8%, from the prior year

Key Community Bank recorded net income attributable to Key of $244 million for the second quarter of 2018, compared to $198 million for the year-ago quarter, benefiting from momentum across Key's businesses, as well as a lower tax rate as a result of tax reform.

Taxable-equivalent net interest income increased by $39 million, or 5.8%, from the second quarter of 2017. The increase in net interest income was primarily attributable to the benefit from higher interest rates and growth in loans, partially offset by lower purchase accounting accretion. Average loans and leases increased $507 million, or 1.1%, largely driven by a $1.1 billion, or 5.8%, increase in commercial and industrial loans. Additionally, average deposits increased $1.3 billion, or 1.7%, from one year ago.

Noninterest income decreased $41 million, or 12.7%, from the year-ago quarter driven by a merchant services gain in the second quarter of 2017. Noninterest income, excluding the merchant services gain in the year-ago period, increased primarily due to higher assets under management from market growth.

The provision for credit losses decreased by $9 million, or 19.1%, from the second quarter of 2017. Net loan charge-offs decreased $13 million, or 27.7%, from the second quarter of 2017, as overall credit quality remained favorable.

Noninterest expense increased $4 million, or 0.6%, from the year-ago quarter. Personnel expense
increased $11 million, primarily driven by recent acquisitions and ongoing investments, including residential mortgage and HelloWallet. Nonpersonnel expense decreased by $7 million, driven by a charitable contribution in the second quarter of 2017, which was partially offset by higher technology development costs.






KeyCorp Reports Second Quarter 2018 Profit     
July 19, 2018
Page 8


Key Corporate Bank
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 2Q18 vs.
 
2Q18
1Q18
2Q17
 
1Q18
2Q17
Summary of operations
 
 
 
 
 
 
Net interest income (TE)
$
277

$
272

$
312

 
1.8
 %
(11.2
)%
Noninterest income
265

287

285

 
(7.7
)
(7.0
)
Total revenue (TE)
542

559

597

 
(3.0
)
(9.2
)
Provision for credit losses
28

14

19

 
100.0

47.4

Noninterest expense
326

314

297

 
3.8

9.8

Income (loss) before income taxes (TE)
188

231

281

 
(18.6
)
(33.1
)
Allocated income taxes and TE adjustments
21

24

57

 
(12.5
)
(63.2
)
Net income (loss) attributable to Key
$
167

$
207

$
224

 
(19.3
)%
(25.4
)%
 
 
 
 
 
 
 
Average balances
 
 
 
 
 
 
Loans and leases
$
39,710

$
38,260

$
37,704

 
3.8
 %
5.3
 %
Loans held for sale
1,299

1,118

1,000

 
16.2

29.9

Total assets
47,213

45,549

44,131

 
3.7

7.0

Deposits
21,057

20,815

21,145

 
1.2

(.4
)
 
 
 
 
 
 
 
TE = Taxable Equivalent, N/M = Not Meaningful

Additional Key Corporate Bank Data
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 2Q18 vs.
 
2Q18
1Q18
2Q17
 
1Q18
2Q17
Noninterest income
 
 
 
 
 
 
Trust and investment services income
$
29

$
29

$
35

 

(17.1
)%
Investment banking and debt placement fees
153

141

134

 
8.5
 %
14.2

Operating lease income and other leasing gains
(10
)
27

22

 
N/M

N/M

 
 
 
 
 
 
 
Corporate services income
44

44

38

 

15.8

Service charges on deposit accounts
13

13

13

 


Cards and payments income
12

11

10

 
9.1

20.0

Payments and services income
69

68

61

 
1.5

13.1

 
 
 
 
 
 
 
Mortgage servicing fees
19

17

12

 
11.8

58.3

Other noninterest income
5

5

21

 

(76.2
)
Total noninterest income
$
265

$
287

$
285

 
(7.7
)%
(7.0
)%
 
 
 
 
 
 
 
N/M = Not Meaningful
Key Corporate Bank Summary of Operations (2Q18 vs. 2Q17)

Commercial and industrial loans up $3.3 billion, or 15%, from prior year
Investment banking and debt placement fees up $19 million, or 14.2%, from prior year

            Key Corporate Bank recorded net income attributable to Key of $167 million for the second quarter of 2018, compared to $224 million for the same period one year ago.

            Taxable-equivalent net interest income decreased by $35 million, or 11.2%, compared to the second quarter of 2017. The decline is primarily related to $33 million of lower purchase accounting accretion, as well as loan spread compression. Average loan and lease balances increased $2 billion, or 5.3%, from the year-ago quarter, driven by broad-based growth in commercial and industrial loans. Average deposit balances decreased $88 million, or 0.4%, from the year-ago quarter, due to the managed exit of higher cost corporate and public sector deposits offsetting growth in core deposits.

            Noninterest income was down $20 million, or 7.0%, from the prior year. This decrease was largely due to a $32 million decline in operating lease income and other leasing gains, driven by a lease residual loss in the second quarter of 2018. Other declines included other noninterest income down $16 million, mostly due to a merchant services gain in the year-ago period. These decreases were slightly offset by higher investment banking and debt placement fees of $19 million, related to strength in advisory fees, including benefit from the acquisition of Cain Brothers, as well as a $6 million increase in corporate services income from higher derivatives revenue.

            During the second quarter of 2018, the provision for credit losses increased $9 million, or 47.8%, compared to the second quarter of 2017, mostly due to higher net loan charge-offs.

            Noninterest expense increased by $29 million, or 9.8%, from the second quarter of 2017. The increase from the prior year was largely related to acquisitions and investments throughout the year, which drove an increase in personnel expense and intangible asset amortization. Operating lease expense also increased compared to the year-ago period.



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 $25 million for the second quarter of 2018, compared to $24 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 $137.8 billion at June 30, 2018.

Key provides deposit, lending, cash management, 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 Second Quarter 2018 Profit     
July 19, 2018
Page 9



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 10:00 a.m. ET, on Thursday, July 19, 2018. An audio replay of the call will be available through July 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 Second Quarter 2018 Profit     
July 19, 2018
Page 10





KeyCorp
Second 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 Second Quarter 2018 Profit     
July 19, 2018
Page 11


Financial Highlights
(dollars in millions, except per share amounts)
 
 
 
Three months ended
 
 
 
6/30/2018
3/31/2018
6/30/2017
Summary of operations
 
 
 
 
Net interest income (TE)
$
987

$
952

$
987

 
Noninterest income
660

601

653

 
 
Total revenue (TE)
1,647

1,553

1,640

 
Provision for credit losses
64

61

66

 
Noninterest expense
993

1,006

995

 
Income (loss) from continuing operations attributable to Key
479

416

407

 
Income (loss) from discontinued operations, net of taxes (a)
3

2

5

 
Net income (loss) attributable to Key
482

418

412

 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
464

402

393

 
Income (loss) from discontinued operations, net of taxes (a)
3

2

5

 
Net income (loss) attributable to Key common shareholders
467

404

398

 
 
 
 
 
 
Per common share
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
$
.44

$
.38

$
.36

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



 
Net income (loss) attributable to Key common shareholders (b)
.44

.38

.37

 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution
.44

.38

.36

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



 
Net income (loss) attributable to Key common shareholders — assuming dilution (b)
.44

.38

.36

 
 
 
 
 
 
 
Cash dividends declared
.12

.105

.095

 
Book value at period end
13.29

13.07

13.02

 
Tangible book value at period end
10.59

10.35

10.40

 
Market price at period end
19.54

19.55

18.74

 
 
 
 
 
 
Performance ratios
 
 
 
 
From continuing operations:
 
 
 
 
Return on average total assets
1.41
%
1.25
%
1.23
%
 
Return on average common equity
13.29

11.76

11.12

 
Return on average tangible common equity (c)
16.73

14.89

13.80

 
Net interest margin (TE)
3.19

3.15

3.30

 
Cash efficiency ratio (c)
58.8

62.9

59.3

 
 
 
 
 
 
 
From consolidated operations:
 
 
 
 
Return on average total assets
1.40
%
1.24
%
1.23
%
 
Return on average common equity
13.37

11.82

11.26

 
Return on average tangible common equity (c)
16.84

14.97

13.98

 
Net interest margin (TE)
3.17

3.13

3.28

 
Loan to deposit (d)
86.9

86.9

87.2

 
 
 
 
 
 
Capital ratios at period end
 
 
 
 
Key shareholders’ equity to assets
10.96
%
10.90
%
11.23
%
 
Key common shareholders’ equity to assets
10.21

10.16

10.48

 
Tangible common equity to tangible assets (c)
8.32

8.22

8.56

 
Common Equity Tier 1 (e)
10.12

9.99

9.91

 
Tier 1 risk-based capital (e)
10.94

10.82

10.73

 
Total risk-based capital (e)
12.83

12.73

12.64

 
Leverage (e)
9.91

9.76

9.95

 
 
 
 
 
 
Asset quality — from continuing operations
 
 
 
 
Net loan charge-offs
$
60

$
54

$
66

 
Net loan charge-offs to average loans
.27
%
.25
%
.31
%
 
Allowance for loan and lease losses
$
887

$
881

$
870

 
Allowance for credit losses
945

941

918

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

1.07

1.06

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

162.8

171.6

 
Allowance for credit losses to nonperforming loans (f)
173.4

173.9

181.1

 
Nonperforming loans at period-end (f)
$
545

$
541

$
507

 
Nonperforming assets at period-end (f)
571

569

556

 
Nonperforming loans to period-end portfolio loans (f)
.62
%
.61
%
.59
%
 
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (f)
.65

.65

.64

 
 
 
 
 
 
Trust assets
 
 
 
 
Assets under management
$
39,663

$
39,003

$
37,613

 
 
 
 
 
 
Other data
 
 
 
 
Average full-time equivalent employees
18,376

18,540

18,344

 
Branches
1,177

1,192

1,210

 
 
 
 
 
 
Taxable-equivalent adjustment
$
8

$
8

$
14





KeyCorp Reports Second Quarter 2018 Profit     
July 19, 2018
Page 12


Financial Highlights (continued)
(dollars in millions, except per share amounts)
 
 
Six months ended
 
 
6/30/2018
 
6/30/2017
Summary of operations
 
 
 
 
Net interest income (TE)
$
1,939

 
$
1,916

 
Noninterest income
1,261

 
1,230

 
Total revenue (TE)
3,200

 
3,146

 
Provision for credit losses
125

 
129

 
Noninterest expense
1,999

 
2,008

 
Income (loss) from continuing operations attributable to Key
895

 
731

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

 
5

 
Net income (loss) attributable to Key
900

 
736

 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
$
866

 
$
689

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

 
5

 
Net income (loss) attributable to Key common shareholders
871

 
694

 
 
 
 
 
Per common share
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
$
.82

 
$
.64

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

 

 
Net income (loss) attributable to Key common shareholders (b)
.82

 
.64

 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution
.81

 
.63

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

 

 
Net income (loss) attributable to Key common shareholders — assuming dilution (b)
.81

 
.63

 
 
 
 
 
 
Cash dividends paid
.225

 
.18

 
 
 
 
 
Performance ratios
 
 
 
 
From continuing operations:
 
 
 
 
Return on average total assets
1.33
%
 
1.11
%
 
Return on average common equity
12.53

 
9.97

 
Return on average tangible common equity (c)
15.82

 
12.43

 
Net interest margin (TE)
3.17

 
3.21

 
Cash efficiency ratio (c)
60.8

 
62.4

 
 
 
 
 
 
From consolidated operations:
 
 
 
 
Return on average total assets
1.33
%
 
1.11
%
 
Return on average common equity
12.60

 
10.04

 
Return on average tangible common equity (c)
15.91

 
12.52

 
Net interest margin (TE)
3.15

 
3.19

 
 
 
 
 
Asset quality — from continuing operations
 
 
 
 
Net loan charge-offs
114

 
124

 
Net loan charge-offs to average total loans
.26
%
 
.29
%
 
 
 
 
 
Other data
 
 
 
 
Average full-time equivalent employees
18,458

 
18,365

 
 
 
 
 
Taxable-equivalent adjustment
16

 
25

(a)
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)
June 30, 2018, ratio is estimated.
(f)
Nonperforming loan balances exclude $629 million, $690 million, and $835 million of purchased credit impaired loans at June 30, 2018, March 31, 2018, and June 30, 2017, respectively.
 
 
 
 
 
 




KeyCorp Reports Second Quarter 2018 Profit     
July 19, 2018
Page 13


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,” and “cash efficiency ratio.”

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

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.

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. Management believes this ratio provide greater consistency and comparability between Key’s results and those of its peer banks. Additionally, this ratio is used by analysts and investors as they develop earnings forecasts and peer bank analysis.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.
 
Three months ended
 
Six months ended
 
6/30/2018
3/31/2018
6/30/2017
 
6/30/2018
6/30/2017
Tangible common equity to tangible assets at period-end
 
 
 
 
 
 
Key shareholders’ equity (GAAP)
$
15,100

$
14,944

$
15,253

 
 
 
Less: Intangible assets (a)
2,858

2,902

2,866

 
 
 
Preferred Stock (b)
1,009

1,009

1,009

 
 
 
Tangible common equity (non-GAAP)
$
11,233

$
11,033

$
11,378

 
 
 
Total assets (GAAP)
$
137,792

$
137,049

$
135,824

 
 
 
Less: Intangible assets (a)
2,858

2,902

2,866

 
 
 
Tangible assets (non-GAAP)
$
134,934

$
134,147

$
132,958

 
 
 
Tangible common equity to tangible assets ratio (non-GAAP)
8.32
%
8.22
%
8.56
%
 
 
 
Pre-provision net revenue
 
 
 
 
 
 
Net interest income (GAAP)
$
979

$
944

$
973

 
$
1,923

$
1,891

Plus: Taxable-equivalent adjustment
8

8

14

 
16

25

Noninterest income
660

601

653

 
1,261

1,230

Less: Noninterest expense
993

1,006

995

 
1,999

2,008

Pre-provision new revenue from continuing operations (non-GAAP)
$
654

$
547

$
645

 
$
1,201

$
1,138

Average tangible common equity
 
 
 
 
 
 
Average Key shareholders' equity (GAAP)
$
15,032

$
14,889

$
15,200

 
$
14,961

$
15,192

Less: Intangible assets (average) (c)
2,883

2,916

2,756

 
2,899

2,764

Preferred stock (average)
1,025

1,025

1,025

 
1,025

1,251

Average tangible common equity (non-GAAP)
$
11,124

$
10,948

$
11,419

 
$
11,037

$
11,177

Return on average tangible common equity from continuing operations
 
 
 
 
 
 
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)
$
464

$
402

$
393

 
$
866

$
689

Average tangible common equity (non-GAAP)
11,124

10,948

11,419

 
11,037

11,177

 
 
 
 
 
 
 
Return on average tangible common equity from continuing operations (non-GAAP)
16.73
%
14.89
%
13.80
%
 
15.82
%
12.43
%
Return on average tangible common equity consolidated
 
 
 
 
 
 
Net income (loss) attributable to Key common shareholders (GAAP)
$
467

$
404

$
398

 
$
871

$
694

Average tangible common equity (non-GAAP)
11,124

10,948

11,419

 
11,037

11,177

 
 
 
 
 
 
 
Return on average tangible common equity consolidated (non-GAAP)
16.84
%
14.97
%
13.98
%
 
15.91
%
12.52
%
Cash efficiency ratio
 
 
 
 
 
 
Noninterest expense (GAAP)
$
993

$
1,006

$
995

 
$
1,999

$
2,008

Less: Intangible asset amortization
25

29

22

 
54

44

Adjusted noninterest expense (non-GAAP)
$
968

$
977

$
973

 
$
1,945

$
1,964

 
 
 
 
 
 
 
Net interest income (GAAP)
$
979

$
944

$
973

 
$
1,923

$
1,891

Plus: Taxable-equivalent adjustment
8

8

14

 
16

25

Noninterest income
660

601

653

 
1,261

1,230

Total taxable-equivalent revenue (non-GAAP)
$
1,647

$
1,553

$
1,640

 
$
3,200

$
3,146

 
 
 
 
 
 
 
Cash efficiency ratio (non-GAAP)
58.8
%
62.9
%
59.3
%
 
60.8
%
62.4
%

 
 
 
 
 
 
 
 
 



KeyCorp Reports Second Quarter 2018 Profit     
July 19, 2018
Page 14


GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
 
 
 
Three months ended
 
 
 
6/30/2018
Common Equity Tier 1 under the Regulatory Capital Rules (“RCR”) (estimates)
 
 
Common Equity Tier 1 under current RCR
$
12,378

 
Adjustments from current RCR to the fully phased-in RCR:
 
 
 
Deferred tax assets and other intangible assets (d)

 
 
Common Equity Tier 1 anticipated under the fully phased-in RCR (e)
$
12,378

 
 
 
 
 
Net risk-weighted assets under current RCR
$
122,352

 
Adjustments from current RCR to the fully phased-in RCR:
 
 
 
Mortgage servicing assets (f)
727

 
 
Deferred tax assets
319

 
 
All other assets

 
 
Total risk-weighted assets anticipated under the fully phased-in RCR (e)
$
123,398

 
 
 
 
 
Common Equity Tier 1 ratio under the fully phased-in RCR (e)
10.03
%

(a)
For the three months ended June 30, 2018, March 31, 2018, and June 30, 2017, intangible assets exclude $20 million, $23 million, and $33 million, respectively, of period-end purchased credit card receivables.
(b)
Net of capital surplus.
(c)
For the three months ended June 30, 2018, March 31, 2018, and June 30, 2017, average intangible assets exclude $21 million, $24 million, and $36 million, respectively, of average purchased credit card receivables. For the six months ended June 30, 2018, and June 30, 2017, average intangible assets exclude $23 million and $38 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 Second Quarter 2018 Profit     
July 19, 2018
Page 15


Consolidated Balance Sheets
(dollars in millions)
 
 
 
 
 
 
 
 
 
6/30/2018

3/31/2018

6/30/2017

Assets
 
 
 
 
Loans
$
88,222

$
88,089

$
86,503

 
Loans held for sale
1,418

1,667

1,743

 
Securities available for sale
17,367

17,888

18,024

 
Held-to-maturity securities
12,277

12,189

10,638

 
Trading account assets
833

769

1,081

 
Short-term investments
2,646

1,644

2,522

 
Other investments
709

715

732

 
 
Total earning assets
123,472

122,961

121,243

 
Allowance for loan and lease losses
(887
)
(881
)
(870
)
 
Cash and due from banks
784

643

601

 
Premises and equipment
892

916

919

 
Operating lease assets
903

838

691

 
Goodwill
2,516

2,538

2,464

 
Other intangible assets
361

387

435

 
Corporate-owned life insurance
4,147

4,142

4,100

 
Accrued income and other assets
4,382

4,216

4,783

 
Discontinued assets
1,222

1,289

1,458

 
 
Total assets
$
137,792

$
137,049

$
135,824

 
 
 
 
 
 
Liabilities
 
 
 
 
Deposits in domestic offices:
 
 
 
 
 
NOW and money market deposit accounts
$
55,059

$
54,606

$
53,342

 
 
Savings deposits
6,199

6,321

7,0