KEYCORP 
By Net interest income up 7.8% from fourth quarter of 2011 to $607 million
Net interest margin expands 24 basis points to 3.37% from fourth quarter of 2011
Average total loans up 6.6% from fourth quarter of 2011 led by 20.7% commercial and industrial loan growth
Average total deposits up 7.3% from fourth quarter of 2011
Net loan charge-offs decline to 44 basis points of average total loans
Ongoing Fit for Growth efficiency initiative charges of $16 million, or $.01 per share incurred during the quarter
CLEVELAND, Jan. 24, 2013 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced fourth quarter net income from continuing operations attributable to Key common shareholders of $193 million, or $.21 per common share, compared to $214 million, or $.23 per common share for the third quarter of 2012, and $201 million, or $.21 per common share for the fourth quarter of 2011. During the fourth quarter Key incurred $16 million, or $.01 per common share of costs associated with its previously announced Fit for Growth efficiency initiative. For 2012, net income from continuing operations attributable to Key common shareholders was $827 million, or $.88 per common share, compared to $857 million, or $.92 per common share for 2011. For 2012, Key incurred $25 million, or $.02 per common share of costs associated with its Fit for Growth efficiency initiative.
"We had a good finish to 2012," said Chairman and Chief Executive Officer Beth E. Mooney. "Our full-year results reflect success in executing on our strategies to grow loans, add additional payment capabilities to our product line in the form of credit cards and improved mobile banking, and moving forward on our efficiency initiative."
Mooney added: "Our momentum continued in the most recent quarter. The net interest margin was up 14 basis points versus the prior quarter driven by ongoing liability repricing and growth in both commercial and consumer loan balances. We also experienced significant revenue growth in our Corporate Bank from both our investment banking and commercial mortgage businesses."
"Progress continues on our efficiency initiative," said Mooney. "We ended the year with run rate savings of approximately $60 million annualized. We also continued to invest in the future revenue growth of our company by continuing to upgrade our technology to meet the needs of our clients. We remain committed to deliver on our goal of achieving an efficiency ratio in the range of 60% to 65%."
FOURTH QUARTER 2012 FINANCIAL RESULTS
-- Net interest income of $607 million, up $29 million from prior quarter
-- Net interest margin of 3.37%, up 14 basis points from prior quarter due
to lower funding costs and increased loan fees
-- Continued loan growth driven by 6% quarterly increase in commercial,
financial and agricultural loans
-- Average deposits increased 2% from prior quarter
-- Noninterest expense increased $22 million from prior quarter, of which
$10 million was associated with Fit for Growth efficiency initiative
-- Provision for loan and lease losses decreased $52 million from the third
quarter of 2012
-- Net loan charge-offs decreased $51 million from prior quarter to .44% of
average loans, the lowest level since third quarter of 2007
-- Maintained solid balance sheet with Tier 1 common equity of 11.16%
Selected Financial Highlights
dollars in millions, except per share data Change 4Q12 vs.
4Q12 3Q12 4Q11 3Q12 4Q11
---- ---- ---- ---- ----
Income (loss) from continuing operations attributable to Key common shareholders $193 $214 $201 (9.8)% (4.0)%
Income (loss) from continuing operations attributable to Key common shareholders per .21 .23 .21 (8.7) -
common share
Return on average total assets from continuing operations .97% 1.08% 1.01% N/A N/A
Tier 1 common equity 11.16 11.30 11.26 N/A N/A
Book value at period end $10.78 $10.64 $10.09 1.3% 6.8%
Net interest margin (TE) from continuing operations 3.37% 3.23% 3.13% N/A N/A
TE = Taxable Equivalent, N/A = Not Applicable
INCOME STATEMENT HIGHLIGHTS
Revenue
dollars in millions Change 4Q12 vs.
4Q12 3Q12 4Q11 3Q12 4Q11
---- ---- ---- ---- ----
Net interest income (TE) $607 $578 $563 5.0% 7.8%
Noninterest income 466 544 414 (14.3) 12.6
--- --- --- ----- ----
$1,073 $1,122 $977 (4.4)% 9.8%
Total revenue
TE = Taxable Equivalent
Taxable-equivalent net interest income was $607 million for the fourth quarter of 2012, and the net interest margin was 3.37%. These results compare to taxable-equivalent net interest income of $563 million and a net interest margin of 3.13% for the fourth quarter of 2011. The increase in net interest income and the net interest margin was primarily a result of a change in funding mix from the redemption of certain trust preferred securities, maturity of long-term debt, and maturity of higher-costing certificates of deposit during the past year.
Compared to the third quarter of 2012, taxable-equivalent net interest income increased by $29 million, and the net interest margin improved by 14 basis points. The improvement was driven largely by lower funding costs, resulting from an increase in demand and non-time interest-bearing deposits, and maturity of higher rate certificates of deposit. In addition, Key experienced an increase in loan-related fees compared to the third quarter when the Company wrote-off capitalized loan origination costs of $13 million as a result of the early termination of leveraged leases.
Noninterest Income
dollars in millions Change 4Q12 vs.
4Q12 3Q12 4Q11 3Q12 4Q11
---- ---- ---- ---- ----
Trust and investment services income $104 $106 $104 (1.9)% N/M
Service charges on deposit accounts 75 74 70 1.4 7.1%
Operating lease income 16 17 25 (5.9) (36.0)
Letter of credit and loan fees 59 52 56 13.5 5.4
Corporate-owned life insurance income 36 26 35 38.5 2.9
Electronic banking fees 18 18 18 N/M N/M
Gains on leased equipment 2 46 9 (95.7) (77.8)
Insurance income 14 13 11 7.7 27.3
Net gains (losses) from loan sales 57 39 27 46.2 111.1
Net gains (losses) from principal investing 2 11 (8) (81.8) N/M
Investment banking and capital markets income (loss) 47 38 24 23.7 95.8
Other income 36 104 43 (65.4) (16.3)
--- --- --- ----- -----
Total noninterest income $466 $544 $414 (14.3)% 12.6%
N/M = Not Meaningful
Key's noninterest income was $466 million for the fourth quarter of 2012, compared to $414 million for the year-ago quarter. Net gains (losses) from loan sales increased $30 million from the year-ago quarter due to an increase in volume in Key's commercial mortgage banking business. Investment banking and capital markets income also increased $23 million from one year ago. The fourth quarter of 2011 included a $24 million charge resulting from VISA's announcement of a planned increase to its litigation escrow deposit.
Compared to the third quarter of 2012, noninterest income decreased by $78 million. Other income declined $68 million, primarily due to a $54 million gain associated with the redemption of certain trust preferred securities in the third quarter of 2012. Gains on leased equipment also decreased $44 million, primarily related to the early terminations of leveraged leases in the third quarter of 2012. These decreases in noninterest income were partially offset by increases in net gains (losses) from loan sales of $18 million, corporate-owned life insurance income of $10 million, investment banking and capital markets income of $9 million, and letter of credit and loan fees of $7 million.
Noninterest Expense
dollars in millions Change 4Q12 vs.
4Q12 3Q12 4Q11 3Q12 4Q11
---- ---- ---- ---- ----
Personnel expense $433 $411 $387 5.4% 11.9%
Nonpersonnel expense 323 323 330 N/M (2.1)
--- --- --- --- ----
Total noninterest expense $756 $734 $717 3.0% 5.4%
N/M = Not Meaningful
Key's noninterest expense was $756 million for the fourth quarter of 2012, compared to $717 million for the same period last year. Personnel expense increased $46 million due to several factors - an increase in contract labor for technology investments attributable to the previously announced credit card portfolio acquisitions and related implementation of new payment systems and merchant services processing; higher employee benefits due to an increase in medical claims expense and an adjustment to the annual retirement contribution accrual; and severance expense associated with Key's Fit for Growth efficiency initiative. Nonpersonnel expense decreased $7 million from one year ago. Operating lease expense, other real estate owned (OREO) and marketing expense decreased from the year ago quarter. These declines were partially offset by an increase of $11 million related to the amortization of the intangible assets associated with the third quarter 2012 acquisitions of the previously announced credit card portfolio as well as the branches in Western New York.
Compared to the third quarter of 2012, noninterest expense increased by $22 million due to increases in personnel expense. Salaries were up due to the previously discussed technology investment spend along with an increase in employee benefits due to higher medical claims expense and an adjustment to the annual retirement contribution accrual. Severance expense also increased as a result of Key's Fit for Growth efficiency initiative. Nonpersonnel expense in total was unchanged from the third quarter of 2012.
BALANCE SHEET HIGHLIGHTS
As of December 31, 2012, Key had total assets of $89.2 billion compared to $87.0 billion at September 30, 2012, and $88.8 billion at December 31, 2011.
Average Loans
dollars in millions Change 12-31-12 vs.
12-31-12 9-30-12 12-31-11 9-30-12 12-31-11
-------- ------- -------- ------- --------
Commercial, financial and agricultural (a) $22,436 $21,473 $18,590 4.5% 20.7%
Other commercial loans 13,494 13,605 15,185 (.8) (11.1)
Total home equity loans 10,218 10,202 9,833 .2 3.9
Other consumer loans 5,711 5,415 5,056 5.5 13.0
----- ----- ----- --- ----
Total loans $51,859 $50,695 $48,664 2.3% 6.6%
(a) Commercial, financial and agricultural average balance for the three months ended December 31, 2012 and September 30, 2012 includes $90 million and $54 million of assets from commercial credit cards, respectively.
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Average loans were $51.9 billion for the fourth quarter of 2012, an increase of $3.2 billion compared to the fourth quarter of 2011. Commercial, financial and agricultural loans grew by $3.8 billion over the year-ago quarter, with strong growth across Key's corporate and middle market segments. In addition, the third quarter 2012 credit card portfolio and Western New York branch acquisitions added $1 billion of mostly consumer loans. This growth was partially offset by managed declines in the commercial real estate portfolio, the equipment lease portfolio, which included the early termination of certain leveraged leases in the exit portfolio, and run-off of consumer loans in the designated exit portfolio.
Compared to the third quarter of 2012, average loans increased by $1.2 billion. Much of the growth in loans was attributable to a $759 million increase in commercial and industrial lending within the commercial, financial and agricultural loan category. In addition, the full fourth quarter impact of the third quarter 2012 credit card portfolio acquisitions added $257 million to average loans.
Key originated approximately $10.2 billion in new or renewed lending commitments to consumers and businesses during the fourth quarter of 2012 and $37.8 billion for 2012.
Average Deposits
dollars in millions Change 12-31-12 vs.
12-31-12 9-30-12 12-31-11 9-30-12 12-31-11
-------- ------- -------- ------- --------
Non-time deposits $56,229 $54,098 $48,800 3.9% 15.2%
Certificates of deposits ($100,000 or more) 2,992 3,420 4,275 (12.5) (30.0)
Other time deposits 4,714 5,158 6,505 (8.6) (27.5)
----- ----- ----- ---- -----
Total deposits $63,935 $62,676 $59,580 2.0% 7.3%
Cost of interest-bearing deposits .47% .57% .82% N/A N/A
N/A = Not Applicable
Average deposits totaled $63.9 billion for the fourth quarter of 2012, an increase of $4.4 billion compared to the year-ago quarter. The growth reflects an increase in demand deposits of $3.4 billion and the impact of Key's third quarter 2012 Western New York branch acquisition, which added $2 billion of mostly interest-bearing non-time deposits.
Compared to the third quarter of 2012, average deposits increased by $1.3 billion. The growth was largely due to an increase of $1 billion in demand deposits.
ASSET QUALITY
dollars in millions Change 4Q12 vs.
4Q12 3Q12 4Q11 3Q12 4Q11
---- ---- ---- ---- ----
Net loan charge-offs $58 $109 $105 (46.8)% (44.8)%
Net loan charge-offs to average loans .44% .86% .86% N/A N/A
Nonperforming loans at period end (a) $674 $653 $727 3.2 (7.3)
Nonperforming assets at period end 735 718 859 2.4 (14.4)
Allowance for loan and lease losses 888 888 1,004 - (11.6)%
Allowance for loan and lease losses to nonperforming loans 132% 136% 138% N/A N/A
Provision (credit) for loan and lease losses $57 $109 $(22) (47.7)% N/M
(a) December 31, 2012 and September 30, 2012 amounts exclude $23 million and $25 million, respectively, of purchased credit impaired loans acquired in July 2012.
N/A = Not Applicable, N/M = Not Meaningful
Key's provision for loan and lease losses was $57 million for the fourth quarter of 2012, compared to $109 million for the third quarter of 2012 and a credit of $22 million for the year-ago quarter. Key's allowance for loan and lease losses was $888 million, or 1.68% of total period-end loans at December 31, 2012, compared to 1.73% at September 30, 2012, and 2.03% at December 31, 2011.
Net loan charge-offs for the fourth quarter of 2012 totaled $58 million, or .44% of average loans. These results compare to $109 million, or .86% for the third quarter of 2012, and $105 million, or .86% for the same period last year. The third quarter of 2012 included $45 million of incremental net loan charge-offs reported in accordance with updated regulatory guidance. Further review of the loans subject to this updated regulatory guidance was performed during the fourth quarter of 2012 and resulted in a partial home equity loan charge-off reversal and reallocation of the updated charge-off amounts to other consumer loan portfolios.
At December 31, 2012, Key's nonperforming loans totaled $674 million and represented 1.28% of period-end portfolio loans, compared to 1.27% at September 30, 2012 and 1.47% at December 31, 2011. Nonperforming loans at December 31, 2012 included $46 million of loans related to the regulatory guidance issued in the second and third quarters of 2012. Nonperforming assets at December 31, 2012, totaled $735 million and represented 1.39% of portfolio loans and OREO and other nonperforming assets, compared to 1.39% at September 30, 2012, and 1.73% at December 31, 2011.
CAPITAL
Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at December 31, 2012.
Capital Ratios
12-31-12 9-30-12 12-31-11
-------- ------- --------
Tier 1 common equity (a), (b) 11.16% 11.30% 11.26%
Tier 1 risk-based capital (a) 11.94 12.10 12.99
Total risk based capital (a) 14.86 15.17 16.51
Tangible common equity to tangible assets (b) 10.15 10.39 9.88
(a) 12-31-12 ratio is estimated.
--------------------------------
(b) The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "tangible common equity" and "Tier 1 common
equity." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.
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As shown in the preceding table, at December 31, 2012, Key's estimated Tier 1 common equity and Tier 1 risk-based capital ratios stood at 11.16% and 11.94%, respectively. In addition, the tangible common equity ratio was 10.15% at December 31, 2012.
Summary of Changes in Common Shares Outstanding
in thousands Change 4Q12 vs.
4Q12 3Q12 4Q11 3Q12 4Q11
---- ---- ---- ---- ----
Shares outstanding at beginning of period 936,195 945,473 952,808 (1.0)% (1.7)%
Common shares repurchased (10,530) (9,639) - N/M N/M
Shares reissued (returned) under employee benefit plans 104 361 200 (71.2) (48.0)
--- --- --- ----- -----
Shares outstanding at end of period 925,769 936,195 953,008 (1.1)% (2.9)%
N/M = Not Meaningful
As previously reported and as authorized by Key's Board of Directors and pursuant to Key's 2012 capital plan submitted to the Federal Reserve and not objected to by the Federal Reserve, Key had authority to repurchase up to $344 million of its Common Shares for general repurchase and repurchases in connection with employee elections under its compensation and benefit programs.
During the fourth quarter of 2012, Key completed $89 million of Common Share repurchases. Following completion of these repurchases, Key has remaining authority to repurchase up to $88 million of its Common Shares for general repurchase and repurchases in connection with employee elections under its compensation and benefit programs. Key's existing repurchase program does not have an expiration date. Common Share repurchases under the current authorization are expected to be executed through the first quarter of 2013.
LINE OF BUSINESS RESULTS
The following table shows the contribution made by each major business segment to Key's taxable-equivalent revenue from continuing operations and income (loss) from continuing operations attributable to Key for the periods presented. For more detailed financial information pertaining to each business segment, see the tables at the end of this release.
Major Business Segments
dollars in millions Change 4Q12 vs.
4Q12 3Q12 4Q11 3Q12 4Q11
---- ---- ---- ---- ----
Revenue from continuing operations (TE)
--------------------------------------
Key Community Bank $567 $576 $546 (1.6)% 3.8%
Key Corporate Bank 424 392 412 8.2 2.9
Other segments 86 160 43 (46.3) 100.0
--- --- --- ----- -----
Total segments 1,077 1,128 1,001 (4.5) 7.6
Reconciling items (4) (6) (24) N/M N/M
--- --- --- --- ---
Total $1,073 $1,122 $977 (4.4)% 9.8%
====== ====== ====
Income (loss) from continuing operations attributable to Key
------------------------------------------------------------
Key Community Bank $31 $(23) $40 N/M (22.5)%
Key Corporate Bank 130 118 156 10.2% (16.7)
Other segments 43 102 23 (57.8) 87.0
--- --- --- ----- ----
Total segments 204 197 219 3.6 (6.8)
Reconciling items (5) 22 (12) N/M N/M
--- --- --- --- ---
Total $199 $219 $207 (9.1)% (3.9)%
==== ==== ====
TE = Taxable equivalent, N/M = Not Meaningful
Key Community Bank
dollars in millions Change 4Q12 vs.
4Q12 3Q12 4Q11 3Q12 4Q11
---- ---- ---- ---- ----
Summary of operations
Net interest income (TE) $370 $365 $365 1.4% 1.4%
Noninterest income 197 211 181 (6.6) 8.8
--- --- --- ---- ---
Total revenue (TE) 567 576 546 (1.6) 3.8
Provision (credit) for loan and lease losses 23 120 30 (80.8) (23.3)
Noninterest expense 529 512 476 3.3% 11.1
--- --- --- --- ----
Income (loss) before income taxes (TE) 15 (56) 40 N/M (62.5)
Allocated income taxes (benefit) and TE adjustments (16) (33) - N/M N/M
--- --- --- --- ---
Net income (loss) attributable to Key $31 $(23) $40 N/M (22.5)%
Average balances
Loans and leases $29,252 $28,386 $26,406 3.1% 10.8%
Total assets 33,086 32,136 29,867 3.0 10.8
Deposits 50,123 49,537 48,076 1.2 4.3
Assets under management at period end $22,334 $21,988 $17,938 1.6% 24.5%
TE = Taxable Equivalent, N/M = Not Meaningful
Additional Key Community Bank Data
dollars in millions Change 4Q12 vs.
4Q12 3Q12 4Q11 3Q12 4Q11
---- ---- ---- ---- ----
Noninterest income
Trust and investment services income $50 $51 $45 (2.0)% 11.1%
Service charges on deposit accounts 61 62 59 (1.6) 3.4
Electronic banking fees 18 18 18 - -
Other noninterest income 68 80 59 (15.0) 15.3
--- --- --- ----- ----
Total noninterest income $197 $211 $181 (6.6)% 8.8%
Average deposit balances
NOW and money market deposit accounts $25,765 $25,072 $22,524 2.8% 14.4%
Savings deposits 2,403 2,373 1,959 1.3 22.7
Certificates of deposit ($100,000 or more) 2,623 2,941 3,639 (10.8) (27.9)
Other time deposits 4,703 5,137 6,491 (8.4) (27.5)
Deposits in foreign office 355 344 393 3.2 (9.7)
Noninterest-bearing deposits 14,274 13,670 13,070 4.4 9.2
------ ------ ------ --- ---
Total deposits $50,123 $49,537 $48,076 1.2% 4.3%
Home equity loans
Average balance $9,807 $9,734 $9,280
Weighted-average loan-to-value ratio (at date of origination) 70% 71% 70%
Percent first lien positions 55 54 53
Other data
Branches 1,088 1,087 1,058
Automated teller machines 1,611 1,620 1,579
Key Community Bank Summary of Operations
-- Six consecutive quarters of average loan growth
-- Core deposits up $4.9 billion, or 12.8% from the prior year and $1.3
billion, or 3.2% from the prior quarter
Key Community Bank recorded net income attributable to Key of $31 million for the fourth quarter of 2012, compared to $40 million for the year-ago quarter.
Taxable-equivalent net interest income increased by $5 million, or 1.4% from the fourth quarter of 2011. Average loans and leases grew 10.8% while average deposits increased 4.3% from one year ago. The Western New York branch and credit card portfolio acquisitions contributed $33 million to net interest income, $1 billion to average loans and leases, and $2 billion to deposits. The positive contribution to net interest income from the acquisitions was partially offset by a lower earnings credit applied to deposits in the current period compared to the same period one year ago.
Noninterest income increased by $16 million, or 8.8% from the year-ago quarter. Credit card and merchant fees increased $9 million due to the acquisition of the credit card portfolio in the third quarter of 2012. Trust and investment services income increased $5 million, primarily due to an increase in assets under management resulting from market appreciation and increased production. Service charges on deposit accounts also increased $2 million.
The provision for loan and lease losses decreased by $7 million, or 23.3% compared to the fourth quarter of 2011, primarily as a result of lower net loan charge-offs from the same period one year ago. Net loan charge-offs were $12 million for the fourth quarter of 2012, down $59 million from the same period one year ago.
Noninterest expense increased by $53 million, or 11.1% from the year-ago quarter. Key's third quarter 2012 Western New York branch and credit card portfolio acquisitions contributed $30 million to the increase in noninterest expense spread across several expense categories, including personnel, loan servicing and intangible amortization expense, which increased $11 million. Personnel expense, excluding the impact of acquisitions, was $8 million higher than one year ago. Various other miscellaneous expenses also increased from the same period one year ago.
Key Corporate Bank
dollars in millions Change 4Q12 vs.
4Q12 3Q12 4Q11 3Q12 4Q11
---- ---- ---- ---- ----
Summary of operations
Net interest income (TE) $188 $182 $177 3.3% 6.2%
Noninterest income 236 210 235 12.4 .4
--- --- --- ---- ---
Total revenue (TE) 424 392 412 8.2 2.9
Provision (credit) for loan and lease losses 11 (3) (61) N/M N/M
Noninterest expense 206 209 228 (1.4) (9.6)
--- --- --- ---- ----
Income (loss) before income taxes (TE) 207 186 245 11.3 (15.5)
Allocated income taxes and TE adjustments 77 68 89 13.2 (13.5)
--- --- --- ---- -----
Net income (loss) attributable to Key $130 $118 $156 10.2% (16.7)%
Average balances
Loans and leases $19,477 $18,886 $17,784 3.1% 9.5%
Loans held for sale 538 441 356 22.0 51.1
Total assets 23,461 22,914 21,811 2.4 7.6
Deposits 13,672 12,873 11,162 6.2 22.5
Assets under management at period end $28,340 $27,682 $33,794 2.4% (16.1)%
TE = Taxable Equivalent, N/M = Not Meaningful
Additional Key Corporate Bank Data
dollars in millions Change 4Q12 vs.
4Q12 3Q12 4Q11 3Q12 4Q11
---- ---- ---- ---- ----
Noninterest income
Trust and investment services income $55 $56 $58 (1.8)% (5.2)%
Investment banking and debt placement fees (a) 109 82 62 32.9 75.8
Operating lease income and other leasing gains (b) 18 20 26 (10.0) (30.8)
Corporate services income (c) 30 27 44 11.1 (31.8)
Other noninterest income 24 25 45 (4.0) (46.7)
--- --- --- ---- -----
Total noninterest income $236 $210 $235 12.4% .4%
(a) Included in "Investment banking and capital markets income (loss)," "Net gains (losses) from loan
sales," and "Letter of credit and loan fees" on the Consolidated Statements of Income.
(b) Included in "Operating lease income" and "Gains on leased equipment" on the Consolidated Statements of
Income.
(c) Included in "Service charges on deposit accounts," "Letter of credit and loan fees," and "Investment
banking and capital markets income (loss)" on the Consolidated Statements of Income.
Key Corporate Bank Summary of Operations
-- Investment banking and debt placement fees were $109 million for the
fourth quarter of 2012, up $47 million, or 75.8% from the prior year and
up $27 million, or 32.9% from the prior quarter
-- Average loan balances up 9.5% from the prior year and 3.1% from the
prior quarter
-- Average deposits up 22.5% from the prior year and 6.2% from the prior
quarter
Key Corporate Bank recorded net income attributable to Key of $130 million for the fourth quarter of 2012, compared to $156 million for the same period one year ago.
Taxable-equivalent net interest income increased by $11 million, or 6.2% compared to the fourth quarter of 2011. Average earning assets increased $1.7 billion, or 8.9% from the year-ago quarter, and average deposit balances increased $2.5 billion, or 22.5% from the year-ago quarter, contributing to the improvement in net interest income.
Noninterest income increased by $1 million, or .4% from the fourth quarter of 2011. Net gains (losses) from loan sales from commercial mortgage banking activities in the Real Estate Capital line of business increased $30 million. This increase was offset by a $23 million decline in other income due to gains realized in the fourth quarter of 2011 related to the disposition of certain investments held by the Real Estate Capital line of business and a $7 million decrease in operating lease revenue compared to the year-ago quarter.
The provision for loan and lease losses in the fourth quarter of 2012 was a charge of $11 million compared to a credit of $61 million for the same period one year ago. Net loan charge-offs were $21 million for the fourth quarter of 2012, up $9 million from the same period one year ago.
Noninterest expense decreased by $22 million, or 9.6% from the fourth quarter of 2011. Contributing to the decline in noninterest expense were decreases in personnel expense of $7 million, operating lease expense of $4 million, and other miscellaneous expenses of $8 million. In addition, the provision (credit) for losses on lending-related commitments was a credit of $16 million compared to a credit of $10 million one year ago.
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 $43 million for the fourth quarter of 2012, compared to net income attributable to Key of $23 million for the same period last year. These results were primarily attributable to increases in net interest income of $31 million and net gains (losses) from principal investing of $10 million, partially offset by an increase in the loan and lease loss provision of $16 million.
*****
KeyCorp was organized more than 160 years ago and is headquartered in Cleveland, Ohio. One of the nation's largest bank-based financial services companies, Key had assets of approximately $89.2 billion at December 31, 2012.
Key provides deposit, lending, cash management and investment services to individuals, small and mid-sized businesses in 14 states under the name KeyBank National Association. 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.
This earnings release contains forward-
looking statements within the meaning of the
Private Securities Litigation Reform Act of
1995, including statements about Key's
financial condition, results of operations,
earnings outlook, asset quality trends and
profitability. Forward-looking statements
are not historical facts but instead
represent management's current expectations
and forecasts regarding future events, many
of which, by their nature, are inherently
uncertain and outside of Key's control.
Key's actual results and financial condition
may differ, possibly materially, from the
anticipated results and financial condition
indicated in these forward-looking
statements. Factors that could cause Key's
actual results to differ materially from
those described in the forward-looking
statements can be found in KeyCorp's Annual
Report on Form 10-K for the year ended
December 31, 2011, its Quarterly Reports on
Form 10-Q for the periods ended March 31,
2012, June 30, 2012, and September 30, 2012,
each of which have been filed with the
Securities and Exchange Commission and are
available on Key's website (www.key.com/ir)
and on the Securities and Exchange
Commission's website (www.sec.gov). Forward-
looking statements are not guarantees of
future performance and should not be relied
upon as representing management's views as
of any subsequent date. Key does not
undertake any obligation to update the
forward-looking statements to reflect the
impact of circumstances or events that may
arise after the date of the forward-looking
statements.
---------------------------------------------
Notes to Editors:
A live Internet broadcast of KeyCorp's conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on Thursday, January 24, 2013. An audio replay of the call will be available through January 31, 2013.
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.
*****
Financial Highlights
(dollars in millions, except per share amounts)
Three months ended
------------------
12-31-12 9-30-12 12-31-11
Summary of operations
Net interest income (TE) $607 $578 $563
Noninterest income 466 544 414
Total revenue (TE) 1,073 1,122 977
Provision (credit) for loan and lease losses 57 109 (22)
Noninterest expense 756 734 717
Income (loss) from continuing operations attributable to Key 199 219 207
Income (loss) from discontinued operations, net of taxes (b) 4 - (7)
Net income (loss) attributable to Key 203 219 200
Income (loss) from continuing operations attributable to Key common shareholders $193 $214 $201
Income (loss) from discontinued operations, net of taxes (b) 4 - (7)
Net income (loss) attributable to Key common shareholders 197 214 194
Per common share
Income (loss) from continuing operations attributable to Key common shareholders $.21 $.23 $.21
Income (loss) from discontinued operations, net of taxes (b) - - (.01)
Net income (loss) attributable to Key common shareholders (e) .21 .23 .20
Income (loss) from continuing operations attributable to Key common shareholders -
assuming dilution .21 .23 .21
Income (loss) from discontinued operations, net of taxes - assuming dilution (b) - - (.01)
Net income (loss) attributable to Key common shareholders - assuming dilution (e) .21 .23 .20
Cash dividends paid .05 .05 .03
Book value at period end 10.78 10.64 10.09
Tangible book value at period end 9.67 9.54 9.11
Market price at period end 8.42 8.74 7.69
Performance ratios
From continuing operations:
Return on average total assets .97% 1.08% 1.01%
Return on average common equity 7.70 8.57 8.26
Return on average tangible common equity (a) 8.59 9.56 9.15
Net interest margin (TE) 3.37 3.23 3.13
Cash efficiency ratio (a) 69.34 64.62 73.29
From consolidated operations:
Return on average total assets .93% 1.01% .91%
Return on average common equity 7.86 8.57 7.97
Return on average tangible common equity (a) 8.77 9.56 8.83
Net interest margin (TE) 3.29 3.14 3.04
Loan to deposit (d) 85.77 86.24 87.00
Capital ratios at period end
Key shareholders' equity to assets 11.51% 11.79% 11.16%
Tangible Key shareholders' equity to tangible assets 10.48 10.73 10.21
Tangible common equity to tangible assets (a) 10.15 10.39 9.88
Tier 1 common equity (a), (c) 11.16 11.30 11.26
Tier 1 risk-based capital (c) 11.94 12.10 12.99
Total risk-based capital (c) 14.86 15.17 16.51
Leverage (c) 11.37 11.37 11.79
Asset quality - from continuing operations
Net loan charge-offs $58 $109 $105
Net loan charge-offs to average loans .44% .86% .86%
Allowance for loan and lease losses to annualized net loan charge-offs 384.85 204.78 241.01
Allowance for loan and lease losses $888 $888 $1,004
Allowance for credit losses 917 931 1,049
Allowance for loan and lease losses to period-end loans 1.68% 1.73% 2.03%
Allowance for credit losses to period-end loans 1.74 1.81 2.12
Allowance for loan and lease losses to nonperforming loans 131.75 135.99 138.10
Allowance for credit losses to nonperforming loans 136.05 142.57 144.29
Nonperforming loans at period end (f) $674 $653 $727
Nonperforming assets at period end 735 718 859
Nonperforming loans to period-end portfolio loans 1.28% 1.27% 1.47%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming
assets 1.39 1.39 1.73
Trust and brokerage assets
Assets under management $50,674 $49,670 $51,732
Nonmanaged and brokerage assets 25,197 24,220 30,639
Other data
Average full-time equivalent employees 15,589 15,833 15,381
Branches 1,088 1,087 1,058
Taxable-equivalent adjustment $6 $6 $6
Financial Highlights (continued)
(dollars in millions, except per share amounts)
Twelve months ended
12-31-12 12-31-11
-------- --------
Summary of operations
Net interest income (TE) $2,288 $2,292
Noninterest income 1,967 1,808
Total revenue (TE) 4,255 4,100
Provision (credit) for loan and lease losses 229 (60)
Noninterest expense 2,907 2,790
Income (loss) from continuing operations attributable to Key 849 964
Income (loss) from discontinued operations, net of taxes (b) 9 (44)
Net income (loss) attributable to Key 858 920
Income (loss) from continuing operations attributable to Key common shareholders $827 $857
Income (loss) from discontinued operations, net of taxes (b) 9 (44)
Net income (loss) attributable to Key common shareholders 836 813
Per common share
Income (loss) from continuing operations attributable to Key common shareholders $.88 $.92
Income (loss) from discontinued operations, net of taxes (b) .01 (.05)
Net income (loss) attributable to Key common shareholders (e) .89 .87
Income (loss) from continuing operations attributable to Key common shareholders -
assuming dilution .88 .92
Income (loss) from discontinued operations, net of taxes - assuming dilution (b) .01 (.05)
Net income (loss) attributable to Key common shareholders - assuming dilution (e) .89 .87
Cash dividends paid .18 .10
Performance ratios
From continuing operations:
Return on average total assets 1.05% 1.17%
Return on average common equity 8.39 9.26
Net interest margin (TE) 3.21 3.16
From consolidated operations:
Return on average total assets .99% 1.04%
Return on average common equity 8.48 8.79
Net interest margin (TE) 3.13 3.09
Asset quality - from continuing operations
Net loan charge-offs $345 $541
Net loan charge-offs to average loans .69% 1.11%
Other data
Average full-time equivalent employees 15,589 15,381
Taxable-equivalent adjustment $24 $25
(a) The following table entitled "GAAP to Non-GAAP Reconciliations" presents the computations of certain financial measures related to "tangible common equity," "Tier 1 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.
(b) 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. As a result of these decisions, Key has accounted for these businesses as discontinued operations.
(c) 12-31-12 ratio is estimated.
(d) Represents period-end consolidated total loans and loans held for sale (excluding education loans in the securitization trusts) divided by period-end consolidated total deposits (excluding deposits in foreign office).
(e) Earnings per share may not foot due to rounding.
(f) December 31, 2012 and September 30, 2012 amounts exclude $23 million and $25 million, respectively, of purchased credit impaired loans acquired in July 2012.
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles
GAAP to Non-GAAP Reconciliations
(dollars in millions)
The table below presents certain non-GAAP financial measures related to "tangible common equity," "return on tangible common equity," "Tier 1 common equity," "pre-provision net revenue," and "cash efficiency ratio."
The tangible common equity ratio and the return on 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. Since the commencement of the Comprehensive Capital Analysis and Review process in early 2009, the Federal Reserve has focused its assessment of capital adequacy on a component of Tier 1 risk-based capital known as Tier 1 common equity, a non-GAAP financial measure. Because the Federal Reserve has long indicated that voting common shareholders' equity (essentially Tier 1 risk-based capital less preferred stock, qualifying capital securities and noncontrolling interests in subsidiaries) generally should be the dominant element in Tier 1 risk-based capital, this focus on Tier 1 common equity is consistent with existing capital adequacy categories.
Tier 1 common equity is neither formally defined by GAAP nor prescribed in amount by federal banking regulations; this measure is considered to be a non-GAAP financial measure. Since analysts and banking regulators may assess Key's capital adequacy using tangible common equity and Tier 1 common equity, management believes it is useful to enable investors to assess Key's capital adequacy on these same bases. The table also reconciles the GAAP performance measures to the corresponding non-GAAP measures.
The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of the provision for loan and lease losses makes it easier to analyze the results by presenting them on a more comparable basis.
The cash efficiency ratio performance measure removes the impact of Key's intangible asset amortization from the calculation. Management believes this ratio provides greater consistency and comparability between Key's results and those of its peer banks. Additionally, this ratio is used by analysts and investors to assist in the development of their 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
12-31-12 9-30-12 12-31-11
-------- ------- --------
Tangible common equity to tangible assets at period end
Key shareholders' equity (GAAP) $10,271 $10,251 $9,905
Less: Intangible assets (a) 1,027 1,031 934
Preferred Stock, Series A 291 291 291
--- --- ---
Tangible common equity (non-GAAP) $8,953 $8,929 $8,680
====== ====== ======
Total assets (GAAP) $89,236 $86,950 $88,785
Less: Intangible assets (a) 1,027 1,031 934
Tangible assets (non-GAAP) $88,209 $85,919 $87,851
======= ======= =======
Tangible common equity to tangible assets ratio (non-
GAAP) 10.15% 10.39% 9.88%
Tier 1 common equity at period end
Key shareholders' equity (GAAP) $10,271 $10,251 $9,905
Qualifying capital securities 339 339 1,046
Less: Goodwill 979 979 917
Accumulated other comprehensive income (loss) (b) (172) (109) (72)
Other assets (c) 117 121 72
--- --- ---
Total Tier 1 capital (regulatory) 9,686 9,599 10,034
Less: Qualifying capital securities 339 339 1,046
Preferred Stock, Series A 291 291 291
--- --- ---
Total Tier 1 common equity (non-GAAP) $9,056 $8,969 $8,697
====== ====== ======
Net risk-weighted assets (regulatory) (c), (d) $81,150 $79,363 $77,214
Tier 1 common equity ratio (non-GAAP) (d) 11.16% 11.30% 11.26%
Pre-provision net revenue
Net interest income (GAAP) $601 $572 $557
Plus: Taxable-equivalent adjustment 6 6 6
Noninterest income 466 544 414
Less: Noninterest expense 756 734 717
Pre-provision net revenue from continuing operations
(non-GAAP) $317 $388 $260
===
GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
Three months ended
------------------
12-31-12 9-30-12 12-31-11
-------- ------- --------
Average tangible common equity
Average Key shareholders' equity (GAAP) $10,261 $10,222 $9,943
Less: Intangible assets (average) (a) 1,030 1,026 934
Preferred Stock, Series A (average) 291 291 291
--- --- ---
Average tangible common equity (non-GAAP) $8,940 $8,905 $8,718
====== ====== ======
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to Key common
shareholders (GAAP) $193 $214 $201
Average tangible common equity (non-GAAP) 8,940 8,905 8,718
Return on average tangible common equity from continuing operations (non-GAAP) 8.59% 9.56% 9.15%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP) $197 $214 $194
Average tangible common equity (non-GAAP) 8,940 8,905 8,718
Return on average tangible common equity consolidated (non-GAAP) 8.77% 9.56% 8.83%
Cash efficiency ratio
Noninterest expense (GAAP) $756 $734 $717
Less: Intangible asset amortization on credit cards 8 6 -
Other intangible asset amortization 4 3 1
--- --- ---
Adjusted noninterest expense (non-GAAP) $744 $725 $716
==== ==== ====
Net interest income (GAAP) $601 $572 $557
Plus: Taxable-equivalent adjustment 6 6 6
Noninterest income 466 544 414
--- --- ---
Total taxable-equivalent revenue (non-GAAP) $1,073 $1,122 $977
====== ====== ====
Cash efficiency ratio (non-GAAP) 69.34% 64.62% 73.29%
Three months ended
------------------
12-31-12 9-30-12
-------- -------
Tier 1 common equity under Basel III (estimates)
Tier 1 common equity under Basel I $9,056 $8,969
Adjustments from Basel I to Basel III:
Cumulative other comprehensive income (e) (197) (145)
Deferred tax assets (f) (80) (72)
--- ---
Tier 1 common equity anticipated under Basel III $8,779 $8,752
====== ======
Total risk-weighted assets under Basel I $81,150 $79,363
Adjustments from Basel I to Basel III:
Market risk impact 1,225 579
Loan commitments less than one year 952 1,127
Residential mortgage and home equity loans 1,855 1,855
Other 1,173 1,119
----- -----
Total risk-weighted assets under Basel III (g) $86,355 $84,043
======= =======
Tier 1 common equity ratio under Basel III 10.17% 10.41%
(a) Three months ended December 31,
2012 and September 30, 2012 exclude
$123 million and $130 million,
respectively, of period end
purchased credit card receivable
intangible assets. Three months
ended December 31, 2012 and
September 30, 2012 exclude $126
million and $86 million,
respectively, of average ending
purchased credit card receivable
intangible assets.
(b) Includes net unrealized gains or
losses on securities available for
sale (except for net unrealized
losses on marketable equity
securities), net gains or losses on
cash flow hedges, and amounts
resulting from the application of
the applicable accounting guidance
for defined benefit and other
postretirement plans.
(c) Other assets deducted from Tier 1
capital and net risk-weighted
assets consist of disallowed
intangible assets (excluding
goodwill) and deductible portions of
nonfinancial equity investments.
There were no disallowed deferred
tax assets at December 31, 2012,
September 30, 2012, and December 31,
2011.
(d) 12-31-12 amount is estimated.
(e) Includes AFS mark-to-market,
cash flow hedges on items recognized
at fair value on the balance sheet,
and defined benefit pension
liability.
(f) Deferred tax asset subject to
future taxable income for
realization, primarily tax credit
carryforwards.
(g) The amount of regulatory capital
and risk-weighted assets estimated
under Basel III (as fully phased-in
on January 1, 2019) is based upon
the federal banking agencies' notice
of proposed rulemaking, which
implement Basel III and the
Standardized Approach.
GAAP = U.S. generally accepted
accounting principles
Consolidated Balance Sheets
(dollars in millions)
12-31-12 9-30-12 12-31-11
-------- ------- --------
Assets
Loans $52,822 $51,419 $49,575
Loans held for sale 599 628 728
Securities available for sale 12,094 11,962 16,012
Held-to-maturity securities 3,931 4,153 2,109
Trading account assets 605 663 623
Short-term investments 3,940 2,208 3,519
Other investments 1,064 1,106 1,163
Total earning assets 75,055 72,139 73,729
Allowance for loan and lease losses (888) (888) (1,004)
Cash and due from banks 585 974 694
Premises and equipment 965 942 944
Operating lease assets 288 290 350
Goodwill 979 979 917
Other intangible assets 171 182 17
Corporate-owned life insurance 3,333 3,309 3,256
Derivative assets 693 771 945
Accrued income and other assets 2,801 2,871 3,077
Discontinued assets 5,254 5,381 5,860
Total assets $89,236 $86,950 $88,785
======= ======= =======
Liabilities
Deposits in domestic offices:
NOW and money market deposit accounts $32,380 $30,573 $27,954
Savings deposits 2,433 2,393 1,962
Certificates of deposit ($100,000 or more) 2,879 3,226 4,111
Other time deposits 4,575 4,941 6,243
----- ----- -----
Total interest-bearing deposits 42,267 41,133 40,270
Noninterest-bearing deposits 23,319 22,486 21,098
Deposits in foreign office - interest-
bearing 407 569 588
Total deposits 65,993 64,188 61,956
Federal funds purchased and securities 1,609 1,746 1,711
sold under repurchase agreements
Bank notes and other short-term borrowings 287 388 337
Derivative liabilities 584 657 1,026
Accrued expense and other liabilities 1,425 1,238 1,763
Long-term debt 6,847 6,119 9,520
Discontinued liabilities 2,182 2,335 2,550
Total liabilities 78,927 76,671 78,863
Equity
Preferred stock, Series A 291 291 291
Common shares 1,017 1,017 1,017
Capital surplus 4,126 4,118 4,194
Retained earnings 6,913 6,762 6,246
Treasury stock, at cost (1,952) (1,868) (1,815)
Accumulated other comprehensive income
(loss) (124) (69) (28)
Key shareholders' equity 10,271 10,251 9,905
Noncontrolling interests 38 28 17
Total equity 10,309 10,279 9,922
------ ------ -----
Total liabilities and equity $89,236 $86,950 $88,785
======= ======= =======
Common shares outstanding (000) 925,769 936,195 953,008
Consolidated Statements of Income
(dollars in millions, except per share amounts)
Three months ended Twelve months ended
------------------ -------------------
12-31-12 9-30-12 12-31-11 12-31-12 12-31-11
-------- ------- -------- -------- --------
Interest income
Loans $563 $538 $542 $2,155 $2,206
Loans held for sale 5 5 4 20 14
Securities available for sale 85 93 128 399 583
Held-to-maturity securities 19 21 9 69 12
Trading account assets 3 4 5 18 26
Short-term investments 2 1 1 6 6
Other investments 11 9 9 38 42
Total interest income 688 671 698 2,705 2,889
Interest expense
Deposits 49 60 85 257 390
Federal funds purchased and securities sold under repurchase
agreements 1 1 1 4 5
Bank notes and other short-term borrowings 2 1 2 7 11
Long-term debt 35 37 53 173 216
Total interest expense 87 99 141 441 622
Net interest income 601 572 557 2,264 2,267
Provision (credit) for loan and lease losses 57 109 (22) 229 (60)
--- --- --- --- ---
Net interest income (expense) after provision for loan and lease losses 544 463 579 2,035 2,327
Noninterest income
Trust and investment services income 104 106 104 421 434
Service charges on deposit accounts 75 74 70 287 281
Operating lease income 16 17 25 75 122
Letter of credit and loan fees 59 52 56 221 213
Corporate-owned life insurance income 36 26 35 122 121
Net securities gains (losses) (a) - - - - 1
Electronic banking fees 18 18 18 72 114
Gains on leased equipment 2 46 9 111 25
Insurance income 14 13 11 50 53
Net gains (losses) from loan sales 57 39 27 150 75
Net gains (losses) from principal investing 2 11 (8) 72 78
Investment banking and capital markets income (loss) 47 38 24 165 134
Other income 36 104 43 221 157
Total noninterest income 466 544 414 1,967 1,808
Noninterest expense
Personnel 433 411 387 1,618 1,520
Net occupancy 69 65 66 260 258
Operating lease expense 12 13 18 57 94
Computer processing 39 43 42 166 166
Business services and professional fees 55 49 57 193 186
FDIC assessment 8 7 7 31 52
OREO expense, net 1 1 5 15 13
Equipment 27 27 25 107 103
Marketing 20 18 24 68 60
Provision (credit) for losses on lending-related commitments (14) (8) (11) (16) (28)
Intangible asset amortization on credit cards 8 6 - 14 -
Other intangible asset amortization 4 3 1 9 4
Other expense 94 99 96 385 362
Total noninterest expense 756 734 717 2,907 2,790
--- --- --- ----- -----
Income (loss) from continuing operations before income taxes 254 273 276 1,095 1,345
Income taxes 55 52 69 239 369
Income (loss) from continuing operations 199 221 207 856 976
Income (loss) from discontinued operations, net of taxes 4 - (7) 9 (44)
Net income (loss) 203 221 200 865 932
Less: Net income (loss) attributable to noncontrolling
interests - 2 - 7 12
Net income (loss) attributable to Key $203 $219 $200 $858 $920
==== ==== ==== ==== ====
Income (loss) from continuing operations attributable to Key common shareholders $193 $214 $201 $827 $857
Net income (loss) attributable to Key common shareholders 197 214 194 836 813
Per common share
----------------
Income (loss) from continuing operations attributable to Key common shareholders $.21 $.23 $.21 $.88 $.92
Income (loss) from discontinued operations, net of taxes - - (.01) .01 (.05)
Net income (loss) attributable to Key common shareholders (b) .21 .23 .20 .89 .87
Per common share - assuming dilution
------------------------------------
Income (loss) from continuing operations attributable to Key common shareholders $.21 $.23 $.21 $.88 $.92
Income (loss) from discontinued operations, net of taxes - - (.01) .01 (.05)
Net income (loss) attributable to Key common shareholders (b) .21 .23 .20 .89 .87
Cash dividends declared per common share $.05 $.05 $.03 $.18 $.10
Weighted-average common shares outstanding (000) 925,725 936,223 948,658 938,941 931,934
Weighted-average common shares and potential common shares outstanding (000) (c) 930,382 940,764 951,684 943,259 935,801
(a) For the three months ended December 31, 2012, September 30, 2012, and December 31, 2011, Key did not have any impairment losses related to securities.
(b) Earnings per share may not foot due to rounding.
(c) Assumes conversion of stock options and/or Preferred Series A shares, as applicable.
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)
Fourth Quarter 2012 Third Quarter 2012 Fourth Quarter 2011
------------------ -------------------
Average Average Average
Balance Interest (a) Yield/Rate (a) Balance Interest (a) Yield/Rate (a) Balance Interest (a) Yield/Rate (a)
Assets
Loans: (b), (c)
Commercial, financial and agricultural $22,436 (h) $213 3.77% $21,473 (h) $203 3.76% $18,590 $183 3.90%
Real estate - commercial mortgage 7,555 82 4.35 7,463 83 4.40 8,090 92 4.48
Real estate - construction 1,070 14 4.94 1,116 12 4.55 1,380 16 4.68
Commercial lease financing 4,869 49 4.01 5,026 39 3.13 5,715 65 4.58
Total commercial loans 35,930 358 3.96 35,078 337 3.83 33,775 356 4.19
Real estate - residential mortgage 2,164 26 4.70 2,092 25 4.80 1,918 24 5.15
Home equity:
Key Community Bank 9,807 98 3.99 9,734 99 4.02 9,280 96 4.10
Other 411 9 8.23 468 9 7.73 553 11 7.68
--- --- ---- --- --- ---- --- --- ----
Total home equity loans 10,218 107 4.16 10,202 108 4.19 9,833 107 4.30
Consumer other - Key Community Bank 1,339 32 9.63 1,297 32 9.65 1,191 30 9.62
Credit cards 714 23 13.15 432 17 15.38 - - -
Consumer other:
Marine 1,403 22 6.16 1,493 22 6.28 1,820 29 6.35
Other 91 1 8.25 101 3 8.02 127 2 7.87
--- --- ---- --- --- ---- --- --- ----
Total consumer other 1,494 23 6.29 1,594 25 6.39 1,947 31 6.44
----- --- ---- ----- --- ---- ----- --- ----
Total consumer loans 15,929 211 5.30 15,617 207 5.26 14,889 192 5.12
------ --- ---- ------ --- ---- ------ --- ----
Total loans 51,859 569 4.37 50,695 544 4.27 48,664 548 4.47
Loans held for sale 618 5 3.47 532 5 3.28 440 4 3.36
Securities available for sale (b), (e) 11,980 84 2.95 12,608 94 3.07 16,790 128 3.16
Held-to-maturity securities (b) 4,036 19 1.94 4,251 21 1.94 1,648 9 2.12
Trading account assets 606 3 1.91 693 4 2.10 736 5 2.72
Short-term investments 2,090 2 .27 1,868 1 .24 2,929 1 .26
Other investments (e) 1,088 12 4.05 1,134 8 3.08 1,181 9 2.98
Total earning assets 72,277 694 3.85 71,781 677 3.78 72,388 704 3.90
Allowance for loan and lease losses (898) (883) (1,057)
Accrued income and other assets 9,941 9,957 9,942
Discontinued assets - education lending business 5,287 5,421 5,912
Total assets $86,607 $86,276 $87,185
======= ======= =======
Liabilities
NOW and money market deposit accounts $31,058 14 .18 $30,176 14 .19 $27,722 15 .22
Savings deposits 2,408 - .06 2,378 1 .06 1,964 - .06
Certificates of deposit ($100,000 or more) (f) 2,992 16 2.15 3,420 22 2.53 4,275 32 2.97
Other time deposits 4,714 18 1.52 5,158 23 1.76 6,505 37 2.24
Deposits in foreign office 874 1 .21 666 - .21 650 1 .25
Total interest-bearing deposits 42,046 49 .47 41,798 60 .57 41,116 85 .82
Federal funds purchased and securities 1,702 1 .16 1,822 1 .17 1,747 1 .25
sold under repurchase agreements
Bank notes and other short-term borrowings 306 2 1.97 390 1 1.53 471 2 1.87
Long-term debt (f), (g) 3,301 35 4.84 3,793 37 4.43 7,020 53 3.21
Total interest-bearing liabilities 47,355 87 .73 47,803 99 .83 50,354 141 1.12
------ --- --- ------ --- --- ------ --- ----
Noninterest-bearing deposits 21,889 20,878 18,464
Accrued expense and other liabilities 1,781 1,928 2,496
Discontinued liabilities -education lending
business (d), (g) 5,287 5,421 5,912
Total liabilities 76,312 76,030 77,226
Equity
Key shareholders' equity 10,261 10,222 9,943
Noncontrolling interests 34 24 16
Total equity 10,295 10,246 9,959
Total liabilities and equity $86,607 $86,276 $87,185
======= ======= =======
Interest rate spread (TE) 3.12% 2.95% 2.78%
==== ==== ====
Net interest income (TE) and net interest margin (TE) 607 3.37% 578 3.23% 563 3.13%
==== ==== ====
TE adjustment (b) 6 6 6
--- --- ---
Net interest income, GAAP basis $601 $572 $557
(a) Results are from continuing
operations. Interest excludes the
interest associated with the
liabilities referred to in (d)
below, calculated using a matched
funds transfer pricing
methodology.
(b) Interest income on tax-exempt
securities and loans has been
adjusted to a taxable-equivalent
basis using the statutory federal
income tax rate of 35%.
(c) For purposes of these
computations, nonaccrual loans
are included in average loan
balances.
(d) Discontinued liabilities
include the liabilities of the
education lending business and
the dollar amount of any
additional liabilities assumed
necessary to support the assets
associated with this business.
(e) Yield is calculated on the
basis of amortized cost.
(f) Rate calculation excludes
basis adjustments related to fair
value hedges.
(g) A portion of long-term debt
and the related interest expense
is allocated to discontinued
liabilities as a result of
applying our matched funds
transfer pricing methodology to
discontinued operations.
(h) Commercial, financial and
agricultural average balance for
the three months ended December
31, 2012, and September 30, 2012,
includes $90 million and 54
million, respectively, of assets
from commercial credit cards.
TE = Taxable Equivalent, GAAP =
U.S. generally accepted
accounting principles
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)
Twelve months ended December 31, 2012 Twelve months ended December 31, 2011
------------------------------------- -------------------------------------
Average Average
Balance Interest (a) Yield/Rate (a) Balance Interest (a) Yield/ Rate (a)
------- -------- ---------- ------- -------- -----------
Assets
Loans: (b), (c)
Commercial, financial and agricultural $21,141 (h) $810 3.83% $17,507 $705 4.03%
Real estate - commercial mortgage 7,656 339 4.43 8,437 380 4.50
Real estate - construction 1,171 56 4.74 1,677 73 4.36
Commercial lease financing 5,142 187 3.64 5,846 293 5.01
Total commercial loans 35,110 1,392 3.96 33,467 1,451 4.34
Real estate - residential mortgage 2,049 100 4.86 1,850 97 5.25
Home equity:
Key Community Bank 9,520 384 4.03 9,390 387 4.12
Other 473 37 7.81 598 46 7.66
--- --- ---- --- --- ----
Total home equity loans 9,993 421 4.21 9,988 433 4.34
Consumer other - Key Community Bank 1,269 121 9.53 1,167 113 9.62
Credit cards 288 40 13.99 - - -
Consumer other:
Marine 1,551 97 6.26 1,992 125 6.28
Other 102 8 8.14 142 11 7.87
--- --- ---- --- --- ----
Total consumer other 1,653 105 6.38 2,134 136 6.38
----- --- ---- ----- --- ----
Total consumer loans 15,252 787 5.16 15,139 779 5.14
Total loans 50,362 2,179 4.33 48,606 2,230 4.59
Loans held for sale 579 20 3.45 387 14 3.58
Securities available for sale (b), (e) 13,422 399 3.08 18,766 584 3.20
Held-to-maturity securities (b) 3,511 69 1.97 514 12 2.35
Trading account assets 718 18 2.48 878 26 2.97
Short-term investments 2,116 6 .27 2,543 6 .25
Other investments (e) 1,141 38 3.27 1,264 42 3.14
Total earning assets 71,849 2,729 3.82 72,958 2,914 4.02
Allowance for loan and lease losses (919) (1,250)
Accrued income and other assets 9,961 10,385
Discontinued assets - education lending business 5,524 6,203
Total assets $86,415 $88,296
==========
Liabilities
NOW and money market deposit accounts $29,673 56 .19 $27,001 71 .26
Savings deposits 2,218 1 .05 1,958 1 .06
Certificates of deposit ($100,000 or more) (f) 3,574 94 2.64 4,931 149 3.02
Other time deposits 5,386 104 1.92 7,185 166 2.31
Deposits in foreign office 767 2 .23 807 3 .30
Total interest-bearing deposits 41,618 257 .62 41,882 390 .93
Federal funds purchased and securities 1,814 4 .19 1,981 5 .27
sold under repurchase agreements
Bank notes and other short-term borrowings 413 7 1.69 619 11 1.84
Long-term debt (f), (g) 4,673 173 4.10 7,293 216 3.18
Total interest-bearing liabilities 48,518 441 .92 51,775 622 1.21
------ --- --- ------ --- ----
Noninterest-bearing deposits 20,217 17,381
Accrued expense and other liabilities 1,989 2,687
Discontinued liabilities -education lending
business (d), (g) 5,524 6,203
Total liabilities 76,248 78,046
Equity
Key shareholders' equity 10,144 10,133
Noncontrolling interests 23 117
Total equity 10,167 10,250
Total liabilities and equity $86,415 $88,296
==========
Interest rate spread (TE) 2.90% 2.81%
==== ====
Net interest income (TE) and net interest margin (TE) 2,288 3.21% 2,292 3.16%
==== ====
TE adjustment (b) 24 25
--- ---
Net interest income, GAAP basis $2,264 $2,267
(a) Results are from continuing
operations. Interest excludes the
interest associated with the
liabilities referred to in (d)
below, calculated using a matched
funds transfer pricing
methodology.
(b) Interest income on tax-exempt
securities and loans has been
adjusted to a taxable-equivalent
basis using the statutory federal
income tax rate of 35%.
(c) For purposes of these
computations, nonaccrual loans
are included in average loan
balances.
(d) Discontinued liabilities
include the liabilities of the
education lending business and
the dollar amount of any
additional liabilities assumed
necessary to support the assets
associated with this business.
(e) Yield is calculated on the
basis of amortized cost.
(f) Rate calculation excludes
basis adjustments related to fair
value hedges.
(g) A portion of long-term debt
and the related interest expense
is allocated to discontinued
liabilities as a result of
applying our matched funds
transfer pricing methodology to
discontinued operations.
(h) Commercial, financial and
agricultural average balance
includes $36 million of assets
from commercial credit cards.
TE = Taxable Equivalent, GAAP =
U.S. generally accepted
accounting principles
Noninterest Income
(in millions)
Three months ended Twelve months ended
12-31-12 9-30-12 12-31-11 12-31-12 12-31-11
-------- ------- -------- -------- --------
Trust and investment services income (a) $104 $106 $104 $421 $434
Service charges on deposit accounts 75 74 70 287 281
Operating lease income 16 17 25 75 122
Letter of credit and loan fees 59 52 56 221 213
Corporate-owned life insurance income 36 26 35 122 121
Net securities gains (losses) - - - - 1
Electronic banking fees 18 18 18 72 114
Gains on leased equipment 2 46 9 111 25
Insurance income 14 13 11 50 53
Net gains (losses) from loan sales 57 39 27 150 75
Net gains (losses) from principal investing 2 11 (8) 72 78
Investment banking and capital markets income (loss) (a) 47 38 24 165 134
Other income 36 104 43 221 157
--- --- --- --- ---
Total noninterest income $466 $544 $414 $1,967 $1,808
===
(a) Additional detail provided in tables below.
Trust and Investment Services Income
(in millions)
Three months ended Twelve months ended
12-31-12 9-30-12 12-31-11 12-31-12 12-31-11
-------- ------- -------- -------- --------
Brokerage commissions and fee income $32 $34 $33 $134 $132
Personal asset management and custody fees 42 41 38 161 153
Institutional asset management and custody fees 30 31 33 126 149
--- --- --- --- ---
Total trust and investment services income $104 $106 $104 $421 $434
===
Investment Banking and Capital Markets Income (Loss)
(in millions)
Three months ended Twelve months ended
12-31-12 9-30-12 12-31-11 12-31-12 12-31-11
-------- ------- -------- -------- --------
Investment banking income $34 $32 $25 $111 $92
Income (loss) from other investments 2 2 3 13 21
Dealer trading and derivatives income (loss), proprietary (a), (b) (1) 4 (6) (2) (24)
Dealer trading and derivatives income (loss), nonproprietary (b) 3 (9) (9) 6 2
--- --- --- --- ---
Total dealer trading and derivatives income (loss) 2 (5) (15) 4 (22)
Foreign exchange income 9 9 11 37 43
--- --- --- --- ---
Total investment banking and capital markets income (loss) $47 $38 $24 $165 $134
===
(a) For the quarter ended December 31, 2012, income related to foreign exchange derivatives trading and interest rate
derivative trading was less than $1 million and was offset by losses from Key's credit portfolio management
activities. For the quarters ended September 30, 2012, and December 31, 2011, fixed income securities trading
comprised the vast majority of this amount. In these quarters, income related to foreign exchange derivative trading
and interest rate derivative trading was less than $1 million and was offset by losses from Key's credit portfolio
management activities.
(b) The allocation between proprietary and nonproprietary is made based upon whether the trade is conducted for the
benefit of Key or Key's clients rather than based upon the proposed rulemakings under the Volcker Rule. The
prohibitions and restrictions on proprietary trading activities contemplated by the Volcker Rule and the rules
proposed thereunder are not yet final. Therefore, the ultimate impact of the rules proposed under the Volcker Rule
is not yet known.
Noninterest Expense
(dollars in millions)
Three months ended Twelve months ended
12-31-12 9-30-12 12-31-11 12-31-12 12-31-11
Personnel (a) $433 $411 $387 $1,618 $1,520
Net occupancy 69 65 66 260 258
Operating lease expense 12 13 18 57 94
Computer processing 39 43 42 166 166
Business services and professional fees 55 49 57 193 186
FDIC assessment 8 7 7 31 52
OREO expense, net 1 1 5 15 13
Equipment 27 27 25 107 103
Marketing 20 18 24 68 60
Provision (credit) for losses on lending-related commitments (14) (8) (11) (16) (28)
Intangible asset amortization on credit cards 8 6 - 14 -
Other intangible asset amortization 4 3 1 9 4
Other expense 94 99 96 385 362
--- --- --- --- ---
Total noninterest expense $756 $734 $717 $2,907 $2,790
==== ==== ==== ====== ======
Average full-time equivalent employees (b) 15,589 15,833 15,381 15,589 15,381
(a) Additional detail provided in table below.
(b) The number of average full-time equivalent employees has not been adjusted for discontinued operations.
Personnel Expense
(in millions)
Three months ended Twelve months ended
12-31-12 9-30-12 12-31-11 12-31-12 12-31-11
Salaries $257 $251 $234 $989 $919
Incentive compensation 87 89 82 313 306
Employee benefits 66 55 55 242 229
Stock-based compensation 13 11 13 51 45
Severance 10 5 3 23 21
--- --- --- --- ---
Total personnel expense $433 $411 $387 $1,618 $1,520
==== ==== ==== ====== ======
Loan Composition
(dollars in millions)
Percent change 12-31-12 vs.
12-31-12 9-30-12 12-31-11 9-30-12 12-31-11
-------- ------- -------- ------- --------
Commercial, financial and agricultural (a) $23,242 $21,979 $19,759 5.7% 17.6%
Commercial real estate:
Commercial mortgage 7,720 7,529 8,037 2.5 (3.9)
Construction 1,003 1,067 1,312 (6.0) (23.6)
Total commercial real estate loans 8,723 8,596 9,349 1.5 (6.7)
Commercial lease financing 4,915 4,960 5,674 (.9) (13.4)
----- ----- ----- --- -----
Total commercial loans 36,880 35,535 34,782 3.8 6.0
Residential - prime loans:
Real estate - residential mortgage 2,174 2,138 1,946 1.7 11.7
Home equity:
Key Community Bank 9,816 9,768 9,229 .5 6.4
Other 423 409 (d) 535 3.4 (20.9)
--- --- --- --- -----
Total home equity loans 10,239 10,177 9,764 .6 4.9
Total residential - prime loans 12,413 12,315 11,710 .8 6.0
Consumer other - Key Community Bank 1,349 1,313 1,192 2.7 13.2
Credit cards 729 710 - 2.7 N/M
Consumer other:
Marine 1,358 1,448 1,766 (6.2) (23.1)
Other 93 98 125 (5.1) (25.6)
Total consumer - indirect loans 1,451 1,546 1,891 (6.1) (23.3)
Total consumer loans 15,942 15,884 14,793 .4 7.8
Total loans (b), (c) $52,822 $51,419 $49,575 2.7% 6.5%
==========
Loans Held for Sale Composition
(dollars in millions)
Percent change 12-31-12 vs.
12-31-12 9-30-12 12-31-11 9-30-12 12-31-11
-------- ------- -------- ------- --------
Commercial, financial and agricultural $29 $13 $19 123.1% 52.6%
Real estate - commercial mortgage 477 484 567 (1.4) (15.9)
Real estate - construction - 10 35 N/M N/M
Commercial lease financing 8 4 12 100.0 (33.3)
Real estate - residential mortgage 85 117 95 (27.4) (10.5)
--- --- --- ----- -----
Total loans held for sale $599 $628 $728 (4.6)% (17.7)%
==========
Summary of Changes in Loans Held for Sale
(dollars in millions)
4Q12 3Q12 2Q12 1Q12 4Q11
---- ---- ---- ---- ----
Balance at beginning of period $628 $656 $511 $728 $479
New originations 1,686 1,280 1,308 935 1,235
Transfers from held to maturity, net 38 13 7 19 19
Loan sales (1,747) (1,311) (1,165) (1,168) (932)
Loan draws (payments), net (4) (9) (4) (3) (72)
Transfers to OREO /valuation
adjustments (2) (1) (1) - (1)
Balance at end of period $599 $628 $656 $511 $728
==== ==== ==== ==== ====
(a) December 31, 2012 and
September 30, 2012 loan
balances include $90 million
and $88 million of commercial
credit card balances,
respectively.
(b) Excluded at December 31,
2012, September 30, 2012, and
December 31, 2011, are loans in
the amount of $5.2 billion,
$5.3 billion, and $5.8 billion,
respectively, related to the
discontinued operations of the
education lending business.
(c) December 31, 2012 includes
purchased loans of $217 million
of which $23 million were
purchased credit impaired.
September 30, 2012 includes
purchased loans of $231 million
of which $25 million were
purchased credit impaired.
(d) This loan category was
impacted by the $45 million in
net loan charge-offs taken in
the third quarter of 2012
related to the updated
regulatory guidance. During the
fourth quarter of 2012, updated
charge-off amounts were
reallocated to other loan
categories. This amount would
have been $454 million
exclusive of the above-
referenced net loan charge-
offs at September 30, 2012.
N/M = Not Meaningful
Exit Loan Portfolio From Continuing Operations
(dollars in millions)
Balance Change Net Loan Balance on
Outstanding 12-31-12 vs. Charge-offs Nonperforming Status
----------- ----------- --------------------
12-31-12 9-30-12 9-30-12 4Q12 3Q12 (c) 12-31-12 9-30-12
-------- ------- ------- ---- ---- --- -------- -------
Residential properties - homebuilder $24 $31 $(7) $1 - $10 $6
Marine and RV floor plan 33 35 (2) - $(1) 10 12
Commercial lease financing (a) 997 1,035 (38) - (3) 6 8
--- ----- --- --- --- --- ---
Total commercial loans 1,054 1,101 (47) 1 (4) 26 26
Home equity - Other 423 409 (d) 14 11 5 21 18
Marine 1,358 1,448 (90) 14 6 34 31
RV and other consumer 93 98 (5) 1 (1) 2 2
--- --- --- --- --- --- ---
Total consumer loans 1,874 1,955 (81) 26 10 57 51
----- ----- --- --- --- --- ---
Total exit loans in loan portfolio $2,928 $3,056 $(128) $27 $6 $83 $77
====== ====== ===== === === === ===
Discontinued operations - education $5,201 $5,328 $(127) $15 $12 $20 $22
lending business (not included in exit loans above) (b)
(a) Includes (1) the business
aviation, commercial vehicle,
office products, construction
and industrial leases; (2)
Canadian lease financing
portfolios; and (3) all
remaining balances related to
lease in, lease out; sale in,
lease out; service contract
leases; and qualified
technological equipment leases.
(b) Includes loans in Key's
consolidated education loan
securitization trusts.
(c) Credit amounts indicate
recoveries exceeded charge-
offs.
(d) This loan category was
impacted by the $45 million in
net loan charge-offs taken in
the third quarter of 2012
related to the updated
regulatory guidance. During the
fourth quarter of 2012, updated
charge-off amounts were
reallocated to other loan
categories. This amount would
have been $454 million
exclusive of the above-
referenced net loan charge-
offs at September 30, 2012.
Asset Quality Statistics From Continuing Operations
(dollars in millions)
4Q12 3Q12 2Q12 1Q12 4Q11
---- ---- ---- ---- ----
Net loan charge-offs $58 $109 $77 $101 $105
Net loan charge-offs to average loans .44% .86% .63% .82% .86%
Allowance for loan and lease losses to annualized net loan charge-offs 384.85 204.78 286.74 232.39 241.01
Allowance for loan and lease losses $888 $888 $888 $944 $1,004
Allowance for credit losses (a) 917 931 939 989 1,049
Allowance for loan and lease losses to period-end loans 1.68% 1.73% 1.79% 1.92% 2.03%
Allowance for credit losses to period-end loans 1.74 1.81 1.89 2.01 2.12
Allowance for loan and lease losses to nonperforming loans 131.75 135.99 135.16 141.74 138.10
Allowance for credit losses to nonperforming loans 136.05 142.57 142.92 148.50 144.29
Nonperforming loans at period end (b) $674 $653 $657 $666 $727
Nonperforming assets at period end 735 718 751 767 859
Nonperforming loans to period-end portfolio loans 1.28% 1.27% 1.32% 1.35% 1.47%
Nonperforming assets to period-end portfolio loans plus 1.39 1.39 1.51 1.55 1.73
OREO and other nonperforming assets
(a) Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related commitments.
(b) December 31, 2012 and September 30, 2012 amounts exclude $23 million and $25 million, respectively, of purchased credit impaired loans acquired in July 2012.
Summary of Loan and Lease Loss Experience From Continuing Operations
(dollars in millions)
Three months ended Twelve months ended
-------------------
12-31-12 9-30-12 12-31-11 12-31-12 12-31-11
-------- ------- -------- -------- --------
Average loans outstanding $51,859 $50,695 $48,664 $50,362 $48,606
======= ======= ======= ======= =======
Allowance for loan and lease losses at beginning of period $888 $888 $1,131 $1,004 $1,604
Loans charged off:
Commercial, financial and agricultural 15 16 45 80 169
Real estate - commercial mortgage 33 23 24 102 113
Real estate - construction 5 3 2 24 83
--- --- --- --- ---
Total commercial real estate loans 38 26 26 126 196
Commercial lease financing 7 - 6 27 42
--- --- --- --- ---
Total commercial loans 60 42 77 233 407
Real estate - residential mortgage (a) 8 6 7 27 29
Home equity:
Key Community Bank (a) (14) 65 22 99 100
Other (a) 12 6 10 35 45
--- --- --- --- ---
Total home equity loans (2) 71 32 134 145
Consumer other - Key Community Bank 9 9 11 38 45
Credit cards 9 2 - 11 -
Consumer other:
Marine (a) 18 11 20 59 80
Other (a) 2 - 2 6 9
--- --- --- --- ---
Total consumer other 20 11 22 65 89
--- --- --- --- ---
Total consumer loans 44 99 72 275 308
--- --- --- --- ---
Total loans charged off 104 141 149 508 715
Recoveries:
Commercial, financial and agricultural 23 9 17 63 50
Real estate - commercial mortgage 5 2 1 23 10
Real estate - construction 2 1 8 5 27
--- --- --- --- ---
Total commercial real estate loans 7 3 9 28 37
Commercial lease financing 4 8 6 22 25
--- --- --- --- ---
Total commercial loans 34 20 32 113 112
Real estate - residential mortgage 1 - - 3 3
Home equity:
Key Community Bank 4 3 2 11 11
Other 1 1 1 5 4
--- --- --- --- ---
Total home equity loans 5 4 3 16 15
Consumer other - Key Community Bank 1 2 2 6 8
Consumer other:
Marine 4 5 6 22 32
Other 1 1 1 3 4
--- --- --- --- ---
Total consumer other 5 6 7 25 36
--- --- --- --- ---
Total consumer loans 12 12 12 50 62
--- --- --- --- ---
Total recoveries 46 32 44 163 174
--- --- --- --- ---
Net loan charge-offs (58) (109) (105) (345) (541)
Provision (credit) for loan and lease losses 57 109 (22) 229 (60)
Foreign currency translation adjustment 1 - - - 1
--- --- --- --- ---
Allowance for loan and lease losses at end of period $888 $888 $1,004 $888 $1,004
==== ==== ====== ==== ======
Liability for credit losses on lending-related commitments at beginning of period $43 $51 $56 $45 $73
Provision (credit) for losses on lending-related commitments (14) (8) (11) (16) (28)
--- --- --- --- ---
Liability for credit losses on lending-related commitments at end of period (b) $29 $43 $45 $29 $45
=== === === === ===
Total allowance for credit losses at end of period $917 $931 $1,049 $917 $1,049
==== ==== ====== ==== ======
Net loan charge-offs to average loans .44% .86% .86% .69% 1.11%
Allowance for loan and lease losses to annualized net loan charge-offs 384.85 204.78 241.01 257.39 185.58
Allowance for loan and lease losses to period-end loans 1.68 1.73 2.03 1.68 2.03
Allowance for credit losses to period-end loans 1.74 1.81 2.12 1.74 2.12
Allowance for loan and lease losses to nonperforming loans 131.75 135.99 138.10 131.75 138.10
Allowance for credit losses to nonperforming loans 136.05 142.57 144.29 136.05 144.29
Discontinued operations - education lending business:
Loans charged off $19 $17 $31 $75 $138
Recoveries 4 5 6 17 15
--- --- --- --- ---
Net loan charge-offs $(15) $(12) $(25) $(58) $(123)
==== ==== ==== ==== =====
(a) Further review of the loans subject to updated regulatory guidance in the third quarter of 2012 was performed during the fourth quarter of 2012. This review resulted in a partial home equity
loan charge-off reversal and reallocation of the updated charge-off amounts to other consumer loan portfolios. Home equity - Key Community Bank charge-offs were $18 million prior to
adjustments made from this review. Prior to reallocation, Real estate - residential mortgage, Home equity - Other, Consumer other - Marine, and Consumer other - Other charge-offs
were $3 million, $6 million, $11 million, and $1 million, respectively.
(b) Included in "accrued expense and other liabilities" on the balance sheet.
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
(dollars in millions)
12-31-12 9-30-12 6-30-12 3-31-12 12-31-11
Commercial, financial and agricultural $99 $132 $141 $168 $188
Real estate - commercial mortgage 120 134 172 175 218
Real estate - construction 56 53 68 66 54
--- --- --- --- ---
Total commercial real estate loans 176 187 240 241 272
Commercial lease financing 16 18 18 22 27
--- --- --- --- ---
Total commercial loans 291 337 399 431 487
Real estate - residential mortgage (a) 103 83 78 82 87
Home equity:
Key Community Bank 210 171 141 109 108
Other 21 18 17 12 12
--- --- --- --- ---
Total home equity loans (a) 231 189 158 121 120
Consumer other - Key Community Bank 2 3 2 1 1
Credit cards 11 8 - - -
Consumer other:
Marine 34 31 19 30 31
Other 2 2 1 1 1
--- --- --- --- ---
Total consumer other 36 33 20 31 32
--- --- --- --- ---
Total consumer loans 383 316 258 235 240
--- --- --- --- ---
Total nonperforming loans (b) 674 653 657 666 727
Nonperforming loans held for sale 25 19 38 24 46
OREO 22 29 28 61 65
Other nonperforming assets 14 17 28 16 21
--- --- --- --- ---
Total nonperforming assets $735 $718 $751 $767 $859
==== ==== ==== ==== ====
Accruing loans past due 90 days or more $78 $89 $131 $169 $164
Accruing loans past due 30 through 89 days 424 354 362 420 441
Restructured loans - accruing and nonaccruing (c) 320 323 274 293 276
Restructured loans included in nonperforming loans (c) 249 217 163 184 191
Nonperforming assets from discontinued operations - 20 22 18 19 23
education lending business
Nonperforming loans to period-end portfolio loans 1.28% 1.27% 1.32% 1.35% 1.47%
Nonperforming assets to period-end portfolio loans 1.39 1.39 1.51 1.55 1.73
plus OREO and other nonperforming assets
(a) All of the increase in Real
estate -residential mortgage and
$26 million of the increase in
Total home equity loans from
September 30, 2012 to December 31,
2012 was related to regulatory
guidance issued in the second and
third quarters of 2012.
(b) December 31, 2012 and September
30, 2012 amounts exclude $23
million and $25 million,
respectively, of purchased credit
impaired loans acquired in July
2012.
(c) Restructured loans (i.e.,
troubled debt restructurings) are
those for which Key, for reasons
related to a borrower's financial
difficulties, grants a concession
to the borrower that it would not
otherwise consider. These
concessions are made to improve the
collectability of the loan and
generally take the form of a
reduction of the interest rate,
extension of the maturity date or
reduction in the principal balance.
The majority of the increase in
restructured loans included in
nonperforming loans from September
30, 2012 to December 31, 2012 was a
result of updated regulatory
guidance in the third quarter of
2012.
Summary of Changes in Nonperforming Loans From Continuing Operations
(in millions)
4Q12 3Q12 2Q12 1Q12 4Q11
---- ---- ---- ---- ----
Balance at beginning of period $653 $657 $666 $727 $788
Loans placed on nonaccrual status 288 276 350 214 230
Charge-offs (104) (141) (131) (132) (149)
Loans sold (44) (43) (49) (27) (28)
Payments (78) (74) (110) (65) (70)
Transfers to OREO (7) (10) (6) (15) (12)
Transfers to nonperforming loans held for sale (8) - (16) - (19)
Transfers to other nonperforming assets (1) - (14) - (4)
Loans returned to accrual status (25) (12) (33) (36) (9)
--- --- --- --- ---
Balance at end of period (a) $674 $653 $657 $666 $727
==== ==== ==== ==== ====
(a) December 31, 2012 and September 30, 2012 amounts exclude $23 million and $25 million, respectively, of purchased credit impaired loans acquired in July 2012.
Summary of Changes in Nonperforming Loans Held For Sale From Continuing Operations
(in millions)
4Q12 3Q12 2Q12 1Q12 4Q11
---- ---- ---- ---- ----
Balance at beginning of period $19 $38 $24 $46 $42
Transfers in 8 - 16 - 19
Net advances / (payments) (1) (1) - (1) (3)
Loans sold (1) (17) (1) (1) (11)
Transfers to OREO - (1) - - (1)
Valuation adjustments - - (1) (1) -
Loans returned to accrual status / other - - - (19) -
--- --- --- --- ---
Balance at end of period $25 $19 $38 $24 $46
=== === === === ===
Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations
(in millions)
4Q12 3Q12 2Q12 1Q12 4Q11
---- ---- ---- ---- ----
Balance at beginning of period $29 $28 $61 $65 $63
Properties acquired - nonperforming loans 7 11 6 15 13
Valuation adjustments (2) (2) (7) (7) (4)
Properties sold (12) (8) (32) (12) (7)
--- --- --- --- ---
Balance at end of period $22 $29 $28 $61 $65
=== === === === ===
Line of Business Results
(dollars in millions)
Percent change 4Q12 vs.
4Q12 3Q12 2Q12 1Q12 4Q11 3Q12 4Q11
---- ---- ---- ---- ---- ---- ----
Key Community Bank
Summary of operations
Total revenue (TE) $567 $576 $537 $528 $546 (1.6)% 3.8%
Provision (credit) for loan and lease losses 23 120 11 2 30 (80.8) (23.3)
Noninterest expense 529 512 476 457 476 3.3 11.1
Net income (loss) attributable to Key 31 (23) 41 57 40 N/M (22.5)
Average loans and leases 29,252 28,386 27,043 26,617 26,406 3.1 10.8
Average deposits 50,123 49,537 48,253 47,768 48,076 1.2 4.3
Net loan charge-offs 12 93 50 49 71 (87.1) (83.1)
Net loan charge-offs to average loans .16% 1.30% .74% .74% 1.07% N/A N/A
Nonperforming assets at period end $459 $422 $401 $402 $415 8.8 10.6
Return on average allocated equity 4.13% (3.11)% 5.73% 7.74% 5.07% N/A N/A
Average full-time equivalent employees 9,019 9,209 8,757 8,719 8,633 (2.1) 4.5
Key Corporate Bank
Summary of operations
Total revenue (TE) $424 $392 $392 $401 $412 8.2% 2.9%
Provision (credit) for loan and lease losses 11 (3) 4 13 (61) N/M N/M
Noninterest expense 206 209 218 230 228 (1.4) (9.6)
Net income (loss) attributable to Key 130 118 104 100 156 10.2 (16.7)
Average loans and leases 19,477 18,886 18,532 18,584 17,784 3.1 9.5
Average loans held for sale 538 441 514 509 356 22.0 51.1
Average deposits 13,672 12,873 12,409 11,556 11,162 6.2 22.5
Net loan charge-offs 21 8 9 25 12 162.5 75.0
Net loan charge-offs to average loans .43% .17% .20% .54% .27% N/A N/A
Nonperforming assets at period end $175 $197 $248 $237 $294 (11.2) (40.5)
Return on average allocated equity 30.97% 27.61% 23.53% 21.24% 30.03% N/A N/A
Average full-time equivalent employees 2,049 2,146 2,175 2,169 2,204 (4.5) (7.0)
Key Corporate Bank supplementary information (lines of business)
Real Estate Capital and Corporate Banking Services
Total revenue (TE) $189 $166 $181 $165 $184 13.9% 2.7%
Provision (credit) for loan and lease losses 14 (3) 5 - (31) N/M N/M
Noninterest expense 59 62 67 63 66 (4.8) (10.6)
Net income (loss) attributable to Key 72 67 65 64 94 7.5 (23.4)
Average loans and leases 7,625 7,342 7,344 7,700 7,446 3.9 2.4
Average loans held for sale 455 359 337 291 216 26.7 110.6
Average deposits 10,538 9,674 9,254 8,279 7,694 8.9 37.0
Net loan charge-offs 26 9 7 16 10 188.9 160.0
Net loan charge-offs to average loans 1.36% .49% .38% .84% .53% N/A N/A
Nonperforming assets at period end $136 $142 $186 $173 $209 (4.2) (34.9)
Return on average allocated equity 38.86% 34.44% 31.27% 27.92% 36.35% N/A N/A
Average full-time equivalent employees 907 929 983 982 983 (2.4) (7.7)
Equipment Finance
Total revenue (TE) $53 $57 $57 $64 $62 (7.0)% (14.5)%
Provision (credit) for loan and lease losses (6) - 6 (2) (15) N/M N/M
Noninterest expense 35 35 37 37 48 - (27.1)
Net income (loss) attributable to Key 15 14 9 18 18 7.1 (16.7)
Average loans and leases 5,099 5,159 4,887 4,780 4,681 (1.2) 8.9
Average loans held for sale 9 7 23 24 10 28.6 (10.0)
Average deposits 6 6 7 8 9 - (33.3)
Net loan charge-offs 4 (1) 4 5 (1) N/M N/M
Net loan charge-offs to average loans .31% (.08)% .33% .42% (.08)% N/A N/A
Nonperforming assets at period end $26 $30 $33 $28 $41 (13.3) (36.6)
Return on average allocated equity 25.07% 22.73% 14.48% 26.71% 23.19% N/A N/A
Average full-time equivalent employees 367 383 393 394 442 (4.2) (17.0)
Institutional and Capital Markets
Total revenue (TE) $182 $169 $154 $172 $166 7.7% 9.6%
Provision (credit) for loan and lease losses 3 - (7) 15 (15) N/M N/M
Noninterest expense 112 112 114 130 114 - (1.8)
Net income (loss) attributable to Key 43 37 30 18 44 16.2 (2.3)
Average loans and leases 6,753 6,385 6,301 6,104 5,657 5.8 19.4
Average loans held for sale 74 75 154 194 130 (1.3) (43.1)
Average deposits 3,128 3,193 3,148 3,269 3,459 (2.0) (9.6)
Net loan charge-offs (9) - (2) 4 3 N/M N/M
Net loan charge-offs to average loans (.53)% - (.13)% .26% .21% N/A N/A
Nonperforming assets at period end $13 $25 $29 $36 $44 (48.0) (70.5)
Return on average allocated equity 24.61% 21.61% 17.44% 10.33% 24.01% N/A N/A
Average full-time equivalent employees 775 834 799 793 779 (7.1) (.5)
TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful
SOURCE KeyCorp
